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TMI Blog2011 (5) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... over to the buyer - Assesse contended that assessee is following the project completion method, In accordance with the method adopted by the assessee, he has shown the profit from the said project - completion certificate was submitted on 24-4-2006, which date falls within the year ended 3 1-3-2007 - all cases possession has been handed over after 3 1-3-2006, mostly in the months of May - Hence assesse claim was accepted - Thus appeal is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... was not obliged to declare any profits in the assessment year under appeal, that the assessee handed over possession of the flats to all the buyers after 3 1-3-2006, that the profit from the project was declared in the return for the assessment year 2007-08 and therefore there was no obligation to declare any income from the project in the year under appeal. 4. The Assessing Officer rejected the assessee's contentions. He held that AS-7 equally applied to a builder/developer as it applied to a contractor because in a sense the builder/developer is also a contractor having entered into a contract with the tenant/purchaser to whom he is answerable. As regards the claim of the assessee that the sale of the flats is taken cognizance of only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso referred to the order of the Bombay Bench of the Tribunal in the case of Champion Construction Co vs ITO (5 ITD 495) in support of his view. He estimated the profit at 8% of the receipts of Rs.3,04, 12,000 from the 13 persons which came to Rs.24,32,960 and brought the said amount to assessment. 7. The assessee appealed to the CIT (A) challenging the assessment order. The CIT (A) upheld the assessment on the following grounds: a) The assessee ought to have declared profit at least in respect of the sale of the flats to the 13 persons despite following the project completion method. The assessee was not right in relying on accounting standard - 9 to contend that a person following the above method was bound to disclose the profit from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the said method. It is recognized by the AS‑7. In para.3 (not numbered) of the assessment order (first page) for the year under appeal, the Assessing Officer himself refers to the fact that the assessee is following the project completion method and that the Matunga project was commenced during the year ended 3 1-3-2005. Even in the assessment order for the assessment year 2005-06 (copy filed) the Assessing Officer, while examining the return, would appear to have asked the assessee by letter dated 15-11-2007 (page 112 of the paper book) as to why revenue should not be taken credit on the basis of "percentage completion method" since in that year 26% of the project had been completed. On being informed (by letter dated 22-11-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from page 53 onwards. A perusal thereof shows that in all cases possession has been handed over after 3 1-3-2006, mostly in the months of May, June and even November 2006. Page 103 of the paper book is a certificate issued by the Hydraulic Engineer's Department of the Brihanmumbai Mahanagarapalika on 20-6- 2006, to the effect that adequate water supply has been provided in the premises. Thus, even the water supply has been given only in the previous year ended 31-3-2007, relevant to the assessment year 2007-08. It cannot be postulated that possession was handed over long before the water supply was provided. 11. The learned Sr.DR pointed out from the details given in page 34 of the paper book that some flats had been registered in the nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the project was fully or substantially completed in the year ended 3 1-3-2006. What clinches the issue in favour of the claim that the project was completed in the year ended 3 1-3-2007 (asst.year 2007-08) is that the project account (page 89 of the paper book) for the year ended 3 1-3-2007 shows, in addition to the opening work-in-progress of Rs.4,88,30,226, purchases amounting to Rs.53,25,795 which is quite substantial. If in the next year the assessee had to buy materials for such a substantial amount, which approximates to 11% of the opening work-in-progress, it stands to reason that the project might have been completed only in the year ended 3 1-3-2007. Further, in that year the sale price received by the assessee as per the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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