TMI Blog2004 (8) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... shown as taxable. The Assessing Officer however did not accept the assessee s plea holding that "it cannot be accepted that no taxes can be levied till all the sales are completed. The Assessing Officer further held that revenue cannot wait indefinitely for collection of its revenue, and the scheme of the act is that assessee will have to be taxed on the profit. Accordingly, he estimated the profit at the rate of 8% of the work-in-progress during the year." 4. The revenue has raised the following grounds of appeal before the Tribunal : ITA No. 3583/Mum./1995 "1.On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in upholding the assessee s project completion method of accounting in respect of its building construction activities instead of the Assessing Officer s method of taking into account the profits attributable to each years activities separately for the purpose of taxation and thereby deleting the addition of profits of Rs. 25,09,426 estimated at 8% of work-in-progress in the incomplete Vishal Complex project ignoring the statutory requirement of the Income-tax Act, 1961 that income be taxed on yearly basis. 2.On the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2001] 251 ITR 782 (Delhi) He has contended that the profits can be estimated even when the transaction is not completed and so in the present assessee s case, even before the project of building construction being completed, the assessee s profits could well be estimated. In this regard, he has cited the following decisions : (1) P.M. Mohammed Meerakhan v. CIT [1969] 73 ITR 735 (SC) (2) P. Kannan v. CIT [1985] 154 ITR 441 (Kar.) (3) Lalit Ram Mangilal of Cawnpore v. CIT [1950] 18 ITR 286 (All.) (4) N. Rengaswami Pillai v. CIT [1975] 98 ITR 24 (Mad.) He has contended that profit in real estate business will accrue year after year and not after the asset is completely sold. In his support, he has cited the following decisions : (1)26 ITR 647 ( sic ) (Pat.) (2) Tirath Ram Ahuja (P.) Ltd. v. CIT [1976] 103 ITR 15 (Delhi) (3) Bhagyanagar Constructions (P.) Ltd. v. ITO [1993] 46 ITD 236 (Hyd.) (4) Champion Construction Co. v. First ITO [1983] 5 ITD 495 (Bom.) (5) Greater Ashoka Land Dev. Co. (P.) Ltd. v. Asstt. CIT [2001] 79 ITD 595 (Delhi) (6) S.K. Estates (P.) Ltd. v. Asstt. CIT [1997] 60 ITD 621 (Bom.). 6. As against the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the following decisions 1. Shapoorji Pallonji Co. (Rajkot) (P.) Ltd. v. ITO [1994] 49 ITD 479 (Bom.) 2. Madhuvana House Building Co-operative Society v. Asstt. CIT [2002] 76 TTJ (Bang.) 948 3. CIT v. Moghul Builders Planners [2001] 118 Taxman 898 (AP) 4. CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 (SC) He has contended that it is not proper to pick out a word from here and there and that a decision is to be read in the proper context/reference. He has contended that the decisions cited by the ld. DR are distinguishable on facts. 7. We have considered the rival contentions, relevant material on record as also the cited decisions. In Sir Kikabhai Premchand s case ( supra ) it has been held that for income-tax purposes each year is a self-contained accounting period. 8. In British Paints India Ltd. s case ( supra ) it has been held that a method of accounting, though consistently followed by assessee, should, for being acceptable, disclose true and proper income but if correct profits are not deductible from the accounts, the Assessing Officer is entitled and has duty to have recourse to the proviso to section 145 and adopt appropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was sold. 13. In Lalit R. Mangilal of Cawnpore s case ( supra ) it has been held as under : "The proposition that whenever goods are purchased in bulk, so long as the whole lot has not been sold, profits cannot be ascertained and the income does not become taxable, as a general statement of law is not correct". 14. In 26 ITR 647 ( sic ) no judgment of Patna High Court is reported. 15. In Tirath Ram Ahuja P. Ltd. s case ( supra ) it has been held as under : "i. In the case of contracts, one need not wait till the contract was completed in order to ascertain the income and that it was open to the revenue to estimate the profit on the basis of the receipts in each year of construction although the contract was not complete." 16. In Bhagyanagar Constructions (P.) Ltd. s case ( supra ) it has been held that in case of building of contractor, profits should be assessed on year to year basis. However, in this cited case the Assessing Officer had held that the method of accounting followed by assessee was defective and consequently applied the provisions of section 145. The Assessing Officer did not accept the assessee s plea that no profit accrued during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il construction work and adopted Project Completion method and accounted for profit or loss in books of account of the year in which a project was completed. The Assessing Officer completed the assessment under section 143(3) but the CIT passed revisional order under section 263 holding the assessment to be erroneous. However, the Tribunal held that the fact that the profits on the project was postponed from the year of its commencement to the year of its completion could not be basis for considering aforesaid assessment as erroneous. It was also held that in view of the fact that the assessee followed same method of accounting regularly which was also a recognized one, department was bound by assessee s choice of method which could not be rejected as improper merely because it might give assessee benefit in certain years or because according to the Commissioner another method was preferable. 21. In the case of Rajesh Construction ( supra ) upheld the order of CIT(A) wherein the ld. CIT(A) had accepted the Project Completion Method followed by assessee; the Tribunal therein followed the judgment of Hon ble Jurisdictional High Court in the case of CIT v. Tata Iron Steel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleted Project" basis is not a correct method nor that true/fair profits cannot be determined thereby. As such the legal position emanating as above the mere fact that there does exist a method of accounting for profits of each year is no justification for rejecting an equally recognized method of accounting whereby the profits of the adventure/project are determined when the whole adventure/project is completed; being consistently followed by an assessee, without suffering from an infirmity/defect calling for a rejection of the same for the reason that true/fair profits of the adventure/project being not deducible thereby. This view has been laid down by the Hon ble Bombay (Jurisdictional) High Court in Dempo Co. (P.) Ltd. s case ( supra ) as discussed above. 24. As regards the judicial decisions of various High Courts other than the Jurisdictional (Bombay) High Court, we are bound by the judgment of the Jurisdictional High Court, which accordingly we need follow in preference to the judgment of other High Courts. As regards Mumbai Tribunal s order in Champion Construction Co. s case ( supra ) there is another subsequent order dated 5-9-2003 of ITAT, Mumbai in I.T.A. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above, the ld. AR of assessee has contended that the assessee has furnished chart on page 12 of PB showing details regarding mode of payment/receipt of loan/interest being by cheque, filing of confirmation letters, giving of G.I.R. Nos. and the TDS having been deducted from interest payment together with the fact that the Assessing Officer did not issue summons to the creditors. He has contended that the assessee had specifically requested the Assessing Officer to issue summons to the creditors but the Assessing Officer did not issue the summons; in this regard, he has referred to 52 PB. He has relied on Addl. CIT v. Bahri Bros. (P.) Ltd. [1985] 154 ITR 244 (Pat.). Citing Dy. CIT v. Rohini Builders [2002] 256 ITR 360 (Guj.) he has contended that when payment and repayment are by cheque, then initial burden of assessee is discharged. He has also cited the following decisions: 1. Munnalal Murlidhar v. CIT [1971] 79 ITR 540 (All.) 2. Purushottam Dass Ramesh Chand v. ITO [1984] 18 TTJ (Delhi) 324 3. Addl. CIT v. Hanuman Agarwal [1985] 151 ITR 150 (Pat.) He has also contended that the Assessing Officer was all along present before CIT(A). He has relied on CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this amount represents inflated purchase and that the ld. CIT(A) has misunderstood the issue. He has contended that it was not required to be seen as to whether this was a business expenditure or not. He has supported the orders of Assessing Officer. As against this, the ld. AR of assessee has contended that the ex-accountant made this entry of purchases but he misappropriated the amount. He has contended that a complaint of this matter was also lodged with the police, copy of which is placed on pages 22 to 27 PB. He has contended that this is a business loss and allowable as such. He has cited G.C. Dandekar Machine Works Ltd. v. CIT [1993] 202 ITR 161 (Bom.) and Ramchandar Shivnarayan v. CIT [1978] 111 ITR 263 (SC). He has relied on CIT(A) s order. 32. We have considered the rival contentions as also the relevant material on record. In Ramchandar Shivnarayan s case ( supra ) the assessee was engaged in the business in gold, silver etc. and was having income from investments in Govt. securities. He had brought some cash to the place of business for buying securities. He suffered loss of a part of cash at the place of business due to theft by stranger. In the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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