9911796707
TMI Blog2025 (1) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that year. No such discrepancy was recognized and brought on record by the Revenue. The accounting method adopted by the assessee was a recognized method of accounting as per the Accounting Standards issued by ICAI and the percentage completion method was consistently followed by the assessee in all the years to recognize its revenue, which was also accepted by the Revenue. AO was not correct in rejecting the method of accounting regularly followed by the assessee and in working out the income on the basis of actual sales made during the year. Revenue cannot be allowed to flip-flop the method of accounting regularly followed by the assessee without pointing out any defect in the accounts of the assessee. As rightly pointed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Commissioner of Income Tax (Appeal)-10 [in short CIT(A)], Ahmedabad, dated 19.03.2020 for the Assessment Year 2015-16. 2. The brief facts of the case are that the assessee is a partnership firm and the return of income for AY 2015-16 was filed by the assessee on 24.09.2015 declaring total income of Rs. 4,68,360/-. The case was selected for limited scrutiny under CASS. In the course of assessment proceeding, the AO found that the assessee had opening work in progress (WIP) of Rs. 6,47,47,376/- and during the year the assessee had sold stock (flats & shops) of Rs. 4,20,11,458/-. However, in the P & L account, the assessee had shown sale proceed of Rs. 55,70,000/- only. Thus, the difference in the sales as per the WIP stock account and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales as disclosed in the P&L account. He submitted that the Ld. CIT(A) was not correct in deleting the addition on the basis of certain additional evidences filed in the course of appellate proceedings and without calling for any remand report from the AO. He contended that the AO was not allowed an opportunity to verify the facts and figures as submitted before the Ld. CIT(A) in the course of appellate proceedings, which was reproduced in his order. 6. Per Contra Shri Pritesh L Shah, the Ld. AR of the assessee explained that the assessee was consistently following the percentage completion method of accounting since AY 2012-13, which was accepted by the Department in the past. The assessee had disclosed income on the basis of percentage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year is not found correct. The assessee had disclosed sales of Rs. 55,70,000/- in P & L account. Therefore, the set-off of this amount should have been allowed from the sales as worked out from the difference in WIP of stock and only the balance amount should have been considered as undisclosed sales. The AO did not allow the set-off for sales as disclosed by the assessee in the P & L account, which was not correct. On merits, there is no dispute to the fact that the assessee was consistently following the percentage completion method of accounting. This method of accounting as followed by the assessee, was accepted by the Department in the earlier years. This fact was explained by the assessee before the AO to account for the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CAI and the percentage completion method was consistently followed by the assessee in all the years to recognize its revenue, which was also accepted by the Revenue. Under the circumstances, the AO was not correct in rejecting the method of accounting regularly followed by the assessee and in working out the income on the basis of actual sales made during the year. When a fundamental aspect permeating through the different assessment years is found as a fact and the parties have allowed that position to be sustained; it would not be open and appropriate to allow that position to be changed in a subsequent year. The Revenue cannot be allowed to flip-flop the method of accounting regularly followed by the assessee without pointing out any def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above facts and judicial precedents, we do not find anything wrong with the order of the Ld. CIT(A). He has rightly upheld the method of accounting regularly followed by the assessee and has correctly deleted the addition as made by the AO. The addition made by the AO was not only incorrect but was based on wrong presumption which had led to double addition. As explained by the assessee the work-in-progress credited to P&L account comprised of cost-plus profit on percentage completion method and the closing balance of WIP was accordingly disclosed in the accounts. Thus, the profit was already disclosed in closing WIP every year and this fact has not been controverted by the Revenue. Therefore, the Ld. CIT(A) has correctly delete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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