The ITO, Ward-4(4), Ahmedabad V. Mapin Publishing Pvt.Ltd., Ahmedabad

ITA 2873/AHD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0486 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: S RUPAREL
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.2873 / AHD/2011 (ASSESSMENT YEAR 2006-07) ITO, WARD 4(4), AHMEDABAD VS. MAPIN PUBLISHING PVT. LTD., 10/B, VIDHYANAGAR SOCIETY, PART I, USMANPURA, AHMEDABAD-380013 PAN/GIR NO. : AABCM4557E (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI D K SINGH, SR. DR RESPONDENT BY: SHRI S RUPAREL, AR DATE OF HEARING: 20.02.2013 DATE OF PRONOUNCEMENT: 08.03.2013 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDE R OF LD. CIT(A) VII, AHMEDABAD DATED 22.09.2011 FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUND NO.1 IS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE DISALLOWANCE OF DEDUCTION U/S 36(L)(VA) OF RS.4 8,956/- WITHOUT APPRECIATING FACT THAT EMPLOYEE'S CONTRIBUTION IS N OT COVERED U/S 43B BUT IT IS COVERED UNDER THE PROVISIONS OF SECTI ON 36(L)(VA) R.W.S 2(24)(X). 2.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY THE LD. A.R. THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE I.T.A.NO. 2873 /AHD/2011 2 BY THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD. AS REPORTED IN 319 ITR 306 (S. C.). 2.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) BY FOLLOWING T HE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ALOM EXT RUSIONS LTD. (SUPRA) AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE I N THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE S TANDS REJECTED. 3. GROUND NO.2 IS AS UNDER: 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF EXPENDITURE OF RS.45,78,354 AFTER R EJECTING THE BOOKS OF ACCOUNTS WITHOUT APPRECIATING THE FACT THA T THE ASSESSEE ITSELF HAD ADMITTED DURING APPELLATE PROCEEDINGS TH AT THE CHANGE IN ACCOUNTING POLICY HAD AN IMPACT OF RS.8,29,296/- ON THE PROFIT OF THE YEAR. 3.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER. HE AL SO SUBMITTED THAT THE ASSESSEE HAS ADMITTED BEFORE THE AUTHORITIES BE LOW THAT BECAUSE OF CHANGE IN ACCOUNTING POLICY, THERE IS AN IMPACT OF RS.8,29,296/- ON THE PROFIT OF THE ASSESSEE FOR THE CURRENT YEAR AND, TH EREFORE, AT LEAST TO THIS EXTENT, ADDITION MADE BY THE A.O. SHOULD BE CONFIRM ED. LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 3.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDER AUTHORITIES BELOW. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) AS PER PA RA 3.4-3.9 OF HIS ORDER AND FOR THE SAKE OF READY REFERENCE, THESE PARAS AR E REPRODUCED BELOW: 3.4 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND THE APPELLANT'S SUBMISSION. THE APPELLANT SUBMITTED THAT EARLIER THE APPELLANT COMPANY WAS FOLLOWING METHOD OF ACCOU NTING WHEREBY ADVANCES RECEIVED FROM THE SPONSORS WERE TR EATED AS INCOME IRRESPECTIVE OF THE FACTS WHETHER THE PROJEC T IS COMPLETED OR I.T.A.NO. 2873 /AHD/2011 3 NOT AND THE EXPENDITURE INCURRED ON THE SAME PROJEC T WHETHER COMPLETED OR NOT WAS ACCOUNTED FOR AS EXPENDITURE I N THE PROFIT & LOSS ACCOUNT. HOWEVER, DURING THE YEAR UNDER CONSID ERATION, THE METHOD OF ACCOUNTING WAS 1 CHANGED WHEREBY THE ADVANCES RECEIVED AND EXPENDITURE INCURRED IN RESPECT OF THE PROJECT COMPLETED DURING THE YEAR UNDER CONSIDERATION WERE ACCOUNTED FOR IN THE PROFIT & LOSS ACCOUNT AND THE ADVANCES RECEI VED AND EXPENDITURE INCURRED FOR INCOMPLETE PROJECTS WAS CA RRIED FORWARD TO THE BALANCE SHEET UNDER THE HEAD ADVANCES AND WO RK-IN- PROGRESS RESPECTIVELY. THE APPELLANT ARGUED THAT TH E CHANGE IN THE METHOD OF ACCOUNTING WAS BONA FIDE AND FOR THE COMP LIANCE OF THE STATUTORY REQUIREMENTS OF ACCOUNTING STANDARD - AS 9 - RECOGNITION ISSUED BY THE INSTITUTE OF CHARTERED AC COUNTANTS OF INDIA AND AS PER THE PROVISIONS OF S.5 OF THE INCOM E TAX ACT. THE APPELLANT FURTHER ARGUED THAT THE METHOD OF ACCOUNT ING ADOPTED NOW DURING THE YEAR UNDER CONSIDERATION IS MORE ACC URATE, SCIENTIFIC AND IN COMPLIANCE OF VARIOUS, STATUTORY REQUIREMENTS, AND THEREFORE, BONA FIDE CHANGE OF METHOD OF ACCOUNTING CANNOT BE REJECTED FOR THE REASON THAT IT WOULD RESULT IN BRI NING INTO ACCOUNT IN ONE YEAR THE LOSSES OF SEVERAL YEARS. 3.5 THE APPELLANT FURTHER ARGUED THAT SO FAR AS THE CLAIM OF EXPENDITURE IS CONCERNED, EARLIER ALSO, THE APPELLA NT WAS CLAIMING THE EXPENDITURE WHEN IT IS INCURRED AND DURING THE YEAR ALSO THE SAME IS CLAIMED ON ITS INCURRENCE ONLY. THE ONLY DI FFERENCE IS THAT EARLIER THE EXPENDITURE WAS CLAIMED IRRESPECTIVE OF COMPLETION OF THE PROJECT WHEREAS DURING THE YEAR UNDER CONSIDERA TION, THE EXPENDITURE HAS BEEN CLAIMED IN THE PROFIT & LOSS A CCOUNT ONLY IN RESPECT OF COMPLETED PROJECT AND THE EXPENDITURE IN CURRED IN RESPECT OF UNCOMPLETED PROJECT HAS BEEN CARRIED FOR WARD TO BALANCE SHEET UNDER THE HEAD WORK-IN -PROGRESS. ACC ORDINGLY, THE APPELLANT ARGUED THAT CLAIM OF EXPENDITURE AMOUNTIN G TO RS.45,78,354/- IS IN ANY CASE NOT THE IMPACT OF CHA NGE IN METHOD OF ACCOUNTING AND THIS EXPENDITURE HAS BEEN INCURRE D DURING THE YEAR UNDER CONSIDERATION ONLY IN RESPECT OF COMPLET ED PROJECT AND THEREFORE THE SAME IS ALLOWABLE TO THE APPELLANT. 3.6 THE APPELLANT ALSO ARGUED THAT CHANGE IN ACCOUN TING POLICY HAS AN IMPACT OF RS.8,29,296/- ON THE PROFIT OF THE CUR RENT YEAR AND NOT RS.45,78,354/-. IT WAS EXPLAINED THAT EXPENSES OF R S.13,05,200/- ON INCOMPLETE PROJECTS WAS SHOWN AS WORK-IN-PROGRES S UNDER I.T.A.NO. 2873 /AHD/2011 4 INVENTORIES AND ADVANCES RECEIPT OFRS.21,34,496/- A GAINST THE SAME WERE SHOWN AS ADVANCES FROM CUSTOMER UNDER THE HEAD CURRENT LIABILITIES, RESULTING INTO NET RS.8,29,296/- CARRI ED TO BALANCE SHEET. IF THE METHOD OF ACCOUNTING WAS NOT CHANGED THAN THE SUM OF RS.13,05,200/- COULD HAVE BEEN DEBITED AND RS.21 ,34,496/- COULD HAVE BEEN CREDITED TO THE PROFIT & LOSS ACCOU NT AND THE PROFIT FOR THE YEAR WOULD HAVE BEEN HIGHER BY A SUM OF RS.8,29,296/-. IN SUPPORT THEREOF, THE APPELLANT AL SO FURNISHED CERTIFICATE OF CHARTERED ACCOUNTANT M/S SORAB S. EN GINEERS, COPY OF WHICH IS ENCLOSED HEREWITH AT PAPER BOOK PAGE NO .70. 3.7 IN VIEW OF THE ABOVE DISCUSSION, I AGREE WITH T HE ARGUMENTS MADE BY THE APPELLANT THAT DURING THE YEAR UNDER CO NSIDERATION THE CHANGE IN METHOD OF ACCOUNTING, WAS BONA FIDE AND W ITH THE COMPLIANCE OF THE ACCOUNTING STANDARD - AS 9 - REVE NUE RECOGNITION ISSUED BY THE INSTITUTE OF CHARTERED AC COUNTANTS OF INDIA AND PROVISIONS OF S.5 OF THE ACT. AS PER THE PROVISIONS OF THE ACT, THE INCOME IS REQUIRED TO BE ACCOUNTED FOR OR OFFERED FOR TAXATION IN THE YEAR IN WHICH IT IS ACCRUED TO THE ASSESSEE AND DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS CHANGED METHOD OF ACCOUNTING TO ACCOUNT FOR THE INCOME IN T HE YEAR IN WHICH THE PROJECT IS COMPLETED I.E. ON THE BASIS OF ACCRUAL OF INCOME. THIS METHOD OF ACCOUNT IS MORE ACCURATE, SC IENTIFIC AND AS PER THE VARIOUS STATUTORY REQUIREMENTS AND THEREFOR E IN MY OPINION, THE CHANGE IN SUCH METHOD OF ACCOUNTING IS BONA FID E AND THE SAME CANNOT BE REJECTED ON THE GROUND THAT IT HAS RESULT ED INTO CLAIMING MORE EXPENDITURE DURING 1 THE YEAR UNDER CONSIDERAT ION. THEREFORE, I HOLD THAT THE ACTION OF ASSESSING OFFICER IN REJE CTING CHANGE IN THE METHOD OF ACCOUNTING IS INCORRECT AND NOT SUSTAINAB LE AND \ ACCORDINGLY ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. 3.8 IN ANY CASE, AS SUBMITTED BY THE APPELLANT, I A GREE THAT CLAIM OF EXPENDITURE AMOUNTING TO RS.45,78,354/- IS NOT THE IMPACT OF CHANGE IN METHOD OF ACCOUNTING AND THE SAME HAS BEE N INCURRED DURING THE YEAR UNDER CONSIDERATION AND THEREFORE T HE SAME IS LEGITIMATELY ALLOWABLE TO THE APPELLANT. I AGREE WI TH THE APPELLANT THAT IN EARLIER YEARS, THE EXPENDITURE INCURRED WAS DEBITED TO PROFIT & LOSS ACCOUNT IRRESPECTIVE OF THE COMPLETION OF TH E PROJECT WHEREAS DURING THE YEAR UNDER CONSIDERATION EXPENDI TURE INCURRED ONLY IN RESPECT OF COMPLETED PROJECT HAS BEEN CLAIM ED. THE I.T.A.NO. 2873 /AHD/2011 5 DIFFERENCE IS ONLY OF THE STAGE OF THE COMPLETION O F THE PROJECT. I ALSO FIND THE EXPENDITURE IN QUESTION IS INCURRED D URING THE YEAR UNDER CONSIDERATION AND THAT TOO FOR THE PROJECT WH ICH ARE COMPLETED DURING THE YEAR. THEREFORE, WHICHEVER WAY , WHETHER ON THE BASIS OF INCURRING OF THE EXPENDITURE WHICH WAS THE OLD METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT OR PROJECT COMPLETION METHOD WHICH IS THE NEW METHOD OF ACCOUNTING, THIS EXPENDITURE IS ALLOWABLE. THEREFORE, THE EXPENDITURE AMOUNTING TO RS.45,78,354/- IS LEGITIMATELY ALLOWABLE TO THE APPELLANT. THIS GR OUND OF APPEAL IS THUS ALLOWED. 3.9 NOW SO FAR AS THE REJECTION OF BOOKS OF ACCOUNT S IS CONCERNED, THE APPELLANT VEHEMENTLY ARGUED THAT THE ASSESSING OFFICER HAS NOT PIN-POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS OF THE APPELLANT OR THE ASSESSING OFFICER HAS NOT E STABLISHED THAT PROFIT CANNOT BE DEDUCED BECAUSE OF METHOD OF ACCOU NTING ADOPTED BY THE APPELLANT. THE APPELLANT HAS FURTHER PLACED RELIANCE ON NUMBER OF DECISIONS. IN THIS REGARD, I AM OF THE OP INION THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT NOR HAS ESTABLISHED THAT ON ACCOUN T OF METHOD ACCOUNTING ADOPTED BY THE APPELLANT, PROFIT CANNOT BE DEDUCED. THEREFORE, I HOLD THAT THE ACTION OF ASSESSING OFFI CER IN REJECTING BOOKS OF ACCOUNTS' IS NOT CORRECT. ACCORDINGLY, I ALLOW THIS GROUND OF THE APPEAL. 3.3 WE FIND THAT IN PARA 3.9 OF THE ORDER OF LD. CI T(A), LD. CIT(A) HAS HELD THAT THE ACTION OF THE A.O. IN REJECTING THE B OOKS OF ACCOUNTS IS NOT CORRECT. NO GROUND HAS BEEN RAISED BY THE REVENUE AGAINST THIS DECISION OF LD. CIT(A) AND HENCE, THIS IS BY NOW A SETTLED P OSITION OF LAW THAT WHERE THE A.O. HAS REJECTED THE BOOKS BY INVOKING T HE PROVISIONS OF SECTION 145(3) OF THE ACT AND SUCH REJECTION OF BOO KS BY THE A.O. HAS NOT BEEN APPROVED BY LD. CIT(A) AND NO GROUND HAS BEEN RAISED BEFORE THIS TRIBUNAL AGAINST THIS DECISION OF LD. CIT(A), THEN THE GROUNDS RAISED BY THE REVENUE FOR DELETING THE ADDITION OR DISALLOWAN CE ON THE BASIS OF SUCH REJECTION OF BOOKS OF ACCOUNT HAS NO MERIT. MOREOV ER, WE FIND THAT IN THE I.T.A.NO. 2873 /AHD/2011 6 PRESENT CASE, EARLIER, THE ASSESSEE WAS FOLLOWING C ASH SYSTEM OF ACCOUNTING AND FOR THE PRESENT YEAR, THE ASSESSEE H AS STARTED FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. BOTH THE ACCOUNTI NG SYSTEMS ARE APPROVED SYSTEMS OF ACCOUNTING AND THIS IS NOT THE CASE OF THE A.O. THAT THIS CHANGE IN ACCOUNTING SYSTEM BY THE ASSESSEE IN THE PRESENT YEAR IS NOT A BONA FIDE CHANGE AND ASSESSEE HAS NOT BEEN FOLLOW ING THE SAME CONSISTENTLY IN THE FUTURE. EVEN BEFORE US, NOTHIN G HAS BEEN BROUGHT ON RECORD BY THE LD. D.R. TO SHOW THAT THE ASSESSEE IS NOT FOLLOWING THE CHANGED METHOD OF ACCOUNTING CONSISTENTLY IN FUTURE . HENCE, WHEN THE CHANGED METHOD OF ACCOUNTING IS A VALID METHOD OF A CCOUNTING, SUCH CHANGE IN METHOD OF ACCOUNTING IS BONA FIDE CHANGE AND NO ADDITION IS CALLED FOR ON ACCOUNT OF SUCH CHANGE IN METHOD OF ACCOUNTING. REGARDING THIS ARGUMENT OF LD. D.R. THAT WHEN THE A SSESSEE ITSELF IS ACCEPTING THAT THERE IS IMPACT OF RS.8,29,296/- ON THE PROFIT OF THE ASSESSEE IN THE PRESENT YEAR BECAUSE OF CHANGE IN M ETHOD OF ACCOUNTING, ADDITION SHOULD BE CONFIRMED AT LEAST TO THIS EXTEN T, WE WOULD LIKE TO OBSERVE THAT THIS ARGUMENT IS FALLACIOUS. THE CASE OF THE ASSESSEE IS THIS THAT EVEN IF IT IS HELD THAT THE CHANGE IN THE METH OD OF ACCOUNTING IS NOT A BONA FIDE CHANGE THEN ALSO, ADDITION CAN BE MADE ON LY TO THE EXTENT OF RS.8,29,296/- BECAUSE THIS IS THE ONLY IMPACT IN TH E PROFIT OF THE CURRENT YEAR BECAUSE OF THIS CHANGE IN ACCOUNTING METHOD BU T LD. D.R. IS ARGUING THAT THIS MUCH ADDITION MUST BE CONFIRMED. WE DO N OT FIND ANY MERIT IN THIS ARGUMENT OF THE LD. D.R. AND SINCE WE HAVE SEE N THAT THE CHANGE IN THE METHOD OF ACCOUNTING IN THE PRESENT YEAR BY THE ASSESSEE IS A BONA FIDE CHANGE, NO ADDITION IS JUSTIFIED EVEN TO THE E XTENT OF THIS IMPACT ON THE PROFIT OF THE CURRENT YEAR BECAUSE OF THE CHANG E IN THE METHOD OF I.T.A.NO. 2873 /AHD/2011 7 ACCOUNTING. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. THIS GROUND OF THE REVENUE IS ALSO REJECTED. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 5. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 22/02/2013 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26/02/2013.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 08/03/2013 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.8/3 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 08/0 3/2013 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .