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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 ..... m of accounting, which is the system of accounting regularly employed by the Assessee; and to give credit for prepaid taxes on account of tax deducted at source, as per law, having regard to section 199 of I.T. Act r.w.r. 37BA of Income Tax Rules. Disallowance of expenses out of Car Expenses, Telephone Expenses and Staff Welfare Expenses - Held that:- Assessee failed to bring any materials for our consideration to prove that the disallowances confirmed by the Ld. CIT(A) were excessive, unreasonable, erroneous or against law. The Ld. Counsel for Assessee failed to make a case for any interference with the order of Ld. CIT(A) on these issues. Therefore, grounds related to disallowances are hereby dismissed. - Appeal of the assessee is partly allowed. - ITA No:- 6261/Del/2015 - - - Dated:- 18-9-2018 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER For The Assessee : Sh. Rajan Bhatia And Sh. Sunil Dhamija, Adv. For The Revenue : Ms. Ashima Neb, Sr. DR ORDER PER: ANADEE NATH MISSHRA, AM Assessee filed return of income declaring total income of ₹ 49,91,720/-. This was initially processed U/s 143(1) of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c is based mechanically merely on information received which information is also wrong and wholly vague. 8. That the AO has acted without jurisdiction and AO s action u/s 147/148 is without any basis. In fact jurisdictional facts were absent to take / justify action u/s 147/148. 9. That when the time to issue 143(2) notice or complete the original assessment u/s 143(3) has not elapsed no notice u/s 148 can be issued. 10. That the AO erred in adding to income an amount of ₹ 48,19,659/- on account of difference in TDS receipts by absolutely ignoring that the assessee is following Cash Method of Accounting which is well recognized as per section 145 of the I.T. Act, 1961 and CIT (Appeals) erred in upholding the same. 11. That the AO erred in by not allowing the assessee the Cash Method of Accounting being followed by the assessee regularly since the inception and thereby making a bogus addition of ₹ 48,19,659/- and the CIT (Appeals) erred in upholding the same. 12. That the AO erred in treating the difference of receipts as Income (as shown / offered and available in Form 26AS) by not appreciating the fact that the assessee is following C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and the CIT(Appeals) not deleting the entire amount. 21. That the AO erred in by disallowing 1/10th of various Expenses (Accounting Charges, Business Promotion, Conveyance, Entertainment, Office repair Maintenance Staff Welfare etc.) amounting to ₹ 1,46,305/- on adhoc basis without any cogent evidence and the CIT(Appeals) erred in by upholding the same. 22. That the Order of AO is based on surmises and is absolutely mechanical in nature and further all relevant evidences were ignored while computing the assessment and the assessment framed is time barred, and CIT(Appeals) erred in by upholding the same. 23. That the AO passed the order absolutely mechanically without applying his mind and CIT(Appeals) erred in by upholding the same. 24. That the AO wrongly charged the interest u/s 234(A), 234(B), 234(D) totaling to ₹ 6,65,739/- (Rs. 54,506+Rs.5,76,524+ ₹ 34,709), and CIT(Appeals) erred in by upholding the same. 25. The appellant craves to leave to add, to alter, and to delete all or any grounds of appeal. 2.1. Although the Assessee has taken numerous grounds in the appeal filed in Income Tax Appellate Tribunal (ITAT), bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the Assessee follows cash system of accounting and not mercantile system of accounting; and therefore, it is to be expected that the gross receipts as per the form 26AS will not match with gross receipts recognized in accordance with cash system of accounting. However, the Ld. Counsel fairly conceded that the Assessee had claimed credit for prepaid taxes on account of TDS, even in respect of those professional receipts appearing in form 26AS which were not shown by the Assessee as professional receipt in the return of income for this year. Further, when pointed out by Ld. Departmental Representative appearing for Revenue, the Ld. Counsel for Assessee also conceded that the initiation of proceedings U/s 147 read with section 148 of I.T. Act are being contested by the Assessee for the first time before ITAT; and this issue was not contested either at the stage of assessment proceedings or at the stage of appellate proceedings before Ld. CIT(A). During the course of making submissions before us at the time of hearing, the Ld. Counsel for the Assessee decided not to press grounds related to initiation of proceedings U/s 147 r.w.s. 148 of I.T. Act. Therefore, grounds rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l payment is made later. At times, a situation may arise, as has happened in the case of the Assessee, that actual payment of certain sum(s) or income (as the case may be) may be made to the payee (here, the Assessee) in a subsequent year although tax has been deducted at source by the deductor is an earlier year, because the sum or income (as the case may be) was credited by the deductor to the account of the payee, in such earlier year. In such situations, if the payee follows cash system of accounting instead of mercantile system, even though the sum or income (as the case may be) has been credited to the account of the payee and the corresponding amount has accrued as income of the payee in the earlier year, the payee does not recognize it as income of the earlier year, and offers it as income of the subsequent year (the year in which actual payment was received) in accordance with cash system of accounting. This is what has happened in the present case: though certain sums/income appear in form 26AS for this year (because tax was deducted at source in this year) the assessee has not offered it as income in the Return of Income because actual payment was not received by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed U/s 145(1) of I.T. Act. The Assessee distorted the law by wrongly claiming credit for prepaid taxes on account of tax deducted at source; even though corresponding amounts are not offered as income, and thus the approach of the Assessee was to distort law. On the other side, the approach of Revenue was to wrongly invert the law by erroneously charging such amounts to tax which are not assessable as Assessee s income of this year under cash system of accounting regularly followed by the Assessee, merely because Assessee has claimed credit for tax deducted at source on corresponding amounts; instead of following the correct approach whereunder Revenue should have allowed credit for tax deducted as source in respect of such amounts only which are assessable as income of this year in accordance with cash system of accounting regularly followed by assessee. We disapprove the approaches of both Assessee and Revenue. It is not permitted for anyone to either distort or to invert law. Therefore, we set aside the orders of Ld. CIT(A) and the Assessing Officer and we restore this matter to the file of the Assessing Officer to re-compute the income of the assessee in accordance with cash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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