TaxTMI 
TaxTMI 
2026 (9) TMI 258
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....ferred to as 'NFAC'], dated 29.09.2023, which in turn arises out of an order passed by assessing officer u/s. 143(3) of the Act, dated 29.03.2016. 02. Brief facts of the case that the assessee, Kishore Projects Pvt. Ltd., a company engaged in the business of execution of Government civil contracts, filed its return of income for the Assessment Year 2013-14 on 27.11.2013, declaring a total income of Rs. 32,90,130/-. The case was selected for scrutiny under CASS and notice under section 143(2) of the Act dated 02.09.2014 was issued. Subsequently, notices under section 142(1) of the Act along with detailed questionnaires were issued from time to time. During the course of assessment proceedings, the jurisdiction of the case was transferred ....
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....dent Fund amounting toRs.13,725/- had been deposited beyond the due dates prescribed under the relevant Act. The said amount was, therefore, disallowed under section 36(1)(va) of the Act. Consequently, the Assessing Officer completed the assessment under section 143(3) of the Act vide order dated 29.03.2016, determining the total income at Rs. 96,03,320/- as against the returned income of Rs. 32,90,130/-, after making aggregate additions of Rs. 63,13,194/-. 03. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal and sustained the additions made by the Assessing Officer. 04. Still aggrieved, the assessee is in further appeal before this Tribunal. ....
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....urther contended that the Assessing Officer as well as the Ld. CIT(A) proceeded on the premise that the assessee was following the mercantile system of accounting and, accordingly, treated the liability as pertaining to earlier years. According to the assessee, such an approach was factually incorrect, as the assessee had consistently maintained its accounts on the cash basis. It was also submitted that there was no finding that the assessee had changed its method of accounting during the year under consideration or that the cash system had not been regularly followed in the earlier or subsequent years. 08. On the other hand, the Ld. DR supported the order of the authority below. 09. We after hearing the rival submission of the partie....
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....he Assessing Officer to make an assessment in the manner provided under the Act where the accounts are not correct or complete, or where the notified accounting standards have not been regularly followed, subject to the conditions prescribed therein. In the present case, no specific defect in the books of account has been pointed out and no exercise for rejection of the books under section 145 has been undertaken. In our considered view, the Assessing Officer could not, on the one hand, accept the books of account and the method of accounting regularly followed by the assessee and, on the other hand, selectively apply the principles of mercantile accounting for disallowing a particular expenditure. If the Department intended to disregard th....
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....t Tax amounting to Rs. 8,06,688/- and Rs. 1,306/-, aggregating to Rs. 8,07,994/-. The assessee has challenged the said disallowance on the ground that the interest was paid for delayed discharge of statutory dues and was compensatory in nature and not penal. 11. On this issue the Ld. AR submitted that the interest was levied because of delay in payment of Work Contract Tax and was, therefore, compensatory in character. It was argued that such interest does not constitute a penalty for an offence or an expenditure incurred for a purpose prohibited by law. Rather, the interest represents compensation to the Government for the period during which the statutory dues remained unpaid. Accordingly, the expenditure was allowable as a business de....
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....ues remained unpaid. The Hon'ble Supreme Court in Mahalakshmi Sugar Mills Co. Ltd. v. CIT (123 ITR 429) has recognised that interest payable on delayed payment of statutory dues is compensatory in nature. Applying the ratio of the said decision to the facts of the present case, we find that the interest paid by the assessee cannot be regarded as a penalty for an infraction of law. It represents an additional financial liability arising from the delay in payment of statutory dues. We also find that the assessee has claimed the expenditure on the basis of actual payment, consistently with its cash system of accounting. The Revenue has not demonstrated that the payment was not actually made, nor has it established that the expenditure was incu....