This article provides an in-depth analysis of the case ITA No. 4807/DEL/2019, where the appellant, DCIT, Central Circle, Karnal, contested against the respondent, Dwarkadhis Buildwell Pvt. Ltd., Bhiwani. The case pertains to the assessment year 2014-15. The appeal was filed on May 27, 2019, and the final tribunal order was pronounced on August 16, 2023.
The dispute arose from a search and seizure operation conducted at the residential and business premises of Dwarkadhis Buildwell Pvt. Ltd. Following this, statutory proceedings were initiated. During the scrutiny assessment proceedings, the department carried out field enquiries which revealed that 70% of the stock in trade had been sold, compared to 75% of the booking amount received.
The primary issue in this appeal was the method of accounting used by the assessee. The Assessing Officer (AO) applied the Percentage of Completion Method (POCM) and made an addition of Rs. 8.42 crores to the income of the assessee. The AO justified this application by referring to the Accounting Standard for real estate projects issued by the Institute of Chartered Accountants of India, which mandated the use of POCM from April 1, 2012.
The assessee contended that the Project Completion Method (PCM) should be applied, as it had been consistently following this method since AY 2010-11. The method of accounting had been accepted by the AO in assessments framed under Section 143(3) read with Section 153A of the Income Tax Act for the preceding years.
The CIT(A) accepted the assessee’s arguments, citing the principles of res judicata as enunciated by the Hon’ble Supreme Court in Excel Industries Ltd (358 ITR 295) and supported by the decision of the Hon’ble Jurisdictional High Court in Paras Buildtech India (P) Ltd (382 ITR 630). Consequently, the addition made by the AO was deleted.
The Delhi ‘B’ Bench of the Income Tax Appellate Tribunal (ITAT) heard the appeal, with Shri N.K. Billaiya as the Accountant Member and Shri Yogesh Kumar U.S. as the Judicial Member. The hearing took place on August 10, 2023, and the order was pronounced on August 16, 2023.
The ITAT carefully reviewed the orders of the authorities below. It noted that the assessee had been consistently following the PCM, which had been accepted in previous assessments after thorough scrutiny. The tribunal emphasized the importance of maintaining consistency in the method of accounting, as per the Hon’ble Supreme Court’s ruling in the case of Bilhari Investment Pvt Ltd (299 ITR 1).
The tribunal further observed that the Accounting Standard Guidance Note referred to by the AO had not been notified by the Central Government for the purpose of Section 145(2) of the Act. Thus, no adverse inference could be drawn based on this Guidance Note. This position was supported by the Hon’ble Delhi High Court’s decision in Paras Buildtech India (P) Ltd.
Based on these considerations, the ITAT found no reason to interfere with the findings of the CIT(A). The appeal by the Revenue was dismissed. The tribunal’s final judgment is summarized as follows:
Considering the facts of the case in totality, in light of the judicial decisions discussed hereinabove, we do not find any reason to interfere with the findings of the ld. CIT(A).
In the result, the appeal of the Revenue in ITA No. 4807/DEL/2019 is dismissed.
The order is pronounced in the open court on 16.08.2023.
Sd/- Sd/-
(YOGESH KUMAR U.S) (N.K. BILLAIYA)
JUDICIAL MEMBER ACCOUNTANT MEMBERDated: 16th August, 2023
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
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