Itta/406/2015 Of Commissioner Of Income Tax-Iii v. Sri Zulfi Rayadjee

THE HON’BLE SRI JUSTICE RAMESH RANGANATHANAND THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHYI.T.T.A.NOs.405 AND 406 OF 2015 COMMON JUDGMENT: {Per the Hon’ble Sri Justice Ramesh Ranganathan} In both these appeals, filed under Section 260A of the IncomeTax Act, 1961 (“the Act” for brevity), the Revenue questions theorders passed by the Income Tax Appellate Tribunal confirming theorder passed by the Commissioner of Income Tax (Appeals). The respondent-assessee was subjected to tax under the Actfor failure to maintain proper books of accounts. Their income wasestimated at 15% of the advances received during that particularfinancial year. On the assessee preferring an appeal there against,the Commissioner of Income Tax (Appeals) observed that theassessee had been consistently following the project completionmethod of accounting which was accepted by the Revenue; andthere was no justifiable reason for the assessing authority to eitherreject the assessee’s claim for being subjected to tax on completionof the project or to change the method of accounting from projectcompletion method to percentage completion method. This view ofthe Commissioner of Income Tax (Appeals) found favour with theIncome Tax Appellate Tribunal which noted that in the assessee’sown case, for the assessment years 2001-2002 and 2003-2004, theadditions had been deleted by the Tribunal on the very same issue. The assessing authority was directed to re-compute the assessmentas per project completion method. Sri B.Narasimha Sarma, learned Senior Standing Counsel forIncome Tax, would submit that the Tribunal had erred in affirmingthe order of Commissioner of Income Tax (Appeals) since what wasin issue before the Tribunal was primarily the failure of the assesseeto maintain proper books of accounts. While this submission of Sri B.Narasimha Sarma, learnedSenior Standing Counsel, is not without merit and the revenue maywell be justified in computing the income of the assessee at 15% ofthe amounts received, in the absence of proper books of accountsbeing maintained by the assessee, the question which would stillnecessitate consideration is whether computation of income at 15%should be on the amounts received based on the percentagecompletion method or the project completion method. The method of accounting to be followed is primarily for theassessee to determine and, save justifiable reasons, the assessingauthority would ordinarily accept the method of accountingconsistently followed by the assessee. The assessment order doesnot disclose any reasons, much less justifiable reasons, for theassessing officer to reject the petitioner’s claim for following theproject completion method. Consequently computation of theincome of the assessee, even if it were to be estimated at 15% inthe absence of proper books of accounts being maintained can onlybe on the amounts received by the assessee as per the projectcompletion method, and not the percentage completion method. We find no legal infirmity in the order of the Income Tax AppellateTribunal, much less any substantial question of law, necessitatinginterference in these appeals. Both these appeals fail and are, accordingly, dismissed. There shall be no order as to costs. Miscellaneous petitions, if any,pending shall stand dismissed. ______________________________ (RAMESH RANGANATHAN, J) ___________________________________ (M.SATYANARAYANA MURTHY, J) RRB