COMMISSIONER OF INCOME TAX-II, JALANDHAR vs. CHARANJIT SINGH KANWAR, THE FORT KARTARPUR, JALANDHAR

ITA/195/2012HC Punjab & HaryanaPHHC01099266201221 January 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI3 pages
AI SummaryDismissed

What were the facts?

The appeals were filed by the Commissioner of Income-tax (CIT), Jalandhar, against the order of the Income Tax Appellate Tribunal (ITAT), Amritsar Bench, for the assessment year 2007-08. The dispute involved the deletion of an addition of ₹27,60,300 made by the Assessing Officer (AO) on account of disallowance of expenditure incurred for performing an 'Akhand Path'. The AO had disallowed this expenditure, stating that the assessee, Sh. Charanjit Singh Kanwar, followed a mixed system of accounting, which was contrary to Section 145 of the Income Tax Act, 1961, requiring either a cash or mercantile method. The AO also pointed to defects in receipts, such as a lack of specific remarks regarding the purpose of the expenditure.

What did the High Court hold?

The High Court held that no substantial question of law arose for consideration. It noted that both the Commissioner of Income Tax (Appeals) and the Tribunal had relied on the Supreme Court judgment in CIT v. Realest & Services Ltd. (307 ITR (SC) 202), which states that a consistently followed method of accounting should not be disturbed unless a change would result in a gain for the Revenue. The lower authorities found that changing the method would not serve a useful purpose, as excluding receipts pertaining to paths performed in earlier years would reduce the income of the current assessment year without a corresponding increase in income for paths booked in subsequent years. Based on these findings, the appeals were dismissed.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT was correct in deleting the addition of ₹27,60,300 made by the AO on account of disallowance of expenditure for performing the Akhand Path, considering the assessee followed a mixed system of accounting while Section 145 of the Income Tax Act, 1961, mandates either a cash or mercantile method? The assessee contended that the consistent method of accounting should not be disturbed unless it results in a gain for the Revenue. The revenue argued that the mixed accounting system was incorrect and that specific defects were found in the receipts provided by the assessee, failing to prove all receipts were for the Akhand Path. 2. Whether, on the facts and circumstances, the ITAT was correct in deleting the addition of ₹27,60,300 by holding that no specific defects were found by the AO, when specific defects like lack of remarks on receipts and failure to prove the purpose of expenditure were duly found?

Which sections of the Income-tax Act were involved?

Section 145,Section 260-A

AI-generated summary — verify with the full judgment below

ITA Nos.195 & 196 of 2012 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: January 21, 2013

1.

ITA No.195 of 2012 (O&M) The Commissioner of Income-tax Jalandhar …Appellant Versus Sh. Charanjit Singh Kanwar, the Fort Kartarpur …Respondent

2.

ITA No.196 of 2012 (O&M) The Commissioner of Income-tax Jalandhar …Appellant Versus Sh. Charanjit Singh Kanwar, the Fort Kartarpur …Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON’BLE MS. JUSTICE RITU BAHRI Present: Mr. Vivek Sethi, Advocate for the appellant. 1 To be referred to the Reporters or not? 2 Whether the Judgment should be reported in the Digest HEMANT GUPTA, J. This order shall dispose of the above mentioned two Income Tax Appeals filed under Section 260-A of the Income Tax Act, 1961 (for short 'the Act') against the order dated 20.03.2012 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for short 'the Tribunal') in respect of the assessment year 2007-08 raising the following substantial questions of law: “(i) Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law and on facts

IT

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