2022 (1) TMI 738 - HC - Income Tax

Revenue recognition - Adoption of the Accounting Standard AS-7 for determination of revenue - bogus purchases - HELD THAT - In the present case, both the learned ITAT as well as the learned CIT(A) have placed reliance on and upheld the adoption of the Accounting Standard AS-7 by the respondent-assessee for determination of its revenue. The learned counsel for the appellant does not deny that incase the case of the Revenue is to be accepted, it will also impact the revenue determination for the respondent-assessee and its profits. In any case, the dispute involved is factual in nature and no substantial question of law arises for consideration in the present appeal.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal dismissing appeal against CIT(A) order on grounds of bogus purchases.

Analysis:
1. The appeal challenged the order of the Income Tax Appellate Tribunal (ITAT) dismissing the appeal against the order of the Commissioner of Income Tax (Appeals) (CIT(A)) regarding alleged bogus purchases made by the respondent-assessee. The search and seizure operation conducted under Section 132 of the Income Tax Act, 1961 led to additions in the respondent's income, which was disputed by the appellant.

2. The Assessing Officer made additions to the respondent's income based on alleged bogus purchases from sham entities. The CIT(A) allowed the appeal, emphasizing the regular recognition of revenue by the respondent under the 'construction-linked percentage completion method' as per Accounting Standard AS-7. The ITAT dismissed the appeal, noting the lack of opportunity for cross-examination and the reliance on information without sufficient reasoning.

3. The appellant contended that the respondent failed to discharge the burden of proof regarding the genuineness of the transactions. However, the Court found no merit in this argument. Both the CIT(A) and the ITAT upheld the adoption of Accounting Standard AS-7 by the respondent for revenue determination, impacting the profitability of the respondent if the Revenue's case was accepted.

4. The Court concluded that the dispute was factual, with no substantial question of law requiring consideration. There was no perversity in the findings of the CIT(A) and the ITAT. Consequently, the Court dismissed the appeal challenging the ITAT order, affirming the decisions of the lower authorities.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the arguments presented and the Court's reasoning in reaching its decision.