Judgment : (V.M. Kanade, J.) The appellant has filed this appeal challenging the judgment and order passed by Income Tax Appellate Tribunal ('ITAT' for short), Panaji Bench dated 27/01/2006 in ITA No.8/PNJ/1999 for Assessment Year 1996-1997. 2. The appeal was admitted by order dated 03/10/2006 on the following two substantial questions of law: “(i) Whether on the facts and in the circumstances of the case the Tribunal was right in rejecting the method of valuation of work in progress adopted by the appellant which was based upon the Accounting Standard No.7 (AS-7) laid down by the Institute of Chartered Accountants of India as per which the profits of the appellant could be correctly computed and which was regularly followed by the appellant in subsequent years ? (ii) Whether on the facts and in the circumstances of the case, the decision of the Hon'ble Supreme Court in the case of CIT Vs. British Paints India Ltd. ought to have been brought to the notice of Counsel appearing on behalf of the appellant by the Hon'ble Tribunal before placing reliance on the same as mandated by the Hon'ble Supreme Court in Sandvik Asia Ltd. Vs. CIT(281 ITR page 643) ?” 3. Brief facts are as under: The appellant is a Company engaged in business of constructing residential and commercial buildings and sale of the flats and commercial shops and also business of Real Estate Development. The relevant financial year in the present case is financial year ended on 31/03/1996. It is the case of the appellant that till the financial year ended on 31/03/1995, the appellant Company had only one project known as 'Radha Enclave' which consisted of construction and sale of residential flats and commercial shops. It is the contention of the appellant that all the direct and indirect costs which were incurred by the appellant were in respect of only one project namely 'Radha Enclave' and, therefore, all these costs were included under the head “works-in-progress”. The appellant's case is that during the next assessment year i.e. year ended on 31/03/1996, the appellant had started two work projects and as such, it was not possible to allocate indirect costs including financial costs, selling costs and general administrative costs on the three projects. The appellant, therefore, made change in the method of valuation of work in progress and excluded the marketing and financial costs and a portion of administrative costs. The appellant, therefore, made change in the method of valuation of work in progress and excluded the marketing and financial costs and a portion of administrative costs. The case of the appellant is that they followed Accounting Standard 7 system ('AS-7 system' for short) and thereafter continued to follow the said system in all subsequent years. According to the appellant, since in the year ended on 31/03/1995, the Company did not sell any flat, it had included all the direct and indirect costs in respect of the project 'Radha Enclave' and these costs therefore, included under the head 'work-in-progress'. 4. The appellant filed its return declaring total income of Rs.2,550/-. DCIT, Circle 2, Margao by its assessment order dated 13/10/1998 assessed the total income at Rs.39,82,980/-and while doing so, the Assessment Officer made addition of sum of Rs.17,88,824/-since according to the Assessment Officer, the appellant had undervalued its profits by changing method of valuation of work in progress. 5. Being aggrieved by the said order, the appellant filed an appeal before the Commissioner of Income Tax (Appeals), Belgaum. The Commissioner of Income Tax (Appeals) allowed the appeal of the appellant and upheld the claim of the appellant in respect of the valuation of work in progress. The Commissioner of Income Tax (Appeals) also held that the change in Accounting System was bona fide. It observed that even otherwise if the indirect costs had not been included in work in progress, the appellant could have carried forward the loss which was incurred in the said year. 6. The revenue challenged the said order by filing an appeal before the ITAT. The tribunal allowed the appeal filed by the revenue by its order dated 27/01/2006 in ITA No.8/PNJ/99. The Tribunal relied upon the decision of Supreme Court in the case of CIT Vs. British Paints India Ltd; 188 ITR 44 and restored the order of the Assessment Officer. 7. Being aggrieved by the aforesaid order, present appeal has been filed which was admitted by this Court on the above referred two substantial questions of law framed by this Court. 8. Learned Counsel appearing on behalf of the appellant has submitted that the Tribunal had erred in relying on the judgment of the Apex Court in the case of CIT Vs. British Paints India Ltd (supra). 8. Learned Counsel appearing on behalf of the appellant has submitted that the Tribunal had erred in relying on the judgment of the Apex Court in the case of CIT Vs. British Paints India Ltd (supra). It is submitted that in subsequent years, the appellant had followed AS-7 system which was accepted by the revenue and in fact after 2000, it became mandatory to follow AS-7 system. He submitted that change in the accounting system was made bona fidely and honestly on account of peculiar facts and circumstances of the case arisen and there was no intention to evade the duty since even otherwise, the appellant would have been entitled to carry forward loss to the extent of Rs.17,88,824/-. He also invited our attention to the judgment of Calcutta High Court in the case of HelaHoldings Pvt. Ltd Vs. Commissioner of Income Tax and another reported in 2003 Vol. 263 ITR 129 wherein the Calcutta High Court had after referring to the provisions of Section 145 had held that the change of method of accounting was permissible and it was open for the assessee to produce the records and show that it has followed the said accounting system in subsequent years. It is submitted that the case on which reliance is placed by ITAT namely British Paints India Ltd (supra) is not correct and distinguishable from the present case. He submitted that in the said case trading costs were not included in the costs incurred in the manufacturing of paints and, therefore, the Court had rightly held that change of method of accounting was not permissible. It was submitted that in the present case, the costs which are indirect costs pertain to financial costs, marketing costs and administrative costs. It is submitted, therefore, that the Tribunal has clearly erred in applying the ratio of the said case to the facts of the present case. It was submitted that it was not disputed that in the earlier assessment year, the appellant had undertaken only one project and in the subsequent year, two more projects were commenced and secondly, in the earlier assessment year, there was no sale of flats. However, in the subsequent year, the assessee had sold flats in respect of first project. It was submitted that it was not disputed that in the earlier assessment year, the appellant had undertaken only one project and in the subsequent year, two more projects were commenced and secondly, in the earlier assessment year, there was no sale of flats. However, in the subsequent year, the assessee had sold flats in respect of first project. It was submitted that the financial loan was taken in respect of projects and, therefore, the said costs had to be brought in profits and loss account for the next assessment year. Though the appeal was admitted also on second substantial question of law namely that the Tribunal had not brought the said judgment to the notice of the appellant and the Court had given decision on the basis of the said judgment, the appellant chose to make submission only on the first substantial question of law framed by this Court. 9. On the other hand, learned Counsel appearing on behalf of the respondents submitted that the Assessment Officer had held that change in the method of accounting system was not bona fide and it was done to avoid tax and this finding of fact was confirmed by ITAT and the appeal filed by revenue is allowed and the order passed by the Assessment Officer was confirmed. She invited our attention to the judgment of Calcutta High Court in the case of K. K. Jalan (HUF) V. Commissioner of Income-tax reported in (1993)71 TAXMAN 248 (CALCUTTA) in which it was held that findings of fact not being assailed as perverse, the want of bona fides being proved fact, the order passed by the ITAT on the basis of finding of fact could not be set aside. 10. On the other hand, learned Counsel appearing for the appellant submitted that the judgment in the case of HelaHoldings Pvt Ltd. (supra) is subsequent judgment wherein it was held that it is permissible to change the method of valuation and change accounting system. He also invited our attention to clause (2) of Section 145 of the Income Tax Act. It is submitted that the Central Government by virtue of the sub clause had to notify in the official gazette the accounting standards which have to be followed by any class of assessees. It is submitted that the Central Government had notified that builders and developers were required to follow AS-7 system. It is submitted that the Central Government by virtue of the sub clause had to notify in the official gazette the accounting standards which have to be followed by any class of assessees. It is submitted that the Central Government had notified that builders and developers were required to follow AS-7 system. It is submitted that in the said system in paragraph 8.7, examples of costs which relate to the activities of the contractor, were referred to and they included general administrative costs, selling costs and financial costs. It is submitted on behalf of the appellant that in the present case, financial cost namely interest on the loan taken by the appellant alone was to the tune of more than 16 lakhs. 11. After having heard both learned Counsel at length, in our view, the submission made by learned Counsel for the appellant will have to be accepted. The Commissioner of Income Tax (Appeals) in his judgment has rightly held that change in the accounting system was bona fide after taking into consideration the facts in the present case. The ITAT however, while giving its reasons has clearly avoided to give any finding on this question of fact and as such, it cannot be said that ITAT had given any finding against the appellant on the question of bona fides of the appellant or had set aside the finding which was recorded by the Commissioner of Income Tax (Appeals). The submission made by learned Counsel appearing on behalf of the respondents that this finding was confirmed by ITAT cannot be accepted. Learned Commissioner of Income Tax has rightly observed that since there was no sale of flats in the earlier assessment year, the appellant could have shown the said expenditure which was incurred, as loss and could have carried forward the loss in the next year. Secondly, it is admitted position that in the subsequent years, the appellant has been following AS-7 accounting system and the same was accepted by the Assessment Officer. In fact thereafter, the Central Government has directed all the developers and builders to follow AS-7 accounting system. Taking into consideration the aforesaid facts, therefore, the ITAT has clearly erred in setting aside the order passed by the Commissioner of Income Tax (Appeals). In fact thereafter, the Central Government has directed all the developers and builders to follow AS-7 accounting system. Taking into consideration the aforesaid facts, therefore, the ITAT has clearly erred in setting aside the order passed by the Commissioner of Income Tax (Appeals). Thirdly, in our view, the ratio of the judgment in the case of British Paints India Ltd (supra) would strictly not apply to the facts of the present case though the principles governing work in progress may be similar to those governing the stock. The fact remains that in the said case, the costs incurred by the Company which were part of the manufacturing costs were not taken into consideration and, therefore, those costs were trading costs and would be covered under the trading account. In the present case, however, the costs in fact were indirect costs namely financial costs, general administrative costs and marketing costs and, therefore, they had to be shared amongst three projects and had to be considered in the profit and loss account under AS-7 system. The ratio of this judgment, therefore, strictly speaking would not support the case of the revenue. 12. In the result, the appeal is allowed. The substantial question of law no.1 is accordingly answered. The judgment and order passed by ITAT is set aside and the order passed by the Commissioner of Income Tax (Appeals) is confirmed. 13. The appeal is, accordingly, disposed of.