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TMI Blog2021 (2) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent overruling the objection of the petitioner for reopening the assessment for the aforesaid Assessment Year 2013-14. 4. The reasons furnished by the first respondent for reopening of the assessment for the respective Assessment Years are identical. It has been stated that the petitioner follows a mercantile system of accounting and therefore the income accrues the moment bills are raised by the petitioner. 5. Since the petitioner was reducing a part of the bill amount from its Profit and Loss Account as excess billing, it is submitted that such adjustment on the liability side of the balance sheet will not affect the income already accrued as the accounting entries do not change or alter the income which had accrued to it. 6. Under these circumstances, the petitioner was called upon to show cause why a sum of Rs. 7,74,20,000/- for the Assessment Year 2011-12 and Rs. 58,45,26,000/- for the Assessment Year 2013-14 shown as billing in excess of revenue under the current liabilities to the total income should not be added to the income. 7. It is the case of the petitioner that it was adopting and arriving at the correct income for the purpose of payment of income tax by adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Act, 1961, Accounting Standards was in force from 1996, as per which, if the fundamental accounting assumption relating to Going Concern, Consistency and Accrual are followed in financial statements, specific disclosure in respect of such assumptions are not required. Only when fundamental accounting assumption is not followed, such fact shall be disclosed. 14. He further submitted that as per the above notification, accrual refers to the assumption that revenue and cost are accrued, that is, recognised as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the period to which they relate. 15. He further submitted that as per AS-7 of the Institute of Chartered Accountants of India revised in 2002, if the outcome of the construction contract can be estimated reliably, contract revenue and contract cost associated with construction contract should be recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the reporting date. 16. The learned counsel for the petitioner relied upon the following decisions of the courts:- i. Commissioner of Income-tax, Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f computation of income. He submitted that even in the context of chit fund, the Hon'ble Supreme Court has recognised in Bilahari Investments Private Limited case referred to supra the revenue method of accounting in the case of chit fund business. 20. He submitted that there the Hon'ble Supreme Court has categorically held that recognition/identification of income under the Income Tax Act, 1961 is attainable by several methods of accounting. It could be attained by one or more method. Completed contract method is one of such methods and similarly, percentage of completion method is another method. 21. He therefore prays for quashing of the impugned notices issued under section 148 of the Income Tax Act, 1961 for the respective Assessment Years and the respective communications overruling the objection of the petitioner for reopening of the completed assessment for the contentious Assessment Years. 22. Defending the impugned order, the learned counsel for the respondents submitted that the petitioner has not filed any documents to substantiate the percentage of completion of the work at the time of respective assessments and therefore the respondents were justified in reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged to refund the advance payment received under the ordinary law of contract or special enactments, like the Consumer Protection Act. 31. Though in the context of construction contracts, the Central Government vide S.O.3079 (E) dated 29.9.2016 has officially recognized the Percentage of Completion Method for the Assessment Years 2017-18 onwards, the Supreme Court has given the seal of approval to the said method in Commissioner of Income Tax Vs. Bilahari Investments Private Limited referred to supra. 32. This method was also recognised by the Institute of Chartered Accountants of India in AS-7 which was originally issued in the year 1983 and later revised in the year 2002. As per the aforesaid Standard in para 21 when the outcome of a construction contract can be estimated reliably, contract revenue and contract cost associated with the construction contract should be recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the reporting date. 33. Thus, it cannot be said that the petitioner was not entitled to adopt percentage method of recognition of income for computation of income tax under accrual method of accounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation incorporates the reasons given in the decision of the Hon'ble Supreme Court in Calcutta Discount Co. Ltd. Vs. Income Tax Officer, (1961) 41 ITR 191 (SC). 39. At the same time, the conclusions arrived in the impugned communications dated 26.11.2018 overruling the objections of the petitioner for the reopening of the assessments by the impugned notices are not conclusive. They are only prima facie views of the Assessing Officer. It is for the petitioner to establish that it has correctly followed the accounting method by producing the supporting documents to substantiate the percentage of work that was completed for the purpose of proper determination of taxable turnover for payment of income tax. Mere disclosure in the Profit and Loss Account and Balance Sheet is not sufficient. 40. Therefore, I do not find any justifiable reasons to interfere at this stage of the re-assessment proceedings. Therefore, the first respondent is therefore directed to complete the re-assessment after examining the documents to be produced by the petitioner and pass reassessment orders on merits. 41. The petitioner is therefore directed to file documents to substantiate its cases before t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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