Pr. Commissioner of Income Tax (Central)-3 v. Indarapuram Habitat Centre Pvt. Ltd

ORDER %

06.11.2017

¶1The question,whichthe Revenueurges in these two appeals,is whetherthe ITAT fell into errorin acceptingthe method,oftreatment of revenue and income by the assessee, who is a developer and undertakes construction projects including those of commercial buildings. The AO sought to bring additionalamount to tax on the groundthat even whilethe assesseeclaimedto have followedthe AS-9method,he neitherfollowedthe ProjectCompletionMethodi.e. the Revenue recognitionon transferof goods, he also did not apply the other more recognisedmethod approved under Section 145 of the IncomeTax Act, i.e, the PercentageCompletionMethod.

¶2Learnedcounselfor the appellanturged that the ITAT fell into error in acceptingthe assessee'ssubmissionsin the presentinstance. He reliedupon the guidancenote issuedby the InstituteofChartered ITA 476/2017& \ ^ ^ Accountants,with respectto the applicabilityof AS-7, to the effect that if the activitywas close to constructioncontracts,AS-7 would apply. It was, therefore,urged that, in the presentcase, the assessee was clearlycoveredby AS-7. The ITATerredin holdingotherwise.

¶3The ITAT'sfindingsare extractedbelow:- "TheAO, duringthe asst. yr. 2006-07has also accepted the projectcompletionmethodfollowedby the assessee and has not disturbed the income by making any estimatedincomeon the work-in-progress.There is also merit in the submissionof the counselfor the assessee that the assessee has Declared huge income in the subsequentyear after completionofthe saidprojectas againstmeagerincomeestimatedby the AO. Theproject completionmethodis an acceptedmethodofaccounting for builders. The assessee is regularlyfollowing this method-ofaccountingwhich has been acceptedby the AO in the preceding as well as in the subsequent assessmentyear. Further the AS-7 as discussedby the AO and the CIT(A) is applicableonlyfor contractors engagedin the civilconstructionbusinessand the same does notapplyto builders/developers.It is an established legal proposition that an assessee can follow any recognized.method of accountingand the condition is that the same method has to be followed consistently. Since the assessee in the instant case was regularly followingtheprojectcompletionmethodand has offered the income in theyear ofcompletionofproject, there is no soundreason as to why the same shouldbe rejected andpercentagecompletionmethodbefollowed."

¶4This Court is of the opinionthat the instancespointedout by the ITAT, in the presentcase, are significant-both in the previous assessmentyear as well as in the subsequentassessmentyears,the AO ITA 476/2017 & ^ appearsto have acceptedthe systemofaccounting. There is nothing on record to suggest that the assessee was undertakinglarge scale activity.

¶5In the circumstances,the findings rendered by the ITAT are peculiarto the circumstancesofthe case and, cannotbe said to have universalor wide applicabilityso as to requireaquestionoflaw. \

¶6No substantialquestionoflaw, therefore,arises.

¶7Theappealis, therefore,dismissed. S. RAVINDRA BHAT, J NOVEMBER 06, 2017 st r SANjEteVSACHDEVA,J ITA 476/2017 & V ^

* IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 476/2017 + . , PR. COMMISSIONEROF INCOMETAX (CENTRAL)-3 Appellant Through Mr. Rahul Chaudhary,Advocate. versus INDRAPURAMHABITATCENTREPVT. LTD.Respondent Through None. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE SANJEEV SACHDEVA