9911796707
TMI Blog2012 (4) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ract in accordance with the mercantile system of accounting in the assessment year 1997-98? 2. Whether the Tribunal was right in law in sustaining the order of assessment when the requirement of Section 144 of the Act has not been complied with by the Assessing Authority?" 2. The factual position as found by the Income Tax Appellate Tribunal (tribunal, for short) with regard to question No. 1 is that the assessee was awarded a works contract by NBCC for doing electrical work vide contract dated 27th September, 1991. The payments received/bills raised and the expenditure incurred were not included in the profit and loss account, but were shown in the balance sheet under the head "running payment against work in progress" and "running ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 143(3) and 144 of the Act. 4. The CIT(Appeals) rejected the plea raised by the assessee regarding "project completion method", inter alia, recording as under:- "The Ld. Counsel of the appellant has specifically invited my attention to the words "regularly followed". It has been claimed that this should be read as being followed from year to year. The Ld. Counsel has pleaded that upto asstt. Year 1996-97 the appellant was following hybrid system of accounting. Only because of amendment to Section 145, the appellant had to shift to mercantile system of accounting for financial year 1996- 97. Therefore, it has been pleaded that the expression "regularly followed" was inapplicable to the case of the appellant. On careful c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g petty. Repeated opportunities were allowed to the appellant to give justification for claiming the loss during the asstt. year under appeal from NBCC project. Neither any work was done during the previous year not any payments were received. Neither the dispute had been referred to the arbitrator during the previous year nor the decision of the arbitrator had been received. In fact, the dispute is still pending before the arbitrator. Under such circumstances, the only reasonable course of action would be to carry forward the debit as well as credit to succeeding years till such time as the arbitration award is received. Thus, during the asstt. year under appeal, neither the loss would be allowable as deduction nor the profit could be esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,599/- and the expenditure, i.e., Rs.22,73,383/- had not been included either in the debit or the credit side of the profit and loss account. 7. When the matter was taken up by the assessee before the tribunal, they approved the findings recorded by the CIT(Appeals) with reference to paragraph 10 of his order. The relevant portion of the order of the tribunal reads:- "9. It is undeniable that under a mercantile system of accounting, the expenditure or loss incurred by the assessee in relation to a transaction is to be allowed on the basis of its accrual in contrast of cash system of accounting wherein such loss or expenditure is to be allowed only when it is actually paid for. The system of accounting for the year under consideration, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 8. The only confusion, which is created by the aforesaid paragraph and the reasoning given by the tribunal, is regarding the clarification which was required in respect of paragraph 11 of the order of the CIT(Appeals). Accordingly, we clarify that in case the assessee had not claimed loss of Rs.4,10,783/- in the profit and loss accounts, the same will not be reduced. In case he had claimed this loss, it will be disallowed. We will also clarify that both entries of Rs.18,62,599/- and Rs.22,73,383/- will be excluded from the credit and debit side of the profit and loss account. We accordingly answer the question No. 1 partly in affirmative and partly in negative and in terms of what has been directed above. 9. The next aspect relates to r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
