TMI Blog2016 (4) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of the Revenue was based on a factually erroneous premise, the Court is of the view that the reopening of the assessments for the said AYs is not sustainable in law. Decided in favour of assessee - W.P.(C) 924/2014 & CM 1873/2014 (for stay), W.P.(C) 1045/2014 & CM 2151/2014 (for stay), W.P.(C) 3077/2015 & CM 5498/2015 (for stay), W.P.(C) 3078/2015 & CM 5500/2015 (for stay) - - - Dated:- 3-3-2016 - S. MURALIDHAR AND VIBHU BAKHRU, JJ. For The Petitoner : Mr. Salil Kapoor with Mr. Sanat Kapoor, Ms.Ananya Kapoor, Mr.Sumit Lal Chandani and Mr. Arun Vir Singh, Advocates. For The Respondent : Mr. Rahul Chaudhary, Senior Standing Counsel with Mr. Raghvendra Singh and Mr.Sharad Agarwal, Advocates. ORDER CM No. 1874/2014 (for exemption) in W.P. (C) No. 924/2014 CM No. 2152/2014 (for exemption) in W.P. (C) No. 1045/2014 1. Exemptions allowed subject to all just exceptions. 2. The applications are disposed of. W.P.(C) No. 924/2014 CM No. 1873/2014 (for stay) W.P.(C) No. 1045/2014 CM No. 2151/2014 (for stay) W.P.(C) No. 3077/2015 CM No. 5498/2015 (for stay) W.P.(C) No. 3078/2015 CM No. 5500/2015 (for stay) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly following mixed system of accounting. As per section 145 of the I.T.Act, 1961, income chargeable under the head 'profits and gains of business or profession' shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. xxx Following the cash basis of accounting, unpaid expenses or expenses payable or provision for expenses are not allowed as deductible expenditure. Since, there is an outstanding balance of ₹ 5,97,750/- and ₹ 4,12,215/- in the Sundry creditors and amounts payable respectively in M/s. Park Hospital and M/s. Sunil Nursing Home respectively during the F.Y 2005-06, the same are not an allowable expenditure under Cash system of accounting. Following the mercantile system of accounting, bills raised and accrued income has to be shown as taxable income. Since, the assessee is not showing any debtors or receivables in the balance sheet, accrued income during the F.Y 2005-06 has escaped from the assessment. The case has been completed u/s. 143(3) on 22.12.2008 assessing the total income at ₹ 14,40,230/-. The assessee neither at the time of assessment nor while filing the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/- has escaped from assessment. 12. For AY 2009-10, the notice was issued two days later, i.e., on 7th March 2014, again by the ACIT where the reasons were identical for the reasons for AY 2007-08. 13. The Assessee s objection to the reopening of the above assessment were negatived by orders passed by the AO on 13th December 2013 as far as AYs 2006-07 and 2008-09 were concerned and by orders dated 11th March 2015 as far as AYs 2007-08 and 2009-10 were concerned. 14. While directing notice to be issued in W.P. (C) No. 924 and 1045 of 2014 (for AYs 2006-07 and 2008-09) on 7th February 2014, the Court restrained further proceedings pursuant to the impugned notices. Similar orders were passed at the time of issuance of notices in the other two petitions W.P. (C) Nos. 3077 and 3078 of 2015( for AYs 2007-08 and 2009-10). 15. The Court has heard the submissions of Mr. Salil Kapoor, learned counsel for the Petitioner and Mr. Rahul Chaudhary, learned Senior Standing counsel for the Revenue. 16. The main reason for the reopening of the assessment is admittedly the letter given by the Assessee while the assessment for AY 2010-11 was under scrutiny. It is stated that in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercantile system which was followed. The auditor had issued a clarification in this regard. This is specifically mentioned in the objections filed by the Assessee in its letter dated 21st October 2013. This letter dated 1st December 2012 of the auditor states in this audit report by clerical mistake the method of accounting is mentioned as mixed but it is on mercantile system basis and instead of mixed method it should be treated as mercantile basis . 19. Similar objections were also filed as regards the notices under Section 148 of the Act issued for the other three AYs. As regards AYs 2007-08 and 2009-10, in its objections the Assessee in the letter dated 9th December 2014 pointed out that the letter dated 14th March 2013 was written by the Assessee under some misconception as he does not understand as what is the mercantile or cash based accounting. It was further stated: First of all, this letter was written by the assessee in some misconception as he does not understand as to what is the mercantile or cash basis of accounting. He is a layman as regards to accounting systems, records, policies etc. He is a doctor by profession and does not have accounting knowledge. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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