The Commissioner of Income-tax (Central), Hyderabad v. K. V. Ram Kumar - 2017-LL-0718-28

Citation	2017-LL-0718-28
Appellant Name	The Commissioner of Income-tax (Central), Hyderabad
Respondent Name	K. V. Ram Kumar
Court	HIGH COURT OF HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
Relevant Act	Income-tax
Date of Order	18/07/2017
Judgment	View Judgment
Keyword Tags	calculation of profit • method of accounting • net profit rate • question of law • books of account
Bot Summary:	436, 442, 445, 450 and 452 of 2017 COMMON ORDER: These appeals by the Revenue under Section 260A of the Income- tax Act, 1961, seek to raise the following substantial questions of law for consideration: Whether on the facts and in the circumstances of the case, the order of the Tribunal is perverse Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the method of accounting adopted by the assessee is correct method of accounting These questions are framed in the context of the common order dated 31.08.2009 passed by the Income Tax Appellate Tribunal, Visakhapatnam Bench, in so far as it pertains to the appeals by the respondent/assessee and the Revenue in relation to the assessment years 2000-01 to 2006-07. Admittedly, the respondent/assessee did not maintain books of accounts. Dealing with this issue, the Tribunal opined that when two options were available to the assessee, i.e., either to compute the profit by applying the net profit rate to the gross receipts or by taking the net worth basis, it was his choice as to the mode of accounting he would adopt. The Tribunal further found upon examination of the assessment orders that the 2 Assessing Officer found no specific defect in the mode of calculation of profit by the respondent/assessee on the basis of net worth. The Tribunal therefore concluded that the method of accounting adopted by the respondent/assessee was within his discretion and there was no infirmity in application of the said method for determining the profits of the years in question. It is an admitted fact that the CBDT s own circular permits the adoption of the mode of accounting utilised by the respondent/assessee in the absence of books of accounts. When the Assessing Officer found no defect in the application of such mode of accounting, it was not open to him to dispense with the said method of accounting and adopt his own method basing on surmises.

THE HONBLE SRI JUSTICE SANJAY KUMAR AND HON BLE SRI JUSTICE GUDISEVA SHYAM PRASAD I.T.T.A.Nos.436, 442, 445, 450 and 452 of 2017 COMMON ORDER: (per SK,J) These appeals by Revenue under Section 260A of Income- tax Act, 1961, seek to raise following substantial questions of law for consideration: (i) Whether on facts and in circumstances of case, order of Tribunal is perverse? (ii) Whether on facts and in circumstances of case, Tribunal is correct in law in holding that method of accounting adopted by assessee is correct method of accounting? These questions are framed in context of common order dated 31.08.2009 passed by Income Tax Appellate Tribunal, Visakhapatnam Bench, in so far as it pertains to appeals by respondent/assessee and Revenue in relation to assessment years 2000-01 to 2006-07. Admittedly, respondent/assessee did not maintain books of accounts. By virtue of Central Board of Direct Taxes (CBDT) Circular bearing No.21/48/68 IT (Inv) dated 26.02.1969, he adopted process of calculating net profit on basis of net worth/net wealth. Assessing Officer was however of opinion that profit should be computed by applying net profit rate to gross receipts. Dealing with this issue, Tribunal opined that when two options were available to assessee, i.e., either to compute profit by applying net profit rate to gross receipts or by taking net worth basis, it was his choice as to mode of accounting he would adopt. Reference was made to various judicial pronouncements in this regard that held mode of accounting to be choice of assessee. Tribunal further found upon examination of assessment orders that 2 Assessing Officer found no specific defect in mode of calculation of profit by respondent/assessee on basis of net worth. Tribunal therefore concluded that method of accounting adopted by respondent/assessee was within his discretion and there was no infirmity in application of said method for determining profits of years in question. We find no perversity in findings of Tribunal. It is admitted fact that CBDT s own circular permits adoption of mode of accounting utilised by respondent/assessee in absence of books of accounts. When Assessing Officer found no defect in application of such mode of accounting, it was not open to him to dispense with said method of accounting and adopt his own method basing on surmises. We therefore find no question of law, much less substantial question of law, arising in these appeals. appeals are accordingly dismissed at threshold. No order as to costs. JUSTICE SANJAY KUMAR JUSTICE GUDISEVA SHYAM PRASAD Date:18.07.2017 GJ Commissioner of Income-tax (Central), Hyderabad v. K. V. Ram Kumar

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