2011 (8) TMI 1183 - AT - Income Tax

Summary

Issues involved: Appeal against order of Commissioner of Income-tax (Appeals) II, Pune for assessment year 1999-2000.

Issue 1: Addition of Rs. 7,50,000 on account of alleged on-money received by the assessee firm.

The assessee firm, a construction business, disclosed additional income of Rs. 7,50,000 for AY 1999-2000 after a survey action u/s 133A. The project completion was in AY 2003-04, and the income was offered in the return for that year. Despite being taxed in AY 2003-04, AO made the same addition for AY 1999-2000, leading to the appeal.

Issue 2: Discrepancy in accounting method and taxation of on-money.

The assessee followed the "project completion method" for accounting, including on-money. The AO's decision for AY 2003-04 was accepted, but objected for AY 1999-2000. The AO's addition of Rs. 7,50,000 for AY 1999-2000, already taxed in AY 2003-04, is contested in the appeal.

Issue 3: Taxation of income without accrual in relevant year.

Despite no accrual of income in the previous year relevant to AY 1999-2000, the addition of Rs. 7,50,000 as business income for that year was sustained. This discrepancy in taxation is a key point of contention in the appeal.

Issue 4: Double taxation of the same income for different assessment years.

The AO's addition of Rs. 7,50,000 as business income for AY 1999-2000, already taxed in AY 2003-04 u/s 143(3), is challenged in the appeal. The argument revolves around the legality and fairness of taxing the same income twice for different assessment years.

In the proceedings, the counsel cited a relevant order from the Pune Bench, emphasizing that unaccounted receipts should not be taxed on cash basis but on par with other business receipts. The Tribunal found merit in this argument, noting that the impugned income was already taxed in AY 2003-04, the year of project completion, and should not be taxed again on cash basis for AY 1999-2000. The Tribunal reversed the CIT(A)'s decision based on this legal position and allowed the grounds raised by the assessee, ultimately allowing the appeal.

*Order pronounced in the court on 26-8-2011.*