TaxTMI 
TaxTMI 
2012 (6) TMI 435
X X X X Extracts X X X X
X X X X Extracts X X X X
....and the mercantile system in respect of the others ? B. Whether the provisions of section 209(3) of the Companies Act, 1956 as amended by the Companies (Amendment) Act, 1988 have any overriding effect on the provisions of section 145 of the Income- tax Act, 1961 and the income of the company assessee is required to be computed under the Income-tax Act, 1961, on the basis indicated in section 209(3) of the Companies Act, 1956, irrespective of the method of accounting regularly employed by such company ? C. Whether the Tribunal misdirected in law in upholding the assessment of interest income on accrual basis even though the appellant was admittedly following the cash system of accounting regularly in respect of interest incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... interest to maintain its mercantile system, viz., on accrual basis. He submits that when there is no reason assigned for discarding the entire accounting system it is not within the competence of the Assessing Officer to do so. Therefore, the decision of the Commissioner of Income-tax (Appeals) was absolutely perfect and justified and the learned Tribunal has committed an error on the plea that since the relevant provisions of section 209 of the Companies Act stood amended in 1988. In view of the amendment it was incumbent upon the appellant-assessee to maintain the accounts as men- tioned in the amended provisions of sub-section (3) of section 209. Accord- ing to him, the reliance of the Tribunal on the provisions of the Companies Act as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the existing method. In this case, Mr. Khaitan submits that there was no finding nor any decision either by the Assessing Officer or by the learned Tribunal that the mixed accounting system needs to be dis- carded because the same results in distortion of profit. In other words, he said that he cannot make a piecemeal change in the accounting system. Either the entire accounting system has to be discarded or not at all. 4. He submits that the amendment of the Companies Act has got no impact as wrongly held by the learned Tribunal though this amendment of the Companies Act is later piece of legislation but still then the income-tax authority is not bound by the provisions of the said amended provision. 5. We have gone throug....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assess- ment in the manner provided in section 144." 7. Therefore, the assessee maintained the books of account on the basis of mixed procedure and it was permissible at the relevant point of time even though the amendment of the Companies Act came into force at the relevant point of time. Indeed, the Commissioner of Income-tax (Appeals) on earlier occasion has allowed this mixed accounting system and accepted the same and granted appropriate relief. Therefore, we are of the view that the Assessing Officer should not have ignored the earlier order of the Commission....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n distortion of profit, the Department can insist of sub- stitution of the existing method. In other words, it is held that if the Department does not find that a method adopted in the accounting results in distortion of profit the Department cannot discard any portion of the accounting system. 10. It is true those decisions certainly favour the view taken by the Commissioner of Income-tax (Appeals) and also support the submissions of Mr. Khaitan but then in those decisions the impact of the amendment of the provisions of the Companies Act section 209 with regard to the method of keeping of books of account by the company was not considered. 11. Sub-section (3) of the amended provision of section 209 which came into force on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isions where there has been an express provision in the Act itself. It is inconceivable that the income-tax authority without having any authority to resort to the same provision of some other Act in the same subject. The income-tax authorities derive their power and exercise their jurisdiction under the provision of the Income-tax Act and income-tax alone unless otherwise permitted by the other Act itself. 14. We are, therefore, of the opinion the provisions of the Companies Act are meant for the requirement of the Companies Act and in case of infrac- tion thereof necessary consequence as provided in the Companies Act itself follows. Accordingly, we hold that the learned Tribunal had no justification to discard the mixed accounting....