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TMI Blog2017 (5) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 (hereinafter 'the Act'). 2. The only issue in this appeal of assessee in ITA No. 546/Mum/2009 for AY 2005-06 is against the order of CIT(A) confirming the adhoc addition of 3% of work in progress at Rs. 2,63,44,750/-. For this assessee has raised following grounds: - "Ground No 1 (I) The learned Commissioner of Income tax (Appeals) erred in confirming the action of the A.O. in disregarding the method of accounting followed by the appellant consistently and assessing the appellant on the income of an ad- hoc figure of Ps. 2,63,44750/- (at 3% of Work-in-Progress Rs. 87,81,58,362/- (ii) He failed to appreciate that the appellant was following Project Completion method regularly and had on its own, in future years offered incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplete approx. Finishing Work 80% complete approx. External Dev. & services 70% compete approx. 4. According to AO, the considerable amount of work in progress is completed and sale amount has been received for total 282 flats having been sold equivalent to the area of 4424 sq. meter out of total saleable area of 50089.36 sq. meters. The assessee was asked to show cause as to why percentage completion method should not be adopted in view of AS-7 issued by ICAI. The assessee replied that what has been received is part consideration i.e. advance and at the time of sale consideration, the construction of apartment is not completed and total consideration is not received. It was explained before the AO that the meager part of construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. Act. Give credit for taxes paid, if any. Issue Demand Notice/Challan accordingly. the ITNJS-150 forms part of this order." Aggrieved, assessee preferred the appeal before CIT(A). 5. The CIT(A) also confirmed the action of the AO by observing in Para 6.1 to 6.3 as under: -. "6.1 I see that as per the certificate dated 30.11.2007 (of the architect) of the appellant Shri Farhad Kharegat, the percentage-wise construction completed is as under: - RCC Work 90% complete approx. Finishing Work 80% complete approx. External Dev. & services 70% compete approx. 6.2 From the facts on record, it is ample clear that substantial work of the project completed Substantial amount of sale proceed is also had received. 282 flats have already bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee came in second appeal before Tribunal.-. 6. We have heard the rival contention and gone through the facts and circumstances of the case. Admittedly, the assessee is regularly following project completion method of accounting for computation of its income. Admittedly, the assessee has also not completed the construction, as per Revenue, as it has completed the construction of 4,244 sq. Meter of area as against the area of 50,089.63 sq. meters. The AO also admitted that the RCC work is completed up to 90%, finishing work is completed up to 80% and extern development and services work is completed up to 70%.The learned Counsel for the assessee filed complete detail of cumulative amount received from parties and cumulative expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been constantly followed since beginning of the business and the assessing authorities have accepted the same in the preceding years, the construction of projects in hand during the relevant assessment years were not complete at all and were at the various stages of construction/development. There is no dispute to the fact that the income returned was only on account of other receipts and the AO adopted the fixed percentage of profit method in respect of construction projects and added to the income. Hon'ble High Court laid down the proposition that the completed contract method followed by the assessee was correct and resort to section 145(1) was not justified. 7. The learned Counsel for the assessee also relied on the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned judgment of the High Court. 21. Before concluding, we may point out that under section 211(2) of the Companies Act, Accounting Standards ("AS") enacted by the Institute of Chartered Accountants have now been adopted [see: judgment of this Court in J.K. Industries case (supra)]. Shri Tripathi, learned counsel for the Department, has placed reliance on AS 22 as the basis of his argument that the completed contract method should be substituted by deferred revenue expenditure (spreading the said expenditure on proportionate basis over a period of time). He also relied upon the concept of timing difference introduced by AS 22. It may be stated that all these developments are of recent origin. It is open to the Department to consider these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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