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TMI Blog2013 (11) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... n deleting expenditure of Rs.45,78,354/- after rejecting books of accounts. 2.00. Facts leading to the present Appeal, in nutshell, are as under : 2.01. The assessee Company filed its e-return of income on 27/12/2006 declaring total income of Rs.(-)6,65,163/-. The same was processed under section 143(1) of the Income Tax Act. The case was selected for scrutiny through CASS and notice under section 143(2) was issued and served on the assessee. 2.02. On verification of the return of the income and audited report, it was noticed by the assessing officer that the assessee Company has changed its accounting policy during the year under consideration and it was found that the Company has assessed loss of Rs.6,29,200/-. During the year under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee by observing that the assessee has deviated from the accounting system and has shown less profit of Rs.45,78,354/-. 2.05. Being aggrieved by and dissatisfied with the assessment order passed by the assessing officer dtd. 29/12/2008, making addition of Rs.45,78,354/-, the assessee preferred appeal before the CIT(A) and the CIT(A) allowed the appeal preferred by the assessee deleting addition of Rs.45,78,354/- made by the assessing officer, by observing that the assessee has adopted accounting system which was permissible under the law and the assessee adopted / followed system of accounting bonafide. 2.06. Being aggrieved by and dissatisfied with the order passed by the CIT(A) deleting addition of Rs.45,78,354/- made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act before them, addition / disallowance made on such rejection of books of accounts cannot be sustained. By making above submissions, it is requested to admit / allow the present appeal. 4.00. Heard Ms.Bhatt, learned counsel appearing on behalf of the appellant - revenue and perused the assessment order as well as the order passed by the CIT(A) as well as the impugned order passed by the tribunal. 4.01. At the outset, it is required to be noted that the assessee changed the accounting system and started following mercantile accounting system. Under the old accounting system, the assessee company was showing advance received from the sponsors as income irrespective of the project being completed or not. Similarly, expenditure incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration, the method of accounting was changed whereby the advances received and expenditure incurred in respect of the project completed during the year under consideration were accounted for in the profit & loss account and the advances received and expenditure incurred for incomplete projects was carried forward to the Balance Sheet under the head Advances and Work-in-progress respectively. The Appellant argued that the change in the method of accounting was bona fide and for the compliance of the statutory requirements of Accounting Standard - AS 9 - Revenue Recognition issued by the Institute of Chartered Accountants of India and as per the provisions of S.5 of the Income Tax Act. The Appellant further argued that the method of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inventories and advances receipt of Rs.21,34,496/- against the same were shown as Advances from customer under the head Current Liabilities, resulting into Net Rs.8,29,296/- carried to Balance Sheet. If the method of accounting was not changed than the sum of Rs.13,05,200/- could have been debited and Rs.21,34,496/- could have credited to the Profit & Loss account and the profit for the year would have been higher by a sum of Rs.8,29,296/-. In support thereof, the Appellant - also furnished certificate of Chartered Accountant M/s.Sorab S. Engineers, copy of which is enclosed herewith at paper book page no.70. 3.7. In view of the above discussion, I agree with the arguments made by the Appellant that during the year under consideration the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red was debited to profit & loss account irrespective of the completion of the project whereas during the year under consideration expenditure incurred only in respect of completed project has been claimed. The difference is only of the stage of the completion of the project. I also find the expenditure in question is incurred during the year under consideration and that too for the project which are completed during the year. Therefore, whichever way, whether on the basis of incurring of the expenditure which was the old method of accounting followed by the appellant or project completion method which is the new method of accounting, this expenditure is allowable. Therefore, the expenditure amounting to Rs.45,78,354/-, is legitimately allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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