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2017 (11) TMI 960 - AT - Income TaxRevenue recognition - application of percentage completion method or project completion method - contention of the assessee that the loss returned by the assessee in the year of completion of project stood accepted by the Department when similar method of revenue recognition, viz., Project Completion method’ was adopted and that, what led the authorities below to take a different method is not discernible from their orders - Held that:- In the instant case, the assessee has adopted the mercantile system of accounting and has adopted the project completion method for revenue recognition. From the sample copy of one of the prospective buyers as submitted it is clear that the total value of the flat/shop was quite an ascertained value and nothing sort of it is depicted there from as to which part of the receipt was not ascertainable. The assessee was also in receipt of the amounts as stipulated in the said agreement. The assessee has also incurred expenditure towards construction works and the auditor’s report categorically speaks of revenue recognition on accrual basis. However, the loss claimed by the assessee is based on application of Project completion method. In such peculiar facts, it has to be decided whether the profit earned on a particular receipt would be taxable or not during the year under consideration or not. The learned authorities below also appear to have not examined all these aspects of the case. They have also not properly examined whether there was any item of income, the quantum of which was not ascertainable during the disputed year. There is nothing on record before us to examine that the assessee has been consistently following the project completion method for revenue recognition in respect of all the projects undertaken by assessee during the years preceding to the year under consideration, as also to the subsequent projects undertaken by him. This aspect also needs examination at the stage of AO before finally deciding the issue. In case the assessee is found to have adopted consistent method of revenue recognition in preceding and subsequent projects, then the Assessing Officer will not be justified to work out the profit by applying percentage of completion method during the impugned year on selective basis. Therefore, the matter deserves to be restored back to the file of Assessing Officer to decide the issue afresh - Decided in favour of assessee for statistical purposes
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