9911796707
TMI Blog2017 (9) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... 009 determining total income at Rs. 8,07,46,810 accepting income declared by the assessee. Subsequently, the case was reopened u/s 147 for the reason that income chargeable to tax has been escaped assessment on account of non disclosure of income from sale of flat. Therefore, the AO issued a notice u/s 148 calling for return of income from the assessee. Thereafter the case was converted into scrutiny assessment and notices u/s 143(2) and 142(1) were issued calling for certain specific details. In response to show cause notices, the assessee's authorized representative appeared from time to time and furnished relevant details, as called for. The AO completed assessment u/s 143(3) r.w.s. 147 of the Act on 26-03-2015 determining total income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cantile system of accounting and project completion method; hence, the revenue from the project should have been recognized when the project has been declared as complete. 4. The CIT(A), after considering the relevant submissions of the assessee observed that although the sale agreement was entered into in the next financial year, the challenge of the AO that the project was complete in the impugned financial year was not controverted by the assessee. Once the aspect of completion of project in the impugned financial year coupled with the fact that assessee follows mercantile system of accounting, it is natural and logical conclusion that amount should have been offered to tax in accordance with the accounting standard professed to be foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of hearing, the Ld. AR for the assessee submitted that he did not press grounds 1 & 2 challenging the validity of reopening of assessment. Therefore, the grounds raised by the assessee challenging reopening of assessment have been dismissed, as not pressed. Thus, the effective ground that remains for our consideration is addition made by the AO towards advance received for sale of flat. 6. The Ld.AR for the assessee submitted that the assessee follows mercantile system of accounting and project completion method for revenue recognition as per AS-9 issued by ICAI which is mandatory in nature. The revenue is recognized from sale of goods or rendering services only when the seller has transferred the property in the goods to the buyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrect. 7. On the other hand, the Ld.DR strongly supported the order of the lower authorities. 8. We have heard both the parties and considered the materials available on record. The AO made additions towards advance received for sale of two flats on the ground that the assessee is following mercantile system of accounting and project completion method for recognition of revenue. According to the AO, revenue from the project should be recognized when the project is complete. The AO further observed that when the project has been declared as complete during the year under consideration any advance received against sale of flat construes sale and the same has to be offered for tax irrespective of the fact whether entire amount of sale is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has entered into sale agreement in the financial year relevant to AY 2008-09 for transfer of flats. Though the assessee has received part of sale consideration in the relevant financial year, the agreement to sell has been entered in the subsequent financial year and the final sale deed has been executed in the subsequent financial year. The assessee also recognized the revenue from sale of flats in the assessment year 2008-09. These facts were not disputed by the AO as well as the CIT(A). The AO made additions only on the ground that the assessee is following mercantile system of accounting and project completion method for recognition of revenue and accordingly needs to recognize revenue in respect of advances received for sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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