TMI Blog2022 (11) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... ound during the course of search. In our opinion, learned Assessing Officer did not assume proper jurisdiction to issue notice under section 153A of the Act and consequently the notice issued under section 153A of the Act and the assessment order passed under section 153A r.w.s 143(3) of the Act for the assessment year 2016-17 is bad in law. Accordingly, the assessment for the AY 2016-17 is quashed. Period of limitation to issue notice u/s 153C - AY 2017-18 - The time limit to issue notice was upto 30.9.2018. The search took place on 10.1.2018. The assessment is pending during this time. As such, in case of pending assessments only one assessment shall be made separately for each assessment year on the basis of the income unearthed during the search or any other material existing or brought on the record of the AO. Even in the absence of any incriminating material abated assessment or reassessment could be done. The returns filed u/s 139 of the Act gets replaced by return filed u/s 153A(1) of the Act. Pending proceedings in appeal, revision/application shall not abate subsequent to initiation of section 153A of the Act. Further, recording of satisfaction under section 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has received 100% money of the land and the department itself even on the percentage completion method is only considering the income progressively. Thus, the question of applying the project completion method does not apply on these type of transactions. The lower authorities have committed an error in adopting the percentage completion method of income recognition in computing the income from business. Adopting percentage completion method of recognizing revenue has resulted in double taxation which is impermissible in law and also brought on record by assessee that the same income has been offered for taxation in subsequent assessment years and paid tax thereon - the income offered in the subsequent years is income of the impugned assessment year will result in double taxation which is impermissible in law. Addition being expenditure of personal nature - HELD THAT:- As assessee has not placed any evidence in support of cheque was cancelled and no payment has been made. Hence, we dismiss this ground. - ITA Nos.107 to 109/Bang/2022 - - - Dated:- 14-11-2022 - Shri Chandra Poojari, Accountant Member And Shri George George K., Judicial Member For the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax (Appeals) failed to follow the binding precedents of the jurisdictional High Courts in violation of the doctrine of stare decisis and erroneously held that the Appellant ought to have followed the percentage completion method of recognizing revenue on the facts and circumstances of the case. g) The learned Commissioner of Income Tax (Appeals) is not justified in holding the Appellant ought to have followed the percentage completion method of recognition of revenue when the Expert Advisory Committee of the Institute of Chartered Accountants of India has categorically opined that the provisions of Accounting Standard - 7 are not applicable to real estate developers on the facts and circumstances of the case. h) Without prejudice, the learned Commissioner of Income Tax (Appeals) failed to appreciate that no risk and reward in the land has been transferred to the prospective purchasers of units in the project in the financial year relevant to the assessment year in question and consequently no addition can be made on the facts and circumstances of the case. i) The learned Commissioner of Income Tax (Appeals) is not justified in holding that the Appellant ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n double taxation which is impermissible in law. a) The learned Commissioner of Income Tax (Appeals) failed to appreciate that bringing to tax the income by adopting the percentage completion method has resulted in double taxation which is impermissible in law. b) Without prejudice, the learned Commissioner of Income Tax (Appeals) ought to have given credit for the taxes paid on the same income in the subsequent years on the facts and circumstances of the case. 5) Grounds on the Commissioner of Income Tax (Appeals) is not justified in placing reliance on the statement recorded when the same has been retracted. a) The learned Commissioner of Income Tax (Appeals) erred in holding that reliance placed by the learned Assessing Officer on the statement of the Managing Director is validly made when the statement of admission was retracted by way of an affidavit which was submitted on the learned Assessing Officer vide letter dated 30.05.2019 on the facts and circumstances of the case. b) The learned Commissioner of Income Tax (Appeals) failed to appreciation that it is a settled position of law that consent does not confer jurisdiction and consequently erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Assessing Officer is not justified in assuming jurisdiction under section 153A of the Act in the absence of any incriminating material found during the course of search on the facts and circumstances of the case. e) The learned Assessing Officer is not justified in issuing notice under section 153A of the Act and completing the assessment vide order under section 143(3) r.w.s 153A of the Act when no incriminating material was found during the course of search. f) The learned Assessing Officer is not justified in issuing a notice under section 153A of the Act without recording satisfaction as to inference of liability based on search material unearthed during the course of search on the facts and circumstances of the case. g) The learned Assessing Officer is not justified in making addition based on the joint development agreement which is not an incriminating material as the same was already available with the department during the course of earlier years assessment proceedings and during the course of proceedings before the Deputy Director of Income Tax (Investigation) on the facts and circumstances of the case. h) The learned Assessing Officer is not just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 153A of the Act on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajit Jain, reported in 260 ITR 80. 3. The notice issued under section 153A of the Act is bad in law in as much as it does not contain whether the learned Assessing Officer proposes to assess or reassess the income of the appellant and consequently the notice issued under section 153A of the Act is inval id and the entire assessment proceedings is bad in law and void ab initio on the facts and circumstances of the case. 4. The appellant craves leave of this Hon'ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal as may be 'necessary at the time of hearing. 5. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity. 2.1 We have heard the rival submissions and perused the materials available on record. With regard to admission of additional grounds, in our opinion, all the facts are already on record and there is no necessity of investigation of any fresh fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 The AO without appreciating the submissions of the assessee concluded the assessment vide orders dated 31.12.2019 passed under section 153A r.w.s 143(3) of the Act for the assessment year 2016-17 and 2017-18 and under section 143(3) r.w.s 154 of the Act for the assessment year 2018-19. The income of the assessee was assessed as under - Particulars AY 2016-17 AY 2017-18 AY 2018-19 Returned income Nil (55,90,47,243) (12,59,36,710) Add: Addition made under the head income from business by adopting percentage completion method 39,83,94,525 201,74,10,242 108,59,10,257 Add: Expenditure of personal nature - 2,01,556 Assessed income 39,83,94,525 145,85,64,555 95,99,73,547 3.7 The assessee being aggrieved by the assessment orders filed appear before the Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uble taxation which is impermissible in law. f) Reliance placed on the statement of the Managing Director when the statement recorded has been retracted by way of an affidavit is bad in law. g) The appellate order passed under section 250 of the Act is without following the mandatory statutory provisions of section 250(1) and 250(2)(a) of the Act in as much as without granting an opportunity of personal hearing to the Assessee is in violation of the principles of natural justice and consequently the appellate order passed under section 250 of the Act is bad in law and required to be quashed on the facts and circumstances of the case. h) The addition of Rs. 2,01,556/- made in the assessment year 2018-19 being the alleged personal expenditure is unsustainable on the facts and circumstances of the case. 3.12. The Ld. A.R. submitted that the assumption of jurisdiction under section 153A of the Act is bad in law in the absence of any incriminating material unearthed during the course of search and consequently the order passed under section 143(3) r.w.s. 153A of the Act is bad in law. a) The assessee filed original return of income for the assessment year 2016-17 on 13.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search indicates that - it is not incriminating material as it is merely a change of perception and consequently outside the scope of section 153A of the Act. g) The revenue recognition pol icy being followed by the assessee with respect to the Prestige Lakeside Habitat Project was further clarified by the Assessee during the course of assessment proceedings for the assessment year 2014-15 and 2015-16 and during the course of proceedings before the Deputy Director of Income Tax (Investigation). The details of the same are as under: 3.13 During the course of assessment proceedings for the assessment year 2014-15, the Assessee vide letter dated 02.12.2016 submitted before the learned Assessing Officer that it would be declaring revenues from the Prestige Lakeside Habitat project relating to its share arising from transfer of right, title and interest in the land to the ultimate purchasers when the risk rewards of ownership of land are transferred to them. i) The AO passed assessment order under section 143(3) of the Act dated 14.12.2016 without making any addition on this account. ii) During the course of assessment proceedings for the assessment year 2015-16, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch under the provisions of section 132 of the Act on the appellant and further whether the mandatory requirements for assuming jurisdiction under section 153A of the Act have been complied with on the facts and circumstances of the case. a) The Ld. A.R. submitted that as could be seen from the assessment order no additions have been made on account of discovering any incriminating material found during the course of search and the very fact that no unaccounted money or investments were found during the course of search and no additions have been made based on the search materials the assessee has an apprehension and strong belief that the mandatory requirements for assuming jurisdiction under section 153A of the Act have not been complied with and further the reasons for invoking the provisions of section 153A of the Act and issuance of a notice under section 153A of the Act have not been recorded by the learned assessing officer and consequently the entire assessment is unstainable in law. b) The learned assessing officer has to demonstrate that the search made on the assessee and further proceedings initiated by the learned assessing officer was a valid one and condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , no incriminating documents belonging to the impugned assessment year were found during the search proceedings and consequently, no additions could have been made based on the alleged incriminating documents belonging to the assessee which is demonstrated by the fact that additions made in the impugned assessment orders was not based on any incriminating documents. In the absence of any incriminating materials, the assumption of jurisdiction under section 153A of the Act is patently wrong and opposed to all known canons of law. h) The reason to believe is sine qua non for conducting search and valid search only can lead to assessment under section 153A of the Act. Reliance is placed on the of the decision of Hon'ble Jurisdictional Karnataka High Court in the case of CIT Vs. IBC Knowledge Park (P) Ltd. (385 ITR 346)(Karn.). i) Reliance is also placed on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla, reported in 380 ITR 573 wherein held that unless incriminating material leading to an inference of undisclosed income is found, invocation of provisions of section 153A of the Act is not possible. j) The ld. AR further contended that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings valid and to assume jurisdiction to make an assessment under section 153 A of the Act. It was submitted that a valid search is a sine qua non for making a valid assessment under section 143 (3) r.w.s. 153 A of the Act on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajit Jain, reported in (260 ITR 80) (SC). n) The very fact that no incriminating material has been found or even referred to or whispered in the assessment order and the only issue was the application of either percentage completion method or project completed which information was available with the department on several occasions before the search is a very clear categorical, positive inference can be made that the search was invalid and there was no material to conclude that there was reason to believe to conduct a search. In the present facts of the case, the conduct of the department in searching for a mere change in method of computing when all information are available cannot constitute reason to believe for conduct of search. Thus, the search should held to be invalid in law. o) Wherefore, the ld AR pleaded that the Tribunal may call for records and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to suspect as the case may be, shall not be disclosed to any person or any Authority or Appellate Tribunal as recorded by income Tax Authority u/s.132 or section 132A. We, therefore, cannot go into that question at all. 6.2 The Hon'ble Jurisdictional High Court in the case of Prathibha Jewellery House Vs. CIT (2017) 88 taxmann.com 94 (Karnataka) dismissed the writ petitions and held that: 10. Having heard the learned counsels for the parties, this Court is satisfied that the present writ Date of Order 07.11.2017 WP. Nos 24646-24651/2015 Prathiba Jewellery House Vs. The Commissioner of Income Tax (Appeals) Ors. Petitions de4serve to be dismissed for the following reasons:- (i) That the decision of this Court in the case of C. Ramaiah Reddy, which allowed the Appellate Authority to go into the question of validity of Search is a subject-matter of pending appeal before the Hon ble Supreme Court and therefore, not only the Authorities of the Department, but even this Court should await the decision of Hon ble Supreme Court on the said issue and cannot direct the Appellate Authorities like (CTC Appeal) below by way of a writ of mandamus to go into the question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not indicate whether to assess/reassess which is mandatory as per provisions of section 153A of the Act and the said notice is incomplete and not in accordance with the provisions of the Act and consequently the notice issued under section 153A of the Act is bad in law. It is not clear from the notice that the Assessing officer proposes to assess or reassess. It is not put to notice of the Assessee and consequently the principle of natural justice is offended and notice issued is bad in law. c) The ld. AR placed reliance on the parity of reasoning of the following decisions - i) Standard Chartered Finance Limited Vs. CIT, 381 ITR 453 (SC) ii) CIT Vs. Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 (Kar) iii) Mohd Farhan A. Shaikh v. DCIT (2021) 125 taxmann.com 253 (Bombay) iv) CIT Vs. B.N.Keshav (ITA No.21/2003 dated: 3rd April, 2008) v) CIT Vs. Kurban Ibrahimji Mithiborwala (1971) 82 ITR 821 (SC) d) The ld. AR submitted that once the notice is bad in law and all the proceedings consequent to the same are also not sustainable in law and the assessment framed under section 153A r.w.s 143(3) of the Act is unsustainable in law. 8. Reliance placed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2nd Additional ground:- 10. We have heard the rival submissions and perused the materials available on record. In this case as rightly pointed out by the Ld. D.R., there was search action in the case of assessee u/s 132 of the Act at assessee s office situated at 2/55, Veerannapalya, Opp. To Lumbini Gardens, Nagavara, Bengaluru 560 045 on 10.1.2018. The search was in connection with the search in the case of MRG Hospitality Group. There was a sized material in the form of loose sheet containing amount received by present assessee from M/s. Prestige Habitat Ventures till Nov 17 and the seized material was marked as A/TBIPL/CO/08. This seized material was confronted to Shri Prakash Shetty, Managing Director of M/s. Trishul Buildtech Infrastructures Pvt. Ltd. and he is not able to give satisfactory answer regarding accounting of the amount received from Prestige Habitat Ventures in his books of accounts as per seized material. An assessment or reassessment under section 153A arises only when a search has been initiated and conducted and there were seized material found during the course of search action. Therefore, such an assessment has a vital link with the initiation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of search action. We have gone through the seized material marked A/TBIPL/CO/08. The ld. AR alleged that the assessment framed is not based on the said seized material and no addition made on the basis of seized material showing the amount received by assessee from M/s. Prestige Habitat Ventures till November, 2017. The amount shown in the seized material has been duly recorded in books of accounts and disclosed to the department before the search action took place on 10.11.2018. There was no whisper in the assessment order with regard to any additions made on the basis of the said seized material. The only issue considered by AO while framing assessment was the application of percentage completion method instead of project completion method applied by the assessee. These informations were already on record with the department before search action and the seized material found during the course of search is not the basis to draw such inference that by following contract completion method, the assessee has undisclosed any income of the assessee. More so, the assessee has offered the income from the projects with Prestige Habitat Ventures with regard to sharing of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided also that Provided also that . 10. In Canara Housing Development Company, supra, the coordinate Bench of this Court while considering proceedings under Section 263 of the Act vis- -vis proceedings under Section 153A of the Act, has observed thus: 10. Section 153A of the Act starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the total income of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the assessing officer to upset or disturb a concluded assessment. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in the case of the searched person, the same reason would hold good as in the case of any other person. It has been held that detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded but at the same time, search can be at three stages: (i) when reassessment is reinitiated; (ii) at the stage during the course of reassessment; (iii) where reassessment is altered by a different assessment in respect of the searched person or in respect of a third party. 13. In Principal Commissioner of Income Tax and Another V/s. BMR Energy Ltd. (ITA No.358/2018 and connected cases DD.08.01.2019), a coordinate bench of this Court has held that the judgment reported in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under Section 153A of the Act is linked with search and requisition under Sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, Section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under Section 132 or requisition under section 132A, as the case may be, shall abate. Sub-Section (2) of Section 153A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 132A or requisition under Section 132A made after 31.05.2003. CBDT explained these provisions through circular dated 5.9.2003, which is reported in (2003) 263 ITR (St) 62. The said circular is as under: . 10. Under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The introduction of Section 153A of the Act provides a departure from this proceeding. Under Section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the total income of the assessment years in question in separate assessment orders. Consequently, there would be only one assessment order in respect of six assessment years in which total disclosed or undisclosed income would be brought to tax. Consequently, even though an assessment order has been passed under Section 143(1) (a) or under Section 143(3) of the Act, the Assessing Officer would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation. The fetter imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus: 26. In the High Court the question was whether the CIT could invoke the power under Section 263 of the Act once the proceedings under Section 153A was initiated. The High Court in Canara Housing (supra) answered the question in the negative. It referred to the decision of this Court in CIT v. Anil Kumar Bhatia (supra) and came to the conclusion that once proceedings are initiated under Section 153A of the Act the legal effect was that even where an assessment order is passed, it would stand reopened. In the eye of law there was no order of assessment. It meant that the AO shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the total income of each year and then pass the assessment order. 27. It is important to note that Canara Housing was also a case where some material was unearthed during the search. Further, the High Court was clear that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of any issue can be made to the assessment Section 153A and 153C of the Act. The legal position has been summarized in Kabul Chawla supra as under: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the total income of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-122000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing independent assessment order under Section 153A read with Section 143(3) of the Act cannot disturb the assessment/reassessment, which has attained finality unless the materials gathered in the course of the proceedings under Section 153A of the Act establish that the reliefs granted in the final assessment/reassessment were contrary to the facts coming during the course of Section 153A proceedings. 26. In the light of these judgments, we have analyzed Section 153A of the Act vis - vis the material on record. Strong reliance was placed by the Revenue on the Canara Housing Development Company supra, in support of the contention that search under Section 132 of the Act is sine qua non for initiation of proceedings under Section 153A of the Act but it is not dependent on any undisclosed income being unearthed during search. There is no cavil on this proposition that search under Section 132 or requisition under 132A is a condition precedent for invoking Section 153A of the Act, the assessing officer can assess or re-assess the total income with respect to six assessment years separately immediately preceding the assessment year relevant to the previous years in which the sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account documents seized or requisitioned belong or belongs to a person other than the person referred to in Section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of Section 153A. 10.2 . Thus, the scope of provisions of section 153A of the Act could be summarized as follows: Scenario Scope of Section 153A 1. No return of income is filed by the assessee (whether or not time limit to file return of income has expired. Since no return has been filed, the entire income shall be regarded as undisclosed income. Consequently, AO would have the authority/jurisdiction to assess the entire income, similar to jurisdiction in regular assessment u/s 143(3). No requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where: (a) Assessment originally completed u/s 143(3) OR (b) No assessment earlier completed u/s 143(3) Pending assessment/reassessment proceedings u/s 147 would abate and would converge/merge in proceedings u/s 153A. Accordingly, the powers of the AO, in both the cases, shall extent to: (a) Assess income that would validly be assessed in the pending proceedings u/s 147, and 10.3 In the light of above, we will examine the facts of present case for AY 2016-17: 10.3.1 In this case, the assessee filed return for AY 2016- 17 u/s 139(1) of the Act on 13.10.2016 declaring Nil income and processed u/s 143(1) of the Act on 24.8.2017. The search took place on 10.1.2018. The time limit to issue notice u/s 143(2) of the Act was on or before the expiry 6 months from the end of the financial year in which the return is furnished. Thus, the time limit to issue a notice u/s 143(2) of the Act for the AY 2016-17 is on or before 30.09.2017. No notice u/s 143(2) of the Act has been issued to the assessee before this date or any assessment framed u/s 143(3) of the Act. No assessment is pending for the AY 2016-17. Hence, to issue notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated in his statement to declare profit arising out of value added to the property by way of construction, to the tune of Rs.131 Crores as on 31.3.2018 out of total construction revenue of Rs.187 crores according to percentage of work completion and given a bifurcation as follows and it was retracted only during the course of assessment: 31.3.2016 - 25% - Rs.47 Crores 31.3.2017 - 55% - Rs.56 Crores 31.3.2018 - 70% - Rs.28 Crores 10.5 The question that needs to be addressed is whether the addition could be made merely on the basis of admission made by the assessee in the statement recorded u/s 132(4) of the Act? 10.6 We place reliance on the decision rendered by Hon'ble Supreme Courtin the case of Pullangode Rubber Product Co. Vs. State of Kerala (91 ITR 18) (SC), wherein it was held that the admission may be an important piece of evidence, but the same is not conclusive. It is open to the person who made the admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82] 136 ITR 355 (Bom.). 32. If particular levy is not permitted under the Act, tax cannot be levied applying the doctrine of estoppel. (See Dy. CST v. Sreeni Printers [1987] 67 SCC 279. 33. This Court in the case of Nirmala L. Mehta v. A. Balasubramaniam, CIT [2004] 269 ITR 1 has held that there cannot be any estoppel against the statute. Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. In the case on hand, it was obligatory on the part of the Assessing Officer to apply his mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field. 10.8. The Hon'ble Calcutta High court in case of CIT V. Bhaskar Mitter (73 Taxmann 437) has held as under: 8. The controversy raised in the second question is as to whether the annual letting value of the property determined by the Tribunal could be a figure lower than that returned by the assessee. The principles for determining the annual letting value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration as the assessment for AY 2016-17 has already been concluded by operation of law as the time limit to issue notice u/s 143(2) of the Act is already lapsed, issue of notice u/s 153A of the Act for the AY 2016-17 is bad in law. 10.10. In the case in hand, there was seized material found during the course of search action which were marked as A/TBIPL/CO/08 which reads as follows which was reproduced by AO in page No.4 of the assessment order in AY 2016-17: 10.11 This seized material provoked the department to issue a notice u/s 153A of the Act to the assessee. This statement contains information with regard to total units, booked units and unsold units upto November, 2017. It also includes booked sale value, booked stagewise received value and booked balance receivable. It also includes percentage of shares of Prestige Habitat Ventures and assessee s share. The table also contains IBRD recovered and interest on IBRD. Further it contains the details of management fee, TDS, and total deductions, balance receivable. Finally, it is an indication of total apartments constructed and assessee s share therein and total amount receivables and received upto November, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share arising from transfer of right, title and interest in the land to the ultimate purchasers when the risk rewards of ownership of land are transferred to them. i) The AO passed assessment order under section 143(3) of the Act dated 14.12.2016 without making any addition on this account. ii) During the course of assessment proceedings for the assessment year 2015-16, the Assessee reiterated its revenue recognition policy vide letter dated 13.12.2017 . The submission was accepted and the AO completed the assessment without making any addition on this count. iii) The Assessee also made similar submissions before the Deputy Director of Income Tax (Investigation) in response to a summons under section 131 of the Act vide letters dated 06.02.2015 10.16. The assessee made argument before the lower authorities that Joint Development agreement and the method of revenue recognition of the assessee are details/ information which were already available with the department during the course earlier assessment proceedings and other proceedings. Consequently, by no stretch of imagination can it be held that the joint development agreement is incriminating material found during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding proceedings in appeal, revision/application shall not abate subsequent to initiation of section 153A of the Act. Further, recording of satisfaction under section 153A of the Act is not necessary unlike section 153C of the Act which mandates the recording of satisfaction. (Delhi International Pvt. Ltd. cited supra). In view of this discussion, we hold that issue of notice u/s 153A of the Act for the AY 2017-18 and consequent framing of assessment u/s 143(3) r.w.s. 153A of the Act is valid. AY 2018-19:- 12. This assessment year is a searched assessment year as the search was took place on 1.10.2018 and the assessment has to be framed u/s143(3) of the Act and there is no infirmity in framing assessment u/s 143(3) of the Act and the assessee cannot have any grievance in framing assessment u/s 143(3) of the Act. Main Grounds:- (A.Y. 2016-17, 2017-18 2018-19) 13. First issue in all these assessment years in main ground is with regard to additions made under the income from business by computing the income based on percentage completion method with respect to the Prestige Lakeside Habitat project is unsustainable in law. a) At the outset, the ld. AR submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book deals with execution of sale deed and most importantly at Page 176 of the paper book it is stated that if the prospective purchases do not make the payments, the agreement can be terminated. Consequently to hold that the purchasers are in control of the property is absolutely not correct. Reference is also made to Para 1.3 of the development agreement at Page 115 of the paper book which clearly states that the parties confirm that the owner shall retain legal possession, domain and control over the property till the same is developed and sold either in whole or in parts to prospective purchasers as provided in the agreement. f) The argument of the Ld. A.R. is that as per clause 1.3 of the development agreement at page no.6 para 1.3 of JDA dated 22.6.2013 which clearly states as follows:- 1.3 The owner shall not revoke the permission, so granted during the subsistence of this agreement till completion of the entire Project as the Developer will be incurring substantial expenditure plan approvals and for construction of the said Project in the Schedule Property. It is specifically understood between the Parties that the permission given to the Developer to enter the Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... double taxation which is impermissible in law. a) The ld. AR submitted that adopting percentage completion method of recognizing revenue has resulted in double taxation which is impermissible in law. b) The assessee has recognized revenue and paid taxes for the various assessment years with respect to the revenue and income arising thereon from Prestige Lakeside Habitat as under - c) The Assessee has recognized revenue from the Prestige Lakeside Habitat Project to the tune of Rs. 348 crores (approx) for the year ended 31.03.2019 relevant to the assessment year 2019-20 and has also paid tax of Rs. 36.83 crores (approx) on the net taxable income returned of Rs. 113 crores (approx) for the assessment year 2019-20 d) Similarly for the assessment year 2020-21, the Assessee has recognized revenue to the tune of Rs.431 crores (approx) has paid tax of Rs. 72.45 crores (approx) on net taxable income returned of Rs. 287.85 crores (approx). e) Similarly for the assessment year 2021-22, the Assessee has recognized revenue to the tune of Rs.238.27 crores (approx), has paid tax of Rs. 37.80 crores (approx) on net taxable income of Rs. 150.19 crores (approx) g) The Assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the family had no knowledge that a united joint family existed, he presumably proceeded on the basis that the said family had really ceased to exist under the terms of the compromise decree. This was, therefore, not a case of election between two alternative units of assessment, but an attempt to bring to tax the income of an assessable entity which had escaped assessment. That apart, under section 3 of the 1922 Act, in the matter of assessment, there is no question of any election apart, under section 3 of the 1922 Act, in the matter of assessment, there is no question of any election between a HUF and a member thereof in respect of the income of the family. If a HUF exists, under section 3 of the 1922 Act, the ITO has to assess it in respect of its income. Indeed, under section 14(1) of the 1922 Act, any part of the income reeived by its members cannot be assessed over again. While section 3 of the 1922 Act confers an option on the ITO to assess either the association of persons or the members of the association individually, no such option is conferred on him thereunder in the case of a HUF, as its existence excludes the liability of its members in respect of the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neutral and consequently no addition could have been in the impugned assessment year. The ld. AR placed reliance on the following decisions i) CIT v. Excel Industries Ltd. (2013) 358 ITR 295 (SC) ii) CIT v. Bilhari Investment (P.) Ltd. (2008) 299 ITR 1(SC) 14.4 The statement of the CIT(A) that the assessee has not been directed to offer income in the subsequent year is totally unacceptable as the method for offering income has not only been accepted in the two prior years by way of scrutiny assessment order under section 143(3) of the Act but also in a subsequently assessment year i.e., AY 2019-20 by way of a scrutiny assessment order under section 143(3) of the Act. 14.5 The ld. AR has explained on various occasions regarding its revenue recognition policy and in all the various occasions the department has not proceeded further in the matters and has accepted the explanation and closed the issue. Thus, the findings and observations of the CIT(A) are devoid of factual foundation, contrary to the material on record and requires to be deleted. 14.6 It is well settled proposition that assessees file return based on legal advice and sometimes the department takes cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee and the cost of development and construction was incurred by the Developer. As such the resources and efforts of land owner and developer were pooled together so as to bring out the maximum productive result. 15.1 Further, he submitted that the intent of the assessee i.e. as a part of its business activities, it wanted to sell its undeveloped land after getting it developed and such development was got carried out through a developer. The business motive being to earn maximum profits by selling developed land rather than undeveloped land. This also shows that the assessee would receive the consideration for its land as well as for the profits earned on account of the land being developed before being sold. That was why during search Sri. K Prakash Shetty, the Managing Director of the assessee company had stated under oath that we are estimating about 30% as attributable towards construction and the balance 70% towards transfer of land . Thus, this was admitted that the revenue received by the assessee included profit element on account of development of its land, which it would not have got if the undeveloped land was sold. The arrangement helped the Developer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... significant risks and rewards got transferred to the buyer and the assessee was not having any effective control over the land to a degree which a landowner usually would have as an owner. No significant uncertainty regarding amount of consideration to be received from the sale existed at this stage. Registering the land in the name of the buyer became a mere formality. Completion of the entire project or the registration of the land in the name of the buyer thus did not impact the accrual of income in the hands of the assessee. 15.3 The ld. D.R. further stated that it is also relevant here to look into the significant accounting issues involved and the applicability of Accounting Standard 9 (AS 9) read with the Guidance Note for Real Estate Transactions (Revised 2012) and Accounting Standard 7 (AS 7) issued by ICAI in the case of owner as well as developer. Application of the principle of prudence and matching concept in the case of accounting for real estate developers always needs to be there. 15.4 Further, Ld. D.R. submitted that the Guidance Note issued by ICAI thus recommend that Revenue in case of real estate sales should be recognized when all the following condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to which it belongs on the basis of the provisions of the Act. It does not depend on the whims of the assessee to choose the year in which it wants to disclose its income. If allowed to do so, the postponement of the income and thus tax liability would continue indefinitely. The payment of correct taxes in the relevant year by the assessees enables the Government to timely get its share of revenue and thus avoids the burden of interest which it would otherwise be required to bear on account of borrowings if there is shortfall in tax collection. Further, even an AO too does not have an option in this matter and the income is required to be assessed as per law in the relevant assessment year only. 15.7. The ld. D.R. further submitted that as regards the decisions relied upon by the assessee, the same are found to be rendered on different facts and the ratio of the same do not apply to the case under consideration. In Bhawani Cotton Mills Ltd Vs. State of Punjab, AIR 1967 SC 1616, as relied upon by the assessee, no such ratio had been laid down by the SC that an assessee was free to offer its income in subsequent years or that if income was offered in a wrong assessment year it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the said project as and when the risk and rewards of ownership in constructed area along with undivided interest in land has been transferred to purchasers of units in the project on the basis of project completion method of revenue recognition for accounting its share of revenue from the said project. The assessee s accounts has been audited under Company Act as well as under Income Tax Act and has been filing the return of income with the department. The assessee entered into sale agreement with various customers and received advance from the customers in respect of assessee s share of constructed area in Prestige Lakeside Habitat Project, shown in the balance sheet as under head Other long term liabilities from year to year. The search took place in the premises of the assessee on 10.1.2018. By that time, the assessee has filed the return of income for these assessment years as follows: Assessment Year Date of filing return 2016-17 13.10.2016 2017-18 04.10.2017 2018-19 30.10.2018 (After the date of search) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2015 16.5. It was noted that Joint Development agreement and the method of revenue recognition of the assessee are details/ information which were already available with the department during the course earlier assessment proceedings and other proceedings. From the above, it is clear that in earlier assessment year 2015-16, department has accepted the method of computation of income from the Habitat project as declared by the assessee i.e. completion contract method. On same set of facts, from the AY 2016-17 onwards, the department wanted to change the method of computation of income by following percentage contract completion method instead of project completion method. As regards the argument of ld DR that advance received from the prospective buyers vide sale agreement represent the receipts in respect of the contracts undertaken, it was found that this was not supported by facts and figures. The assessee is not a contractor who has undertaken the construction activity. On the other hand, is a land owner who has given the land for construction to Prestige Lakeside Habitat Project. He is getting his share of constructed area and against which assessee entered into sale agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) wherein held that: Assessee builder having regularly employed project completion method which is an accepted method of accounting and the AO having accepted the same in the preceding assessment year, there is no justification to reject the said method to apply the percentage completion method when the assessee has offered the income in the year of completion of the project. 16.8 In the case of ACIT Vs. National Builders 137 ITD 227 (Ahd Trib) wherein held that: AS-7 has also made a provision that advances received from customers may not necessarily reflect work performed. Outcome of a contract cannot be estimated reliably, therefore, no profit can be recognized. Clauses of agreement dated 1st March- 2002 prescribe that lease of units agreed to be allotted by assessee to intending allottees become legally en forcible only upon GSRTC approving allotment and uptill that time, there would be no legally tenable transaction by appellant in favour of intending lessee. Such approvals have in fact been granted by GSRTC in F.Y. 2004-05 relevant for A.Y. 2005-06 onwards. Vide order dated 18/5/2004 District Collector has restrained assessee from leasing in any manner whats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent remand report there is no reference of any sales agreement. The appellant has also denied to have executed any sale agreement for sale of flat. It may also be noted that the appellant during assessment proceedings, vide written submission dated 8.1.2011 (para 2) also brought to the notice of the AO that no sales was made during the A.Y. under consideration as alscs that even during search proceedings, no sale agreement were found which may be-said to be of legally enforceable. Therefore in the absence of any sale agreement or execution of any sale deed it cannot said that accounting standard AS-9 for revenue recognition was applicable in the appellant's case. It may further be stated that the appellant company in earlier A.Y. followed project completion method and in the background of above discussion when AS-7 and AS-9 are prima facie not found to be applicable therefore there was no basis of determination of income by percentage completion method. (Paras 8) Conclusion: In the absence of any sale agreement or execution of any sale deed it cannot said that accounting standard AS-9 for revenue recognition was applicable in the appellant s case. Conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of CIT Vs. Taparia Tools Ltd. 16.12 In the case of Prestige Estate Projects (P) Ltd. Vs. DCIT 129 TTJ 680 (Bang) (Trib) wherein held that: The appellant undertakes construction activity for those persons to whom it intends to sell the super-built area along with undivided share of land in a project which it is developing as a developer. Hence, the assessee is not a construction contractor and revised AS-7 was considered as not applicable. Accounting Standard-7 has not been specified by the Central Government under s. 145(2). Hence, the AD could not have rejected the accounts under s. 145(3) on the ground that the assessee has not followed the prescribed method of accounting. As per s. 145(1), income is to be computed in accordance with system of accounting regularly employed by the assessee. The assessee was employing regularly the project completion method and the project completion method is an accepted method of accounting. The assessee has changed the method of accounting from project completion method to percentage completion method in the subsequent year. Hence, the change in this year will be revenue neutral. Moreover, the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en given retrospective operation. The supreme court in the case of Bilahari Investments (P.) Ltd. supra has held as under: Every assessee is entitled to arrange its affairs and follows the method of accounting which the department has earlier accepted. It is only in those cases where the department records a finding that the method adopted by the assessee results in distortion a profits that the department can in substitution of the existing method. 8. In the instant case, admittedly the assessee is following mercantile system of accounting and as per notes to the accounts, the assessee is following completed contract method of accounting for contracts. The aforesaid method of assessment has been accepted by the department in the past and therefore, in view of law laid down by the Supreme Court in Bilahari Investments Pvt. Ltd., the Commissioner of Income-tax (Appeals) as well as the tribunal has rightly held that there was no justification on the part of the assessing officer to change the earlier method adopted by the assessee and to determine the income on estimate basis. 9. The submission made on behalf of the revenue that the directions issued by a bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of accounting to declare the profit namely, on project completion method as per the provisions of the Companies namely, section 211(3A) the Profit and Loss Account and balance sheet of the company has to comply with the Accounting Standard. As per proviso to section 211(3C), Standards of accounting specified by the ICAI are deemed to be Accounting Standard until the Accounting Standards are prescribed by the Central Government. In other words, the companies are required to adopt and follow the Accounting Standards as prescribed by ICAI. In the event of such prescribed Accounting Standards are not being followed, then, such companies are required to disclose in its Profit and Loss Account and Balance sheet the reasons as prescribed under section 211(3B) of the Companies Act. To put it differently, the Companies Act also provided for deviation from the Accounting Standards also. There is no dispute to the fact that AS-7 effective from 01.04.2003 is applicable to all construction contractors. The objective of AS-7 reads: The objective of this Standard is to prescribe the accounting treatment of revenue and costs associated with construction contracts. Because of the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It may be noted that the same result could be attained by any one of the accounting methods. The completed contract method is one such method. Similarly, the percentage of completion method is another such method. Under the completed contract method, the revenue is not recognized until the contract is complete. Under the said method, costs are accumulated during the course of the contract. The profit and loss is established in the last accounting period and transferred to the profit and loss account. The said method determines results only when the contract is completed. This method leads to objective assessment of the results of the contract. On the other hand, the percentage of completion method tries to attain periodic recognition of income in order to reflect current performance. The amount of revenue recognized under this method is determined by reference to the stage of completion of the contract. 16.15 In the case of SN Builders Developers 431 ITR 241 (Karn) 7. Now we may deal with the second substantial question of law. The Tribunal relied upon the decision in the case of Prestige Estate Projects (P.) Ltd. (supra), rendered by it and held that for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same results in terms of profits and therefore, revenue neutral. In view of preceding analysis, the fourth substantial question of law is also answered against the revenue and in favour of the assessee. In the result, the appeal fails and is hereby dismissed. 16.18 In the case of DCIT Vs. Esteem Classic in ITA No.842 of 2018 dated 22.3.2021 (Karn) 8. We have considered the submissions made on both sides and have perused the afore-mentioned decisions carefully. On perusal of the afore-mentioned decisions referred to supra rendered by this Court in the case of PRESTIGE ESTATE PROJECTS, BANJARA DEVELOPERS CONSTRUCTIONS (P) LTD., VARUN DEVELOPERS, S.N. BUILDERS DEVELOPERS IN ITA 393/2014 AND ITA 739/2018 as well as the decisions of the Hon ble Supreme Court in EXCEL INDUSTRIES and in BILAHARI INVESTMENTS supra and taking into account the fact that the Revenue itself has recognized the completed contract method for computation of the subsequent Assessment years, that is 2013-2014 and 2014-2015, we answer the substantial questions of law against the Revenue and in favour of the assessee. In the result, the appeals preferred by the Revenue fail and are h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opted by assessee it is open to him to adopt a more suitable basis for computation of true profits. Their Lordships then also dealt with method of accounting and observed as under- among Indian businessmen as elsewhere, there are current two principle systems of book keeping, there is, firstly, the cash system in which record is maintained of actual receipts and actual disbursements, entries being posted when money or money's worth is actually received, collected or disbursed. There is secondly, mercantile system in which entries are posted in eth books of account on the date of transaction i.e. on the date on which rights accrue or liabilities are incurred irrespective of the date of payment. 31. Further in the decision of the coordinate Bench, ITAT Allahabad Bench in the case of Mahabir Jute Mills V/s JCIT reported in (2013) 36 Taxmann.com 587 as also on the decision in the case of CIT V/s Advance Construction Company P. Ltd reported in (2005) 275 ITR 30 (Guj), where their Lordships have reiterated position that choice of accounting method lies with that of assesse, the only caveat being that it has to show that the chosen method has been regularly followed. The se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue authorities in the assessment proceedings u/s 143(3) read with respect of 153(A) of the Act that the assessee has been consistently following project completion method/completed contract method for the treatment of advances received from proposed buyers through developer JSM DPL. In the light of the above fact we observe that Hon'ble Gujarat High Court in the case of Manjusha Estates (P) Ltd Vs ITO reported in (2017) 393 ITR 644 (Guj,) adjudicating similar issue i.e. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the project completion method which was followed consistently by the assessee and instead applying work in progress method and taxing 80 per cent. Thereon as net profit? held that as assessee has followed the method which is consistent considering the decision in the case of CIT v Shivalik Buildwell P Ltd (2013) 40 taxmann.com 219 (Guj))(supra) and CIT Vs. Umang Hiralal Thakur (2014) 42 taxmann. com 194 (Guj)(supra) and therefore this court is are of the opinion that the view taken by the Tribunal and the Commissioner of Income Tax is not correct. Issue decided in favour of assesssee. 34. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee lies with the assessee but the assessee would be required to show that he assessee's regular method would not be rejected as improper merely because it gives the assessee the benefit in certain years or that as per the Assessing Officer, the other method would have been more preferable. If the method adopted does not afford true picture of profit, it would be rejected, but then such rejection should be based on cogent evidence and should be done with caution. In the present case, the appellant has declared substantial profits on the basis of project completion method in the subsequent years. In construction, the project completion method and percentage completion methods, both have also been recognized by the Central Board of Direct Taxes in the instruction No.4 of 2009 dated June 30, 2009. Therefore, the Assessing Officer is not considered justified in bringing to tax the profit of Rs.1,66,70,811 in the year under consideration, particularly when such profits have already been offered to tax by the appellant in the assessment year 2007-08. The addition of Rs.1,66,70,811 are directed to be deleted . 36. Further the co-ordinate Bench of Ahmedabad Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Commissioner of Income-tax (Appeals) has recorded a finding after pursuing the assessment records of the subsequent years that the assessee has offered for taxation its income in the. subsequent year as per the consistent system of accounting followed by the assessee. The learned Departmental representative could not point out any error in the above finding of the learned Commissioner of Income-tax (Appeals). In view of the above discussion, we do not find any error in the order of the learned Commissioner of Income-tax (Appeals) and therefore, the same is upheld and the appeal of the Revenue is dismissed. It is reported that the decision of Appellate Tribunal in the case of Vraj Developers (supra) has attained the finality as the said decision is not challenged by the Department before higher forum. In view of the above and more particularly, when it has been found that the assessee is consistently following the accounting system of percentage completion method, which is permissible and accepted by ICAI and the Central Board of Direct Taxes with respect to construction work, it cannot be said that the learned Appellate Tribunal has committed any error/or illegality, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute of Chartered Accounts of India has been recognized by the Act and in such circumstances, there was no guidance or strict procedure for adopting a particular accounting standard under the/act and it depends upon facts and circumstances of each case. In other words, the assessee was entitled to adopt Project Completion method for determining its income which was being regularly followed by it. Though the Assessing Officer had rejected the plea of the assessee, but the CIT(A) while accepting the appeal of the assessee made the following observations:- It is however not the AO's case that the profits have been distorted by following the project completion method. The impugned order is also silent as regards the position of the books of account. In other words the books have not been rejected, nor any defects pointed out. In the case of CIT vs. Bilahari Investment (P) Ltd (2008) 299 ITR 1 SC, the Apex Court held that the completion contract method adopted by the assessee for chit discount consistently over the years, is not required to be substituted by percentage completion method. In CIT v Manish Buildwell (P) Ltd (2011) 245 CTR 397 (Del), it was enunciated that project com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod. It was further held that Every assessee is entitled to arrange its affairs and follow the method of accounting which the Department has earlier accepted. It is only on those cases where the department records a finding that the method adopted by the assessee results in distortion of profits, the Department can insist on substitution of the existing method . Applying the above said principles to the facts of the present case we find that the assessee before us has been following the systematic method of accounting from year to year which has been accepted by the department and no defects have been pointed out by the department in the method of accounting adopted by the assessee and thus, there is no reason to reject the same. The Hon'ble Delhi High Court in CIT v Manish Buildwell (P) Ltd (supra) had held that It is well settled that the project completion method is one of the recognized methods of accounting. It cannot be said that the projection completion method followed y the assessee would result in deferment of the payment of the taxes which are to be assessed annually under the IT Act. AS-7 issued by the ICAI also recognizes the position that in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract 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 . 39. 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 the accounting methods. The completed contract method is one such method. Similarly, the proceedings of completion method is another such method. Under the completed contract method, the revenue is not recognized until the contract is complete. Under the said method, costs are accumulated during the course of the contract. The profit and loss is established in the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have failed to bring forth any inconsistency in the books of accounts. The Assgessing Officer in the instant case has merely applied the method of percentage completion adopted by the Developer JSM DPL and calculated the income of the assessee completely ignoring the fact that the assessee was merely the owner of land and he was entitled to 32% of saleable area only on completion of construction and the deadline of which was 60 months from the date of agreement i.e. from 1.4.2009. The Ld.A.0 also ignored the fact that right to sale its share of constructed area with the assessee was only from April, 2014 onwards and the assessee has offered the revenue for taxation from F.Y 2014-15 onwards as and when the sale deed has been registered. As held by various courts as discussed above that the method of adopting project completion method is not ultra virus and the assessee is free to adopt either the percentage completion method or project completion method with the only rider that it should be consistently adopted and in case of any deviation the effect of profit or loss should be offered to tax as the case may be. Revenue has not disputed this fact that assessee has offered the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces Ltd. 216 CTR (SC) 345 Paras Buildtech India Pvt. Ltd. Vs CIT (2016) 382 ITR 0630 (Delhi) CIT V. Manish Buildwell Pvt. Ltd. (2011) 245 CTR 0397 (Del) CIT vs. Shivalik Buildwell (P.) Ltd. - 40 taxmann.com 219(Gujarat) ITA No. 853 of 2015(Bom) CIT vs. Millennium Estates Private Ltd. CIT vs. Aditya Builders - 378 ITR 75(Bom) Bakshi Vikram Vikas Construction Co. P. Ltd. V. DCIT - 158 Taxman 61 (Del.) CIT v. V. S. Dempo Co. Pvt. Ltd. (131 CTR 203)(Bom) ACIT v. Rajesh Builders (2004-TIOL-88-ITAT-MUM) Maitri Developers v. ITO (2011-TIOL-472-ITAT-Mum) 16.19 As seen from the various judgements, jurisdictional High Court time and again held that method of accounting followed by the assessee, which is the project completion method of recognizing revenue is permitted in law and could be followed by assessee. Thus, it is settled position of law that decision of the higher authority to be followed and judicial discipline requires consistency in its proceedings. 16.20 Further, contention of ld. DR is that assessee has to follow the percentage completion method for recognizing the income since the developer has followed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an attempt to distinguish the cases at Para 4.15 of the order. In the case of British Paints is not at all applicable to the facts of our case and the facts of British Paints is totally different from the principles of consistency of the very same project. In fact, British Paints is a case of valuation of goods and whether it should include overhead expenditure or not and in that context the Hon'ble Supreme Court held that overhead expenditure has to be added. The Hon'ble Supreme Court has also reversed the decision based on the issue being a finding of fact. The Supreme Court also found fault with the High Court as the Tribunal has dealt with the matter as matter of fact. Hence, the said decision stands distinguished. 16.24 The reliance placed in para 4.16 of the order under section 250 of the Act on the decision of the Hon'ble Supreme Court in Mysore Minerals Limited v. CIT (1999) 239 ITR 775 (SC) is not at all applicable on the facts and circumstances of the case in as much as there has been no handing over of possession to the purchaser. Without prejudice, the observation that the registration of the land is a mere formality is too farfetched in as much as even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact of the case. The other decisions referred to are not applicable to the facts and circumstances of the case. 16.28 Further noted that the finding of the Commissioner of Income Tax (Appeals) in Para 4.16 at Page 37 of the order and first five lines at Page 40 of the order are contrary to each other. In the first instance at Page 37, the Commissioner of Income Tax (Appeals) says that the registration of land is a mere formality, whereas in Page 41, he says that reasonable development has taken place. This clearly indicates that the project has not been completed. It is not comprehensible as to how a finding can be given that a registration is a mere formality when lot of balance consideration is to be received. The finding based on such erroneous facts requires to be vacated. 16.29 The Commissioner of Income Tax (Appeals) has referred to the decisions relied upon by the assessee which ought to have been followed and merely stating that these cases do not apply to the facts of the assessee's case does not lead to proper distinguishment of the case. 16.30 The lower authorities failed to appreciate that in the case of a developer it may not be possible to evolve a me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the land owned by it which will be conveyed to the purchaser by way of executed of sale deed on completion of construction, subject to the purchaser complying with the terms of the agreement to sell and construction agreement. Further, it is categorically stated in the agreement to sell that the purchaser shall not seek conveyance or possession until then 16.34 At Page 67 of the appeal memo for AY 2016-17, a clause from the joint development agreement with respect to marketing fee has been extracted which has been paid by the assessee to the developers and the same has been claimed and allowed in the respective years when the income has been offered, namely, AY 2019-20 onwards. 16.35 The Assessee is also entitled to terminate the agreement to sell entered into with the purchaser in case of non-compliance with the terms and conditions of the agreement to sell, for example, payment of balance consideration. This goes to prove that till the entire consideration is received, which event is completed on the date of execution of sale deed, the significant risks and rewards of ownership cannot be considered to be transferred to the purchaser. 16.36 The reliance placed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly recognized methods of accounting for construction of project. As held by Hon ble Supreme Court in the case of Bilahari Investments Pvt. Ltd. cited (supra), wherein held as under:- 15. 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 the accounting methods. Completed contract method is one such method. Similarly, percentage of completion method is another such method. 16. Under completed contract method, the revenue is not recognised until the contract is complete. Under the said method, costs are accumulated during the course of the contract. The profit and loss is established in the last accounting period and transferred to P L account. The said method determines results only when contract is completed. This method leads to objective assessment of the results of the contract. 17. On the other hand, percentage of completion method tries to attain periodic recognition of income in order to reflect current performance. The amount of revenue recognised under this method is determined by reference to the stage of completion of the contract. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long treated the said project as capitalised item and debited all the expenses to the capital account. This method has been accepted by the Revenue in the past. It is also undisputed that in the current year project is not at all complete. Redevelopment is still in progress. The assessee has also to recoup expenditure from other co-owners. Agreement to sale has not been registered, possession of the property has not been handed over. In these circumstances, assessee cannot be thrust upon percentage of completion method of accounting by the Assessing Officer. 16.42 Hence, in our opinion, the percentage completion method cannot be applied to the assessee s case. 16.43 The ld. DR made one more argument that percentage completion method has been made compulsory by subsequent insertion of Section 43CB of the Act by Finance Act, 2017 w.e.f. 1.4.2017. 16.44 We have carefully gone through the relevant provisions of the Act. From the perusal of above section, it is clear that it is applicable to construction and service contracts and not to the land owner, who receives sales consideration in the form of constructed area by entering into JDA with the developer. 16.45 Furthermore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 the accounting methods. The completed contract method is one such method. Similarly, the percentage of completion method is another such method. Under the completed contract method, the revenue is not recognized until the contract is complete. Under the said method, costs are accumulated during the course of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered this question in T.M.M. Sankaralinga Nadar Bros. v. CIT 4 ITC 226. After dealing with the contention the Full Bench expressed the following opinion: The principle to be deduced from these two cases is that where the question relating to assessment does not vary with the income every year but depends on the nature of the property or any other question on which the rights of the parties to be taxed are based, e.g., whether a certain property is trust property or not, it has nothing to do with the fluctuations in the income; such questions if decided by a Court on a reference made to it would be res judicata in that the same question cannot be subsequently agitated.... (p. 242) One of the decisions referred to by the Full Bench was the case of Hoystead v. Commissioner of Taxation 1926 AC 155. Speaking for the Judicial Committee, Lord Shaw stated : Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances. If this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption under sections 11 and 12. 16.46.1 In view of the above, we are of the opinion that department is precluded from changing the method of accounting which has been consistently followed by the assessee from year to year in middle of the duration of the project. At the same time, we are aware of the fact that the concept of res judicata does not apply to income tax proceedings as each assessment year is being independent assessable unit, what is decided in one year may not apply in the following assessment year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in the subsequent year. 16.47 Further, there is no doubt that the land is held to be applicable to be stock in trade of the assessee and consequently 2(47) has no application. Thus, assessments have to be made under normal provisions of computing business income and the same has to be computed only when the transaction is complete. A mere advance received, especially when there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 113 crores (approx) for the assessment year 2019-20 16.52 Similarly for the assessment year 2020-21, the Assessee has recognized revenue to the tune of Rs.431 crores (approx) has paid tax of Rs. 72.45 crores (approx) on net taxable income returned of Rs. 287.85 crores (approx). 16.53 Similarly for the assessment year 2021-22, the Assessee has recognized revenue to the tune of Rs.238.27 crores (approx), has paid tax of Rs. 37.80 crores (approx) on net taxable income of Rs. 150.19 crores (approx) 16.54 The Assessee has paid advance tax of Rs.21 crores (approx) for the assessment year 2022-23. Thus, there was no loss to revenue and revenue only wants to pre collect the taxes by way of this kind of assessments, which shall be avoided. 16.55 In view of the above, the income offered in the subsequent years is income of the impugned assessment year will result in double taxation which is impermissible in law. 16.56 The ld.AR submitted that if the lower authorities sought to tax the same income in the assessment year 2016-17, as a corollary, they ought to have given credit to the taxes paid on the same transaction for the assessment year 2019-20 and 2020-21, this argument ..... X X X X Extracts X X X X X X X X Extracts X X X X
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