1982 (1) TMI 96 - AT - Income Tax

ITAT Upholds Dismissal of Revised Return Appeal Under Section 139(5)

The ITAT dismissed the appeal regarding the validity of filing a revised return under section 139(5) due to a change of accounting system from mercantile ... Return Of Income Issues:1. Validity of filing a revised return under section 139(5) due to change of accounting system.2. Whether the change of accounting system from mercantile to cash basis was justified.3. Acceptance of revised return by the authorities.4. Applicability of case laws on filing revised returns.5. Interpretation of section 139(5) regarding filing of revised returns.Detailed Analysis:1. The case involved a challenge by the assessee against the findings and conclusions of the AAC on the appeal against the ITO's order. The primary issue was the validity of filing a revised return under section 139(5) due to a change of accounting system from mercantile to cash basis. The ITO declined to accept the revised return, stating that the accounts were originally prepared on a mercantile basis and the change to cash basis was subsequent to the first return. The AAC also upheld the ITO's decision, emphasizing that the change after one and a half years was not justified.2. The assessee contended that the change to cash basis was due to commercial expediency and business conditions. However, the AAC found that the change was not proper and was an afterthought. The AAC noted that the firm had maintained accounts on a mercantile basis for a specific period and could not escape tax liability by changing the method of accounting later. The AAC examined the details of purchases and sales to determine the validity of the change to cash basis.3. The AAC discussed the propriety of the revised return and sustained the ITO's order, stating that there was no omission or wrong statement in the original return requiring a revised filing. The authorities below rejected the claim of the assessee regarding the revised return, leading to the appeal before the ITAT.4. The assessee relied on case laws such as Dhampur Sugar Mills Ltd. v. CIT and others to support the right to file a revised return. The departmental representative supported the lower authorities' decision, emphasizing that once a method of accounting is adopted, it cannot be changed subsequently. Reference was made to the decision in New Victoria Mills Co. Ltd. v. CIT to support this argument.5. The ITAT analyzed the facts and submissions, noting that the original return was filed correctly without any omissions. The revised return was filed after re-writing the books on a cash basis due to tax liability concerns. The ITAT emphasized that section 139(5) allows revised returns only for bona fide errors or omissions, which were not present in this case. The ITAT cited various High Court decisions to support its conclusion that the revised return was not justified and upheld the AAC's order based on adequate grounds.In conclusion, the ITAT dismissed the appeal, stating that no interference was warranted based on the facts and legal interpretations presented in the case.