| The Tax Publishers2020 TaxPub(DT) 4417 (Jp-Trib) INCOME TAX ACT, 1961
Section 145(3)
Where assessee had been consistently following the same accounting policy for recognition of revenue, which had even been accepted in the past, thus, there was no justification on the part of AO to disturb the accounting policy adopted by the assessee and thereby apply percentage completion method for the relevant assessment year.
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Accounting method - Rejection - Estimation of income - Assessee engaged in business of Real Estate/Developer---Assessee consistently following same accounting policy for recognition of revenue
Assessee-firm was in business of Real Estate/Developer. It followed AS-9 in so far as recognition of revenue was concerned and followed AS-7, i.e., percentage completion method to work out the profits at the end of each financial year as the projects were spread in series of financial years. AO was of the view that the assessee failed to maintain its accounts in a manner which could present 'true and fair picture' of its accounts and financial transactions. Further, the AO was of the view that the project completion method followed by the assessee for recognition of revenue, did not declare the complete and correct profits. Accordingly, he rejected the books of account under section 145(3) and percentage completion method was applied for the year under consideration. Held: It was found that project completion method for recognition of revenue, was accepted by AO in assessee's own case for earlier assessment years. Further, percentage completion method for recognition of revenue, till financial year 2015-16 (assessment year 2016-17), was not mandatory/compulsory to be followed by the assessee. It was only with effect from financial year 2016-17 (assessment year 2017-18), that the percentage completion method had been made compulsory for the Real Estate Developers and that too for projects commencing on or after 1-4-2016, by way of introduction of Income Computation and Disclosure Standards (ICDS - III), relating to Construction Contracts. Since the assessee had been consistently following the same accounting policy for recognition of revenue, which had even been accepted in the past, thus, there was no justification on the part of AO to disturb the accounting policy adopted by the assessee and thereby apply percentage completion method for the relevant assessment year.
REFERRED : CIT v. Bilahari Investment (P) Ltd (2008) 168 Taxman 95 (SC) : 2008 TaxPub(DT) 1709 (SC)
FAVOUR : In assessee's favour
A.Y. : 2015-16
IN THE ITAT, JAIPUR BENCH
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