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TMI Blog2007 (5) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... ance should be worked out in view of rule 3(c)(ii) of the Income-tax Rules, 1962? R.A. No. 982/Del/96 assessment year 1986-87: 1. Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was legally correct in deleting the addition of Rs. 1,80,075 made by the Assessing Officer under section 40A(5) of the Income-tax Act and holding that disallowance should be worked out in view of rule 3(c)(ii) of the Income-tax Rules? R. A. No. 981/Del/96 assessment year 1985-86: 1. Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was legally correct in deleting the addition of Rs. 1,39,658 made by the Assessing Officer under section 40A(5) of the Income-tax Act and holding that disallowance should be worked out in view of rule 3(c)(ii) of the Income-tax Rules? 2. Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was legally correct in deleting the addition of Rs. 3,67,872 made by the Assessing Officer towards the claim of bonus pertaining to the previous accounting year as a result of change in method of accounting in respect of bonus from cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine and the creditors were bogus, the amounts should not be disallowed but should always be allowed as deduction while arriving at the real profit derived by the assessee in his business." 5. In respect of working out the amount of addition under section 40A(5) 5 of the Act, the facts are that the assessing authority had made an addition of Rs. 1,77,953, Rs. 1,39,658, Rs. 1,80,075 and Rs. 1,24,574 in respect of the assessment years 1984-85, 1985-86, 1986-87 and 1987-88 respectively, under section 40A(5) of the Act. In appeal, the Tribunal has directed the Assessing Officer to work out the disallowance in terms of rule 3(c) (ii) of the Income-tax Rules, 1962. 6. So far as the remaining question is concerned, the facts are that during 6 the assessment year 1985-86, the respondent-assessee who was following the cash system of accounting in respect of bonus payable to its employees, had changed it to mercantile system of accounting. However, the assessee had claimed deduction of Rs. 3,67,872 which pertains to the previous accounting year on the ground that the same pertains to the liability of earlier years but was paid during the year in question. The expenditure was disallowed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 (All) and of the apex court in the case of CIT v. Sugauli Sugar Works P. Ltd. [1999] 236 ITR 518 ; [1999] 2 SCC 355. He further submitted that the decision of the Calcutta High Court in the case of General Industrial Society Ltd. [1994] 207 ITR 169 has been considered by the apex court in the case of CIT v. Sugauli Sugar Works P. Ltd. [1999] 236 ITR 518 and has been distinguished. 12. In respect of disallowance worked out under section 40A(5) of the Act, he did not advance any serious argument. However, on the question of change of method of accounting, he submitted that the Tribunal has held that the change from cash system to mercantile system of account in respect of payment of bonus to the employees, is bona fide. According to him, change in method of accounting is permissible provided the same is bona fide and is followed from year to year thereafter. Relying upon a Division Bench decision of the Calcutta High Court in the case of CIT v. Kesoram Industries and Cotton Mills Ltd. [1993] 204 ITR 154, he submitted that the Tribunal had rightly deleted the addition of Rs. 3,67,872 in this behalf. 13. We have given our anxious consideration to the various pleas raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion. The Bench said (page 172) 'It appears from the assessment order that there is one peculiar aspect in the present case. It is the practice of the assessee to write back such unclaimed and unspent liabilities from year to year on grounds of bar of limitation of the liability and to get away without paying tax on such amount written back to profit on the same plea. This has been happening since the assessment year 1977-78. This fact, to our mind, is very significant. One more notable feature is that the assessee never divulged to the Assessing Officer the details and particulars of the claims despite specific enquiry. These two factors combine to lend to the case a colour different from the case relied upon on behalf of the assessee.' The-Bench distinguished the other decisions referred to before it by pointing out that the facts were entirely different in those cases. Hence, the ruling of the Calcutta High Court in the case cited will not help the appellant as it turned on the peculiar facts of the case as stated in the passage extracted." 18. It has further held, in paragraph 12 of the report, as follows : "12. The principle that expiry of the period of limitation pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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