Haryana Vidyut Prasaran Nigam Ltd., Panchkula V. Addl. CIT, Panchkula

ITA 146/CHANDI/2011

• Counselvise Citation: 14621514 RSA 2011
• Duration Of Justice: 4 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: HARISH NAYYAAR
• Keywords: Capital asset; Depreciation; Charitable institution; Opportunity of being heard; Cost of acquisition; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 43B; 12A; 12AA; 10; 154; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 486/CHD/2009 ASSESSMENT YEAR: 2005-06 ITA NO. 1097/CHD/2010 ASSESSMENT YEAR: 2006-07 & ITA NO. 146/CHD/2011 ASSESSMENT YEAR: 2007-08 HARYANA VIDYUT PRASARAN NIGAM VS. THE ADDL CIT, LIMITED, SHAKTI BHAWAN, PANCHKULA RANGE, PANCHKULA PANCHKULA PAN NO. AAACH9216J ITA NO. 1080/CHD/2010 ASSESSMENT YEAR: 2006-07 THE ACIT, CIRCLE, VS. HARYANA VIDYUT PRASARAN NIG AM LTD., PANCHKULA SHAKTI BHAWAN, PANCHKULA PAN NO. AAACH9216J ITA NO. 136/CHD/2011 ASSESSMENT YEAR: 2007-08 THE DCIT, CIRCLE, VS. HARYANA VIDYUT PRASARAN NIG AM LTD., PANCHKULA SHAKTI BHAWAN, PANCHKULA PAN NO. AAACH9216J ITA NO. 533/CHD/2011 ASSESSMENT YEAR: 2008-09 ITA NO. 1022/CHD/2014 ASSESSMENT YEAR: 2009-10 2 & ITA NO. 63/CHD/2015 ASSESSMENT YEAR: 2011-12 THE DCIT, CIRCLE, VS. HARYANA VIDYUT PRASARAN NIG AM LTD., PANCHKULA SHAKTI BHAWAN, PANCHKULA PAN NO. AAACH9216J (APPELLANT) (RESPONDENT) APPELLANT BY : SH. HARISH NAYYAAR RESPONDENT BY : SHRI RAVI SARANGAL DATE OF HEARING : 17.08.2015 DATE OF PRONOUNCEMENT : 21.08.2015 ORDER PER H.L.KARWA, VP THESE THREE APPEALS BY THE ASSESSEE AND FIVE APPEAL S BY THE REVENUE INVOLVING CERTAIN COMMON ISSUES WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRSTLY, WE WILL TAKE UP THE APPEAL IN ITA NO. 4 86/CHD/2009 RELATING TO ASSESSMENT YEAR 2005-06. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), PANCHKULA DATED 6.3.2009. GRO UND NO. 1 OF THE APPEAL IS GENERAL IN NATURE AND HENCE NO FINDINGS ARE REQUIRE D TO BE GIVEN. 3. GROUND NO. 2 OF THE APPEAL READS AS UNDER:- 2) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS. 22696139 ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. THE ADDITION HAS BEE N MADE WITHOUT CONSIDERING THE FACTS OF THE CASE CORRECTLY AND WITHOUT APPRECIATING THE POSITION OF LAW IN THIS RE GARD. THE ADDITION IS UNJUST, ILLEGAL AND DESERVES TO BE DELE TED. IT IS PRAYED THAT ADDITION OF RS. 22696139 MAY KIND LY BE ORDER TO BE DELETED. 3 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT AS SESSEE BEING A STATE GOVERNMENT UNDERTAKING IS IN RECEIPT OF CAPITAL GRA NTS / SUBSIDIES ON FIXED ASSETS. DURING THE YEAR UNDER CONSIDERATION THE ASS ESSEE RECEIVED A CAPITAL GRANT IN AID TO THE TUNE OF RS. 9,07,84,559. THIS AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE TO MEET THE PART COST OF ASSETS INSTALLED. THE ASSETS ACQUIRED BY THE ASSESSEE ARE PARTLY FUNDED BY THE STATE GOVERNMENT . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THIS AMOUNT SHOULD NOT BE REDUCED FROM THE ORIG INAL COST OF THE ASSETS. IN RESPONSE TO THE ABOVE QUERY IT WAS STATED BY THE AS SESSEE THAT THE AMOUNT RECEIVED WAS A CAPITAL RECEIPT AND HENCE WAS NOT TA XABLE. THE ASSESSING OFFICER TOOK THE VIEW THAT AFTER AMENDMENT TO SECTION 43(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), THE CONTENTION RAISED BY THE A SSESSEE CANNOT BE ACCEPTED. AS PER THE ASSESSING OFFICER, THE EXPLANATION 10 OF SE CTION 43(1) DEFINES THE ACTUAL COST AND SUCH GRANT IN AID WAS TO BE REDUCED FOR A RRIVING AT THE ACTUAL COST. AS PER THE PROVISIONS OF EXPLANATION 10 OF SECTION 43( 1), THE ASSESSING OFFICER HELD THAT THIS SUBSIDY OR THE GRANT SHALL REDUCE THE ACT UAL COST OF THE ASSETS ELIGIBLE FOR DEPRECIATION. ACCORDINGLY, THE ASSESSING OFFICER R EDUCED THE ENTIRE CAPITAL GRANT FROM THE WRITTEN DOWN VALUE OF ASSETS OF THE PLANT AND MACHINERY IN THE ASSESSEES BALANCE SHEET. THE TOTAL VALUE OF THE AS SETS AS PER THE BALANCE SHEET ARE RS. 10,81,17,59,409/-. THE REDUCTION OF RS. 9,07,8 4,559/- AS GRANT IN AID REDUCED FROM THE COST OF ASSETS RESULTED IN DISALLOWANCE OF 25% DEPRECIATION ON AID. CONSEQUENTLY, AN ADDITION OF RS. 2,26,96,139/- WAS MADE. 5. ON APPEAL, LEARNED CIT(A) UPHELD THE ORDER OF AS SESSING OFFICER AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING OF THE APPEAL, LEARNED R EPRESENTATIVES OF BOTH THE PARTIES ADMITTED THAT ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT, 4 CHANDIGARH BENCH IN THE CASE OF M/S UTTAR HARYANA B IJLI VITRAN NIGAM LTD. (UHBVN LTD.)VS. ADDITIONAL, CIT, PANCHKULA IN ITA N O. 554/CHD/2009 RELATING TO ASSESSMENT YEAR 2005-06. WE OBSERVE THAT WHILE DECIDING A SIMILAR ISSUE THE TRIBUNAL IN THE CASE OF UHBVN LTD (SUPRA) VIDE ITS ORDER DATED 3.8.2015, HELD AS UNDER:- 8. DURING THE COURSE OF HEARING BEFORE US, OUR ATTE NTION WAS DRAWN TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OW N CASE IN ASSESSMENT YEAR 2003-04 IN ITA NO. 752/CHD/2011 DT . 16/04/2014, WHEREBY BOTH THESE ISSUES WERE DEALT WITH AND DECID ED AGAINST THE ASSESSEE. THOUGH THIS WAS AN APPEAL FILED BY THE R EVENUE AGAINST THE ORDER OF THE LD. CIT(A) QUASHING THE ORDER PASS ED BY THE AO UNDER SECTION 154. THE GROUND WERE RAISED ON THE LE GALITY OF ORDER PASSED UNDER SECTION 154 AS WELL AS ON MERITS. HON BLE ITAT WHILE UPHOLDING THE ORDER MADE UNDER SECTION 154 ALSO ADJ UDICATED THE ISSUE ON MERIT AT PAGE 4 PARA 9 AS FOLLOWS: THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RE LATION TO SUCH EXERCISE OF POWER UNDER SECTION 154 OF THE ACT. THE ASSESSEE HAD REWORKED THE DEPRECIATION OF CERTAIN P ORTION OF THE ASSETS WHICH WERE NOT ADMISSIBLE IN VIEW OF THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF TH E ACT. THE NON-APPLICATION OF PROVISIONS OF THE ACT IS A MISTA KE AND SUCH MISTAKES ARE AMENABLE TO RECTIFICATION BY EXER CISE OF POWERS UNDER SECTION 154 OF THE INCOME TAX ACT. 196 1. THE COMPLEXITY OF THE WORKING OF THE ALLOWABLE DEPRECIA TION TO RE-WORK VALUE OF ASSETS DOES NOT IN ANY MANNER REST RAIN THE ASSESSING OFFICER AND THE ASSESSING OFFICER IS OPEN TO CARRY OUT THE RECTIFICATION UNDER SECTION 154 OF THE ACT IN ORDER TO CORRECT ANY MISTAKE IN APPLICATION OF LAW. WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HO NBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. INVESTMENT T RUST OF INDIA LTD. 184 TAXMAN 381 (P&H). HOWEVER, WE DIR ECT THE ASSESSING OFFICER TO RECOMPUTE THE DEPRECIATION ON REDUCED VALUE OF ASSETS AFTER GIVING A REASONABLE OPPORTUNI TY OF HEARING TO THE ASSESSEE IN THIS REGARD. THE ASSESSE IS DIRECTED TO PRODUCE THE RELEVANT DATA / MATERIAL BE FORE THE ASSESSING OFFICER IN THIS RESPECT. ACCORDINGLY, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE ALLOWED FOR STA TISTICAL PURPOSES. SINCE NO CHANGE IN FACTS WAS BROUGHT TO OUR NOTICE DURING THE COURSE OF HEARING, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE ALSO DIRECT THE AO TO RECOMPUTE THE DEPRECIATION ON REDU CED VALUE OF ASSETS AFTER GIVING REASONABLE OPPORTUNITY TO THE A SSESSEE AS WAS DECIDED AGAINST ASSESSEE. 5 9. IN THE RESULT THE GROUNDS OF APPEAL ARE DECIDED FOR STATISTICAL PURPOSES. 7. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE CASE OF UHBVN LTD REFERRED TO ABOVE. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF UHBVN LTD (SUPRA) WE DIRECT THE ASSESSING O FFICER TO RE-COMPUTE THE DEPRECIATION ON REDUCED VALUE OF ASSETS AFTER AFFOR DING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE M ATTER. THE ASSESSEE IS DIRECTED TO PRODUCE THE RELEVANT MATERIAL BEFORE THE ASSESSI NG OFFICER IN SUPPORT OF ITS CLAIM. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWE D FOR STATISTICAL PURPOSES. IT IS MADE CLEAR THAT SHRI HARISH NAYYAR, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT A PART OF THE GRANTS IN AID HAVE BEEN RECEIVED IN THE PAST YEAR ALSO. HE, THEREFORE, SUBMITTED THAT ASSESSING OFFICER MAY BE DIRECTED TO GIVE BENEFIT OF DISALLOWANCE OF DEPRECIATION FROM THE GRANT IN AID MADE IN THE EARLIER YEARS. SINCE WE HAVE RESTORED THE MATTER TO THE ASSESSING OFFICER, THE ASSESSEE IS FREE TO RAISE THIS CONTENTION BEFORE THE ASSESSING OFFICER AND WE DIRECT THE ASSESSING OFFICER TO CONSIDER AND DECIDE THIS CONTENTION OF T HE ASSESSEE IN ACCORDANCE WITH LAW. 8. GROUND NO. 3 OF THE APPEAL READS AS UNDER:- 3) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS. 125606580 ACCOUNT O F DISALLOWANCE OF INTEREST PAYMENT ON LOANS TAKEN FR OM MARKET COMMITTEE. THE ADDITION HAS BEEN MADE WITHOUT CONSI DERING THE FACTS OF THE CASE CORRECTLY AND WITHOUT GIVING AN OPPORTUNITY OF HEARING TO THE APPELLANT IN THIS REG ARD. THE ADDITION IS UNJUST, ILLEGAL AND DESERVES TO BE DELE TED. IT IS PRAYED THAT ADDITION OF RS. 125606580 MAY KI NDLY BE ORDER TO BE DELETED. 9. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E TOOK A LOAN OF RS. 1,63,93,60,346/- FROM MARKET COMMITTEE. THIS WAS TH E BALANCE OUTSTANDING ON 6 31.3.2005 AND WAS INCLUSIVE OF THE INTEREST DUE IN THE FINANCIAL EXPENSES CLAIMED BY THE ASSESSEE. THE INTEREST OF RS. 12,56,06,580/- HAD BEEN CLAIMED AS AN EXPENDITURE. THE ASSESSING OFFICER FURTHER NOTICED THAT THE AMOUNT REPRESENTED ONLY ACCRUED INTEREST WHICH WAS CREDITED TO THE LOA N ACCOUNT OF THE MARKET COMMITTEES. ACTUAL PAYMENT OF THIS INTEREST WAS NOT MADE BY THE ASSESSEE. NO TDS WAS MADE AND, THEREFORE, ASSESSING OFFICER DISA LLOWED THE INTEREST AMOUNT IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 10. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF ASSES SING OFFICER AND, HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL 11. AFTER HEARING THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES WE FIND THAT A SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE ITAT , CHANDIGARH BENCH IN THE CASE OF M/S UTTAR HARYANA BIJLI VITRAN NIGAM LTD. ( UHBVN LTD.)VS. ADDITIONAL CIT, PANCHKULA IN ITA NO. 554/CHD/2009 RELATING TO ASSESSMENT YEAR 2005-06. THE TRIBUNAL VIDE ITS ORDER DATED 3.8.2015 ALLOWED THE CLAIM OF THE UHBVN LTD. (SUPRA) AND OBSERVED AS UNDER:- 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL PLACED ON RECORDS. 23. IT IS A MATTER OF FACT THAT AN AMOUNT OF RS. 3, 29,91,315/- IS ACCRUED INTEREST ON LOAN TAKEN FROM MARKET COMMI TTEE, HOWEVER, NO ACTUAL PAYMENT OF THIS INTEREST AMOUNT WAS MADE. IT IS ALSO AN UNDISPUTED FACT THAT NO TDS HAS BEEN DEDUCTED ON THE SAID INTEREST. AS PER THE ORDER OF LD. CIT DT. 09/09/2005 PLACED AT PAPER BOOK PAGE 20 THE MARKET COMMITTEE I S A CHARITABLE INSTITUTION REGISTERED UNDER SECTION 12A OF THE ACT, INCOME OF WHICH IS EXEMPTED UNDER SECTION 11. CBDT HAS ALSO ISSUED A CIRCULAR DT. 12/113/68-IT (A-II), DT. 28/1 0/1968, WHEREBY, IT HAS BEEN CLARIFIED THAT THERE IS NO NEE D TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENT TO INSTITUTIONS WHOSE INCOME IS EXEMPT UNDER SECTION 11 OF THE ACT. 7 12. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO TH E FACTS OF THE CASE OF M/S UTTAR HARYANA BIJLI VITRAN NIGAM LTD. (UHBVN LTD.) VS. ADDITIONAL, CIT, PANCHKULA IN ITA NO. 554/CHD/2009 REFERRED TO ABOVE . THE ISSUE INVOLVED IS IDENTICAL. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF UHBVN LTD (SUPRA) WE DIRECT THE ASSESSING OFFICER TO DEL ETE THE ADDITION. THIS GROUND OF APPEAL IS ALLOWED. 13. GROUND NO.4 OF THE APPEAL READS AS UNDER:- 4) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS. 19180274 ON ACCOUNT OF DISALLOWANCE OF INTEREST PAYMENT ON LOANS TAKEN FR OM HRDF BOARD. THE ADDITION. THE ADDITION HAS BEEN MADE W ITHOUT CONSIDERING THE FACTS OF THE CASE CORRECTLY. THE AD DITION IS UNJUST, ILLEGAL AND DESERVES TO BE DELETED. IT IS PRAYED THAT ADDITION OF RS. 19180274 MAY KIN DLY BE ORDER TO BE DELETED. 14. THE ASSESSEE HAD TAKEN A LOAN FROM HARYANA RURA L DEVELOPMENT FIRM (HRDF). AN INTEREST OF RS. 1,91,80,274/- WAS CLAIME D AS AN EXPENDITURE IN SCHEDULE XXIV OF INTEREST AND FINANCE CHARGES OF TH E ASSESSEES BALANCE SHEET. THE ASSESSING OFFICER OBSERVED THAT INTEREST HAS NO T BEEN ACTUALLY PAID BY THE ASSESSEE. IT IS ONLY ACCRUED INTEREST. NO TDS WAS D EDUCTED ON THIS AMOUNT OF RS. 1,91,80,274/- ALSO. THEREFORE, BY APPLYING SECTION 40(A)(IA), THE ASSESSING OFFICER DISALLOWED THE CLAIM OF ASSESSEE. CONSEQUENTLY, THE AMOUNT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 15. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF ASSES SING OFFICER, AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 16. AT THE VERY OUTSET SHRI HARISH NAYYAR LD. COUNS EL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAD TAKEN A LOAN FROM HRDF BOARD. ACCORDING TO HIM, 8 THE INCOME OF THE SAID BOARD IS EXEMPT FROM INCOME TAX ON ITS INCOME, THEREFORE, ASSESSEE WAS NOT OBLIGED TO DEDUCT TDS AND CONSEQUE NTLY NO DISALLOWANCE U/S 40(A)(IA) WAS REQUIRED TO BE MADE. IN OUR OPINION, THIS ASPECT OF THE MATTER NEEDS TO BE VERIFIED AT THE LEVEL OF THE ASSESSING OFFICE R. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND REMAND THE MA TTER TO THE ASSESSING OFFICER TO VERIFY AND EXAMINE THE ABOVE CONTENTION OF THE A SSESSEE. THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE AFRESH IN A CCORDANCE WITH LAW AFTER AFFORDING DUE AND REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE IN THE MATTER. THIS GROUND OF APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. 17. GROUND NO. 5 OF THE APPEAL READS AS UNDER:- 5) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS. 769077 ON ACCOUNT OF ADDITION UNDER SECTION 43B OF THE INCOME TAX ACT. THE ADDITI ON HAS BEEN MADE WITHOUT CONSIDERING THE FACTS OF THE CASE CORRECTLY. THE ADDITION IS UNJUST, ILLEGAL AND DESERVES TO BE DELETED. IT IS PRAYED THAT ADDITION OF RS. 769077 MAY KINDL Y BE ORDER TO BE DELETED. 18. DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E HAD TAKEN A LOAN OF RS. 769077/- FROM THE PUNJAB NATIONAL BANK. A TOTAL EXP ENDITURE OF RS. 51,41,200/- HAS BEEN INCURRED ON ACCOUNT OF INTEREST PAYMENT FO R WORK IN CAPITAL LOAN. IN VIEW OF EXPLANATION 3D OF SECTION 43B OF THE ACT, A N ADDITION OF AMOUNT OF 10% OF THE CASH CREDIT FACILITY AVAILED FROM THE PUNJAB NATIONAL BANK WAS MADE TO THE INCOME OF THE ASSESSEE AS THE SAID AMOUNT HAS NOT A CTUALLY BEEN PAID. THUS THE ASSESSING OFFICER MADE AN ADDITION OF RS. 7,69,077/ -. ON APPEAL THE CIT(A) CONFIRMED THE ADDITION AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 19. SHRI HARISH NAYYAR, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE AUTHORITIES BELOW HAVE NOT AFFORDED PROPER OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. HE FURTHER SUBMITTED THAT UNDER THE PROV ISIONS OF THE SECTION, UNDER 9 WHICH THE IMPUGNED ADDITION HAS BEEN MADE, IS NOT A PPLICABLE TO THE FACTS OF THE PRESENT CASE. 20. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE AD DITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) IS IN ACCORDANCE WITH LAW. 21. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE RELEVANT FACTS OF THE CASE ARE NOT AVAILABLE ON RECORD. IT IS ALSO TRUE THAT PROPER OPPORTUNITY HAS NOT BEEN AFFO RDED TO THE ASSESSEE TO EXPLAIN ITS CASE. WE, THEREFORE, SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND REMAND THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTIO N TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING DUE AND REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 22. FOR STATISTICAL PURPOSES, THIS GROUND OF APPEAL STANDS ALLOWED. 23. GROUND NO.6 OF THE APPEAL READS AS UNDER:- 6) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS. 556018 ON ACCOUNT OF DISALLOWANCE OF INTEREST PAYMENTS TO NATIONAL CAPIT AL REGION PLANNING BOARD. THE ADDITION HAS BEEN MADE WITHOUT CONSIDERING THE FACTS OF THE CASE CORRECTLY. THE AD DITION IS UNJUST, ILLEGAL AND DESERVES TO BE DELETED. IT IS PRAYED THAT ADDITION OF RS. 556108 MAY KINDL Y BE ORDER TO BE DELETED. 24. THE ASSESSEE HAD TAKEN A LOAN OF RS. 6,74,35,00 0/- FROM NATIONAL CAPITAL REGION PLANNING BOARD (NCRPB). THE ASSESSEE CLAIMED THE INTEREST PAYMENT OF RS. 556108/- AS EXPENSES UNDER INTEREST AND FINANCE CHARGES. THE ASSESSING OFFICER NOTICED THAT NO TDS HAS BEEN DEDCUTED ON TH E PAYMENTS OF THE INTERST MADE BY THE SO TO NCRPB. APPLYING THE PROVISIONS OF SECTION 40(A)()IA) OF THE 10 ACT, THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS. 5,56,108/-. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE A SSESSING OFFICER. 25. AT THE VERY OUTSET SHRI HARISH NAYYAR POINTED O UT THAT AS PER THE PROVISIONS OF SECTION 196(III) OF THE ACT, THE ASSESSEE WAS NO T LIABLE TO DEDUCT TAX AT SOURCE. THEREFORE, AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE IMPUGNED ADDITION. 26. AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMST ANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ABOVE PLEA OF THE ASSESSEE NEEDS TO BE VERIFIED AND EXAMINED AT THE LEVEL OF ASSESSING OFFICER. ACCORDINGLY, WE SE T ASIDE THE ORDER OF CIT(A) AND REMAND THE MATTER TO THE ASSESSING OFFICER WITH A D IRECTION TO VERIFY THE CONTENTIONS OF THE ASSESSEE AND DECIDE THE ISSUE AF RESH IN ACCORDANCE WITH LAW AFTER AFFORDING A DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 27. FOR STATISTICAL PURPOSES THIS GROUND OF APPEAL IS ALLOWED. 28. GROUND NO. 7 OF THE APPEAL READS AS UNDER:- 6) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS. 107042952 ON ACCOUNT OF DISALLOWANCE OF LEGITIMATE CLAIM MADE BY THE APPELL ANT ON ACCOUNT OF DIMINUTION IN THE VALUE OF ASSETS. THE DISALLOWANCE IS ILLEGAL, NOT IN CONSONANCE WITH THE PROVISIONS OF LAW AND DESERVES TO BE DELETED. IT IS PRAYED THAT ADDITION OF RS. 107042952 MAY KI NDLY BE ORDER TO BE DELETED. 29. DURING THE YEAR UNDER CONSIDERATION THE EXPENSE S OF RS. 10,70,42,952/- WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF DIMINUTION OF ASSETS. BOTH THE PARTIES BELOW HAVE STATED THAT THE DIMINUTION REPRESENTED A PROVISION CREATED BY THE ASSESSEE WHICH IS NOT ALLOWABLE AS A DEDUCTION UNDE R THE PROVISIONS OF THE ACT. 11 30. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE MAY OBSERVE HER E THAT BOTH THE AUTHORITIES BELOW HAVE NOT ASSIGNED ANY COGENT REASONS WHILE RE JECTING THE CLAIM OF THE ASSESSEE. THE ONLY REASON ASSIGNED BY THE AUTHORIT IES BELOW IS THAT DIMINUTION REPRESENTS A PROVISION CREATED BY THE ASSESSEE WHIC H IS NOT ALLOWABLE AS DEDUCTION UNDER THE PROVISIONS OF THE ACT. IN THE C ASE OF MANEKLAL D. SHAH V P.K. GUPTA & OTHERS (2004) 267 ITR 340 (BOM.), THE HON BLE BOMBAY HIGH COURT HELD THAT RIGHT TO REASONS IS AN INDISPENSABLE PART OF THE SOUND SYSTEM OF JUDICIAL REVIEW. A REASONED DECISION IS NOT ONLY FOR THE PU RPOSE OF SHOWING THAT THE CITIZEN IS RECEIVING JUSTICE, BUT ALSO A VALID DISC IPLINE FOR THE AUTHORITY ITSELF. THEREFORE, STATING OF REASONS IS ONE OF THE ESSENTI ALS OF JUSTICE. THE HONBLE BOMBAY HIGH COURT FURTHER OBSERVED THAT ORDER SHOU LD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE HIGHER COURT GUESSING THE REASO NS. THE REASONS PROVIDE A LIVE LINK BETWEEN THE CONCLUSION AND THE EVIDENCE. THE H ONBLE COURT FURTHER OBSERVED THAT IT GIVES AN OPPORTUNITY TO THE HIGHER COURT TO SEE WHETHER OR NOT THE SUBORDINATE COURT OR AUTHORITY OR THE TRIBUNAL CONSIDERED THE RELEVANT MATERIAL. IN THE INSTANT CASE THE AUTHORITIES BELOW HAVE NOT PASSED SPEAKING ORDERS. EVEN THE RELEVANT FACTS ARE NOT ON RECORD. IN THE ABSENCE OF RELEVANT FACTS, WE ARE NOT IN A POSITION TO DECIDE THE ISSUE CORREC TLY. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND REMAND THE MATTER TO THE ASSESSING O FFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTE R AFFORDING A DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. FOR STATISTICAL PURPOSES, THE APPEAL STANDS ALLOWED. 31. GROUND NO.8 OF THE APPEAL READS AS UNDER:- 8) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS. 303930384 ON ACCOUNT OF PRIOR PERIOD EXPENDITURE DEBITED TO THE ACCOUNTS OF THE C URRENT YEAR ON THE GROUND THAT THESE AMOUNTS DID NOT PERTAIN TO YEAR UNDER QUESTION. THE ADDITION HAS BEEN MADE WITHOUT 12 CONSIDERING THE FACTS OF THE CASE CORRECTLY. THE A DDITION IS UNJUST, ILLEGAL AND DESERVES TO BE DELETED. IT IS PRAYED THAT ADDITION OF RS. 303930384 MAY KIN DLY BE ORDER TO BE DELETED. 32. THE ASSESSEE CLAIMED PRIOR PERIOD EXPENSES AT R S. 303930384/-. THE CLAIM OF THE ASSESSEE WAS THAT THESE EXPENSES WERE CRYSTA LLIZED DURING THE FINANCIAL YEAR 2004-05 AND THE LIABILITY TO INCUR THESE EXPEN SES AROSE IN THIS YEAR THE ASSESSING OFFICER OBSERVED THAT ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM. HE FURTHER OBSERVED THAT IT WAS STATED BY THE ASSESSEE THAT A MAJOR PART OF THE PAYMENTS RELATES TO REFIXATION OF TARIFF OF ELECTRI CITY AND A PART PAYMENTS PERTAINS TO SALARY ARREARS ETC. THE ASSESSING OFFICER MADE T HE ADDITION STATING THAT ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACC OUNTING. ACCORDING TO ASSESSING OFFICER, IN MERCANTILE SYSTEM, EXPENDITUR E IS CHARGED TO THE YEAR TO WHICH IT IS RELATABLE. ON APPEAL THE CIT(A) UPHELD THE ORDER AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 33. AT THE VERY OUTSET SHRI HARISH NAYYAR, LD. COUN SEL FOR THE ASSESSEE SUBMITTED THAT LIABILITY TO INCUR THE SUM OF RS. 30 ,39,30,384/- IS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, THERE WAS NOT JUSTIFICATION IN MAKING THE ADDITION. HE FURTHER SUBMITTED THAT AUTH ORITIES BELOW HAVE NOT AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE MAKING THE ADDITION. 34. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE THINK IT PROPER TO REMAND THE MATTER TO THE FILE OF THE ASSESSING OFFICER. THE ORDERS PASSED BY THE AUTHORITIES BELOW ARE NOT SPE AKING ORDERS. EVEN THE RELEVANT FACTS ARE NOT ON RECORD. IN THE ABSENCE OF THE RELE VANT FACTS, WE ARE NOT IN A POSITION TO DECIDE THE ISSUE CORRECTLY. WE, THEREF ORE, SET ASIDE THE ORDER OF 13 CIT(A) AND REMAND THIS ISSUE TO THE ASSESSING OFFIC ER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER AFFOR DING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 35. FOR STATISTICAL PURPOSES THIS GROUND OF APPEAL IS ALLOWED. 36. GROUND NO. 9 OF THE APPEAL READS AS UNDER:- 9) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS. 1986710 ON ACCOUNT O F DISALLOWANCE OF PENAL INTEREST DEBITED TO PROFIT AN D LOSS ACCOUNT. THE ADDITION HAS BEEN MADE WITHOUT CONSIDE RING THE FACTS OF THE CASE CORRECTLY, THE BACKGROUND AND PAS T HISTORY IN THE MATTER. THE ADDITION IS UNJUST, ILLEGAL AND DES ERVES TO BE DELETED. IT IS PRAYED THAT ADDITION OF RS. 1986710 MAY KINDL Y BE ORDER TO BE DELETED. 37. VIDE GROUND NO.9 OF THE APPEAL THE ASSESSEE HAS CHALLENGED THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS. 19,86, 710/- MADE ON ACCOUNT OF DISALLOWANCE OF PENAL INTEREST AND DEBITED TO PROFI T AND LOSS ACCOUNT. 38. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF THE A SSESSING OFFICER OBSERVING AS UNDER:- 2.1 THIS ISSUE HAS ALSO ARISEN IN THE CASE OF HARY NA POWER GENERATION CORPORATION LTD. IN A.Y. 2002-03 AND THE APPELLANTS CASE IN THE A.Y. 2002-03. AS THE FACTS ARE IDENTICA L, THE ISSUE IS DISPOSED OF WITH THE SAME DIRECTIONS, WHICH ARE REP RODUCED BELOW FROM MY ORDER IN APPEAL NO. 41/P.K.L./06-07 DATED 1 3/08/2007. 4.1 DURING HEARING OR THE APPEAL, THE APPELLANT SU BMITTED AS FOLLOWS: PENAL INTEREST ON CAPITAL LIABILITIES AMOUNTING T O RS. 1,34,37,878/- AS SHOWN IN THE ORDER IS NOT CORRECT. IN FACT THIS 14 AMOUNT IS RS. 1,12,56,063/- AS PER REVISED INCOME T AX RETURN FILED ON 31/03/2004. AS PER THE AUDITED ACCOUNTS, ON THE BASIS OF WHICH THE REVISED INCOME TAX RETURN WAS FILED, TOTAL INTEREST AND FIN ANCE CHARGES AS PER SCHEDULE-22 WERE RS. 1,82,48,26,247/- (INCLU DING PENAL INTEREST ON CAPITAL LIABILITIES RS. 1,12,56,063/-). OUT OF THE ABOVE AMOUNT, RS. 64,76,80,833/- BEING INTEREST OF CAPITAL NATURE WAS REDUCED FROM THE TOTAL INTEREST. AS REGA RDS PENAL INTEREST ON CAPITAL LIABILITIES, IT IS STATED THAT THIS INTEREST RELATES TO ACQUISITION OF CAPITAL ASSETS, WHICH IS INCLUDED IN THE ABOVE AMOUNT OF RS. 64,76,80,833/- CAPITALIZED. HENCE. NO EXPENDITURE ON THIS ACCOUNT WAS DEBITED TO PROFIT A ND LOSS ACCOUNT RATHER IT WAS AN ADDITION IN THE TOTAL COST OF ACQUISITION OF CAPITAL ASSETS. A REFERENCE TO THE SCHEDULE 22 OF THE BALANCE SHEET REVEALS THAT THE EXPENDITURE ON CAPITAL LIABILITIES HAS ALR EADY BEEN REDUCED FROM THE REVENUE EXPENDITURE AND ONLY SUCH AMOUNT WHICH REVENUE NATURE HAVE BEEN PAID TO THE EXPENDIT URE ACCOUNT. THE ADDITION IS NOT JUSTIFIED AND DESERVES TO BE DELETED. 4.2 IT IS FURTHER SUBMITTED THAT: AS REGARDS THE GROUND RELATING TO PENAL INTEREST ON CAPITAL LIABILITIES CONCERNED, WE INVITE YOUR KIND ATTENTIO N TO THE DECISION OF THE HONBLE ITAT IN WHICH THE SIMILAR I SSUE IN TE CASE OF HARYANA STATE ELECTRICITY BOARD FOR ASSESSM ENT YEAR 1996-97 AND 1997-98 IN APPEAL NUMBER 762 AND 763/CH D/2001 CONSIDERED BY THE HONBLE ITAT. AFTER ITS DUE CONSI DERATION, THE ADDITION WAS SET-ASIDE TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION AND VERIFICATION OF THE MATTER. THE MATTER HAS NOT BEEN ADJUDICATED BY THE ASSESSING OFFICER A S A RESULT OF WHICH THE ADDITION SET ASIDE BY THE HONBLE ITAT STANDS DELETED, AS THE SAME HAS NO EFFECT OF MAKING ADDITI ON TO THE INCOME ON THIS ACCOUNT. IN OUR SUBMISSION, IN ABSEN CE OF ANY FINDING BY THE ASSESSING OFFICER ON THE MATTER, NO ADDITION CAN BE MADE. WE WOULD LIKE TO CLARIFY THAT AS ON DATE, THE ORDER OF ITAT HAS THE FORCE OF LAW AND HAS BEEN TAKEN AS THE FINAL ORDER 15 IN RESPECT OF THE ISSUE AT STAKE. SINCE THE ORDER D ATED 26/07/2005 OF HONBLE ITAT CHANDIGARH BENCH HAS SET ASIDE THE FINDING OF THE CIT(APPEALS) AND DIRECTED THE AO TO REEXAMINE THE MATTER, IN OUR SUBMISSION THE FINDING OF THE AO ALSO DESERVES TO BE TREATED ON THE SAME FOOTING AS IN THE CASE OF HSEB, FOR ASSESSMENT YEAR 1999-2000. 4.3 I HAVE PERUSED THE ORDER NO. 762,763/CHANDI/20 01 DATED 26/07/05 RELATING TO PAYMENT OF PENAL INTEREST. THE RELEVANT EXTRACT OF THE ORDER READS AS UNDER: IN REGARD TO THE GROUND OF APPEAL RELATING TO THE ADDITION OF RS. 30,97,248/- MADE BY THE AO ON ACCOUNT OF PENAL INTEREST ON CAPITAL LIABILITIES, THE LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE AO DISALLOWED THIS AMOUNT BEING CAPITAL EXPENDITURE AS IN THE PAST BUT FAILED TO SPECIFY TH E WORD PAST. NO SUCH DISALLOWANCE HAD EVER BEEN MADE IN THE PAST , WHICH APPARENTLY IS THE BASIS FOR MAKING THE ADDITION DUR ING THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED BEFORE THE AO THAT THIS AMOUNT WAS ACTUAL OVERDUE INTEREST PAID TO CERTAIN LENDING INSTITUTIONS WHO AUTHORIZED THE ASSESSEE TO REPAY T HE PRINCIPAL AMOUNT AFTER THE DUE DATE ON PAYMENT OF ADDITIONAL AMOUNT OF INTEREST. THE AMOUNT HAD BEEN PAID AS OVERDUE INTER EST BEING THE FINANCIAL CHARGES ON THE CREDIT AVAILED BY THE ASSESSEE AND HAS BEEN INCURRED EXCLUSIVELY FOR THE PURPOSES OF T HE BUSINESS OF THE ASSESSEE. HOWEVER, THE AO HAD DISALLOWED THI S AMOUNT. ON APPEAL, THE CIT(A) HELD THAT THE CONTENTION OF T HE ASSESSEE THAT THE SAME STOOD ALREADY REDUCED FROM REVENUE CH ARGES SHOULD BE VERIFIED BY THE ASSESSING OFFICER AFTER O BTAINING DETAILS AND VERIFICATION THEREOF. THE CIT(A) HAS AC CEPTED THE ASSESSEES CONTENTION THAT SAME ALREADY STOOD REDUC ED FROM THE REVENUE CHARGES AND SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR VERIFICATION. ACCORDINGLY, WE FIND NO MERIT IN THE APPEAL OF THE ASSESSEE SINCE THE MATTER ALREADY STA NDS SET ASIDE BY THE CIT(A) TO THE AO. IT WOULD BE SEEN FROM THE ABOVE THAT THE ISSUE WAS RESTORED TO THE AO FOR LIMITED PURPOSE OF VERIFYING WHETHER THE AMOUNT WAS ALREADY REDUCED FROM THE REVENUE CHARGES OR NOT. IN THE LIG HT OF THE AFORESAID JUDGMENT AS WELL AS THE APPELLANTS CLAIM AS REPROD UCED IN PARA 4 16 ABOVE, THE AO IS DIRECTED TO VERIFY THE CLAIM OF TH E APPELLANT WHETHER THE IMPUGNED AMOUNT OF PENAL INTEREST ON CAPITAL LI ABILITY IS ALREADY REDUCED FROM REVENUE CHARGES OR NOT. IN CASE, IT HA S ALREADY BEEN REDUCED, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTION. THE GROUND IS DISPOSED OFF ACCORDINGLY 2.2 AS DIRECTED ABOVE, IN THE PRESENT CASE ALSO, TH E AO IS DIRECTED TO VERIFY THE CLAIM OF THE APPELLANT WHETHER THE IM PUGNED AMOUNT OF PENAL INTEREST ON CAPITAL LIABILITY IS ALREADY REDU CED FROM REVENUE CHARGES OR NOT ALLOW THE DEDUCTION. THE GROUND IS D ISPOSED OFF ACCORDINGLY. 39. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH THE PARTIES WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS IS SUE. IN OUR OPINION, LD. CIT(A) HAS CORRECTLY DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE WHETHER THE IMPUGNED AMOUNT OF PENAL INTE REST ON CAPITAL LIABILITY IS ALREADY REDUCED FROM THE REVENUE CHARGES OR NOT. IN THAT VIEW OF THE MATTER WE DO NOT SEE ANY MERIT IN THIS GROUND OF APPEAL AND A CCORDINGLY WE DISMISS THE SAME. 40. GROUND NO. 10 OF THE APPEAL READS AS UNDER:- 10) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN GIVING DIRECTIONS FOR COMPUTING THE AMOUNT OF LOSSES TO BE CARRIED FORWARD CORRECTLY, WHEREAS THE APPELLANT HAS FILED THE RETURN DECLARING A LOSS OF RS. 4679912960. THE ASSESSING O FFICER HAS ARRIVED AT A FIGURE OF RS. 468248168, WHICH IS FACT UALLY INCORRECT. IT IS PRAYED THAT SUITABLE DIRECTIONS IN THE MATTER MAY BE GIVEN TO THE ASSESSING OFFICER TO RECOMPUTE THE LOS S TO BE CARRIED FORWARD CORRECTLY SO THAT NO UNDUE HARDSHIP S IS CAUSED TO THE APPELLANT. 41. SHRI HARISH NAYYAR, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT A SUITABLE DIRECTION IN THE MATTER MAY BE GIVEN TO THE ASSESSI NG OFFICER TO RECOMPUTE THE LOSS TO BE CARRIED FORWARD CORRECTLY SO THAT NO UND UE HARDSHIP IS CAUSED TO THE ASSESSEE. 17 42. CONSIDERING THE FACTS OF THE PRESENT CASE, WE D IRECT THE ASSESSING OFFICER TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER AFFOR DING A DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 43. FOR STATISTICAL PURPOSES, GROUND NO.10 OF THE A PPEAL IS ALLOWED. 44. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY AND PARTLY FOR STATISTICAL PURPOSES. ITA NO. 1097/CHD/2010 (ASSESSMENT YEAR 2006-07) 45. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF CIT(A), PANCHKULA DATED 1.6.2010 RELATING TO ASSESSMENT YEA R 2006-07. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE AND HENCE NO FINDIN GS ARE BEING GIVEN. 46. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2) THAT THE NEXT GROUND OF APPEAL IS TO CHALLENGE T HE CONFIRMATION OF ADDITION OF RS. 51382026 ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. IT IS PRAYED THAT ADDITION OF RS. 51382026, WHICH H AS BEEN MADE WITHOUT CONSIDERING THE FACTS OF THE CASE, IS ARBITRARY AND MAY KINDLY BE ORDERED TO BE DELETED. 47. AT THE TIME OF HEARING OF THE APPEAL, SHRI HARI SH NAYYAR, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR THIS GROUND OF APPEA L AND ACCORDINGLY, WE DISMISS THE SAME AS NOT PRESSED. 48. GROUND NOS. 3 & 4 OF THE APPEAL READS AS UNDER: - 3) THAT THE NEXT GROUND OF APPEAL IS TO CHALLENGE THE CONFIRMATION OF ADDITION OF RS. 23592123 ON ACCOUNT OF DISALLOWANCE OF INTEREST PAYMENTS ON LOANS TAKEN FR OM NCR PLANNING BOARD. IT IS PRAYED THAT ADDITION OF RS. 23592123, WHICH H AS BEEN MADE WITHOUT CONSIDERING THE FACTS OF THE CASE, IS ARBITRARY AND MAY KINDLY BE ORDERED TO BE DELETED. 18 4) THAT THE NEXT GROUND OF APPEAL IS TO CHALLENGE THE CONFIRMATION OF ADDITION OF RS. 850543 UNDER SECTIO N 43B OF THE INCOME TAX ACT. IT IS PRAYED THAT ADDITION OF RS. 850943, WHICH HAS BEEN MADE WITHOUT CONSIDERING THE FACTS OF THE CASE, IS ARBIT RARY AND MAY KINDLY BE ORDERED TO BE DELETED. 49. IT IS OBSERVED THAT WE HAVE ALREADY DECIDED A S IMILAR ISSUE IN ITA NO. 486/CHD/2009 FOR ASSESSMENT YEAR 2005-06 VIDE GROUN D NOS. 6 & 5 RESPECTIVELY. FOR THE DETAILED REASONS GIVEN HEREIN ABOVE, WE SET ASIDE THE ORDER OF CIT(A) ON THESE ISSUE AND REMAND THE MATTER TO THE ASSESSING OFFICER GIVING THE SAME DIRECTIONS AS IN ITA NO. 486/CHD/2009 FOR ASSESSMEN T YEAR 2005-06. THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE A FRESH IN ACCORDANCE WITH LAW AFTER AFFORDING DUE AND REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. GROUND NOS. 3 & 4 OF THE APPEAL ARE ALLOWED FOR STA TISTICAL PURPOSES. 50. IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ITA NO. 146/CHD/2011 (ASSESSMENT YEAR 2007-08) 51. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 29.11.2010 OF CIT(A), PANCHKULA RELATING TO ASSESS MENT YEAR 2007-08. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE AND HENCE N O FINDINGS ARE BEING GIVEN. 52. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS. 313759072 ON ACC OUNT OF INTEREST PAYMENT ON LOANS TAKEN FROM REC. THE ADDI TION HAS BEEN CONFIRMED WITHOUT CONSIDERING THE FACTS OF THE CASE CORRECTLY. THE ADDITION IS UNJUST, ILLEGAL AND DESERVES TO BE QUASHED. IT IS PRAYED THAT ADDITION OF RS. 313759072, MAY KI NDLY BE ORDERED TO BE DELETED. 19 53. AS PER THE ASSESSING OFFICER THE ASSESSEE FAILE D TO DEDUCT TAX U/S 194A (1) OF THE ACT ON INTEREST AMOUNTING TO RS. 31,37,59,07 2 PAID ON LOAN TAKEN FROM RURAL ELECTRIFICATION CORPORATION (REC). THE ASSESS ING OFFICER DISALLOWED THE SAME U/S 40(A)(IA) OF THE ACT. ON APPEAL, THE CIT( A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER AND HENCE THE ASSESSEE IS IN APPE AL BEFORE THE TRIBUNAL. 54. AT THE VERY OUTSET, SHRI HARISH NAYYAR, LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE AS REC IS A NOTIFIED EXEMPT INSTITUTION. IN OUR OPINION, THE AB OVE CONTENTION OF THE ASSESSEE NEEDS TO BE VERIFIED AT THE LEVEL OF ASSESSING OFFI CER. THE ASSESSING OFFICER SHOULD VERIFY AS TO WHETHER REC IS A NOTIFIED EXEMP T INSTITUTION AND, THEREFORE, NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE. ACCOR DINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMAND THE MATTER TO THE FI LE OF ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH KEEPING IN VIEW THE ABOVE O BSERVATIONS. NEEDLESS TO SAY THAT ASSESSING OFFICER SHOULD AFFORD A REASONABLE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUE. 55. FOR STATISTICAL PURPOSES, THIS GROUND OF APPEAL STANDS ALLOWED. 56. GROUND NO. 3 OF THE APPEAL READS AS UNDER:- 3) THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS. 27475128 ON ACCO UNT OF PRIOR PERIOD EXPENDITURE DEBITED TO THE ACCOUNTS OF THE CURRENT YEAR. THE ADDITION HAS BEEN CONFIRMED WITHO UT CONSIDERING THE FACTS OF THE CASE CORRECTLY. IT IS PRAYED THAT ADDITION OF RS. 27475128, MAY KIN DLY BE ORDERED TO BE DELETED. 57. THE ASSESSEE CLAIMED RS. 2,74,75,128/- AS PRIOR PERIOD EXPENSES. THE ASSESSING OFFICER DISALLOWED THE SAME OBSERVING THA T THE ASSESSEE FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING AND NOTHING HAS BEE N BROUGHT ON RECORD TO SHOW THAT THE LIABILITY TO PAY THIS EXPENDITURE HAS IN A NY WAY ARISEN OR CRYSTALLIZED 20 DURING THE FINANCIAL YEAR 2006-07 I.E. THE YEAR UND ER CONSIDERATION. THE ASSESSEE TOOK THE PLEA THAT THE SIMILAR ADDITION MADE IN THE ASSESSMENT YEAR 2006-07 HAS BEEN DELETED BY CIT(A), PANCHKULA VIDE HIS ORDER DA TED 1.6.2010. HOWEVER, THE LD. CIT(A) DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND UPHELD THE ORDER OF ASSESSING OFFICER AND HENCE THE ASSESSEE IS IN A PPEAL BEFORE THE TRIBUNAL. 58. BEFORE US, SHRI HARISH NAYYAR, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER (DY. CIT, PANCHKULA CIRCLE, PANCH KULA VIDE ITS ORDER DATED 27.3.2012 PASSED U/S 154 OF THE ACT HAS ALLOWED THE CLAIM OF THE ASSESSEE. HE HAS CATEGORICALLY OBSERVED THAT DISALLOWANCE IS PRIOR P ERIOD EXPENSES WAS A MISTAKE APPARENT FROM THE RECORDS. HE, THEREFORE, RECTIFIED THE MISTAKE U/S 154 OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER (SH. MANVEET SI NGH SEHGAL, ACIT, PANCHKULA CIRCLE PANCHKULA) VIDE HIS ORDER DATED 15.1.2013 U/S 154 OF THE ACT RECTIFIED THE ORDER PASSED BY THE ASSESSING OFFICER ON 27.3.2012. CONSEQUENTLY, HE MADE AN ADDITION OF RS. 2,74,75,128/- TO THE TOTAL INCOME O F THE ASSESSEE. IT APPEARS THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON 1 5.1.2013 AFTER RECEIVING THE ORDER OF CIT(A). SHRI HARISH NAYYAR LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DETAILS OF THE PREVIOUS YEARS EXPENDITURE ALON GWITH DOCUMENTARY EVIDENCE WERE ALSO FURNISHED BEFORE THE ASSESSING OFFICER. H OWEVER, ASSESSING OFFICER DISALLOWED THE SAME WITHOUT TAKING INTO CONSIDERATI ON THE FACTS OF THE MATTER AND DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCE EDINGS. 59. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND ALSO THE ORDERS PASSED U/S 154 OF THE ACT, WE ARE OF THE OPINION THAT THE ORDER OF CIT(A) DESERVES TO BE SET ASIDE ON THIS ISSUE AND T HE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING DUE AND REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. FOR STATISTICAL PURPOSES, THIS GROUND OF APPEAL IS ALLOWED. 21 60. FOR STATISTICAL PURPOSES ITA NO. 146/DH/2011 IS ALLOWED. ITA NO. 1080/CHD/2010 ( ASSESSMENT YEAR 2006-07) ITA NO. 136/CHD/2011 (ASSESSMENT YEAR 2007-08 ITA NO. 533/CHD/2011 (ASSESSMENT YEAR 2008-09) ITAT NO. 1022/CHD/2014 (ASSESSMENT YEAR 2009-10) ITA NO. 63/CHD/2015 (ASSESSMENT YEAR 2011-12) 61, THE ABOVE APPEALS ARE FILED BY THE REVENUE. IN THESE APPEALS, COMMON ISSUE INVOLVED RELATES TO DELETION OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST PAYMENT ON LOANS TAKEN FROM MARKET COMMITT EES. THE ASSESSING OFFICER HAS MADE DISALLOWANCE HOLDING THAT ASSESSEE HAD TAK EN LOANS OF DIFFERENT AMOUNTS IN DIFFERENT YEARS FROM MARKET COMMITTEES ON WHICH ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF CERTAIN AMOUNT ON ACCRUAL B ASIS BUT INTEREST HAS ACTUALLY NOT BEEN PAID. THE ASSESSING OFFICER OBSERVED THAT TDS HAS NOT BEEN DEDUCTED BY THE ASSESSEE AT THE TIME OF CREDIT OF INTEREST. THE CONTENTION OF THE ASSESSEE WAS THAT INTEREST WAS PROVIDED BUT TAX ON THE SAME HAS NOT BEEN RECOVERED SINCE MARKET COMMITTEES PROVIDED A LETTER VIDE WHICH THEY HAVE BEEN GRANTED REGISTRATION U/S 12AA OF THE INCOME TAX ACT AS A RE SULT OF APPELLATE ORDER OF ITAT DELHI. IT IS SAID THAT MARKET COMMITTEES ARE C HARITABLE INSTITUTIONS WHOSE INCOME IS EXEMPT U/S 11 OF THE I.T. ACT. AS PER CI RCULAR F. NO. 12/113/68-II(A- II) DATED 28.10.1968 NO TAX IS TO BE DEDUCTED WHILE MAKING PAYMENT TO THE INSTITUTIONS WHOSE INCOME WAS EXEMPT U/S 11 OF THE ACT. THE CIT(A) DELETED THE ADDITION STATING THAT IN THE ABOVE NOTIFICATION IT HAS BEEN MENTIONED THAT MARKET COMMITTEES ARE ESTABLISHED UNDER THE STATE AGRICULT URE PRODUCE MARKET ACT. THE MARKET COMMITTEES TO WHOM INTEREST HAS BEEN CREDITE D BY THE ASSESSEE ARE SET UNDER THE PUNJAB AGRICULTURE PRODUCE MARKET ACT, AN D HENCE NO TDS IS DEDUCTIBLE. HE ACCORDINGLY DELETED THE ADDITION. 22 62. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH T HE PARTIES WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE ITAT, CHANDIGARH BENCH, IN THE CASE OF M/S UTTAR HARYANA BIJLI VITRAN NIGAM LTD. (UHBVN LTD.)VS. ADDITIONAL CIT, P ANCHKULA IN ITA NO. 554/CHD/2009 RELATING TO ASSESSMENT YEAR 2005-06. THE TRIBUNAL VIDE ITS ORDER DATED 3.8.2015 HELD THAT SINCE THE INCOME OF THE MA RKET COMMITTEE IS EXEMPT U/S 11 AND ALSO IT COMES UNDER EXCLUSIONARY CLAUSE U/S 194A THERE IS NO NEED TO DEDUCT TAX ON THE SAME. THEREFORE, NO DISALLOWANCE INVOKING THE PROVISIONS OF SECTION 40(A)(IA) IN THE HANDS OF ASSESSEE CAN BE M ADE. WE HAVE ALREADY REPRODUCED THE ABOVE OBSERVATIONS OF THE TRIBUNAL I N PARA 11 (SUPRA). RESPECTFULLY, FOLLOWING THE ORDER OF THE TRIBUNAL I N THE CASE OF M/S UTTAR HARYANA BIJLI VITRAN NIGAM LTD. (UHBVN LTD.) VS. AD DITIONAL CIT, PANCHKULA (SUPRA), WE REJECT GROUND NO. 1 OF ALL THE APPEALS PREFERRED BY THE REVENUE. 63. GROUND NO.2 RAISED BY THE REVENUE IN ITA NO. 1022/CHD/2014, READS AS UNDER:- 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THAT LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 4,35, 23,908/- MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES, WHEN THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. 64. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE CLAIMED PRIOR PERIOD EXPENSES AT RS. 3,65,92,742/- ON ACCOUNT OF INTERES T CHARGES AND RS. 69,31,166/- ON ACCOUNT OF OTHER PRIOR PERIOD EXPENSES. ACCORDI NG TO ASSESSING OFFICER THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCO UNTING AND THERE WAS NOTHING TO SHOW THAT LIABILITY TO PAY THIS EXPENDITURE IN A NY WAY EITHER ARISEN OR CRYSTALLIZED DURING THE FINANCIAL YEAR 2009-09. TH US, ASSESSING OFFICER DISALLOWED PRIOR PERIOD EXPANSES ON ACCOUNT OF INTE REST CHARGES OF EARLIER YEARS AND PRIOR PERIOD EXPENSES AMOUNTING TO RS. 4,35,23, 908/- AS THE SAME WAS NOT RELATED TO THE CURRENT YEAR. 23 65. ON APPEAL THE CIT(A) DELETED THE ADDITION OBSER VING AS UNDER:- 6.2 I HAVE GONE THROUGH THE FACTS OF THE CASE AND WRITTEN SUBMISSIONS FILED BY THE APPELLANT. SIMILAR PRIOR P ERIOD EXPENSE IN THE APPELLANTS OWN CASE FOR THE ASSESSM ENT YEAR 2006-07 IN APPEAL NO. 99/PKL/08-09 DATED 1.6.2010 W ERE CONSIDERED AND DIRECTION TO THE AO WAS ISSUED TO EX AMINE AND IN CASE LIABILITY BECAME ASCERTAINED DURING THE YEA R, THE SAME SHOULD BE ALLOWED. DURING THE YEAR UNDER CONSIDERAT ION, IT IS NOTED THAT THE AO HAS DISALLOWED AN AMOUNT OF RS.4,35,23,908/- ON ACCOUNT OF PRIOR PERIOD EXPENSE S. THE APPELLANT HAS SUBMITTED THAT THE COMPANY IS FOLLOWI NG MERCANTILE SYSTEM OF ACCOUNTING. HOWEVER, DURING CO URSE OF ITS NORMAL ACTIVITIES CERTAIN LIABILITIES ARISE WHICH P ERTAIN TO LAST YEARS BUT ON ACCOUNT OF SPECIFIC REASONS IN RESPECT OF EACH TRANSACTION THE SAME COULD NOT BE QUANTIFIED IN THE YEAR TO WHICH THEY PERTAINED. THESE LIABILITIES WERE ON ACC OUNT OF ARREARS OF SALARY, POWER BILLS AND OTHER PURCHASES WHICH WERE IN DISPUTE BEFORE OTHER AUTHORITIES. THE DETAILS OF SUCH EXPENSES ALONGWITH DOCUMENTARY EVIDENCES WERE ALSO FILED BEFORE THE AO. THE SAME DETAILS WERE ALSO FURNISHED BEFORE ME AND IT IS NOTICED THAT THE EXPENSES WERE MAINLY ON ACCOUNT OF REFUND OF EARNEST MONEY, REFUND OF PENALTY, ADJUSTM ENT OF EXCESS INTEREST, ENERGY BALLS, ARREAR OF PAY AND AL LOWANCES, INSPECTION CHARGES, MAINTENANCE CHARGES ON ACCOUNT OF REVISION OF RATES, PAYMENT TO CONTRACTORS ON HIGH C OURT DECISION ETC. MAJORITY OF THE EXPENSES HAVE ARISEN DUE TO ADJUSTMENTS OR ON DIRECTION OF COURTS ETC. 6.3 ON PERUSAL OF THE NATURE OF EXPENSES, IT IS NO TICED THAT A MAJOR EXPENSE OF RS. 3.65 CRORES IS ON ACCOUNT OF R EVISED ANNUAL FEE AND CHARGES UNDER ULDC SCHEME FOR THE PE RIOD 2004 TO 2009 AS PER CERC ORDER. ANOTHER EXPENSE OF RS. 4,58,446/- IS ON ACCOUNT OF BILLS RAISED BY PGCIL D URING THE YEAR PERTAINING TO SLDC FOR FINANCIAL YEAR 2007. AN OTHER EXPENSE OF RS.8,73,493/- AS INSPECTION CHARGES DUE TO CPRJ WAS PAID DURING THE YEAR AFTER COMPLETION OF FORMAL ITIES WITH CPRI. THE EXPENSES OF RS.30,13,432/- ON ACCOUNT OF OPERATION AND MAINTENANCE CHARGES PERTAINING TO F.Y. 2007-08 WERE 24 CHARGED DUE TO REVISION OF RATES. ANOTHER EXPENSE O F RS. 14,92,348/- WAS ON ACCOUNT OF PAYMENT TO CONTRACTOR AS PER DIRECTION OF HIGH COURT. A PAYMENT OF RS.3,23,238/- , RS.49,000/- AND RS.28,728/- WAS ON ACCOUNT OF REFUN D OF PAYMENT OF PENALTY WHICH WERE IMPOSED EARLIER BUT R EFUNDED DURING THE YEAR ON ACCOUNT OF EXTENSION OF TIME FOR COMPLETION OF WORK. THERE ARE CERTAIN OTHER EXPENSES OF LOWER AMOUNTS WHICH ALSO SHOWS THE LIABILITIES ON ACCOUNT OF SUCH EXPENSES WERE ASCERTAINED DURING THE YEAR UNDER CONSIDERATIO N. THEREFORE, ON PERUSAL OF NATURE OF SUCH EXPENSES, I T IS FOUND THAT THE LIABILITY TO PAY THESE EXPENSES HAVE ARISE N DURING THE YEAR AND THOUGH THE EXPENSES PERTAINED TO PRIOR PER IOD BUT AS THEY HAVE CRYSTALLIZED DURING THE YEAR, SUCH EXPENS ES ARE ALLOWABLE DURING THE YEAR UNDER CONSIDERATION. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS,4,35,23,908/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. THIS GROUND OF APPEAL IS ALLOWED. 66. AGGRIEVED BY THE DELETION OF ADDITION, THE REVE NUE IS IN APPEAL BEFORE THIS TRIBUNAL. 67. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH T HE PARTIES AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS UN DISPUTED FACT THAT ASSESSEE IS A STATE GOVERNMENT UNDERTAKING. THE ACCOUNTS OF THE A SSESSEE ARE SUBJECT TO AUDIT BY COMPTROLLER AND AUDITOR GENERAL OF INDIA. THERE IS NO DISPUTE THAT ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTS. IN THE CASE OF SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD V S CIT [1995] 213 ITR 523 (GUJ.), THE HONBLE GUJARAT HIGH COURT HELD THAT MERELY BECAUSE AN EX PENSES RELATES TO A TRANSACTION OF AN EARLIER YEAR IT DOES NOT BECOME A LIABILITY P AYABLE IN THE EARLIER YEAR UNLESS IT CAN BE SAID THAT THE LIABILITY WAS DETERMINED AN D CRYSTALLIZED IN THE YEAR IN QUESTION ON THE BASIS OF MAINTAINING ACCOUNTS ON TH E MERCANTILE BASIS. THE HON HON'BLE HIGH COURT FURTHER OBSERVED THAT IN EACH CA SE WHERE THE ACCOUNTS ARE MAINTAINED ON THE MERCANTILE BASIS IT HAS TO BE FOU ND IN RESPECT OF ANY CLAIM, WHETHER SUCH LIABILITY WAS CRYSTALLIZED AND QUANTI FIED DURING THE PREVIOUS YEAR 25 SO AS TO BE REQUIRED TO BE ADJUSTED IN THE BOOKS OF ACCOUNT OF THAT PREVIOUS YEAR. IF ANY LIABILITY, THOUGH RELATING TO THE EARLIER YE AR, DEPENDS UPON MAKING A DEMAND AND ITS ACCEPTANCE BY THE ASSESSEE AND SUCH LIABILITY HAS BEEN ACTUALLY CLAIMED AND PAID IN THE LATER PREVIOUS YEARS IT CAN NOT BE DISALLOWED AS DEDUCTION MERELY ON THE BASIS THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS AND THAT IT RELATED TO A TRANSACTION OF THE PREVIOUS YEAR. IN THE INSTANT CASE, THE LD. CIT(A) HAS CATEGORICALLY STATED THAT LIABILITY WAS DETERM INED AND CRYSTALLIZED IN THE YEAR IN QUESTION PERTAINS TO MAINTAINING ACCOUNTS ON THE MERCANTILE BASIS. HE HAS CATEGORICALLY STATED THAT THESE LIABILITIES WERE ON ACCOUNT OF ARREARS OF SALARY, POWER BILLS AND OTHER PURCHASES WHICH WERE IN DISPU TE BEFORE THE AUTHORITIES. THE ASSESSEE FURNISHED THE DETAILS OF SUCH EXPENSES ALONGWITH DOCUMENTARY EVIDENCE BEFORE THE ASSESSING OFFICER. THE LD. COM MISSION FURTHER OBSERVED THAT THE SAME DOCUMENTS WERE ALSO FURNISHED BEFORE HIM A ND THE EXPENSES WERE MAINLY ON ACCOUNT OF EARLIER MONTH, REFUND OF PENALTY, ADJ USTMENT OF EXCESS INTEREST, ENERGY BILLS, ARREAR OF PAY AND ALLOWANCES, INSPECT ION CHARGES, MAINTENANCE CHARGES ON ACCOUNT OF REVISION OF RATES, PAYMENT TO CONTRACTORS ON HIGH COURT DECISION ETC. THE LD. COMMISSIONER OBSERVED THAT MA JORITY OF THESE EXPENSE HAVE ARISEN DUE TO ADJUSTMENT OR ON DIRECTION OF COURTS ETC. THE LD. CIT(A) HAS GIVEN THE DETAILS OF EARLIER YEARS EXPENDITURE IN P ARA 6.3 OF THE IMPUGNED ORDER. THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE FI NDINGS OF CIT(A). THE CIT(A) HAS ALSO OBSERVED THAT NATURE OF THE EXPENSES ARE S UCH THAT LIABILITY TO PAY THESE EXPENSES HAS ARISEN DURING THE YEAR AND THOUGH THE EXPENSES PERTAIN TO PRIOR PERIOD. THE CIT(A) HAS ALSO GIVEN A CATEGORICAL FIN DINGS THAT THE LIABILITY WAS DETERMINED AND CRYSTALLIZED DURING THE YEAR AND, TH EREFORE, THESE EXPENSES WERE ALLOWABLE WHILE THE ASSESSEE WAS FOLLOWING THE MERC ANTILE SYSTEM OF ACCOUNTING. 68. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE DO NOT SEE ANY VALID GROUND IN INTERFERING WITH THE FI NDINGS OF LD. CIT(A) ON THIS 26 ISSUE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) AND REJECT THE GROUND RAISED BY THE REVENUE. 69. IN VIEW OF THE ABOVE DISCUSSION, ALL THE FIVE A PPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/08/2015. SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 21 ST AUGUST, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR