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2019 (8) TMI 1052 - AT - Income TaxReal Income - electricity bill raised at higher price but recognised in income at lower price approved by ATE - differential was shons as contingent sales - HELD THAT - Ld.CIT(A) allowed the appeal of the assessee following the decision of this Tribunal in the assessee s own case 2017 (5) TMI 531 - ITAT VISAKHAPATNAM wherein it was held that sale on account of differential sale price claimed by the assessee which was pending before the ATE for adjudication is not accrued to the assessee as revenue for the relevant financial year. The assessee has rightly recognized the revenue as per the sale price fixed by the state government which is the real income accrued to the assessee as per the prevailing situation. The additional claim made by the assessee is a mere claim which was not settled by the authorities. Unless the issue is settled, the assessee cannot recognize its revenue merely based on its claim, The assessee has rightly treated the difference between sale price claimed and the price paid by the APTRANSCO as contingent sales. Since, there is no change in the facts and the Ld.CIT(A) allowed the appeal of the assessee following the order of this Tribunal, we do not find any reason to interfere with the order of the Ld.CIT(A) and uphold the same. - Decided in favour of assessee.
Issues Involved:
1. Discrepancy between purchase bills and receipts admitted by the assessee. 2. Treatment of income related to power division. 3. Application of mercantile system of accounting. 4. Revenue recognition and adjustments. 5. Appeal against the order of the Assessing Officer (AO). 6. Decision of the Commissioner of Income Tax (CIT-A). 7. Admissibility of deduction under section 80-IA of the Income Tax Act. Detailed Analysis: Issue 1: Discrepancy between purchase bills and receipts The appeal was filed by the revenue against the order of the CIT(A) regarding the difference between purchase bills and receipts admitted by the assessee. The AO treated the undisclosed amount as income, leading to an addition to the total income of the assessee. The discrepancy arose from the transfer of an amount to the 'Contingent Sales Account' without including it in the total sales, as per the AO's findings. Issue 2: Treatment of income related to power division The AO contended that the assessee, following the mercantile system of accounting, should have recognized the total sales in the Profit & Loss account based on the bills raised. The AO added the undisclosed amount to the income, affecting the deduction under section 80-IA of the Income Tax Act. Issue 3: Application of mercantile system of accounting The AO emphasized the application of the mercantile system, where income accrual is independent of receipts. The assessee's method of reducing turnover in the Profit & Loss account was deemed contradictory, violating Accounting Standard '9' on revenue recognition. Issue 4: Revenue recognition and adjustments The CIT(A) allowed the appeal of the assessee, citing previous tribunal decisions where the disputed sale price was not treated as income until settled. The tribunal upheld the CIT(A)'s decision, emphasizing that revenue recognition should align with actual income accrued as per prevailing situations. Issue 5: Appeal against the AO's order The assessee appealed against the AO's decision, arguing that the disputed sale price should be considered contingent until resolved. Previous tribunal decisions supported the assessee's stance, leading to the dismissal of the revenue's appeal. Issue 6: Decision of the CIT(A) The CIT(A) based the decision on previous tribunal rulings, where the disputed sale price was not recognized as income until resolved. The CIT(A) upheld the appeal of the assessee, leading to the dismissal of the revenue's appeal. Issue 7: Admissibility of deduction under section 80-IA The addition to the income by the AO impacted the deduction under section 80-IA of the Income Tax Act. The CIT(A) decision in favor of the assessee led to the dismissal of the revenue's appeal, rendering the cross objections filed by the assessee infructuous. In conclusion, the judgment highlighted the importance of revenue recognition, adherence to accounting standards, and the impact of the mercantile system of accounting on income determination in the context of the disputed sale price and contingent sales. The decision favored the assessee based on previous tribunal rulings, ultimately leading to the dismissal of the revenue's appeal.
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