9911796707
TMI Blog2012 (7) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... ld Commissioner of Income Tax(Appeals) has erred in confirming rejection of books of accounts by the Assessing Officer u/s 145(3) of the I T Act, 1961. 2. The ld Commissioner of Income Tax(Appeals) has erred in confirming addition of Rs. 22,97,326/- by way of net profit @ 8% on cost incurred on closing balance of WIP disregarding the facts and circumstances of the case and without proper application of law." 3 The assessee company was incorporated on 14.3.2000 and in the business of erection and maintenance of elevators since then. Right from the beginning, the assessee has been recognises revenue/sales on completion of contract of erection of elevators. The Assessing Officer proposed to assess the income on the basis of percentage of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andatory in nature from that date. The revised standard recognizes only one method that recognizing revenue and cost on percentage of completion method. The Assessing Officer has further observed that the assessee could not justify the valuation of closing stock with stock registered as no register was maintained. Further, the assessee has made commission at 4% on the total contract procured by the brokers. The Assessing Officer has mentioned that the assessee has not mentioned the name of the parties from whom the order was taken and hence, the genuineness of the commission payment was also doubted by the Assessing Officer for want of verification. Accordingly, he rejected the books of account u/s 145(3) and estimated the net profit at 8% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Projects P Ltd vs DCIT reported in 129 TTJ (Bang) 680 and submitted that when the assessee is not a construction contractor, the revised AS-7 is not applicable in the case of the assessee and therefore, the Assessing Officer cannot reject the books of account on the basis of AS-7. The ld AR has then referred CBDT press release dt 20.10.2011 and discussion papers on AS and submitted that prior to 20.11.2011, it cannot be applied as a mandatory requirement for the assessee. 4.1 The ld AR has also relied upon the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs VS Dempo & Co Pvt Ltd reported in 131 CTR 203 (Bom) and submitted that when the assessee has regularly and consistently following the method of accounting in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls recorded by the Assessing Officer. Therefore, the projects were substantially completed. When the projects were substantially completed, then the assessee cannot defer the income assessable to tax. He has relied upon the order of the lower authorities and submitted that the Assessing Officer has also pointed the defect in the valuation of the closing stock as well as the genuineness of the commission payment @ 4% of the total contract procured. 4.4 In rebuttal, the ld AR has submitted that the Assessing Officer has not given any finding as to who the valuation of the closing stock is not correct and as far as the commission payment by the assessee is concerned, if the Assessing Officer has doubted the same, then the addition is only wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thod of accounting since beginning and the revenue has accepted the same for the AY 2004-05 while passing the assessment u/s 143(3). The copy of the assessment order has been filed by the ld AR of the assessee before us. Even otherwise the revenue has not disputed the factum of accepting the method of accounting in the earlier year. Apart from this, if we see the details of the net profit rate, the assessee has been admitting the net profit rate ranging from 1.63% to 2.26%. The year wise details of the net profit rate are as under: Asst Year Sales Net Profit (before Tax) Net Profit Ratio 2003-04 22429254 365935 1.63% 2004-05 38188962 864619 2.26% 2005-06 42137063 907144 2.15% 2006-07 52322511 1161603 2.22% 5.3 The net p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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