02 August 2011
a Prop concern contractor dealing with plant set up contract job, during 2007-08 total bill RAISED to a particular debtor Rs. 2 cr 74 lacs. actual pmt received Rs. 2 cr 26 lacs on which tds deduted @1% ie,2,26,000. Concern usal practice showing income on the basis of TDS certificate, ie 2.26 cr.
Now dept issued a notice containing that company charge entire expenses on the baais of accrual basis of accounting but incomr charge on cash basis. which is not allowed and added the balance fig of Rs 38 Lacs as income and charge Interest & Penaly?
02 August 2011
Even though the method of accounting adopted by the contractor is not correct yet it can be argued that the income of Rs 38.00 lacs has already been shown in the next year, so addition of Rs 38.00lac will result into double taxation for the assessee which is against the principal of natural justice.
It can further be argued by taking resort to AS-9, that the same method for revenue recognition was being consistently followed by the assessee it can not be said that the assessee has concealed any income.
Further it can be argued that the principle of prudence as per AS-1 has to be followed by the assessee.
By following the matching principle in this case, it is possible that the CIT (A) may consider the argument and may disallow the additional expenditure incurred by the assessee in respect to the contract bills taken as income in the next financial year.
It is a matter where penalty can not be levied on the ground of available records and details with the department.
03 August 2011
You have to file an appeal before CIT(A) for Rs.38 lacs on the ground that the addition cannot be made on the basis of regular accounting policy followed by the firm since past several years and it has been accepted by the department from time to time.
The other view has been explained by the expert and I with it.
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