Vinayka Associates, Ranchi V. DCIT CIRCLE-1, Ranchi

ITA 251/RAN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0478 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MOHANTY
• Assessee Lawyers: P C PAUL
• Section: 145

Judgement Text

P A G E 1 | 6 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI SMC BENCH, RANCHI BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO. 251 / RAN /201 6 ASSESSMENT YEAR : 2012 - 013 VINAYAKA & ASSOCIATES, C/O. D.P.PAUL, CA, 718A, NAVIN MITRA ROAD, LALPUR, RANCHI. VS. DCIT, CIRCLE1, RANCHI. PAN/GIR NO. (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.C.PAUL, ADV REVENUE BY : SHRI A.K.MOHANTY, JCIT DATE OF HEARING : 27 / 11 / 2018 DATE OF PRONOUNCEMENT : 28 / 11 / 2018 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), RANCHI, D ATED 10.6.2016 FOR THE ASSESSMENT YEAR 2012 - 13. 2. THE ASSESSE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1 . THAT THE CIT(A) IS NOT JUSTIFIED IN AGREEING WITH THE VIEW OF THE DCIT, RANCHI THAT AS - 7 WILL APPLY STEAD OF AS - 9 ISSUED BUY THE ICAI. 2. THAT THE CIT(A) IS NOT JUSTIFIED IN AGREEING WITH VIEW OF THE DCIT RANCHI IN APPLYING SECTION 145(3) OF THE I.T.ACT, 1961. WITHOUT PREJUDICE TO ABOVE. ITA NO.251/RAN/2016 ASSESSMENT YEAR : 2012 - 013 : P A G E 2 | 6 THE CIT(A) IS NOT JUSTIFIED IN NOT EXPRESSING ANY OPINION WHETHER THE RATE OF NET PROFIT ESTIMATED 10% ON GROSS RECEIPTS BY THE AO IS HIGH AND EXORBITANT OR NOT? 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFF ICER OBSERVED THAT UNDER THE PERCENTAGE COMPLETION METHOD, INCOME IS RECOGNISED OR ARRIVED AT DURING EVERY ACCOUNTING YEAR EVEN THOUGH THE PROJECT IS NOT COMPLETED. THE COST INCURRED DURING EACH ACCOUNTING YEAR IS MATCHED WITH THE REVENUE, WHICH CAN BE AT TRIBUTED TO THE PROPORTION OF THE WORK COMPLETED. IN FACT, THE BASIC SUBSTANCE OF SUCH A CONTRACT IS THAT A CONTINUOUS SALE OCCURS DURING THE PERIOD OF CONTRACT IN THE PROPORTION OF PAYMENTS RECEIVED BY THE BUILDER FROM CUSTOMERS. THE ASSESSE HAS FOLLOWE D PROJECT COMPLETION METHOD AS PER WHICH, INCOME IS ACCOUNTED IN THE YEAR IN WHICH THE PROJECT IS COMPLETED. THEREFORE, HE REJECTED THE BOOK RESULTS OF THE ASSESSE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ESTIMATED THE INCOME @ 10% OF T HE GROSS RECEIPTS WHICH WAS WORKED OUT TO RS.64,81,708/ - AND AFTER GIVING CREDIT OF RS.52,50,184/ - FOR INCOME SHOWN BY THE ASSESSE AT RS.52,50,184/ - ADDED BALANC E AMOUNT OF RS.12,31,524/ - TO THE INCOME OF THE ASSESSE. 4. ON APPEAL, THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSE ON THE GROUND THAT AN ASSESSMENT FOR A PARTICULAR YEAR IS FINAL ITA NO.251/RAN/2016 ASSESSMENT YEAR : 2012 - 013 : P A G E 3 | 6 AND CONCLUSIVE BETWEEN THE PARTIES ONLY IN RELATION TO THAT YEAR AND TH E DECISION GIVEN IN AN ASSESSMENT FOR AN EARLIER YEAR IS NOT BINDING EITHER ON THE ASSESSEE OR THE DEPARTMENT IN A SUBSEQUENT YEAR. 5. LD AUTHORISED REPRESENTATIVE REFERRED TO PAGE 49 OF PAPER BOOK, WHEREIN, COPY OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. BILAHARI INVESTMENT PVT LTD., (2008) 299 ITR 1 (SC) I S FILED AND SUBMITTED THAT THE HONBLE SUPREME COURT HELD THAT WHERE THE ASSESSE COMPANY WAS FOLLOWING COMPLETED CONTRACT METHOD FOR SEVERAL YEARS TO DEDUCT CHIT DISCOUNT, THE REVENUE CANNOT INSIST FOR FOLLOWING PERCENTAGE COMPLETION METHOD IN THE ABSENCE OF FINDING THAT COMPLETION CONTRACT METHOD DISTORTING BOOK RESULTS OF THE ASSESSEE . HE R EFERRED TO PAGE 74 OF PAPER BOOK, WHEREIN, THE DECISION OF HONBLE DELHI HIGH COU RT IN THE CASE OF PARAS BUILDTECH INDIA PVT LTD VS CIT (2016) 382 ITR 630 (DEL) IS FILED AND SUBMITTED THAT THE HONBLE DELHI HIGH COURT FOLLOWING TH E DECISION OF HONBLE SUP REME COURT IN THE CASE OF BILAHARI INVESTMENT PVT LTD. (SUPRA) HELD AS UNDER; 19. THE SETTLED LEGAL POSITION AS FAR AS SECTION 145 OF THE ACT IS CONCERNED IS THAT IT IS NOT OPEN TO AN AO TO REJECT THE A CCOUNTS OF AN ASSESSEE UNLESS HE COMES TO A DETERMINATION THAT NOTIFIED ACCOUNTING STANDARDS HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE. AS POINTED OUT BY THE CIT (A) IN THE ORDER DATED 2ND JULY, 2010, THE AS OF THE ICAI DID NOT HAVE ANY STATUTORY RE COGNITION UNDER THE ACT ALTHOUGH IT WAS BINDING UNDER ITA NO.251/RAN/2016 ASSESSMENT YEAR : 2012 - 013 : P A G E 4 | 6 THE COMPANIES ACT , 1956. THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IN THE PRESENT CASE I.E. PROJECT COMPLETION METHOD WAS CERTAINLY ONE OF T HE RECOGNIZED METHODS AND HAS BEEN CONSISTENTLY FOLLOWED BY IT. 20. IN COMMISSIONER OF INCOME TAX V. BILAHARI INVESTMENT P LTD . (2008) 299 ITR 1 (SC) IT WAS OBSERVED AS UNDER: 'RECOGNITION/IDENTIFICATIO N OF INCOME UNDER THE 1961 ACT IS ATTAINABLE BY SEVERAL METHODS OF ACCOUNTING. IT MAY BE NOTED THAT THE SAME RESULT COULD BE ATTAINED BY ANY ONE OF THE ACCOUNTING METHODS. THE COMPLETED CONTRACT METHOD IS ONE SUCH METHOD. SIMILARLY, THE PERCENTAGE OF COMPL ETION METHOD IS ANOTHER SUCH METHOD. UNDER THE COMPLETED CONTRACT METHOD, THE REVENUE IS NOT RECOGNIZED UNTIL THE CONTRACT IS COMPLETE. UNDER THE SAID METHOD, COSTS ARE ACCUMULATED DURING THE COURSE OF THE CONTRACT. THE PROFIT AND LOSS IS ESTABLISHED IN TH E LAST ACCOUNTING PERIOD AND TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT. THE SAID METHOD DETERMINES RESULTS ONLY WHEN THE CONTRACT IS COMPLETED. THIS METHOD LEADS TO OBJECTIVE ASSESSMENT OF THE RESULTS OF THE CONTRACT. ON THE OTHER HAND, THE PERCENTAGE OF COMPLETION METHOD TRIES TO ATTAIN PERIODIC RECOGNITION OF INCOME IN ORDER TO REFLECT CURRENT PERFORMANCE. THE AMOUNT OF REVENUE RECOGNIZED UNDER THE METHOD DETERMINED BY REFERENCE TO THE STAGE OF COMPLETION OF THE CONTRACT. THE STAGE OF COMPLETION CAN BE L OOKED AT UNDER THIS METHOD BY TAKING INTO CONSIDERATION THE PROPORTION THAT COSTS INCURRED TO DATE BEARS TO THE ESTIMATED TOTAL COSTS OF CONTRACT. THE ABOVE INDICATES THE DIFFERENCE BETWEEN THE COMPLETED CONTRACT METHOD AND THE PERCENTAGE OF COMPLETION METHOD.' 6. HE FURTHER REFERRED TO PAGES 5 TO 16 OF PAPER BOOK AND POINTED OUT THEREFROM THAT IN ASSESSMENT YEAR 2013 - 14, WHICH IS THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR, THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE OBSERVING THAT THE ASSE SSEE WAS CONSISTENTLY FOLLOWING PROJECT COMPLETION METHOD FOR REVENUE ITA NO.251/RAN/2016 ASSESSMENT YEAR : 2012 - 013 : P A G E 5 | 6 RECOGNITION AND REJECTION OF THE SAME WAS NOT JUSTIFIED. THEREFORE, HE SUBMITTED THAT THE RETURNED INCOME OF THE ASSESSEE SHOULD BE ACCEPTED AND THE ADDITIONS MADE SHOULD BE DELETED. 7. LD DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE SUBMISSION OF LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE. 8. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS NOT IN DISPUTE THAT THE CIT(A) IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR 201 3 - 14 HAS HELD THAT THE ASSESSEE WAS CONSISTENTLY FOLLOWING THE PROJECT COMPLETION METHOD FOR REVENUE RECOGNITION AND THE REJECTION OF THE SAME WAS NOT JUSTIFIED AND ALLOWED THE APPEAL OF THE ASSESSEE. LD DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY MAT ERIAL ON RECORD TO CONTROVERT THE ABOVE FINDINGS OF THE CIT(A) OR BRING ANY MATERIAL TO SHOW THAT THE ABOVE FINDINGS OF THE CIT(A) WAS VARIED IN APPEAL BY ANY HIGHER FORUM. THEREFORE, RESPECTFULLY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BILAH ARI INVESTMENT PVT LTD., (SUPRA) AND HONBLE DELHI HIGH COURT IN THE CASE OF PARAS BUILDTECH INDIA PVT LTD (SUPRA) , I SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE ADDITION OF RS.12,31,524/ - AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. ITA NO.251/RAN/2016 ASSESSMENT YEAR : 2012 - 013 : P A G E 6 | 6 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON 28 / 11 /2018. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER RANCHI ; DATED 28 / 11 /2018 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. SECRETARY, ITAT, RANCHI ON TOUR 1. THE APPELLANT : VINAYAKA & ASSOCIATES, C/O. D.P.PAUL, CA, 718A, NAVIN MITRA ROAD, LALPUR, RANCHI 2. THE RESPONDENT. DCIT, CIRCLE1, RANCHI 3. THE CIT(A) - RANCHI 4. PR.CIT - RANCHI 5. DR, ITAT, RANCHI 6. GUARD FILE. //TRUE COPY//