Aakar Enterprises, CHENNAI V. ACIT Non Corporate Circle 9, CHENNAI

ITA 2811/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5227 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 22-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: N K MOHNOT

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2811/CHNY/2017 ' (' / ASSESSMENT YEAR : 2004-05 M/S AAKAR ENTERPRISES, C/O D. MOHNOT & CO., CHARTERED ACCOUNTANTS, NO.28, OLD NO.38, COLLEGE ROAD, NUNGAMBAKKAM, CHENNAI - 600 006. PAN : AAAFA 5417 B V. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS RANGE VI, PRESENTLY AT NON-CORPORATE CIRCLE 9, CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI N.K. MOHNOT, CA ,-*+ . / / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT 0 . 1$ / DATE OF HEARING : 09.04.2018 2!( . 1$ / DATE OF PRONOUNCEMENT : 19.04.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -10, CHENNAI, DATED 28.09.2017 AND PERTAINS TO ASSESSMENT YEAR 2004-05. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF 4,25,000/- TOWARDS PROVISION FOR YIELD TESTING. 2 I.T.A. NO.2811/CHNY/17 3. SHRI N.K. MOHNOT, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE HAS DEBITED 4,25,000/- TOWARDS PROVISION FOR YIELD TESTING. ACCORDING TO THE LD. REPRESENTA TIVE, THIS AMOUNT WAS SHOWN AS OUTSTANDING IN THE BALANCE SHEET OF THE AS SESSEE. THE ASSESSEE WAS FOLLOWING MIXED SYSTEM OF ACCOUNTING. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER DISALLOWE D THE CLAIM OF THE ASSESSEE ONLY ON THE GROUND THAT THE LIABILITY WAS DISCHARGED SUBSEQUENTLY IN THE FINANCIAL YEAR UNDER CONSIDERAT ION. ACCORDING TO THE LD. REPRESENTATIVE, THE CIT(APPEALS) IS NOT CORRECT IN SAYING THAT THE LIABILITY IS UNASCERTAINED ONE. THE LD. REPRESENTA TIVE FURTHER CLARIFIED THAT THERE WAS NO DEMAND RAISED DURING THE YEAR UNDER CO NSIDERATION. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT THE MIXED SYSTEM OF ACCOUNTING IS ALSO ONE OF THE METHOD OF ACCOUNTING. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS IMPORTED CASHEW DU RING THE YEAR UNDER CONSIDERATION FROM OVERSEAS COUNTRIES AND SOLD THE SAME ON HIGHSEAS SALE BASIS. ACCORDING TO THE LD. REPRESENTATIVE, T HE ASSESSEE HAS FILED ENTIRE MATERIAL BEFORE THE ASSESSING OFFICER AS WEL L AS THE CIT(APPEALS) TO ESTABLISH THE HIGHSEAS SALE OF CASHEW IMPORTED B Y THE ASSESSEE. HENCE, ACCORDING TO THE LD. REPRESENTATIVE, THE CIT (APPEALS) IS NOT CORRECT IN SAYING THAT THE CLAIM OF THE ASSESSEE IS UNASCERTAINED ONE. 3 I.T.A. NO.2811/CHNY/17 4. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE COULD N OT SATISFACTORILY EXPLAIN THE PROVISIONS MADE WHILE CLAIMING THAT IT WAS FOLLOWING MIXED SYSTEM OF ACCOUNTING. ACCORDING TO THE LD. D.R., T HE CLAIM OF LIABILITY IS ONLY UNASCERTAINABLE ONE AND NO DEMAND WAS RAISED D URING THE YEAR UNDER CONSIDERATION. REFERRING TO THE ORDER OF THE CIT(APPEALS), MORE PARTICULARLY AT PAGE 7, THE LD. D.R. POINTED OUT TH AT EVEN IN CASE WHERE THE ASSESSEE WAS MAINTAINING MERCANTILE SYSTEM OF A CCOUNTING, THE UNASCERTAINABLE LIABILITY FOR WHICH A PROVISION WAS MADE CANNOT BE ALLOWED AS DEDUCTION. ACCORDING TO THE LD. D.R., C ONTINGENT LIABILITY DOES NOT CONSTITUTE EXPENDITURE, THEREFORE, THE SAME CAN NOT BE ALLOWED AS DEDUCTION WHILE COMPUTING TAXABLE INCOME. THEREFOR E, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED TH E ORDER OF THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE PROVISION FOR YIELD TESTING IS AN UNASCERTAINABLE LIABILITY AND THERE W AS NO DEMAND DURING THE YEAR UNDER CONSIDERATION. UNLESS A PROVISION WAS M ADE FOR MEETING A LIABILITY WHICH WAS ASCERTAINABLE ONE AND IT WAS CR YSTALIZED DURING THE YEAR UNDER CONSIDERATION, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE SAME CANNOT BE ALLOWED DURING THE YEAR UNDER CO NSIDERATION. HOWEVER, IT IS MADE CLEAR THAT THE SAME HAS TO BE A LLOWED IN THE YEAR IN 4 I.T.A. NO.2811/CHNY/17 WHICH THE LIABILITY WAS CRYSTALIZED AND PAID BY THE ASSESSEE. SINCE THE ASSESSEE CLAIMS THAT THE PAYMENT WAS MADE IN THE NE XT ASSESSMENT YEAR, THE SAME HAS TO BE ALLOWED IN THAT YEAR AND D EFINITELY NOT IN THE YEAR UNDER CONSIDERATION. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON 19 TH APRIL, 2018 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 19 TH APRIL, 2018. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-10, CHENNAI-34 4. PRINCIPAL CIT-7, CHENNAI. 5. 69 ,1 /DR 6. :' ; /GF.