TaxTMI 
TaxTMI 
2013 (11) TMI 1053
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.... was issued and served on the assessee. 2.02. On verification of the return of the income and audited report, it was noticed by the assessing officer that the assessee Company has changed its accounting policy during the year under consideration and it was found that the Company has assessed loss of Rs.6,29,200/-. During the year under consideration as compared to last year profit of Rs.1,27,860/- and therefore, the assessing officer was of the opinion that the impact of change in system has resulted in reduction of revenue during the year and therefore, show cause notice was issued to the assessee Company directing to show cause as to why Rs.45,78,354/- should not be added to the total income of the assessee. 2.03. In response to the notice, the assessee submitted its reply submitting that the expenditures in question are accrued / incurred during the year in accordance with the accounting system following consistently, however, submitted that change in the amounting system is permissible under the law. It was submitted that under the old system the assessee Company was showing advance received from the sponsors as income irrespective of the project being completed or not. I....
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....system to mercantile system in the year under consideration at least to the extent of Rs.8,29,296/-. It is submitted that therefore, the learned tribunal has materially erred in deleting addition Rs.45,78,354/- made by the assessing officer. It is further submitted by Ms.Bhatt, learned counsel appearing on behalf of the appellant - revenue that the learned tribunal has materially erred in holding that the revenue having not raised a ground on the rejection of books of accounts under section 145(3) of the Act before them, addition / disallowance made on such rejection of books of accounts cannot be sustained. By making above submissions, it is requested to admit / allow the present appeal. 4.00. Heard Ms.Bhatt, learned counsel appearing on behalf of the appellant - revenue and perused the assessment order as well as the order passed by the CIT(A) as well as the impugned order passed by the tribunal. 4.01. At the outset, it is required to be noted that the assessee changed the accounting system and started following mercantile accounting system. Under the old accounting system, the assessee company was showing advance received from the sponsors as income irrespective of the ....
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....n compliance of various statutory requirements, and therefore, bona fide change of method of accounting cannot be rejected for the reason that it would result in bringing into account in one year the losses of several years. 3.5. The Appellant further argued that so far as the claim of expenditure is concerned, earlier also, the Appellant was claiming the expenditure when it is incurred and during the year also the same is claimed on its incurrence only. The only different is that earlier the expenditure was claimed irrespective of completion of the project whereas during the year under consideration, the expenditure has been claimed in the Profit and Loss account only on respect of completed project and the expenditure incurred in respect of unclaimed project has been carried forward to Balance Sheet under the head work-in-progress. Accordingly, the Appellant argued that claim of expenditure amounting to Rs.45,78,354/- is in any case not the impact of change in method of accounting and this expenditure has incurred during the under consideration only in respect of completed project and therefore the same is allowable to Appellant. 3.6. The Appellant also argued that change i....
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....ree with the Appellant that in the earlier years, the expenditure incurred was debited to profit & loss account irrespective of the completion of the project whereas during the year under consideration expenditure incurred only in respect of completed project has been claimed. The difference is only of the stage of the completion of the project. I also find the expenditure in question is incurred during the year under consideration and that too for the project which are completed during the year. Therefore, whichever way, whether on the basis of incurring of the expenditure which was the old method of accounting followed by the appellant or project completion method which is the new method of accounting, this expenditure is allowable. Therefore, the expenditure amounting to Rs.45,78,354/-, is legitimately allowable to the Appellant. 3.9. Now, so far as the rejection of books of accounts is concerned, the Appellant vehemently argued that the assessing officer has not pin-pointed out any defects in the books of accounts of the Appellant or the assessing officer has not established that profit cannot be deduced because of method of accounting adopted by the appellant. The Appellant....