Tribunal allows appeal, deletes disallowed amount for purchases, upholds accounting method.

The Tribunal allowed the appeal of the assessee by condoning the delay in filing the appeal and deleting the addition of Rs. 3,58,500 disallowed for purchases made by the assessee. The Tribunal held that the assessee's method of accounting based on delivery was consistent and should be accepted, emphasizing that statutory liabilities or expenses can be deducted in the year they become real and enforceable. The Tribunal concluded that the Revenue authorities were not justified in rejecting the assessee's books of account or making the addition on account of purchases.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of Rs. 3,58,500 for purchases made by the assessee.
3. Consideration of the method of accounting followed by the assessee.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed a petition dated 25-9-1992 for condonation of delay in filing the appeal, supported by an affidavit from the Director explaining that the delay was due to an employee's mischief. The learned departmental representative raised no objection. After considering the facts and circumstances, the Tribunal condoned the delay and admitted the appeal.

2. Disallowance of Rs. 3,58,500 for Purchases:
The assessee received two bills dated 15-6-1985 and 25-6-1985 totaling Rs. 3,58,500, with goods received on 1-7-1985 and exported on 3-7-1985. The assessee recorded these purchases in the year relevant to the assessment year 1987-88. The Assessing Officer disallowed these purchases and added Rs. 3,58,500 to the total income, reasoning that the purchases related to the assessment year 1986-87. The CIT(A) confirmed this disallowance, stating that the liability became determined in the earlier year and should have been accounted for then, as the assessee follows a mercantile system of accounting.

3. Consideration of the Method of Accounting:
The Tribunal noted that the Assessing Officer did not consider the assessee's explanation and that the CIT(A) ignored the facts and the assessee's submissions. The Tribunal observed that the purchases were recorded based on delivery and export, not debited in the previous year, and not included in the closing stock as of 30th June 1985. The Tribunal found that the addition could not be sustained merely because the assessee follows a mercantile system. It was also noted that the purchases were not challenged as bogus or included in the previous year's purchases. The Tribunal referenced the Calcutta High Court decision in CIT v. Orient Supply Syndicate and the Gauhati High Court decision in CIT v. Nathmal Tolaram, supporting the view that statutory liabilities or expenses can be deductible in the year they become real and enforceable.

The Tribunal also highlighted that the CIT(A) did not consider whether the assessee consistently followed this method of accounting. The Tribunal confirmed that the assessee had been consistently following this method, as admitted by the CIT in an order under section 264. The Tribunal cited the Calcutta High Court decision in CIT v. Hazaribagh Coal Syndicate P. Ltd., emphasizing that the substance of the situation should be considered to avoid unreasonable loss to the Revenue or hardship to the assessee. The Tribunal concluded that the consistent practice of accounting for purchases based on delivery had become the regular method of accounting for the assessee.

The Tribunal also referenced the Kerala High Court decision in St. Teresa's Oil Mills v. State of Kerala, which states that accounts regularly maintained in the course of business should be accepted unless proven unreliable. The Tribunal held that the Revenue authorities were not justified in rejecting the assessee's books of account or making the addition on account of purchases.

Conclusion:
The Tribunal quashed the orders of the authorities below and deleted the addition of Rs. 3,58,500. The appeal of the assessee was allowed.

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