Search Results For: 145


Binod Kumar Agarwala vs. CIT (Calcutta High Court)

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DATE: June 21, 2018 (Date of pronouncement)
DATE: September 19, 2018 (Date of publication)
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Strictures against CA for certifying bogus accounts with a view to mislead bankers. The matter is typical of how business is conducted in this country and why loans obtained from banks remain unpaid. The ITAT may only be faulted for not reporting the CA to the ICAI for having apparently abetted in the commission of a colossal act of misrepresentation. ICAI directed to look into the matter and take necessary action

A rosy picture as to the financial position of the applicant seeking credit facilities from a bank would be presented before the bank for the bank to assess the creditworthiness of the applicant and the desirability of extending credit facilities to such applicant; but later another balance-sheet and profit and loss accounts would be slipped into the file, possibly indicating a less robust financial position of the constituent. If such was the object on the exercise, to which Roy Ghosh and Associates appear to have been a willing accomplice, the assessee has been appropriately dealt with by the fora below. The balance-sheet and profit and loss accounts of an assessee accompanied by a certificate as to its fairness, notwithstanding the caveat as noticed in paragraph 2(A) thereof, cannot be tailor-made to suit a particular purpose or window-dressed to make it attractive for bankers to rely thereupon and all the gloss and sheen removed thereafter when it was the time to pay tax

Ashoka Hi-Tech Builders Pvt.Ltd vs. DCIT (ITAT Indore)

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DATE: August 3, 2018 (Date of pronouncement)
DATE: August 7, 2018 (Date of publication)
AY: 2012-13, 2013-14
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CITATION:
S. 43CB/ 145: Entire law on taxation of real estate construction contracts explained in the context of 'completed contract' vs. 'percentage completion' with reference to Accounting Standards AS-7 and AS-9 and all important judgements on the point

In our considered view, provisions of AS7 cannot override the provisions of section 145 in so far as the computation of business income under the Income Tax Act for the purpose of determining income is concerned. In the instant case, we find that the learned Assessing Officer has brought no material on record to show that the system of accounting adopted by the assessee for the year under appeal was not consistently followed y the assessee or the system adopted was a defective system. In our considered view, even a project completion method is also a recognized system of accounting. Simply the Institute of Chartered Accountants of India has recommended the percentage completion method does not mean that project accounting or the same is a defective system of accounting

CIT vs. Virtual Soft Systems Ltd (Supreme Court)

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DATE: April 24, 2018 (Date of pronouncement)
DATE: April 26, 2018 (Date of publication)
AY: 1999-00
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Bifurcation of lease rentals into interest and loan recovery: An assessee can only be taxed on "real income". The bifurcation of lease rental is not an artificial calculation. Lease equalization is an essential step in the accounting process to ensure that real income from the transaction in the form of revenue receipts only is captured for the purposes of income tax. The Guidance Note issued by the ICAI carries great weight. The method of accounting prescribed in such a Guidance Note, in order to compute real income and offering the same for taxation, cannot be disregarded by the AO unless such action falls within the scope and ambit of S. 145(3) of the IT Act

The method of accounting followed, as derived from the ICAI’s Guidance Note, is a valid method of capturing real income based on the substance of finance lease transaction. The rule of substance over form is a fundamental principle of accounting, and is in fact, incorporated in the ICAI’s Accounting Standards on Disclosure of Accounting Policies being accounting standards which is a kind of guidelines for accounting periods starting from 01.04.1991. It is a cardinal principle of law that the difference between capital recovery and interest or finance income is essential for accounting for such a transaction with reference to its substance. If the same was not carried out, the Respondent would be assessed for income tax not merely on revenue receipts but also on non-revenue items which is completely contrary to the principles of the IT Act and to its Scheme and spirit

CIT vs. Pashupati Nath Agro Food Products Pvt. Ltd (Allahabad High Court)

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DATE: May 4, 2017 (Date of pronouncement)
DATE: May 13, 2017 (Date of publication)
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S. 145: If the AO has not rejected the books of account, it means that the assessee has maintained the books of accounts in accordance with the prescribed standards as per s. 145 of the Act. If so, the AO is not entitled to make any addition on account of sale of goods out of books or for investment in stock out of undisclosed sources

On perusal of the impugned judgment and order of the Tribunal dated 27.10.2009 reveals that the assessee has maintained the books of accounts in accordance with the prescribed standard as per Section 145 of ‘the Act’. The account books have not been rejected by the assessing officer. In view of the above, the Tribunal formed an opinion where once the account books are expected to be maintained in the prescribed accounting standard, the assessing officer could not have made any additions towards the sale of rice treating it to be outside the books of accounts or towards investing in stock of rice and wheat outside the books of accounts

CIT vs. Uday M. Ghare (Bombay High Court)

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DATE: March 6, 2017 (Date of pronouncement)
DATE: March 10, 2017 (Date of publication)
AY: 2009-10
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CITATION:
S. 145: The average cost method of valuing inventories is an accepted method of valuation approved by the accounting standards issued by the ICAI. The AO is not entitled to disregard the method if the assessee has consistently followed the method

The Assessing Officer sought to question the method of accounting only because the assessee has not been regularly following the same or the income is not computed in accordance with the standards notified under subsection (2). We do not find that there was any material with regard to the standards and notified. It is only whether the assessee was consistent in following the method of accounting provided in subsection (1) of Section 145 of the Income Tax Act, 1961. If that is the other eventuality in which the Assessing Officer derives his power in terms of Section 145, then, in para 12 the Tribunal has found that the assessee has maintained proper books of account. No defect has been pointed out by the Assessing Officer either in the purchases or in the sales

Samwon Precision Mould Mfg. (India) P. Ltd. vs. ITO (ITAT Delhi)

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DATE: February 2, 2016 (Date of pronouncement)
DATE: April 10, 2016 (Date of publication)
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S. 145: Books of account cannot be rejected on an arbitrary basis

It is a subsidiary of a Korean Company and, therefore, the authorities below had to be circumspect before arriving at such a conclusion, particularly when there is no iota of material to doubt the quantitive details, audited results vis-a-vis the turnover and profit declared so as to warrant rejection. Instances of irregularities in cash payment cannot warrant ipso facts rejecting of books of accounts, at best disallowance could have been made u/s 40A (3) of the Act

ITO vs. Deepak Popatlal Gala (ITAT Mumbai)

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DATE: March 27, 2015 (Date of pronouncement)
DATE: April 1, 2015 (Date of publication)
AY: 2010-11
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Addition towards bogus purchases cannot be made solely on the basis of statements of seller before sales-tax authorities. The AO has to conduct own enquiries and give assessee opportunity to cross-examine the seller

Where the AO has made addition merely on the basis of observations made by the Sales tax dept and has not conducted any independent enquiries for making the addition especially in a case where the assessee has discharged its primary onus of showing books of account, payment by way of account payee cheque and producing vouchers for sale of goods, such an addition could not be sustained

Ramesh Kumar & Co vs. ACIT (ITAT Mumbai)

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DATE: November 28, 2014 (Date of pronouncement)
DATE: April 1, 2015 (Date of publication)
AY: 2010-11
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CITATION:
AO is not entitled to treat all purchases as bogus merely because sales-tax department has called the seller a "Hawala dealer". The AO ought to have verified the bank details of the assessee and the seller and other evidence before treating the purchases as bogus

The AO has made the addition as some of the suppliers of the assessee were declared Hawala dealer by the Sales tax Department. This may be a good reason for making further investigation but the AO did not make any further investigation and merely completed the assessment on suspicion. Once the assessee has brought on record the details of payments by account payee cheque, it was incumbent on the AO to have verified the payment details from the bank of the assessee and also from the bank of the suppliers to verify whether there was any immediate cash withdrawal from their account

Vardhman Developers Ltd vs. ITO (ITAT Mumbai)

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DATE: February 4, 2015 (Date of pronouncement)
DATE: February 9, 2015 (Date of publication)
AY: 2009-10
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CITATION:
Expenditure towards repair and renovation of leased premises is capital in nature. Method for allocation of common expenses to different WIP projects of a builder explained

The assessee being a builder and developer, Accounting Standard 7 (AS-7), issued by the ICAI, titled, ‘Construction Contracts’, would not apply, so that the prescription of AS-9 and AS-2, based on general principles that govern any business, would apply for the revenue recognition and inventory valuation respectively. Only costs incurred toward a particular project, or otherwise related to construction activity, would stand to be allocated and, thus, capitalized as a part of the project cost

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