Desai Builders Pvt.Ltd., Ahmedabad V. The ACIT.,(OSD)Range-1, Ahmedabad

ITA 2120/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0316 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 25-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ./ ITA NO. 2120/AHD/2012 / ASSESSMENT YEAR : 2006-07 DESAI BUILDERS PVT LTD, NIRAV COMPLEX, 1 ST FLOOR, NAVRANGPURA, AHMEDABAD-9 PAN : AAACD 6916 H VS ACIT (OSD), RANGE-1, AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI KARAN SHAH, AR REVENUE BY : SHRI SATISH SOLANKI, SR DR / DATE OF HEARING : 18/08/2016 / DATE OF PRONOUNCEMENT: 13/10/2016 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-6, AHM EDABAD DATED 20.07.2012 FOR ASSESSMENT YEAR 2006-07. 2. FOLLOWING GROUNDS ARE RAISED:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS.12,47,022/- ON ACCOUNT OF NET PROFIT CALCULATED ON THE BASIS OF PERCENTAGE COMPLETION METHOD WHILE MAKING AN OBSERV ATION THAT THE APPELLANT POSTPONED THE INCOME INDEFINITELY AND ANY CONSTRUCTION PROJECT CANNOT BE TREATED AS INCOMPLETE EVEN AFTER 13 YEARS AND THE PROFIT FROM THE PROJECT SHOULD BE TAXED WHEN IT IS SUBSTANTIALLY CO MPLETED. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAI LING TO CONSIDER THE FACT THAT THE APPELLANT COMPANY HAS NOT RECOGNIZED ANY R EVENUE FROM THE PROJECTS CARRIED OUT DURING THE FINANCIAL YEAR 2005 -06 RELEVANT TO AY 2006-07 AS THE PROJECTS WERE INCOMPLETE DURING THE PREVIOUS YEAR RELEVANT TO AY 2006-07. 3. THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT T HE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD WHICH WAS ACCEP TED IN EARLIER YEARS. SMC-ITA NO. 2120/AHD/2012 DESAI BUILDERS PVT LTD VS. ACIT (OSD) AY : 2006-07 2 ALL THE DEVELOPMENT AGREEMENTS WERE EXECUTED BY THE ASSESSEE BEFORE 01.04.2003, WHEREAS THE REVISED AS-7 IS APPLICABLE FOR DEVELOPMENT AGREEMENTS ENTERED INTO AFTER 01.04.2003. THE DEPA RTMENT ITSELF BY ORDERS U/S 143(3) FOR AY 1996-97, 1997-98, 2003-04 AND 200 5-06 HAS ACCEPTED THE ASSESSEES METHOD BASED ON PROJECT COMPLETION METHO D. THERE IS NO REASON TO REJECT THE ASSESSEES ACCEPTED METHOD OF ACCOUNT ING IN THIS YEAR SINCE IN PAST NUMBER OF EARLIER YEARS FOR THE SAME PROJECT. BEFORE THE LD. CIT(A), THE ASSESSEE RELIED ON A CATENA OF JUDGMENTS, INCLUDING THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS BRITISH PAINTS INDIA LIMITED, 188 ITR 44 (SC). RELIANCE IS PLACED ON ALL THOSE CASES. FU RTHER RELIANCE IS PLACED ON ITAT JUDGMENTS IN THE CASE OF (1) DCIT VS. SHRI UMA NG HIRALAL THAKKAR IN ITA NO.560/AHD/2010 AND (2) ACIT VS. M/S. VRAJ DEVE LOPERS IN ITA NO.19/AHD/2008, HOLDING THAT PROJECT COMPLETION MET HOD IS A RECOGNIZED METHOD AND IF THE ASSESSEE IS REGULARLY FOLLOWING T HAT METHOD, THEN IN THE INTERVENING PERIOD PERCENTAGE COMPLETION METHOD CAN NOT BE APPLIED AND THE INCOME CANNOT BE ESTIMATED ON THE BASIS OF VALU E OF WORK-IN-PROGRESS. RELIANCE IS PLACED ON WRITTEN SUBMISSIONS FILED BEF ORE THE LD. CIT(A). 4. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER O F THE LD. CIT(A). 5. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ASSESSEE HAS PLACED COPIES OF NUMBER OF ASSESSMENT ORDERS IN ITS OWN CASE PASSED U/S 143(3), WHEREIN THE DEPARTMENT HAS ACCEPTED THE PROJECT COMPLETION METHOD AS ASSESSEES ACCEPTED METHOD OF ACCOUNTING. IT IS NOT DISPUTED THAT ALL THE DEVELOPMENT AGREEMENTS ENTERED INTO BY THE ASSESSEE WERE PRIOR TO 01.04.2003. SINCE THE ASSESSEE AND DEPARTMENT, BOTH HAVE BEEN FOLLOWING PROJECT COMPLETION METHOD AS A RECOGNIZED METHOD OF ACCOUNTING IN ASSESSEES CASE, THERE IS NO JUSTIFICATION IN REJEC TING THE METHOD OF ACCOUNTING SMC-ITA NO. 2120/AHD/2012 DESAI BUILDERS PVT LTD VS. ACIT (OSD) AY : 2006-07 3 IN THIS YEAR AND APPLYING THE WORK-IN-PROGRESS METH OD. IN VIEW THEREOF, THE ADDITION IN QUESTION IS DELETED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 13 TH OCTOBER, 2016 AT AHMEDABAD. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 13/10/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD