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TMI Blog2022 (12) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... led its return of income declaring loss of Rs. 179,93,48,979/- which was subsequently revised to Rs. 202,43,94,235/-. The case of the assessee was selected for complete scrutiny under CASS and notices under section 143(2) and 142(1) alongwith questionnaire were issued, necessary information and documents were called for and examined by the AO. 2.1. One of the issue raised by the AO during the course of assessment proceeding relates to amount of Rs. 1,43,06,414/- in respect of Operation and Maintenance Services in respect of which the bill was raised but not accounted for in the books of accounts by the assessee company during the financial year relevant to impugned assessment year. In this regard, a show cause dt. 10/08/2017 was issued to the assessee seeking its explanation as to why the said amount should not be treated as income of the assessee for the year under consideration particularly when the assessee company is following the mercantile system of accounting drawing drawn reference to the Audit Report submitted by the Statutory Auditor wherein it has been stated that: "The company is providing Operation and Maintenance Service to 220KV Grid Substation, Mohali & 220 KV Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making other addition which are not in dispute before us. 3. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). The submissions made before the AO were reiterated. It was submitted that as per the Accounting Standard -9, it provides that the Revenue recognition is mainly concerned with the timing of recognition of revenue in the statement of profit and loss of an enterprise. The amount of revenue arising on a transaction is usually determined by agreement between the parties involved in the transaction. Where the uncertainties exist regarding the determination of the amount or its associated costs, these uncertainties may influence the time of revenue recognition. It was further submitted that the Accounting Standard-9 further clarifies that where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, revenue recognition is postponed to the extent uncertainty involved and in such cases it may be appropriate to recognize revenue only when it is reasonable certain that the ultimate collection will be made. It was submitted that in the present case, there was uncertainty regarding receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognition" (copy attached at CP-1). Further also clarified in para 9.2 of AS- 9 that:- "Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, e.g., for escalation of price, export incentives, interest etc., revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognize revenue only when it is reasonably certain that the ultimate collection will be made" (copy attached at CP-2). In view of the above facts the amount of Rs. 1,43,06,414/- cannot be treated as income of the company in the year under consideration and cannot be added to the income even on the basis of mercantile system of accounting." 5.1. It was further submitted that the Operation & Maintenance bills for 220 KV Grid Sub Station Mohali and 220 KV Ganguwal - Mohali single CKT Line of Rs. 1,43,06,414/- was raised for the period 2011-12 to 2014-15 to UT Electricity Department vide bill no. 4 dt. 07/04/2014 read with memo no. 929/Comml./ISB-4/UT dt. 09/04/2014. It was submitted that subsequently, UT Electricity Department contested the above bill and referred the matter to Central Electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter after series of long correspondence, the UT Electricity Department agreed to pay O& M charges for 220 KV Ganguwal-Mohali Line for years 2010-11 to 2016-17 on CERC norms fixed for 220KV lines through memo no. 8534 dt. 14/06/2018. It was submitted that the assessee thereafter raised a revised invoice no. 1-R/FA/ISB-4 dt. 28/09/2018 on account of O&M charges in respect of 220 KV Ganguwal-Mohali and 220 KV Ganguwal-Mohali single Line amounting to Rs. 99,11,248/- vide Memo No. 2382/84/Comml/ISB-4 dt. 28/09/2018 which was duly accounted for in the F.Y. 2018-19 relevant to A.Y. 2019-2000 and which has been duly accepted by the Revenue. It was accordingly submitted that where the revenue has already been recognized in the subsequent assessment year and accepted by the department, the same cannot be brought to tax again in the year under consideration especially where the same is contested and was under dispute which has now been settled in the subsequent year. Further it was submitted that the assessee has been incurring losses year after year and it could make hardly any difference if the claim allowed in the impugned year or in the subsequent year as the same would be tax neutra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any agreement with UT Electricity Department as well as its ultimate collection and once, there was resolution and acceptance thereof at the revised figure after indulgence by Central Electricity Authority, the revenue has been duly recognized in the books of accounts in the subsequent financial year. We find that the assessee has been consistent in following the said policy as can be seen from the audit report where bills raised for F.Y. 2010-11 have been accounted for in the year under consideration and which has infact, formed the basis for the action on part of the Assessing officer where it states that: "That during the year under audit, Company has accounted for income towards Operation and Maintenance Services amounting to Rs. 97,71,474/- as prior period income in respect of the bills raised by erstwhile PSEB for F.Y. 2010-11. However, the company has contested that as no agreement for such Operation and Maintenance Services are executed and there is an uncertainty regarding the receipt of this income, therefore, the same has been accounted for on the basis of actual receipt." 8. The Assessing officer cannot follow dual approach in taxing the revenues pertaining to earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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