COMMISSIONER OF INCOIME-TAX Vs. BANJARA DEVELOPERS

JUDGEMENT

(1.) This appeal has under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to Assessment year 1997- 98. The appeal was admitted by a bench of this Court by order dated 17.09.2012 on following substantial question of law:

(2.) Facts leading to filing of this appeal briefly stated are that assessee is a company carrying on the business of development of plots and construction of flats. Admittedly, the assessee company follows mercantile system of accounting and completed contract method of accounting for contracts. The assessee filed its return of income for assessment year 1997-98 on 27.11.1998 declaring the income of Rs.7,59,730/-. The aforesaid return of income was processed under Section 143(ia) and the income returned, was accepted. Subsequently, the case was selected for scrutiny and assessment was completed under Section 143(3) on 10.02.2000 by which the income was determined at Rs.7,59,730/-. Subsequently, it was noticed that assessee had received Rs.1,52,42,380/- as advance from 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 method of book of accounting followed by the assessee and estimated the income of the assessee by applying 8% rate on the advances received by the assessee on a sum of Rs.1,52,42,380/-. Accordingly, addition was made by the assessing officer.

(3.) Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by an order dated 04.02.2003 inter alia held that advance of Rs.1,53,42,380/- is in fact accumulated balance of number of years (advance as on 31.03.1996 being Rs.1,44,14,067/-) that completed income for completed contracts being declared in subsequent assessment years. Accordingly, it was held that assessing officer was not justified in making an addition of 8% on total advances as on 31.03.1997 and assessing officer was directed to delete an addition of Rs.12,19,390/-. In the result, the appeal was allowed. Being aggrieved, the revenue preferred an appeal. The appeal which was dismissed by the Income Tax Appellate Tribunal by an order dated 13.07.2005.