TMI Blog2014 (3) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... as fully completed and occupancy certificate was received - It was only at that time that the proverbial risks and rewards were transferred to the purchaser – thus, PCM followed by the assessee-AOP was in order and the action of the FAA to reject the stand taken by the AO was justified – thus, the order of the FAA upheld - Decided against Revenue. Disallowance of deduction u/s 80IB(10) of the Act - No income has accrued for assessment year 2007-08 based on the project completion method – Held that:- PCM followed by the assessee was the right method of accounting for determining the taxable income of the assessee, that project was completed in AY. 2009-10 – thus, the issue of eligibility of 80IB deduction has been left open by the FAA when he held that the AO would be at liberty to make necessary inquiries - no prejudice has been caused to the interest of the Revenue – thus, the order of the FAA upheld – Decided against revenue. - ITA No. 3408/M/2010, ITA No. 3559/M/2011 - - - Dated:- 12-3-2014 - Sh. Vijay Pal Rao And Rajendra,JJ. For the Appellant : Shri A. C. Tejpal For the Respondent : Shri J. D. Mistry B. N. Rao ORDER Per Rajendra, A. M: Challengi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT v/s British Indian Paint 188 ITR 441 and the accrued income can not wait for taxation 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. The Appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. Assessee-company is engaged in the business of builders Property developers. Details of dates of filing of returns, incomes returned, dates of assessment, assessed incomes, dates of orders of the CIT (A)can be summarised as under :- AY. Dt.of filing of Return Returned Income (Rs.) Date of assessment Assessed Income Dt. of orders of CIT(A) 2007-08 14.11.2007 Nil 18.12.2009 17,68,97,860/- 10.03.2010 2008-09 30.09.2008 (-)33,708/- 14.12.2010 14,72,68,810/- 22.02.2011 ITA No. 3408/M/2010-AY-2007-08 2. First ground of appeal is about deleting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was entitled to 5% share in the total project which had been worked out to 10% of the premises in the B Wing of the project, that AEPPL was entitled to whole of A Wing of the GE, that AEPPL incurred total expenses involved in development of the project except for the costs borne by Trust as above stated, that the project commenced with commence - ment certificate issued on 16. 12. 2004 and same was completed by end March, 2009 in terms of the occupation certificates issued by the authorities. AO was of the opinion that project had substantially complete but assessee had has shown NIL income. According to the AO in F. Y. relevant to A. Y. 2005-06 being starting year of the project, assessee had shown Work-In-Progress of Rs. 52, 00, 000/- whereas, in F. Y. 2005-06 there was Work-In-Progress of Rs. 14. 84 crores but assessee had again shown NIL income, that in the F. Y. 2006-07 relevant to A. Y. 2007-08 substantial part of the project appear was complete with substantial advances received from the customers against the booking of flats. According to the AO during that year assessee had completed substantial part of the project and has shown Work- In-Progress of Rs. 25. S9crores and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its profits and unless the AO disputed the method adopted by the assessee or the accounting was so defective that true profits could not be deduced for assessment, that the AO had no authority to change the method adopted by the assessee, that the order of the AO was beset with other mistakes as well, that the AO was not correct in taking the cumulative WIP as at 31. 3. 2007 and estimating income for assessment, that the AO, while estimating profits on WIP method also, had not followed her own concept that each assessment year was independent unit for assessment, that following her own concept, she could consider the WIP for the year of Rs. 10, 74, 68, 492 only and nothing beyond, that the AO erred in taking the ratio of profits on completion of the project to apply to the WIP, that the sale price in the subject previous year was lesser than the price in the later years when the project was nearing completion and therefore, the profit ratio applied was on higher side. 4. Before him a cash flow statement for all the years, in which the project was developed, was filed and it was submitted that the cash inflow on account of advances against sales were always less than the investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial ground that assessee has started project in FY. 2004- 05and in FY. 2004-05 and F. Y 2006-07, no income was offered under the disguise of mercantile system of accounting, that it was not the case of mercantile system of accounting but it was also noose of method of accounting profits on project completion basis duly recognised by ACAI and the Courts and Tribunals, that the AO had accepted the Returns of income for AY. s 2005-06, 2006-07and had passed orders accepting the total income as shown by the assessee, that the project was completed at the end of the Financial year ended 31. 3. 2009 relevant to the AY. 2009 -10, that it was not the case of the AO that the project completion method followed by the assessee was not recognised one, that it was also not her case that there were defects in accounting method followed by the assessee that deserved rejection of accounts or the method followed by the assessee, that there was no justification for adopting a different method, that it was not her case that true profits could not be deduced from the PCM followed by the assessee, that her only contention was that if the accounting method followed by the assessee was approved it had th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the project was substantially complete in the AY. 2007- 08, FAA held that the Architect's certificate, dated 14. 11. 2009, filed in response to directions of the AO, proved that stand taken by the AO was not factually correct, that even at the time of survey conducted in March, 2008 the assessee had completed 70% of the project, that at that point of time slab work was complete but construction of podium and amenity were pending, that interior furnishing of flats were in progress, that common space work and installation of lifts were in progress, that the AO did not consider the statements made at the time of survey nor did he took cognisance of the architect's certificate, that AO was not justified in holding that substantial work was were complete in the AY. 2007-08 and therefore profits had become taxable in that year. Finally, he held that the project had been completed in the assessment year 2009-10 upon the MCGM issuing the occupation certificates-the last of which was issued on 30. 03. 2009. As a result, he directed the AO to delete addition of Rs. 17, 68, 97, 360/- 6. Before us, Departmental Representative(DR)supported the order of the AO. Authorised Repr- sentat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould normally be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. The onus is upon the AO to show that either the books of account maintained by the assessee were incorrect or incomplete or that the method of accounting adopted by him was such that true profits of the assessee cannot be deduced therefrom. (325ITR13, Paradise Holidays-Del. ) v. If a particular accounting system has been followed and accepted and there is no acceptable reason to differ with it, the doctrine of consistency would come into play. (339ITR382-Jagatjit Industries Ltd. , Del. ) In the matter before us, assessee was following a particular method of accounting regularly in the earlier as well as subsequent assessment years. As the Assessee is a builder and developer and in such a case PCM is an accepted method of accounting. AS-7 is applicable only in case of contractors, engaged in the civil construction business, it does not apply to builder developer. It is established principle of taxation that PCM and percentage completion method are recognised methods to assess correct income of an assessee under the Act. However, the choice of method of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time and received the purchase consideration from time to time from the purchasers and handed over the possession of the building when the building was fully completed and occupancy certificate was received. It was only at that time that the proverbial risks and rewards were transferred to the purchaser. Therefore, in our opinion PCM followed by the assessee-AOP was in order and the action of the FAA to reject the stand taken by the AO was justified. Only objection of the AO, as stated by the FAA was that the assessee has deferred the taxes to subsequent years. But, as held the Hon'ble Gauhati High Court it cannot be basis for rejecting the method of accounting regularly followed by the assessee. Therefore, confirming the order of the FAA we decide ground no. 1 against the AO. 8. Second ground of appeal is against disallowance of the claim of deduction u/s 801B(l0) of the Act. While the project of development of GE was going on, an action u/s. 133A of the Act was conducted in the registered office as well as site office on 11. 3. 2008to verify the genuineness of the claim u/s 80IB(10). Statement of Mr Vaid, representing one of the members of the AOP was recorded in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same family, that the assessee had sold more than one flat as such to the same person or to members of the same family, that such sales were not of all flats but only few flats were of such type, that barring few instances of combining of flats, all other flats are independent units having built-up area of less than 1000 sq. ft. , that while appreciating the background of the case AO also admitted that the sanctioned plans did not envisage duplex flats, that each one BHK flat had been sold as such one BHK flat, that each agreement hds been registered separately, that merely because the purchasers havd combined more than one flat into one or intended to be so even if they were not combined at the time of taking occupation or the assessee made such provision at the-instance of the purchasers, it could not be said in the context that the assessee violated the norms under the provisions of section 80IB(10), that the deduction claimed under section 801B(10) could not be denied on the grounds taken by the AO. Analysing the provisions of the Act and the Development Control Regulations (DCR), he held that the areas of a unit at the floor level used in the Act and the exception of area ..... X X X X Extracts X X X X X X X X Extracts X X X X
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