ANAND ASSOCIATES,SILVASSA vs. ITO, WARD SILVASSA, SILVASSA

The grounds of appeal

1. 1. 1. 1. 1. are as under:- “1. The LD CIT(A) has erred in law and on facts of the case in upholding the addition of Rs. 19,15,358/- made by the AO rejecting the income offered under percentage completion method as per AS 9 by your appellant.

The assessee filed return of income for assessment year 2015-16 on 21-09-2015 declaring total income, at Rs. 2,93,250/-. The same was processed u/s. 143(1) of the Act. The case of the assessee was selected for limited scrutiny. Notice u/s. 143(2) was issued on 27-07-2016 which was duly served upon the assessee. Questionnaire along with notice u/s. 142(1) was issued on 15-07-2017. In response to the statutory notices, the A.R. of the assessee filed the details and attended the assessment proceedings. The assessee is engaged in the business of construction/development of residential complex and sale of flat on completion of construction. The Assessing Officer disallowed the expenditure to the extent of Rs. 2,64,120/- in respect of penalty paid to Silvasa Municipal Corporation for deviation in plan. The Assessing Officer made addition of Rs. 19,15,358/- in respect of percentage completion method as the assessee followed the said method but has not offered the revenue work out and which derived income from purchase.

Being Aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

The assessee has followed the project completion from the earlier assessment year i.e. assessment year 2014-15 which is prior to the present assessment year. In fact in plan 5-9 the CIT(A) has accepted the assessee project completion method but to its direction has made addition to that effect.

The ld. D.R. relied upon the assessment order and the order of the CIT(A) .

Heard both the sides and perused the material available on record. It is pertinent to note that since the assessment year 2014-15, the assessee was following the project completion method which is since inception of the firm. The Revenue has accepted this accounting method which is recognized by the Institute of Chartered Accountant and is in accordance of Accounting Standard AS-9. This fact was not disputed by the Assessing Officer as well as by the CIT(A). In assessee’s case, the ownership of the flat was transferred only after execution of the sale deed on realization of full consideration but in fact the advance receipt from the buyers were shown as liability in the balance sheet of assessment year 2014-15 which was offered to tax in the later years as and when the sale deeds were executed. This fact was totally ignored by the Assessing Officer as well as by the CIT(A). Thus, the appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed.