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2015 (12) TMI 697 - AT - Income TaxRejection of books of accounts - estimation of net profit from civil contract receipts - inclusion or exclusion of work in progress for determining the gross turnover - Held that:- It is an admitted fact that the work in progress is not a turnover but it is a cost of material and other charges incurred on unbilled works. The assessee contended that the work in progress is carried over to subsequent year and recognized the income, therefore it cannot be taken into turnover for the current year. We find force in the arguments of the assessee for the reason that the assessee did not received any amount towards this work in progress. Though the income should be recognized on percentage completion method or completion contract method in civil contract works, the A.O. necessarily has to follow the method of accounting followed by the assessee from the earlier years. The assessee contended that it is recognizing its income only on completion contract method. When the assesse is following a particular method, of accounting, which was accepted by the department in earlier years, cannot disputed now. Therefore, we are of the opinion that the A.O. is not correct in including the work in progress for the purpose of determining the gross receipts for estimation of net profit. The CIT(A), rightly excluded the work in progress from the contract receipts. We do not find any error or infirmity in the order of CIT(A). Therefore, we direct the A.O. to exclude the work in progress from the gross turnover. The co-ordinate bench of this Tribunal in the case of ACIT Vs. Teja Constructions [2014 (1) TMI 832 - ITAT HYDERABAD ] has upheld the estimation of net profit at 9% from main contract works. Thus the CIT(A) has rightly estimated the net profit of 9% on the total turnover, excluding work in progress. - Decided against revenue
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