2022 (11) TMI 975

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.... Rs.56,20,70,000.00/- (1202070000/-64,00,00000/-) was stated as understatement of income on account of sale of energy shown by the assessee during the year under consideration. 3. While confirming the addition, the ld. CIT(A) has observed as under: "Decision- As mentioned in the assessment order, as per point 13A(i) of annexure A of form 6B of the audit report of the auditor it has been observed that assessee had shown sale of energy amounting to Rs 64,00,00000/- which is the amount actually received by the assessee from sale of energy to the state government, whereas the company was required as per law to book the energy sale on accrual basis during the FY 2006-07 amounting to Rs 1202070000/- though not shown in the financial statements to the income tax department. The argument of the assessee was that the revenue should be measured at the fair value of consideration received or receivable. That it may be appropriate to recognize revenue only when it is reasonably certain that ultimate collection will be made. Where there is no uncertainty as to ultimate collection, revenue is recognized at the time of sale or rendering of service even though payments are made by installment....

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....assessee corporation cannot be determined as it has not produced any document either from state power of payment to the assessee corporation. Also as per assessee, the debtor is indirectly the government of the state of J&K. The funds receivable from the state government cannot be said to be unrecoverable. 5. Assessee is a separate entity than the state government of J&K and cannot make its revenue recognition depended on the budgets of the state government. 6. As admitted by the assessee, the statutory audit was not carried out till filing of IT return. In view of the above observations of the AO, I am fully in agreement with the AO that there are sufficient reasons to believe that the financial accounts submitted by the appellant are incorrect and false and were rightly rejected. Hence the difference in the sale of energy amounting to Rs 56,20,70,000/- (1202070000 - 640000000) was rightly treated as understatement of income on account of sale of energy shown by the assessee during the year under assessment which addition is confirmed." 4. The ld. counsel for the assessee of Sh. R. K. Gupta, Adv. submitted that there was no understatement of the income as the assessee compa....

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....nue has taxed the sales of energy in preceding assessment years on cash basis only. The relevant pages of CIT(A)'s order are 5-7 of his order. Hence, we are in appeal before your Honour. 1. That consistency of booking sales on cash basis should have been accepted by department. By this method of realization basis, there is no loss to revenue and due taxes are paid. Earlier the cash system of accounting has been followed is duly disclosed by Tax Auditors as well as by Special Auditor and it is not a disputed fact. 2. The assessment order passed by Ld. A.O in respect of Assessment year 2008-09 is placed at page 97-100 of paper book. Kind attention is invited to para 3 of the order; relevant page 98 of paper book. The Ld. A.O has specifically stated in 4th line of this para that "During the year under consideration the company has changed the system of accounting from cash to mercantile resulting in increase in revenue of Rs.36,86,66,000". 3. Your Honours, this assessment order has been passed on 24.12.2010 for which return of income has been filed well within due date on 30.09.2009. The appellant company has Suo-moto declared the additional revenue of Rs.36,86,66,000/- du....

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...., unjustified and bad in law. 5. Thus, once the appellant company has itself offered to tax an amount of Rs. 36,86,66,000/- in A.Y. 2008-09 by making change in Accounting Method and Ld. A.O has accepted it in scrutiny then the order passed for A.Y. under consideration is absolutely wrong in adding Rs.56,20,70,000/- on the issue which stands addressed correctly and rightly and which is not controverted by Ld. A.O in the following year. 6. Other case laws of Hon'ble SC (i) UCO Bank vs CIT Placed at page 110-117 (ii) CIT Vs Realest Builders & Services Ltd; Placed at page 118-120 It is, therefore, prayed that addition imposed by ld. AO amounting to Rs.56,20,70,000/- may kindly be deleted." 5. The ld. DR stands by the impugned order. 6. Heard both the sides and perused the material on record. Admittedly, the Ld. CIT(A) has sustained the addition of Rs.56,20,70,000 on account of difference in sale of energy treating it as understatement of income. The Ld. AR contended that the appellant company has shown sales to the extent of disputed amount of Rs.56,20,70,000 and the same sales stands realized as per the method of accounting being followed by the appellant company consi....