2023 (12) TMI 393

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....g Percentage of Completion Method [POCM]. 3. Briefly stated, the facts of the case are that a search and seizure operation was conducted at the residential as well as business premises of the assessee group and accordingly, statutory proceedings were initiated against the assessee. 4. During the course of scrutiny assessment proceedings, field enquiries of the project were undertaken by the department and field enquiries revealed that 70% of stock in trade has been sold as against 75% of booking amount received. 5. Taking a leaf out of these facts, the Assessing Officer formed a belief that POCM is applicable and to justify this, the Assessing Officer referred to the Accounting Standard for real estate project issued by Institute o....

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.... has been framed after thorough scrutiny and method of accounting has been accepted by the Assessing Officer. On such facts the ratio laid down by the Hon'ble Supreme Court enunciating Rule of Consistency squarely applies. 13. In so far as applicability of Accounting Standard Guidance Note is concerned, it is pertinent to mention that the same has not been notified by the Central Government for the purpose of section 145(2) of the Act. Therefore, no adverse inference can be drawn. For this proposition, we draw support from the decision of the Hon'ble High Court of Delhi in the case of Para Buildtech India (P) Ltd [supra] wherein the Hon'ble High Court has held as under: (i) Section 145 (1) of the Act states that the ....

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....as under: "15. Recognition/identification of income under the 1961 Act is attainable by several methods of accounting. It may be noted that the same result could be attained by any one of the accounting methods. Completed contract method is one such method. Similarly, percentage of completion method is another such method. 16. Under completed contract method, the revenue is not recognised until the contract is complete. Under the said method, costs are accumulated during the course of the contract. The profit and loss is established in the last accounting period and transferred to P & L account. The said method determines results only when contract is completed. This method leads to objective assessment of the results of t....

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....d of time. In the past, the Department had accepted the completed contract method and because of such acceptance, the assessees, in these cases, have followed the same method of accounting, particularly in the context of chit discount. Every assessee is entitled to arrange its affairs and follow the method of accounting, which the Department has earlier accepted. It is only in those cases where the Department records a finding that the method adopted by the assessee results in distortion of profits, the Department can insist on substitution of the existing method. Further, in the present cases, we find from the various statements produced before us, that the entire exercise, arising out of change of method from completed contract m....