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TMI Blog2013 (11) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... he projects of which the outcome is reliably estimated. As per the accounting system followed by the assessee, the stage of completion is determined by reference to the cost incurred to date to the total estimated cost, provided the company has incurred 30% of the total project cost and has booked sales of 30% of the total number of units to be sold. As per the details furnished, the Assessing Officer found that the assessee has estimated project cost for its Palm County Project for the year ending 31.03.2006 at Rs.15,12,08,874/- whereas the project sales is Rs.17,31,27,262/-. The total expenditure of the cost incurred on the project upto the year ending 31.03.2006 was shown at Rs.6,32,55,236/-. Excepting one or two, all the flats were booked upto the year ending 31.03.2006. The total sale value of the flats booked upto 31.03.2006 worked out to Rs.16.32,92,262/- and the actual cash receipts from the customers on such sales booked amounted to Rs.7,08,61,131/- as against the projected revenue of Rs.17,31,27,262/-. As the cost of project incurred and the sale of flats exceeded 30% the assessee recognized revenue on this project for the assessment year under dispute. As per the working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the year is Rs.707.93 lakhs. The Assessing Officer did not accept the explanation of the assessee by observing that the assessee cannot consider only projected cost for arriving at percentage of completion ignoring the projected sales for recognizing revenue. The Assessing Officer further held that in view of revised Accounting Standard 7, the assessee has to recognize the revenue at 41.83% of the projected sales and also held that considering the flats booked and advance amounts received till 31.3.2006, it cannot be said that there is any uncertainty existing with regard to the amount of consideration, as the ultimate collection of consideration is certain. The Assessing Officer finally recognised the revenue for the impugned assessment year at Rs.7,24,24,359 being 41.93 % of the projected sales and added the differential amount of Rs.16,31,487 to the income of the assessee. The addition made was challenged by the assessee before the CIT(A). 6. In the course of hearing before the CIT(A), the assessee contended that the method of accounting for recognition of revenue is regularly employed by the assessee and other group companies. In support of such contention, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the impugned order, following the order of the Tribunal in that case. 9. We have heard the rival submissions and perused the materials on record. Undisputedly, the assessee has been following the same accounting method for recognizing the revenue from its real estate business. Therefore, the Assessing Officer should not have disturbed the method of accounting consistently followed by the assessee. If the Assessing Officer disturbs the accounting method regularly followed by the assessee, then the financial results of the company would be distorted. In the present case, there is no dispute that the assessee is following the percentage completion method from year to year. The accounting method followed by the assessee cannot be disturbed in the middle of the project, so as to bring some additional amount to taxation. Similarly, the Assessing Officer cannot estimate income on unsold stock. The coordinate bench of the tribunal while considering similar issue in the case of M/s. Omega Shelters P. Ltd. in ITA No.798 and 799/Hyd/2010 dated 18.2. 2011, held in the following manner- "8. We have heard the learned representatives of the parties and perused the record as well as gone thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , such specific inclusion was missing. Hence, in our considered opinion, AS-7 does not apply to the builders and real estate developers. The method followed by the assessee company cannot be called as an unreasonable method and any change in the method would only be tax neutral. Therefore, we find no infirmity in the order of the CIT (A) as the same has been passed by the CIT (A) after analyzing and examining the issue elaborately. Accordingly we confirm the order of the CIT (A) and dismiss the grounds raised for both the years by the revenue in this regard." After going through the aforesaid order of the coordinate Bench, we are of the view that the CIT(A) has committed no mistake in deleting the addition made by the Assessing Officer. Accordingly, we uphold the order of the CIT(A) on this issue and reject the grounds raised by the department in this behalf. 10. Grounds No.9 to 11 relate to disallowance of reimbursed expenditure by the Assessing Officer under S.40(a)(ia) of the Act. 11. Briefly the facts are that during the assessment proceeding, the Assessing Officer noticed that the assessee has utilised the office accommodation and other infrastructure facility provided by i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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