ACIT 14(2)(2), MUMBAI V. PETRON ENGINEERING CONSTRUCTION LTD, MUMBAI

ITA 2794/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8899 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 11-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGH
• Assessee Lawyers: AYUSH J RAJANI
• Keywords: Depreciation; Wrong claim; Revenue expenditure
• Section: 143(3); 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , BEFORE SHRI C.N. PRASAD , JM AND SHRI RAJESH KUMAR , AM ITA NO. 2794 / MUM/ 20 1 5 ( / ASSESSMENT YEAR: 20 11 - 12 ) ASSTT. COMMISSIONER OF INCOME TAX 14(2)(2), 432,4 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. M/S PETRON ENGINEERING CONSTRUCTION LTD, 6 TH FLOOR,SWASTIK CHAMBERS, SION TROMBAY ROAD, P B NO.7206, CHEMBUR, MUMBAI - 400071 ./ PAN : AACCP8775G ( / APPELLANT) : ( / RESPONDENT ) / REVENUE BY : MS.ANUPAMA SINGH /RESPONDENT BY : SHRI AYUSH J RAJANI / DATE OF HEARING : 4 .1.2017 / DATE OF PRONOUNCEMENT : 18. 1. 201 7 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE REVENUE CHALLENGING THE ORDER DATED 9. 2.201 5 PASSED BY THE LD. CIT(A) - 2 2 , MUMBAI FOR TH E ASSESSMENT YEAR 20 11 - 12 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.9.2011 DECLARING TOTAL INCOME OF RS.47,48,54,523/ - WHICH WAS REVISED ON 28.11.2011 AT AN INCOME OF RS.47,48,54,523/ - AND THE SECOND R EVISED 2 ITA NO. 2 794 /M/201 5 RETUR N OF INCOME WAS ALSO FILED ON 28.3.2013 DECLARING A TOTAL INCOME OF RS.47,39,49,478/ - . THE ASSESSEE HAS BEEN DOING THE BUSINESS OF FABRICATION , ERECTIONS, INSTALLATIONS AND COMMISSIONING OF PLANT AND MACHINERY ETC. THE CASE OF THE ASSESSEE WAS SELECTED A ND STATUTORY NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSMENT WAS COMPLETED BY MAKING THE THREE ADDITIONS CONSISTING OF ADDITION ON ACCOUNT OF SCRAP VALUE OF RS.12,49,313/ - , PRIOR PERIOD EXPENSES RS.29,63 ,241/ - AND EXCESS DEPRECIATION ON UPS AND PRINTER RS.4,18,093/ - VIDE ASSESSMENT ORDER DATED 3.3.2014 PASSED UNDER SECTION 143(3) OF THE ACT BY ASSESSING THE TOTAL INCOME AT RS.47,94,85,170/ - . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). 3. THE ISSUE RAISED BY THE REVENUE IN THE FIRST GROUND OF APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.12,49,313/ - BY THE LD.CIT(A) AS MADE BY THE AO BY DISREGARDING THE FACT THAT DISMANTLED SCRAP MA TERIAL HAS SOME VALUE EVEN AFTER DISMANTL ING THE STRUCTURE. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAD CONSTRUCTED TEMPORARY BUILDINGS ON VARIOUS SITES FOR CARRYING OUT WORKS AT THESE LOCATIONS AND DEPRECIATION ON THESE TEMPORARY SHEDS/BUILDINGS W AS CLAIMED @100% . AFTER COMPLETION OF WORK , THESE STRUCTURES/SHEDS WERE DISMANTLED . THE AO CAME TO THE CONCLUSION THAT EVEN AFTER DEMOLITION OF THE STRUCTURES WHICH WAS MADE OF WOOD, BRICKS MORTAR AND MILD STEEL WOULD DEFINIT ELY HAVE SOME SCRAP VALUE 3 ITA NO. 2 794 /M/201 5 AND ACCORDINGLY ESTIMATED THE SAME AT THE RATE OF 3% OF THE TOTAL COST SHEDS OF RS.4,16,43,779/ - WHICH WORKED OUT TO RS.12,49,313/ - . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE APPELLATE PROCEEDINGS , THE FAA PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 3.3 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISSIONS. THE AO HAD A DDED RS.12,49,313/ - ESTIMATED THE SCRAP VALUE ON NOTIONAL BASIS AT 3 % OF RS .4, 16,43,779/ - BEING TEMPORARY B UI LDING ADDED DURING THE PREVIOUS Y EAR. 3.4 THE APP ELLANTS MAIN CONTENTION IS ON DEMOLISHING OF THE TEMP ORARY BUILDING, WHOLE AREA HAS TO BE LEVELLED AT THE GROUND LEVEL AND SCRAP VALUE RECEIVED ON, WOODS, BRICKS, SAND, CEMENT, PLASTIC, ETC. WHICH DOES NO T HAVE ANY REALIZABLE VALUE. FURTHER APPELLANT STATED THAT AS CLAIM FOR 100% OF THE DEPRECIATION WAS ACCEPTED BY THE AO, THEN ONLY THIS AMOUNT HAS TO BE R EDUCED FROM WDV OF TH E &'DEPRECIATION WHICH WAS ALLOWED TO THE APPE LLANT ESTIMATING IT AS NOTIONAL IN COME IN - THE ASSESSMENT ORDER. ON CONSIDE RING THE FACTS, IT WILL BE CLEAR THAT IT WILL BE DIFFICULT TO OBTAIN ANY REALIZABLE V ALUE OF THE MATERIAL IN THE DEMOLITION OF THE TEMPORARY STRUCTURES. HOWEVER , IF AO ASSUMED THERE IS A CERTAIN REALIZABLE VALUE, AO IS DIRECTED TO REDUCE THIS NOTIONAL AMOUNT OF RS.12,49,313/ - FROM THE WDV OF ASSETS SOLD INSTEAD OF MAKING SEPARATE ADDITION IN THE ASSESSMENT. HENCE GROUND OF APPEAL IS PARTLY ALLOWED 4. AGGRIEVED BY THE ORDER OF THE CIT(A) , THE REVENUE HAS CHALLENGE D THE ORDER OF THE FAA BEFORE THIS TRIBUNAL AND VEHEMENTLY SUBMITTED THAT THE TEMPORARY STRUCTURES WHICH W ERE MADE OF WOOD, SAND, BRICKS, CEMENT, STEEL DEFINITELY HAS SOME SCRAP VALUE AND THEREFORE THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N PARTLY AND DIRECTING THE AO THAT IF AT ALL DEMOLISHED MATERIAL FROM THE TEMPORARY SHEDS HAS REALIZABLE VALUE THEN THE SAME SHOULD BE REDUCED FROM THE WDV OF THE ASSETS.THE LD. DR PRAYED BEFORE US 4 ITA NO. 2 794 /M/201 5 THAT THE ORDER OF THE LD.CIT(A) IS WRONG AND THEREFORE DESERVED TO BE REVERSED ON THIS ISSUE BY RESTORING THE ORDER OF THE AO. 5 . ON THE OTHER HAND, THE LD.AR WHILE VEHEMENTLY OPPOSING THE ARGUMENTS OF THE LD.DR SUBMITTED THAT THE ASSESSEE IS A LISTED COMPANY AND THEREFORE IT IS ESSENTIAL IN THE BUSINESS OF T HE ASSESSEE TO CONSTRUCT TEMPORARY STRUCTURE/SHEDS FOR WORKERS FOR CARRYING OUT THE CONTRACTUAL ASSIGNMENTS AND DEMOLISH THE SAME AFTER PROJECT /WORK IS COMPLETED AND COMMISSIONED AND ALSO DEMOLITION . AFTER DEMOLITION OF STRUCTURES , THE RESULTANT WASTE MA TERIALS HAVE HARDLY ANY REALIZABLE VALUE . MOREOVER, THE LD.AR SUBMITTED THAT THE INCOME FROM THE DEMOLISHED MATERIAL CANNOT BE ASSESSED ON THE BASIS OF SURMISES AND CONJECTURE AND ESTIMATION BY STRONGLY REL YING ON THE DECISION OF CO - ORDINATE BENCH OF T HE TRIBUNAL IN THE CASE OF ACIT V/S M/S RICHA AND CO. IN ITA NO.3502 AND 3503/DEL/2009 (AY - 2004 - 05 AND 2005 - 06) ORDER DATED 26.4.2010, WHEREIN THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT NO ADDITION ON ACCOUNT OF SCRAP CAN BE MADE ON ESTIMATE D BASIS . SIMILARLY, THE LD. AR ALSO RELIED ON THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF PNC CONSTRUCTION CO.LTD V/S DCIT (2013) 37 TAXMANN.COM 361 (AGRA - TRIB). FINALLY, THE LD.AR REQUESTED THE BENCH THAT IN VIEW OF THE ADH OC NATURE OF ADDITION BEING BASED UP ON SURMISES , CONJECTURE AND PRESUMPTIONS WAS RIGHTLY DELETED BY THE FAA AND THEREFORE THE ORDER OF THE FAA BE UPHELD ON THIS GROUND. 5 ITA NO. 2 794 /M/201 5 6 . AFTER CONSIDERING THE RIVAL CONTENTIONS OF THE PARTIES AND ON PERUSAL OF THE MATE RIAL PLACED BEFORE US INCLUDING THE DECISION OF THE LOWER AUTHORITIES AND CASE LAW RELIED UPON BY THE PARTIES , W E FIND THAT THE AO HAS MADE ADDITION ON ADHOC BASIS AT THE RATE OF 3% OF THE COST OF DEMOLISHED STRUCTURE S FOR SCRAP RESULTING FROM DEMOLITION O F TEMPORARY SHEDS/BUILDING DEFINITELY HAS REALIZABLE VALUE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE FAA CAME TO THE CONCLUSION THAT THE AO HAS ALREADY ALLOWED 100% DEPRECIATION OF THE STRUCTURE AND IF AT ALL THEIR REALIZATION VALUE IF T HE MATERIAL RESULTING FROM DEMOLITION HAVE SOME NOTIONAL INCOME THAT SHOULD BE REDUCED FROM THE WDV AND SHOULD NOT ADDED TO T HE TOTAL INCOME OF THE ASSESSEE. NOW, CONSIDERING T HE FACTS OF THE ASSESSEE IN THE LIGHT OF VARIOUS CASE LAW RELIED UPON BY THE LD.AR, WE FIND THAT THE ADDITION CANNOT BE MADE ON ADHOC BASIS BY MAKING PRESUMPTIONS, SURMISES AND CONJECTURE. IN THE CASE OF M/S RICHA AND CO. (SUPRA) THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS HELD AS UNDER (PARA 7) : . 7. WE HAVE HEARD BOTH THE PA RTIES AND WE HAVE EXAMINED MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER IN THE THREE YEARS HAS NOT FOUND ANY DEFECT IN THE BOOKS OF ACCOUNT. IT HAS NOT WORKED OUT OR MADE ANY BASIS TO HOLD THAT GENERATION OF SCRAP AND ITS SALE IS NOT CORRECTLY AND P ROPERLY REFLECTED IN THE BOOKS OF ACCOUNTS. THERE IS NO FINDING THAT ASSESSEE SUPPRESSED PRODUCTION BY SHOWING EXCESSIVE WASTAGE OR EXCESSIVE GENERATION OF SCRAP. MANUFACTURING, PRODUCTION AND TRADING ACCOUNTS HAVE BEEN DULY ACCEPTED. EVEN THEN AD HOC ADDI TION HAS BEEN MADE IN THE THREE YEARS WITHOUT ANY LEGAL BASIS. THERE IS NO RULE THAT GENERATION OF SCRAP SHOULD BE 0.2% OF THE TURNOVER AS LEARNED CIT (APPEALS) TRIED TO MAKE OUT IN ITS ORDER FOR ASSESSMENT YEAR 2006 - 07. ON FACTS, WE DO NOT SEE ANY GOOD GR OUND TO SUSTAIN ADDITION MADE FOR SALE OF SCRAP. IT HAS RIGHTLY BEEN DELETED BY 6 ITA NO. 2 794 /M/201 5 THE LEARNED CIT (APPEALS) IN ASSESSMENT YEAR 2004 - 05 AND 2005 - 06 AND ERRONEOUSLY SUSTAINED IN ASSESSMENT YEAR 2006 - 07. IT IS DIRECTED TO BE DELETED IN ALL THE THREE YEARS BEFOR E US. 7 . SIMILARLY IN THE CASE OF PNC CONSTRUCTION CO.LTD(SUPRA) VIDE PARA 35 AND 36, HAS HELD AS UNDER : 35. THE BRIEF FACTS OF GROUND NO.3 ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE CLAIMED TEMPORARY BUILDING STRUCTU RE EXPENDITURE OF RS.1,02,11,975/ - . THE A.O. ACCEPTED THE FACT THAT THE ASSESSEE HAS TO INCUR SUCH EXPENSES IN THIS LINE OF BUSINESS. THE A.O. MADE ADHOC ADDITION OF RS.5,00,000/ - TO COVER THE POSSIBLE LOSS OF REVENUE ON ACCOUNT OF WRONG CLAIM OF THE ASSES SEE. THE CIT(A) CONFIRMED THE SAID ADDITION. 36. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTIES AND RECORDS PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT THE EXPENDITURE INCURRED WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THIS FACT H AS NOT BEEN DISPUTED BY THE A.O. THE A.O. MADE THE DISALLOWANCE WITHOUT POINTING OUT ANY SPECIFIC EXPENDITURE WHICH WAS INCURRED OTHER THAN FOR THE PURPOSES OF BUSINESS. IN THE LIGHT OF THE DETAILED DISCUSSION MADE WHILE DECIDING GROUND NO.2 IN PARAGRAPH N OS.33 & 34 OF THIS ORDER, FOLLOWING THE SAID DISCUSSION, WE DELETE THE ADHOC ADDITION OF RS.5,00,000/ - . IN VIEW OF THE RATIO LAID DOWN BY THE AGRA BENCH OF THE TRIBUNAL, WE ARE OF THE OPINION THAT THE ADDITION ON ADHOC BASIS MADE ON SURMISES, CONJECTURE AND PRESUMPTIONS CANNOT BE SUSTAINED AND WAS RIGHTLY DELETED BY THE LD. CIT(A). ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 8 . THE ISSUE RAISED IN THE SECOND GROUND OF APPEAL IS REGARDING DELETION OF DISALLOWANCE OF RS.29,63,241/ - BY THE LD.CIT(A) AS MADE BY THE AO ON ACCOUNT OF PRIOR PERIOD EXPENSES BY DISREGARDING THE FACT THAT THE ASSESSEE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE PRIOR PERIOD EXPENSES ARE NOT ADMISSIBLE. 7 ITA NO. 2 794 /M/201 5 9 . BRIEF FACTS OF THE CASE ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOUND FROM THE PERUSAL OF THE TAX AUDIT REPORT THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.29,63,241/ - IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD PRIOR PERIOD EXPENSES AND ACCORDINGLY ISSUE D SHOW CAUSE NOTICE TO T HE ASSESSEE VIDE LETTER DATED 10.2.2014 AS TO WHY THE SAID EXPENSES SHOULD NOT BE DISALLOWED. THE ASSESSEE VIDE LETTER DATED 13.2.2014 REPL IED AND RESPONDED THE SHOW CAUSE BY STATING THAT THE SAME COULD NOT BE ACCOUNTED FOR IN THE PREVIOUS FINANCIAL YE AR AS THESE WERE CRYSTALLIZED AFTER CLOSE OF THE YEAR. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AMOUNTING TO RS.26,63,241/ - . DURING THE APPEAL PROCEEDINGS, THE FAA DELETED THE DISALLOWAN CE BY HOLDING AS UNDER : 4.3 I HAVE CAREFULLY CONSIDERED: THE APPELLANT'S SUBMISSIONS. THE APPELLANT IN HIS SUBMISSIONS STATES THAT PRIOR PERIOD EXPENSES TO THE TUNE OF RS. 29,63,241/ - WHICH ARE MAINLY BILLS WHICH ARE RECEIVED FROM THE VENDOR AFTER 30TH M ARCH. HENCE THESE ITEMS ARE SEPARATELY SHOWN IN THE PROFIT AND LOSS ACCOUNT AND ALSO IN THE TAX AUDIT REPORT IN ANNEXURE D WHICH IS REQUIRED AS PER THE ACCOUNTING STANDARD N. EVEN CBDT HAD NOTIFIED THE ACCOUNTING STANDARD ON PRIOR PERIO D EXPENSES AND STAT ED THAT THESE ARE TO BE SHOWN SEPARATELY. IT IS CLEAR FROM THE SUBMISSIONS OF THE APPELLANT THAT THE BILLS WHICH ARE PRESENTED BE LONGS TO THE EARLIER YEAR BUT BILLS ARE RECEIVED IN THIS YEAR FOR PAYMENT. 'IN SUCH A CASE, ACCOUNTING STAND ARDS ACCEPTED THE PRIOR PERIOD EXPENSES ARE MENTIONED SEPARATELY AND CLAIMED SEPARATELY. AS APPELLANT HAD BORROWED THE ACCOUNTING STANDARD WHICH IS APPROVED BY CBDT IS IN THE NATURE ~F REVENUE EXPENDITURE THOUGH APPELLANT IS FOLLOWING MERCANTILE S YSTEM OF ACCOUNTING. HERE IT HAS BEEN DULY APPROVED IN THIS YEAR AS BILLS ARE ONLY RECEIVED AFTER MARCH 3 1 ST. . THIS IDENTICAL VIEW IS EXPRESSED BY HON,'BLE !TAT, DELHI IN THE CASE OF GOE TZE (INDIA) LTD.. VS. DY, COMRIFLSSIONER OF INCOME - TAX, NEW DELHI [I TA NO.207/DEL/2005) WHERE IN IT IS HELD AS UNDER: 8 ITA NO. 2 794 /M/201 5 SINCE THE BILLS WERE RECEIVED SUBSEQUENT TO THE FINALIZATION OF THE APPELLANT S PRECEDING YEAR S ACCOUNTS, THE SAID EXPENSES HAVE BEEN BOOKED UNDER PRIOR PERIOD EXPENSES AND THAT THERE WAS NO JUSTIFICATION FOR DISALLOWING THE CLAI M OF PRIOR PERIOD EXPENSES. IN ASSESSMENT YEAR 1985 - 86 ALSO THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. IN THE YEAR UNDER CONSIDERATION ALSO THE ASSESSEE HAS CLARIFIED THE POSITION BY POINTING OUT THAT THE BILLS WERE RECEIVED AFTER THE CLOSE OF THE YE AR I.E., AFTER THE CLOSE OF THE ACCOUNTING YEAR AND, THEREFORE, THEY WERE ACCOUNTED FOR IN THE SUBSEQUENT YEAR. THIS EXPLANATION OF THE ASSESSEE, THEREFORE, IS FULLY ACCEPTABLE. ON GOING THROUGH THE DETAILS FURNISHED BY THE ASSESSEE IN THE TAX AUDIT REPORT , STATEMENT OF EXPENSES AND BY FOLLOWING POST ORDERS IN THE CASE OF THE ASSESSEE, THERE IS NO JUSTIFICATION FOR DISALLOWING THE PREVIOUS YEAR S EXPENSES. 4.4 IN VIEW OF THE ABOVE JUDGMENT OF THE ITAT AND THE APPELLANTS CLAIM FOR PRIOR PERIOD EXPENSE S IS ALLOWED AND GROUND OF THE APPEAL IS ALLOWED 10 . ON THE OTHER HAND, THE LD.DR TOOK US THROUGH THE ASSESSMENT ORDER WHEREIN THE AO STATED THAT THE EXPENSES WERE FOR AMORTIZATION BY PREPARING FINANCIAL STAT EM ENT AND THUS THE CLAIM OF THE ASSESSEE IN SUBSEQUENT YEAR AMOUNT S TO OMISSION AND WAS NOT ALLOWABLE UNDER THE ACT AND SO RIGHT L Y DISALLOWED BY THE AO. THE LD. DR THEREFORE, RELIED ON THE ORDER OF THE AO AND PRAYED THE ORDER OF THE LD.CIT(A) BE REVERSED ON THIS ISSUE BY ALLOWING THE APPEAL OF THE REVENUE. 11 . THE LD. AR VEHEMENTLY SUBMITTED BEFORE US THAT THE AO HAS WRONGLY MENTIONED IN THE ASSESSMENT ORDER THAT AS A RESULT OF OMISSION IN THE FINANCIAL STATEMENT IN THE EARLIER YEARS EXPENSES C OULD NOT BE ACCOUNTED FOR WHEREAS ALL THESE SO CAL LED PRIOR PERIOD EXPENSES WERE CRYSTALLIZED AND 9 ITA NO. 2 794 /M/201 5 MATERIALIZED DURING THE YEAR AND WAS RIGHTLY CLAIMED BY THE ASSESSEE. THE LD FAA ALLOWED THE APPEAL OF THE ASSESSEE AFTER GOING INTO THE FACTS AND LEGALITY OF THE CASE. THE LD. AR IN DEFEN S E OF HIS ARGUMENT RELIED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S MAHANAGAR GAS LTD (2014) 42 TAXMANN.COM 40 (BOM) AND THE DECISION IN THE CASE OF GOETZE (INDIA) LTD.. V /S DY . COM MISSIONER OF INCOME - TAX, NEW DELHI (2008) 115 ITD 119 (DEL ). FINALLY THE LD.AR SUBMITTED BEFORE US THAT THESE EXPENSES REPRESENTED VARIOUS TYPES OF ADMINISTRATIVE AND OTHER EXPENSES FOR WHICH THE BILLS WERE RECEIVED AFTER CLOSE OF THE YEAR WHEN THE STATEMENT OF THE ASSESSEE WERE ALREADY FINALIZED AND THUS CRYSTA LLIZED IN THE SUBSEQUENT YEAR AND ACCORDINGLY ACCOUNTED AND CLAIMED IN THE PROFIT AND LOSS ACCOUNT AS PER LAW. FINALLY THE LD AR PRAYED THAT THE ORDER OF THE LD.CIT(A) BE UPHELD ON THIS ISSUE. 12 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AN D PERUSED THE MATERIAL PLACED BEFORE US INCLUDING IMPUGNED ORDER AND CASE LAW RELIED UPON BY THE ASSESSEE. WE FIND THAT THE ASSESSEE HAS CHARGED TO THE PROFIT AND LOSS ACCOUNT AN AMOUNT OF RS.29,63,249/ - UNDER THE HEAD PRIOR PERIOD EXPENSE COMPRISING VA RIOUS TYPES OF EXPENSES INCLUDING ADMINISTRATIVE EXPENSES BILLS OF WHICH WERE RECEIVED AFTER CLOS E THE FINANCIAL YEAR WHEN FINANCIAL STATEMENT S WAS ALREADY PREPARED AND FINALIZED. THE ASSESSEE ACCOUNTED FOR THESE EXPENSES IN THE CURRENT YEAR AND THE FAC T WAS MENTIONED IN THE TAX 10 ITA NO. 2 794 /M/201 5 AUDIT REPORT IN ANNEXURE AS PER THE ACCOUNTING STANDARD - II. WE FIND THAT THE LD.CIT(A) ALSO RECORDED THE FINDING OF FACTS THAT THESE BILLS PERTAINING TO EARLIER YEAR WERE RECEIVED IN THE CURRENT YEAR AND THEREFORE ADMISSIBLE AS CURRENT YEAR REVENUE EXPENSES THOUGH THE APPELLANT WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. WE FIND MERIT IN THE CASE OF THE ASSESSEE AND ALSO FIND THAT THE FINDING OF THE LD.CIT(A) IS CORRECT AND JUSTIFIED. IN OUR OPINION THE BILLS RECEIVED DURING THE YEAR NOTWITHSTANDING RELATING TO THE EARLI E R YEARS WERE CORRECTLY ACCOUNTED FOR AND THEREFORE PERTAIN ED TO CURRENT YEAR AS BEING MATERIALIZED DURING THE YEAR. THE CASE OF THE ASSESSEE ALSO STANDS COVERED BY PARA 22 OF THE DECISION IN THE CASE OF GOETZE (INDIA) LTD.(SUPRA) WHICH READS AS UNDER : 22. ALTHOUGH WE HAVE CANCELLED THE REASSESSMENT BY ALLOWING GROUND NOS. 1 AND 2 IN FAVOUR OF THE ASSESSEE AND BY HOLDING THAT THE REASSESSMENT MADE IN THE CASE OF THE PRESENT ASSESSEE WAS NULL AND VOID, HOWEVER, WE PROCEED TO DECIDE THE ISSUE RELATING TO THE SUSTENANCE OF DISALLOWANCE OF RS. 75,96,534 ON MERITS ALSO. WE HAVE ALREADY SET OUT RELEVANT DETAILS AND SUBMISSIONS OF THE PARTIES IN THIS REGARD IN EARLIER PART OF THIS ORDER. WE HAVE POINTED OUT THAT IN ASSESSMENT YEAR 1988 - 89, A SIMILAR ISSUE RELATING TO DISALLOWANCE OF RS. 12,79,584 IN RESPECT OF PREVIOUS YEAR S EXPENSES WAS ALLOWED IN FAVOUR OF THE ASSESSEE BY THE ITAT. THE RELEVANT OBSERVATIONS OF THE ITAT HAS ALSO BEEN REPRODUCED BY US IN PARA 9 OF THEIR ORDER. IN THAT CASE THE TRIBUNAL HAD EXAMINED THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND HELD THAT SINCE THE BILLS WERE RECEIVED SUBSEQUENT TO THE FINALIZATION OF THE APPELLANT S PRECEDING YEAR S ACCOUNTS, THE SAID EXPENSES HAVE BEEN BOOKED UNDER PRIOR PERIOD EXPENSES AND THAT THERE WAS NO JUSTIFICATION FOR DISALLOWING THE CLAIM OF PRIOR PERIOD EXPENSES. IN ASSESSMENT YEAR 1985 - 86 ALSO THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. IN THE YEAR UNDER CONSIDERATION ALSO THE ASSESS EE HAS CLARIFIED THE POSITION BY POINTING OUT THAT THE BILLS WERE RECEIVED AFTER THE CLOSE OF THE YEAR I.E., AFTER THE CLOSE OF THE ACCOUNTING YEAR AND, THEREFORE, THEY WERE ACCOUNTED FOR IN THE 11 ITA NO. 2 794 /M/201 5 SUBSEQUENT YEAR. THIS EXPLANATION OF THE ASSESSEE, THEREFORE, IS FULLY ACCEPTABLE. ON GOING THROUGH THE DETAILS FURNISHED BY THE ASSESSEE IN THE TAX AUDIT REPORT, STATEMENT OF EXPENSES AND BY FOLLOWING POST ORDERS IN THE CASE OF THE ASSESSEE, THERE IS NO JUSTIFICATION FOR DISALLOWING THE PREVIOUS YEAR S EXPENSES. HE NCE, EVEN ON MERITS, WE HOLD THAT THE DISALLOWANCE WAS NOT JUSTIFIED AND CONSEQUENTLY WE DELETE THE DISALLOWANCE ON MERITS ALSO . THE FACTS OF THE ASSESSEES CASE IS MATERIALLY SAME VIS - A - VIS AS STATED HEREINABOVE W E, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE ABOVE CASE A R E INCLINED TO DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. 13 . RESULTANTLY, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18TH JAN, 2017. S D SD ( C.N. PRASAD ) ( RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 18. 1.2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI