TaxTMI 
TaxTMI 
2013 (8) TMI 178
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and on behalf of the assessee, it was submitted by the ld. AR, its counsel, that the assessee has been consistently following the receipt method of accounting in respect of the refund of VAT arising to it. Accordingly, the refund of Rs. 22,74,136, pertaining to AYs. 2005-06 & 2006-07, received during the relevant year, was credited in its accounts, and duly returned as income for the current year, i.e., A.Y. 2008- 09. The ld. CIT, however, was of the view that the assessee following mercantile method of accounting, the refund of VAT, which for the current year is in the sum of Rs.25,15,287, was omitted to be accounted for by the assessee for the current year and, thus, there was an escapement of income to that extent. The assessment was, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment order to both these aspects of the assessee's assessment. Non-application of mind by the assessing authority, apart from an incorrect assumption of fact/s or an incorrect application of law, it is trite, would satisfy the requirement of an order being erroneous. In the instant case, the law stands amended by Finance Act, 1995, w.e.f. 01.04.1997, so that in terms of section 145, as substituted thus, there is no scope for the assessee to follow a mixed system of accounting qua its income u/s.28 or 56. Accordingly, the income assessable either as profits or gains from business or profession or from other sources, is to be computed in accordance with either cash or mercantile system of accounting as being regularly employed. The asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ghted in her arguments by the ld. DR, it is impermissible for the assessee to follow cash method of accounting in respect of the sales tax/VAT refund due to it; it admittedly following mercantile method of accounting. As such, in terms of s. 5 r/w s. 145, income becomes chargeable to tax when the assessee acquires the right to receive such income. In fact, apart from the auditor's report, to which reference has been made by the ld.CIT, the notes to the assessee's accounts itself state that the sales-tax (VAT) paid on purchases amounting to Rs.25.15 lakhs and, thus, included in the cost of the purchases, is, though refundable from the Sales Tax Department, not taken as income as the same is subject to acceptance by the Sales Tax Authority. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, therefore, a valid application for refund is submitted with the authorities in accordance with the law, following the prescribed procedure, the assessee is entitled to believe that its claim would be accepted. The procedural delay in signifying the acceptance of the claim, or the actual refund, which could be delayed for various reasons, and which the ld. AR was at pains to impress upon us, would we are afraid be of little moment. Again, the fact that the income stands to be returned in another year by the assessee, which is a matter subsequent, would be to no effect. This is as income has to be subject to, notwithstanding it being returned for another year, tax in the right year; each year being an independent unit of assessment. Going ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y order as sustainable in law. In fact, the non-application of mind in the matter by the assessing authority, which is evident qua both, would itself render his order liable for revision. The ld. AR during the proceedings also raised an issue with regard to the invalidity of the revisionary proceedings inasmuch as the proposal u/s.263 was moved by Dy. CIT-24(3) and, further, forwarded by the Addl. CIT attached to his (the Commissioner's) office. Even as explained during hearing, we are unable to find the basis of the assessee's claim. The show cause notice u/s. 263 in the instant case has been issued by the ld.CIT under his hand. Further, the objections raised by him are with reference to the material on record, including the assessment ord....