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TMI Blog2003 (4) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... o the work-in-progress in the balance sheet and the assessee stated to be following completed contract system whereby the entire profits of the project will be offered for taxation only in the year in which the project is completed. The AO did not accept these contentions. Following the decision of the Tribunal, Bangalore, Bench, in the case of United Property Developers (P) Ltd., in ITA No. 546/Bang/1997, order dt. 10th Sept., 1999, he proceeded to add 8 per cent of the work-in-progress as income from apartment construction. 3. It was contended on behalf of the assessee before the CIT(A) that in all the preceding years, the assessee was following project completion method, which has all along been accepted by the Department, but this contention did not find favour with the CIT(A). According to him, the principle of res judicata or estoppel is not applicable to the income-tax proceedings and even if the method has been regularly followed by the assessee and even if it is earlier accepted by the Department, if the method itself was faulty and was not reflecting the correct income of the assessee, the AO was well within his rights to invoke the provisions of s. 145 and to pass appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A), there is substantial amount of certainty with which the project proceeds based on the completion of various different stages and the payments received from the buyers minus the expenditure incurred up to that stage the income could easily be determined in the case of a developer. The AO, according to the CIT(A), in the facts and circumstances of the case, in the light of discussions made in his order, is justified in estimating income at 8 per cent of the work-in-progress. 4. The assessee is aggrieved. The order of the CIT(A) is challenged by the assessee on several grounds. The learned counsel pleaded that the assessee is a developer and builder and has been declaring income on project completion method from year to year. The income returned on such project completion method has been accepted for the previous year as shown below: Asst. yr. Name of the project 1990-91 Fernville Glendale 1994-95 Nandi, Himagiri, Ligoury Court, Rucella Varsha 1995-96 Jacaranda Iris 1996-97 Brindavan Layout 2000-01 Kamanahalli Canara Bank Layout (Assessment pending) 2001-02 Nandi Enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the order of the CIT(A), especially the fallacies of the project completion method for recognizing the Revenue wherein it postpones such ascertainment for an indefinite period. 6. We have carefully gone through the records and considered the rival submissions. In our view, the contentions of the assessee have to succeed. Sec. 145 of the IT Act requires that business income or other sources income shall be normally computed in accordance with the method of accounting regularly employed by the asssessee. If the assessee has maintained accounts the section leaves it to the assessee to adopt any system of accounting and obliges the AO to compute income, profits and gains in accordance with such method of accounting regularly employed if profits of the business can properly be deduced therefrom. If an authority is required to this proposition, useful reference may be made to the decision of the Supreme Court in the case of CIT vs. A. Krishnaswamy Mudaliar Ors. (1964) 53 ITR 122 (SC) and CIT vs. McMillan Co. (1958) 33 ITR 182 (SC). The assessing authority has to look into the substance of the situation and decide the matter in such a manner that neither Revenue is put to unreaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the method of accounting regularly employed by it. When once the choice is made by the assessee of a system that is recognized by the production of accounting or by the assessees of the same class the assessee cannot be taken away from that class just for the purpose of bringing some income to tax by arbitrarily making addition to the disclosed income. It is not the case of the Department that the assessee has not followed this method in its true requirements nor the Department has found any mistakes in this method which the assessee suggests has followed from year to year. In our view, it becomes the duty of the AO to accept the results disclosed by the assessee from the method of accounting adopted by the assessee which itself is a recognized method in the class of the business to which the assessee falls. The Department, in making this exercise has not followed any principle or method which can be said to be recognized. It has only unjustly and arbitrarily estimated income which cannot be permitted especially when the assessee has maintained elaborate books of account and also subjected its books of account to audit by an outside agency. The AO has not pointed out any defects ..... X X X X Extracts X X X X X X X X Extracts X X X X
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