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TMI Blog2018 (9) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... v) Rs. 1,46,305/- on account staff welfare/misc. expenses/entertainment to customers. 2. The Assessee filed appeal before the Ld. CIT(A), in which the aforesaid additions/ disallowances were contested. Vide order dated 28.09.2015, the Ld. CIT(A) confirmed the aforesaid additions of Rs. 48,19,659/- and allowed partial relief out of expenses related to Car and Telephone Expenses. The present appeal before us is against the aforesaid order dated 28.09.2015 of the Ld. CIT(A). The Assessee has taken the following grounds in the appeal:- "1. That the order of the Ld. CIT (Appeals) is bad both in law and on the facts of the case. 2. That the action of the AO u/s 147/148 is bad in law and on facts. Section 147/148 is not applicable to the facts of the case. 3. That the proceedings u/s 1471/48 are time barred. 4. That there was 'No reason to believe' to take action u/s 147/148. That the AO acted merely under "suspicion" and this vitiates the AO's action. Further, there was no "nexus" between the primary facts and belief u/s 147/148 and this vitiates the action u/s 147/148. 5. That the reasons to reopen were neither recorded nor supplied to the assessee and this vitiates the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 48,19,659/- had not accrued to the assessee. The AO did not consider the submissions of the Appellant and the so called difference in TDS receipts amount is not taxable at all as the same has been offered for taxation in subsequent year following the Cash System of accounting and CIT(Appeals) erred in by upholding the same. 16. That it was not open to the AO to intervene and substitute the different method of accounting then the one which being followed by the assessee uniformly and regularly since the inception and CIT (Appeals) erred in by upholding the same. 17. That the Ld. CIT (Appeals) erred in by applying Rule 37 BA of I.T. Rules, and by ignoring the fundamental fact that under the I.T. Act, it is the choice of the assessee to follow either of the system of accounting viz. Cash System or Mercantile System under section 145 of the I.T. Act, 1961, and rules are to be read in conjunction with the Act. 18. That the order of the AO is null and void in view of the legal precedents of the various courts in assesses favour and CIT (Appeals) erred in by not following / adhering to the same inspite of the written submissions. 19. That the AO erred in by disallowing l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer for initiation of proceedings U/s 147 r.w.s. 148 of I.T. Act. The reasons recorded by the Assessing Officer are reproduced below for ready reference:- " As per information in form 26AS available in this office, it revealed that Sh. Dhruv Sachdev has received gross receipts to the tune of Rs. 1,94,11,386/- from professional receipts during F.Y. 2010-11 relevant to the Assessment Year 2011-12 against his PAN: BAVPS3244Q. However, on perusal of Income-tax return for the A.Y. 2011-12, it is revealed that assessee has declared gross received of Rs. 1,38,40,587/- only for the F.Y. 2010-11 relevant to the A.Y. 2011-12. Therefore, facts are leading to conclusion that the assessee has not declared his income/receipts to the tune 55,70,799/-(Rs. 1,94,11,386/- minus 1,38,40,587/-) for A.Y. 2011-12 and has evaded tax liability on the income earned during this period. Keeping in view the facts mentioned above, I have reason to believe that Income of Rs. 55,70,799/- chargeable to tax has escaped assessment for the A.Y. 2011-12 as defined under Section 147 of the I.T. Act, 1961 in case of Sh. Dhruv Sachdev. Therefore, I am satisfied and have reason to believe that it is a fit case fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this year because tax was deducted at source, the income was shown in a subsequent year, based on cash system of accounting regularly followed by the Assessee. The Ld. Counsel drew our attention to the reconciliation filed by the Assessee before the Assessing Officer and before the Ld. CIT(A) wherein information was provided as to year in which income was shown by Assessee. The Ld. Counsel strongly contended that the income of the Assessee should be determined as per cash method of accounting, which is regular method adopted by the assessee. The Ld. Counsel for Assessee also relied on order dtd. 03-01-2018 of SMC Bench of ITAT in Assessee's own case, in ITA No. 6914/Del/2017 for A.Y. 2007-08. The Ld. Departmental Representative relied on the orders of the Assessing Officer and the Ld. CIT(A). 4.1. We have heard both sides and perused the materials on record. Before we decide this issue, law as it applies to facts of this case, needs to be understood. In the case of the Assessee i.e. the Payee, deductors have deducted tax at source U/s 194J and U/s 194A of I.T. Act. Under these provisions, the deductor is required to deduct tax at source at the time of credit of the specified sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such amounts to tax which are not assessable during the year on the basis of regular method of accounting followed by the assessee. Section 145(1) of I.T. Act makes it abundantly clear that income chargeable under the head of "Profit and Gain of business or profession" shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the Assessee. If the assessee has erroneously taken credit for prepaid taxes on account of tax deducted at source; then having regard to Rule 37BA of Income Tax Rules, Revenue will be justified in denying credit for such amount of prepaid taxes on account of tax deducted at source. However, Revenue cannot, merely because credit for tax deducted at source has been erroneously claimed by the Assessee, bring corresponding professional receipts to tax, if such receipts are otherwise not assessable as income in accordance with law. We find that both sides, Revenue as well as Assessee, are in error of law. On one hand, the Assessee has erroneously claimed credit for prepaid taxes on account of tax deducted at source even in respect of such amounts which are not assessable to tax in this year as per method of accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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