DR. Ajit Gupta Vs ACIT (Delhi High Court)
The Delhi High Court considered four writ petitions challenging notices issued under Section 148 of the Income Tax Act, 1961 for Assessment Years 2006-07 to 2009-10 and the corresponding orders rejecting the assessee’s objections. The notices were issued after the Assessing Officer relied upon the assessee’s letter dated 14.03.2013, furnished during scrutiny proceedings for AY 2010-11, stating that the cash system of accounting had been followed until FY 2008-09 before shifting to the mercantile system. On this basis, the Assessing Officer concluded that sundry creditors and expenses payable were not allowable deductions under the cash system and that income had escaped assessment.
The assessee objected that the mercantile system of accounting had consistently been followed for the relevant assessment years and earlier years. It was pointed out that the assessment order for AY 2006-07 itself recorded the method of accounting as “mercantile” and that the mention of “mixed” in the tax audit report under Section 44AB was a clerical error, which had been clarified by the auditor. The assessee also explained that the letter dated 14.03.2013 had been written under a misconception, as he was a medical practitioner without knowledge of accounting systems. It was further submitted that if the cash system were assumed, the overall tax impact across the years would be revenue neutral.
