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2015 (10) TMI 2059 - PUNJAB & HARYANA HIGH COURT

2015 (10) TMI 2059 - PUNJAB & HARYANA HIGH COURT - [2016] 384 ITR 451 - Method of accounting - Whether the ITAT has erred in law in deleting addition of ₹ 12,34,000/- and directing to follow recognized method of accounting to compute the profits in the Real Estate business when the guidance notes of 2006 of ICAI require accounting of income on percentage completion method? - Held that:- The Delhi High Court in Commissioner of Income Tax v. Manish Build Well (P) Ltd. (2011 (11) TMI 35 - DEL .....

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tion under the Act for doing so, it cannot be held that the approach of the CIT(A) and the Tribunal was erroneous or illegal in any manner so as to call for interference by this Court. - Decided in favour of assessee. - ITA No. 19, 206, 218, 219, 220 and 228 of 2015 (O&M) - Dated:- 13-8-2015 - Ajay Kumar Mittal And Ramendra Jain, JJ. For the Appellant : Mr. Rajesh Sethi, Senior Standing Counsel with Mr. Arun Biriwal, Adv. and Ms. Pridhi Jaswinder Sandhu, Adv For the Respondent : None JUDGMENT Aj .....

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014 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh (hereinafter referred to as "the Tribunal") in ITA No. 561/Chd/2013 for the assessment year 2009- 10, claiming the following substantial questions of law:- a) Whether the ITAT has erred in law in deleting addition of ₹ 12,34,000/- and directing to follow recognized method of accounting to compute the profits in the Real Estate business when the guidance notes of 2006 of ICAI r .....

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thod by the assessee the percentage completion method cannot be applied when the guidance note of ICAI requires that the accounts of business of Real Estate are to be maintained by percentage completion method? 3. Briefly put, the facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee filed its return of income under Section 153A of the Act on 28.10.2007 declaring a total income at ₹ 38,343/-. A search operation under Section 132(1) of the A .....

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e assessment year 2010-11 was allowed. Being dissatisfied, the revenue filed appeals before the Tribunal. The Tribunal vide order dated 6.6.2014 (Annexure A-3) dismissed the appeals of the revenue. Hence, the present appeals by the revenue. 4. Learned counsel for the revenue submitted that each year is a separate year and the assessee is liable to pay tax on the percentage completion method and not on the basis of project completion method. According to the learned counsel, it would not be prope .....

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e on the completion of the flat when full payment had been made to it by the person concerned and possession was delivered to him. It was pointed out that neither Accounting standard 9 (AS 9) or Accounting Standard 7 (AS 7) issued by the Institute of Chartered Accountants of India has been recognized by the Act and in such circumstances, there was no guidance or strict procedure for adopting a particular accounting standard under the Act and it depends upon facts and circumstances of each case. .....

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of account. In other words the books have not been rejected, nor any defects pointed out. In the case of CIT vs. Bilahari Investment (P) Ltd., (2008) 299 ITR 1 SC , the Apex Court held that the completion contract method adopted by the assessee for chit discount consistently over the years, is not required to be substituted by percentage completion method. In CIT (v) Manish Buildwell (P) Ltd. (2011) 245 CTR 397 (Del), it was enunciated that project completion method is one of the recognized meth .....

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sessee has option to adopt any one of them. The relevant findings recorded by the Tribunal read thus:- "47. We have heard the rival contentions and perused the record. The issue arising in the present appeal before us is in relation to the method to be applied for recognizing the revenue generated by the assessee in the course of carrying on the business of real estate developers. The case of the assessee is that it is following one of the accepted accounting standards approved by ICAI for .....

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epted standards of accounting and either of the methods can be applied by the assessee. In the facts of the present case before us, the assessee had chosen to compute its income on the basis of project completion method i.e. recognizing the income on the completion of the project and not from year to year whereas the case of the revenue was that it should account for the income as it is generated in the hands of the assessee i.e. from year to year on the basis of the work completed being relatab .....

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d of accounting which the Department has earlier accepted. It is only in those cases where the department records a finding that the method adopted by the assessee results in distortion of profits, the Department can insist on substitution of the existing method." 50. Applying the above said principles to the facts of the present case, we find that the assessee before us has been following the systematic method of accounting from year to year which has been accepted by the department and no .....

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be assessed annually under the IT Act. AS-7 issued by the ICAI also recognizes the position that in the case of construction contracts, the assessee can follow either the project completion method or the percentage completion method." 52. Where the assessee was following a particular method of accounting consistently, which has been accepted by the department from year to year and in the absence of any defect being pointed out by the Assessing Officer that by following such method, income .....

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