VINAYKA ASSOCIATES,RANCHI vs. DCIT CIRCLE-1, RANCHI

This is an appeal filed by the assessee against the order of

the CIT(A), Ranchi, dated 10.6.2016 for the assessment year

2012-13.

‘ 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.

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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?

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

attributed 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 followed

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

the 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 balance amount of

Rs.12,31,524/- to the income of the assesse.

on the ground that an assessment for a particular year is final

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and conclusive between the parties only in relation to that year

and the decision given in an assessment for an earlier year is not

binding either on the assessee or the department in a subsequent

year.

book, wherein, copy of the decision of Hon’ble Supreme Court in

the case of CIT vs. Bilahari Investment Pvt Ltd., (2008) 299 ITR 1

(SC) is filed and submitted that the Hon’ble 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 referred to page 74 of paper

book, wherein, the decision of Hon’ble Delhi High Court in the case

of Paras Buildtech India Pvt Ltd vs CIT (2016) 382 ITR 630 (Del)

is filed and submitted that the Hon’ble Delhi High Court following

the decision of Hon’ble Supreme 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 accounts 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 recognition under the Act although it was binding under

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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 the 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/identification 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 completion 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 the 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 looked 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."

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 assessee was

consistently following project completion method for revenue

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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.

submission of ld Authorised Representative of the assessee.

dispute that the CIT(A) in the immediately succeeding assessment

year 2013-14 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 material 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 Hon’ble Supreme Court in

the case of Bilahari Investment Pvt Ltd., (supra) and Hon’ble 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.

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Order pronounced on 28 /11/2018.

Sd/- (N.S Saini) ACCOUNTANT MEMBER Ranchi; Dated 28/11/2018 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Vinayaka & Associates, C/O. D.P.Paul, CA, 718A, Navin Mitra Road, Lalpur, Ranchi

Sr. Pvt. Secretary, ITAT, Ranchi on tour

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