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2018 (2) TMI 601

ting System followed by the assessee and held it to be a hybrid system and thus contrary to the statutory mandate. The assessee's claim that it was following the mercantile system of accounting was not accepted. The CIT(A) relying on the past precedent available in the decision cited, and considering the facts in the year under consideration which were identical rejected the addition made by the AO by way of a disallowance. - ITA Nos. 1204 & 1205/CHD/2016 - Dated:- 7-2-2018 - Ms. Diva Singh, Judicial Member And Smt. Annapurna Gupta, Accountant Member Appellant by Sh. Ashish Abrol, CIT DR. Respondent by Sh. Adish Bajaj, AR ORDER Per Diva Singh, J. M. The present appeals have been filed by the Revenue assailing the correctness of the separate orders dated 26th September, 2016 of CIT(A), Patiala pertaining to 2006-07 and 2007-08 assessment years. Both these appeals are being decided by a common order for the sake of convenience. 2. It was a common stand of the parties before the Bench that the sole issue raised in the appeals is identical, accordingly, the arguments advanced in ITA No. 1204/CHD/2016 would address the issues raised in ITA No. 1205/CHD/2016 as facts circumstances and po .....

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well- settled and constantly accepted by the Department a mere change in opinion of the AO cannot be made the basis of addition". Without controverting the appellant on facts, the AO has contended that the principle of estoppel does not operate because the Department is entitled to judge the accounts of the assessee each year on their merits. Relying on the case of Jamna Das Rameswar Das v CIT (1952) 21 ITR 109 (Punj.), he has averred that the fact that the Department has accepted a particular form of accounts as sufficient in one year does not debar them from holding later that particular items or particular claims made by the assessee in later years have not been established. In his rejoinder the counsel for the appellant has distinguished the case, law relied upon by the AO and has further claimed that the judgement of Hon'ble Delhi High Court in the case of CIT vs. Jagatjit Industries Limited (2011) 339 ITR 382 (Del.) is applicable being on identical facts as in the case of the appellant. I have perused the aforesaid judgements. It is not the case of the AO that the appellant has followed a different accounting system in the year under consideration or that there is d .....

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d Events Occurring After the Balance Sheet 'Date". I have considered the submission of the appellant in this regard and find force in it. Para 6 of AS-4 dealing with the accounting treatment of contingent gains mandates that "contingent gains are not recognized in the financial statements since their recognition may result in the recognition of revenue which may never be realized. However, when the realization of a gain is virtually certain, then such a gain is not a contingency and accounting for the gain is appropriate". Thus it is clear that only those gains should be recognized the realization of which is certain at the balance sheet date, not otherwise. It is evident from the record and history of the case that the PS ERC takes 2 to 3 years to finalize the actual units for which tariff compensation is to be given and invariably in every year the number of units varies. In the year under consideration the appellant Board initially claimed tariff compensation for 7364.00 MUs on the basis of its projections. However, on 14/06/05, the PSERC in its Tariff Order of Financial Year of 2005-06 approved compensation for 7000.00 MUs which the appellant duly incorporate .....

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nt tariff order vide which the balance subsidy of 411.89 crores has been taken. This order of Regulatory commission placed in the assessment records is dated 03.07.2008 and as on 31.03.2008 the assessee could not be supposed to anticipate the figure. From the facts of the case it also transpires that there is no other method to accounting for the income from subsidy and by adopting the method of accounting the norms of mercantile system have been duly carried out as the determining factor in the amount of subsidy is the order of the Regulatory Authority which go on changing from time to time. The fact remains the amount of accrual of income would go on changing from one order of the Regulatory Authority to other and the effect to the changed amount can only be given after receipt of the order. It was held in the case of the assessee for the assessment year 2005-06 by the Hon'ble Tribunal". 32. Before us, the Ld. DR argued that the mixed accounting policy of the assessee cannot be accepted and the subsidy has to be rightly taxed in the year it is accrued. 33. Ld. AR submitted that the subsidy is received from the State Govt.for providing free electricity to agricultural con .....

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e year 2007-08 is 411.89 crores which was received in the financial year 2008-09 and was offered for taxation in the relevant year when the amount was so determined. From this discussion it would transpire that figure of subsidy receivable cannot be accounted unless and until the same is quantified. The relevant figures of subsidy were, after revised estimates, determined vide order dated July 3, 2008 vide which the balance subsidy payable was intimated at ₹ 411.89 crores. Since this order was issued after close of the financial year 2007-08 the effect thereto could not be anticipated as on 31.03.2008. The sum due at ₹ 411.89 crores, after making amendment in the later part of the tariff order, was accounted for in financial year 2008-09, relevant for the assessment year 2009-10. Incidentally, it may be submitted that the figure of subsidy payable for the assessment year under appeal was determined at Rs.,2578.13 crores against the figure of 2848.04 crores. 36. The above figures are indicative of the true state of affairs and it will be appreciated that that the amount of subsidy receivable cannot be determined till the final truing up is made. 37. Based on the facts pl .....

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