Hybried system of accounting

Pradip Shaw (Practice) (227 Points)

03 August 2011  

An individual 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's usal practice is showing income on the basis of TDS certificate, ie 2.26 cr.

Now dept issued a notice containing that company charged entire expenses on the baais of accrual basis of accounting but income was shown on cash basis. which is not allowed and added the balance fig of Rs. 38 Lacs as income and charge Interest & Penaly?  

How I represent the case in our favour ???