TMI Blog2012 (7) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... of advance or part payments of the contract amount itself would not necessary means that the project is completed even to the extent of percentage of receipt of the amount - authorities below are not justified in estimating the profits on percentage basis as per the work in progress shown by the assessee - in favour of the assessee - ITA No. 2208/Mum/2011, ITA No. 7223/Mum/2010 - - - Dated:- 25-5-2012 - SHRI VIJAY PAL RAO, SHRI N K BILLAIYA, JJ. Assessee by Sh Kiriti Sheth Revenue by Sh T C Subramanian ORDER PER VIJAY PAL RAO, JM These appeals by the assessee are directed against two separate orders dated 2.2.2011 and 20.9.2010 of the Commissioner of Income Tax(Appeals) for the AYs 2006-07 and 2007-08 respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis in respect to the projects by applying Accounting Standards (AS-7). 3.1 In response to the show cause notice, the assessee submitted before the Assessing Officer that the assessee is maintaining its books of account on the basis of mercantile system of accounting and in accordance with sec. 145(1) of the Act. It was further submitted that the assessee has followed AS-I and the Central government has not notified any other AS in exercise of power conferred u/s 145(2). As such the assessee contended that the AS-7 issued by the Institute of Chartered Accountant of India is not applicable so far as the applications of the provisions of the Act are concerned. 3.2 The Assessing Officer did not accept the explanation and contention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been found by the Assessing Officer which has any negative implication on the correctness of the books of account. The ld AR has referred section 209 of the Companies Act and submitted that the AS-7 has no role for maintaining the books of account; but it is relevant only for the preparation of the final account, being balance sheet, Profit Account as mandates by sec. 211 of the Companies Act. He has referred the notification u/s 145(2) dt 25.1.1996 and submitted that as per the said notification, the AS-1 regarding disclosure of accounting policies has been notified and not AS- 7. The ld AR has further submitted that as per AS-7, the accepted sales are recognized even if the contract work has not commenced, therefore, the AS-7 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even otherwise for the AYs under consideration, the net profit ratio admitted by the assessee is similar to the profit ratio of the earlier year. He has relied upon the decision of the Hon ble jurisdictional High Court in the case Ito VS Nagri Mills Co Ltd reported in 33 ITR 681 and submitted that when the tax chargeable on the assessee in the different years is at uniform rate, then it would have no consequence to the department whether the income is assessed on completion method or on percentage method. He has further pointed out that when all the payments received by the assessee were subjected to TDS u/s 194C, then the method adopted by the assessee would not affect any revenue because the advance tax has been received by the reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails, we note that the amounts received by the assessee upto 30.3.2006 in respect of these projects vary from 5 to 60% of the contract amount. Therefore, even otherwise the total contract amount shown by the Assessing Officer is Rs. 4,39,82,678 out of which the assessee received the total amount of Rs. 2,67,05,243/- which comes to about 60% of the total contract amount. This figure is only average of all the contract amounts received by the assessee whereas in some of the cases, the assessee received nil/less amount; therefore, those contracts cannot be even treated as partly completed. This is not a case of completion of contract and receiving the contracted amount, say 80% or 90% of the total contract value. Therefore, in these facts, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turbance in the method of account consistently following by the assessee, the Assessing Officer is permitted to adopt a different method. It is pertinent to note that in the contract of installation of elevators/lifts, assesseee s responsibility and liabilities extent even after the execution work is completed. Therefore, in any case, the project cannot be treated as completed until and unless the execution of installation work is completed by the assessee. The receipts of advance or part payments of the contract amount itself would not necessary means that the project is completed even to the extent of percentage of receipt of the amount. 6 In view of the above discussion, we are of the considered opinion that the authorities below are n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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