Appeal dismissed in favor of assessee for bid loss disallowance. Revenue's arguments rejected. Entries not conclusive.

The High Court dismissed the appeal in favor of the assessee regarding the disallowance of bid loss claimed in the computation of total income for the Assessment Year 2014-15. The Court held that the revenue's arguments regarding the violation of Section 145(1) of the Income Tax Act and non-compliance with Board's Notification and Accounting Standard AS 22 of ICAI were not valid. The Court emphasized that entries in the books of accounts were not conclusive, and the matter should be assessed based on the provisions of the Act, citing a precedent from a Supreme Court decision.

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Issues:
1. Disallowance of bid loss claimed in the computation of total income.
2. Violation of Section 145(1) of the Income Tax Act.
3. Compliance with Board's Notification No.69(E) dated 25.01.2016 and Accounting Standard AS 22 of ICAI.

Analysis:

Issue 1: Disallowance of bid loss claimed in the computation of total income
The appeal pertained to the Assessment Year 2014-15, where the revenue challenged the Tribunal's decision to delete the disallowance of bid loss claimed by the assessee. The revenue argued that the bid loss claimed was incorrect as per the provisions of section 145(1) of the Income Tax Act and was not in line with the Board's Notification and Accounting Standard AS 22 of ICAI. The Assessing Authority disallowed the claim, stating that the method of accounting and bid loss claimed as an expenditure was not in accordance with the system of accounting.

Issue 2: Violation of Section 145(1) of the Income Tax Act
The revenue contended that the bid loss claimed by the assessee in two ways, one debited in the profit and loss account under 'other expenses' and the other reduced in the computation of income, was not permissible. They argued that the claim violated Section 145(1) of the Act and the notification issued by the Central Board of Direct Taxes. The revenue further highlighted that the accounting standard AS 22 of ICAI did not allow the bid loss pertaining to a different period than the one for which income computation was made.

Issue 3: Compliance with Board's Notification and Accounting Standard
The revenue emphasized that the claim of bid loss by the assessee did not comply with the Board's Notification and Accounting Standard AS 22 of ICAI. They argued that the activities of the assessee did not fall under the extraordinary item mentioned in the circular, and the accounting standard required uniformity in statements of different entities to apply the principle of 'matching concept' for a true picture of revenue. The revenue asserted that the assessee failed to meet these requirements.

The High Court, after considering the submissions and referring to a Supreme Court decision in TAPARIA TOOLS, concluded that the substantial question of law was already settled against the revenue. The Court held that the entries in the books of accounts were not conclusive, and the matter should be examined based on the provisions of the Act. Consequently, the appeal was dismissed, ruling in favor of the assessee.

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