M/s. Edelweiss Financial Advisors Ltd., Ahmedabad V. The ACIT.,Range-3, Ahmedabad

ITA 2646/AHD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76867 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 01-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 26-11-2012
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: VIJAY RANJAN
• Section: 43B; 28

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , , , 0 00 0 0 00 0 ' ' ' ' , , , , #$ #$ #$ #$ # % # % # % # % BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NOS. 2646/AHD/2012 ASSESSMENT YEAR 2007-08 EDELWEISS FINANCIAL ADVISORS LTD. (FORMERLY KNOWN AS ANAGRAM CAPITAL LTD.) AHMEDABAD. PAN: AABCA2916K VS ACIT, CIRCLE-3, AHMEDABAD. &'/ APPELLANT )*&' / RESPONDENT REVENUE BY : SHRI K.C. MATHEWS, SR. DR ASSESSEE(S) BY : SHRI VIJAY RANJAN, AR + , $/ // / DATE OF HEARING : 02/07/2014 -./ , $ / DATE OF PRONOUNCEMENT: 11/07/2014 #0 #0 #0 #0/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XXI, AHMEDABAD DATED 09.10.2012. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING DISALLOWANCE OF LEAVE ENCASHMENT U/S. 43B(F) FOR RS 22,42,958/- MAD E BY THE ASSESSING OFFICER WHILE PASSING ORDER GIVING EFFECT TO COMMIS SIONER OF INCOME TAX (APPEALS)S ORDER. ITA NO. 2646/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD. AY 2007-08 - 2 - 3. THE BRIEF FACTS OF THE CASE ARE THAT IN RESPECT OF LEAVE ENCASHMENT, THE COMMISSIONER OF INCOME TAX (APPEALS ) CONFIRMED THE ADDITION, HOWEVER, REGARDING QUANTUM OF ADDITION IT DIRECTED THE ASSESSING OFFICER TO VERIFY THE FIGURES AS PER THE CONTENTION OF THE ASSESSEE. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THA T OUT OF TOTAL DISALLOWANCE OF RS 47,95,263/- ON ACCOUNT OF LEAVE ENCASHMENT EXPENSES, RS 22,42,958/- PERTAINED TO EARLIER YEARS AND THE S AME HAS BEEN NEITHER DEBITED TO PROFIT AND LOSS ACCOUNT NOR CLAIMED IN S TATEMENT OF INCOME. THEREFORE, IT WAS CONTENDED THAT NO DISALLOWANCE OF THE SAID AMOUNT SHOULD BE MADE DURING THE YEAR UNDER CONSIDERATION. THE A SSESSING OFFICER DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE ON THE GROUN D THAT IT IS SPECIFICALLY PROVIDED IN THE SECTION THAT DEDUCTION SHALL BE ALL OWED IRRESPECTIVE OF PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SU M WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING EMPL OYED BY HIM IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF T HAT PREVIOUS YEAR IN WHICH THE SAID SUM IS ACTUALLY PAID BY HIM. THEREF ORE, IN THE OPINION OF THE ASSESSING OFFICER, DEDUCTION IS ALLOWABLE ONLY IN T HE YEAR IN WHICH LIABILITY HAS BEEN PAID. THEREFORE, HE DISALLOWED THE ENTIRE AMOUNT OF RS 47,95,263/- WHICH WAS OUTSTANDING ON THE DATE OF FI LING OF RETURN BY THE ASSESSEE. 4. ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND CONTENDED THAT AS THE SUM OF RS 22,42,958/- WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT OR CLAIMED IN THE STATEMENT OF INCOME AND WHICH WAS THE OPENING BALANCE BROUGHT FORWARD FROM EARLIER YE ARS, THEREFORE, NO DISALLOWANCE OF RS 22,42,958/- FROM OUT OF THE TOTA L AMOUNT OF RS 47,95,263/- WAS WARRANTED. THE COMMISSIONER OF INC OME TAX (APPEALS) DID NOT ACCEPT THE APPEAL OF THE ASSESSEE AND CONFIRMED THE ORDER OF THE ASSESSING OFFICER FOR THE VERY SAME REASON THAT THE AMOUNT WAS NOT ACTUALLY PAID BY HIM. ITA NO. 2646/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD. AY 2007-08 - 3 - 5. BEFORE US, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS MADE SIMILAR ARGUMENTS AS WERE MADE BEFORE THE LOWE R AUTHORITIES AND HAS PRAYED FOR DELETION OF THE DISALLOWANCE OF RS 22,42 ,958/-. 6. ON THE OTHER HAND, THE DEPARTMENTAL REPRESENTAT IVE HAS SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IT IS AN UNDISPUTED FACT THAT A SUM OF RS 47,95,263/- WAS SHOWN IN THE BALAN CE SHEET OF THE ASSESSEE AS THE OUTSTANDING LIABILITY FOR EXPENSES TOWARDS LEAVE ENCASHMENT PAYABLE TO THE EMPLOYEES OF THE COMPANY. THE ASSES SING OFFICER HAS ADDED BACK THIS AMOUNT WHILE COMPUTING TOTAL INCOME OF TH E ASSESSEE. BOTH THE LOWER AUTHORITIES HAVE CONFIRMED THE DISALLOWANCE O N THE GROUND THAT THE DEDUCTION IS ALLOWABLE TO THE ASSESSEE IN THE YEAR IN WHICH THE SAID AMOUNT IS PAID BY THE ASSESSEE. THE ARGUMENT OF THE AUTHO RIZED REPRESENTATIVE OF THE ASSESSEE IS THAT OUT OF THE SUM OF RS 47,95,263 /- OUTSTANDING AND PAYABLE BY THE ASSESSEE, SUM OF RS 22,42,958/- IS T HE SUM OUTSTANDING AND PAYABLE ON ACCOUNT OF LEAVE ENCASHMENT PERTAINING T O EARLIER YEARS WHICH HAVE ALREADY BEEN DISALLOWED WHILE COMPUTING INCOME OF THE ASSESSEE OF EARLIER YEARS. ACCORDING TO HIM, DURING THE YEAR U NDER CONSIDERATION, NO DEDUCTION FOR THE SUM OF RS 22,42,958/- HAS BEEN CL AIMED BY THE ASSESSEE IN THE RETURN OF INCOME FILED BY THE ASSESSEE. IN SUPPORT OF THIS ARGUMENT, HE HAS FILED BEFORE US COPY OF THE BALANCE SHEET OF THE ASSESSEE. BY REFERRING TO PROFIT AND LOSS ACCOUNT OF THE ASSESSE E AS AT 31 ST MARCH 2007, HE POINTED OUT THAT LEAVE ENCASHMENT EXPENSES DEBIT ED IN THE PROFIT AND LOSS ACCOUNT DURING THE YEAR UNDER CONSIDERATION IS ONLY RS 18,55,494/- . HE SUBMITTED THAT OUT OF THIS AMOUNT, A SUM OF RS 8,11 ,018/- WAS PAID TILL THE DATE OF FILING OF RETURN OF INCOME BY THE ASSESSEE AND THE BALANCE AMOUNT OF RS 10,44,476/- WAS OUTSTANDING PAYMENT. THEREFORE, IT IS THE SUBMISSION OF ITA NO. 2646/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD. AY 2007-08 - 4 - THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT DISALLOWANCE HAS TO BE RESTRICTED TO THE EXTENT OF RS 10,44,476/- AND NOT RS 47,95,263/-. 8. WE FIND THAT ACCORDING TO THE SECTION 43B OF TH E ACT, AN AMOUNT WHICH IS OTHERWISE ALLOWABLE TO THE ASSESSEE ACCORD ING TO THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS TO BE ALLOWE D DEDUCTION WHILE COMPUTING INCOME OF THE ASSESSEE IF THE SAID AMOUNT IS ACTUALLY PAID EITHER DURING THE FINANCIAL YEAR OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S. 139(1) OF THE ACT. THUS, ACCORDING TO SECTION 43B, DISALLOWANCE CAN BE MADE ONLY OF THAT AMOUNT WHICH HAS BEEN CLAIMED DED UCTION IN THE PROFIT AND LOSS ACCOUNT OF THE YEAR OR IN THE COMPUTATION OF INCOME OF THE YEAR BY THE ASSESSEE BUT HAS NOT BEEN ACTUALLY PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S. 139(1) OF THE ACT BY THE ASSE SSEE. SINCE THE OPENING BALANCE BROUGHT FORWARD FROM EARLIER YEARS IS NOT C LAIMED AS DEDUCTION BY THE ASSESSEE IN PROFIT AND LOSS ACCOUNT OF THE YEAR OR IN COMPUTATION OF INCOME OF THE YEAR BY THE ASSESSEE, THEREFORE NO DI SALLOWANCE OF SUCH AMOUNT CAN BE MADE. IN THE INSTANT CASE, WE FIND T HAT ONLY RS 18,55,494/- WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT OF THE Y EAR UNDER CONSIDERATION ON ACCOUNT OF LEAVE ENCASHMENT. THUS, THE MAXIMUM DIS ALLOWANCE WHICH COULD HAVE BEEN MADE BY THE ASSESSING OFFICER WAS OF RS 1 8,55,494/-. THUS, THE DISALLOWANCE OF RS 47,95,263/- MADE BY THE ASSESSIN G OFFICER IS CLEARLY UNSUSTAINABLE. THE ASSESSEE CLAIMED BEFORE US THAT OUT OF RS 18,55,494/- DEBITED DURING THE YEAR, RS 8,11,018/- WAS ACTUALLY PAID BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF THE RETURN U/S. 13 9(1) OF THE ACT. IN OUR CONSIDERED VIEW, IF IT IS SO, THEN THE DISALLOWANCE OF ONLY RS 10,44,476/- COULD BE MADE U/S. 43B(F) OF THE ACT. WE, THEREFOR E, SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND REMAND THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR MAKING THE ASSESSMENT AFRESH ON THIS IS SUE IN THE LIGHT OF THE DISCUSSIONS MADE HEREINABOVE AFTER VERIFICATION ABO UT THE PAYMENT OF RS 8,11,018/- BEFORE THE DUE DATE U/S. 139(1) AS CLAIM ED BY THE ASSESSEE. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER SHAL L ALLOW REASONABLE ITA NO. 2646/AHD/2012 EDELWEISS FINANCIAL ADVISORS LTD. AY 2007-08 - 5 - OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE ADJUD ICATING THE ISSUE AFRESH. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOW ED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AS ABOVE. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 11 TH OF JULY, 2014 AT AHMEDABAD. SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 11/07/2014 GHANSHYAM MAURYA, SR. P.S. TRUE COPY #0 , )1 2#1/ #0 , )1 2#1/ #0 , )1 2#1/ #0 , )1 2#1// COPY OF THE ORDER FORWARDED TO : 1. &' / THE APPELLANT 2. )*&' / THE RESPONDENT. 3. 3 / CONCERNED CIT 4. 3() / THE CIT(A)-III, AHMEDABAD 5. 167 ) , , / DR, ITAT, AHMEDABAD 6. 78 9+ / GUARD FILE. #0 #0 #0 #0 / BY ORDER, : :: :/ // / ; ; ; ; ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD