2005 (1) TMI 371 - AT - Income Tax

Summary

Issues:
1. Validity of invoking provisions of s. 147 of the Act
2. Acceptance of revised return showing loss of Rs. 33,363
3. Charging of interest under ss. 234B and 234C without passing any order

Issue 1: Validity of invoking provisions of s. 147 of the Act
The appellant challenged the jurisdiction of the Assessing Officer (AO) under s. 147 of the Act. The AO issued a notice under s. 148 after recording reasons, as the work-in-progress (WIP) valuation was revised by the assessee, resulting in an understatement of profit. The AO held that the WIP cannot be changed without reference to the audited statement. The CIT(A) dismissed the appeal challenging the reopening of assessment and the assessment of income at Rs. 97,690 instead of the loss declared in the revised return. The Tribunal considered the change in the method of accounting from WIP to project completion method as bona fide. Referring to a relevant case, the Tribunal held that the assessee can change the method of accounting before the assessment is completed. Consequently, the Tribunal directed the AO to compute the income based on the revised return, i.e., a loss of Rs. 33,363.

Issue 2: Acceptance of revised return showing loss of Rs. 33,363
The appellant contended that the revised return declaring a loss of Rs. 33,363 was valid due to a change in the method of accounting from WIP to project completion method. The learned counsel for the appellant argued that this method was consistently followed in subsequent years and accepted by the Department. The Departmental Representative opposed this, stating that the method could not be changed after the accounts were closed and income accrued. The Tribunal, after considering the submissions and relevant case law, upheld the appellant's claim, allowing the appeal on merits and directing the AO to compute the income as a loss of Rs. 33,363.

Issue 3: Charging of interest under ss. 234B and 234C without passing any order
The appellant challenged the interest charged under ss. 234B and 234C, contending that it was erroneous and without jurisdiction as no order was passed for such charging. The Tribunal held this issue as consequential and ruled accordingly, without providing detailed findings.

In conclusion, the Tribunal allowed the appeal partly, directing the AO to compute the income as a loss of Rs. 33,363 based on the revised return. The Tribunal's decision was based on the bona fide change in the method of accounting by the appellant, which was recognized as permissible under relevant legal precedents.