KAPOL CO-OPERATIVE BANK LTD, MUMBAI V. ITO 1(3)(4), MUMBAI

ITA 2063/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83985 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIDANAND DUBE
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Business expenditure; Opportunity of being heard; Principle of natural justice; Agreed addition
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER I.T.A.NO. 2063/M/2012 ( AY: 2007 - 2008) KAPOL COOPERATIVE BANK, SAMRUDHI BUILDING, GROUND FLOOR, PLOT NO.127, VALLABHAI ROAD, NEAR SHUBHAM HALL, VILE PARLE (W), MUMBAI 400 056. PAN: AAAAT0142M VS. ITO - 1(3)(4), ROOM NO.564, 5 TH FLOOR, AYAKAR BHAVAN, NEW MARINE LINES, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAHUL K. HAKANI RESPONDENT BY : SHRI SACHIDANAND DUBE DATE OF HEARING: 29.9.2014 DATE OF ORDER: 29 .10.2014 O R D E R PER D. KARUNAKARA RAO, AM : THIS APPEAL FILED BY THE ASSESSEE ON 28.3.2012 IS AGAINST THE ORDER OF THE CIT (A) - 2, MUMBAI DATED 30.11.2011 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. IN THIS APPEAL, THE GROUNDS RAISED BY THE ASSESSEE ARE BASICALLY ARGUMENTATIVE IN NATURE AND THE SAME REVOLVES AROUND THE ADDITION OF RS. 10,81,012/ - . THEREFORE, THE RELEVANT GROUND NO.1.1 IS EXTRACTED AND THE SAME READ S AS UNDER: DISALLOWANCE OF EXPENSES OF RS. 10,81,012/ - THE CIT (A) ERRED IN CONFIRMING THE ORDER OF THE AO ON THE GROUND THAT PRIOR PERIOD EXPENSES AS UNDER RS. 10.81 LAC S PERTAINING TO AY 2006 - 07 WERE WRONGLY CLAIMED BY THE APPELLANT AS EXPENDITURE FOR THE AY 2007 - 2008. S.NO. PARTICULARS AMOUNT 1 ANNUAL MAINTENANCE & SERVICE CHARGES FOR COMPUTERS RS. 8,41,800/ - 2 SECURITY CHARGE FOR HEAD OFFICE, DEMAT DEPT AND CASH VAN RS. 1,16,212/ - 3 SHORT PROVISION OF PROFESSIONAL CHARGES RS. 1,23,000/ - 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY AND FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. DURING THE ASSESSMENT 2 PROCEEDINGS, AO NOTED FROM THE P & L ACCOUNT THAT THE PRIOR PERIOD EXPENSES PERTAINING TO THE FY 2005 - 2006 WERE DEBITED. IN OTHER WORDS, IN THE COMPUTATION OF INCOME, THE SAID PRIOR PERIOD EXPENDITURE WAS NOT FULLY ADDED . WITHOUT GOING INTO THE CLAIM OF THE ASSESSEE THA T THE EXPENDITURE TO THE TUNE OF RS. 10,81,012/ - WAS ACTUALLY CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION OR NOT , AO MADE ADDITION OF RS. 10,81,012/ - . AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). 4. DURING THE PROCEEDINGS BEFORE THE CIT (A), A SSESSEE SUBMITTED THAT THE SAID ADDITION IS NOT SUSTAINABLE IN LAW. DISAGREEING WITH THE FINDING OF AO, ASSESSEE CONTESTED THAT IT IS NOT AN AGREED ADDITION, THEREFORE , IT IS A DISPUTED ADDITION. FURTHER, ASSESSEE CONTESTED THAT THE AO FAILED TO APPRECIA TE THE FACT THAT MOST OF THE BILLS WERE ISSUED BY THE SUPPLIERS DURING THE AY 2007 - 2008 UNDER CONSIDERATION AND THE SAID BILLS WERE RECEIVED VERY LATE MUCH AFTER THE ANNUAL ACCOUNTS FOR THE AY 2005 - 2006 WERE FINALIZED AND APPROVED BY THE GENERAL BODY OF ME MBERS (GBM) OF THE BANK. IF ONLY AO HAS CONSIDERED THE DATES APPEARED ON THE BILLS, THE EXPENDITURE IN QUESTION IS ACCRUED ONLY IN THE CURRENT FY. ASSESSEE JUSTIFIED HIS CLAIM BY MENTIONING THAT THE SAID AMOUNTS WERE SUBJECT TO TDS IN THE YEAR UNDER CONS IDERATION AND THEREFORE, THE CLAIM MADE IN THE AY 2007 - 2008 IS PROPER. HE ALSO RELIE D ON THE PROVISIONS OF SECTION 37 OF THE ACT IN SUPPORT OF HIS CLAIM THAT THE SAID EXPENDITURE IS AN ALLOWABLE ONE. ON CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE, LD CIT (A) HELD THAT THE SAID EXPENDITURE BEING A PRIOR PERIOD EXPENSES PERTAINING TO THE AY 2006 - 2007 IS NOT ALLOWABLE IN THE YEAR UNDER CONSIDERATION. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A), ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNA L BY RAISING THE ABOVE GROUND NO.1.1. IN GROUND NOS. 1.2 TO 1.11, ASSESSEE RAISED VARIOUS ARGUMENTATIVE GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, IT IS THE CASE OF THE ASSESSEE THAT THE SAID EXPENDITURE IS UNDISPUTEDLY A BUSINESS EXPENDITURE OF THE ASSESSEE AND THE SAME WAS INCURRED IN THE AY 2006 - 2007. THE SAID EXPENDITURE RELATES TO ANNUAL MAINTENANCE AND SERVICE CHARGES OF COMPUTERS, SECURITY CHARGES AND SHORT PROVISION OF PROFESSIONAL CHARGES ETC. THE SUPPLIERS HAVE SENT THE BILLS LATE AND THEY WERE RECEIVED BY THE ASSESSEE ONLY AFTER THE ANNUAL ACCOUNTS FOR THE AY 2006 - 07 WERE CLOSED. THE EXAMINATION OF THE B ILLS INDICATE THAT THEY WERE RAISED IN THE FY 2006 - 2007 RELEVANT FOR THE AY 2007 - 2008. RELYING ON THE JUDGMENT IN THE CASE OF CIT VS. 3 SOURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD (91 ITR 170) AND THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE O F CIT VS. VISHNU INDUSTRIAL GASES (229 ITR 1988), LD COUNSEL FOR THE ASSESSEE ARGUED THAT THE CLAIM OF THE ASSESSEE IS ALLOWABLE CONSIDERING THE FACT THAT THE BILLS ARE RAISED IN THE YEAR UNDER CONSIDERATION AND THE CLAIM CANNOT BE DENIED MERELY BASING ON THE DATE APPEARING ON THE BILLS. 6. ON THE OTHER HAND, LD DR HEAVILY RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND FIND THAT IT IS A SETTLED PROPOSITION IN LAW THAT THE DATE OF CRYSTALLIZATION OF THE L IABILITY BECOMES RELEVANT FOR MAKING CLAIM BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YEAR. ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES, WE FIND , THEY HAE NOT APPLIED THE SET LAW IN THE FACT OF THE PRESENT ISSUE IN PROPER PERSPECTIVE. THE ASSESSIN G OFFICER HAS NOT EXAMINED THE APPLICABILITY OF THE ABOVE REFERRED JUDGMENTS. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE LEGAL PROPOSITIONS CITED ABOVE, WE ARE OF THE OPINION THAT THIS ISSUE SHOULD BE REMANDED TO THE FILE OF THE AO FOR FRESH ADJUDI CATION. ACCORDINGLY, WE REMAND THE MATTER TO THE FILE OF AO WITH A DIRECTION TO AFFORD AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE AND TO APPLY THE RATIO LAID DOWN IN THE JUDGMENT OF SOURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD (SUPRA) AND THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF VISHNU INDUSTRIAL GASES (SUPRA). ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSE E IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONO UNCED IN THE OPEN COURT ON 2 9 T H OCTOBER, 2014. S D / - S D / - (H.L. KARWA) (D. KARUNAKARA RAO) PRESIDENT ACCOUNTANT MEMBER DATE: 2 9 .10.2014. AT :MUMBAI OKK COPY TO : 1. APPELLANT 2. RESPONDENT 4 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR A, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI