2012 (3) TMI 539 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) by disallowing expenditure incurred for performance of the Akhand Path.
2. Examination of the accounting method of the assessee and alleged defects.

Issue 1: Deletion of Addition by AO for Akhand Path Expenditure

The Revenue challenged the deletion of additions of Rs. 27,60,300/- and Rs. 61,21,800/- made by the AO for the assessment years 2007-08 and 2008-09 respectively. The AO disallowed these expenditures on the grounds that the receipts for Akhand Path were treated as advances and not as income until the performance of the Akhand Path. The AO argued that the expenses should not be booked in the relevant year as the Akhand Path was performed in earlier years.

The assessee contended that the income and expenditure were accounted for as and when they were earned/incurred, following a consistent accounting method. The CIT(A) accepted the assessee's explanation and allowed the claim, noting that the AO did not point out any specific defect or prove any expenditure as false.

Issue 2: Examination of Accounting Method and Alleged Defects

The AO examined the books of accounts and receipts, issuing a show cause notice. The AO's main allegation was that the majority of receipts were general donations and not specifically for Akhand Path, and that the expenses were not allowable as they related to earlier years. The assessee responded that all receipts were for Akhand Path and expenses were booked only after the performance of the Akhand Path.

The CIT(A) considered the assessee's consistent accounting method and the AO's report, which aligned with the assessee's explanation. The CIT(A) found no merit in the AO's disallowance, citing the Supreme Court decision in CIT vs. Realest & Services Ltd. 307 ITR 202 (SC), which supports the consistency of the accounting method unless a change benefits the Revenue.

Conclusion:

The Tribunal dismissed the Revenue's appeals for both assessment years, upholding the CIT(A)'s decision to allow the assessee's claim. The Tribunal found no infirmity in the CIT(A)'s order, noting the absence of any specific defect pointed out by the AO and the consistent accounting method followed by the assessee.

Order:

The appeals of the Revenue in ITA No.382(Asr)/2011 and ITA No.385(Asr)/2011 are dismissed. Order pronounced in the open court on 20th March, 2012.