2011 (9) TMI 745 - HC - Income Tax

Construction Business - deletion of 8% of the work in progress from assessment of income. - Project Completed Method OR Completed Contract Method - Books of account maintained - Held That - Once the books of account were maintained, it is the Project Completion method which has to be followed. - In view of H.M. Constructions (2001 -TMI - 57617 - ITAT BANGALORE ), the defects pointed out do not relate to the receipts, income, method of accounting and also work in progress, project completion method to be followed.

Summary

Issues:
1. Assessment method: Completed Contract method vs. Percentage Completion method.
2. Recognition of Project Completion method.
3. Maintenance of regular books of account.

Analysis:
The judgment involves three appeals by the Revenue challenging the Tribunal's decision affirming the Appellate Commissioner's order. The Assessing Officer initially used the Percentage Completion method due to the absence of regular books of account by the assessee, a company engaged in Development and Construction business. The Commissioner, however, recognized the Project Completion method as a valid accounting method, citing precedent cases. The Tribunal supported this view based on previous judgments, emphasizing that once books of account are maintained, the Project Completion method should be followed.

The substantial question of law revolved around whether the Project Completion method could be applied in the absence of regular books of account. The Revenue argued for the Percentage Completion method in such cases. However, the Appellate Commissioner and the Tribunal found that the assessee had indeed maintained books of account, and the defects pointed out were not relevant to income calculation or method of accounting. Both authorities concluded that the Project Completion method was appropriate in this scenario, in line with previous court decisions.

The Tribunal's decision was upheld, stating that the assessee had maintained books of account, and the defects highlighted were immaterial to income calculation or work in progress assessment. The judgment emphasized that the Project Completion method is valid when books of account are in order, as established by previous rulings. Consequently, the appeals by the Revenue were dismissed, affirming the use of the Project Completion method in this case.