Section 145 – The project completion method is one of the recognised methods of accounting and as the assessee has consistently been following such recognised method of accounting, in the absence of any prohibition or restriction under the Act for doing so, the CIT(A) is correct in holding that the AO’s assertion that the project completion method is not a legal method of computation of income is not supported by facts and judicial precedents

Section 145 – The
project completion method is one of the recognised methods of accounting and as
the assessee has consistently been following such recognised method of
accounting, in the absence of any prohibition or restriction under the Act for
doing so, the CIT(A) is correct in holding that the AO’s assertion that the
project completion method is not a legal method of computation of income is not
supported by facts and judicial precedents

FACTS

The
assessee, a partnership firm engaged in the business of real estate and
construction of buildings for the past several years, filed its return of
income declaring therein a total income of Rs. 1,12,120. The AO completed the
assessment u/s. 143(3) of the Act, assessing the total income of the assessee
to be Rs. 3,94,62,580. While assessing the total income of the assessee, the AO
rejected the books of accounts on the ground that the assessee did not produce
bills / vouchers before him for ascertaining the accuracy and correctness of
the books of accounts; that it did not furnish evidence regarding closing
stock; and that the assessee is following the project completion method and not
the percentage completion method. The AO observed that the project completion
method has no existence since 1^st April, 2003 and laid emphasis on
revised AS-7 introduced by the ICAI in 2002.

Aggrieved, the assessee preferred an appeal to CIT(A) who
noted that in the assessee’s own case in the assessment proceedings for AY
2014-15, the AO has accepted the project completion method. The CIT(A) allowed
the appeal filed by the assessee.

But the Revenue preferred an appeal to the Tribunal where
it placed reliance on the decision of the Supreme Court in the case of CIT
vs. Realest Builders & Services Ltd. [(2008) 22 (I) ITCL 73 (SC)].

HELD

The Tribunal observed that the assessee’s business came
into existence on 11^th March, 2003 and since then it has been
consistently following the project completion method of accounting. It is well
settled that the project completion method is one of the recognised methods of
accounting and as the assessee has consistently been following such recognised
method of accounting, in the absence of any prohibition or restriction under
the Act for doing so, it can’t be held that the decision of the CIT(A) was
erroneous or illegal in any manner. The judgement in the case of CIT vs.
Realest Builders & Services Ltd. (supra) relied on by the DR on the
method of accounting is rather in favour of the assessee and against the
Revenue in the peculiar facts of the case. As such, the appeal filed by the
Revenue was dismissed.