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TMI Blog2017 (11) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... asis. However, the loss claimed by the assessee is based on application of Project completion method. In such peculiar facts, it has to be decided whether the profit earned on a particular receipt would be taxable or not during the year under consideration or not. The learned authorities below also appear to have not examined all these aspects of the case. They have also not properly examined whether there was any item of income, the quantum of which was not ascertainable during the disputed year. There is nothing on record before us to examine that the assessee has been consistently following the project completion method for revenue recognition in respect of all the projects undertaken by assessee during the years preceding to the year under consideration, as also to the subsequent projects undertaken by him. This aspect also needs examination at the stage of AO before finally deciding the issue. In case the assessee is found to have adopted consistent method of revenue recognition in preceding and subsequent projects, then the Assessing Officer will not be justified to work out the profit by applying percentage of completion method during the impugned year on selective basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject and a sum of ₹ 2,70,02,097/- against booking of 33489 sq. ft. area in Agra Project upto 31.03.2005. Keeping all the facts and circumstances of the case in view, the AO was of the opinion that proportionate completion method for revenue recognition is applicable in the instant case for arriving at the correct profits of the assessee company in respect of the projects undertaken by it as per AS-9. It was also observed that during this year, 62.47% of Pitampura Project and 29.44% of Agra Project stood completed and the determination of profit would be based on the proportionate revenue and not on the alternate results, which are to be considered in the year of completion and not in the intervening period when the project is under completion. The AO, therefore, did not accept the claim of loss made by assessee and estimated ₹ 50 lacs of total profit in Pitampura Project and ₹ 1.50 crores in Agra Project. After applying the proportionate completion method and taking into consideration the revenue receipts from the prospective buyers, determined the profit of ₹ 17,94,767/- and ₹ 8,12,405/- from both the Pitampura and Agra Projects respectively. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that the appellant has been continuously taking advances from its prospective buyers of the property and utilizing the same for construction in projects. As per agreement with the prospective buyer, the specifications of the property are determined and as such the appellant company is providing service to its prospective buyer. Had it been a case of project completion method, the appellant should have constructed the properties from its own funds and such properties should have been sold as out of shelf item and then only revenue should have been recognized at the completion. Such is not the case of the appellant. The appellant is taking advances from the customers against the sale booking of the units and, therefore, it should definitely book profit under the revenue recognition method as per AS:9. Therefore, the action taken by the A.O. is fully justified and there is no ground to interfere in the findings of the A.O. The addition of ₹ 26,07,172/- made by the AO is justified and the same is, therefore, sustained. Ground No. 4 is dismissed. Aggrieved by the impugned order, the assessee is in appeal before the Tribunal. 3. The ld. AR of the assessee submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order and the impugned order. 5. We have heard the submissions of both the sides and have perused the entire material available on record. The contention of the assessee has been that the loss returned by the assessee in the year of completion of project, i.e., 2007-08 stood accepted by the Department when similar method of revenue recognition, viz., Project Completion method was adopted and that, what led the authorities below to take a different method is not discernible from their orders and hence, rule of consistency should be applied during the year under consideration. In this regard we observe that firstly, the assessment order for A.Y. 2007-08 placed before us does not depict as to which method for revenue recognition was adopted by the assessee in that year and secondly, even if it is taken for granted that the assessee would have adopted project completion method, it cannot be denied that the assessment year 2007-08 was the year of completion of project, whereas the situation in the year under consideration is not such. From the records placed before us, it is found that the assessee has been adopting mercantile system of accounting and in such system account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion method. In such peculiar facts, it has to be decided whether the profit earned on a particular receipt would be taxable or not during the year under consideration or not. The learned authorities below also appear to have not examined all these aspects of the case. They have also not properly examined whether there was any item of income, the quantum of which was not ascertainable during the disputed year. Moreover, there is nothing on record before us to examine that the assessee has been consistently following the project completion method for revenue recognition in respect of all the projects undertaken by assessee during the years preceding to the year under consideration, as also to the subsequent projects undertaken by him. This aspect also needs examination at the stage of AO before finally deciding the issue. In case the assessee is found to have adopted consistent method of revenue recognition in preceding and subsequent projects, then the Assessing Officer will not be justified to work out the profit by applying percentage of completion method during the impugned year on selective basis. Therefore, the matter deserves to be restored back to the file of Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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