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2018 (10) TMI 1401 - ITAT DELHIAccrual of income - method of account - construction project - although 100% advance had been received during the year, the sales was not recognized - CIT(A) while allowing the assessee’s appeal by deleting the addition made u/s 68 enhanced the assessee’s appeal by ₹ 1,27,07,336/- by invoking provisions of section 251(1)(a) - method of accounting followed by the Assessee is project completion method - Held that:- Neither any defect has been pointed out in the method of accounting being followed by the assessee nor any concrete finding has been given that correct profits cannot be computed following the method of accounting adopted by the assessee. The main thrust of the Ld. CIT (A) seems to be that the assessee is deferring the payment of taxes. But this inference of the Ld. CIT (A) cannot be accepted as the assessee has been consistently following one method of accounting which has been accepted by the Department in earlier assessment years. In the present case, there was therefore no good reason for the ITAT to have reversed the finding of the CIT (A). The only reason given in the impugned order of the ITAT is that 'risks and rewards' of ownership were transferred to the buyers who had paid the booking advance amounts and in some cases these rights were transferred to third parties. However, this does not in any manner affect the treatment of the said amounts in the books of the Assessee. As noted hereinbefore, the expenses of construction were not debited to the P & L account of the Assessee. It was shown as cost of construction or block of buildings. It is only as and when a conveyance deed was executed or possession delivered that the receipt was shown as income. The explanation added by way of Notes to the Accounts was not taken note of by the ITAT when it came to the conclusion that the percentage completion method should apply to the Assessee. The other aspect that appears to have escaped the attention of the ITAT is that the Assessee offered to tax in the subsequent FY the amounts received and therefore there was no actual loss to the revenue. In similar circumstances, the Supreme Court in CIT v. Excel Industries Limited [2013 (10) TMI 324 - SUPREME COURT] observed that the dispute if any raised at the instance of the Revenue would be at best academic. The stand of the Assessee in the present case also finds support in the decision of the Gujarat High Court in CIT-IV v. Shivalik Buildwell (P) Ltd. [2012 (10) TMI 1019 - GUJARAT HIGH COURT]. It was held that the Assessee in that case, who was a developer, was entitled to book the amount received as booking advance as income on transfer of the property. Till then the advance booking amounts could not be treated as his trading receipt. The High Court recognized that the Assessee in that case was entitled to apply the project completion method in terms of the applicable AS. Accordingly we set aside the order of the Ld. CIT (A) making the impugned enhancement and also direct the Assessing Officer that the income as declared by the assessee in its Return of Income be taken as the figure for the purpose of calculation of the tax liability. - Decided in favour of assessee.
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