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TMI Blog2012 (12) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... rya for the Respondent. ORDER Vivek Varma, Judicial Member These two appeals filed by the assessee are against the orders of CIT (A)-XXII, Mumbai, dated 22.04.2008 and 26.08.2009 respectively for assessment years 2005-2006 and 2006-2007. 2. The common issue in both years involved is the estimated profit taken at 8% on total cost, instead of project completion method adopted by the assessee. 3. The facts of the case are that the assessee was carrying on a project and was consistently following the project completion method and the assessee declared its profit from the project in assessment year 2007-2008, on the basis of completion of project and the occupation certificate issued by the BMC on 22.09.2006. 4. The CIT(A), in the impugned order, has reproduced the AO's observations, against the declared results and observed as under: "During the assessment proceedings, the Assessing Officer observed that the appellant is following project completion method for determining the profit of the project. The profit shown in the project was offered for taxation for the AY 2007-2008 on the basis of completion of the project and occupation certificate issued by the B.M.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this assessment year. Hence, he has concluded that by following the work completion method, the appellant is creating loss to the revenue and estimated the profit at the rate of 8% of the total cost including land cost, construction cost and administrative expenses of Rs. 4,58,07,762/- and determining the profit at Rs. 36,64,620/-". 5. Not satisfied with the view taken by the AO, the assessee approached the CIT (A), before whom, the assessee's counsel reiterated the factual position and submitted as under: "Our client has purchased land along with tenanted ground and first floor structure situated at Madan Malviya Road, Mulund (W), Mumbai - 400080 for M/s. Pressure Pack Pvt. Ltd. Our client has purchased TDS on the said premises and constructed second floor on the said property. Our client followed the accountancy method of work completion basis and accordingly carried forward the work-in-progress account till the work is completed. The possession was also given to the purchasers after occupation certificate from the authority is received. The work is completed in FY 2006-2007 i.e. AY 2007-2008 and occupation certificate is also obtain during he said period. Moreover th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to Construction Contracts. The revised AS-7 recognized only the percentage completion method and is to be applicable only to the Construction Contractors' Financial accounting and not be builders and developers doing activity in their own account. These builders will have to recognize the Revenue as AS-9 "Revenue Recognition". Under the circumstances and facts stated above, we request you to kindly adopt the accounting method as followed by our client as stated above and allow the above appeal and oblige". 6. The CIT (A), while deciding the issue recognized the fact that the applicability of AS-7 and AS-9 are debatable issues. However, the CIT(A) came to the conclusion that the AO was correct in bringing to tax the amount of deemed profit in the current years and not in assessment year 2007-2008, which according to the revenue authorities was postponement of tax liability. 7. Aggrieved, the assessee is in appeal before the ITAT in both the years. 8. Before us, the AR pointed out that being a builder, the assessee was following AS-9, which gave option to the assessee for adoption of proportionate completion method and completed service contract method and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O makes any attempt to reject the books, which in these circumstances have to be accepted. The AR has referred to the case of CIT v. Advanced Construction Co. (P.) Ltd. [2005] 275 ITR 30/143 Taxman 61 (Guj.), wherein it was observed that, "the provision, therefore, specifically provides that the choice of method of accounting lies with the assessee, the only caveat being that it has to show that the chosen method has been regularly followed. The section is couched in mandatory terms and the Department is bound to accept the assessee's choice of method and regularly employed, except for the situation, wherein the Assessing Officer is permitted to intervene, in case it is found that true income, profits and gains cannot be arrived at by the method employed by the assessee. In the present case, the Tribunal has categorically found that "the assessee has followed the standard accounting method as this being the first year of the business it was the sole choice of the assessee to adopt a particular method of accounting contemplated under section 145 of the Act". The AR also referred to the case of Asstt. CIT v Dharti Estate [2011] 129 ITD 1 (Mum)(TM), wherein it was held (head n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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