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2023 (12) TMI 536 - AT - Income TaxMethods of accounting for recognizing the revenue - assessee has been following “Project Completion Method” adopted by the assessee BUT in search admitted that company will adopt “Percentage Completion Method” then-onwards - AO applied the percentage completion method on the ground that the appellant firm through its managing partner had agreed to follow the said method during search operation and had filed its return of income for A.Y. 2016-17 by following percentage completion method - HELD THAT:- As decided in Bilahari Investment (P) Ltd [2008 (2) TMI 23 - SUPREME COURT] the rule of law in adopting the accounting standard in case of builder and developer is absolutely clear and precise, so that it is only in those case where the Department records a finding that the method adopted by the assessee results in distortion of profit, the Department can insist on substitution of the existing method. Reverting to the facts of the present case before us there is no reason recorded by the AO nor the ld. CIT(A) that the Project Completion Method which the assessee has adopted for recognition of revenue and the profit elements distorts the profits for the year under consideration. In absence of any such finding either by the AO or by the ld. CIT(A), the Department therefore cannot insist the assessee to substitute the Percentage Completion Method in place of Project Completion Method which the assessee has adopted for the year under consideration. There is another decision in M/s. Prestige Estate Projects Pvt. Ltd. [2020 (5) TMI 239 - KARNATAKA HIGH COURT] where their Lordships have observed when the Department has accepted in the previous years, in the light of guidance note applicable to developers a certain method of accounting and the profit arrived at is revenue neutral, then in such scenario, the substantive question of law has to be answered in favour of the assessee and against the Revenue. Therefore, in the case of the assessee for A.Y. 2015-16 when the Department has not pointed out any distortion in the profit arrived at for the year under consideration by adopting Project Completion Method, then the Revenue arrived at has to be revenue neutral and the Department cannot insist on the assessee to adopt Percentage Completion Method. More so, because the Revenue has already accepted Project Completion Method for the assessee for the previous consecutive A.Ys. 2013-14 & 2014-15. Thus addition made in the case of the assessee is unjustified unwarranted and invalid in the eyes of law. Decided in favour of assessee.
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