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2013 (8) TMI 178 - ITAT MUMBAIJurisdiction power u/s 263 by CIT(A) - receipt method of accounting in respect of the refund of VAT - refund pertaining to AYs. 2005-06 & 2006-07 received during the relevant year was credited in its accounts and duly returned as income for the current year - as per CIT the assessee following mercantile method of accounting, the refund of VAT, which for the current year was omitted to be accounted for by the assessee for the current year thus, there was an escapement of income to that extent - Held that:- As it is impermissible for the assessee to follow cash method of accounting in respect of the sales tax/VAT refund due to it, it admittedly following mercantile method of accounting. As such, in terms of s. 5 r/w s. 145, income becomes chargeable to tax when the assessee acquires the right to receive such income. In fact, apart from the auditor’s report, to which reference has been made by the CIT, the notes to the assessee’s accounts itself state that the sales-tax (VAT) paid on purchases are included in the cost of the purchases, is, though refundable from the Sales Tax Department, not taken as income as the same is subject to acceptance by the Sales Tax Authority. The assessee has throughout completely failed to exhibit the uncertainty that it claims to have prevailed, and which weighed with it in deferring the recognition of the said income, i.e., in its accounts. The assessee is rather, it is apparent, following the same, i.e., the said procedure, as a matter of course, regularly accounting for the VAT refund only upon receipt, and which, as explained, cannot hold in view of section 145 proscribing (w.e.f. A.Y. 1997-98) a mixed method of accounting in preference to a pure, i.e., either cash or mercantile, method of accounting; As decided in CIT vs. Punjab Bone Mills [2001 (7) TMI 114 - SUPREME Court] that income by way of cash incentive accrued to the assessee at the time of filing of the claim in its respect (with the concerned authority). Thus as noted that the assessee has not stated any factual reason/s with regard to the uncertainty that is stated to exist with regard to the claim for VAT refund. In fact, where the difference in income followed a consistent though incorrect method of valuation of closing stock, so that its effect neutralized in the succeeding year, the argument was found not valid. The direction by the CIT, therefore, for including the amount of VAT refund accrued to it is to be upheld. On the second aspect, the fact that the assessee has been before the AO able to exhibit that no difference to its returned income arises when reckoned in terms of section 145A, would not in any manner undermine the jurisdiction or the validity of the revisionary order on that score. The CIT could have examined the said issue himself, and it is quite within his competence to direct the AO to examine the assessee’s case, as stands done by him. In fact, all his order shows is that the issue had not been verified at the time of the assessment proceedings and, accordingly, directs the AO to pass a fresh order upon due verification and in accordance with the law. As such, on the merits of both the objections, it is find the revisionary order as sustainable in law. Against assessee.
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