Section 271B r.w.s 44AB — Penalty for failure to get accounts audited — Assessee following project completion method of accounting — Whether advances received from the customers could be considered as part of turnover — Held, No.

Section 271B r.w.s 44AB — Penalty for failure to get accounts audited — Assessee following project completion method of accounting — Whether advances received from the customers could be considered as part of turnover — Held, No.

The assessee, a property developer, was following project completion method. During the year the opening work in progress was Rs.4.35 crore and the closing work in progress was Rs.10.07 crore. Besides the assessee had also received advances against sale of flats of Rs.4.03 crore. According to the AO, the assessee was required to obtain and file report u/s.44AB by 31-10-2005. For failure to do so, he levied a penalty u/s.271B. On appeal the CIT(A) confirmed the AO’s order.

Held:

According to the Tribunal, when the assessee was following the project completion method of accounting, the advances received against booking of flats cannot be treated as sale proceeds or a turnover or as part of gross receipt because the same was not received by the assessee unconditionally. For the purpose it relied on views expressed by the Institute of Chartered Accountants of India and on the Pune Tribunal decision in the case of ACIT v. B. K. Jhala & Associates, (69 ITD 141). Accordingly, the penalty levied was deleted and the appeal filed by the assessee was allowed.