TMI Blog2016 (9) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... method’ adopted by the assessee. There is also no repudiation to the assertions of the assessee before us that the decision of CIT(A) for Assessment Year 2007-08, rendered under similar situation, has not been appealed against by the Revenue before the Tribunal. For all the above reasons, in our considered opinion, CIT(A) made no mistake in holding that in view of the uncertainties involved, the action of the Assessing Officer in deducing the income of the assessee in the current year by making an ad-hoc estimation of profits is not justified. Apart therefrom, in our view, the Assessing Officer has not been able to demonstrate any justifiable reason for departing from his earlier accepted position of Assessment Year 2005-06 that the income is to be computed on ‘project completion method’. For all the above reasons, the order of CIT(A) deserves to be affirmed. - Decided against revenue - ITA NO. 982/MUM/2012 - - - Dated:- 19-8-2016 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Assessee : Aasifa Khan For The Revenue : Shri A. Ramachandran ORDER PER G.S. PANNU, AM : The captioned appeal by the Revenue is directed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion method adopted by the assessee for deducing the income from the construction of the project in question. Instead, the Assessing Officer estimated the profits for the year by applying a rate of 8% on the advances of ₹ 4,71,33,974/- received by the assessee upto the year under consideration, thereby resulting in an addition of ₹ 37,70,718/- to the returned income. Such an action of the Assessing Officer was carried in appeal before the CIT(A), raising contentions on facts and in law. 5. In appeal before the CIT(A), assessee pointed out that in the earlier two Assessment Years of 2004-05 and 2005-06 the project completion method adopted by the assessee was accepted by the Department and it was also pointed out that so far as assessment for Assessment Year 2005-06 is concerned, same was also a scrutiny assessment made u/s 143(3) of the Act. Assessee also explained the factual matrix that so far as construction of A wing was concerned, it was commenced in 2002 and the construction of the other saleable wing was commenced only in Assessment Year 2004-05. It was also pointed out that the aggregate of loans and advances were utilized in construction of A wing me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration the project was completed only about 50%. The total sale consideration upto AY 2006-07 was only ₹ 471,33,924/- as against the cumulative sale figure of ₹ 7,68,91,449/- in AY 2010-11. Therefore it cannot be said that there was substantial completion of the project. Profit can be estimated only when the project is substantially completed usually at about 80%. There is no evidence that there was substantial completion of the project. ii) Appellant has been consistently following the project completion method and this has been accepted by the Assessing Officer in earlier two years. Therefore there cannot be a sudden departure without assigning reason. iii) Admittedly, there was lot of litigations by partners against the project. Even till FY 2011-12 the cases filed by the partners were in Supreme Court, National Consumer Redressal Commission. The final verdict of the Supreme Court came in FY 2011-12. Therefore the profit from the project cannot be estimated in the financial year 2005-06. The final verdict of Supreme Court has arrived in June 2011. iv) Because of constant litigations between partners Bombay High Court had issued injunction stopping t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there was no justification for interfering with the ultimate conclusion of the CIT(A). 9. We have carefully considered the rival submissions. In the present case, it is quite clear that the income of ₹ 37,70,718/- has been assessed to tax purely on an ad-hoc basis. Even if the Assessing Officer was to give a go-by to the project completion method adopted by the assessee and deduce the income from the impugned project, it was imperative for the Assessing Officer to adopt a rationale basis. The reliance placed by the Assessing Officer on the decision of Tribunal in the case of Champion Construction Co. (supra) to justify application of percentage rate to deduce profit is also misplaced on facts. In the case of Champion Construction Co. (supra) it was found on the basis of fact-situation that the methodology adopted by the assessee was resulting in postponement of tax liability inasmuch as the project was already substantially completed and income was not being offered for taxation. In the present case, assessee had demonstrated that there was no substantial completion of project in the instant assessment year, and rather the fact-situation clearly showed that on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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