PunjabHaryana High Court Commissioner Of Income Tax vs Dakshin Haryana Bijli Vitran Nigam on 1 October, 2014 ITA2092014 [1] CHANDIGARH ITA2092014 (O&M) Date of decision: 01.10.2014 The Commissioner of Income Tax, Hisar ..... Appellant VERSUS Dakshin Haryana Bijli Vitran Nigam Ltd., Hisar ..... Respondent HON'BLE MR. JUSTICE AMIT RAWAL Present: Mr.Tejender K.Joshi, Advocate, for the appellant. ******* RAJIVE BHALLA, J. (ORAL) CM14665CII2014 Prayer in this application is to condone delay of 666 days in refiling the appeal. We have heard counsel for the applicant/appellant and in view of averments in the application duly supported by an affidavit filed by Mr.T.K.Joshi, Advocate, allow the application and condone delay of 666 days in refiling the appeal. ITA2092014 The revenue is before us challenging order dated 30.11.2011, passed by the Income Tax Appellate Tribunal, Delhi Bench 'B' New Delhi, (hereinafter referred to as the 'ITAT') dismissing an appeal filed by the revenue, thereby confirming order dated 06.11.2009, passed by the Commissioner of Income Tax ITA2092014 [2] (Appeals), Rohtak (hereinafter referred to as the 'CIT(Appeals)'. Counsel for the revenue submits that as the assessee maintains a mercantile system of accounting, the mere fact that receipts may have not been realised, does not absolve the assessee of its liability to pay tax on surcharge levied for delayed payment and reflected in the bills raised by the assessee. It is further submitted that the mere fact that the assessee is a Government entity or that surcharge is debatable or may not eventually be paid or may be waived, cannot be a ground to set aside the order passed by the Assessing Officer. The ITAT and the CIT(Appeals) have, therefore, erred in deleting the addition made by the Assessing Officer. We have heard counsel for the revenue, appraised the impugned order as well as orders passed by the CIT(Appeals), Rohtak and the Assessing Officer, Hisar. The question that calls for an answer, in the facts of this case, is whether surcharge for delayed payment reflected in the bills raised by the assessee and its accounts, would invite payment of a tax dehors recovery/payment/receipt of surcharge. The Assessing Officer, took a view that as surcharge levied upon delayed payments of bills is reflected in the bills and the accounts of the assessee, the fact that the surcharge may or may not be paid or recovered or may eventually be waived, is entirely irrelevant as the assessee maintains a mercantile system of accounting. ITA2092014 [3] Aggrieved by the aforesaid finding, the assessee filed an appeal. The CIT(Appeals) vide order dated 06.11.2009, set aside the addition made by the Assessing Officer by holding as follows: "The issue involved and the submissions made by the appellant have been considered. It is undisputed that the appellant is following mercantile system of accounting; it is levying surcharge on delayed payment of bills by the consumers; the surcharge is taken as income as and when it is collected; however a provision for charge is made as noted above under the head 'provision of surcharge not realized'. This method has been regularly followed by the appellant. During appeal proceedings before the undersigned the appellant has produced bills pertaining to as many as 50 parties of various places and has shown that the bills are accepted even without payment of surcharge by the consumers and that surcharge is shown in the books as income as and when it is collected/received. It is settled law that, "Incometax is a levy on income. No doubt, the Incometax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book keeping an entry is made about a 'hypothetical income". Which does not materialize. Where income has, in fact, been received and is subsequently given up, in such circumstances that it remains