TaxTMI 
TaxTMI 
2023 (7) TMI 861
X X X X Extracts X X X X
X X X X Extracts X X X X
.... with regard to the deletion ordered by the Income Tax Appellate Tribunal, Chandigarh (for short 'Tribunal') qua disallowances/additions made by the assessing officers during the above mentioned years. The facts have been extracted from Income Tax Appeal No.398 of 2009. 2. The brief facts are that the respondent-assessee company was engaged in the business of development and sale of industrial plots and sheds. It had filed return of income for the assessment year 2003-04 on 31.10.2003 declaring total taxable income for the relevant year along with carried forward losses. The return was processed. On scrutiny, notice under Section 143 (2) was issued on 07.10.2004. After seeking relevant details and information from the respondent, its assessment for the concerned year was finalized. It was observed that the assessee had treated the money received by sale of plots/sheds as capital receipt and had not accounted for the closing stock of plots/sheds due to which revenue on these accounts was not ascertainable. The respondent-assessee was asked to clarify the facts and in response thereto, it was submitted by the respondent that it was following project completion method and wou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....DC) of the Udyog Sahayak Expenses had admitted that some of the expenses were of capital in nature? 4. Learned counsel for the revenue has emphatically argued that the orders passed by the CIT (A) and the Tribunal are not sustainable and are liable to be set aside. The assessing officer had duly observed on the basis of the audit report that against receipt of an amount of Rs.12.40 crores on account of sale of plots/sheds, an expenditure of Rs.9.54 crores only was shown to be incurred on development of plots/sheds. The said amount and the interest of Rs.1.78 crores as accrued on the receipt amount, was wrongly treated as capital receipt. The assessing officer had rightly observed that the 'project completion method' could not be accepted as correct method of accounting since the assessee was required to reflect the receipts/expenses on the basis of percentage of project completed during the year. She further argued that the orders passed by the CIT (A) and the Tribunal deleting the additions made on account of Udyog Sahayak Expenses by treating them as capital income were also not sustainable. It is stressed that the Tribunal could not have dismissed the appeal without hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... raised by them. The respondent-assessee company is admittedly engaged in the business of development and sale of industrial plots and sheds. During the assessment year 2003-04, it had admittedly received an amount of Rs.12.40 crores. The said amount and the interest accrued thereon amounting to Rs.1.78 crores was being treated by the respondent assessee as capital receipts whereas the expenditure on development of plot/sheds was claimed to be Rs.9.54 crores. The assessee had submitted that since it was following project completion method, therefore, excess of receipts qua expenses would be accounted for by it in subsequent years i.e. in the year of completion. The assessing officer had not accepted the method of accounting by way of "project completion method". The CIT (A) had, however, observed that the project completion method was accepted method of accounting for the purpose of the respondent. The Tribunal had affirmed the order passed by CIT (A). Now it is to be considered by us as to whether the method of accountancy as followed by the assessee and as accepted by the authorities below was the correct method or not? In this context, it would be relevant to refer to Section 14....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be said to have accrued to him though it might be received later on, on being ascertained, it was held that such income was to be treated as advance. 8. Reference can further be had to Bilahari Investment (P) Ltd.'s case (Supra), wherein the Hon'ble Apex Court had observed that the income made by the business during the period can be measured only with the revenue earned during such period is compared with the expenditure incurred for earning that revenue. The revenue is recognized only when the services are actually rendered. If the services are partially rendered, revenue is to be shown proportionate with the degree of completion of services. 9. So far as the method of accounting by way of 'project completion method' is concerned, the same was discussed by Hon'ble Apex Court in CIT v. Hyundai Heavy Industries Co. Ltd., (2007) 210 CTR (SC) 178, wherein it was observed that there was a concept in accounts which was called the concept of Contract Accounts. Under that concept, two methods existed for ascertaining profit of contract namely, 'Completed Contract Method' and 'Percentage of Completion Method' to the rules of recognition of cost and re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nate to the degree of completion of the service and, therefore, the assessee was justified in spreading over the amount of membership fees and expenses. 10. On applying the principles of law as enunciated in the cases cited above to the present case, it emerges that admittedly and undisputedly the respondent-assessee company was applying "project completion method". The observations made by the assessing authority that such method could not be accepted, had no basis. It was also observed by the CIT (A) as well as the Tribunal that the same method was followed consistently by the assessee during the previous assessment years. The CIT (A) had passed a detailed order while considering various decisions rendered by the Apex Court as well as different High Courts including this Court. The Tribunal affirming the order passed by CIT (A) had observed that the principle of consistency was to be applied in the case. It is certainly not open to an assessing officer to reject the accounts of assessee under Section 145 of the Act, unless he comes to a conclusion that notified accounting standards had not been regularly followed by such assessee. As such, the assessee could not be compelled to ....