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TMI Blog2016 (7) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... aving been following the "completed project" method consistently, which being a recognized method of accounting, the assessee's method of accounting cannot be rejected nor is there any justification for estimating assessee's profits of the year from the assessee's business activity of building construction by resorting to applying of percentage of profit to the work-in-progress of the year. In view of the above discussion, we set aside the orders of authorities below and direct the Assessing Officer to accept the method adopted by the assessee for all the assessment years. - Decided in favour of assessee Charging of interest under section 234A - Held that:- The interest under section 234A is chargeable from the date of expiry of the notice period given under section 153A to the date of completing the assessment under section 143(3) r.w.s. 153A of the Act.The interest under section 234B is to be levied only on the additional tax levied on the enhanced income determined under section 143(3) r.w.s. 153A of the Act. Therefore, the period of charging of interest should be from the date of determination of income under section 143(1) or 143(3) to the determination of enhanced incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) erred in concluding that the project completion method is no more in existence since 104.2003, in total disregard to the principles enunciated by the higher courts on this issue. 8. The Learned CIT(A) erred in not appreciating that the point of sale occurs only at the time of handing over of possession and hence is the right point of recognition of income. 9. The Learned CIT(A) erred in upholding the decision of the A.O in taxing the income on the basis of cost of construction, thereby charging the amounts to tax, when the income has not even accrued. 10. Without prejudice to the above, the Learned CIT(A) erred in upholding the action of the A.O in adopting 8% as the percentage of income, without giving any basis for adopting this percentage. 11. The Learned CIT (A) erred in not deleting the levy of interest u/s 234A and 234B of the Income tax Act, 1961, which has been raised without creating a charge in the assessment order as a charge was not created by the Assessing Officer as part of the order, the levy of interest is illegal and is invalid and void ab-initio. 12. All the above Grounds of Appeal are without prejudice to one another. 13. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od followed by the tax payer for recognizing revenue in the books of accounts cannot be regarded as unreasonable. Further, the tax department cannot change the method of accounting. Despite not controverting the decisions of the Mumbai Benches of the Tribunal in the case of Unique Enterprises v. ITO (supra), the ld. CIT(A) could not distinguish as to what was the revenue loss by following the Project Completion Method adopted by the assessee. The assessment order is very cryptic and not given complete facts and figures to demonstrate that the impugned method of accounting adopted by the assessee results in underestimation of profit and therefore, the Assessing Officer and the ld. CIT(A) rejected the method adopted by the assessee. 6. Further, in the case of Awadhesh Builders v. ITO [2010] 37 SOT 122 (Mum), the Mumbai Benches of ITAT has observed and held as under: 2.6 We have perused the records and considered the rival contentions carefully. The assessee is a builder and real estate developer. The dispute is regarding year of accounting of income. The dispute is not whether the assessee had underestimated the income in a particular year. The assessee has been following p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.8 It is established legal position that an assessee can follow any recognised method of accounting and condition is that the same method has to be followed consistently. In case of a building project, the Institute of Chartered Accountants of India which is an authority on prescribing accounting standards had prescribed accounting standard AS-7 in 1983 for accounting of income in respect of real estate projects and in terms of AS-7 which was applicable to both contractor and real estate developer, a person is free to follow either of project completion method or percentage completion method depending upon the nature of project. The assessee, in this case, has followed project completion method which is one of the prescribed methods by the Institute of Chartered Accountants of India. The accounting standard AS-7 was subsequently revised and revised statements were made applicable to housing projects undertaken on or after 1-4-2003 and as per the revised standards, revised AS-7 was applicable only to a contractor and in case of real estate developer, revised AS-9 was prescribed as per which the income has to be accounted only on completion of project when the flats are sold, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and observed that it would be appropriate to adopt the rate shown by the assessee on the basis of books of account maintained for assessment year 2007-08 which were audited. He, accordingly, directed the Assessing Officer to adopt the same rate of profit as taken in assessment year 2007-08. Aggrieved by the said decision the revenue is in appeal. 3.1 We have heard both the parties, perused the records and considered the matter carefully. As we have already held that income of the project can be assessed only in assessment year 2007-08 when the project was complete and not in this year the issue of estimation of profit has become infructuous. We, therefore, dismiss the appeal of the revenue as having become infructuous in view of our decision given in relation to the appeal of the assessee. 4. In the result, appeal of the assessee is allowed whereas that by the revenue is dismissed. 7. Thus, in our opinion, profits in the case of a trade adventure/project may be determinable in each year without waiting for the whole adventure/project to be finally completely, yet there is also another method of accounting for profits of the adventure/project referred to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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