TMI Blog2012 (9) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting for the incomes on cash basis and the expenses were claimed on mercantile basis under the head PGBP - which is neither cash nor mercantile – Held that:- As the Tribunal direct the AO to consider the allowability of the expenses in question namely interest, salaries and rent in the year of their payment in accordance with law. Appeal decides in favour of revenue - ITA No. 1375 & 1376/CHD/2010 - - - Dated:- 22-6-2012 - Ms.SUSHMA CHOWLA, AND SHRI MEHAR SINGH, JJ. Appellant by : Shri M.R.Sharma Respondent : Shri Akhilesh Gupta ORDER PER MEHAR SINGH, AM The present two appeals filed by the assessee are directed against the order dated 21.09.2010 passed by the CIT(A) u/s 250(6) of the Income-tax Act,1961 (in short 'the Act'), for the assessment year 2003-04 2005-06. As both the appeals involve similar facts and issues, they are being disposed of by a consolidated order for the sake of convenience and brevity. 2. In appeal, for the assessment year 2003-04, the assessee has raised the following Grounds of Appeal: 1 . That the order of the Assessing Officer as upheld by the Commissioner of Income T ax (Appeals) is bad in law and is beyond all the cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is bad in law and is liable to be set aside. 6. In ITA No. 1376/Chd/2010 (A.Y. 2005-06), vide ground No.2, assessee has made a similar contentions. As these grounds of appeal are identical in nature, same are being adjudicated together. 7. Before the AO, assessee contended that notices u/s 143(2) and proceedings initiated u/s 147/148 of the Act are not valid. It was pointed out that the amendment to Section 143(2) w.e.f. 01.04.2008 cannot operate retrospectively. Accordingly, assessee requested that proceedings initiated u/s 147/148 of the Act may be dropped. The AO dealt with the objection raised by the assessee in the matter in para 6 of the assessment order dated 29.10.2008 passed u/s 143(2)/147 of the Act. Contents of the same are self-explanatory in nature. For the sake of proper appreciation and ready reference, the same is reproduced hereunder: "6. I have carefully considered the various arguments advanced by the assessee through written replies furnished from time to time but these are hardly of any consequence. The objection of the~ assessee with regard to the issue of notice u/s 143(2) is not tenable. The date from which: an amendment becomes effective becomes often ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ths from the end of the F.Y. in which the return was filed. I agree with the reasoning of the AO and hold that notice u/s 143 (2) was issued in time and therefore this ground of appeal is dismissed." 9. In the course of present appellate proceedings, ld. 'AR' stated that both grounds of appeal, raised in these appeal are identical in subject matter and nature and hence, consolidated pleadings, in both the appeals are made. He gave factual history of the case and referred to various pages of the Paper Book, indicating issuance of notice u/s 148 of the Act. Page 1 of the Paper Book contains notices u/s 148 of the Act dated 5.6.2007 for the assessment year 2003-04 issued by the AO and similarly, page 2 of the Paper Book contains notice u/s 148 dated 5.6.2007 for the assessment year 2005-06 issued by the AO. Page No. 5 and 7 contains reasons recorded by the AO u/s 148 for the assessment year 2003-04 and 2005-06 respectively. Page No. 11 of the Paper Book contains factual background of the case. The ld. 'AR' contended that the provisions of Section 292BB of the Act were inserted by the Finance Act 2008 w.e.f. 1.4.2008, hence, the same cannot be invoked by the AO. Ld. 'AR' was of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO merely applied the provisions of Section 143(2) of the Act, amended vide Finance Act,2008, w.e.f. 1.4.2008. Therefore, the decision of the Hon'ble jurisdictional High Court is not applicable to the facts of the present case. 11(ii) Ld. 'AR' further placed reliance on the decision of Indore Bench of the Tribunal, in the case of Servite Sisters Society V Asstt.CIT (2010) 130 TTJ (Ind) 96. We have carefully perused the rival submissions, facts of the case and the ratio laid down by the Hon'ble Bench and found that the same is not applicable to the facts of the present case, being different and distinguishable. 11(iii) Ld. 'DR', on the other hand, referred to the circular issued by CBDT to support the contention. The circular is reported in 310 ITR (Statutes) 42. It was contended by the ld. 'DR' that circular issued by the CBDT, explaining the relevant amendments are binding, on the Income tax authorities, as held in plethora of decisions of the Hon'ble High Courts and Hon'ble Supreme Court. 12. We have carefully perused the rival submissions, facts of the case and the case laws cited in this appeal. The AO has invoked the amended provisions of Section 143(2) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is clear that in both the assessment years, the assessee filed return of income, in response to the impugned notices u/s 148 of the Act on 29.06.2007. Therefore, according to the pre-amended provision of Section 143(2), notice in this case could have been issued by 30.6.2008. However, AO issued notice on 11.7.2008 for the assessment year 2003-04. Similarly, for the assessment year 2005-06, notice u/s 143(2) was issued by the AO on 11.7.2008. However, it is evident that the AO is competent to issue notice, on 1.4.2008, in terms of pre-amended provisions of Section 143(2) of the Act. Accordingly, the AO has issued notice strictly in accordance with the impugned instructions. Hence, we do not find any illegality in the said notices. 16. Having regard to the fact-situation of the present case, the notice u/s 143(2) can be issued on 1.4.2008, under the pre-amended provision. Therefore, in terms of the circular under reference, AO has validly issued impugned notices, in both the cases, in consonance with provisions of the said CBDT circular. In this connection, it is pertinent to mention here that the circulars or general directions, issued by the CBDT would be binding u/s 119 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the above order f or the assessment year 2004-05 just to show the so called bona fides which in fact were not there because the original return f or this year was filed by the assessee on 26/09/2006 by calculating interest on receipt basis and cl aiming expenditure on mercantile basis. Moreover, the issue of accessibility of income on cash basis has reached finality by the judgement of Ld. ITAT referred to supra and cannot be altered now. The plea of ignorance of law on such a significant issue of assessability of income cannot also be accepted as a valid excuse because the assessee is guided by a very senior Advocate for the last many years and it was not difficult f or him to seek his opinion regarding adopting of system of accounting after the amendment made to section 145 permitting only one system i.e. cash or mercantile and not hybrid system/Tax planning may be legitimate provided it is within the frame work of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2008. While deciding the case, Hon'ble ITAT has considered the case law cited by the assessee (supra) and upheld the stand of the Department. 9. I have considered the issue and the submissions made by the AR. Admittedly, the assessee has been following hybrid system of accounting which is not permissible u/s 145 of the IT Act. The stand the Department in assessing the income on cash basis f or the A.Y. 2004-05has been upheld by the Hon'ble ITAT. Therefore, income assessed by the AO in re-assessment proceedings under cash system of accounting f or the A.Ys. 2003-04 2005-06 is appropriate. Revised return filed by the assessee f or the A.Y. 2006-07 adopting mercantile system of accounting does not help him in contesting the income brought to tax under cash system of accounting for the A.Ys. 2003-04 2005-06. Therefore, the addition made by the AO is sustained f or both the assessment years and this ground of appeal is dismissed." 19. In the course of present appellate proceedings, it transpired that the issue in question, in both these grounds of appeal, is directly covered by the decision of Chandigarh Bench, in assessee's own case in ITA No. 193/Chd/2008 assessment year 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en upheld by the Hon'ble Punjab Haryana High Court also in CIT vs. Punjab State Industrial Development Corporation Limited 255 ITR 351 (P H). Moreover, when the change is warranted on account of a statutory provision, in our considered opinion, the principle of consistency has to fail and give way to the legislative mandate. In the present case, as section 145(1) stands on the statute for the instant assessment year, the permissible system of accounting for computing income chargeable under the head 'profit and gains of business or profession' are either cash or mercantile system and none of the methods have been employed by the assessee. Therefore, our decision to uphold the action of the income tax authorities in rejecting method of accounting employed by the assessee, which is neither cash nor mercantile. At this stage, we may refer to an alternative plea raised by the appellant that the expenses disallowed by the Assessing Officer in this year due to the change of accounting method should be considered for deduction in the respective years of actual payment. To this plea there was no disagreement from the Ld. D. R. representing the Revenue. On this aspect therefore we direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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