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Issues involved: Jurisdiction u/s 263 of the Income Tax Act regarding computation of income from construction work.
Summary: The appeals were against the Commissioner's order u/s 263 of the Act, challenging the computation of income from civil construction contracts. The assessee followed the project completion method for accounting, recognizing profit or loss upon project completion. The Commissioner directed the Assessing Officer to consider profits on work-in-progress, citing legal precedents. The assessee argued that their method was valid, supported by the Bombay High Court decision and consistent practice since 1982-83. The Senior Departmental Representative acknowledged both methods were recognized but emphasized the need for a reasonable view favoring the revenue. After reviewing the arguments, the Tribunal found no error in the assessment orders. It noted that the chosen method of accounting was regularly employed by the assessee, as evidenced by consistent practice. The Tribunal emphasized that the revenue must respect the assessee's chosen method unless it does not properly deduce profits. Citing legal precedents, the Tribunal concluded that the assumption of jurisdiction u/s 263 was not lawful in this case. Therefore, the Tribunal canceled the order u/s 263 and upheld the assessments by the Assessing Officer, rendering all subsequent proceedings irrelevant. In conclusion, both appeals were allowed in favor of the assessee.
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