TaxTMI 
TaxTMI 
2015 (1) TMI 829
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....1/Ahd/2003 1998-99 1378/2006 23/12/05 3396/Ahd/2003 1999-00 1379/2006 23/12/05 3397/Ahd/2003 2000-01 1380/2006 23/12/05 2197/Ahd/2004 2001-02 1443/2011 30/06/11 1375/aHD/2009 2006-07 1444/2011 27/05/11 3624/aHD/2008 2005-06 1.1 These matters were admitted by this Court for consideration of the substantial question of law as to whether the Appellate Tribunal was justified in deleting the addition made by the Assessing Officer invoking the provisions of Section 145(3) of the Act, towards membership fees. The questions of law raised in each appeal is reproduced hereunder: TAX APPEAL NO. 1159 OF 2006 Whether the Appellate Tribunal was right in law and on facts in accepting the method of accounting followed by the assessee ignoring the fact that during the regular assessment proceedings for A.Y.1997-98 the method of accounting followed by the asseessee was rejected by the Assessing Officer? TAX APPEAL NO. 1375 OF 2006 A. Whether the Appellate Tribunal was right in law and on facts in quashing the order u/s.263 of the I.T. Act passed by the CIT and in reaching the ....
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....ion 145(3) and rejected the method of accounting of the assessee and taxed the pre-received membership fees less pre-paid commission and insurance premium. The assessee preferred an appeal before the CIT(A) and the CIT(A) allowed the assessee's appeals and directed the Assessing Officer to follow the method of accounting regularly followed by the assessee. The revenue therefore challenged the orders passed by CIT(A) before the Tribunal and the Tribunal vide impugned orders dismissed the appeals and upheld the orders passed by CIT(A). Being aggrieved by the said order, the revenue is in appeal before us. 3. Mr. Manish Bhatt, learned Senior Standing Counsel appearing on behalf of Ms. Mauna Bhatt, learned Standing Counsel for the revenue submitted that the Tribunal has committed an error in quashing the order u/s 263 of the Act passed by the CIT and in reaching the conclusion that the assessment order passed by the A.O by accepting the assessee's method of accounting was neither erroneous nor prejudicial to the interests of revenue. 3.1 Mr. Bhatt submitted that since discount is given by the shop keepers and insurance facility is provided by the Insurance Company, the as....
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....; "(b) "Actual" refers to the assumption that revenues and costs are accrued, that is, recognized ad they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate;" 5.2 The assessee has accordingly recorded the revenue as well as expenditure in the financial statement of period to which they relate. We find that the Tribunal has rightly observed as under in para 8 as under: "... When the assessee issued facility cards for number of years, the assessee has received entrance fee as well as membership fee. Entrance fee is recorded in the year of receipt while the membership fee is spread over to the period to whichthe membership relates. Similarly, the assessee pays insurance premium for the number of years for which the card is issued because the assessee has to provide the accidental insurance for the entire period of the card. Such expenditure is also spread over to the period for which the card is issued. The Revenue has claimed that the receipt of membership fee as well as the expenditu....
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....h regard to valuation. It charges for payment of tax, the income which is to be computed in the manner provided by the Act and that it is the duty of the Assessing Officer to deduce a proper taxable income. It is held that the Assessing Officer is required to compute the income in accordance with the method of accounting regularly employed by the assessee and if the system adopted by the assessee does not result in ascertainment of proper profits then, it is the duty of the assessing officer to make appropriate adjustments and deduce true profits. 6.1 The Apex Court in the case of Rakesh Shantilal Mardia vs. Deputy Commissioner of Income-tax reported in [2012] 210 Taxman 565 (SC) considering the decision of the Bombay High Court in the case of Taparia Tools Ltd. (supra) has held that matching principle is required to be followed in order of arrive at the real income of the assessee. 6.2 Similarly, in the case of Commissioner of Income-Tax vs. Dinesh Kumar Goel reported in [2011] 331 ITR 10 (Delhi), the Delhi High Court has held as under: "... even when the income accrues or ari....