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TMI Blog2008 (1) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... tem adopted by the assessee does not cause any loss of revenue as true and real income was declared. Therefore, the ld. CIT(A) failed to appreciate that the Assessing Officer has changed his opinion, which was bad in law. 2. On perusal of the order of the learned CIT(A), it is found that during the course of assessment the Assessing Officer examined the audit report filed with the return of income, which stated that the assessee was maintaining books of account on cash basis. Therefore, the assessee was requested to explain as to why he was accounting for the receipts in respect of retainership fees on accrual basis. It was explained that the "advance retainership fees" was shown as advance in the books of account. That portion of the advance which was co-related to the services rendered in the year was offered for taxation by debiting it to the advance account. It was further explained that there was no change in the method of accounting in this behalf, which had been followed for more than three decades. The Assessing Officer did not accept the explanation of the assessee. It was pointed out by him that the provisions of section 145, as applicable to the instant assessment year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or this year was enhanced by holding that the assessee was not following cash system of accounting but hybrid system of accounting by pointing out that advance retainership fees was not declared as income in full. He referred to the paper book filed by him, which contained 126 pages. Pages 56 to 126 constituted additional evidence consisting of - (i) copies of notices under section 148 of the Act issued by the Assessing Officer for assessment years 1998-99 to 2000-01, (ii) replies submitted by the assessee in compliance to the aforesaid notice, (iii) consolidated order passed by the Assessing Officer under section 147 dropping the proceedings for these years, (iv) summary balance-sheets for various years ending on 31-3-1997 to 31-3-2006, (v) comparative details of advance retainership fees received in the financial years ending on 31-3-1998 to 31-3-2005, and (vi) copies of assessment orders passed under section 143(3) of the Act for assessment years 2003-04 to 2005-06. It was his case that these documents came into the possession of the assessee after the conclusion of appellate proceedings for this year, for which the order was passed on 13-9-2005. The purpose for filing the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee gave up 75 per cent of its earnings during the relevant year, amounting to Rs. 1,36,903 in case of Malabar Steamship Co. Ltd. and Rs. 2,00,625 in the case of New Dholera Steamships Ltd. The main question before the Hon'ble Court was whether, the aforesaid two sums constituted the income of the assessee for the year ended on 31-3-1948? The Hon'ble Court pointed out that the income-tax is a levy on income. The Act takes into account two points of time at which the liability to tax is attracted, namely, the accrual of income and its receipt. However, the substance of the matter is the income. If the income does not result at all, there cannot be a tax even though in book-keeping, an entry is made about a hypothetical income, which does not materialize. Where income has, in fact, been received and is subsequently given up, it remains the income of the recipient, even though given up, the tax is payable. However, where the income has not resulted at all, there is obviously neither accrual nor receipt of income, even if entry to that effect has been passed in the books of account. 3.2 Coming to the issue of consistency, he relied on the decision of Hon'ble Supreme Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Service Tax Act. Our attention was drawn to the head note on page 276, wherein it was mentioned that the principle of res judicata does not apply in matters pertaining to tax for different years because it debars the courts from entertaining issues on the same cause of action, whereas the cause of action for each assessment year is distinct. The courts will, however, generally adopt an earlier pronouncement of law or a conclusion of facts unless a new ground is urged or there is a material change in factual position. This approach is based not on res judicata but on theory of precedent. This mandate is subject to distinguishing the earlier decision or showing that the earlier decision was per incuriam. 4. In reply, the learned DR referred to paragraphs 4.6 and 4.7 of the order of the learned CIT(A). The contents of these paragraphs have already been summarized by us. It may be mentioned that paragraph 4.6 deals with the amendment made in section 145, with effect from 1-4-1997, under which the assessee can follow either cash or mercantile system of accounting thereby prohibiting the hybrid system of accounting from assessment year 1997-98. Paragraph 4.7 contains his finding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performed over a period of time. The amount relatable to the services rendered in the year under consideration was shown as income, the reason being that the assessee became entitled to receive that amount from the client in respect of the services rendered. In other words, debt to the extent of the amount pertaining to services rendered only got vested in the assessee. The rest of the amount was taken as liability to be adjusted in subsequent year as and when the service was rendered. It is but clear that the excess amount would have to be returned in case the service was not performed in subsequent year and, therefore, in respect of such amount no debt came into 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. 5.1 Coming to the issue of consistency of assessments, it may be mentioned that the Hon'ble Supreme Court itself mentioned in the case of Radhasoami Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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