DCIT, CHENNAI V. M/s. Dr. Agarwal's Eye Hospital Ltd., CHENNAI

ITA 2295/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6252 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 04-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOPI KRISHNA
• Assessee Lawyers: V S JAYAKUMAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , # , ' ( BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./ ITA NO.2295/MDS/2016 '# # /ASSESSMENT YEAR: 2011-12 THE DY. COMMISSIONER OF INCOME- TAX, CORPORATE CIRCLE-1(1), CHENNAI-34. VS. M/S.DR.AGARWALSS EYE HOSPITAL LTD., NO.19, CATHEDRAL ROAD, GOPALAPURAM, CHENNAI-86. [PAN: AAACD 2373 G ] ( * /APPELLANT) ( +,* /RESPONDENT) DEPARTMENT BY : MR.GOPIKRISHNA, JCIT ASSESSEE BY : MR.V.S.JAYAKUMAR, ADV. 6 /DATE OF HEARING : 06.09.2017 6 /DATE OF PRONOUNCEMENT : 08.09.2017 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.2295/MDS/2016 IS AN APPEAL FILED BY THE REV ENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1 , CHENNAI, IN ITA NO.112/1-15 & NEW ITA NO.64/CIT(A)-1/2014-15 DATED 27.05.2016 FOR THE AY 2011-12. ITA NO.2295/MDS/2016 :- 2 -: 2. SHRI GOPIKRISHNA, CIT., REPRESENTED ON BEHALF OF THE REVENUE AND SHRI V.S.JAYAKUMAR, ADV., REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IT WAS SUBMITTED BY THE LD.DR THAT THE LD.CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE EXPENSES WHICH HAS BEEN DISALLO WED BY THE AO WITHOUT APPRECIATING THE FACT THAT THE EXPENSES WHI CH ARE CLAIMED, DID NOT BELONG TO THE RELEVANT AY BUT RELATE TO THE IMMEDIA TELY PRECEDING FINANCIAL YEAR. IT WAS A SUBMISSION THAT THE ORDER OF THE LD.CIT(A) WAS LIABLE TO BE REVERSED. 4. IN REPLY, THE LD.DR SUBMITTED THAT THE GENUINENE SS OF THE EXPENDITURE COULD NOT BE DISPUTED. IT WAS A SUBMIS SION THAT ON ACCOUNT OF NON-CRYSTALIZATION, THE EXPENSES COULD NOT BE CLAIM ED IN THE IMMEDIATELY PRECEDING AYS BUT THE SAME HAS BEEN CLAIMED AS AND WHEN THE SAME WERE CRYSTALLIZED. IT WAS A SUBMISSION THAT THE ORDER O F THE LD.CIT(A) WAS LIABLE TO BE UPHELD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET, IT IS NOTICED THAT THE AY INVOLVED IS 2011-12. THE REVEN UE HAS FILED AN APPEAL IN THE ASSESSEES OWN CASE IN RESPECT OF THE IMMEDI ATELY PRECEDING AY BEING AY 2010-11 IN ITA NO.865/MDS/2017. IT IS NOT ICED THAT THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE FOR THE IMMEDIATELY PRECEDING AY IN ITA NO.865/MDS/2017 VID E ITS ORDER DATED 05.09.2017 HELD AS FOLLOWS: ITA NO.2295/MDS/2016 :- 3 -: FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAD B EEN FOLLOWING THIS ACCOUNTING PRACTICES CONSISTENTLY. IN THE LIGHT OF THE RATIO SETTLED BY THE DELHI HIGH COURT IN THE CASE OF CIT VS. JAGATJIT INDUSTRIES IN ITA NO. 848/2010, THE ISSUE N O. (I), SUPRA, IS IN FAVOUR OF THE ASSESSEE. NOW, LET US EXAMINE WHETHER THE NATURE A ND GENUINENESS OF THE EXPENDITURE HAS BEEN EXAMINED OR NOT. IN THIS REGARD, THE RELEVANT PORTION OF THE ASSESSMENT ORDER IS EXTRACTED AS UNDER: 4. THE ASSESSEE FILED A REPLY DATED 12.10.2015, IN THIS REGARD WHICH IS REPRODUCED AS FOLLOWS: THE DISALLOWANCES MENTIONED IN YOUR ORDER RELATES T O PRIOR PERIOD EXPENDITURE (EXPENDITURE PERTAINING TO PREVIOUS ASSESSMENT YEAR CLAIMED DURI NG AY 2010-11). THE ASSESSEE RUNS CHAIN OF OPHTHALMOLOGY HOSPITALS AND HAS OVER 25 BR ANCHES ACROSS INDIA. ON ACCOUNT OF THE VOLUME OF TRANSACTIONS, CERTAIN BILLS COULD BE ACCOUNTED ONLY AFTER THE YEAR END. THOUGH THE ASSESSEE IS A COMPANY AND REQUIRE TO MAI NTAIN BOOKS OF ACCOUNTS ON ACCRUAL BASIS, PROVISION FOR EXPENDITURE CANNOT BE MADE BAS ED ON ESTIMATES SINCE ESTIMATE CANNOT BE ACCURATE. IN SUCH HIGH VOLUME LOW VALUE TRANSACTION, THE LIAB ILITY IN RESPECT OF CERTAIN BILLS WOULD NOT HAVE CRYSTALLIZED AS AT THE YEAR-END ON ACCOUNT OF VARIOUS FACTORS. WE HAVE ALREADY FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS)-1 FOR AY 2012-13 ON SIMILAR GROUNDS. IN CIT VS. VISHNU INDUSTRIAL GASES (IN THE HIGH COU RT OF DELHI, ITR NO. 229/1988, DECIDED ON: 6 TH MAY, 2008) WHERE THE DEPARTMENT HAD NOT DISPUTED TH AT THE EXPENDITURE WAS DEDUCTIBLE IN PRINCIPLE BUT WAS ONLY DISPUTING THE YEAR IN WHICH THE DEDUCTION COULD BE ALLOWED HELD. 5. THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDER ED AND IS NOT ACCEPTED AS THE SAID AMOUNT IS NOT AN ALLOWABLE EXPENDITURE UNDER T HE PROVISIONS OF THE ACT. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND TH E DEDUCTIONS CAN BE ALLOWED IN RESPECT OF ONLY THOSE EXPENSES WHICH ARE INCURRED IN THE RE LEVANT ACCOUNTING YEAR FOR THE PURPOSE OF COMPUTING THE PROFITS AND GAINS. HENCE THE SAID AMOUNT IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. FROM THE ABOVE, IT IS CLEAR THAT THE AO HAS NOT EXAM INED THE NATURE AND GENUINENESS OF THE IMPUGNED EXPENDITURE. HE HAS SIMPLY DISALLOWED FOR THE REASON THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE D EDUCTION CAN BE ALLOWED IN RESPECT OF ONLY THOSE EXPENSES WHICH ARE INCURRED IN THE RELEV ANT ACCOUNTING YEAR OF COMPUTING THE PROFITS AND GAINS. THUS, HE HAD NOT EXAMINED THE NA TURE AND GENUINENESS OF THE EXPENDITURE AT ALL. IN THE VIEW OF THAT WE ARE OF THE CONSIDERED OPINION THAT THE AO HAS TO EXAMINE THE NATURE AND GENUINENESS OF THE EXPENDITU RE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW FOLLOWING THE RATIO OF THE DELHI HIGH COUR T (SUPRA). TO THAT EXTENT, THE REVENUES APPEAL IS TREATED AS ALLOWED. 6. IN THE RESULT, THE REVENUES APPEAL IS TREATED A S PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. AS IT IS NOTICED THAT THE ISSUES FOR THE RELEVAN T AY ARE ALSO IDENTICAL TO THIS ISSUES IN RESPECT OF THE REVENUES APPEAL I N ITA NO.865/MDS/2017 REFERRED TO SUPRA, RESPECTFULLY FOLLOWING THE DECIS ION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.865/MDS/2017 FOR T HE AY 2010-11 ON ITA NO.2295/MDS/2016 :- 4 -: IDENTICAL DIRECTIONS GIVEN BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.865/MDS/2017, THE ISS UES ARE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION. WE ALSO MAK E IT CLEAR THAT THERE CAN BE IN NO CASE DOUBLE ALLOWANCE OF AN EXPENDITURE, A S, FOR EXAMPLE, THROUGH INCREASED OPENING STOCK FOR THE CURRENT YEA R (ON ACCOUNT OF THE GOODS BEING RECEIVED DURING THE PRECEDING YEAR) AND ALSO BY RECORDING THE PURCHASE IN ACCOUNTS ON THE RECEIPT OF THE CORRESPO NDING INVOICES DURING THE CURRENT YEAR. IN THESE CIRCUMSTANCES, THE APPEA L FILED BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 08 , 2017, AT CHENNAI. SD/- SD/- ( ) ( SANJAY ARORA ) /ACCOUNTANT MEMBER ( # ) (GEORGE MATHAN) ' /JUDICIAL MEMBER /CHENNAI, : /DATED: SEPTEMBER 08, 2017. TLN 6 +';< =< /COPY TO: 1. * /APPELLANT 4. > /CIT 2. +,* /RESPONDENT 5. < +'' /DR 3. > ( ) /CIT(A) 6. # /GF