TMI Blog2005 (1) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... esuming the jurisdiction in terms of the said section. The order passed by the AO be declared null and void and not tenable in law. 2. Without prejudice to ground No. 1 and in the alternative: (a) On facts and circumstances prevailing in the case and as per provisions of law, it be held that first appellate authority is in error in confirming the order passed by the AO under s. 143(3) r/w s. 147 relying on the ratio of the decision in the case of CIT vs. Abad Fisheries (2002) 177 CTR (Ker) 532. Keeping in view, inter alia, the ratio of decisions in cases of Vipan Khanna vs. CIT (2002) 175 CTR (P H) 335 : (2002) 255 ITR 220 (P H) and that of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC), it shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33,363. The AO noticed that the work-in-progress originally valued and certified by the proprietor and duly accepted by the auditor without qualification in the tax report has been revised as Rs. 50,10,353 resulting in understatement of profit and, therefore, on 27th Feb., 2002, the AO after recording the reasons, issued notice under s. 148 of the Act. In response to the said notice, the assessee filed a return on 31st March, 2002, declaring loss of Rs. 33,363. The AO required the assessee to explain how the change in WIP can be accepted and how this has been worked out and to file extract of account and the relevant book entries. After considering the assessee's reply, the AO took the view that the WIP cannot be changed by a revised return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t certain changes in the WIP and the net profit, which was shown at Rs. 97,690, was reduced from the WIP. Thus, only the net WIP increased with some minor adjustments was carried over to the next year. It was specifically pointed out by the learned counsel for the assessee that this method of accounting has been consistently followed in all the subsequent years. He also brought to my notice that this system has been accepted by the Department for the subsequent years including the asst. yr. 1996-97. Thus, the change in method of accounting was bona fide and was being followed regularly in the subsequent years. He, therefore, submitted that the changed method of accounting is recognised method of accounting and, therefore, the authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first year of business of the assessee. It is true that the assessee realised his mistake and changed the method of accounting bona fide. Earlier, the income was declared on the basis of WIP and subsequently, the assessee adopted the method of accounting as project completion method for working out profit. It is also true that project completion method of accounting is well recognised method and the assessee was following this system in subsequent years, which was accepted by the Department including the asst. yr. 1996-97. In the case of Kwality Overseas Employment Corporation vs. ITO (1984) 7 ITD 689 (Bom), the facts before the Tribunal, Bombay Bench, were that the assessee initially filed return by adopting mercantile system for comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven before an assessment has been made, corrected that method, the ITO does not come into picture at all on the ground of objection to a change of method of accounting. As far as the ITO is concerned, he has to consider the revised return and this is based on a proper method of accounting followed by the assessee. Whether the assessee fixed this as its method of accounting for the first time or it went through different changes and finally fixed this as its method of accounting is of no relevance to the income-tax assessment or consequence to the ITO. We have no hesitation, therefore, in holding that for arriving at the income for the years under appeal, especially the first year when the assessment was made, no objection can be taken on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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