TaxTMI 
TaxTMI 
2022 (7) TMI 1310
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....pt the accounting method followed by the assessee as accounting standard-9 (AS-9) instead of accounting standard-7 (AS-7) despite the fact that the assessing officer arrived at a conclusion finding that the assessee is a contractor and not a builder after analysing the various aspects of the business of the assessee? (ii) Whether in the facts and circumstances of the case the Tribunal was justified in law to delete the addition of Rs.5,67,14,868/- under the head "Income from Business" by accepting the assessee's accounting standard as AS-9 which is exclusively applicable for sales of goods whereas the assessee sells flats which are immovable in nature and only movable objects are treated as goods under Goods Act ? (iii) Whether in the facts and circumstances of the case the Tribunal was justified in law in accepting the accounting method AS-9 (Project Completion Method) instead of accounting method AS-7 (Percentage Completion Method) since the assessee is a contractor which has been proved by the assessing officer in the Assessment Order ? We have heard Ms. Smita Das De, learned Counsel appearing for the appellant/revenue and Mr. J.P. Khaitan, learned Senior Advocate appear....
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....rder passed by the CIT(A), which, in our opinion, was unnecessary unless and until a specific issue decided against the assessee, is challenged before the tribunal. Be that as it may, the tribunal took note of the order passed by the CIT(A) and affirmed the same and, in particular, pointed out that the principle of consistency has to be applied. In the case of Commissioner of Income Tax, Central-1 Vs. Manish Build Well (P.) Ltd., reported in (2011) 16 taxmann.com 27 (Delhi) one of the substantial questions of law which was raised was whether the assessing officer wrongly held that the determination of income by the respondent therein on completion of its projects amounts to deferment of payment of taxes which is assessable annually under the existing tax law of the land. The said question was answered in favour of the assessee and against the revenue and in doing so, the Hon'ble Court referred to the decision of the Hon'ble Supreme Court in CIT Vs. Hyundai Heavy Industries Co. Ltd., reported in (2007) 291 ITR 482 (SC) for the principle that the project completion method is one of the recognised methods of accounting. The Court also noted that the said principle was reiterated by t....
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....mely the project completion method, to suit its convenience to book income was baseless. A further finding recorded by the CIT (A) is that there was no manipulation in the books of accounts. So far as the method of accounting is concerned, the CIT(A) held that the project completion method is a well recognized and accepted method of accounting and was the only method suitable for any developer who has to deliver a completed product to the buyer. Ultimately the CIT(A) held as under:- "Thus on overall perusal of the assessment order it is seen that neither any defect has been pointed out by the assessing officer in the method of accounting followed by the appellant nor any finding has been given that true and fair profits cannot be deduced following the said method of accounting. No evidence was found during the course of search to show that the books of account are not properly maintained by the appellant. The main thrust of the assessing officer in making the addition is that the assessee is deferring the payment of taxes. But this allegation of the assessing officer cannot be accepted as the assessee is consistently following a method of accounting which is well recognized in d....
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....t performance. The amount of revenue recognized under this method is determined by reference to the stage of completion of the contract. The stage of completion can be looked at under this method by taking into consideration the proportion that costs incurred to date bears to the estimated total costs of contract. The above indicates the difference between the completed contract method and the percentage of completion method." (underlining ours) After the above judgements of the Supreme Court it cannot be said that the project completion method followed by the assessee would result in deferment of the payment of the taxes which are to be assessed annually under the Income Tax Act. Accounting Standards 7 (AS7) issued by the Institute of Chartered Accountants of India also recognize the position that in the case of construction contracts, the assessee can follow either the project completion method or the percentage completion method. In view of the judgments of the Supreme Court (Supra), the finding of the CIT (A), upheld by the Tribunal, does not give rise to any substantial question of law. Further, the Tribunal has also found that there was no justification on the part of t....