SHREYANS BUILDERS,CHENNAI vs. DCIT, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -12, Chennai, dated 11.12.2017 and pertains to assessment year 2009-10.

Sh. T. Banusekar, the Ld. representative for the assessee, submitted that this is second round of litigation before this Tribunal. In the first round of litigation, according to the Ld. representative, this Tribunal by an order dated 06.06.2014, remitted back the matter to the file of the Assessing Officer to consider the certificate of the Architect produced by the assessee. After considering the certificate of the Architect, according to the Ld. representative, the Assessing Officer once again fixed the percentage of the work in progress at 91%. Referring to the assessment order, the Ld. representative submitted that the Assessing Officer found that there was no basis for arriving at 85% of work in progress by the Architect. Referring to the order of the CIT(Appeals) dated 27.12.2012, passed in the first round of litigation, more particularly, at page 7 of the order, a copy of which is available at page 8 of the paper-book, the Ld. representative submitted that for the assessment year 2005-06, the assessee declared the percentage completion at 19%. For the assessment year 2006-07, it was offered at 30%. For the assessment year 2007-08, the assessee offered the percentage completion at 58%. These three years, according to the Ld. representative, the Assessing Officer accepted the percentage of completion of the project. For the assessment year 2008-09 alone, the Assessing Officer disputes the percentage of completion of the project.

On the contrary, Ms. Anita, the Ld. Departmental Representative, submitted that in the first round of litigation, the Tribunal remitted back the matter to the file of the Assessing Officer to reconsider the matter in the light of certificate issued by the Architect. The Assessing Officer, after considering the certificate of the Architect, found that there was no basic material on record. The Assessing Officer has also found that there was no basis for the Architect to certify the project. According to the Ld. D.R., the Assessing Officer found that the Architect is not the competent person to certify the completion of project. The sale value declared by the assessee works out to 91% of the work. According to the Ld. D.R., the actual sale value is ₹61,19,25,900/-. However, what was declared by the assessee is only ₹51,40,17,756/-. Therefore, according to the Ld. D.R., the difference of ₹4,28,34,813/- was assessed as undisclosed income and brought to taxation.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee is following project completion method. The Assessing Officer admittedly accepted the method of accounting. For earlier three assessment years, it is also not in dispute that the percentage of completion of earlier was accepted by the Assessing Officer. In other words, the opening percentage of completion for the year under consideration is accepted by the Assessing Officer. Now on the basis of the sale value, the Assessing Officer estimated the project completion at 91% as against 84% declared by the assessee. As rightly claimed by the Ld. representative for the assessee, if the closing percentage of project completion was altered, then the opening percentage of project completion for next assessment year will also be altered correspondingly.

This Tribunal is of the considered opinion that when the percentage of completion for earlier three years and subsequent year is not in dispute, there is no reason for disputing the percentage of completion at 84% as declared by the assessee. The sale value declared by the assessee cannot alone be basis for the purpose of estimating the percentage of completion method. The actual work executed by the assessee has to be taken into consideration. Therefore, this Tribunal is of the considered opinion that when the Assessing Officer himself accepted the percentage of completion as declared by the assessee for earlier assessment years and for this assessment year, the opening work in progress was also accepted, there is no reason for doubting the claim of percentage of completion on the basis of sale value. Therefore, this Tribunal is unable to uphold the orders of the authorities below. Accordingly, orders of both the authorities below are set aside and the addition made by the Assessing Officer is deleted.

In the result, the appeal filed by the assessee is allowed.