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1. These two appeals by the Assessee under Section 260A (1) of the Income Tax Act, 1961 ('the Act') are directed against the orders dated 17th February, 2015 of the Income Tax Appellate Tribunal ('ITAT') in ITA No. 4316/Del/2010 [for the Assessment Year ('AY') 2005-06] and ITA No. 235/Del/2010 [for AY 2006-07].

2. Admit.

3. The following questions of law are framed for consideration:

(a) For AY 2005-06, whether the ITAT was justified in setting aside the order of the CIT (A) and holding in the facts and circumstances of the case the advance amount received by the Assessee should be treated as income in its hands in the year in which the advance amounts were received and in applying AS-7 (revised) i.e. the percentage completion method to the Assessee?

7. The Assessee filed a return of income along with an audited financial statement on 13th October 2005 for AY 2005-06 by declaring an income of Rs.57,75,159. A question arose during the assessment proceedings whether the percentage completion method (encapsulated in AS 7 issued by the ICAI) should be applied to the Assessee? The Assessing Officer (AO) called upon the Assessee to submit whether the working of the profit was done as per the project completion method or the percentage completion method as provided in AS-7 issued by ICAI. In reply thereto, the Assessee took the categorical stand that AS-7 was not applicable since it was a developer and not a contractor. It further took the stand that it had booked sales on signing of title deeds in AYs 2005-06 and 2006-07.

10. As far as AY 2006-07 is concerned, the AO by the assessment order dated 31st December, 2007 again applied the percentage completion method and made an addition of Rs.10,76,70,521 (constituting the advance booking amounts received) to the income of the Assessee. It was urged by the Assessee before the AO in respect of the aforementioned advance booking amount, that the civil work/construction activities had not even started and no amount could therefore be booked either under the project completion or the percentage completion methods. It was further pointed out that a sum of Rs.53.5 lakhs had been refunded in the immediate next year since the transaction could not materialise. The AO, however, negatived the above pleas.

The above indicates the difference between the completed contract method and the percentage of completion method."

21. In the present case, there was therefore no good reason for the ITAT to have reversed the finding of the CIT (A). The only reason given in the impugned order of the ITAT is that 'risks and rewards' of ownership were transferred to the buyers who had paid the booking advance amounts and in some cases these rights were transferred to third parties. However, this does not in any manner affect the treatment of the said amounts in the books of the Assessee. As noted hereinbefore, the expenses of construction were not debited to the P & L account of the Assessee. It was shown as cost of construction or block of buildings. It is only as and when a conveyance deed was executed or possession delivered that the receipt was shown as income. The explanation added by way of Notes to the Accounts was not taken note of by the ITAT when it came to the conclusion that the percentage completion method should apply to the Assessee.