TMI Blog2009 (7) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Avoidance Agreement (DTAA), its profits attributable to permanent establishment alone are taxable in India. It offered 10 per cent of the receipt of Rs. 11,01,09,187, i.e., Rs. 1,10,10,919 as taxable profits of the project office and claimed the losses which are incurred by the branch office against this income. The Assessing Officer taking into consideration the gist of audited financial statement filed with Reserve Bank of India observed that the assessee has offered income under normal provision of the Act for assessment year 2003-04 and has offered the same to tax under the Act on book profit when the deemed income was more than the book profit but has opted to show deemed income just because audited net profit was on a higher side. According to him, the assessee had to adopt a consistent approach in computing the income for income-tax purposes and he cannot pick and choose when to apply the deeming provisions and when not. He further observed that in the period, the expenses are more the assessee cannot adopt net profit as per P L account and then shift to deeming provisions in the year, there is greater revenue receipts. He further observed that the stand adopted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier assessment year. In afore-noted factual background, I am unable to appreciate as to how when there was no change in the facts and circumstances of the case in the year under consideration as compared to immediately preceding assessment years the taxable profit earned by appellant in India could be computed by following a different accounting method, i.e., the gross basis. It is true that principle of res judicata does not apply to income-tax proceedings however, the rule of consistency does apply to the income-tax proceeding. Since there was no change in fact and circumstances of the case in the year under consideration and the appellant had not pointed out any fresh fact for changing method of computation of profit, I am of considered view that the appellant was not justified in computing the profit on gross basis under section 44BBB(1) in the year under consideration as against determination of profit on net basis as per audited books of account, a consistent method followed by the appellant itself in immediately preceding assessment years. My above view of rule of consistency gets support from judgment of Hon ble Delhi High Court in case of CIT v. A.R.J. Security Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ambit of section 80-1 of the Act, the Revenue cannot be allowed to now turn around and contend that deduction under the said section is not allowable to them in respect of the present assessment years. In view of above discussion and respectfully following the rule of consistency as upheld in above cited authority, I am of considered view that profit of the appellant was to be computed on net basis under section 44BBB(2), a method consistently followed by the appellant in earlier assessment years and Assessing Officer was justified in taxing the income of the appellant on net basis. 5.3-3 Hon ble Supreme Court in the case of Sanyasi Rao ( supra ) has held that "section 44AC is the valid piece of Legislation and is an adjure to and explanatory to section 206C. It does not dispense with the regular assessment as provided in accordance with sections 28 to 44C of the Act". The ratio decidendi of Hon ble Supreme Court will apply with equal force to the identical provisions of section 44BBB. Following the dictum of law as laid down by Apex Court, the appellant had disclosed the profit on net basis in immediately preceding assessment years on the basis of books of account un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration as per the primitive tax provision of section 44BBB. The decision of the Supreme Court in the case of Union of India v. A. Sanyasi Rao [1996] 85 Taxman 321 referred to by the CIT (Appeals) is distinguishable on facts and in fact help the assessee. He further submitted that the principle of setting off of losses is contemplated under section 70 of the Act, which is not overridden by section 44BBB and, therefore, the loss for the year and brought forward are to be set off with the profits computed under section 44BBB of the Act, to arrive at total income liable to income-tax, even as per the alternate basis adopted by the Assessing Officer. For this proposition, he relied upon the decision of Dy. CIT v. CIT Alcatel [1993] 47 ITD 275 (Delhi) and Anchor Line Ltd. v. ITO [1990] 32 ITD 403 (Bom.) 7. The learned DR, on the other hand, relying upon the orders of CIT (Appeals) as well as Assessing Officer submitted that the assessment under the normal provision has rightly been made by the Assessing Officer in view of the Delhi High Court decision in the case of CIT v. A.R.J. Security Printers [2003] 264 ITR 276 following the rule of consistency as enunciated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like others mentioned above, is a non obstante provision and starts with the words "Notwithstanding anything to the contrary contained in sections 28 to 44AA". It determines the income at a sum equal to ten per cent of the amount paid or payable on account of such civil construction or the business of erection of plant or machinery or testing or commissioning thereof, as the profits and gains of such business chargeable to tax under the head "Profits and gains from business or profession". By sub-section (2) of this section, an option is given to the assessee to claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited under section 44AB. It is only in that case, the Assessing Officer has to make assessment on the total income or loss of the assessee under section 143(3) of the Act as per the books of account maintained by the assessee. The provisions under section 44BBB being a non obstante provision overrides the provision of sections 28 to 44AA of the Act, and, therefore, in our opinion, has to be g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistency. These cases are to settle a dispute resolved in earlier year have thus no application. In our view, therefore, the Assessing Officer cannot force the system, which has been followed in the earlier year as per the option by the provision of law itself. He has to follow the mandate of the law and as held by the Allahabad High Court in the case of CIT v. Motilal Padampat Sugar Mills Co. Ltd. [1979] 118 ITR 825 , the doctrine of promissory estoppel cannot be applied in the teeth of an obligation or liability imposed by law. Promissory estoppel cannot be invoked to compel the Government or even a private party to do an act prohibited by law. There can also be no promissory estoppel against the exercise of legislative power. The Legislature can never be precluded from exercising its legislative function by resort to the doctrine of promissory estoppel. In these circumstances, when section 44BBB mandates that income of the assessee is to be computed at 10 per cent of the receipts and the assessee does not claim a lower profit than that to be assessed under sub-section (2) of section 44BBB and the Assessing Officer cannot proceed to determine the income of the assessee under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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