Symphony Ltd., Ahmedabad V. The Dy.CIT, Circle-8, Ahmedabad

ITA 2133/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6379 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 17-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SYMPHONY LTD. SAUMYA, NEAR BAKERI CIRCLE, NAVRANGPURA, AHMEDABAD PAN: AACCS6739B (APPELLANT) VS THE D CIT, CIRCLE - 8 , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: SHRI BHARAT SHAH, A.R. DATE OF HEARING : 01 - 11 - 2 018 DATE OF PRONOUNCEMENT : 16 - 01 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2010 - 11 , ARI SES FROM ORDER OF THE CIT(A) - 9, AHMEDABAD DATED 24 - 04 - 2 015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. T HE ASSESSEE HAS FILED RETURN OF INCOME ON 6 TH SEP, 2010 DECLARING TOTAL INCOME OF RS. 66 , 39 , 5 7 , 520/ - . SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 26 TH SEP, 2011. I T A NO . 2133 / A HD/20 15 A SS ESSMENT YEAR 2010 - 11 I.T.A NO. 2133 /AHD/20 15 A.Y. 2010 - 11 PAGE NO . SYMPHONY LTD. VS. D CIT 2 ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS PASSED ON 27/01/2014. THE ASSESSEE HAS FILED APPEAL AGAINST THE DECISION OF LD. CIT(A) ON THE TWO ISSUES I.E. DISALLOWANCE U/S. 14 OF THE ACT AND DISALLOWANCE ON SALE TAX EXPENSES . BOTH THESE TWO ISSUES UNDER THE GROUNDS OF APPEAL ARE DISCUSSED AS UNDER. DISALLOWANCE U/S. 14A 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFIC ER NOTICED THAT ASSESSEE HAS MADE HUGE INVESTMENT AND EARNED SUBSTANTIAL EXEMPT INCOME H OWEVER, IT HAS NOT MADE ANY DISALLOWANCE U/S. 14A OF THE ACT. THERE F ORE, THE QUERY WAS RAISED TO THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE U/S. 14A SHOULD NOT BE MADE A S IT HAS EARNED EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION . THE ASSESSEE RESPONDED THAT IT HAS MADE INVESTMENT FROM ITS OWN FUND IN THE MUTUAL FUND, THEREFORE, NO DISALLOWANCE WAS REQUIRED TO BE MADE U/S. 14 A OF THE ACT. THE ASSESSING OFFICER HAD NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT IT HA D GIVEN GENERAL EXPLANATION AND COULD NOT ESTABLISH BY WAY OF SUBMITTING FUND FLOW THAT THERE WAS NO DIVERSION OF INTEREST BEARING FUND. CONSEQUENTLY, AS PER PROVISION OF SECTION 1 4 R.W.S RULE 8D OF T HE ACT THE ASSESSING OFFICER HAS COMPUTED DISALLOWANCE TO THE AMOUNT OF RS . 30 ,93,671/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). T HE LD. CIT(A) H AS PARTLY ALLOWED THI S GROUND O F THE APPEAL OF THE ASSESSEE BY RESTRICTING ADDITION TO THE AMOUNT OF RS . 12 , 52 , 481/ - . RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 3.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. I HAVE ALSO PERUSED VARIOUS CAS E LAWS RELIED UPON BY THE APPELLANT. IT IS SEEN THAT T HE ASSESSING OFFICER MADE DISALLOWANCE U/S. 14A AS PER THE PROVISIONS OF RULE 8D OF I.T. RULES, 1962. THE PROVISIONS OF RULE 8D WERE INSERTED WITH EFFECT FROM 24 - 03 - 2008 AND THE SAME IS APPLICABLE FRO M A.Y. 2008 - 09 AND SUBSEQUENT YEARS. THIS I.T.A NO. 2133 /AHD/20 15 A.Y. 2010 - 11 PAGE NO . SYMPHONY LTD. VS. D CIT 3 VIEW WAS EXPRESSED BY BOMBAY HIGH COURT IN GODREJ AND BOYECE MFG. CO. LTD. (2010) 328 ITR 81 (BOM). 3.3 PROVISIONS OF SEC. 14A(3) EXPRESSLY PROVIDES T HAT PROVISIONS OF SEC. 14A(2) SHALL ALSO APPLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. PROVISIONS OF SEC. 14A(2) FURTHER PROVIDES THAT THE A.O. SHALL MADE DISALLOWANCE FOR THE PURP OSE OF SEC. 14A AS PER THE PROVISIONS OF RULE 8D OF I.T. RULES, 192. THIS WAY, PROVISIONS OF SEC. 14A R.W. RULE 8D ARE MANDATORY AND IN MY CONSIDERED VIEW THE A.O. HAD RIGHTLY FOLLOWED PROVISIONS OF SEC. 14A R.W. RULE 8D OF THE I.T. RULES, 1962. IT IS AL SO A MATTER O F RECORD TH AT T H E APPELLANT HAS NOT POINTED OUT ANY DEFECT IN THE COMPUTATION OF DISALLOWANCE AS PER THE PROVISIONS OF RU L E 8D AS ADOPTED BY THE A.O. IS TAKEN CORRECT FOR THE PURPOSE OF T HIS ORDER. 3.4 IT IS SEEN THAT THE LD. AR HAS RELIED UPON VARIOUS CASES. A PERUSAL OF THESE CASES REVEALS THAT T H E HON BLE ITAT ALLOWED THE APPEAL OF THE APPELLANT AS THE A.O. HAS NOT RECORDED HIS SATISFACTION THAT T H E EXPENSES CLAIMED BY T H E ASSESSEE IS INCORRECT AND THE A.O. HAD STRAIGHTWAY APPLIED THE PRO VISIONS OF RULE 8D. THE RATIO OF T H E SE CASES WILL NOT BE APPLICABLE IN THE INSTANT C ASE AS THE A.O. WAS NOT SATISFIED WITH THE EXPENSES CLAIMED BY THE APPELLANT AND THE A . O. A ND CONFRONTED THI S VIEW TO THE APPELLANT. IN VIEW OF THESE FACTS, WITH DUE RESP ECT, I AM NOT INCLINED TO FOLLOW THE RATIO OF THESE CASES. I HAVE FURTHER OBSERVED THE FACTS OF THE CASE AND THE SUBMISSIONS O F THE APPELLANT. IT IS SEEN THAT APPELLANT S TOTAL INVESTMENTS AMOUNT TO R S. 6,24,69,511/ - THIS YEAR , AS AGAINST THE SURPLUS OWN FUNDS OF RS. 9,66,05,405/ - . AS PER APPELLANT THE A.O. HAS NOT BEEN ABLE TO PROVE THE FACT OF UTILIZATION OF INTEREST BEARING FUNDS FOR EARNING OF EXEMPT INCOME. GIST OF THE APPELLANT S SUBMISSION IS THAT S INCE HE HAS ENOUGH INTEREST FREE FUNDS WHICH FAR EXCEED S THE INVESTMENTS MADE BY HIM, THEREFORE, NO ALLOCATION OF INTEREST EXPENDITURE CAN BE MADE TOWARDS EARNING OF INTEREST FREE INCOME. IN THIS REGARD IT IS SEEN FROM THE ASSESSMENT ORDER THAT APPELLANT HAS NOT FURNISHED ANY EVIDENCE T O SHOW THAT INVES TMENTS WERE MADE FROM INTEREST FREE FUNDS. THIS ISSUE HAS BEEN DEALT IN THE CASE OF GUJARAT GAS FINANCIAL SERVICES LTD, HON BLE SPECIAL BENCH OF ITAT AHMEDABAD 115 ITD 218 THE ISSUE OF DISALLOWANCE U/S. 14A HAS BEEN DISCUSSED IN PARA 101 OF THE ORDER O F THE HON BLE ITAT SPECIAL BENCH AS UNDER: - THERE I S NO DISPUTE AND T HERE CANNOT BE ANY DOUBT, THAT SOME EXPENDITURE IS INCURRED FOR MAKING OR EARNING FROM DIVIDEND. IN CASE OF MIXED ACCOUNTING TH E EXPENDI TURE IS NOT IDENTIFIED AS SUCH IS DIRECTLY IS RE LATED TO EARNING OF DIVIDEND . BUT THAT CANNOT B E A GROUND TO SAY THAT NO EXPENDI TURE IS INCURRED FOR EA R N ING DIVIDEND INCOME OR THAT NO EXPENDITURE COULD BE RELATED TO THAT INCOME. UPON HEARING BOTH THE PARTIES AND CONSIDERING MATERIAL AVAILABLE ON RECOR D INTEREST OF JUSTICE WILL BE SERVED IF 10% OF THE EXPENDITURE IS ALLOCATED FOR EARNING DIVIDEND AND DISALLOWED U/S. 14A OF THE I.T. ACT. THE APPELLANT CONTENDED THAT IT WAS HAVING SUFFICIENT INTEREST FREE FUNDS TO INVEST IN THE SHARES AND MUTUAL FUNDS A ND THE A.O. HAS NOT PROVED NEXUS BETWEEN THE INVESTMENT IN EQUITY SHARES AND THE INTEREST BEARING FUNDS AND ACCORDINGLY DISALLOWANCE U/S. 14A CANNOT BE MADE. AS PER THE PROVISIONS OF RULE 8D OF I.T. RULES, 1962 THE A.O. IS NOT REQUIRED TO PROVE NEXUS BETW EEN INVESTMENTS IN EQUITY SHARES AND INTEREST BEARI NG FUND. IN VIEW OF THESE FACT I AM NOT INCLINED TO AGREE WITH THE CONTENTIONS OF THE LD. A.R. THE APPELLANT ALSO CONTENDED THAT DISALLOWANCE U/S. 14A SHOULD BE MADE O N NET INTEREST AND NOT AT THE GROSS I NTEREST EXPENDITURE. I AM AL S O NOT INCLINED ON THIS ISSUE WITH H E APPELLANT SINCE SECTION 14A REFERS TO INTEREST EXPENDITURE ON RENT, TAXES , SALARIES, INTEREST ETC. IN RESPECT OF WHICH ALLOWANCES ARE PROVIDED FOR. THESE DEDUCTIONS ARE FOR THE DEBITS IN T H E REAL SENSE. THE PAY BACK DOES NOT CONSTITUTE EXPENDITURE INCURRED IN TERMS OF SECTION 14A. IN VIEW OF THESE FACTS, I HOLD THAT DISALLOWANCE FOR T HE PURPOSE OF SECTION 14A IS TO BE MADE AGAINST INTEREST EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT . THIS WAY, I AM INCLINED TO AGREE WITH THE DISALLOWANCE MADE BY THE A.O. FURTHER IN THE CASE OF M/S. DHANUKA & SONS 339 ITR 319 HON BLE KOLKATA HIG H COURT HAS HELD THAT, IT IS FO R THE ASSESSEE TO SHO W THE SOURCE OF ACQUISITION OF THESE SHARES BY PRODUCTI ON OF MATERIAL T HAT TH E SE WERE ACQUIRED FROM THE FUNDS AVAILABLE IN THE HANDS OF THE ASESSEE AT THE RELEVANT POINT OF TIME WITHOUT TAKING BENEFIT OF ANY LOAN. HON BLE AHMEDABAD BENCH IN THE CASE OF ACIT VS. TRANSFORMER & RECTIFIERS (INDIA) LTD. ITA NO. 30 90/AHD/2011 HAS HELD THAT THE ONUS IS I.T.A NO. 2133 /AHD/20 15 A.Y. 2010 - 11 PAGE NO . SYMPHONY LTD. VS. D CIT 4 ON TH E ASSESSE E TO ESTABLISH THAT THERE IS NO NEXUS BETWEEN THE EXEMPT INCOME AND THE INTEREST EXPENDITURE INCURRED. IN T HE CASE OF CHEMINVEST LTD. [212 ITD 318 2009 (DEL)] DELHI SPECIAL BENCH HELD THAT SEC. 14 DISAL LOWANCE HAD TO BE MADE IN RESPECT OF INTEREST ON LOANS, WHICH WERE UTILIZED FOR INVESTMENT IN S HARES , EVEN THOUGH NO DIVIDEND INCOME WAS EARNED I N THOSE SHARES DURING THE RELEVANT YEAR. WHEREAS HON BLE ITAT CHENNAI IN THE CASE OF SI V A INDUSTRIES & HOLDING LTD. ITS - 438 - ITAT - 2011 (CHNY) AND TS - 317 - ITAT - 2012(CHNY)]RELYING ON THE SPECIAL BENCH RULING I N CHEMINVVET LTD, CHENNAI ITAT HELD, THAT THE DISALLOWANCE U/S . 14A WAS APPLICABLE, EVE N THOUGH THE ASSESSEE D ID NOT EARN ANY EXEMPT INCOME IN AY 2007 - 08. ITA T NOTED THAT WHILE DISPOSING THE APPEAL FOR THE EARLIER YEAR, THE RULING OF WAS INCORRECT. IN THE EARLIER YEAR, ITAT HAD HELD THAT THE DISALLOWANCE FOR INTEREST PAID ON LOANS BORROWED FOR MAKING INVESTMENT IN SHARES WAS NOT APPLICABLE AS TH E ASSES S EE DID NOT EARN ANY DIVIDEND FROM S U CH INVESTMENT. IN THE C ASE OF TECHNOPACK ADVISORS P LTD [(2012) 50 SOT 31 (DELHI)(URO) IT IS HE L D THAT EVEN IF THE INTEREST IN SHAR E S DID NOT YIELD ANY DIVIDEND IN THE YEAR UNDER CONSIDERATION , THE DISALLOWANCE U/S. 14A ON TH E EXPENDITURE INCURRED FOR EARNING INCOME WAS DISALLOWABLE, NOTWITHSTANDING THE FACT THAT NO SUCH INCOME WAS EARNED. HON BLE KERALA HC IN CASE OF POPULAR VEHICLES & SERVICES LTD. [(2010) 325 ITR 523 (KEL)] HAS HELD. THE ASSESSEE BORROWED FUNDS FROM BANKS , WHICH WERE DIVERTED TO PARTNERSHIP FIRMS, IN WHICH IT WAS A PARTNER HC NOTED THAT T H E ASSESSEE DI D NOT RECEIVE ANY INTEREST FROM THOSE FIRMS. THE ONLY BENEFIT DERIVED WAS SH A RE OF PROFIT WHICH WAS EXEMPT U/S. 10(2A). HC SUSTAINED THE DISALLOWANCE OF IN TEREST BY INVOKING PROVISIONS OF SEC. 14A SIMILARLY IN THE CASE OF VISHNU ANANT MAHAJ A N [TS - 396 - ITAT - 2012(AHD)] AHMEDABAD SPECIAL BENCH OF HON BLE ITAT HELD, THAT SEC. 14A DISALLOWABLE IS APPLICABLE TO PARNTERS SHARE IN THE FIRM S FIRM PROFIT WHICH IS E XMEPT U/S. 10(2A). ITAT SB HELD THAT PROFIT FROM FIRM IS NOT INCLUDED IN THE TOTAL INCOME OF THE PARTNER BY VIRTUE OF EXEMPTION PROVISIONS OF SEC. 10(2A). ITAT HELD THAT A PARTNERSHIP FIRM IS NOT A PASS THROUGH VEHICLE AND THE FIRM AND PARTNERS ARE SEPAR ATELY ASSESSABLE TO TAX, DESPITE THE POSITION OF LAW UNDER THE PARTNERSHIP ACT THAT THE FIRM IS A COMPENDIUM OR COLLECTIVE NAME. THE CBDT HAS RECENTLY ISSUED CIRCULAR NO. 5/2014 DATED 11 FEB, 2014 THROUGH WHICH IT HAS TAKEN VIEW THAT DISALLOWANCE OF EXPEND ITURE FOR EARNING EXEMPT INCOME U/S. 14A R.W. RULE 8D WOULD BE ATTRACTED EVEN IF THE CORRESPONDING EXEMPT INCOME HAS NOT BEEN EARNED DURING THE FINANCIAL YEAR, THEREBY SUPER SEDING A FEW DECISIONS RENDERED IN THIS REGARD. IN VIEW OF DETAILED DISCUSSION IN ABOVE PARAGRAPHS, THE CONTENTIONS OF APPELLANT IS NOT FULLY ACCEPTABLE. HOWEVER IT IS SEEN THAT THE STAND TAKEN BY THE A.O. OF APPLYING RULE 8D IS CORRECT BUT THE A.O. HAS NOT CONSIDERED THE INTEREST ALRE ADY DISALLOWED BY APPELLANT IN COMPUTATION OF INCOM E. THE APPELLANT HAS DISALLOWED THE INTEREST ON INCOME - TAX I.E. RS. 35,06,675/ - (INTEREST ON FBT RS. 21,200, INTEREST ON INCOME - TAX RS. 34,68,428 INTEREST ON TDS R S. 7,082 INTEREST ON WEALTH TAX RS. 9,965) BUT THE A.O. HAS ERRED IN COMPUTATION U/S. 14A T HE CORRECT AMOUNT COMES TO RS. 12,52,481/ - INSTEAD DISALLOWED AM O U N T OF RS. 30,93,671/ - AS WORKED OUT BY APPELLANT IN ITS SUBMISSION. ACCORDINGLY THE A.O. IS DIRECTED TO WORK OUT CORRECT DISALLOWANCE U/S. 14A I.T. ACT. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL CONTENDED THAT ASSESSEE HAS MADE INVESTMENT OUT OF SURPLUS INTEREST FREE FUND AVAILABLE WITH THE ASSESSE THEREFORE NO EXPENDITURE UNDER RULE 14D OF THE IT ACT SHOULD BE DISALLOWED. HE HAS ALSO PLACED RELIANCE ON THE DECISIONS OF CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF ASSESSEE ITSELF VIDE ITA NO. 1817 & 1896/AHD/2014 ASSESSMENT Y EAR 2009 - 10 DATED 311 - 08 - 2018. I.T.A NO. 2133 /AHD/20 15 A.Y. 2010 - 11 PAGE NO . SYMPHONY LTD. VS. D CIT 5 ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY . WE HAVE GONE THROUGH THE BALANCE SHEET OF THE ASSESSEE FOR THE PERIOD AS ON 31 ST MARCH, 2010 AND OBSERVED THAT ASSESSEE WAS HAVING INTEREST FREE RESERVE AND SURPLUS FUND TO T HE AMOUNT OF RS. 6286.04 LACS AS AGAINST INVESTMENT OF RS. 2965.21 LACS MADE DURING THE YEAR UNDER CONSIDERATION. W E HAVE ALSO NOTICED THAT CO - ORDINATE BENCH OF THE ITAT IN T H E CASE OF THE ASSESSEE ITSELF VIDE ITA NO. 1817/AHD/2014 ON 31 ST AUGUST , 2018 HAS DECIDED THE IDENTICAL ISSUE ON IDENTICAL FACTS AS UNDER: - 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IN THE IMPUGNED ORDER. LD. A.R. FILED VOLUMINOUS PAPER BOOK IN SUPPORT OF ITS CONTENTION AND STATED THAT HIS RESERVE AND SURPLUS ARE OF RS. 15606 7282/ - AND HIS INVESTMENT OF RS. 125383779/ - AND SAME IS EVIDENT FROM THE PAPER BOOK AT PAGE NO. 5. THEREFORE, SECTION 14A READ WITH RULE 8D IS NOT APPLICABLE TO HIM READ WITH RULE 8D IS NOT PERMISSIBLE. IN THE CASE OF PR. COMMISSIONER OF INCOME TAX VS. SI NTEX INDUSTRIES LTD. 2018) 93 TAXMANN.COM 24 (SC) HAS HELD IN FAVOUR OF ASSESSEE HOLDING THAT WHERE ASSESSEE HAD SURPLUS FUND AGAINST WHICH MINOR INVESTMENT WAS MADE, NO QUESTION OF MAKING ANY DISALLOWANCE OF EXPENDITURE U/S. 14A OF THE ACT AROSE AND THERE FORE, THERE WAS NO QUESTION OF ANY ESTIMATION OF EXPENDITURE UNDER RULE 8D OF THE INCOME TAX ACT. THUS, RESPECTFULLY FOLLOWING THE AFORESAID APEX COURT JUDGMENT, WE DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES. RESPECTFULLY FOLLOWING THE DECISION O F THE CO - ORDINATE BENCH IN THE CASE OF THE ASSESSEE ITSELF O N IDENTICAL FACT AND SIMILAR ISSUE, WE ALLOW THE APPEAL OF THE ASSESSE. 7. DURING THE COURSE OF ASSESSMENT , THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS CLAIMED SALE TAX EXPENSES OF RS. 8 , 74 . 889/ - PERTAINING TO EARLIER YEARS (2000 - 01 TO 2001 - 02). T HE ASSESSEE EXPLAINED THAT THESE EXPENSES PERTAINED TO PATNA BRANCH AN D THE SAME WERE RELATED TO THE PAYMENT MADE I N THE EARLIER Y E AR AGAINST WHICH THE APPEAL WAS FILED, THEREFORE, THE IMPUGNED E XPENSES WAS SHOWN AS ADVANCES IN THE BALANCE SHEE T AS THE SAID LIABILITY WAS NOT ACCEPTED BY THE ASSESSEE. AND AFTER DISMISSAL OF THE APPEAL THE I.T.A NO. 2133 /AHD/20 15 A.Y. 2010 - 11 PAGE NO . SYMPHONY LTD. VS. D CIT 6 AMOUNT PAID WAS TREATED AS EXPENSES FOR THE YEAR UNDER CONSIDERATION . THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE. HE OBSERVED THAT SUCH EXPENDITURE CAN BE CLAIMED ONLY IN THE YEAR IN WHICH IT HAS BEEN INCURRED AND FILING OF APPEAL CANNOT BE BASED FOR CLAIMING PRIOR PERIOD EXPENSES. CONSEQUENTLY , HE HAS DISALLOWED THE CLAIM OF EXPEN SES OF RS. 8 , 74 , 889/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 8. AGGRIEVED ASSESSEE FILED APPEAL BEFORE LD. CIT(A). THE LD. CIT(A) HA S SUSTAINED THE DISALLOWANCE. THE RELEVANT PART OF DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 9.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. IT IS SEEN THAT THE APPELLANT HAS CLAIMED EXPENSES OF RS. 8,74,889/ - WHICH PER TINS TO EARLIER YEARS (2000 - 01 & 2001 - 02). THIS FACT IS ADMITTED BY THE APPELLANT ALSO. EVEN IF THE APPELLANT DID NOT ACCEPT THE SALES - TAX DEMAND RAISED BY THE LOWER AUTHORITIES, IT SHOULD HAVE CLAIMED THE EXPENDITURE DURING THE THOSE YEARS ONLY. FILING OF APPEAL CANNOT BE THE BASIS FOR CLAIMING PRIOR PERIOD EXPENSES. THE APPELLANT HAS FAILED TO ESTABLISH AS TO HOW THE SAID EXPE NDITURE CRYSTALIZED DURING THE YEAR UNDER CONSIDERATION. AS THESE EXPENSES PERTAIN TO THE EARLIER YEARS, ACCORDINGLY, I AM OF THE CONSIDERED OPINION THAT THESE EXPENSES CANNOT BE ALLOWED IN THE CURRENT ASSESSMENT YEAR AS PER THE CONSISTENT ACCOUNTING POLI CY OF THE APPELLANT. IN VIEW OF THE ABOVE, DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 8,74,889/ - IS CONFIRMED. 9. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS CONTENDED THAT THE SALE TAX EXPENSES WERE CLAIMED ON THE BASIS OF CRYSTALLIZATION OF THE SAID LIABILITY . HE HAS ALSO PLACED RELIANCE ON THE DECISION OF CO - ORDINATE BENCH OF ITAT IN ITA 3484/AH D/2010 IN THE CASE OF ITO VS. NATIONAL GINNING & PROCESSING FACTORY ORD ER DATED 22 - 07 - 2015 AND ITA NO S . 714 T O 715 AND 996/AH D/2009 IN THE CASE OF M/S. TRANSPEK INDUSTRY VS. ACIT ORDER DATED 30 - 12 - 2011. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF LD. CIT(A). I.T.A NO. 2133 /AHD/20 15 A.Y. 2010 - 11 PAGE NO . SYMPHONY LTD. VS. D CIT 7 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY . THE LD. CIT(A) HAS STATED THAT ASSESSE E HAS FAILED TO ESTABLISH HOW SAID EXPENDITURE CRYSTALIZED DURING THE YEAR. AFTER TAKING INTO CONSIDERATION THE SUBMISSION OF THE ASSESSEE AND THE DECISION OF CO - ORDINATE BENCHES OF THE ITAT , WE CONSIDER IT WILL BE AP PROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO EX AMINE THE CLAIM OF THE ASSESSEE AFTER AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT LIABILITY HAS CRYSTALIZED DURING THE YEAR UNDER CONSIDERATION . THEREFORE , THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PR ONOUNCED IN THE OPEN C OURT ON 16 - 01 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMA RJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 16 /01/2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,