9911796707
TMI Blog2024 (5) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders of the Commissioner of Income Tax (Appeals) (hereinafter referred to as Ld. First Appellate Authority or 'the ld. FAA' for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short). Further details of the orders of the lower authorities are as under:- ITA No. CIT(A) who passed the order Appeal No. & Date of order of the CIT(A) AO who passed the assessment order & Date of order Section of the IT Act under which the AO passed the order 2506/Del/2016 CIT(A)-7, New Delhi 877/CIT(A)-7/Del/14-15 date 29.02.2016 DCIT, Cir. 19(1) & (2), New Delhi, 02.03.2015 143(3) 2507/Del/2016 CIT(A)-7, New Delhi 629/CIT(A)-7/Del/15-16, date: 31.03.2016 DCIT, Cir. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee it can be seen that the agreement for sale/purchase of energy with customers contains the clause for surcharge for delayed payment. Surcharge is to be calculated @ 15% per annum on all payments outstanding after the specified period on a day to day basis. It is the case of assessee that , the Assessing Officer has grossly erred in law and on facts of the case in making addition of Rs. 27,18,55,862/ in AY 2011-12 on account of surcharge to the declared income, alleging it, as accrued income. Ld. DR has though defended it. What comes up is that while doing so the Assessing Officer has also rejected the assessee's method of accounting for surcharge and did not take into account the accounting standards as applicable to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt of surcharge. The Assessing Officer, took a view that a surcharge levied upon delayed payments of bills is reflected in the bills and the accounts of the assessee, the fact that the surcharge may or may not be paid or recovered or may eventually be waived, is entirely irrelevant as the assessee maintains a mercantile system of accounting. Aggrieved by the aforesaid finding, the assessee filed an appeal. The CIT(Appeals) vide order dated 06.11.2009, set aside the addition made by the Assessing Officer by holding as follows:- "The issue involved and the submissions made by the appellant have been considered. It is undisputed that the appellant is following mercantile system of accounting: it is levying surcharge on delayed payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Standard (AS)-9, issued by the institute of Chartered Accountant of India the addition made by the Assessing Officer is deleted." The revenue thereafter filed an appeal before the ITAT, which affirmed the order passed by the CIT (Appeals) and dismissed the appeal. A relevant extract from the order passed by the ITAT is as follows:- "In our considered opinion, all the above judgment clearly favour the stand taken by the assessee. We may hasten to mention that looking at the intricacies the facts may vary, therefore, basic principles of accrual or mercantile system as laid down by various authorities are to be applied in a careful manner. The assessee being a sate PSU; the surcharge on delayed payment being disputable item; was not mandat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject matter of tax merely because of an entry in the accounts books maintained by an assessee. A reference in this regard may be made to a judgment of the Hon'ble Supreme Court in "Commissioner of Income-tax Vs. Shoorji Vallabhdas and Co." [1962] 046 ITR 0144, wherein it has held as follows:- "Income-tax is a levy on income. Though the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt, yet the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income", which does not materialize. Where income has, in fact, been received and is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance. The assessee as well as the Revenue, both are in appeal so far as assessment years 2011-12 to 2015-16 is concerned. The Revenue is aggrieved with the findings of the learned first appellate authority wherein relief is granted to assessee by reducing the quantum of disallowances made by the assessing officer and the assessee is aggrieved with the additions sustained. 9. Learned counsel for the assessee contended that disallowances of Rule 8D read with Rule 14A of the Act has been dealt with by the ITAT in assessment years 2008-09 to 2010-11. In all these assessment years, the ITAT has restored the additional evidences, filed by the assessee before the ITAT, which is a certificate of the CA certifying the quantum of expenses incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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