INCOME TAX ACT, 1961

Section 143(3)

Assessment - Addition to income - Assessee having twin revenue sources, i.e., from construction contract and from developing a project - Profit from project allegedly not determined using percentage completion method

Pursuant to search and seizure proceedings carried on in certain group, of which assessee also belonged, AO made addition in relation to money received for sale of certain flats. CIT(A) deleted addition made for relevant assessment year. However, CIT(A) observed that assessee was following percentage completion method of accounting for computing its profit from the project. He alleged that profit from project('NOP') was not determined using the percentage completion method by assessee and thus, CIT(A) enhanced profit from said project. Held: Assessee had two main stream of revenues, one from project (NOP) and from other project. Assessee was basically construction contractor and also indulged in developing and sale of said project. On overall basis, assessee was following percentage completion method. Issue was as to whether method of percentage of completion method could be applied for construction contract as well as real estate development project with reference Guidance Note GN(A) 23 (R2012). Project of assessee ('NOP') did not have same economic substance as construction contract. Revenue can be recognized significantly based on principle of AS-9 (Accounting Standard as per ICAI). Assessee carried stock-in-trade for next assessment year and it was uncertain as to whether cost of sales will remain same and there may be cost of holding the stock which might reduce profit of assessee, therefore it was prudent to absorb the profit based on the revenue not based on estimation which should have been earned by the assessee by the end of relevant year. Accordingly, enhancement proposed by CIT(A) was reduced.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

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