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27-11-2010 - A Latest Update as on 27.11.2010
Monday, December 27, 2010

M/S. DEVSONS PVT. LTD. Vs. COMMISSIONER OF INCOME TAX AND ORS., REPORTED IN THE HIGH COURT OF DELHI AT NEW DELHI,  ITA NO. 367/2004, DATE OF ORDER NOVEMBER 19, 2010

QUESTION 

1. Whether the Income-tax Appellate Tribunal was right in law in holding that there was, in the facts and circumstances of the case, a change in the method of accounting introduced by the assessee without any justifiable reasons?   

  

BRIEF FACTS OF THE CASE

The necessary facts available on the record are that the appellant derives income as a contractor with the Jaipur Municipal Corporation (hereinafter referred to as „the JMC) for lifting the garbage from the walled city of Jaipur and had filed its return of income on 30th November, 1995 declaring the total income of `4,50,317/- for the year under consideration. The appellant had shown gross receipts from JMC at ` 81,90,784/-. From the details of the bills submitted by the appellant, however, the Assessing Officer concluded that the total receipts of the appellant from JMC were ` 1,17,39,415/- as against ` 81,90,780/- as shown by the appellant. The Assessing Officer also concluded that the appellant had declared receipts on the basis of the amount actually received which was contrary to the system of accounting maintained by the appellant, viz., the mercantile system. In first appeal, the Commissioner of Income Tax (Appeals) deleted the addition of ` 35,39,631/- and found that the appellant had been maintaining the accounts of income receivable from JMC on the basis of the bills submitted and approved by JMC after making various deductions as per the contract. This system of accounting had been regularly followed by the appellant and accepted by the Department since 1990. The ITAT reversed the order of the CIT(A). The ITAT held that during the period under consideration, the appellant had changed its method of accounting and such change was not bonafide. The Tribunal found that the appellant, despite the fact that that he had been maintaining the accounts on mercantile system, had declared the receipts from the JMC on the basis of the amounts actually received. The Tribunal observed that though it is the prerogative of a party to maintain accounts in the manner it likes, but the assessee cannot be at liberty to change his system of accounting at the drop of the hat, at his whims and fancies.  

   

DECISION

In our considered view, therefore, the Tribunal was not right in holding that there was a change in the method of accounting by the assessee company. The assessee company had submitted the details of all the bills to the Assessing Officer. The Assessing Officer as well as the Tribunal, in our view, erred in holding that the appellant had declared receipts on the basis of the amount actually received which was contrary to the system of accounting maintained by the assessee company, viz. the mercantile system.

(For judgment, please click here)

  

 

What's New 

a.   GSR 849-Companies (Central Govt's) General Rules and Forms (Third Amendment), 2010-Revision of Form No. 1 and Form No. 32, effective from 05-12-2010  (Click for detail)

b.   GSR 848-Companies (Central Govt's) General Rules and Forms (Third Amendment), 2010-Revision of Form No. 1 and Form No. 32, effective from 05-12-2010  (Click for detail)

c  RBI/2010-11/286-Submission of information to Credit Information Companies  (Click for detail)

  

           
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"Voice of CA"

CA. Sanjay Kumar Agarwal, Founder - Voice of CA
Member  Central Council - ICAI
Former Chairman - NIRC
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CA. Mukesh K Bansal, Co-Moderator-FEMA
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mukbansal80@gmail.com 

 

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