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Issues:
1. Change in method of accounting for cash incentive. 2. Justification of the change in method of accounting. 3. Applicability of relief under section 80HHC of the IT Act. 4. Frequency of changing the method of accounting. 5. Bona fide nature of the change in method of accounting. Analysis: Issue 1: The primary issue in this case revolves around the change in the method of accounting for a cash incentive by a partnership firm. The firm switched from the mercantile system to the cash system for the assessment year 1988-89, leading to a dispute with the tax authorities. Issue 2: The assessee contended that the change in accounting method was bona fide and not aimed at evading tax liability. The Department, however, argued that the change was made with the ulterior motive of availing relief under section 80HHC of the IT Act. Issue 3: The Departmental Representative highlighted that the assessee's method of accounting changes were selective and aimed at maximizing benefits under specific provisions, such as section 80HHC. This raised concerns about the genuineness of the change in accounting method. Issue 4: The Tribunal observed that the assessee had a history of frequently changing accounting methods, particularly concerning the cash incentive. Such frequent changes, especially for a specific item of income, raised doubts about the consistency and reliability of the financial reporting. Issue 5: The Tribunal referred to legal precedents, emphasizing that a change in the accounting method must be genuine and not driven solely by convenience or tax planning. The decision underscored the importance of maintaining a consistent approach to accounting practices. In conclusion, the Tribunal upheld the decision of the CIT(A) and dismissed the appeal filed by the assessee. The judgment highlighted the significance of maintaining a consistent and bona fide approach to accounting practices, especially concerning specific items of income like the cash incentive. The case serves as a reminder of the importance of transparency and adherence to accounting principles in tax assessments.
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