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2011 (9) TMI 43 - AT - Income TaxMAT - System of accounting - Mercantile system versus Cash system - whether provisions of Section 209(3) of Companies Act, 1956 overrides the provisions of Section 145 of the Act - Computation of book profit u/s 115JB (Minimum Alternate Tax) - Held that: - in the case of Chennai Finance Co. Ltd. (2001 -TMI - 66128 - ITAT HYDERABAD) it has held that the provisions of section 209(3) of the Company Act 1956 do not override provisions of section 145 of the Act. Regarding rejection of books of accounts - AO rejected the books on the ground that when the assessee was following cash system of accounting there cannot be any sundry creditors appearing in the balance sheet. - Held that: the reply given by the assessee justifies the action of the assessee in showing sundry creditors in the balance sheet. Therefore, this cannot be a valid basis for rejecting the books of account. - The system followed by the assessee does not in any way detract from the cash system of accounting. - The reasons assigned by the AO for rejecting the books of account are not proper. Regarding applicability of Accounting Standard (AS-9) - Held that: - those accounting standards are applicable only to the assesses, who follow mercantile system of accounting. Since the assesse, in the present case follows cash system of accounting, we are of the view that the rejection of books of accounts on this basis cannot be upheld. Principle of consistency - Held that: - right from A.Y 1983-84 till A.Y 2003-04 the revenue has accepted the cash system of accounting followed by the assessee and has completed the assessment on that basis. In A.Y 2004-05 the AO cannot be allowed to take a different stand. As rightly contended on behalf of the assessee there should be finality and certainty in all litigation including litigation arising out the Act.
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