DEEPNARAIN NAGU AND CO Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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Egbert Singh, Accountant Member -
(1.) IN this appeal, the assessee has challenged the findings and conclusions given by the AAC on the appeal preferred by it against the order of the ITO. Briefly speaking, the facts of the case are as under :
(2.) The assessee filed his return, showing an income of Rs. 57,990, on 18-9-1978, in the status of an individual. Computation of the income was furnished. The return was also accompanied by closed and adjusted copies of accounts, i.e., trading accounts, etc. Copy of the balance sheet was also enclosed. The ITO further noted in the assessment order that on 6-10-1979 a return, noted as "revised" under Section 139(5), was filed, showing the status as a firm while declaring an income of Rs. 19,048. He further noted that no reasons were given for the revised return. The balance sheet accompanying the revised return was superscribed "books maintained on cash basis . Before the ITO, the assessee claimed that a revised return was filed due to change of accounting system from mercantile to cash. The ITO noted it was clear that the change of the system was subsequent to the filing of the first return. He noted that the accounts were closed and adjusted and the statutory return of income was filed on the basis of the books of account which were kept correctly and completely on mercantile basis. He noted that there was no omission or wrong statement occurring in the e return, which would necessitate the filing of the revised return. He noted that there was no wrong statement in the original return either. The ITO observed that the accounts originally prepared were admittedly maintained on mercantile basis and the second set of books of account has been prepared much later on cash basis. The ITO, briefly speaking, declined to accept the revised return of the assessee.
Before the AAC, the assessee contended that on account of commercial expediency and business conditions prevailing in the market and because the assessee could not pay tax on sales, which could not be realised in cash, the assessee-firm has to opt out for offering the income on cash basis as per the revised return. The AAC noted that the firm started business on 21-10-1977 and admittedly maintained the accounts on mercantile basis for the period of 5 months and 10 days as the accounting period ended on 31-3-1978. He noted that the books were kept on mercantile method of accounting which consisted of cash book, ledger, purchase register, etc. He noted that the assessee cannot be allowed to change the books of account on mercantile basis to cash/ basis after a lapse of one and half years. He was also of the view that an assessee cannot escape the liability to tax by omitting to make an entry or making a wrong entry in the account books. He examined the details of purchases and sales and noted that realisations of bills were made within reasonable time, i.e., 3 to 6 months. Thus, he found that the contention of the assessee that the change of mercantile to cash basis was on account of commercial expediency, was not proper and it was an after-thought.
(3.) AS far as the propriety of the revised return is concerned, the AAC discussed the findings of the ITO. He noted that the accounts were properly closed and adjusted, and that there was no omission or wrong statement occurring therein vis-a-vis the mercantile method of accounting regularly followed by the assessee up to the last date of the accounting period. He discussed the provisions of Section 139(5) and ultimately sustained the order of the ITO.;
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