AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1509
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....incurred more than 38% of the estimated project cost, whereas the assessee has entered into agreements to sell the flats only within 19% of the flats sold. The ld. AO issued notices u/s 133(6) of the Act to five purchasers of flats which were duly complied with by the flat purchasers. According to the ld. AO the assessee had received advances from buyers but had not recognized the Revenue during the instant financial year. Accordingly, the notice was issued on 29.11.2017, requesting the assessee to provide area of flats sold till 31.03.2015, along with the copies of agreements. The ld. AO finally made the addition of Rs. 2,23,94,373/-, on the ground that the assessee did not recognize the revenue during the year even though the area sold exceeded the threshold limit of 25% as per the ICAI guidelines. 2.2. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee after taking into consideration the reply and the contentions of the assessee by observing and holding as under:- "I have gone through the assessment order, submissions made by the appellant and the provisions of Accounting Standard 7 & Accounting standard 9. In real estate projects revenu....
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....he AO had also recognized revenue of advances received of even those buyers whose 10% of sale value had not been received by the assessee. Thus 1" two conditions of AS 7 had been violated by AO in making the addition. The action of the Ld AO is even voilative of the settled principles of Double Taxation and Consistency. The appellant had contended that it is following the Percentage of Completion Method in letter and Spirit and ITR for and wef A/y 2016-17 & 2017-18 have been filed by recognizing the income based on Percentage of Completion Method and in case, the action of the Ld AO would be upheld, this would amount to unsettling the incomes, taxes and other affairs of the appellant for the subsequent assessment years, needless to mention by involving the revenue as well as the appellant in unwanted litigation. In this regard, I derive support from the ratio of the following judicial pronouncements: The Hon'ble Supreme Court in the case of United Commercial Bank vs. CIT [240 ITR 355(SC)), held that the method followed consistently for thirty years and accepted by Revenue Method was valid and could not be rejected. In the case of CIT vs. Sarangpur Cot....
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.... of accounting followed by the assessee in the past and whether rchange in method of accounting was warranted on the ground that profit is being underestimated under the impugned method of accounting. If the Assessing Officer comes to the conclusion that there is underestimation of profits, he must give facts and figures in that regard and demonstrate to the Court that the impugned method of accounting adopted by the assessee results in underestimation of profits and is, therefore, rejected. Otherwise, the presumption would be that the entire exercise is revenue neutral. In the instant case, that exercise had never been undertaken. The Assessing Officer was required to demonstrate both the methods, one adopted by the assessee and the other by the department. In the circumstances, there was no reason to interfere with the conclusion given by the High Court" The Hon'ble Supreme Court in the case of CIT vs. Bilahari Investment P. Ltd. [299 ITR 1 (SC)] held, as follows: "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 t....
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....be made applicable to the appellant for the above assessment year more so, when the appellant is not fulfilling any of the twin conditions laid out therein. I further find, even presuming, that the provisions of AS-9 have been correctly invoked by the Ld AO, the same would tantamount of Double Taxation, more so, when the appellant had offered the corresponding Revenue in subsequent years. Hence I hereby delete the addition made by the AO. This ground of appeal is allowed." 2.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee is following the project completion method and has been offerings to tax the income earned from the sale of flats in the housing project. Whereas the ld. AO has invoked the percentage completion method as against the accounting policy adopted by the assessee and made the said addition on the ground that the assessee during the year has sold more than 25% of the total area and therefore, according to AO, the Revenue calculated at Rs. 2,23,94,370/- was not recognized. We note that the assessee has already offered sale of flats in the subsequent assessment years when the project was completed as per ....
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....dger of Sriram Keshrimal submitted by the appellant From the ledger account it is clear that funds are advanced and received as when required by both the parties and sometimes some statutory payments are also made on behalf of each other and there are some purchase transactions also. Thus all the transactions seems to be in the nature of current account transactions only. Sometimes money is advanced by the appellant, then is received back and again advanced. Also there is a Payable balance at the end of the year. Thus these transactions can in no way be in the nature of Loan & Advances on which Interest is required to be charged. Moreover the AO had also not provided any calculation for the disallowance, but had disallowed the entire Interest paid by the appellant on Loans Liability acquired by assessee which is also wrong. Also there is no relation found from the ledger confirmations of the loan accounts and Sriram Keshrimal as regards to date of loan received and then advanced to Sriram Keshrimal. As such the disallowance of interest paid by assuming any purported interest income in not understandable. The appellant had also contended that the disallowance of Interest is....