The Tribunal By An Order Dated 13.01.2012 By Taking Note Of Decision Of The Supreme Court In °Cit v. Bilahari Investments Pvt. Ltd.,’, (2008) 299 Itr 1 (Sc)Held That In The Instant Case The Assessee Was Following The Completed. Contract Method Consistently And

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 8 DAY OF JULY 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE HEMANT CHANDANGOUDAR| LT.A. NO.153 OF 2012 BETWEEN: 1.THE COMMISSIONER OF INCOIME-TAX. C.R. BUILDING, QUEENS ROAD BANGALORE. 2 |THE INCOME-TAX OFFICER,WARD-11(1), C.R. BUILDING:QUEENS ROAD, BANGALORE.WARD-11(1), C.R. BUILDING:QUEENS ROAD, BANGALORE. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND: M/S. BANJARA DEVELOPERS ANDCONSTRUCTIONS PVT., LTD.,NO.418, I MAIN, I BLOCKR.T. NAGAR.BANGALORE-560032. .. RESPONDENT (BY SRI. PUKALE MANOJ DEVINDER, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,196L ARISING OUT F ORDER DATED 13.01.2012 PASSED IN ITANO.472/BANG/2003 FOR THE ASSESSMENT YEAR 2004-05,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN. (I) SET ASIDE THE ORDER OF THE TRIBUNAL IN ITANO.472/BANG/2003 DATED 13/1/2012, CONFIRMING THE ORDER|OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER|PASSEDBY|THEINCOME|TAXOFFICER,WARD-11(1),BANGALORE. THISITACOMINGONFOR.HEARING,|THISALOK ARADHE J.,DELIVERED THE FOLLOWING: DAY, JUDGMENT This appeal has under Section 260A of the Income| Tax Act, 1961 (hereinafter referred to as the Act forsnort) has been preferred by the assessee. The subjectmatter of the appeal pertains to Assessment year 1997-98. The appeal was admitted by a bench of this Court by orderdated17.09.2012|ON)followingsubstantialquestion of law: (I)Whether the tribunal was correct [nsholding that the assessee could adopt.completed contract method of accountswithout appreciating the amendment to—Section145.oftheActw.e.f._ 01.04.1997|and|applicabletO|thecurrent assessment year? 2 |Facts leading to filing of this appeal brieflystated are that assessee iS a company carrying on the.business of development of plots and construction offlats.Admittedly,theaSS@SSCECCOM padNfollowsmercantile system of accounting and completed contractmethod of accounting for contracts. The assessee filedits return of income for assessment year 1997-98 on27.11.1998 declaring the income of Rs.7,59,730/-. The.aforesaid return of income was processed under Section143(ia) and the income returned, was accepted.—Subsequently, the case was selected for scrutiny andassessment was completed under Section 143(3) on10.02.2000 by which the income was determined atRs.7,59,/730/-.Subsequently,ItWaSnoticedthat|assessee had received Rs.1,52,42,380/- as advancefrom customers pending transfer to income accounts.Thereupon a notice under Section 148 was issued. The assessing officer by an order dated 28.03.2002 inter alia.held that current profit cannot be decided by the methodof book of accounting followed by the assessee andestimated the income of the assessee by applying 8%rate on the advances received by the assessee on a sumof Rs.1,52,42,380/-. Accordingly, addition was made bythe assessing officer. 3.)Being aggrieved, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals). TheCommissioner of Income Tax (Appeals) by an orderdated 04.02.2003 inter alia neldq tnat advance ofRs.1,53,42,380/- is in fact accumulated balance ofnumber of years (advance as on 31.03.1996 beingRs.1,44,14,067/-) that completed income for completedcontracts being declared in subsequent assessmentyears. Accordingly, it was held that assessing officer wasnot justified in making an addition of 8% on totaladvances as on 31.03.1997 and assessing officer wasdirected to delete an addition of Rs.12,19,390/-. In the result, the appeal was allowed. Being aggrieved, therevenue preferred an appeal. The appeal which wasdismissed by the Income Tax Appellate Tribunal by anorder dated 13.07.2005. 3.)Being aggrieved, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals). TheCommissioner of Income Tax (Appeals) by an orderdated 04.02.2003 inter alia neldq tnat advance ofRs.1,53,42,380/- is in fact accumulated balance ofnumber of years (advance as on 31.03.1996 beingRs.1,44,14,067/-) that completed income for completedcontracts being declared in subsequent assessmentyears. Accordingly, it was held that assessing officer wasnot justified in making an addition of 8% on totaladvances as on 31.03.1997 and assessing officer wasdirected to delete an addition of Rs.12,19,390/-. In the result, the appeal was allowed. Being aggrieved, therevenue preferred an appeal. The appeal which wasdismissed by the Income Tax Appellate Tribunal by anorder dated 13.07.2005. 4The aforesaid order passed by the tribunalwas challenged in appeal before this court by therevenue. The said appeal viz., I.T.A.No.36/2006 wasdecided by a bench of this court vide order dated23.09.7010. It was inter alia held that the assessment|year pertains to 1997-98 i.e., subsequent to amendmentto Section 145(1) of the act and the tribunal ought tohave looked into the matter to ascertain whether theassessee could adopt completed contract method whichis not contemplated under Section 145(1) of the Act asit refers to cash or mercantile system of accounting. |The order of the tribunal was set aside and the matter|was remitted to the tribunal for decision of the appealafresh in the light of observations made in the order. © 5.|The tribunal by an order dated 13.01.2012 bytaking note of decision of the Supreme Court in °CIT VS.BILAHARI INVESTMENTS PVT. LTD.,’, (2008) 299ITR 1 (SC)held that in the instant case the assessee|WaSfollowingthecompleted.contractmethodconsistently and the aforesaid method was accepted bythe department in the past as well and therefore, therewas no justification on the part of the assessing officerto change the earlier method adopted by the assesseeand to determine the income on the estimate basis.Accordingly, the appeal was dismissed. Being aggrieved,the revenue is in appeal before US. 6.|Learned.counsel.for.therevenuewhile|inviting the attention of this court to order dated23.09.2010 passed in I.T.A No.36/2006, by a bench ofthis court submitted that the directions contained in theorder have not been complied with. It is furtherSubmitted that assessee is in construction business and|is bound to follow the percentage completion method instead of project completion method. Itis also pointedout that the aforesaid issue is covered by a decision by abench of this court dated 09.09.2014 in favour of therevenue in case of ‘COMMISSTONER OF INCOME TAX AND ANOTHER VS. THUMBAY HOLDINGS (P) LTD’On the other hand, learned counsel for the assesseesubmitted that charge of tax in the instant case pertains.to previous year and not the current year and therefore,the decision rendered in the case of.JSHUMBAYHOLDINGS (P) LTDSupra has no application to thefact situation of the case. It is also urged that method ofaccounting once adopted can be followed. In Support ofaforesaid submission, reference has been made todecisionofthis|courtdated10.08.7011|InI.T.A.No.29/2006.J |We have considered the submissions madeon both the sides and Nave perused the record. Section145 of the Act deals with method of accounting. Section145(1) provides that income chargeable under the head. ‘profits and gains of Dusiness or profession’ or ‘incomefrom other sources’ shall subject to provisions of sub-Section (2) be computed in accordance with either cashOr mercantile system of accounting regularly employedby the assessee. It is noteworthy that Section 145 cameto be amended w.e.f. 01.04.1987 and has not beengiven retrospective operation. The supreme court in the.case of|BILAHARI INVESTMENTS PVT. LTD» SUPDFdhas held as under: ‘profits and gains of Dusiness or profession’ or ‘incomefrom other sources’ shall subject to provisions of sub-Section (2) be computed in accordance with either cashOr mercantile system of accounting regularly employedby the assessee. It is noteworthy that Section 145 cameto be amended w.e.f. 01.04.1987 and has not beengiven retrospective operation. The supreme court in the.case of|BILAHARI INVESTMENTS PVT. LTD» SUPDFdhas held as under: “Every assessee is entitled to arrangeits affairs and follows the method of.accounting which the department has earlier|accepted. It is only in those cases where thedepartment records a finding that the|method adopted by the assessee results in|distortion a profits that the department can|INSISTOP)substitutionoftheexIstingmethod. ” 8.|In the instant case, admittedly the assessee is following mercantile system of accounting and as pernotes to the accounts, the assessee is_ following completed contract method of accounting for contracts.The aforesaid method of assessment has been acceptedby the department in the past and therefore, in view oflaw laid down’ by the Supreme Court in.BILAHARIINVESTMENTS PVT. LTD.,the Commissioner § ofIncome Tax (Appeals) as well as the tribunal has rightlyheld that there was no justification on the part of theassessing officer to change the earlier method adoptedby the assessee and to determine the income on|estimate basis. omThe submission made on behalf of therevenue that the directions issued by a bench of thiscourt vide order dated 23.09.2010 in I.T.A.No.36/2006.appears to be attractive at the first blush Dut on carefulscrutiny of the order it is evident that the tribunal hasreferred to the decision of this court in the case of ‘CITVS. M/S SKYTOP BUILDERS PVT. LTD., ANDOTHERS’' rendered in I.7T.A.No.29/2006 vide’ orddated 10.08.2011 as well as the decision of the supreme. court In.BILAHARI INVESTMENTS PVT, LTD1, SUPId)and has held that the assessee was following completedcontract method which was accepted by the departmentin the past as well and therefore, there is no justificationfor the assessing officer to change the same. For theaforementioned reasons the submission made on behalf|of the revenue cannot be accepted. Similarly, thecontention that the controversy involved in this case iscovered by decision of tnis court dated 09.09.2014rendered in I.T.A.No.835-837/2008 is concerned, sufficeit to say that substantial questions of law involved in theaforesaid appeals were entirely different. By reading theorder of the tribunal as a whole, it is evident that thetribunal nas taken note of tne effect of Section 145 oftne Act. Therefore, the aforesaid submission made onbehalf of the revenue also does not deserve acceptance. —In view of preceding analysis, the substantial|question of law framed by this court is answered against.tne revenue and in favour of the assessee. In the result, A2�6:�5:9�;.56�05?�<27.9�.5�9-./�011203!�9-2�/0<2�;0.3/� 056�./�-272>?�6./<.//26�� ����������������������//�