LUNAR ELECTRICALS Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this appeal by the assessee, which pertains to assessment year 1997-98, the following two substantial questions of law were formulated for determination vide order dated 14th February, 2006:

(2.) The Assessing Officer during the course of assessment proceedings asked the appellant to furnish full details of the 12 projects, including NBCC project, which were complete or were continuing. The Assessing Officer held that the assessee cannot adopt project completion method after amendment of Section 145 of the Income Tax Act, 1961 (Act, for short) with effect from assessment year 1997-98. He held that project completion method would amount to adopting an hybrid system of accounting, which was prohibited and barred by the said amendment. On the basis of the details furnished by the assessee, the Assessing Officer drew up a statement of profit, i.e., income and expenditure account for the period ending 31st March, 1997. He calculated the average rate of profit on the value of 11 contracts and applied the rate of profit on value of work in progress for the NBCC project. Accordingly, the income of the assessee was enhanced from Rs. 4,02,810/- to Rs. 12,93,976/- . The assessment order records that it was passed under Section 143(3) and 144 of the Act.

(3.) The CIT(Appeals) rejected the plea raised by the assessee regarding "project completion method", inter alia, recording as under:-