TMI Blog2008 (1) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... o existence in favour of the assessee. Therefore, this amount did not become the income. Accordingly, we are of the view that the learned CIT(A) erred in finding that the assessee was following hybrid system of accounting on the ground that the whole of the amount received from the clients as retainership fees was not declared as income in the year of receipt of the amount. Consistency of assessments - cash system of accounting - HELD THAT:- In the case of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] held that their findings should not be taken as a general proposition of law to be followed in every case as it has confined to the facts of that case. We may add that if a manifestly wrong decision has been taken by the AO in one year or in a number of years, it will not bind the AO in assessment of a subsequent year because there cannot be any estoppel against the law. However, in this case, we find the earlier and subsequent assessments were made on correct appreciation of the principle of cash system of accounting. Since the assessee succeeds on merits on this aspect, there is no need for us to give a finding that the Assessing Officer was bound in this year to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , leading to an addition of Rs. 4,89,397. Before the learned CIT(A), it was submitted that the retainership fees was received in advance for the contract period of the retainership. The fees was determined on monthly, quarterly or yearly basis. What was received initially was an advance and at the end of the year, that portion of the advance for which professional services had been rendered, was transferred to the fees account and the balance amount was shown as liability under the head "advance retainership fees account". It was further submitted that the Assessing Officer erroneously invoked the provisions of section 145(1) without pointing out any mistake in the system of accounting followed by the assessee. It was also submitted that the issue, which has been settled in the past assessments, should not be raised again. The learned CIT(A) considered the submissions of the assessee and the report of the Assessing Officer thereon. It was pointed out by him that for assessment year 1997-98 and onwards, the assessee cannot adopt hybrid system of accounting. The assessee was admittedly following cash system of accounting. Under this system, the entire amount received, whether arrear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income on account of advance retainership fees. The learned DR had no objection to admission of these evidences and, therefore, the same was admitted. 3.1 Coming to the merits, reliance was placed on the decision of Hon'ble Supreme Court in the case of CIT v. Shoorji Vallabhdas Co. [1962] 46 ITR 144, which deals with the mercantile system of accounting and its import. The facts of the case were that the assessee entered into an agreement on 16-9-1938 with Malabar Steamship Co. Ltd. and on 8-6-1946 with New Dholera Steamships Ltd. Under the agreement, the assessee was entitled to receive commission at the rate of 10 per cent on the freight charges. Such amounts worked out to Rs. 1,71,885 from Malabar Steamship Co. Ltd. and Rs. 2,56,815 from New Dholera Steamships Ltd. These amounts were credited in the books and corresponding debit entries were made in the accounts of the shipping companies. In the year 1947, the assessee floated two private limited companies, called Shoorji Vallabhdas Ltd. and Pratap Sinh Ltd. The assessee wanted to substitute these two companies as managing agents of the shipping companies, one for each of them. Two shareholders of Malabar Steamship Ltd. ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the donations and offerings, large funds were built up and properties were acquired over a number of years. In 1904, a trust deed was executed by the Central Council constituted in the year 1902. The creed split into two as Soami Bagh Sect and Dayalbagh Sansangi. For assessment year 1937-38, the Commissioner accepted that the offerings made to the Satguru were not for the personal benefit and although no formal trust had been created by the donors, the offerings were impressed with the character of trust money and, therefore, the offerings were exempt from income-tax under section 4(3)(i) of the 1922 Act. The claim in case of Dayal Bagh group was accepted by Allahabad High Court. The question was whether, for assessment years 1964-65 to 1969-70 the assessee was entitled to exemption from income-tax under section 11 of the Act? Reversing the decision of the High Court, the Hon'ble Supreme Court held that the properties given to the Satguru were intended for common purpose of furthering the objects of the institution. The Central Council had authority to manage the properties of the institution and on revocation of the trust, the property was not to go back to the Satguru. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for expenditure. 5. We have considered the facts of the case and rival submissions. We may refer to the charging section 4 of the Act to the effect that income-tax shall be charged for any assessment year at the rate or rates provided in any Central Act in respect of the total income of the previous year of every person. Section 5 deals with the "scope of total income", which is defined in respect of any previous year in terms of accrual, deemed accrual, receipt and deemed receipt etc. Section 145 deals with the method of accounting in respect of "profits and gains of business or profession" or "income from other sources". Thus, while sections 4 and 5 deal with the scope of income and its charge to income-tax, section 145 is a procedural section regarding the method to be followed for recording of income in the books of account. It is no doubt true that for assessment year 1997-98 and onwards, the assessee can follow either cash or mercantile system of accounting and the hybrid system of accounting is prohibited. However, what is to be taxed is income and receipt of an amount is not be the basis for the levy of the tax. In the case of Shoorji Vallabhdas Co., the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
