9911796707
TMI Blog2012 (9) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... & served upon on 15-7-2008, being beyond the period of 12-months from the date of filing of return is bad in law and is liable to be set aside. 3. That the order of the Assessing Officer as upheld by the Commissioner of Income Tax (Appeals) in the facts and in the circumstances of the case erred in initiating proceedings U/S 147/148 & framing assessment and thereby making an addition of Rs. 759500-00 on account of interest and Rs. 33000-00 on account of salary is bad in l aw and needs to be set aside. 4. That the appellant craves leave to amend, add, delete any of the grounds of appeal, before the appeal is finally heard and decided." 3. In appeal for the assessment year 2005-06, the assessee has raised following grounds of appeal: "1 . That the order of the Assessing Officer as upheld by the Commissioner of Income T ax (Appeals) is bad in l aw and is beyond all the cannons of law and justice. 2. That the order of the Assessing Officer as upheld by the Commissioner of Income Tax (Appeals) passed on the basis of the notice issued U/S 143(2) dated 11-7-2008 & served upon on 15-7-2008, being beyond the period of 12-months from the date of filing of return is bad in law and is li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters pending as on date on which the amendment is declared to be effective and would also be applicable to other future cases, though it may relate, to amendment or proceedings earlier to the effective date. However, in matters of substantive law the amendment cannot have retrospective effect unless it is specifically made retrospective. In CIT. vs. Kerala Transport Co. (2000) 242-ITR-263 the Hon'ble Kerala High Court took the view that the date on which the dispute had commenced is the relevant date with reference to the Civil Procedure Code, so; that the date on which the notice u/s 143(2) was issued would be the: relevant date for considering the applicability of the amendment. Since on the date of issue of notice u/s 143(2) i.e. 11/7/2008, which falls after 1/4/2008 when amendment was brought on the statute book, it cannot by any stretch of imagination be said to have been issued after 1 the expiry of limitation period i.e. after six months from the end of the relevant financial year i.e. 30/09/2008. The various case laws relied upon by the assessee are not in respect of procedural amendments. Therefore, the contention of the assessee is not acceptable and the case laws do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d March 27,2000 of Hon'ble Supreme Court, in the case of CIT V Hindustan Electro Graphics Ltd. to support his contentions. A bare perusal of the case law reveals that the case law pertains to the assessment year 1989-90 and deals with the issue of levy of additional tax. In the present case, subject matter before the AO, is not levy of additional tax, but the issuance of notice u/s 148 of the Act. The Hon'ble Supreme Court interpreted the levy of additional tax, as having the characteristics of penalty. In view of this, the case law relied upon by the assessee is factually different and distinguishable and, hence, cannot be applied to the facts of the present case. 11. Ld. 'AR' further placed reliance on the decision of the Special Bench in the case of Tobacco Products Pvt. Ltd. V Dy.CI T 120 TTJ (Del)(SB) 577. A bare perusal of the case law relied upon by the assessee reveals that the ld. 'AR' has misread and mis-applied the decision of the Special Bench. In the present case, AO has not taken aid of Section 292BB of the Act in the matter, for the purpose of issue of notice u/s 148 of the Act. However, the decision rendered by the Hon'ble Special Bench pertains to the interpreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext, we deem it fit, to reproduce the relevant clauses number 42.8 and 42.9 of the said circular as under: "42.8 Similarly the amended provision of sub- section (2) of Section 143 shall apply to all such returns (irrespective of the assessment year to which the returns pertain) where notice under sub- Section (2) of Section 143 can still be issued on Ist April 2008 under the pre-amended provision." 42.9 For example, the assessee "A" files his tax return on 31 s t March 2007, the assessee "B" files his tax return on 15 t h April, 2007 and the assessee "C" files his tax return on 16 t h October, 2007. As on Ist April, 2008 notice under the pre-amended provision of sub-section (2) of Section 143 could not have been issued in case of "A" and could have been issued in cases of "B" and "C". Hence, the new provision shall apply for returns filed by 'B" and "C" but not for return filed by "A". In case of returns filed by "B" and "C", the notice under sub- section (2) of Section 143 can be served on the assessee on or before 31 s t September 2008. Any notice served on the assessee in these two cases, after this date, will not be valid." 13. A bare perusal of the explanatory note and part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of the Act by the CBDT, in the nature of contemporanea exposition, following the legitimate aid in the construction of a provision, as has been held in a number of decisions. In view of this, the action taken by the AO, in issuance of impugned notices, for both assessment years as upheld by the CI T(A), does not suffer from any legal infirmity, as the same finds direct support from the impugned circular, issued by the CBDT interpreting the relevant amended provisions of Section 143(2) of the Act by the Finance Act, 2008 w.e.f. 1.4.2008. In view of this, findings of the CIT(A) are upheld and the grounds of appeal of the assessee, in both the appeals, are dismissed. 17. In Ground No.3, the assessee contended that an addition of Rs.7,59,500/- on account of interest and Rs.33,000/- on account of salary, is bad in law and needs to be set aside. Similar ground has been raised by the assesse for the assessment year 2005-06 in ITA No.1376/Chd/2010, whereby it has been contended that an addition of Rs.7,36,000/- on account of interest, Rs.38,000/-, on account of salary, Rs.18,000/- on account of rent and Rs.5,000/- on account of legal charges, is bad in law and needs to be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the method of accounting applied by the assessee is rejected." Similar observation has been made by the AO in para 7 of the assessment order for the assessment year 2005-06 passed on 29.10.2008 u/s 143(3) read with Section 147 of the Act. Ld. CIT(A) passed consolidated order for both assessment years and gave the findings as under : "7. As regards addition made by the AO by adopting cash system of accounting, the AR submitted as under:- The assessee has been consistently following the accounting system of crediting the income received from Fawners on receipt basis and expenditure on account of interest to the creditors and others on accrual basis. When it was pointed out by the AO during the assessment proceedings f or the A.Y. 2004-05 that hybrid system of accounting followed by the assessee is not acceptable as per section 145 (1) of the IT Act, the assessee requested the AO to adopt mercantile system of accounting. Accordingly, assessee revised the return for the A.Y. 2006-07 on 29.2.2007 by adopting mercantile system of accounting declaring additional income of Rs. 7,23,703/-. However, the AO disregarded the request of the assessee and assessed the income on cash b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 145(3) of the Act. Apart from other things, section 145(3) empowers an Assessing Officer to reject the method of accounting employed by the assessee if the same is not in conformity to the method of accounting provided in section 145(1) of the Act. In this case the assessee was accounting for the incomes on cash basis and the expenses were claimed on mercantile basis in order to compute the income chargeable under the head 'Profits and gains of business or profession.' The Assessing Officer found the same as contrary to section 145(1) of the Act on the ground that the said section provided that income chargeable under the head "prof its and gains of business or profession" or "income from other sources" is to be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee, subject to the provisions of sub-section (2) of section 145. In the present case, the assessee was neither employing mercantile basis nor cash basis of accounting. He was employing a hybrid system of accounting. This method of accounting is no longer permissible in vie w of the provisions of section 145(1) of the Act as amended w.e.f. 01.04.1997. It is pertinent to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
