Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

July 2025

Sec 145 – Percentage Completion Method (PCM) – Rejection of consistently followed method of accounting without any defects or inconsistencies – Addition of entire actual sale value led to double addition as income had already been recognised on accrual basis under PCM in earlier years – Not permissible – Once accepted, accounting method cannot be altered without just cause.

By Jagdish T Punjabi, Chartered Accountant
Devendra Jain & Aditya Bhatt, Advocates
Reading Time 3 mins

26 [2025] 122 ITR(T) 154 (Ahmedabad - Trib.)

ITO vs. Sainath Land Developers

ITA NO.: 441 (AHD.) OF 2020

A.Y.: 2015-16 DATE: 31.12.2024

Sec 145 – Percentage Completion Method (PCM) – Rejection of consistently followed method of accounting without any defects or inconsistencies – Addition of entire actual sale value led to double addition as income had already been recognised on accrual basis under PCM in earlier years – Not permissible – Once accepted, accounting method cannot be altered without just cause.

FACTS

The assessee, a partnership firm was engaged in real estate development. The return was selected for limited scrutiny under CASS. During the course of assessment, the Assessing Officer noted that the assessee had shown opening work-in-progress (WIP) of ₹6.47 crores and had sold flats and shops worth ₹4.20 crores during the year. However, the sales reported in the profit and loss account amounted to only ₹55.70 lakhs.

The assessee explained that it had been consistently following the Percentage Completion Method (PCM) of revenue recognition since A.Y. 2012-13, which

Read More
Download PDF

You May Also Like

S. 54F – Capital gain arising out of surrender of tenancy rights is eligible for exemption under section 54F if the developer-builder has allotted a residential flat without any consideration against such surrender by executing Permanent Alternate Accommodation Agreement. S. 56 – Once an income from a source falls within a specific head, the fact that it may indirectly be covered by another head will not make the income taxable under the latter head.

Sec 56(2)(vii)(b)(ii): Addition on account of difference between stamp duty value and purchase consideration for agricultural land made under a provision which was introduced subsequently – AO could not apply amended provision retrospectively – Further, payment of actual consideration duly established – Addition unsustainable.