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TMI Blog2013 (5) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri G. C. Gupta And Shri Anil Chaturvedi,JJ. For the Appellant : Shri U. S. Bhati, AR For the Respondent : Shri Rahul Kumar, SR-DR ORDER Per Anil Chaturvedi, Accountant Member:- This appeal of the assessee arises from the order of Commissioner of Inc-tax (Appeals)-VIII, Ahmedabad ('CIT(A)' for short) dated 10-12-2009 for the assessment year (AY) 2006-07. The facts as culled out from the assessment order as under:- 2. The assessee is a company engaged in the business of manufacturing of machinery of road construction and maintenance machinery and construction of roads. The assessee filed its e-return of income on 31-12-2006 declaring total income of Rs.15,68,08,210/-. Subsequently the case was selected for scrutiny and thereafter the assessment was finalized u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') vide order dated 30-12-2006 and the total income was determined at Rs.16,63,18,100/-. Aggrieved by the order of Assessing Officer (AO) assessee carried the matter before Ld. CIT(A). Ld. CIT(A) vide order dated 10-12-2009 granted partial relief to the assessee. Aggrieved by the aforesaid order of Ld. CIT(A) the assessee is now in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the submissions of the Ld. AR carefully. There is no dispute about the fact that the appellant raised the bills in respect of impugned sales for the entire sale amount of goods etc. It had booked expenses in its P/L account for entire amount of such sales during the relevant period. In other words, it claimed expenses in respect of the income which was not disclosed with the return for the relevant period. 6.4 The appellant is following mercantile system of accounting, therefore, it is incumbent upon him to account for entire amount of sales for which the bills have been raised during the relevant period. The provisions of sec. 145 of the Act are very clear in this regard which lay that the income chargeable under the head "profit and Gains of Business or Profession" shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. As per the provisions of the section, there cannot be a mixed system of accounting more precisely an assessee cannot have two system of accounting. In total contravention of sec. 145 of the Act the appellant has accounted for 90% of sales on mercantile basis and remaining 10% on cash basis. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of this, the addition made by the AO is hereby confirmed and the appellants ground against the same is hereby dismissed." 5. Aggrieved by this order of Ld. CIT(A) assessee is in second appeal before the Tribunal. 6. Before us, at the outset, Ld. AR for the assessee submitted that on similar issue in earlier year, the issue has been decided by Hon'ble Tribunal, wherein the matter was set aside to the file of Ld. CIT(A) with a direction to pass a speaking order. Ld. AR for the assessee pointed out para-5 of the Tribunal's order in ITA No. 1294/Ahd/2009 dated 30-08-2011. He further submitted that since the fact of the year under appeal are identical to that of AY 2005-06 and since the AO and Ld. CIT(A) has followed the order of AY 2005-06 similar directions may also be issued in the year under appeal. On the contrary Ld. SR-DR of the Revenue supported the order of Assessing Officer. 7. We have heard the rival submissions, perused the materials available on record and the paper book filed by the assessee. From the order of Assessing Officer, we find that he has passed very cryptic order and followed the observation made by his predecessor in AY 2005-06 and Ld. CIT(A) had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso not examined the assessee's contention that the amount was in the nature of retention money. Co-ordinate Bench of Tribunal in assessee's own case while deciding AY 2005-06, remitted the issue to the file of Ld. CIT(A) to pass a speaking order. We, following the decision of Co- ordinate Bench also direct the issue to the file of Ld. CIT(A) to pass a speaking order after providing reasonable opportunity of being heard to both the side. This ground of assessee's appeal is allowed for statistical purposes. 9. Coming to second issue with regards to disallowance u/s.14A of the Act. During the course of assessment proceedings, Assessing Officer noted that investments of the assessee were to the extent of Rs.18,19,28,050/-. The assessee was asked to explain as to whether any interest bearing funds were diverted for the purpose of making investment. In response to the query of the AO the assessee submitted before that no interest bearing funds have been used for non-business purpose. Assessing Officer noted that assessee has not substantiated its claim by submitting the day-to-day fund flow statement. He also noted that assessee had not furnished details of exact source of investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es below. 12. We have heard the rival submissions, perused the materials available on record and the case law cited by Ld. AR of the assessee. We find that Ld. CIT(A) has directed the Assessing Officer to work out the disallowance by following Rule 8D of the IT Rules. The Hon'ble Bombay High Court rendered in the case of Godrej Boyee Mfg. Co. Ltd. (supra) has held that though the provisions of Rule 8D of the IT Rules are not applicable to assessment prior to AY 2008-09 but has also held that the disallowance need to be made on a reasonable basis. In view of the aforesaid ratio since the year under appeal is AY 2006-07, following the order laid down by the Hon'ble Bombay High Court rendered in the case of Godrej Boyee Mfg. Co. Ltd. (supra) we remit the issue back to the file of Assessing Officer to work out the disallowance u/s. 14A of the Act in line with the direction given by the Hon'ble Bombay High Court rendered in the case of Godrej Boyee Mfg., Co. Ltd. (supra) after providing reasonable opportunity of being heard to assessee and its submissions. This ground of assessee's appeal is allowed for statistical purposes in terms of direction. 13. Coming to assessee's next ..... X X X X Extracts X X X X X X X X Extracts X X X X
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