Case Law Details
PCIT Vs North Eastern Electric Power Corporation Limited (Meghalaya High Court)
The Meghalaya High Court recently rendered a crucial judgment in the income tax appeal between the Principal Commissioner of Income Tax (PCIT) and North Eastern Electric Power Corporation Limited. The case revolved around the assessment year 2014-2015 and involved significant implications for accounting practices under the Income Tax Act, 1961.
The appeal stemmed from conflicting interpretations of the Mercantile System and Hybrid System of accounting. The Department challenged the order of the Income Tax Appellate Tribunal (ITAT), Kolkata-Guwahati, which had dismissed one appeal and upheld another. Central to the dispute was whether the Company could adopt a hybrid accounting system that deviated from the strict provisions of Section 145(1) of the Income Tax Act, 1961.
The Company argued that its accounting practices, including the treatment of interest on debtors on a cash basis, were in compliance with prevailing judicial interpretations and past precedents. This stance was supported by references to earlier decisions by various high courts and the Supreme Court, emphasizing the practical application of tax laws over strict adherence to accounting principles.
The Meghalaya High Court, after careful consideration, upheld the Tribunal’s decision to quash the revisionary proceedings initiated by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961. The court reiterated that once a revision order becomes final, no further order can be passed unless new grounds are established, which was not the case here.
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