TMI Blog2021 (10) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... ror in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same. The grounds of the appeal of the revenue are accordingly dismissed. - ITA No. 202/Del/2018 - - - Dated:- 21-10-2021 - Kul Bharat, Member (J) And O.P. Kant, Member (A) For the Appellant : Paramita M. Biswas, CIT, DR For the Respondents : Gautam Jain, Advocate and Lalit Mohan, CA ORDER Per O. P. Kant, AM This appeal by the Revenue is directed against order dated 21/09/2017 passed by the Ld. Commissioner of Income-tax (Appeals)-33, New Delhi [in short the Ld. CIT(A)] for assessment year 2012-13, raising following grounds: 1. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of ₹ 10,00,65,850/- made by the Assessing Officer [the AO) following the Percentage of Completion Method (POCM) by ignoring Accounting Standard-7 (AS-7) read percentage for recognition of revenue? 2. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in allowing relief to the assessee despite the fact that principle of res-judicata is not applicable to Income Tax proceedings as each a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profit and loss account at the time of completion of the project and giving hand over to its customers. The entire revenue from sale of such units has also been recognised at the time of sale and handing over of the unit to customers. According to the Assessing Officer, in view of guidance note issued by the Institute of chartered accountant of India (ICAI), revenue from booking of units by the customers should be recognised following percentage of completion method (POCM) applicable to construction contract. The learned the Assessing Officer following the POCM method of revenue recognition, computed addition of ₹ 10,00,65,850/- as under: Particulars Amount (in Rs.) Amount (in Rs.) ESTIMATED PROJECT COST 77,17,99,380* Total Sale consideration of Project 92,61,59,256 Estimated gross profit on completion @20% 15,43,59,876 % of work completed 65%* Cost incurred up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14 97.54 Nil Completed method contract 143 (1) 2014-15 111.77 Nil Completed method contract 143 (1) 2015-16 33.96 96.62 Completed method contract 7. The assessee also pointed out that it was not engaged in construction, instead engaged in development of residential units and therefore Accounting Standard AS-7 is not applicable in the case of the assessee. In view of the submission of the assessee, the Ld. CIT(A) accepted 'completed contract method' of the assessee observing as under:' 4.7 I have perused the order of assessment and the submissions made by the appellant alongwith the material placed on record. The appellant company is engaged in the business of building and developing housing commercial projects. In the assessment order, the AO has held that the appellant should have recognized rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also in the subsequent years and the AO has not given any justification for deviating from the stand consistently taken by the appellant and accepted by the Revenue. On the contrary, the Assessing Officer's finding that principle of res judicata has no application on income tax proceedings is contrary to settled position of law as enunciated by the Apex Court in the case of Excel Industries (supra). The appellant stated that the dispute essentially related to a timing difference and income from these properties has already been shown in A.Y. 2015-16 when the sale deeds were executed and possession handed over. In the assessment order, the AO has not brought any material on record to controvert the contentions of the appellant. Considering the facts and judicial decisions on this subject, the addition made by the AO is not sustainable in law and is deleted. 9. Before us, the Ld. DR relied on the order of the Assessing Officer, whereas the Ld. Counsel of the assessee relied on the order of the Ld. CIT(A). 10. We have heard rival submission of the parties and perused the relevant material on record. The issue in dispute in the instant case is regarding method of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeded to compute the income of the appellant by applying Accounting Standard-7 which was originally issued by Institute of Chartered Accountant of India in the year 1983. That section 145(2) of the Act provides that the Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. It is therefore submitted that unless an accounting standard is notified by the Central Government, same is not binding on an assessee, and hence same cannot be ground for rejecting the method of accounting on the ground that accounting standards as notified under sub-section (2), have not been regularly followed by the assessee. It is submitted with respect that under section 145(2) of the Act, 1961, Central Government has notified two accounting standards i.e. AS-1 (relating to disclosure of accounting policies) and AS-2 (relating to disclosure of prior period and extraordinary items and changes in accounting policies) vide notification No. SO 69(E), dated 25-1-1996. It is submitted that apart from the aforesaid accounting standards, no other accounting standard has been notified by the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of area sold and computes its income in accordance with the provisions of section 145(1) of the Act. It is submitted that in the case of the appellant since it is selling the flats developed/constructed by it as such, in the case of the appellant revenue can be recognized only when the registered sale deed is executed as in the case of sale of flats all significant risks and rewards of ownership are transferred to the buyer and the appellant retains no effective control on the flats transferred to a degree usually associated with ownership, only when the sale deed is executed, as such, method of recognizing revenue by the appellant is perfectly valid and same does not require any interference, and hence approach of the learned AO in applying AS-7 is liable to be rejected. 11. In view of the above, it is evident that accounting standard AS-7 relied upon by the Assessing Officer is applicable strictly in the case of construction contracts only. 12. Further, the Ld. CIT(A) has followed binding precedent of the jurisdictional High Court in the case of Paras buildtech India private limited (supra); Sabh infrastructure Ltd. (supra) and Manish Buildwell P. Ltd. (supra). F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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