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TMI Blog2014 (8) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the assessee was following the method of accounting which neither falls under mercantile system nor cash system of accounting." 2. "On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in not appreciating the fact that there were numerous mismatches between purchases executed by the assessee and their reflection in stock and the assessee maintained no stock of register which call for attention of section 145 of the l.T.Act, 1961." 3. The appellant prays that the order of the CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored." 2. The assessee is a contractor firm engaged in the business of environment infrastructure, water and sewerage plant, pumping station, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various documents submitted by it. The Assessing Officer, invoked the provision of section 145(3) of the Act and made ad hoc addition of Rs. 70,00,0001 - on the ground that appellant does not follow either mercantile method of accounting or cash method of accounting. Section 145 of the Act deals with the method of accounting. The same reads as under: - "Method of accounting. 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of subsection (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment had notified any particular accounting standards to be followed by the contractors engaged in the business that is carried out by the appellant. Hence, even second part of sub-Section (3) of Section 145 does not apply to this case. The Assessing Officer had not pointed out any defect in the accounts books maintained by the assessee, which, admittedly, were produced before the Assessing Officer for his consideration. This is also not the finding of the assessing officer that the account of the assessee was not complete. No provision either in the Act or in the rules requiring an assessee carrying business of this nature, to maintain a stock register, as a part of its accounts has been brought on record, by non-maintaining stock regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the matter in detail chose to make ad hoc addition ignoring the submissions made by the appellant by invoking provisions of section 145 of the Act. So far as section 145 is concerned, it is worth noting observation of the Hon'ble Supreme Court in the case of British Paints India Ltd. (supra) at page-56 as under: "Section 145 of the Income Tax Act, 1961, confers sufficient powers upon the officer - nay it imposes a duty upon him to make such computation in such manner as he determines for deducing the correct profits and gains. This means that where accounts are prepared without disclosing the real cost of the stock-in-trade, albeit on sound expert advice in the interest of efficient administration of the company, it is the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own case for the A.Y. 2005-06 has considered an identical issue vide order dated 9th October 2009 in ITA No. 5039/Mum/2008 in para 3 as under:- "We have considered the rival submissions and have perused the orders of Assessing Officer and CIT(A). We find that these advances were required to be utilized for the purpose of executing contract and as per the terms of the contract, the advances were adjusted as per actual progress of the contract. The CIT(A) has recorded that no advance is adjusted in full in the first bill for the work done as the entire contract was not complete and that if the contract is not completely fulfilled the assessee has to return the amount of advances. We find that the CIT(A) has reproduced a chart showing that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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