TMI Blog2013 (10) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded by the Assessing Officer, CIT (A) and the Tribunal have not been shown to be erroneous or perverse in any manner. - Decided against assessee - ITA No. 235 of 2009 (O&M), ITA No. 105 of 2012 (O&M) - - - Dated:- 24-10-2013 - MR. AJAY KUMAR MITTAL AND MR. JASPAL SINGH, JJ. Mr. S.K. Mukhi, Advocate for the appellant Mr. Yogesh Putney, Advocate for the respondent JUDGEMENT AJAY KUMAR MITTAL, J. 1. This order shall dispose of a bunch of three appeals bearing ITA Nos. 235 of 2009, 105 and 129 of 2012 as according to the learned counsel for the parties, the substantial question of law and the issue involved therein are identical. For brevity, the facts are being extracted from ITA No. 235 of 2009. 2. ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer vide order dated 7.11.2007 (Annexure A-3) concluded that the assessee was following mercantile system of accountancy and, therefore, the amount on account of interest receivable was its income. Accordingly, an amount of ` 54,08,245/- was treated as income of the assessee. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity the CIT(A) ]. The CIT(A) vide order dated 18.8.2008 (Annexure A-2) rejected the appeal. Still dissatisfied, the assessee approached the Tribunal by way of appeal who vide order dated 30.1.2009 dismissed the appeal. Hence, the instant Income Tax Appeal. 4. Learned counsel for the assessee-appellant submitted that the revenue was in error in making an additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the judgments in UCO Bank and Punjab Financial Corporation's cases (supra) were prior to amendment in the year 1995 and, therefore, would not help the assessee. Elaborating the said submission, it was argued that those cases related to the assessment year prior to 1997-98 and the assessee therein was following the mixed system of accountancy. It was in those circumstances that the Hon'ble Apex Court had held that the amount was not exigible to tax till the time it was received. 6. After hearing learned counsel for the parties, we do not find any merit in these appeals. 7. We analyze the concerned provision first. Section 145 of the Act relates to method of accounting. Originally enacted, Section 145 provided th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object of the said provision as under:- Methods of accounting and accounting standards for computing income.- 44.1 Section 145 (1) of the Income-tax Act prior to its amendment by the Finance Act, 1995, provided for computation of income from business or profession or income from other sources in accordance with the methods of accounting regularly employed by the assessee. Income is generally computed by following one of the three methods of accounting, namely, (i) cash or receipts basis, (ii) accrual or mercantile basis, and (iii) mixed or hybrid method which has elements of both the aforesaid methods. It was noticed that many assessees are following the hybrid method in a manner that does not reflect the correct income. The Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem of accounting. 11. On plain reading of the said Section, it is concluded that prior to amendment by Finance Act, 1995 w.e.f. 1.4.1997, assessee had option of choosing any one of the method of accountancy, i.e. (a) cash system; (b) mercantile system or (c) hybrid or mixed system. However, after the amendment, as assessee has an option to adopt either cash system or mercantile system only. Therefore, income chargeable under the head Profits and gains of business or profession or Income from other sources is to be computed in accordance with either cash/ receipt basis; or mercantile/accrual system of accounting regularly employed by the assessee. Under cash system of accountancy, the assessee is liable to pay tax on the income on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (A), this loan has been received back during the year under appeal. The Commissioner of Income-tax (A) has further pointed out that the assessee had advanced ₹ 25 lacs to Panipat Cooperative Sugar Mill during the financial year 1991-92 and received back part of the loan and interest amount of ₹ 55,12,500/- in assessment year 1993-94. The Commissioner of Income Tax (A) has further held that the assessee has failed to produce any document whatsoever to support the claim that the recovery of interest from the two concern was doubtful. The Commissioner of Income-tax (A) has accordingly upheld the addition. 13. Further, the assessee was following the mercantile system of accountancy wherein any income accruing even though not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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