SWASTIK GROUP, NAVI MUMBAI V. ACIT 15(3), MUMBAI

ITA 3539/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62611 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 30-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURALI
• Assessee Lawyers: SURESH SUBRAMANIAN
• Keywords: Business income; Rule of consistency
• Section: 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , . . , . . BEFORE SHRI R.S.SYAL, AM & SHRI AMIT SHUKLA, JM ./ ITA NO.3539/MUM/2011 ( / ASSESSMENT YEAR : 2006-2007 ) SWASTIK GROUP, 703-704, 7 TH FLOOR, COMMODITY EXCHANGE BLDG., PLOT NO.2,3, & 4, SECTOR 19, VASHI, NAVI MUMBAI-400 705 VS. ACIT 15(3), MUMBAI-4007. ./ ./PAN NO. ABCFC 1000 P ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MR. SURESH SUBRAMANIAN / RESPONDENT BY : MR. M. MURALI / DATE OF HEARING : 30 TH MAY 2012 / DATE OF PRONOUNCEMENT : 6 TH JULY, 2012 / O R D E R PER AMIT SHUKLA (J.M.) : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 21-8-2008, PASSED BY THE CIT(A)-2 8, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143( 3) FOR THE ASSESSMENT YEAR 2006-2007. 2 . IN THE GROUNDS OF APPEAL THE ASSESSEE HAS TAK EN FIVE GROUNDS WITH VARIOUS SUB GROUNDS. AT THE OU TSET, GROUND NO.2 ALONG WITH ITS SUB ITA NO : 3539/M/11 2 GROUNDS HAS NOT BEEN PRESSED BY THE LD . AR AND ALSO GROUNDS NO.3 TO 5 BEING GENERAL IN NATURE, HENCE, THEY WERE ALSO NOT PRESSED. 3 . IN GROUNDS NO.1, TWO ISSUES WHICH HAVE BEEN RAISED ARE, DISALLOWANCE OF INTEREST OF ` .5,27,550/- PAID ON UNSECURED LOANS AND CLAIM OF SUCH AN EXPENDITURE AGAINST THE INTEREST RECEIVED FROM THE BANK AND SECOND ISSUE IS WITH REGARD TO ESTIMATE OF BUSINESS INCOME AT THE RATE OF 8% ON PRESUMPTIVE BASIS BY THE ASSESSING OFFICER ON BOOKING ADVANCE COLLECTED BY THE AS SESSEE DURING THE YEAR ON THE BASIS OF REVISED ACC OUNTING STANDARD-7. 4 . REGARDING FIRST ISSUE, LEARNED C OUNSEL SUBMITTED THAT AS PER THE INSTRUCTION OF THE ASSESSEE, THIS I SSUE IS NOT PRESSED AS THE ASSESSEE IS PROPOSING TO FILE APPLICATION UNDER SECTION 154 IN THE ASSESSMENT YEAR 2007-2008 TO SEEK THE CLAIM. THUS, THIS ISSUE IS TREATED AS NOT PRESSED, AND HENCE, IS BEING DISMISSED. 5. THE ONLY ISSUE FOR ADJUDICATION BEFORE US IS ADDITION ON ACCOUNT OF ESTIMATE OF PRESUMPTIVE PROFIT AT THE RATE OF 8% ON BOOKING ADVANCE RECEIVED DURING THE YEAR. THE FACTS RELEVANT FOR THE ISSUE INVOLVED ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS AS BUILDER/DEVELOPER IN NAVI MUM BAI. DURING THE YEAR THE ASSESSEE HAS UNDERTAKEN A REDEVELOPMENT PROJECT AT NAVI MUMBAI. THE ASSESSEE HAS BEEN THROUGH OUT FOLLOWING THE PROJECT COMPLETION METHOD FOR RECOGNISING THE INCOME FROM SUCH PROJECTS. ON THE PERUSAL ITA NO : 3539/M/11 3 OF THE PROFIT LOSS ACCOUNT AND THE BAL ANCE SHEET, THE ASSESSING OFFICER OBSERVED THAT WORK-IN-PROGRESS AS ON 31-3-2006 HAS BEEN VALUED AT ` .6,59,21,547/- AND ALL THE EXPENSES IN CURRED IN RESPECT OF THE PROJECT UNDER CONSIDERATION DURING THE YEAR HAVE BEEN TRANSFERRED TO WORK-IN- PROGRESS WITHOUT COMPUTING ANY PROFIT FOR THE YEAR UNDER CONSIDERATION. IT WAS FURTHER NOTED BY HIM THAT THE RECEIPTS FROM CUSTOMERS WAS SHOWN IN THE BALANCE SHEET AT ` .4,84,25,000/- AS BOOKING ADVANCE AND NO PROFIT OR INCOME HAS BEEN SHOWN ON THESE ADVANCES. BEFORE THE ASSESSING OFFICER, IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAS BEEN REGULARLY EMPLOYING THE PROJECT COMPLETION METHOD FOR RECOGNISING THE INCOME, SINCE RISKS ASSOCIATED WITH THE PROJECT UNDER TAKEN BY IT DO NOT GET TRANSFERRED TO THE PURCHASERS OF THE SHOPS/FLATS TILL THE COMPLETION. IT WAS ALSO STATED THAT PROJECT WAS IN PROGRESS IN THIS YEAR AND WAS NOT IN INITIAL STAGE TILL 31-3-2006. IN THE SUBSEQUENT YEAR, IT HAS OFFERED THE PROFITS AND MOST OF THE PROJECT WAS AT THE COMPETITION STAGE. THE ASSESSING OFFICER HELD THAT THE PROJECT COMPLETION METHOD IS NOT A CORRECT METHOD FOR THE PURPOSE OF COMPUTING TAXABLE INCOME IN VIEW OF THE REVISED ACCOUNTING STANDARD-7, WHEREIN THE INCOME HAS TO BE COMPUTED IN RESPECT OF CONSTRUCTION PROJECTS ON ANNUAL BASIS WITHOUT DEFERRING THE SAME OVER THE PERIOD OF CONSTRUCTION OF WHOLE PROJECT. ACCORDINGLY, THE ASSESSING OFFICER ESTIMATED THE PRESUMPTIVE PROFIT OF 8% ON THE ADVANCE OF ITA NO : 3539/M/11 4 ` .4,84,25,000/- AND HELD THAT SUM OF ` .38,74,000/- IS TO BE TAXED UNDER THE HEAD BUSINESS INCOME IN THIS YEAR. 6 . BEFORE THE CIT(A), THE ASSESSEE REITERATED THE SAME SUBMISSION, FIRSTLY THAT THE SUBSTANTIAL CONSTRUCTION WAS NOT COMPLETED DURING THE YEAR AND, THEREFORE, NO PROFIT HAS DISCLOSED IN THIS ASSESSMENT YEAR AND SECONDLY , THE ASSESSEE HAS BEEN FOLLOWING THE PROJECT COMPLETION METHOD WHIC H IS A WELL RECOGNISED METHOD OF ACCOUNTING. LEARNED CIT(A) AFTER CALLI NG FOR THE REMAND REPORT FROM THE ASSESSING OFFICER ON ASSSESSEES SU BMISSION, REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THE VIEW TAKEN BY THE ASSESSING OFFICER IS JUSTIFIED AND ACCORDINGLY HE CONFIRMED THE ADDITION MADE AT ` .38,74,000/-. 7. BEFORE US, THE LEARNED AR SUBMITTED THAT THE POINT IN ISSUE IS COVERED BY THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF M/S UNIQUE ENTERPRISES VS. ITO, P ASSED IN ITA NO.5109/MUM/2008, VIDE ORDER DATED 20-8-2010 . HE SUBMITTED THAT IN THIS CASE THE ITAT AFTER DISCUSSING THE RELEVANT ACC OUNTING STANDARDS EVEN REVISED ACCOUNTING STANDARD-7 AND THE PROJECT COMPLETION METHOD, HAVE COME TO THE CONCLUSION THAT THE ASSESSEES, WHO ARE FOLLOWING PROJECT COMPLETION METHOD AND HAVE OFFERED INCOME-TAX IN THE YEAR IN WHICH SUBSTANTIAL WORK HAS BEEN COMPLET ED, THE SAME SHOULD BE ACCEPTED. ON THE OTHER HAND, LEARNED DR SUBMI TTED THAT THE ASSESSEE HAS NOT ITA NO : 3539/M/11 5 OFFERED ANY INCOME IN THIS YEAR, EVEN THOUGH IT HAS RECEIVED SUBSTANTIAL IN VIEW OF THE REVISED ACCOUNTING STANDARD-7. THE ASSESSEE BEING A BUILDER WAS REQUIRED TO PREPARE THE ACCOUNTS AS PER ACCOUNTING STANDARD-7. HE THUS, HEAVILY RELIED UPON THE FINDING OF THE ASSESSING OFFICER AS WELL AS CIT(A). 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO THE FINDINGS GIVEN BY THE CIT(A) AS WELL AS THE ASSESSING OFFICER. IT IS NOT DENYING FACT THAT ASSESSEE HAS BEEN OFFERING INCOME ON PROJECT COMPLETION METHOD. FROM THE FACTS OF THE CASE, IT IS NOTED THAT THE PROJECT OF THE ASSESSEE HAD COMMENC ED ON 9-1-2005 BY EXECUTION OF DEVELOPMENT AGREEMENT AND THE PROJECT WAS APPROVED ON 17-2-2005. IT IS ALSO ADMITTED THAT THE PROJ ECT WAS MOSTLY COMPLETED IN THE FINANCIAL YEAR 2006-2007 (I.E. AY 2007-08), WHEREIN THE INCOME HAS BEEN SHOWN IN THAT ASSESSMENT YEAR (I.E.2007-2008). THE ASSESSING OFFICER AS WELL AS CIT(A) HAVE HELD THAT THE INCOME SHOULD BE OFFERED ON PRESUMPTIVE BASIS IN THIS YEAR ALSO WHEN THE PROJECT HAD COMMENCED AND ADVANCES WERE RECEIV ED IN VIEW OF THE REVISED ACCOUNTING STANDARD-7. THIS ISSUE HAS COME UP FOR CONSIDERATION BY ITAT MUMBAI BENCH IN THE CASE OF M/S UNIQUE ENTERPRISES (SUPRA), WHEREIN THIS ASPECT HAS BEEN DEALT WITH IN DETAIL. THE RELEVANT FINDING OF THE TRIBUNAL FOR THE SAKE OF READY REFERENCE ARE REPRODUCED HEREIN BELOW :- ITA NO : 3539/M/11 6 13. THE ASSESSEE IN THIS CASE IS A BUILDER AND REAL ESTATE DEVELOPER. THE UNDISPUTED FACT IS THAT THE ASSESSEE FOLLOWS PROJECT COMPLETION METHOD OF ACCOUNTING SINCE ITS INCEPTION IN THE YEAR 1996. IT HAS BEEN OFFERING INCOME BY THIS METHOD OF ACCOUNTING AND THE DEPARTMENT HAS BEEN ACCEPTING THE SAME OVER THE YEARS. THE OTHER UNDISPUTED FACT IS THAT THE ASSESSEE HAS DECLARED THAT THE PROJECT IS COMPLETED IN THE ASSESSMENT YEAR 2005-06 AND THE ASSESSEE HAS OFFERED THE INCOME ON PROJECT COMPLETION METHOD IN THAT YEAR. THUS, ONLY THE YEAR OF TAXATION IS UNDER DISPUTE. THE ISSUE IS WHETHER THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE HAS BEEN RIGHTLY REJECTED BY THE A.O. THE A.OS CONTENTION, WHICH IS AFFIRMED BY THE CIT(A) IS THAT AS-7 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA IS APPLICABLE TO THE BUILDERS AND REAL ESTATE DEVELOPERS. THIS FINDING IN OUR OPINION IS ERRONEOUS. AS-7 PRIOR TO ITS REVISION IN THE YEAR 2002 DEALT WITH THE ACCOUNTING FOR CONSTRUCTION CONTRACTS, IN THE FINANCIAL STATEMENTS OF ENTERPRISES. WE EXTRACT A PART OF THIS STATEMENT FOR READY REFERENCE: THIS STATEMENT DEALS WITH ACCOUNTING FOR CONSTRUCTION CONTRACTS IN THE FINANCIAL STATEMENTS OF ENTERPRISES UNDERTAKING SUCH CONTRACTS THEREAFTER REFERRED TO AS CONTRACTORS). THE STATEMENT ALSO APPLIES TO ENTERPRISES UNDERTAKING CONSTRUCTION ACTIVITIES OF THE TYPE DEALT WITH IN THIS STATEMENT NOT AS CONTRACTORS BUT ON THEIR OWN ACCOUNT AS A VENTURE OF A COMMERCIAL NATURE WHERE THE ENTERPRISE HAS ENTERED INTO AGREEMENT S FOR SALE.[EMPHASIS OWN] 14. A PERUSAL OF THE ABOVE MAKES IT CLEAR THAT THE STATEMENT APPLIED TO BUILDER AND REAL ESTATE DEVELOPERS. IN AS-7, AS REVISED IN THE YEAR2002, THE SCOPE OF THE STATEMENT IS GIVEN AS FOLLOWS: SCOPE (1) THIS STATEMENT SHOULD BE APPLIED IN ACCOUNTING FOR CONSTRUCTION CONTRACTS IN THE FINANCIAL STATEMENTS OF CONTRACTORS. A CONSTRUCTION CONTRACT IS DEFINED AS FOLLOWS: A CONSTRUCTION CONTRACT IS A CONTRACT SPECIFICALLY NEGOTIATED FOR THE CONSTRUCTION OF AN ASSET OR A COMBINATION OF ASSET THAT ARE CLOSELY INTERRELATED OR INTERDEPENDENT IN TERMS OF THEIR DESIGN, TECHNOLOGY AND FUNCTION OR THEIR ULTIMATE PURPOSE OR USE. FROM READING OF THE ABOVE MAKES IT CLEAR THAT REVISED AS-7 ISSUED IN THE YEAR 2002, DOES NOT APPLY TO BUILDERS AND REAL ESTATE CONSULTANTS. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA HAS IN REPLY TO A QUERY GIVEN IN THE COM PENDIUM OF OPINIONS VOL.XXIII 95 QUERY NO. 15 AS STATED AS FOLLOWS: B. QUERY 5. IN THE LIGHT OF THE ABOVE, TH E QUERIST HAS SOUGHT THE OPINION OF THE EXPERT ADVISORY COMMITTEE ON THE FOLLOWING ISSUES: (A) WHETHER THE REVISED AS-7 WOULD BE APPLICABLE T THE COMPANY FOR ACCOUNTING FOR NEW HOUSING PROJECTS, WHICH MAY BE UNDERTAKEN BY THE COMPANY ON OR AFTER 01.04.2003 ON THE SAME BUSINESS MODEL AS MENTIONED IN THE FACTS OF THE CASE. (B) IN CASE REVISED AS-7 IS NOT APPLICABLE TO THE COMPANY, WHETHER THE COMPANY CAN VALUE ITS INVENTORIES IN ACCORDANCE WITH ACCOUNTING STANDARD (AAS)2, VALUATI ON OF INVENTORIES, ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, CONSIDERING THE DEFINITION OF INVENTORY AS AN ASSET IN THE PROCESS OF PRODUCTION ITA NO : 3539/M/11 7 FOR THE PURPOSE OF SALE, I.E. WHETHER THE ACTIVITY OF DEVELOPING HOUSING PROJECTS ON ITS OWN ACCOUNT AS A COMMERCIAL VENTURE BY THE COMPANY CAN BE CONSTRUED AS A PRODUCTION ACTIVITY. (C) IF THE ACTIVITIES OF THE COMPANY CANNOT BE CONSIDERED AS A PRODUCTION ACTIVITY AND CONSEQUENTLY AS -2 IS ALSO NOT APPLICABLE, WHICH ACCOUNTING STANDARD SHOULD BE FOLLOWED FOR RECOGNITION OF REVENUE AND VALUATION OF ITS CONSTRUCTION WORK-IN- PROGRESS? C. POINTS CONSIDERED BY THE COMMITTEE 6. THE COMMITTEE NOTES THAT ACCOUNTING STANDARD (AS)-7, ACCOUNTING FOR CONSTRUCTION CONTRACTS, ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDI A IN DECEMBER 1983, STATES IN PARAGRAPH 1 THAT THE STATEMENT ALSO APPLIES TO ENTERPRISES UNDERTAKING CONSTRUCTION ACTIVITIES OF THE TYPE DEALT WITH IN THIS STATEMENT NOT AS CONTRACTORS BUT ON THEIR OWN ACCOUNT AS A VENTURE OF A COMMERCIAL NATURE WHERE THE ENTERPRISE HAS ENTERED INTO AGREEMENTS FOR SALE. THEREFORE, THE STANDARD WAS APPLICABLE TO THE ACTIVITIES CARRIED ON BY THE COMPANY AS STATED IN PARAGRAPHS 1 AND 2 ABOVE. THE COMMITTEE ALSO NOTES THAT THE REVISED ACCOUNTING STANDARD (AS) 7, CONSTRUCTION CONTRACTS, ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTS OF INDIA IN 2002, DOES NOT CONTAIN THE AFORESAID SENTENCE CONTAINED IN THE PRE-REVISED AS-7. ON THE OTHER HAND, PARAGRAPH 1 OF REVISED AS-7, CLEARLY STATES THAT, THIS STATEMENT SHOULD BE APPLIED IN ACCOUNTING FOR CONSTRUCTION CONTRACTS IN THE FINANCIAL STATEMENTS OF CONTRACTORS. THEREFORE, THE COMMITTEE IS OF THE VIEW THAT THE REVISED AS 7 IS NOT APPLICABLE TO SUCH ENTERPRISES. [EMPHASIS OWN] THUS, THE REVISED AS-7 CANNOT BE APPLIED TO ENTERPRISES WHICH IS IN THE BUSINESS OF REAL ESTATE DEVELOPERS. 15. THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF PRESTIGE ESTATE PROJECTS (P) LTD.(SUPRA) HAS HELD AS FOLLOWS: ACCOUNTS ACCOUNTING SYSTEM PROJECT COMPLETION METHOD CONSISTENTLY FOLLOWED ASSESSEE DEVELOPER HAD BEEN REGULARLY EMPLOYING PROJECT COMPLETION METHOD WHICH IS AN ACCEPTED METHOD OF ACCOUNTING ACCOUNTING STANDARD -7 HAS NOT BEEN SPECIFIED BY THE CENTRAL GOVERNMENT UNDER S.145(2) HENCE, AO COULD NOT REJECT THE ACCOUNTS UNDER S.145(3) ON THE GROUND THAT THE ASSESSEE HAD NOT FOLLOWED THE PRESCRIBED METHOD OF ACCOUNTING MOREOVER, ASSESSEE WAS UNDER BONA FIDE BELIEF THAT IT WAS ADOPTING A METHOD OF ACCOUNTING WHICH WAS APPLICABLE TO IT AS PER THE REPORT OF THE EXPERT COMMITTEE OF THE ICAI THEREFORE, REVISED AS-7 CANNOT BE APPLIED IN THE CASE OF THE ASSESSEE EVEN OTHERWISE, IN CASE REVISED AS-7 IS TO BE APPLIED, THE OPENING INVENTORIES ARE TO BE VALUED AS PER REVISED AS-7- THAT APART, ON THE PRINCIPLE OF CONSISTENCY, REVENUE SHOULD HAVE ACCEPTED THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE AS THE SAME WAS BEING FOLLOWED FOR MANY YEARS HENCE AO IS DIRECTED TO ACCEPT THE PROJECT COMPLETION METHOD OF ACCOUNTING. 16. MOREOVER, THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA HAS ISSUED GUIDANCE NOTE ON RECOGNITION OF REVENUE BY REAL ESTATE DEVELOPERS. THE RECOMMENDATIONS ARE AT PARA 6, WHICH IS ITA NO : 3539/M/11 8 EXTRACTED FOR READY REFERENCE : REVENUE IN CASE OF REAL ESTATE SALES SHOULD BE RECOGNIZED WHEN ALL THE FOLLOWING CONDITIONS ARE SATISFIED: (I) THE SELLER HAS TRANSFERRED T THE BUYER ALL SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP AND THE SELLER RETAINS NO EFFECTIVE CONTROL OF THE REAL ESTATE TO A DEGREE USUALLY ASSOCIATED WITH OWNERSHIP; (II) NO SIGNIFICANT UNCERTAINTY EXISTS REGARDING THE AMOUNT OF THE CONSIDERATION THAT WILL BE DERIV ED FROM THE REAL ESTATE SALES; AND (III) IT IS NOT UNREASONABLE TO EX PECT ULTIMATE COLLECTION. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT THE FIRST APPELLATE AUTHORITY WAS NOT IN ERROR IN UPHOLDING THE VIEW TAKEN BY THE AO, THAT THE REVISED AS-7 IS APPLICABLE TO BUILDERS AND REAL ESTATE DEVELOPERS. 17. ON THE FACTS OF THIS CASE, WE AGREE WITH THE ARGUMENTS OF SHRI YOGESH THAR, LEARNED COUNSEL FOR THE ASSESSEE, THAT THE DECISION IN THE CASE OF CHAMPION CONSTRUCTION CO. (SUPRA), HAD LAID DOWN THAT WHEN THE ASSESSEE FOLLOWS PROJECT COMPLETION METHOD, IT WOULD BE APPROPRIATE TO OFFER INCOME TO TAX IN THE YEAR IN WHICH 80% OF THE CONSTRUCTION WAS COMPLETED. AT PARA 18, PAGE 507-508, THE TRIBUNAL HELD AS FOLLOWS: WE HAVE EXAMINED THE FACTS OF THE CASE FROM THIS POINT OF VIEW. WE FIND THAT OUT OF THE TOTAL ACCOMMODATION OF 58,970 SQ.FT. CONSTRUCTED, THE ASSESSEE WAS ABLE TO SELL ONLY 25,530 SQ.FT. DURING THE PREVIOUS YEAR RELEVANT FOR THE ASSESSMENT YEAR 1977- 78. NEITHER THE CONSTRUCTION OF T HE MULTI-STOREYED BUILDING WAS COMPLETE NOR EVEN THE HALF PORTION OF THE BUILDING SOLD. THE NET SALE PROCEEDS RECEIVED WERE MUCH LESS THAN THE TOTAL EXPENDITURE/COST INCURRED BY THE ASSESSEE UPTO DATE. IN THE CIRCUMSTANCES SO FAR AS THE ASSESSMENT YEAR 1977-78 IS CONCERNED WE ACCEPT THE ASSESSEES SUBMISSION THAT IT WOULD BE IN ORDER IF NO PROFITS OR LOSSES ARE ESTIMATED FROM THE VENTURE FOR THE ASSESSMENT YEAR 1977-78. THE ASSESSMENT FOR THIS YEAR IS, THEREFORE, CANCELLED EVEN ON THIS SCORE. 18. IN THIS YEAR THE ASSESSEE HAS ADMITTEDLY COMPLETED ONLY 53.95% OF THE CONSTRUCTION AND HENCE, IT CANNOT BE SAID THAT THE ASSESSEE HAS SUBSTANTIALLY COMPLETED THE PROJECT, SO AS TO RECOGNIZE INCOME UNDER THE PROJECT COMPLETION METHOD OF ACCOUNTING. 19. AT PARA 19, THE HONBLE TRIBUNAL IN THE CASE OF CHAMPION CONSTRUCTION CO. (SUPRA) HELD AS FOLLOWS: HOWEVER, THE POSITION AS REGARDS THE ASSESSMENT YEAR 1978-79 IS MATERIALLY DIFFERENT. THE CONSTRUCTION OF THE BUILDING IS COMPLETED IN THAT YEAR. TOTAL AREA EARMARKED FOR SALE IS 61,396/- SQ.FT. OUT OF WHICH UPTO THE END OF THAT YEAR THE A SSESSEE HAD SOLD 49,965 SQ. FT. I.E. ABOUT 80 PER CENT OF THE AREA. THE NET RECEIPTS HAVE FAR EXCEEDED THE TOTAL COST OR EXPENDITURE TO THE ASSESSEE. ASSUMING THERE IS ANY POSSIBILITY OF THE ASSESSEES INCURRING SOME LIABILITY IN FUTURE IN CONNECTION WITH THE COMPLETION OF THE PROJECT OR OTHERWISE, THE UNSOLD PORTI ON COMPRISING OF 12,331/- SQ.FT. AND THE DIFFERENCE BETWEEN THE NET RECEIPTS AND THE TOTAL EXPENDITURE AND THE ITA NO : 3539/M/11 9 AMOUNT ACTUALLY TREATED AS THE ASSESSEES INCOME ARE MORE THAN SUFFICIENT TO TAKE CARE OF ANY SUCH CONTINGENCY. THUS, THE METHODOLOGY FOLLOWED BY THE ASSESSEE IN RECOGNIZING THE INCOME FROM THE PROJECT UNDER PROJECT COMPLETION METHOD IN THE NEXT YEAR IS IN ACCORDANCE WITH THE PROPOSITIONS LAID DOWN BY THE TRIBUNAL IN THE CASE OF CHAMPION CONSTRUCTION CO. (SUPRA). 20. IN ANY EVENT, THE METHOD FOLLOWED BY THE ASSESSEE CANNOT BY ANY STRETCH OF IMAGINATION BE CALLED AS AN UNREASONABLE METHOD. ANY CHANGE IN THE METHOD IS REVENUE NEUTRAL. THE REVENUE CANNOT CHANGE THE METHOD OF ACCOUNTING, AS IS SOUGHT TO BE DONE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 9 . THUS, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE HOLD THAT NO INCOME CAN BE ASSESSED ON PRESUM PTIVE BASIS IN THE ASSESSMENT YEAR 2006-2007 AS THE ASSESSEE HAS ALREADY SHOWN THE INCOME IN THE SUBSEQUENT YEAR 2007-2008 AS PER TH E REGULAR ACCOUNTING METHOD OF PROJECT COMPLETION EMPLOYED BY THE ASSESSEE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSE SSEE AND THE ADDITION CONFIRMED BY THE CIT(A) STANDS DELETED. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JULY, 2012 . 6 TH JULY, 2012 SD/- SD/- ( . . ) ( ) ( R.S.SYAL) ( AMIT SHUKLA) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED 06 / JULY /2012 . . / PKM. . ./PS ITA NO : 3539/M/11 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI