Revision – Section 263 – A. Y. 2007-08 – Assessee consistently following project completion method – Revision on the ground that other method is preferable – Revision not valid

The Assessee was engaged in construction of commercial and residential premises. For the A. Y. 2007- 08, the Assessing Officer accepted the project completion method followed by the assessee and completed the assessment u/s. 143(3). Exercising the powers u/s. 263 of the Act, the Commissioner set aside the assessment and directed to recomputed the income of the asessee applying the percentage completion method. The Tribunal held that the assessee had been consistently following project completion method over the years. Moreover, the issue relating to the appropriate method of accounting is a debatable issue and, thus, the Commissioner would have no jurisdiction u/s. 263 to direct application of one particular method of accounting in preference to another. The Tribunal set aside the order of the Commissioner.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“The assessee had chosen the project completion method of accounting and had been consistently following it over the years. The Revenue could not reject the method because, according to the Commissioner, another method was preferable. Thus, no fault could be found with the order of the Tribunal.”