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Income Tax Appellate Tribunal, MUMBAI “B” BENCH
Order u/s 254(1) of the Income-tax Act, 1961(the Act) O R D E R �याियक सद�य के अनुसार Per Mahavir Singh,JM : This appeal by the Revenue is arising out of the order of CIT(A)-3, Mumbai in appeal No.(Old)CIT(A)-XI/ITO.11(1)(2)/IT-187/09-10; (Now) Appeal No.CIT(A)- 3/ITO.11(1)(2)/IT-187/09-10 Order dated 07.05.2010. The assessment was framed by ITO Ward-11(1)-2, Mumbai u/s. 143(3) of the Income tax Act, 1961 (hereafter the Act) for the assessment year 2007-08 vide his order dated 08.12.2009.
The only in this appeal of Revenue is against the order of CIT(A) deleting the addition of advance received by the assessee from Rose Audio Visual Pvt. Ltd. For this the Revenue has raised following Ground No.1:- “1. Whether on the facts and in the circumstances of the case, Ld. Commissioner of Income tax (Appeals) was justified in deleting the addition of Rs.56,50,000/- made on account of advance received by the assessee from M/s. rose Audio Visual Pvt. Ltd.”
3. Briefly stated, facts are that the Assessing Officer (A.O.) during the course of assessment proceedings on perusal of books of account of the assessee and audit
6116/M/10 Madhu Ramesh.B report observed that the assessee is following cash system of accounting. According to the AO, the assessee has shown advances to the tune of Rs.90.00 lakhs from distributors, but in the balance sheet the same was not offered to tax. During the year the assessee has shown advances from negative rights from B.I.S.K.H of Rs.56.50 lakhs. According to the AO, the assessee has not offered the said advances as income and hence, he brought it to tax for the reason that the assessee is following cash system of accounting.
Aggrieved, the assessee preferred an appeal before the CIT(A) who deleted the addition by observing that the assessee actually is following mercantile system of accounting. For this CIT(A) observed in para 2.1.4 and 2.1.5 as under:-
“2.1.4 Facts and material on record our considered. It is apparent from the copies of returns, accounts and balance sheet provided that in respect of Rose Movie Combines accounts are maintained on mercantile basis. It is also seen that though there were advances received in earlier years, such have not been considered as Appellant's taxable receipt. This is also evidenced from the assessment order u/s. 143(3) for A.Y. 2005-2006, where though the AO has mentioned method of accounting to be cash, all outstanding liabilities and sundry creditors in the balance sheet of proprietary concern Rose Movies Combine have been considered for addition to total income. By its very nature, cash system of accounting would not have outstanding liabilities or sundry creditors in the balance sheet as accounts are maintained on actual receipts and payments only. It seems that the confusion in respect of the method of accounting has arisen because the Appellant follows different method of accounting for different incomes. Moreover, as is evident from the details filed by the Appellant, the entire sum of Rs. 56,50,000/- has not been received by Appellant in the PY relevant to the impugned assessment year. It is only a sum of Rs. 13,00,000/- which was received as advance during the previous year relevant to the impugned assessment. 2.l.5 On a consideration of facts and material, it is held that Appellant in its proprietary concern M/s. Rose Movies Combines follows the mercantile system of accounting and has been doing so for the past few years. In the facts of the case, considering the advances received in the impugned and earlier years as income of impugned year is not justifiable, especially when Appellant has declared the same as income of A.Y. 2008-2009 by following its system of accounting. The addition is deleted.”
Aggrieved, Revenue is in second appeal before the Tribunal .
We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the CIT(A) has recorded the finding of fact
6116/M/10 Madhu Ramesh.B after going through the case records i.e. the copies of returns, accounts and balance sheets, that the assessee in respect of the party Rose Audio Visual Pvt. Ltd. maintains its accounts on mercantile basis. Now before us, ld. SR.DR has not objected to this finding and also could not controvert the same. Once there is a finding of fact that the assessee is following mercantile system of accounting in respect of its account and received advances of Rs.56.50 lakhs from one Rose Audio Visual Pvt. Ltd. and the same is shown as advance in balance sheet, the same cannot be treated as income of the assessee . In view of these facts we confirm the finding of CIT(A) and appeal of the Revenue is dismissed.