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TMI Blog2013 (11) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause it resulted in loss – Decided against Revenue. - Tax Appeal No. 902 of 2013 - - - Dated:- 22-10-2013 - M. R. Shah And Sonia Gokani,JJ. For the Appellant : Mrs. Mauna M. Bhatt, Advocate ORDER (Per : Honourable Mr. Justice M. R. Shah) 1.00. Present Tax Appeal has been preferred by the appellant revenue challenging the impugned Judgement and Order passed by the learned Income Tax Appellate Tribunal C Bench, Ahmedabad in ITA No.2873/Ahd/2011 dated 8/3/2013 with respect to AY 2006-07, by which the learned tribunal has dismissed the said appeal preferred by the revenue confirming the order passed by the CIT(A) in deleting expenditure of Rs.45,78,354/- after rejecting books of accounts. 2.00. Facts leading to the present Appeal, in nutshell, are as under : 2.01. The assessee Company filed its e-return of income on 27/12/2006 declaring total income of Rs.(-)6,65,163/-. The same was processed under section 143(1) of the Income Tax Act. The case was selected for scrutiny through CASS and notice under section 143(2) was issued and served on the assessee. 2.02. On verification of the return of the income and audited report, it was noticed by the assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) deleting addition of Rs.45,78,354/- made by the assessing officer, the revenue preferred an appeal before the ITAT and the ITAT by the impugned judgement and order has dismissed the said appeal preferred by the revenue. 2.07. Being aggrieved by and dissatisfied with the impugned judgement and order passed by the ITAT, the revenue has preferred the present Tax Appeal. 3.00. Ms.Mona Bhatt, learned counsel appearing on behalf of the appellant revenue has vehemently submitted that the tribunal has failed to appreciate the fact that due to change of accounting system during the year under consideration, the assessee adopted expenditure of Rs.45,78,354/- which was pertaining to the completed project of earlier years and because of the said treatment, there is a loss during the year under consideration, which has resulted into less showing of profit. It is submitted that in the present case, Chartered Accountant in his audit report has also noted that profit of the year has been affected by change of system of accounting from cash system to mercantile system in the year under consideration at least to the extent of Rs.8,29,296/-. It is submitted that therefore, the learned tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the project is completed or not and the expenditure incurred on the same project whether completed or not was accounted for as expenditure in the profit and loss account. However, during the year under consideration, the method of accounting was changed whereby the advances received and expenditure incurred in respect of the project completed during the year under consideration were accounted for in the profit loss account and the advances received and expenditure incurred for incomplete projects was carried forward to the Balance Sheet under the head Advances and Work-in-progress respectively. The Appellant argued that the change in the method of accounting was bona fide and for the compliance of the statutory requirements of Accounting Standard AS 9 Revenue Recognition issued by the Institute of Chartered Accountants of India and as per the provisions of S.5 of the Income Tax Act. The Appellant further argued that the method of accounting adopted now during the year under consideration is more accurate, scientific and in compliance of various statutory requirements, and therefore, bona fide change of method of accounting cannot be rejected for the reason that it would resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration, the Appellant has changed method of accounting to account for the income in the year in which the project is completed i.e. on the basis of accrual of income. This method of account is more accurate, scientific and as per the various statutory requirements and therefore in my opinion, the change in such method of accounting is bona fide and the same cannot be rejected and the same cannot be rejected on the ground that it has resulted into claiming more expenditure during the year under consideration. Therefore, I hold that the action of assessing officer in rejecting change in the method of accounting is incorrect and not sustainable and accordingly addition made by the assessing officer is hereby deleted. 3.8. In any case, as submitted by the Appellant, I agree that claim of expenditure amounting to Rs.45,78,354/- is not the impact of change in method of accounting and the same has been incurred during the year under consideration and therefore, the same is legitimately allowable to the Appellant. I agree with the Appellant that in the earlier years, the expenditure incurred was debited to profit loss account irrespective of the completion of the project wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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