IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : `B : NEW DELHI
BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER
AND
SHRI GEORGE GEORGE K., JUDICIAL MEMBER
ITA No.4570/Del /2013
Assessment Year : 2005-06
DCIT, Circle 10(1), Vs. M/s Delhi State Industrial
New Delhi. Development Corporation Ltd.
N-36, Bombay Life Building,
Connaught Place,
New Delhi.
(PAN AAACD 1257 F)
(Appellant) (Respondent)
Appellant by : Shri Parminder Kaur, Sr.D.R.
Respondent by: Shri R.S. Singvi, C.A.
ORDER
PER SHRI GEORGE GEORGE K, JM:
1. This appeal at the instance of the Revenue is directed against the CIT(A)'s
order dated 29.05.2013. The relevant Assessment Year is 2005-06.
2. The Revenue has raised the following effective grounds:
"1. Whether the CIT(A) under the facts and circumstances of the case
and in law was justified in deleting the disallowance of
Rs.70,63,292/- made by the Assessing Officer on account of prior
period expenses?
ITA No.4570/Del /2013 2
Assessment Year : 2005-2006
2. Whether the CIT(A) under the facts and circumstances of the case
and in law was justified in deleting the addition of Rs.27,32,717/-
made by the Assessing Officer on account of difference in sale
amount shown in the profit & loss account and as declared in the
written submission filed by the assessee during the course of
assessment proceedings?"
3. The facts with reference to first ground are as follows.
In the reassessment u/s 143 r.w.s. 147 of the I.T. Act, AO disallowed a
sum of Rs.70,63,292/- stating that the same to be prior period expenses not
relevant to the concerned assessment. The relevant observation of the Assessing
Officer while making the disallowance reads as follows:
"2.1 The contention of the assessee has been examined but it is
found that the assessee could not explain that how under mercantile
accounting system the expenditure which apparently pertains to prior
period are admissible. As per the accepted accounting policy under
mercantile system of accounting only such expenses are allowable as
deduction which are relevant to the year. Since the expenditure are not
relevant to the year and apparently pertain to earlier years the same are
hereby disallowed and addition of Rs.70,63,292/- is hereby made.
(Addition of Rs.70,63,292/"
4. On further appeal, the CIT(A) deleted the disallowance made by the
Assessing Officer. The Revenue being aggrieved is in appeal before us. Ld. D.R.
relied on the order of the Assessing Officer. Ld. A.R. reiterated the submission
made before the Income Tax Authorities.
5. We have heard rival submission and perused the material on record. The
CIT(A) has categorically found that the impugned expenses were revenue in
ITA No.4570/Del /2013 3
Assessment Year : 2005-2006
nature and same had crystallized in the current assessment year, when the
designated authorities approved the said expenditure. It was also found by the
CIT(A) that this system of amounting was followed by the assessee for the past
assessment year, both in respect of income as well as expenses also. The
relevant finding of the CIT(A) reads as follows:
"Decision
(at Page 12)
I have carefully considered the facts of the case and submission of
the appellant. The appellant is a Government of Delhi Undertaking
and there is no dispute that appellant is following mercantile system
of accounting. It was contented that the claim of prior period
expenses is on the basis of liability crystallized during the year and as
such the concept of prior period is not relevant particularly when the
claim is in accordance with system of accounting being regularly
followed by the appellant.
It was further submitted that the claim of income or expenses are
accounted for on the basis of liability crystallized during the year and
as such same is permissible deduction under the law. It was
contended that in case of Government of Delhi Undertaking, income
or expenses are accounted for as and when same are approved by
designated authorities and same system is being followed in respect
of income and expenses both. My attention was drawn to the details
of prior period income and expenses as per schedule of the audited
balance sheet as per which all these expenses are of revenue nature
and correctness and eligibility of the claim has not been disputed
even by the Assessing Officer as only ground of disallowance is that
the claim is pertaining to prior period.
It is further noted that the Assessing Officer has only disallowed net
claim of prior period expenses after adjusting prior period income
and as such Assessing Officer himself has partially accepted claim of
prior period expenses and disallowance is only in respect of net claim
as per details given in schedule of the balance sheet.
It has to be appreciated that in case of Government Undertakings,
ITA No.4570/Del /2013 4
Assessment Year : 2005-2006
there is a code of office management and system of supervision and
regulation and as such it is not permissible to "book any income or
expenses without proper approval and recognization. There is a merit
in the contention of the appellant that adjustment of prior period
income and expenses are accounted for as and when income or
liability is approved and crystallized. The reference to decision of
ITAT in the case of Rites Ltd. is also relevant. Further, principle laid
down by Delhi High Court in the case of CIT Vs. Exxon Mobil
Lubricant Pvt. Ltd. 328 ITR 17 (Del.) and Gujarat High Court in the
case of Saurashtra Cement & Chemical Industries vs. CIT 213 ITR
525 also support the claim of the appellant.
It is further noted that the claim of prior period expenses were
accepted in the original assessment passed u/s. 143(3) and even in the
impugned reassessment, the Assessing Officer has not disputed the
correctness of the liability or the fact that same had crystallized
during the year or that there is any change "in the system of
accounting. In fact, the appellant company has positive income in the
preceding subsequent years and as such there is no advantage to the
appellant or any loss the revenue for claiming such expenes in the
year under reference.
Taking into consideration, facts of the case, nature of the claim and
past history of the case and relevant legal precedents, there is no
legal or factual basis for any disallowance. Further, Assessing
Officer has not made out any case for disallowance and only ground
for reopening and consequential disallowance is on the basis of use
of term prior period, which in itself is not a valid basis for
disallowance when the claim is on the basis of liability crystallized
during the year. As per the above discussion, there is no justification
for disallowance of Rs.70,63,292/-........." (Page 13 of CIT(A).
6. This finding of the CIT(A) has not been dispelled by the revenue by
placing any material/document on record. Hence, we hold that the order of the
CIT(A) on this issue is correct and in accordance with and we confirm the same.
It is ordered accordingly.
ITA No.4570/Del /2013 5
Assessment Year : 2005-2006
7. The facts with reference to second ground are as follows.
The Assessing Officer in course of assessment proceeding noticed that
there was difference of Rs.27,32,717/- on account of income credit in the P&L
account and detailed filed by the assessee reflecting the sale receipts. The AO
held that assessee declared less sale in the P&L account and added the difference
of Rs.27,32,717/- to income.
8. On further appeal, the CIT(A) deleted the addition made. The relevant
finding of the CIT(A) reads as follows.
"The Assessing Officer has also added Rs.27,32,717/-as difference
between the sales reflected in the balance sheet and the sales shown as
per submission filed by the appellant. It was mentioned by the Assessing
Officer that appellant has declared less sales of Rs.27,32,717/-in this
P&L account, therefore, the differential amount of sales was added as
income of the appellant. During the course of. assessment proceedings as
well as appellate proceedings, it was submitted by the appellant that the
amount of Rs.27,32,717/-was not part of the turnover and the same is
shown under the schedule 'other income' of the balance sheet. The
appellant has filed copy of the schedule 'P' and '0' of the balance sheet
wherein this income has been shown as other income received from
service charges and has been shown under the head 'other income'. The
appellant has also filed reconciliation of the differential sales and has
stated that the difference was pertaining to the sale of empty cartons, sale
of Internet surfing and sale of scrap and discount allowed and same has
been shown under the head 'other income' by the appellant. Instead of
showing sales of these miscellaneous income under the head sales, the
appellant had shown under different heads. Hence, there is no difference
in the sales shown by the appellant in the P&L account and has
declared in the written submission. Therefore, the addition made by the
Assessing Officer was not justified and same is deleted."
9. Revenue being aggrieved is in appeal before us.
ITA No.4570/Del /2013 6
Assessment Year : 2005-2006
10. We have heard both the parties and perused the available material. The
assessee has filed the reconciliation statement. The CIT(A) noticed that certain
miscellaneous income which ought have been crediting under the head `sale'
were credited under the head `other income'. The CIT(A) categorically found
that there is no difference in the sale shown by the assessee in the P&L account
and that was declared by the assessee in the course of assessment proceeding.
Since the Revenue has not controverted this factual finding of the CIT(A), we
affirm the view of the CIT(A) and reject the second ground of the Revenue.
11. In the result, the appeal of the Revenue is dismissed as indicated above.
The decision was pronounced in the open court on 21st November, 2014.
Sd/- Sd/-
(J.S. REDDY) (GEORGE GEORGE K.)
Accountant Member Judicial Member
Dated: 21st November, 2014.
Aks/-
Copy forwarded to
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
|
