AI Drafter 
TaxTMI 
TaxTMI 
2014 (1) TMI 694
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.... and delayed payment charges. However the Ld Commissioner of Income Tax (Appeals) directed the Assessing Officer to allow relief to the appellant, if same income is taxed in subsequent years on receipt basis also. Whereas the fact of the matter is that the same is accounted on cash basis as is evident from the Accounting Policy and notes to accounts and hence the question of disallowance does not occur as the amounts are accounted as and when they are received in subsequent year. II) The Learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of the entire Prior Period expenses while fully taxing the Prior Period Income." 2. At the outset it was submitted that both the issues are ....
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....ars, while approving the Revenue's case in principle, directed relief to the assessee in-as-much as the income sought to be taxed had already been subject to tax on receipt basis for the subsequent years. For the current year, the ld. CIT(A) observed likewise, and was of the view that no amount of the addition of Rs.30 lakhs toward compensation, which is arrived on an estimated basis, is maintainable, as the assessee had itself accounted and offered income at Rs.78.18 lakhs for the current year on receipt basis. Aggrieved, the Revenue is in appeal. 3. We have heard the parties, and perused the material on record. The Revenue's stand that it is not permissible for the assessee to adopt different methods of accounting, but has....
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....g, which though cannot be used as an alibi to postpone recognition of income, but must have its basis in facts, i.e., the reason/s for, subsistence and, finally, the actual resolution of uncertainty, which again may not necessarily coincide with the receipt of cash, and surely not in all the cases all the time, even as observed earlier. In the instant case, the assesse, as it appears, is following cash system as a matter of course or, perhaps, as a matter of convenience, being so uniformly for all customers, and in respect of an item/s of income which is regularly charged thereto, and for which they are contractually bound. Besides, the figures itself suggest of the payments being received in the regular course of business. ....
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.... would be on the assessee. Further, we may also clarify that the offer of income pertaining to a preceding year/s on cash basis, would not justify non accounting of income for the current year, or even for a preceding year, which though not received, yet stands accrued during the current year. This is as there could be no option for following a mixed system of accounting and, two, the income not offered to tax on accrual basis, would not preclude it being brought to tax on receipt basis (even for an assessee following accrual method) inasmuch as the same falls within the scope of income u/s. 5 of the Act. We decide accordingly." 3. So as it relates to issue raised under Ground No.2, reference was made to order dated 11/2/2011 in ITA No.5....
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....record, we do not find any infirmity in the order of the CIT(A) to interfere. It is noted that all the expenses bills are received in the year under consideration. The assessee is also following mercantile method of accounting, according to which, liability is accounted when bills are received even though the work is being done in earlier years and payment is made in subsequent years. This method is accepted by the department in all earlier years. In view of these discussions and bearing in mind the entirety of the facts, we uphold the order of the CIT(A). This ground is dismissed." Again for assessment year 2008-09 similar issue was decided in favour of the assessee vide order dated 27/02/2013 in ITA No.6832/Mum/2011 vide para.4 as unde....