9911796707
TMI Blog2018 (10) TMI 1401X X X X Extracts X X X X X X X X Extracts X X X X ..... A). The only reason given in the impugned order of the ITAT is that 'risks and rewards' of ownership were transferred to the buyers who had paid the booking advance amounts and in some cases these rights were transferred to third parties. However, this does not in any manner affect the treatment of the said amounts in the books of the Assessee. As noted hereinbefore, the expenses of construction were not debited to the P & L account of the Assessee. It was shown as cost of construction or block of buildings. It is only as and when a conveyance deed was executed or possession delivered that the receipt was shown as income. The explanation added by way of Notes to the Accounts was not taken note of by the ITAT when it came to the conclusion that the percentage completion method should apply to the Assessee. The other aspect that appears to have escaped the attention of the ITAT is that the Assessee offered to tax in the subsequent FY the amounts received and therefore there was no actual loss to the revenue. In similar circumstances, the Supreme Court in CIT v. Excel Industries Limited [2013 (10) TMI 324 - SUPREME COURT] observed that the dispute if any raised at the instance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered sale deed was executed. As a result, in many cases, although the assessee had received full sale consideration, the corresponding sales were not credited in the Profit Loss account and the amount was carried forward as liability till the registered sale deed was executed. In the year of execution of registered sale deed, the corresponding cost of the plot was reduced from the closing stock and sale proceeds were credited. For the purpose of computing the cost of plot, the average value of plots was taken after duly taking into account the development cost also. The average stock value worked out in this manner was then multiplied by the area of plots for which registered sale deeds were executed during the year and the corresponding stock value was reduced from the closing stock while the corresponding sale proceeds were credited in the Profit Loss account. 2.2 During the year under consideration, the return of income was filed declaring an income of ₹ 4,79,332/-. The total sale proceeds credited to the Profit Loss account were ₹ 44,57,500/-. After adding the extra receipts on accounts of development charges, maintenance charges, power connection charges a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rily enhancing the income of the Appellant by wrongly invoking section 251(1)(a) of the Income tax Act, 1961 by ₹ 1,27,07,336. 1.1 That in doing so, the Ld. CIT (A) has exceeded his authority by travelling to the assessment years beyond the Assessment year in question. 2 That the Ld. CIT (A) has erred in facts and circumstances of the case and in law in rejecting the books of accounts of the Appellant u/s 145(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2.1 That in doing so, the Ld. CIT (A) has failed to appreciate that it is not open to reject the books of accounts unless the adjudicatory authority comes to a determination that the notified accounting standards have not been regularly followed. 2.2 That in doing so, the Ld. CIT (A) has failed to appreciate the letter and intent of section 145(1) of the Act and has employed the section irregularly. 3.1 That on the facts and circumstances of the case and in law, the Ld. CIT (A) has failed to appreciate that the Appellant had been consistently following the method of accounting of recognizing the revenues on the completion of the project i.e. on registration of the sale de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from customers while deleting addition made u/s 68 of the Act by the Assessing Officer. The Ld. AR further submitted that the method of accounting being followed by the assessee was correct inasmuch as section 53A of the Transfer of Property Act, 1882 was amended with the effect that now the transfer of immoveable property is complete only when the sale deed stands executed. It was submitted that in all these eight cases when the sale deeds had been executed, the assessee had duly taken the corresponding receipts/advances as income in the profit loss account. The Ld. AR also drew attention to the amendment made to the Registration Act, 1908 wherein clause 1(a) has been inserted w.e.f. 2001 to section 17 and wherein it has been specified that unregistered documents for the purpose of sale and purchase of immoveable property shall have no effect for the purpose of section 53A of the Transfer of Property Act, 1882. It was submitted that the revenue recognition by the assessee was, therefore, in light of the provisions of Transfer of Property Act, as well as Registration Act, and further that the assessee had been following the practice of showing the amounts received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain system of accounting consistently which has even been accepted by the Department in earlier assessments and, moreover, in the instant appeal the department has not been able to demonstrate as to how the accounting system being followed was giving distorted figures of profit, it would be patently wrong to disturb the method of accounting being followed. At this juncture, any change in the method will result in the income for many assessment years to be recomputed which would be contrary to the judgment of the Hon'ble Supreme Court in the case of Excel Industries Ltd. reported in 358 ITR 295 (SC) wherein it has been held that an exercise which only results in change in income in various years but is overall tax neutral need not be pursued. Here also, the method adopted by the Ld. CIT (A) will only result in profit for each year being different but the overall profitability will be the same. We also draw support from the judgment of the Hon'ble Supreme Court in the case of COT vs. M/s Bilahari Investment reported in (2008) 299 ITR 1 (SC) for the preposition that every assessee is entitled to arrange its affairs and follow the method of accounting, which the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght about in Section 145 (2) which permits the central government to notify in the Official Gazette from time to time the income computation and disclosure standards to be followed by any class of Assesses or in respect of any class of income. That change is prospective and in any event does not apply to the case on hand. 19. The settled legal position as far as Section 145 of the Act is concerned is that it is not open to an AO to reject the accounts of an Assessee unless he comes to a determination that notified accounting standards have not been regularly followed by the Assessee. As pointed out by the CIT (A) in the order dated 2nd July, 2010, the AS of the ICAI did not have any statutory recognition under the Act although it was binding under the Companies Act, 1956. The method of accounting followed by the Assessee in the present case i.e. project completion method was certainly one of the recognized methods and has been consistently followed by it. 20. In Commissioner of Income Tax v. Bilahari Investment P Ltd. (2008) 299 ITR 1 (SC) it was observed as under: Recognition/identification of income under the 1961 Act is attainable by several methods of accounting. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, the Supreme Court in CIT v. Excel Industries Limited 2013 ITR 295 (SC) observed that the dispute if any raised at the instance of the Revenue would be at best academic. The stand of the Assessee in the present case also finds support in the decision of the Gujarat High Court in CIT-IV v. Shivalik Buildwell (P) Ltd. (2013) 40 taxmmann.com 219 (Gujarat). It was held that the Assessee in that case, who was a developer, was entitled to book the amount received as booking advance as income on transfer of the property. Till then the advance booking amounts could not be treated as his trading receipt. The High Court recognized that the Assessee in that case was entitled to apply the project completion method in terms of the applicable AS. 23. This Court too has by order dated 7th January 2015 in ITA 111/2014 (CIT v. SABH Infrastructure Ltd.) held likewise, after noticing the decisions of the Supreme Court in CIT v. Bilahari Investment P. Ltd. (supra) and the order dated 15th November 2011 in ITA No. 928 of 2011(CIT v. Manish Buildwell Pvt. Ltd.). 5.1 Accordingly, on facts of the case and respectfully following the ratio laid down by the Hon ble Apex Court and the Hon ble Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
