2015 (5) TMI 469 - AT - Income Tax

Non-refundable portion of Advance Fee - addition to income - Income/ Revenue Recognition - whether addition resulted in double addition which has already been offered by the Appellant for taxation in the following assessment year i.e. AY 2011-12 on account of recognition of the amount by the Appellant as income in that year and the department also has accepted it as income in assessment in AY 2011-12 - Held that - The issue has been fully considered on similarity facts in 2006-07 assessment year wherein the ITAT considering the same Revenue recognition policy of the assessee allowed the claim of the assessee. The said view on facts has consistently been followed by the ITAT in 2007-08; 2008-09; and 2009-10 assessment years wherein either assessee s appeal has been allowed and where the CIT(A) allowed the relief following the view taken by the ITAT and the department has come in appeal, the departmental appeal has been dismissed. It is also seen that the Revenue agitated the issue before the Hon ble High Court u/s 260A for 2006-07 assessment year. Thus the issue can no longer be said to be res integra as far as the present forum is concerned. - Decision in the case of DCIT, Circle-3(1), New Delhi Versus Career Launcher (India) 2013 (8) TMI 139 - ITAT DELHI followed - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 16,16,61,424/- on account of Non-refundable portion of Advance Fee.
2. Double addition of Rs. 16,16,61,424/- already offered for taxation in the subsequent assessment year.
3. Application of the principle of Res Judicata in income tax proceedings.

Issue-wise Detailed Analysis:

1. Addition of Rs. 16,16,61,424/- on account of Non-refundable portion of Advance Fee:
The assessee, engaged in providing education and training, reported an income of Rs. 7,66,99,443/- for the assessment year 2010-11. The Assessing Officer (AO) added Rs. 16,16,61,424/- to the income, citing that the amount was shown as unearned revenue in the balance sheet and should be recognized as income since it was non-refundable. The AO rejected the assessee's explanation, stating that the principle of res judicata does not apply to income tax proceedings and that each assessment year is a separate unit. The AO argued that the non-refundable portion of the fee had accrued during the year and should be taxed accordingly. The CIT(A) upheld the AO's decision, following the precedent set in previous years.

2. Double addition of Rs. 16,16,61,424/- already offered for taxation in the subsequent assessment year:
The assessee contended that the addition resulted in double taxation since the same amount was offered for taxation in the subsequent assessment year (2011-12) and accepted by the department. The assessee provided a detailed table showing the advance fee recognized as income in subsequent years, which was verified and found consistent with the assessee's accounting policy.

3. Application of the principle of Res Judicata in income tax proceedings:
The assessee argued that the principle of res judicata, though not applicable to income tax proceedings, should prevent the department from changing its stance on a consistent policy followed by the assessee since 1995. The assessee cited the Supreme Court ruling in Radhasoami Satsang vs CIT, which held that the department cannot deviate from a consistent policy accepted over the years. The assessee also referenced previous ITAT orders favoring their position for assessment years 2006-07 to 2009-10, which were not contested further by the department.

Upon appeal, the Tribunal considered the consistent view taken in previous years where similar additions were deleted by the ITAT and not admitted as substantial questions of law by the High Court. The Tribunal noted that the revenue recognition policy of the assessee had been consistently accepted, and there was no new evidence to warrant a different conclusion. The Tribunal allowed the appeal, subject to verification of the amounts set out in the provided table.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the AO to verify the amounts and ensure no double taxation occurs. The consistent application of the revenue recognition policy and previous favorable judgments were key factors in the decision. The principle of res judicata, while not directly applicable, influenced the Tribunal's decision to maintain consistency in tax treatment across assessment years.