TMI Blog2016 (12) TMI 1538X X X X Extracts X X X X X X X X Extracts X X X X ..... s not yield in computing correct income of the assessee. It is well settled that project completion method is one of recognized method of accounting. After considering the various case laws cited by the assessee based on peculiar facts of the case, we are of the considered view that consistency has to be followed as the Revenue has accepted the ‘project completion method’ in the past . The entire profit from this project is stated to have been offered for taxation and due taxes are stated to have been paid to the Revenue albeit in assessment year 2014-15. In our considered view in order to render substantial justice and fair play in the instant case keeping in view peculiar facts and circumstances of the case, we are inclined to accept the appellate order of the ld. CIT(A) subject to verification by the A.O. that the entire profits earned by the assessee from this project ‘Quantum Tower’ in totality has been offered for taxation and due taxes on this project were duly paid to Revenue as contended by the assessee , albeit in the succeeding years by following ‘project completion method’, (including, inter-alia, profit earned on sales of ₹ 42.10 crores as well on closing sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Quantum Tower , Rambaug, S.V. Road, Malad (W), Mumbai. The construction of the project was commenced in the financial year 2008-09. The assessee is following project completion method of accounting and has claimed to have offered to tax income on completion of the project by following project completion method , while revenue is contending that the assessee has postponed its tax liability by following project completion method and instead the assessee should have followed percentage completion method to offer income for taxation. Thus, the controversy revolved around bringing to tax the income of the project by the builder wherein the assessee having followed project completion method while the Revenue is contended that the assessee should follow percentage completion method for offering to tax income earned on the project carried on by the assessee. The assessee has contended before the A.O. that the assessee is builder , and since inception the assessee is following project completion method which is accepted by the Revenue , as the return of income has been filed for assessment years 2009- 10 2010-11 by the assssee by following project completion method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The ld. CIT(A) accepted the contentions raised by the assessee and held that consistency has to be followed and since the Revenue has accepted the method of accounting followed by the assessee in the earlier years, the Revenue cannot be allowed to change the method of accounting in the impugned assessment year by shifting from the project completion method to percentage completion method for offering income to tax. The learned CIT(A) also accepted the contention of the assessee, that in case of builder project completion method can be followed by the tax-payer, vide appellate order dated 23-07-2014 passed by learned CIT(A). 6. Aggrieved by the appellate order dated 23-07-2014 passed by ld. CIT(A), the Revenue is in appeal before the Tribunal. 5. The ld. D.R. relied on the order of the A.O. and submitted that the assessee is following project completion method under which the income cannot be correctly computed and the assessee should have followed the percentage completion method.The ld DR relied upon the assessment order of the AO. 6. The ld. Counsel for the assessee submitted that the assessee is builder and had consistently following project completion metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that no prejudice has been caused to the Revenue as all due taxes have been paid to Revenue in respect of the said project Quantum Tower , Rambaug, S.V. Road, Malad (W), Mumbai , albeit in the subsequent years when project was completed. The project is stated by the assessee to have been completed in the financial year 2013-14. The assessee has placed on record the copy of provisional Profit Loss account for the financial year 2013-14 (paper book/page 23) which was also submitted before learned CIT(A)(paper book/page 22) , whereby the profit earned by the assessee is reflected at ₹ 3.85 crores on total sales of ₹ 42.10 crores while closing stock is reflected at ₹ 29.5 crores. However, audited profit and loss account as well income tax return for the said financial year 2013-14 are not placed on record before the tribunal to evidence that the entire profits on this project Quantum Tower was offered to tax by the assessee in the return(s) of income filed with the Revenue albeit in subsequent years and due taxes were paid to Revenue on the entire project by following project completion method. The assessee has relied upon following case laws : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion method is one of the recognized methods of accounting. In CIT v. Hyundai Heavy Industries Co. Ltd. [2007] 291 ITR 482 / 161 Taxman 191 (SC) the Supreme Court held as follows:- Lastly, there is a concept in accounts which is called the concept of contract accounts. Under that concept, two methods exist for ascertaining profit for contracts, namely, completed contract method and percentage of completion method . To know the results of his operations, the contractor prepares what is called a contract account which is debited with various costs and which is credited with revenue associated with a particular contract. However, the rules of recognition of cost and revenue depend on the method of accounting. Two methods are prescribed in Accounting Standard No.7. They are completed contract method and percentage of completion method . This view was reiterated by the Supreme Court in CIT v. Bilahari Investment (P.) Ltd. [2008] 299 ITR 1/168 Taxman 95 with the following observations: Recognition/identification of income under the 1961 Act is attainable by several methods of accounting. It may be noted that the same result could be attained by any one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records and considered the rival contentions carefully. The assessee is a builder and real estate developer. The dispute is regarding year of accounting of income. The dispute is not whether the assessee had underestimated the income in a particular year. The assessee has been following project completion method as per which income has to be accounted in the year in which project is complete and the flats are sold. The assessee in the earlier two years followed the same method which has been accepted by the department. Though the earlier returns were accepted summarily under section 143(1), the fact is that these assessments have become final and method followed by the assessee in these years stands accepted by the department. However, in the current year, the department has tried to assess the income on the basis of percentage completion method as per which the income has to be assessed on the basis of percentage of work completed during the year. The case of the department is that the profit is inbuilt into the quantum of work done by the assessee and, therefore, the profit has to be computed annually on the basis of work done in a particular year. The department has placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects undertaken on or after 1-4-2003 and as per the revised standards, revised AS-7 was applicable only to a contractor and in case of real estate developer, revised AS-9 was prescribed as per which the income has to be accounted only on completion of project when the flats are sold, i.e., when legal title passes to the buyer or when seller enters into agreement with the buyer for the sale and gives possession to the buyer under the agreement. In this case, the project was not complete during the year and, therefore, there was no question of passing on of the title of ownership or handing over of the possession. Thus, even in terms of the revised accounting standard which was applicable for most part of the work done by the assessee the income had been correctly declared as per project completion method in the year of completion. Even if one applies the old accounting standards on the ground that the project of the assessee had been undertaken prior to 1-4-2003, the assessee was free to follow either percentage completion method or project completion method. The assessee has followed project completion method which was one of the prescribed methods and the same method has been acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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