2009 (12) TMI 26 - HC - Income Tax

Non discloser of work in progress in closing stock - The explanation offered by the assessee that it is following the mixed system of accounting and its receipts were being accounted for on cash basis whereas the expenses were being worked out on mercantile basis, did not find favour with the assessing authority but has been accepted by the First Appellate Authority and Tribunal as well. held that - CIT (A) and Tribunal both followed their earlier year s order wherein it was held that there is nothing objectionable if the assessee has not disclosed the work in progress in the closing stock. The income of assessee is being assessed on the basis of profit and loss account and the assessee has not taken into account its opening stock also. The assessee is maintaining the account books in the same fashion as it was doing earlier and was accepted by the department. This being so, the Tribunal was justified in not sustaining the additions made by the Assessing Officer in this regard

Summary

Issues Involved:
1. Appeal filed under Section 260-A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal related to assessment year 1989-1990.
2. Assessment of income of a registered Firm engaged in property development and sale of flats.
3. Discrepancy in disclosure of work in progress in closing stock.
4. Treatment of receipts and expenses in accounting.
5. Legality of additions made by the Assessing Officer.
6. Rulings of the CIT (A) and Tribunal on disclosure of work in progress.
7. Disallowance of interest paid by the assessee to various parties.

Analysis:
1. The appeal raised two questions of law regarding the correctness of the Income Tax Appellate Tribunal's decision in deleting certain additions to the assessee's income. The Tribunal, along with the CIT (A), had previously ruled in favor of the assessee's accounting method, stating that non-disclosure of work in progress in closing stock was acceptable. The Tribunal justified its decision by noting that the income assessment was based on the profit and loss account, and the assessee's accounting practices were consistent and previously accepted by the department. Consequently, the Tribunal was deemed justified in not upholding the additions made by the Assessing Officer, leading to the dismissal of the appeal.

2. Regarding the second question raised in the appeal, the Tribunal's reliance on its earlier orders for previous assessment years was noted. The Tribunal found no legal flaws or irregularities in its previous decisions. As a result, the Tribunal's decision to delete the addition of interest paid by the assessee to various parties was upheld. The judgment concluded that there was no illegality or perversity in the Tribunal's order, leading to the dismissal of the appeal without any costs being imposed.

This detailed analysis of the judgment highlights the key issues, legal arguments, and the reasoning behind the decision rendered by the High Court of Allahabad.