Anand Associates Vs ITO (ITAT Surat)
Consistently Followed Project Completion Method Cannot Be Rejected: ITAT Surat Deletes Addition on Percentage Completion Basis
The Surat SMC Bench of the ITAT allowed the assessee’s appeal for AY 2015-16 and deleted the addition of ₹19.15 lakh made by rejecting the project completion method of accounting followed by the assessee, a real estate developer. The Assessing Officer had sought to tax income by applying the percentage completion method, despite the assessee consistently following the project completion method since inception, in accordance with Accounting Standard-9. The CIT(A) upheld the addition.
The Tribunal noted that the project completion method had been consistently followed by the assessee from AY 2014-15 onwards and had been accepted by the Revenue in earlier years. Advances received from buyers were correctly shown as liabilities in the balance sheet and were offered to tax only upon execution of sale deeds and transfer of ownership. The ITAT held that once a recognised and consistently followed method of accounting is accepted, the Revenue cannot arbitrarily reject it without demonstrating distortion of true profits.
Finding that both the AO and the CIT(A) ignored settled principles of consistency and accepted accounting standards, the ITAT held the addition to be unsustainable and allowed the appeal in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT SURAT
