2022 (4) TMI 180

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....nt order [for short "Ao"] dt 30/03/2015 passed by the Assessing Officer [for short "Ld AO"] u/s 143(3) of the Act for assessment year [for short "AY"] 2012-2013. ITA No. 177/RPR/2016 AY 2012-2013 2. The interesting issue involved in this appeal is, whether or not an amount of tax deducted at source [for short "TDS"] on advance revenue receipts exigible to tax as "Income", of the year of deduction, where the assessee follows mercantile system of accounting? 3. Before evolving the matter on facts for adjudication, it is necessary to reproduce the grounds challenged by the appellant as under; "(1)In the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the addition made by AO of Rs. 5,85,803/-, expla....

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....the parties; perused material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant as well the respondent. 6. During the course of hearing before the Tribunal it has emerged that; 6.1 The Ld AO after considering the written submissions and verification audit reports and books of accounts placed before him, notifying the difference of Rs.2,93,45,917/- in the turnover / total contract receipts from the business as per the Profit and Loss Account [for short "P&L"] with that of Form No 26AS, sought detailed clarification qua reconciliation from the appellant, and in reply thereof, the assessee substantiated the difference with reconciliation....

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....ns spelt out by the AO, the amount of TDS deducted on advance contract receipts were treated as Income of the firm upon its utilization turning a blind eye to method of accounting regularly employed. 7. Ex post, in order to answer the vexed question framed in para 2 hereof, we shall essentially have to resort to provision of section 145 of the Act, which is reproduced herein below for ready reference; 7.1 "145 Method of accounting. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2)....

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....ere has neither been any whisper of unsatisfaction so far as correctness and completeness of accounts is concern, nor any undertone of provision pursuant to which the impugned order was passed vis-à-vis confirmed by Ld CIT(A). Nevertheless it is inferred from the records that, the lower tax authorities in terms of section 198 of the Act, have brought the amount of TDS to tax in the year in which credit thereof is claimed by the assessees firm, hence it is indispensable for our adjudication to reproduce the provision of section 198 as under; "198 Tax deducted is income received All sums deducted in accordance with the foregoing provisions of this Chapter shall, for the purpose of computing the income of an assessee, ....

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....nism as contemplated in section 4 r.w.s. 28, at the same time adequately shields from any intrusion therein. And on the other hand, it also extincts out the ambiguity (if any) in the provision of section 198, may the reading thereof in isolation lead to an unintended absurd conclusions. 7.7 To Break the ice, upon careful reconciliation of provisions discussed hitherto, we opine that, section 198 r.w.s. 190, is an anti-tax evasion mechanism provided by the legislature to safeguard against the probable claim of non-receipt or non-materialisation of income when accounted in accordance with the method of accounting regularly employed as per section 145(1) of the Act and by no means the provisions of chapter XVII were intend to create any dee....