2012 (10) TMI 678 - AT - Income Tax

Addition on mobilization advance - CIT(A) deleted the addition - Held that - Assessee is receiving mobilization advance from customers to enable the assessee to purchase the raw material for the proposed work. As per the assessee s method of accounting the material finished or semi finished stocks is transferred to customers work site for installation through invoices. The customer is billed and the amount is credited to sales account at pro-rata to the extent work is done and billed from time to time. The mobilization advance is accordingly adjusted proportionately. This system of accounting does not suffer from any short coming moreover it has been accepted by the department in earlier years & there is no change in facts or law as compared to earlier years thus as decided in CIT vs. Dalmia Promoters Developers (P) Ltd. 2006 (1) TMI 57 - DELHI HIGH COURT for rejecting the view taken in earlier assessment years there must be material change in the fact situation or in law - in favour of assessee.

Summary

Issues:
1. Whether the deletion of the addition of Rs. 3,87,74,848/- made by the Assessing Officer on account of mobilization advance was justified.

Detailed Analysis:

Issue 1: Deletion of Addition of Mobilization Advance
The appeal pertains to the deletion of an addition of Rs. 3,87,74,848/- made by the Assessing Officer regarding mobilization advance. The Assessee, engaged in manufacturing aluminum and architectural products, showed the advance under current liabilities. The Assessing Officer added the amount to the income, citing that all income and expenditure should be booked in the year on an accrual basis. The Assessee explained its accounting method, stating that the advance remained a liability until work completion. The Commissioner of Income Tax (A) accepted the Assessee's accounting method, citing consistency and previous acceptance by the Revenue. The Commissioner referred to relevant case laws and held that the Assessing Officer's stand was incorrect due to lack of fresh facts or law changes. The Tribunal upheld the Commissioner's order, emphasizing the Assessee's acceptable accounting method and the absence of any material changes warranting deviation.

This issue involves the interpretation of accounting principles, consistency in tax proceedings, and the application of relevant case laws. The decision highlights the importance of adhering to accepted accounting methods and the principle of consistency in tax assessments.