2008 (8) TMI 120 - HC - Income Tax

Whether Tribunal was justified in holding that the income could be properly reduced from the method of accounting employed by the assessee within the meaning of proviso to Section 145 (1) only because it was in accordance with Section 209 (3) (b) of the Companies - Whether Tribunal was justified in law in deleting the said disallowance in view of decision of this Court in CIT vs (PICUP) U.P. Ltd., issue is decided in favour of the assessee and against the Revenue.

Summary

Issues:
Appeal under Section 260-A of the Income Tax Act, 1961 against Tribunal's order for assessment year 1993-94. Questions raised: 1. Proper reduction of income under Section 145(1) based on Companies Act provision. 2. Deletion of disallowance due to accounting system and real income assessment.

Analysis:

1. The first issue pertains to the Tribunal's decision on whether the income could be reduced from the accounting method employed by the assessee under Section 145(1) of the Income Tax Act. The question raised was whether the Tribunal was justified in holding that the income could be properly reduced based on compliance with Section 209(3)(b) of the Companies Act, as amended by a Government notification. The Court noted that a similar issue had been considered previously for the assessment year 1990-91, where a decision was made in favor of the assessee. Referring to this precedent, the Tribunal decided the issue in favor of the assessee. Consequently, the Court held that the issue in question was squarely covered by the earlier decision, and therefore, the appeal was dismissed.

2. The second issue revolves around the Tribunal's decision to delete the disallowance without fully appreciating the impact of the accounting system on the assessment of the assessee's real income. The appellant argued that the real income of the assessee had escaped assessment due to the accounting method adopted, and the decisions cited by the assessee were not applicable in this context. However, the Court, relying on the previous decision related to the same assessee for a different assessment year, upheld the Tribunal's decision to delete the disallowance. The Court concluded that the issue was adequately addressed by the earlier judgment, and hence, the appeal was dismissed.

In conclusion, the High Court of Allahabad dismissed the appeal under Section 260-A of the Income Tax Act, 1961, directed against the Tribunal's order for the assessment year 1993-94. The Court based its decision on the precedent set in a previous case involving the same assessee, where similar issues were resolved in favor of the assessee. The judgment highlights the importance of consistency in legal decisions and the application of established principles to ensure fairness and uniformity in tax assessments.