ACIT, Hyderabad V. M/s Gayatri Agro Industrial Power Ltd., Hyderabad

ITA 1166/HYD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59166 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHANI KISHORE
• Assessee Lawyers: B SAI PRASAD
• Keywords: Period of limitation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, AM & SMT. ASHA VIJAYARAGHAVAN, JM ITA NO.1166/HYD/2009 ASSESSMENT YEAR 20006-07 THE ACIT, CIRCLE 9(1), HYDERABAD VS M/S GAYATRI AGRO INDUSTRIAL POWER LTD., HYDERABAD (PAN AABCG4892N) APPELLANT RESPONDENT APPELLANT BY : SHRI PHANI KISHORE RESPONDENT BY : SHRI B SAI PRASAD DATE OF HEARING : 12.1.2012 DATE OF PRONOUNCEMENT : 20.1.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM . THIS APPEAL PREFERRED BY REVENUE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A) VI, HYDERABAD DATED 22.9.2009 AND PERTAINS TO THE ASSESSMENT YEAR 2006- 07. 2. BRIEF FACTS OF THE CASE ARE THAT AN ADDITION OF RS.1,79,10,191/- WAS MADE ON ACCOUNT OF SHORT OFFER OF PROFIT/RECEIPTS FROM THE AP TRANSCO. IN THE ASSESS MENT ORDER THE ASSESSING OFFICER HAD STATED THAT ON CROS S VERIFICATION OF INCOME ON EXPORT OF POWER ACCOUNTED , IT APPEARS THAT THE ASSESSEE HAS SHORT OFFERED AN AMOU NT OF RS.1,79,10,121. THE FINDING OF THE ASSESSING OFFIC ER IS AS FOLLOWS: ITA NO.1166/H/2009 GAYATRI AGRO INDUSTRIES POWER LTD. 2 ON CROSS VERIFICATION OF INCOME ON EXPORT OF POWE R ACCOUNTED AS PER LEDGER ACCOUNT FROM 1.4.2005 TO 31.3.2006 IN RESPECT OF AP TRANSCO WITH THE INCOME FROM SALE OF POWER REFLECTED IN THE PROFIT AND LOS S ACCOUNT, IT APPEARS THAT THE ASSESSEE HAD SHORT OFF ERED AN AMOUNT OF RS.1,79,10,121. THE DETAILS ARE MENTIONED BELOW: CLOSING BALANCE OF TOTAL INCOME ON EXPORT OF POWER AS PER AP TRANSCO LEDGER ACCOUNT AS ON 31.3.2006 RS.13,30,21,292 LESS: OPENING BALANCE AS ON 1.4.2005 RS.1,63,98,552 TOTAL INCOME RECEIVED ON EXPORT OF POWER TO AP TRANSCO RS.11,66,22,740/- LESS: INCOME FROM SALE OF POWER REFLECTED IN PROFIT AND LOSS RS.9,87,12,619/- INCOME SHORT OFFERED 3. AS DETAILED ABOVE, IT IS EVIDENT THAT THERE IS A DIFFERENCE OF RS.1,79,10,121/- BETWEEN INCOME ON SA LE OF POWER TO AP TRANSCO AND THE INCOME REFLECTED IN THE P&L A/C. IN THE MATERIAL FILED BY IT, THE ASSESSEE HAS , NOWHERE, GIVEN DETAILS ABOUT THE DIFFERENCE. IN THE ABSENCE OF PROPER EXPLANATION, THERE IS NO ALTERNATIVE THAN TO ADD TH IS AMOUNT TO THE INCOME REFLECTED IN THE P&L ACCOUNT. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE REVENUE IS IN APPEAL BEFORE THE CIT(A). 5. THE CIT(A) HELD AS FOLLOWS: AFTER CAREFUL EXAMINATION OF THE PROVISIONS AND EXPLANATIONS CONTAINED IN AS-9 OF THE ACCOUNTING STANDARDS, I AM OF THE CONSIDERED OPINION THAT, THE ORDER OF THE HONBLE HIGH COURT IS ONLY AN INTERIM ORDER ITA NO.1166/H/2009 GAYATRI AGRO INDUSTRIES POWER LTD. 3 AND NOT A FINAL ORDER. THE ASSESSEE IS NOT QUITE S URE WHETHER THE CLAIM OF THE ASSESSEE WOULD BE FINALLY UP HELD BY THE HIGH COURT. THERE IS A DEFINITE UNCERT AINTY AND THEREFORE THE ASSESSEE FOLLOWED THE PROVISIONS OF AS-9 OF ACCOUNTING STANDARDS AND THE REVENUE IS RECOGNISED TO THE EXTENT, THE AMOUNT ACTUALLY REALI SED ON SALE OF POWER TO AP TRANSCO AND POSTPONED THE BALANCE RECEIVABLE DUE TO UNCERTAINTIES IN ITS RECE IPT, THOUGH BILLING IS DONE AS PER THE FORMULA REFERRED TO IN THE PROCEEDING PARAGRAPH. IN VIEW OF WHAT HAS BEEN DISCUSSED IN THE PRECEDING PARA, THE ASSESSEES APP EAL IS ALLOWED ON THIS POINT AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THIS ADDITION OF RS.1,79,10,121/ -. 6. AGGRIEVED THE REVENUE RAISED THE FOLLOWING GROU NDS: 1. THE CIT(A) ORDER IS ERRONEOUS BOTH IN FACTS AND IN LAW 2. THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,79,10,121/- MADE BY THE ASSESSING OFFICER TOWARDS IN PROFITS OFFERED FROM AP TRANSCO, WHICH T HE ASSESSEE HAS SHORT OFFERED, EVEN THOUGH THE ASSESSE E IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. 7. WE HEARD BOTH PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL ORDER DATED 25 TH OCT. 2011 IN ITA NO.695/H/2011 IN THE CASE OF ACIT VS.M/ S SARO POWER & INFRASTRUCTURE LTD., HYDERABAD FOR THE ASSESSMENT YEAR 2007-08 WHEREIN THE TRIBUNAL HAS HE LD AS FOLLOWS: AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINI ON THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN I.T.A. NO. 1748/HYD/2008 IN THE CASE OF SRI BALAJI BIO MASS POWER PVT. LTD., HYDERABAD FOR THE ITA NO.1166/H/2009 GAYATRI AGRO INDUSTRIES POWER LTD. 4 ASSESSMENT YEAR 2005-06 VIDE TRIBUNAL ORDER DATED 31.1.2011, WHEREIN THE TRIBUNAL HELD AS FOLLOWS: '8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE WITH REGARD TO THE MATERIAL FACTS OF THE CASE. THE ONLY QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE DIFFERENTIAL AMOUNT OF SALES, VIZ., WORKED OUT AT RS. 3.48/- PER UNIT AS PER THE POWER PURCHASE AGREEMENT APPLYING WHICH INVOICES FOR SUPPLY OF POWER TO APTRANSCO WERE RAISED AND RS. 3.18/- APPLYING WHICH IN TERMS OF THE INTERIM ORDERS OF THE HONBLE A.P. HIGH COURT, INVOICES OF THE ASSESSEE WERE SETTLED BY THE APTRANSCO AND ACCOUNTED FOR BY THE ASSESSEE IN THE BOOKS OF ACCOUNT, CAN BE TREATED AS THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06. WE FIND THAT THE CIT(A) HAS GIVEN ELABORATE REASONING BEFORE CONCLUDING THAT THE INCOME WORKED AT THE RATE OF RS. 3.48/- PER UNIT OF POWER SUPPLIED HAD NEITHER ACCRUED TO THE ASSESSEE NOR WAS RECEIVABLE DURING THE PREVIOUS YEAR AND THEREFORE, NO CORRESPONDING DEBT IN RESPECT OF THE DIFFERENTIAL AMOUNT STOOD CREATED IN THE BOOK OF THE PURCHASER, I.E., APTRANCO. MERELY BASED ON THE INVOICES RAISED, INCOME CANNOT BE DEEMED TO ACCRUE TO THE ASSESSEE WHEN THE DIFFERENTIAL INCOME WAS SUBJECT MATTER OF LITIGATION, AND THERE IS NO CERTAINTY OF THE ASSESSEE BEING ENTITLED TO SUCH INCOME, UNLESS IT SUCCEEDS IN SUCH LITIGATION. EVEN IF AN ASSESSEE SUCCEEDS ULTIMATELY IN THE LITIGATION, A DEBT ENFORCEABLE AGAINST THE OTHER PARTY DOES NOT GET CREATED, UNLESS A CLAIM IN THAT BEHALF WAS RAISED BEFORE THE SAME BEING BARRED BY LIMITATION. IT IS FOR THIS REASON THAT AN ASSESSEE, TO KEEP THE ISSUE ALIVE, HAS TO RAISE THE CLAIM AGAINST THE OTHER PARTY WITHIN THE PERIOD OF LIMITATION, WHICH IN ITS VIEW IS DUE TO IT ACCORDING TO THE TERMS OF THE CONTRACT, SO AS TO GET AN ENFORCEABLE RIGHT FOR THE RECOVERY OF THE AMOUNT AS AND WHEN IT SUCCEEDS IN THE LITIGATION. IN THIS VIEW OF THE MATTER, THOUGH INVOICES RAISED CONSTITUTE FUNDAMENTAL RECORD FOR MAINTENANCE OF ACCOUNTS IN THE NORMAL COURSE, AS OBSERVED BY THE ASSESSING OFFICER, THAT LOGIC DOES NOT HOLD GOOD WHEN THE SUBJECT MATTER WAS UNDER DISPUTE AND ITA NO.1166/H/2009 GAYATRI AGRO INDUSTRIES POWER LTD. 5 WAS UNDER LITIGATION BEFORE THE JUDICIAL FORA, INCLUDING THE JURISDICTIONAL HIGH COURT AND HONBLE SUPREME COURT DURING THE RELEVANT POINTS OF TIME. ASSESSEE'S METHOD OF ACCOUNTING ONLY THE AMOUNT WHICH WAS NOT SUBJECT MATTER OF LITIGATION AND WHICH IN FACT WAS RECEIVED BY IT FROM THE APTRANSCO IN TERMS OF THE INTERIM ORDER OF THE A.P. HIGH COURT, WAS IN CONFORMITY WITH THE ACCOUNTING STANDARD 9 AND THE RATIO LAID DOWN BY THE APEX COURT, AMONG OTHERS, IN THE CASE OF LAW DISCUSSED BY THE CIT(A) IN THE IMPUGNED ORDER, AND ALSO IN THE CASE LAW RELIED UPON BY THE ASSESSEE BEFORE US. IN THIS VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A), WHICH IS ACCORDINGLY CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE REJECTED.' IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL AND SINC E THE FACTS AND CIRCUMSTANCES ARE SIMILAR TO THE CASE THA T WAS CONSIDERED BY THE TRIBUNAL STATED SUPRA, WE ARE INCLINED TO DISMISS THE REVENUE. 4. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL, WE DISMISS THE APPEAL FILED BY THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON: 20. 1.2012 SD/- SD/- ( CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 20 TH JANUARY, 2012 ITA NO.1166/H/2009 GAYATRI AGRO INDUSTRIES POWER LTD. 6 COPY FORWARDED TO: 1. THE ACIT, CIRCLE 9(1), HYDERABAD 2. M/S GAYATRI AGRO INDUSTRIAL POWER LTD., 8-2-348/1, GROUND FLOOR, FLORA APARTMENTS, BANJARA HILLS, HYDERABAD 3. THE CIT(A) VI, HYDERABAD 4. THE CIT, HYDERABAD 5. THE CIT, HYDERABAD 6. THE DR, ITAT, HYDERABAD NP/