The ITO, Ward-1(4), RAJKOT-GUJARAT V. M/s. Topland Developers, RAJKOT-GUJARAT

ITA 369/RJT/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0093 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND N SONTAKKE
• Keywords: Revised return
• Section: 143(3); 80IB; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] THE ITO , WARD - 1 (4) , RAJKOT (APPELLANT) VS M/S TOPLAND DEVELOPERS, 211, AASHISH COMPLEX, SARDARNAGAR MAIN ROAD, RAJKOT P AN: AAFFT2168P (RESPONDENT) REVENUE BY : S H RI ARVIND N. SONTAKKE , SR. D . R. ASSESSEE BY: S H RI VIMAL DESAI , A.R. DATE OF HEARING : 20 - 10 - 2 016 DATE OF PRONOUNCEMENT : 21 - 11 - 2 016 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THI S REVENUE S APPEAL FOR A.Y. 2009 - 10 , AR ISES FROM ORDER OF THE CIT(A) - I, RAJKOT DATED 30 - 03 - 2012 IN APPEAL NO. CIT(A) - I T A NO . 369 / RJT /20 12 A SSESSMENT YEAR 200 9 - 10 I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 2 I / RJT/0222/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1 961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROUND OF APPEAL: - 1. THE LD. C.I.T(A) - I, HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.. 72,52,475/ - U/S. 80IB(10) MADE BY THE ASSESSING OFFICER O N BASIS OF PERCEN TAGE COMPLETION ACCOUNTING METHOD. (PROFIT IS DETERMINED AT 10% OF WIP OF RS. 7,25,24,746/ - ). 3. IN THIS CASE, RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1 , 23 , 595/ - WAS FILED ON 11 TH SEPTEMBER, 2009. THE NATURE OF THE BUSINESS OF THE ASSESSEE FIRM I S BUILDER AND DEVELOPER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE A SSESSING O FFICER OBSERVED THAT ASSESSEE HAS SHOWN ENTIRE EXPENDITURE OF RS. 7 , 25 , 24 , 746/ - INCLUDING COST OF CONSTRUCTION MATERIAL, DIRECT EXPENSES AS WORK IN PROGRESS. THE A SSESSI NG OFFICER ISSUED SHOW CAUSE NOTICE DATED 16 TH DECEMBER, 2011 STATING THAT THE ASSESSEE HAS SHOWN DIRECT EXPENDITURE OF RS. 7 , 25 , 24 , 746/ - INCLUDING COST OF CONSTRUCTION MATERIAL, DIRECT EXPENSES AS WORK IN PROGRESS A N D OBTAINED ADVANCE OF RS. 6 , 63 , 57 ,802/ - F R O M CUSTOMERS DURING THE FY 2008 - 09 . QUESTIONING THAT THE FIRM HAS NOT ADOPTED PERCENTAGE COMPLETION METHOD FOR COMPUTATION OF INCOME . THE AO ASKED THE ASSESSEE WHY NOT THE PROFIT SHOULD BE COMPUTED @ 10% OF WIP OF RS.7 , 25 , 24 , 746 WHICH COMES TO RS.72, 52,475 FOR THE YEAR UNDER CONSIDERATION ON THE BASIS OF PERCENTAGE COMPLETION ACCOUNTING METHOD. IN RESPONSE TO SHOW CAUSE NOTICE , T HE ASSESSEE SUBMITTED THAT IT HAS ADOPTED I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 3 MERCANTILE SYSTEM OF ACCOUNTING AND RECORDS INCOME FROM SALE OF RESIDENTIAL UN ITS ON EXECUTION OF SALE DEED . THE COST OF CONSTRUCTION OF SUCH RESIDENTIAL UNITS IS DEBITED TO PROFIT AND LOSS ACCOUNT IN THE YEAR OF SUCH SALES AS PER MATCHING PRINCIPLE . THE ABOVE ACCOUNTING METHOD HAS BEEN REGULARLY AND CONSISTENTLY FOLLOWED BY THE A SSESSEE FIRM IN THE SUBSEQUENT YEARS. DURING THE CONSTRUCTION, THE ASSESSEE FIRM HAS RECEIVED ADVANCE PAYMENTS FROM PROSPECTIVE BUYERS WHO HAD BOOKED THE RESIDENTIAL UNITS. HOWEVER, SUCH BOOKING DID NOTE CONFER ANY OWNERSHIP RIGHTS TO THE BUYER AND PROPER TY SOLELY REMAINED WITH THE ASSESSEE FIRM. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSE AND STATED THAT ASSESSEE HAS OPTED MERCANTILE SYSTEM OF ACCOUNTING AS PER SECTION 145 OF THE ACT. HE FURTHER STATED THAT THE MERCANTILE SYS TEM INCLUDE S AS - 7 AS THE ACCOUNTING STANDARD FROM 1 - 32 PRESCRIBED BY I CAI. UNDER THE CIRCUMSTANCES , ACCORDING TO MERCANTILE SYSTEM OF ACCOUNTING, THE INCOME HAS ALREADY ACCRUED TO THE ASSESSEE AS PER SECTION 5 OF THE ACT. HE FURTHER STATED THAT AS REGA RDS CLAIM OF SECTION 80IB(10) DEDUCTION AT THE TIME OF FILING OF RETURN OF INCOME, THE ASSESSEE HAS NOT SUBMITTED/ATTACHED FORM 10CCB WHICH IS MANDATORY FOR CLAIMING U/S. 80IB(10) OF THE ACT. THEREFORE, HE DETERMINED PROFIT OF THE ASSESSEE @ 10% OF WIP OF RS. 7 , 25 , 24 ,746 / - WHICH COMES TO RS. 72 , 52 , 475/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 . AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THE LD. COMMISSIONER OF INCOME TAX(A) HAS DELETED THE I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 4 ADDITION MADE BY THE ASSESSING OFFICER AND HELD THAT THE MATRIX OF THE CASES SUGGEST THAT THE WHOLE OF THE INCOME OF THE HOUSING PROJECT OF THE ASSESSEE WAS EXEMPT U/S. 80IB(10). IN THIS CONNECTION, THE ORDER OF THE LD. COMM ISSIONER OF INCOME TAX(A) IS REPRODUCED AS UNDER: - 6. I HA VE DULY CONSIDERED THE CONTENTIONS OF THE A.O. AND S UBMISSIONS AND EVIDENCES OF THE APPELLANT. THE APPELLANT IS A REAL ESTATE DEVELOPER. IT HAS FOLLOWED THE SYSTEM OF RECORDING THE SALES AT THE TIM E OF SALE DEED WHEN THE OWN ERSHIP RIGHTS ARE TRANSFERRED T O THE BUYER. THIS METHOD IS A RECOGNIZED M ETHOD AND IT HAS BEEN ACCEPTED IN PAST IN NUMBER OF CASES. IN RESPECT OF THIS METHOD, THE MUMBAI ITAT HELD IN CASE OF ARADHESH BUILDERS (37 SOT 122) AS UNDE R: 'THE CASE OF A CONTRACTOR IS DIFFERENT FROM THAT OF THE REAL ESTATE DEVELOPER. THE PROFIT EARNED BY A CONTRACTOR DEPENDS UPON THE QUANTUM OF WORK DONE AND IS NOT DEPENDENT ON WHETHER THE FLATS/SHOPS CONSTRUCTED ARE ACTUALLY SOLD BY THE OWNER OR NOT. THE REFORE, IN CASE OF A CONTRACTOR, PROFIT CAN BE ESTIMATED ON THE BASIS OF WORK DONE. IN CASE OF REAL ESTATE DEVELOPER, HE CAN EARN THE PROFIT ONLY WHEN THE SPACE CONSTRUCTED IS SOLD. IN CASE, DUE TO SOME REASONS, THE PROJECT IS TERMINATED OR IS ABANDONED TH E BUILDER HAS TO REFUND THE ADVANCES RECEIVED FROM THE BUYERS AND IN THAT CASE, THERE CANNOT BE ANY PROFIT BECAUSE THE FLATS/SHOPS COULD NOT BE SOLD AS THE CONSTRUCTION REMAINED INCOMPLETE. IN THAT CASE, IT WILL BE ONLY A CASE OF INVESTMENT BY THE BUILDER PROFIT OF WHICH WILL ARISE ONLY ON SALE OF FLATS.' IT IS CLEAR FRO M THE ABOVE THAT RECORDING SALES AT THE TIME OF TRANSFERRING THE OWNERSHIP RIGHTS IS AN APPROPRIATE METHOD IN CASE OF A BUILDER/DEVELOPER AS IT TAKES INTO ACCOUNT THE UNCERTAINTY OF REALIZA TION WHICH IS A VITAL FACTOR FOR DETERMINING THE ACCRUAL OF INCOME AS PER ACCOUNTING STANDARD 9 ISSUED BY THE ICAI AND MANDATORY FOR ALL CLASSES OF ASSESSEE'S. IT IS VERY WELL KNOWN THAT MERE BOOKING OF A REAL ESTATE DOES NOT CONFER ANY OWNERSHIP RIGHTS AN D THE BOOKING DOES NOT ALWAYS RESULT INTO SALES, THE APPELLANT HAS FURNISHED A CHART SHOWING CANCELLATION OF BOOKINGS OF ITS PROJECT WHICH C ORROBORATES THIS ASPECT. THEREFORE, IT IS CRYSTAL CLEAR THAT INCOME IN CASE OF A BUILDER/DEVELOPER CANNOT BE SAID T O HAVE BEEN ACCRUED MERELY BECAUSE OF BOOKING AND ADVANCES RECEIVED FROM THE I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 5 PROSPECTIVE BUYERS AS SUCH BOOKING CANNOT BE EQUATED WITH VIRTUAL CERTAINTY OF INCOME. THE APPELLANT'S METHODOLOGY OF RECORDING THE IN COME AT THE TIME OF SALES AND DEBITING THE CO RRESPONDING COST ALSO ENSURE COMPLIANCE WITH MATCHING PRINCIPLE WHICH HAVE TO BE SACRIFICED IN CASE OF A.O.'S AD - HOC METHOD. 6.1 COMI NG TO THE A.O.'S METHOD, I FIND THAT THE SAME IS AN AD HOC METHOD FOR RECOGNIZING T HE INCOME. EARLIER, IN CASE OF CONTRACT ORS UNDERTAK ING LONG TERM RUNNING CONTRACTS WHERE THE INCOME WAS DEFERRED TILL THE LATER PART, A YARDSTICK WAS PRESCRIBED BY THE OLD ACCOUNTING STANDARD, AS - 7 TO RECOGNIZE INCOME ON THE BASIS OF COMPLETION OF AT LE AST 25% OF THE PROJECT. HOWEVER, THE OLD A CCOUNTING STANDARD, AS - 7 HAS BEEN REPLACED BY THE NEW ACCOUNTING STANDARD, AS - 7 FROM 2002 WHEREIN NO SUCH AD HOC YARD STICK IS PROVIDED. UNDER THE NEW ACC OUNTING STANDARD, AS - 7, IT HAS BEEN CLEARLY MENTIONED THAT IF THE OUTCOME OF THE PROJECT CANNOT BE REL IABLY ESTIMATED, CONTRACT REVENUE SHOULD BE RECOGNIZED ONLY TO THE EXTENT OF CONTRACT COST, LEAVING NO P REFIT. THE EXPECTED PROFIT IS NOT TO BE RECOGNIZED IF I T CANNOT BE RELIABLY ESTIMATED . THE APPELLANT'S METHOD OF ACCOUNTING APPEARS TO BE IN CONSONANCE WITH THIS. THE AO'S METHODOLOGY HAS BEEN DERECOGNIZED SINCE 2002 AND THEREFORE IT CAN NOT BE APPLIED TO THE APPELLANT'S CASE IN THE YEAR UND ER APPEAL. EVEN OTHERWISE, IT D OES NOT APPEAR TO BE A SOUND METHOD WHEN THE CONTRACT OF SALE IS WITH DIFFERENT PERSO NS FOR DIFFERENT UNITS AND EXECUTION THEREOF IS AT DIFFERENT POINT OF TIME. UNDER THE NEW ACCOUNTING STANDARD, AS - 7, THE PROJECT COMPLETION METHOD IS ALSO PRESCRIBED AN D THE SAME IS ALSO PERMISSIBLE AS HELD BY THE MUMBAI ITAT IN THE CA SE OF RAJESR BUILDERS (3 SOT 917), THEREFORE, NO FAULT CAN BE FOUND WITH THE METHOD UNDER WHICH THE INCOME IS OFFERED YEAR WISE ON THE BASIS OF TRANSFER OF OWNERSHIP RIGHTS IN PURSUANCE OF SALE DEED AND POSSESSION. RATHER, IN MY VIEW, THIS METHOD REFLECTS THE PROFIT IN BEST MA NNER AS PER THE MATCHING PRINCIPLE. 6. 2 IT IS ALSO SEEN THAT THE APPELLANT HAS RECORDED SALES IN THE SUBSEQUENT YEARS IN RESPECT OF IMPUGNED ADVANCES FROM CUSTOMERS AND WORK IN PROGRESS. THE PROFIT EARNED HA S BEEN OFFERED AT THE TIME OF SALE IN SUBSEQUENT YEAR. THE AO HAS TAXED PART OF SUCH PROFITS IN THE YEAR UNDER APPEAL BY PREPONDING THE INCOME BY SUBSTITUTING THE METHOD OF ACCOUNTING. THUS, THE WHOLE EXERCISE IS REVENUE NEUTRAL IN OVERALL TERMS AND IT IS NOT A CASE OF UNDERSTATEMENT OF ANY INCOME. IT I S A SETTLED POSITION UNDER THE LAW THAT THE ASSESSEE HAS A I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 6 RIGHT TO CHOOSE METHOD OF ACCOUNTING AND AO CAN QUESTION IT ONLY WHEN SUCH METHOD IS NOT RECOGNIZED OR IT RESULTS IN D ISTORTION OR UNDERSTATEMEN T OF INCOME. IN THE APPELLANT'S CASE , THE METHOD OF A CCOUNTING CHOSE N IS A RECOGNIZED METHOD FOL LOWED BY VARIOUS ASSESSEE'S FOR MANY YEARS AND THE SAME HAS BEEN REGULARLY FOLLOWED. UNDER THE CIRC UMSTANCES, THE REVENUE NEUTRAL CHANGE MADE BY THE AO DOES NOT SERVE ANY LOGICA L PURPOSE. THE PRINCIPLE LAID DO WN I N THE APEX COURT JUDGMENT IN CASE OF REALEST BUILDERS AND SERVICES LTD. (SUP RA) APPLIES WITH FULL FORCE AND NO INTERFERENCE CAN BE MADE WITH THE APPELLANT'S M ETHOD OF ACCOUNTING. I THEREFORE HOLD THAT THE SU BSTITUTION OF APPELLANT'S METHOD OF ACCOUNTING BY AD HOC METHOD OF ACCOUNTING MADE BY THE AO IS NOT SUSTAINABLE. WHILE DOING SO, THE AO HAS EVEN FAILED TO INVOKE THE PROVISIONS OF SEC. 145(3) WHICH MAKES THE WHOLE EXERCISE LEGALLY UNTENABLE. THE DECISIONS RELIED ON BY THE AO ARE MUCH PRIOR TO 2002 & AFTE R 2002 THE NEW ACCOUNTING ST ANDARD CAME INTO FORCE AND THE B EFORE THESE DECISIONS CANNOT BE APPLIED TO THE YEAR UNDER APPEAL. OTHERWISE ALSO, THEY ARE DIFFERENT IN TERMS OF FACTS AS IN THOSE CASES, SOME SALES WERE MADE AND DEEDS WERE REGISTERED BUT THE ASS ESSEE DID NOT OFFER ANY INCOME IN THE YEAR OF SALE O N THE GROUND OF PROJECT COMPLETION. IN THE APPELLANT'S CASE, ONLY CONSTRUCTION ACTIVITY WAS STARTED AND THE ENTIRE COST WAS CARRIED AS WO RK IN PROGRESS. THERE WAS NO SAL E. ON THE OTHER HAND, THE RECENT DE CISION RELI ED UPON BY THE APPELLANT IN CASE OF AVADHESH BUILDERS (37 SOT 122) FOUND TO BE SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. 6.4 THE HOUSING PROJECT OF THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 80IBB(10) WHERE IN COMPLETION WITHIN THE PRESCRIBED TIME LIMIT IS ONE OF THE MANDATORY CONDITIONS. FROM THIS ANGLE OF THE MATTER ALSO, THE ACTION OF THE A.O. OF PREPONEMENT OF INCOME BEFORE COMPLETION OF CONSTRUCTION OF R ESPECTIVE UNITS APPEARS TO BE U NREASONABLE. 6.5 THERE IS ONE MORE ASPEC T OF THE MATTER. THE HOUSING PROJECT' OF THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S. 80IB (10) @100%. SUCH DEDUCTION HAS BEEN CLAIMED BY THIS APPELLANT IN THE SUBSEQUENT YEARS ON THE INCOME ARISING FROM RECORDING THE SCALES OF IMPUGNED WORK IN PROGRESS AS IS EVIDENT FROM THE RETURN OF INCOME. BEFORE THE AO, THE APPELLANT ALTERNATIVELY PLEADED THAT IF THE INCOME IS PREPONED, DEDUCTION U/S 80IB(10) SHOULD BE ALLOWED AS THE APPELLANT HAD ALREADY CLAIMED SUCH DEDUCTION IN SUBSEQUENT YEARS ON THE IMPUGNED INCOM E AND BY WAY OF SUCH CLAIM, THE DEDUCTION WAS ATTACHED TO THE INCOME. THE APPELLANT ALSO SHOWED READINESS TO I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 7 PRODUCE RELEVANT DOCUMENTS AND EVIDENCES IN SUPPORT OF ITS ELIGIBILITY FOR CLAIMING DEDUCTION U/S. 80IB (10). THE AO DENIED THIS CLAIM ON THE GROUN D THAT NO DEDUCTION OIL CLAIM WAS MADE BY THE APPELLANT IN THE RETURN OF INC OME IN THE YEAR UNDER APPEAL. I AM OF THE VIEW THAT THIS DENIAL WAS NOT JUSTIFIED. THE APPELLANT HAD NOT DECLARED THE IMPUGNED INCOME IN THE YEAR UNDER APPEAL WHICH THE AO TAXED B Y CHANGE IN METHOD. HENCE, THERE WAS NO OCCASION FOR THE APPELLANT TO CLAIM SUCH DEDUCTION IN THE RETURN OF INCOME. THE APPELLANT DECLARED THE INCOME AND CLAIMED THE DEDUCTION IN THE SUBSEQUENT YEARS. THUS, IT REMAINS AN ADMITTED F ACT THAT THE APPELLANT CL AIM DEDUCTION ON THE IMPUGNED INCOME AND THE DISPUTE WAS CONFINED ONLY TO THE YEAS . UNDER THE CIRCUMSTANCES, THE CLAIM OF THE APPELLANT CANNOT BE DENIED EVEN BY REFERRING TO THE APEX COURT JUDGMENT IN CASE OF GOETZE INDIA LTD. AS IN THE CASE BEFORE THE APE X COURT, THE ASSESSEE MADE NEW CLAIM OF DEDUCTION WHICH HAD NO NEXUS WI TH THE ORIGINAL OR REVISED RETURN. IN THE APPELLANT'S CASE, THE CLAIM OF DEDUCTION WAS NEITHER NEW (UNPREFERRED) NOR IT WAS DIVORCED FROM THE RETURN OF INCOME. IN FACT, ONCE THE APPELLA NT CLAIMED THE DEDUCTION ON IMPUGNED INCOME, THE DEDUCTION WAS ATTACHED TO THE INCOME AND THEREFORE, THE AO WAS OBLIGED TO EXAMINE THE DEDUCTION AND ALLOW THE SAME TO THE APPELLANT IF THE MANDATORY CONDITIONS ARE FULFILLED. IN VIEW OF THIS, I AM OF THE VIE W THAT DENIAL OF DEDUCTION WITHOUT VERIFICATION O F THE CLAIM ON MERITS WAS IMPROPER ON THE PART OF THE A.O. HOWEVER, SINCE I HAVE UPHELD APPELLANT'S METHOD OF ACCOUNTING IN PRECEDING PARAS, THE QUESTION OF EXAMINING THE CLAIM OF DEDUCTION U/S 80IB(10) ON MERITS WILL NOT ARISE AT THIS JUNCTURE. 6.6 L HAV E FACTUAL MATRIX OF THE CASE SUGGESTS THAT THE WHOLE OF THE INCOME OF THE HOUSING PROJECT OF THE APPELLANT WAS EXEMPT U/S. 80IB (10) AND THE AO TAXED PART OF SUCH INCOME BY CHANGING APPELLANT'S METHOD OF A CCOUNTING AND DENYING THE BENEFIT OF DED UCTION. THEREFORE, KEEPING IN VIEW OF THE FACTS OF CASE & LE GAL POSITION AS DISCUSSED ABOVE , I HOLD THA T THE ADDITION OF RS. 72,52,475/ - MADE BY THE AO BY CHANGING THE METHOD OF ACCOUNTING AND BY DENYING THE DEDUCTIO N U/S. 80IB (10) IS NOT SUSTAINABLE. THEREFORE THE ADDITION OF RS. 72,52,475/ - MADE BY THE AO IS DIRECTED TO BE DELETED . GROUNDS NO. 2 TO 4 OF THE APPELLANT ARE THUS ALLOWED. 5 . DURING THE APPELLATE PROCEEDINGS BEFORE US, THE LD. D.R. CONTENDED THAT T HE LD. COMMISSIONER OF INCOME TAX(A) HAS WR ONGLY I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 8 DELETED THE ADDITION OF RS . 72 ,52,475/ - U/S. 80IB(10) WHICH WAS DETERMINED BY THE A SSESSING O FFICER ON THE BASIS OF PERCENTAGE COMPLETION ACCOUNTING METHOD AND HE SUPPORTED THE ORDER OF A SSESSING O FFICER. ON THE OTHER HAND, THE LEARNED COUNSEL RELIED ON THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) AND ALSO SUBMITTED PAPER BOOK CONTAINING REPL IES TO THE A SSESSING O FFICER IN RESPECT OF SHOW CAUSE NOTICE S , CHART SHOWING CANCELLATION OF BOOKING BY THE B UYERS AND DETAILS OF SALE MADE IN THE SUBSEQUENT YEARS TO THE CUSTOMERS FROM WHOM ADVANCES WERE REC E IVED. HE ALSO FURNISHED , THE TEXT OF NEW ACCOUNTING STANDAR D 7, COPY OF DECISIONS OF MUMBAI ITAT IN THE CASE OF RAJESH BUILDERS 3SOT 917 , MUMBAI ITAT I N THE CASE OF A WAD HESH BUILDER S 37 SOT 122 , HYD ERABAD ITAT IN THE CASE OF B H AGYANAGAR CONSTRUCTION S PVT. LTD 47 TTJ 185 , DELHI ITAT IN THE CASE OF GREATER ASHOKA LAND AND DEVELOPMENT CO. LTD 89 TTJ 281, COPY OF APEX COURT J UDGMENT IN THE CASE OF REALEST BUILDERS AND SERVICES PVT. LTD 307 ITR 202, COPY OF JUDGMENT OF AHMEDABAD ITAT IN THE CASE OF ACIT VS. NATIONAL BUILDERS 22 TAXMANN.COM 55. IN ADDITION TO THE ABOVE INFORMATION, THE LD. A R ALSO SUBMITTED THE COP IES OF ASSESSMENT MADE BY THE A SSESSING O FFIC ER IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 WHERE IN THE CLAIM S OF THE ASSESSEE WERE ALLOWED U/S. 80IB(10) OF THE ACT BY THE A SSESSING O FFICER. IN THIS CONNECTION, THE LD. AR HAS ALSO PLACED RELIANCE ON THE JUDGEMENT OF HON B LE HIGH COURT OF GUJARAT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHIVA LIK BUILDWELL PVT. LTD 40 TAXMANN.COM 219 AND DECISION OF CO - ORDINATE BENCH OF HON BLE I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 9 ITAT, AHMEDABAD IN THE CASE OF MEETI INVESTMENT AND CONSULTANCY PVT. LTD VIDE ITA NO. 1714/A HD/2010. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE HAVE PERUSED THE JUDGMENT OF BOTH THE ABOVE TWO CASES .THE HON'BLE HIGH COURT OF GUJARAT IN THE SHIVALIK BUILD WELL PVT. LTD HAS HELD AS UNDER: 3. ON THE REVENUE'S A PPEAL, THE TRIBUNAL CONFIRMED THE VIEW OF CIT (APPEALS), HOWEVER, ON SLIGHTLY DIFFERENT GROUND, NAMELY, THAT THE ASSESSEE BEING A DEVELOPER OF THE PROJECT, PROFIT IN HIS CASE, WILL ARISE ON TRANSFER OF TITLE OF THE PROPERTY AND RECEIPT OF ANY ADVANCES OR B OOKING AMOUNT CANNOT BE TREATED AS TRADING RECEIPT OF THE YEAR UNDER CONSIDERATION. THE TRIBUNAL FURTHER NOTED THAT SUCH METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE HAD BEEN ACCEPTED BY THE REVENUE IN EARLIER YEARS. THE TRIBUNAL WAS, THEREFORE, OF THE OP INION THAT THE ASSESSING OFFICER'S DECISION TO REJECT THE BOOK RESULTS DURING THE YEAR UNDER CONSIDERATION WAS NOT JUSTIFIED. AND FURTHER HON BLE ITAT IN THE CASE OF MEETI INVEST MENT AND CONSULTANCY PVT. LTD HELD AS UNDER: - 5. LD. CIT(A) DELETED THIS A DDITION FOLLOWING THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2005 - 06 IN ASSESSEE'S OWN CASE WHEREIN IT WAS HELD THAT ASSESSEE WAS NOT A CONTRACTOR BUT ONLY A REAL ESTATE DEVELOPER ON WHOSE CASE AS - 7 WOULD NOT BE APPLICABLE. SINCE THE ORDER PASSED BY LD. CIT(A) FOR ASSESSMENT YEAR 2005 - 06 IN ASSESSEE'S OWN CASE HAS BEEN UPHELD BY THE TRIBUNAL VIDE ITS ORDER DATED 03 - 02 - 2012 IN ITA NO. 2152/AHD/2008 DATED 03/02/2012 BY OBSERVING AS UNDER: - '4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT IN THE PRESENT CASE, THE ASSESSEE WAS NOT A CONTRACTOR BUT WAS A DEVELOPER WHO AWARDS CONTRACTS TO DIFFERENT CONTRACTORS FOR EXECUTING CIVIL, ELECTRICAL, PLUMBING WORK ETC. THEREFORE, ACCOUNTING ST ANDARD IN THE PRESENT CIRCUMSTANCES AND FACTS OF THE CASE I.E. AS - 7 CANNOT BE MADE APPLICABLE. ACCOUNTING I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 10 STANDARD AS - 9 WHICH HAS BEEN REPRODUCED BY THE LD. CIT(A) AND HAS BEEN DISCUSSED AT PAGES 4 - 8 OF HIS ORDER IS APPLICABLE IN THE PRESENT CIRCUMSTANCES AND FACTS OF THE CASE. MOREOVER, IT HAS NOT BEEN CONTROVERTED BY THE LD. DR APPEARING FOR THE REVENUE THAT THE ASSESSEE HAD AWARDED THE CONTRACTORS TO VARIOUS OTHER CONTRACTORS. ALSO IT HAS NOT BEEN CONTROVERTED THAT THERE IS NO CONSTRUCTION ACTIVITY CARRI ED OUT BY THE ASSESSEE DURING THE YEAR AND THERE WAS A DISPUTE OF THE PARTIES WHO HAD FILED CIVIL SUIT IN MUMBAI CIVIL COURT. THE ASSESSEE HAD RECEIVED THE ADVANCES WHICH ARE DULY REFLECTED IN THE BALANCE - SHEET OF THE ASSESSEE. THERE IS NO CERTAINTY OF THE REVENUE RECOGNITION AT THIS STAGE. MOREOVER, ALL THE SIGNIFICANT RISKS AND THE OWNERSHIP AT THIS JUNCTURE VEST IN THE HANDS OF THE OWNER I.E. THE ASSESSEE AND THEY HAVE NOT BEEN TRANSFERRED TO THE BUYER OR THE PROPOSED BUYER. THEREFORE, IN THE CIRCUMSTANC E AND FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A), WHICH APPEARS TO BE QUITE REASONED ONE AND HE HAS JUSTIFIED IN REVERSING THE ORDER OF THE AO ON THE ISSUE. THUS, GROUND NO. 1 OF THE REVENUE IS DISMISSED.' WE FEEL NO NEED TO INTERFE RE WITH THE ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. WE FIND THAT THE ASSESSEE IS A DEVELOPER AND RECORDED THE INCOME ON SALES BASIS AND THIS METHOD WAS FOLLOWED IN THE SUSEQUENT YEARS ALSO. WE OBSERVED THAT ONLY RECEIPT OF ADVANCES FROM CUSTOMER DOES NOT RESULT INTO TRANSFER OF OWNERSHIP RIGHTS AND THESE KIND S OF ADVANCES CAN BE CANCELLED AT ANY POINT OF TIME. IN THIS CONNECTION, ASSESSEE HAS ALSO FURNISHED A LIST OF SUCH CANCELLATIONS OF BOOKING BY THE CUSTOMERS. WE CONSIDERED THAT T HE ASSESSEE FIRM HAS ADOPTED MERCANTILE SYSTEM OF ACCOUNTING AND RECORDS INCOME FROM SAL E OF RESIDENTIAL UNITS ON EXECUTION OF SALE DEEDS. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED TO CHANGE THE METHOD OF ACCOUNTING OF THE ASSESSEE ON THE ASSUM PTION THAT INCOME HAS BEEN ACCRUED MERELY ON BOOKING OF UNITS ON THE BASIS OF ADVANCES I.T.A NO. 369 /RJT /20 12 A.Y. 2009 - 10 PAGE NO ITO VS. M/S. TOPLAND DEVELOPERS 11 RECEIVED FROM THE CUSTOMERS. KEEPING IN VIEW THE ABOVE FACTS AND LEGAL FINDINGS, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) BASED ON DETAILED FINDIN GS AND REASONING GIVEN IN HIS ORDER . 7 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 21 - 11 - 201 6 SD/ - SD/ - (RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 21 /11 /2016 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE T RIBUNAL, RAJKOT