Haryana Warehousing Corporation, Panchkula V. CIT, Panchkula

ITA 291/CHANDI/2014

• Counselvise Citation: 29121514 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 24-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: B K NOHRIA
• Keywords: Audit objection; Maximum Marginal Rate; Bad and doubtful debts; Assessment record; Tax effect; Revised return; Revenue expenditure
• Section: 43B; 143(3); 234B; 12AA; 37; 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 291/CHD/2014 ASSESSMENT YEAR: 2009-10 HARYANA WAREHOUSING CORPORATION VS. THE CIT, PANCHKULA PANCHKULA PAN NO. AAATH7482H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. B.K NOHRIA RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 17.09.2015 DATE OF PRONOUNCEMENT : 21 .10.2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT, PANCHKULA DATED 6.3.2014 PASSED U/S 263 OF THE INCO ME-TAX ACT, 1961 (IN SHORT 'THE ACT') RELATING TO ASSESSMENT YEAR 1999-2000. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT PANCHKULA IS ILLEGAL AND UNJUSTIFIED IN INITIATING THE PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 ON THE BASIS OF AUDIT OBJECTION RAISED AS PRELIMINA RY OBJECTION. 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SUBMISSIONS OF THE APPELLANT AND THE RELEVANT CASE LAW CITED HAS NEITHER BEING CONSIDERED NOR DISCUSSED IN THE ORDER U/S 263 AND THE APPELLANT REQUEST FOR QUASHING THE ORDER PASSED BY THE LEARNED CIT PANCHKULA. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT PANCHKULA IS NOT JUSTIFIED IN INITIATIN G THE PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT , 1961 ON THE GROUND THAT 2 CIRCUMSTANCES MUST CO-EXIST TO EN ABLE A CIT TO EXERCISE POWER OF SUO-MOTO REVISION I.E. A. THE ORDER MUST BE AN ERRONEOUS ONE B. BECAUSE OF BEING AN ERRONEOUS ORDER, THE ORDER MUST HAVE BECOME PREJUDICIAL TO THE INTEREST OF REVENUE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE ORDER OF THE LEARNED A O IS NEITHER ERRONEOUS NOR P REJUDICIAL TO THE INTEREST OF THE REVENUE AS THE EXPENDITURE PROV IDED FOR PAYMENT OF SALARIES AND APPROPRIATION OF UNABSORBED OVERHEAD ON CAPITAL WORKS UNDER MISCELLANEOUS EXPENSES IS AS PER THE ACCOUNTING POLICY OF THE APPELLANT SINCE INCEPTION AND WAS RIGHTLY ALLOWED BY THE LEARNED AO AFTER CONSIDERATI ON OF THE PROVISIONS OF SECTION 37 OF THE ACT BY THE TREATING THE INCOME OF THE ASSESSEE ON MERCANTILE SYSTEM OF ACCOUNTING HEN CE THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT, 19 61 ARE NOT ATTRACTED IN THE PRESENT CASE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT AS SESSEE IS A CORPORATION ESTABLISHED U/S 18 OF THE WAREHOUSING CORPORATIONS ACT, 1962 OF THE PARLIAMENT. THE ASSESSEE HAD BEEN CLAIMING EXEMPTIO N U/S 10(29) OF THE ACT IN THE PAST. HOWEVER, SINCE SECTION 10(29) WAS WITHDRA WN W.E.F. 1.4.2003, THE EXEMPTION UNDER SUB SECTION WAS NO LONGER AVAILABLE TO THE ASSESSEE FROM THE ASSESSMENT YEAR 2003-04. THE ASSESSEE FILED AN APP LICATION FOR REGISTRATION U/S 3 12AA OF THE ACT BEFORE THE CIT, PANCHKULA WHO VIDE HIS ORDER DATED 30.09.2003 REJECTED THE APPLICATION OF THE ASSESSEE. THE ASSES SEE CAME IN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 19. 05.2006 ALLOWED THE APPEAL OF THE ASSESSEE AND DIRECTED THE COMMISSIONER TO GRAN T REGISTRATION TO THE ASSESSEE W.E.F. 1.4.2003. IN PURSUANCE OF THE ORDER OF THE TRIBUNAL, THE COMMISSIONER OF INCOME TAX, PANCHKULA HAS GRANTED REGISTRATION U/S 12AA OF THE ACT VIDE HIS ORDER DATED 17.7.2006. 4. THE APPEAL FILED BY THE REVENUE AGAINST THE ORDE R OF THE TRIBUNAL HAS BEEN DISMISSED BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ITS ORDER DATED 30.8.2010 PASSED IN ITA NO. 563 OF 2006. IN THE SLP PREFERRE D BY THE REVENUE AGAINST THE ORDER DATED 30.08.2010 PASSED BY HON'BLE JURISDICTI ONAL HIGH COURT BEFORE THE HON'BLE SUPREME COURT, HAS ALSO BEEN REJECTED ON 18 .07.2011 BY THE HON'BLE SUPREME COURT. FOR THE ASSESSMENT YEAR 2009-10, THE ASSESSEE SUBMI TTED ITS RETURN ON 30.09.2009 DECLARING INCOME OF RS. 15,56,94,893/-. THE ASSESSEE HAS ALSO FILED REVISED RETURN ON 31.3.2011 DECLARING AN INCOME OF RS. 19,01,64,240/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT ON 19.12.2011 DETERMINING THE TOTAL TAXABLE INCOME AT RS. 21,77,1 1,800/- AS AGAINST RETURNED INCOME OF RS. 19,01,64,240/- DISALLOWING DEDUCTION CLAIMED U/S 11(1) AND PRIOR PERIOD EXPENSES. 5. THE LD. COMMISSIONER CALLED FOR AND EXAMINED THE RECORDS OF THE ASSESSMENT PROCEEDINGS OF THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LD. COMMISSIONER OBSERVED THAT ASSESSEE HAD DEBITED A S UM OF RS. 12,88,15,000/- IN THE PROFIT AND LOSS ACCOUNT IN RESPECT OF THE REVI SED PAY SCALES. ACCORDING TO HIM, IT WAS A PROVISION MADE ON ADHOC BASIS FOR THE PAYMENT OF REVISED SCALES TO 4 THE STAFF. HE OBSERVED THAT AS PER THE PROVISIONS OF SECTION 37 OF THE ACT, ANY EXPENDITURE NOT SPECIFICALLY COVERED U/S 30 TO 36 IS DEDUCTIBLE PROVIDED THAT IT MUST HAVE BEEN INCURRED DURING THE PREVIOUS YEAR AN D SHOULD NOT BE IN THE NATURE OF PERSONAL OR CAPITAL EXPENSES AND INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES. THE LD. COMMISSIONER OPINED THAT IN VIEW OF ABOVE OMISSION, THE INCOME WAS UNDER ASSESSED TO THE TUNE OF RS. 12 ,88,15,000/-. HE ALSO OBSERVED THAT ASSESSING OFFICER HAD BEEN NEGLIGENT IN NOT MAKING PROPER ENQUIRIES AND IN NOT EXAMINING THE EXPENSES CLAIMED BY THE ASSESSEE MERELY ON THE BASIS OF PROVISIONS AND THE SAME WAS ACCEPTED W ITHOUT PROPER ENQUIRY HENCE ASSESSMENT MADE U/S 143(3) WAS HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 6. THE LD. CIT FURTHER OBSERVED THAT ASSESSEE HAD DEBITED A SUM OF RS. 50,16,675/- IN RESPECT OF UNABSORBED OVERHEAD ON CA PITAL WORKS UNDER MISCELLANEOUS EXPENSES IN P&L ACCOUNTS. ACCORDING TO HIM, THESE EXPENSES ARE IN THE NATURE OF CAPITAL EXPENSES AND HENCE THE SAM E WAS REQUIRED TO BE CAPITALIZED AND DEDUCTED AS REVENUE EXPENDITURE WAS NOT ALLOWABLE. ACCORDING TO HIM, THE ASSESSING OFFICER HAS ALLOWED DEDUCTION WI THOUT MAKING ANY INQUIRY. THE LD. CIT FURTHER OBSERVED THAT A SUM OF RS. 22,2 1,000/- UNDER HEAD PROCUREMENT OF WHEAT ACCOUNT WAS DEBITED, WHICH P ERTAINED TO CARRY OVER CHARGES OF NAGPUR MANDI. RECOVERY OF THIS AMOUNT WA S DOUBTFUL NOT BAD. HOWEVER, THE ASSESSEE HAD MADE PROVISION ON THIS AC COUNT, WHICH WAS NOT ALLOWABLE U/S 36 AS BAD DEBTS. AS PER THE LD. CIT T HAT DEDUCTION OF RS. 22,21,000/- WAS WRONGLY ALLOWED TO THE ASSESSEE. TH E LD. CIT HAS ALSO OBSERVED THAT ACTIVITY OF THE ASSESSEE WAS NOT CONSIDERED AS CHARITABLE IN NATURE AND THE INCOME OF THE ASSESSEE WAS ASSESSED UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION AND ASSESSED IN THE STATUS OF AOP TR UST AGAINST WHICH TAX WAS CHARGED AS NORMAL RATES AT RS. 73,94,256/-. ACCORD ING TO LD. LD. COMMISSIONER, 5 THE ASSESSEE WAS TREATED AS AOP, THE TAX WAS ALLOWA BLE TO BE CHARGED AT MAXIMUM MARGINAL RATE U/S 167B OF THE INCOME TAX AC T. THE LD. CIT HAS CATEGORICALLY OBSERVED THAT THE ASSESSING OFFICER F AILED TO APPRECIATE THE FACTS ON RECORD TO MAKE PROPER INQUIRIES IN RESPECT OF THE A PPARENT DISCREPANCY ON RECORD. THE ERRORS COMMITTED BY THE ASSESSING OFFICER WERE, THEREFORE, PREJUDICIAL TO THE INTEREST OF REVENUE. CONSIDERING THE ABOVE FACTS, T HE LD. CIT ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE ASSESSME NT ORDER DATED 19.12.2011 SHOULD NOT BE CANCELLED U/S 263 AND THE ASSESSING OFFICER BE DIRECTED TO EXAMINE THE SAME AFRESH AFTER PROPERLY EXAMINING THE ABOVE ISSUES. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED A REPLY D ATED 4.3.2014. THE LD. CIT DID NOT FIND ANY MERIT IN THE REPLY AS WELL AS SUBM ISSIONS OF THE ASSESSEE AND REJECTED THE SAME. THE CIT TREATED THE ASSESSMENT O RDER DATED 19.12.2011 TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E ON FOWLING POINTS:- PROVISION FOR REVISION OF PAY SCALES IN RESPECT OF PROVISIONS MADE ON ACCOUNT OF REVISIO N OF PAY SCALES DEBITED IN THE PROFIT AND LOSS ACCOUNT AT RS . 12,88,15,000/-. THE ASSESSEE STATED THAT IT IS SPEC IFICALLY STATED IN THE NOTES ON ACCOUNTS THAT THE GOVT. OF HARYANA HAS REVISED THE PAY SCALES OF THE EMPLOYEES AS PER 6 LH PAY COMMISSION REPORT, THE BOARD OF DIRECTORS OF THE ASSESSEE IN I TS 176 TH MEETING HELD ON 25.03.2009 HAS APPROVED THE SAME SU BJECT TO THE APPROVAL OF THE GOVT. ACCORDINGLY THE EXPENDITURE O N PAY 1 REVISION HAS BEEN BOOKED AS ACCRUED EXPENDITURE FOR THE YEAR. THE ASSESSEE FURTHER STATED THAT ANOTHER PROVISION OF LEAVE ENCASHMENT ON ADHOC BASIS IN COMPUTATION OF TAXABLE INCOME HAS BEEN ADDED BACK BY THE ASSESSEE ITSELF IS CORRE CT, BECAUSE IT IS COVERED BY SECTION 43B OF THE ACT. IT IS ALSO C ORRECT THAT AS PER SECTION 37 OF THE INCOME TAX ACT, 1961, ANY EXP ENDITURE NOT COVERED U/S 30 TO 36 IS DEDUCIBLE PROVIDED THAT IT MUST HAVE BEEN INCURRED DURING THE PREVIOUS YEAR AND SHOULD NOT BE IN THE NATURE OF PERSONAL OR CAPITAL EXPENSES AND INCURRED WHOLLY OR EXCLUSIVELY FOR THE BUSINESS PURPOSE. THE ASSESSEE HAS INCURRED THE EXPENDITURE BY ACCEPTING THE SAME DURING THE YE AR UNDER CONSIDERATION. 6 THE CLAIM OF THE ASSESSEE HAS BEEN CONSIDERED AND N OTED THAT AS PER THE COPY OF MINUTES OF MEETING DATED 25.03.2009 OF THE BOARD DIRECTORS FURNISHED BY THE ASSESSEE, THE REVI SION OF PAY SCALE OF HARYANA WAREHOUSING CORPORATION HAS BEEN A PPROVED VIDE AGENDA ITEM NO.26 IN WHICH IT HAS BEEN PROPOSE D TO ADOPT FINANCE DEPARTMENT LETTER NO.L/83/2008/LPR(FD) DATE D 7/1/2009 FOR REVISION OF PAY SCALES OF THE EMPLOYEES OF HARY ANA WAREHOUSING CORPORATION W.E.F, 1.1.2006. AS PER THE GOVT. POLICY 40% ARREAR WILL BE GIVEN IN THE CURRENT FINA NCIAL YEAR AND 60% IN THE NEXT FINANCIAL YEAR. THE FINANCIAL IMPLICATION FOR IMPLEMENTING THE REVISED PAYMENT SCALES WAS EST IMATED AT RS.8.50 CRS, APPROX. FOR THE YEAR 2005-06, 2006-07 AND 2007- 08. THEREFORE, THE ASSESSEE SHOULD HAVE MADE PROVIS ION FOR EXPENDITURE OF 40% ONLY IN THE CURRENT FINANCIAL Y EAR. HOWEVER, THE ASSESSEE HAS PROVIDED RS, 12,88,15,000/-. THE A .O. HAS FAILED TO VERIFY THE SAME. THEREFORE, THE A.O. IS D IRECTED TO VERIFY THE SAME AND ALLOW THE PERMISSIBLE AMOUNT ON LY. UNABSORBED OVERHEAD ON CAPITAL WORKS UNDER MISCELLA NEOUS EXPENSES AMOUNTING TO RS. 50,16,675/- THE ASSESSEE HAD DEBITED A SUM OF RS. 50,16,675/- I N RESPECT OF UNABSORBED OVERHEAD ON CAPITAL WORKS UNDER 'MISCELL ANEOUS EXPENSES' IN P&L ACCOUNTS. BEING CAPITA! NATURE EXP ENDITURE, THIS WAS REQUIRED TO BE CAPITALIZED AND DEDUCTION A S REVENUE EXPENDITURE WAS NOT ALLOWABLE. THE ASSESSEE MADE FO LLOWING SUBMISSIONS:- 1. AS THE HARYANA PWD CODE 8,5,4 THE EXECUTING AU THORITY SHOULD ENSURE THAT THE AGENCY CHARGES AS DETERMINED BY THE STATE GOVERNMENT SHALL BE RECOVERED FROM THE SPONSO RING AUTHORITY. IN CASE THE AGENCY CHARGES ARE NOT SO DE TERMINED, THESE SHALL BE CHARGED AS 14% OF THE PROJECT COST. 2. IT IS ACCOUNTING POLICY OF THE ASSESSEE SINCE IN CEPTION OF THE ASSESSEE THAT ADMINISTRATIVE EXPENSES INCURRED ON CONSTRUCTION STAFF @14% HAS BEEN CHARGED TO CAPITAL WORK AND REPAIR AND MAINTENANCE RESPECTIVELY AS PER SYSTEM I N VOGUE IN PWD. REMAINING AMOUNT OF EXPENSES IS CHARGED TO REV ENUE EXPENDITURE AS UNABSORBED OVERHEAD ON CAPITAL WORKS UNDER MISCELLANEOUS EXPENSES IN P&L ACCOUNT. THIS FACT HA S BEEN DISCLOSED IN SCHEDULE P NOTES ON ACCOUNT NO. VI PA GE 77 OF THE ANNUAL REPORT. 7 3. KEEPING IN VIEW THE ACCOUNTING POLICY OF THE A SSESSEE SINCE INCEPTION AND THERE BEING NO CHANGE IN ACCOUNTING P OLICY NO ADDITION WAS MADE TILL DATE IN ANY OF THE ASSESSMEN T YEAR IN THE PAST. 4. THIS POLICY IS ALSO FOLLOWED BY THE PARENT COM PANY OF THE ASSESSEE CENTRAL WAREHOUSING CORPORATION. 5. DETAIL OF TOTAL EXPENDITURE OF THE CONSTRUC TION CELL WERE GIVEN. 6. CALCULATION OF THE CAPITALIZATION OF 14% OF EX PENDITURE INCURRED ON CAPITAL WORKS DEBITED IN THE FIXED ASSE T ALONGWITH COPIES OF THE LEDGER ACCOUNTS WAS ATTACHED. 7. CALCULATION OF THE EXPENSES UNDER THE HEAD REPA IR & MAINTENANCE WAS GIVEN. THE ABOVE SUBMISSIONS OF THE ASSESSEE HAS BEEN CONS IDERED AND FOUND THAT THESE ISSUES WERE NOT EXAMINED BY TH E ASSESSING OFFICER. FURTHER, THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO PROVE THAT THE EXPENDITURE CLAIMED IS REVENUE IN NA TURE. PROVISION OF RS. 22,21,000/- ON ACCOUNT OF PROVISI ON FOR DOUBTFUL RECOVERY UNDER THE HEAD WHEAT ACCOUNT. NO REPLY HAS BEEN SUBMITTED IN RESPECT OF EXPENSES CLAMED ON ACCOUNT OF PROVISION OF RS.22,21,000/- MADE BY THE ASSESSEE FOR DOUBTFUL RECOVERY UNDER THE HEAD 'WHEAT ACCOUNT.' T HE ASSESSING OFFICER IS DIRECTED TO ADD BACK THE VISIO NS OF RS.22,21,000/- CLAIMED BY THE ASSESSEE AFTER DUE VE RIFICATION. CHARGING OF INCOME TAX AT MAXINIUN MARGINAL RATE U/ S 167B OF THE ACT AS THE ASSESSEE HAS BEEN TREATED AS AOP. NO REPLY HAS BEEN SUBMITTED IN RESPECT OF THE DISCR EPANCY IN NOT CHARGING THE TAX AT MAXIMUM MARGINAL RATE AS PER TH E PROVISIONS OF SECTION 167B OF THE INCOME TAX ACT, 1 961. THE ASSESSEE HAS BEEN TREATED AS AOP AND IS CHARGEABLE AT MAXIMUM MARGINAL RATE U/S 167B OF THE ACT. THE A.O. IS THER EFORE, DIRECTED TO CHARGE THE TAX @MAXIMUM MARGINAL RATE O N THE ENTIRE INCOME CHARGEABLE TO TAX. THE LD. COMMISSIONER SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO FRAME THE SAME AFRESH AFTER EXAMINING TH E ABOVE ISSUES. 8 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS EVIDENT FROM THE RECORD THAT THE ASSESSEE DEBITED RS. 12,88,15,000/- IN THE PROFIT AND LOSS ACCOUNT IN RE SPECT OF THE REVISED PAY SCALES SEPARATELY WHICH IS APPEARING IN SCHEDULE P NOTES ON ACCOUNTS, PARA X(F) AT PAGE 79 OF THE 42 ND ANNUAL REPORT 2008-09. IN THE SAID NOTE IT HAS BE EN STATED THAT THE GOVERNMENT OF HARYANA HAS REVISED THE PAY SCALES OF THE EMPLOYEES AS PER THE 6 TH PAY COMMISSION REPORT. THE BOARD OF DIRECTORS OF T HE ASSESSEE IN ITS 176 TH MEETING HELD ON 25.3.2009 HAS APPROVED THE SAME SU BJECT TO FINAL APPROVAL OF THE GOVERNMENT. ACCORDINGLY THE EXPENDITURE OF PAY REVISION HAS BEEN BOOKED AS ACCRUED EXPENDITURE FOR THE YEAR. IT IS ALSO EVI DENT FROM THE RECORD THAT AS PER DIRECTIONS DATED 7.1.2009, OF THE FINANCE DEPARTMEN T GOVERNMENT OF HARYANA, 40% OF THE AGGREGATE ARREARS WAS TO BE PAID DURING THE FINANCIAL YEAR 2008-09 AND 60% OF THE AGGREGATE ARREARS WAS TO BE PAID DURING THE FINANCIAL YEAR 2009-10. IN COMPLIANCE TO THE DIRECTIONS OF THE FINANCE DEPA RTMENT, GOVT. OF HARYANA, THE BOARD OF DIRECTORS OF THE ASSESSEE IN ITS MEETING H ELD ON 25.3.2009 VIDE AGENDA ITEM NO. 26 APPROVED THE REVISION OF PAY SCALES TO ITS EMPLOYEES W.E.F. 1.1.2006 AND PROVISION OF RS. 12,88,15,000/- WAS MADE IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2009 TO THE RELEVANT ASSESSMEN T YEAR 2009-10. IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT DATED 19.12.2011, THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSEE AND NO A DDITION / DISALLOWANCE WAS MADE. HOWEVER, THE LD. CIT IN HIS ORDER PASSED U/S 263 OF THE ACT HELD THAT THE ASSESSEE SHOULD HAVE MADE PROVISION FOR EXPENDITURE OF 40% IN THE CURRENT FINANCIAL YEAR. ACCORDING TO HIM, THE ASSESSING OF FICER HAS FAILED TO VERIFY THE SAME AND DIRECTED THE ASSESSING OFFICER TO VERIFY T HE SAME AND ALLOW THE PERMISSIBLE AMOUNT ONLY I.E. 40% OF THE ARREARS. SHRI B.K.NOHRIA LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER THE DIRECTI ON DATED 7.1.2009 OF THE FINANCE DEPARTMENT, GOVT. OF HARYANA, THE ASSESSEE IS LIABL E TO REFLECT THE LIABILITY IN THE 9 ACCOUNTS WHEN ADMITTED BY IT OR WHEN THE DEMAND IS MADE AGAINST IT OR WHEN THE LIABILITY IS ASCERTAINED AND THE ASSESSEE IS AT LIB ERTY TO REFLECT THE SAME WHEN IT CHOSE TO ADMIT THE LIABILITY I.E. EITHER WHEN THE D EMAND IS MADE OR WHEN THE LIABILITY IS ASCERTAINED OR WHEN IT ADMITS LIABILIT Y. IT IS ALSO APPARENT FROM THE RECORDS THAT THE BOARD OF DIRECTORS OF THE ASSESSEE HAD APPROVED THE PAY SCALES REVISION DURING THE YEAR UNDER CONSIDERATION. THE I NCURRING OF THE LIABILITY IS CERTAIN AND HAS BEEN ESTIMATED WITH REASONABLE CER TAINTY. THE LIABILITY IS NOT A CONTINGENT LIABILITY. THE LIABILITY IS IN PRAESENTI THOUGH IT WILL TO BE DISCHARGED AT A FUTURE DATE. IN THE INSTANT CASE, 40% AGGREGATE ARREARS WAS TO BE PAID DURING THE FINANCIAL YEAR 2008-09 AND 60% OF THE AGGREGATE ARREARS WAS TO BE PAID DURING THE FINANCIAL YEAR 2009-10 AND A PROVISION OF RS. 1 2,88,15,000 WAS MADE IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.20 09 RELATING TO THE RELEVANT ASSESSMENT YEAR 2009-10. THUS, THE ASSESSEE HAS ES TIMATED THE QUANTUM OF SUCH ENHANCED LIABILITY. THE LIABILITY WAS CERTAIN AND THE ASSESSEE TOOK THE MOST PRUDENT DECISION IN MAKING PROVISION OF SALARY AT R S. 12,88,15,000/-. SHRI_B.K. NOHRIA, LD. COUNSEL FOR THE ASSESSEE POINTED OUT TH AT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND TAKING INTO ACCOUNT T HE ACCOUNTING STANDARD NOTIFIED BY THE CENTRAL GOVERNMENT WHICH IS RECORDE D IN (1996) 218 ITR (ST.)1 AND APPLICABLE FOR ASSESSMENT YEAR 1997-98, IT HAS TO BE HELD THAT THE PROVISIONS TOWARDS ENHANCED LIABILITY ON ACCOUNT OF SALARY IS ALLOWABLE AS AN ACCRUED LIABILITY. THE HON'BLE SUPREME COURT IN THE CASE O F BHARAT EARTH MOVERS VS. CIT [2000] 245 ITR 428 (SC) HAD AN OCCASION TO DECIDE THE ISSUE OF ACCRUAL OF LIABILITY ON ACCOUNT OF ENTITLEMENT OF LEAVE SALARY . THE HON'BLE SUPREME COURT HELD THAT IF A BUSINESS LIABILITY HAS DEFINITELY AR ISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED OR DISCHARGED AT A FUTURE DATE. THE HON'BLE COURT FURT HER OBSERVED THAT WHAT SHOULD BE CERTAIN IS THE INCURRING OF LIABILITY. IT SHOUL D ALSO BE ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATI ON WOULD NOT BE POSSIBLE. IF THESE REQUIREMENTS ARE SATISFIED THE LIABILITY IS N OT A CONTINGENT ONE. THE LIABILITY 10 IS IN PRAESENTI THOUGH IT WILL TO BE DISCHARGED AT A FUTURE DATE, IT DOES NOT MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIAB ILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAIN'. THE HON'BLE APEX COURT, THEREFORE, HELD THAT THE PROVISIONS MADE BY THE APPELLANT COMPANY FOR MEETING THE LIABILITY INCURRED BY IT UNDER THE LEAVE ENCASHMENT SCHEME PROPORTIONATE WITH THE ENTITLEME NT EARNED BY THE EMPLOYEES OF THE COMPANY, INCLUSIVE OF THE OFFICERS AND THE S TAFF, SUBJECT TO THE CEILING AN ACCUMULATION AS APPLICABLE ON THE RELEVANT DATE, WA S ENTITLED TO DEDUCTION OUT OF THE GROSS RECEIPTS OF THE ACCOUNTING YEAR DURING WH ICH THE PROVISION IS MADE FOR THE LIABILITY. THE HON'BLE COURT HAS CATEGORICALLY HELD THAT THE LIABILITY IS NOT A CONTINENT LIABILITY. IN THE INSTANT CASE, THE ASSES SEE HAS ESTIMATED THE LIABILITY WITH REASONABLE CERTAINTY THOUGHT THE QUANTIFICATIO N WOULD NOT BE OF EXACT FIGURE. THUS, CONSIDERING THE FACTS AND CIRCUMSTANCE OF THE PRESENT CASE, WE HOLD THAT IN THIS CASE THE INCURRING OF THE LIABILITY WAS CERTAI N AND HAS BEEN ESTIMATED WITH REASONABLE CERTAINTY. THE LIABILITY IS NOT A CONTIN GENT LIABILITY. THE LIABILITY IS ACCRUED DURING THE YEAR UNDER CONSIDERATION THOUGH THE LIABILITY WAS TO BE DISCHARGED AT A FUTURE DATE. EVEN AS PER THE ACCOUN TING STANDARDS NOTIFIED BY THE CENTRAL GOVERNMENT WHICH IS REPORTED IN [1996] 218 ITR (STATUTE.)1, WHICH IS APPLICABLE FROM ASSESSMENT YEAR 1997-98, IT HAS TO BE HELD THAT THE PROVISIONS MADE TOWARDS ENHANCED LIABILITY ON ACCOUNT OF SALAR Y AND WAGES ARE ALLOWABLE AS AN ACCRUED LIABILITY. IN THE INSTANT CASE, THE LD. CIT HAS HELD THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE BASIS THAT THE FINANCIAL IMPLICATION FOR IMPLEMENTING THE REVISED PAY SCALES WHICH WAS ESTIMATED AT RS. 8.50 CRORES APPROX. FOR THE YEARS 2005-06. 2006-07 AND 2007-08 AND THEREFORE THE ASSESSEE SHOULD HAVE MADE PROVISI ON FOR EXPENDITURE OF 40% ONLY IN THE CURRENT FINANCIAL YEAR. IN OUR CONSIDER ED VIEW WHAT IS IMPORTANT IS NOT THE GOVERNMENT POLICY TO PROVIDE 40% ARREARS IN THE CURRENT FINANCIAL YEAR I.E. 2008-09 AND 60% ARREARS IN THE NEXT FINANCIAL YEAR I.E. 2009-10, WHAT IS IMPORTANT IS THE DIRECTIONS ISSUED VIDE LETTER DATE D 7.9.2009 BY THE FINANCE DEPARTMENT, GOVERNMENT OF HARYANA AND ON THAT ACCOU NT WE FIND THAT LIABILITY IS 11 ACCRUED DURING THE YEAR UNDER CONSIDERATION. AS WE HAVE ALREADY OBSERVED HERE- IN-ABOVE THAT THE PROVISION FOR THE SALARY IS NOT A CONTINENT LIABILITY, THE LIABILITY ACCRUED AS PER THE DIRECTIONS OF THE FINANCE DEPART MENT, GOVERNMENT OF HARYANA AND HENCE THE LIABILITY IS ACCRUED DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE AND ALSO FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS REFERRED TO ABOVE, WE HOLD THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS NOT ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF REVENUE TO THE ABOVE EXTENT. IN OUR OP INION, THE ASSESSING OFFICER HAS CORRECTLY ALLOWED THE CLAIM OF THE ASSESSEE BEING P ROVISION MADE ON ACCOUNT OF REVISION OF PAY SCALES DEBITED IN THE PROFIT AND LO SS ACCOUNT AT RS. 12,88,15,000/-. 7. ANOTHER ASPECT OF THE MATTER IS THAT THE COMMIS SIONER OF INCOME TAX HAD INITIATED THE PROCEEDINGS U/S 263 OF THE ACT ON THE BASIS OF AUDIT OBJECTIONS DATED 22.10.2012. IT IS ALSO APPARENT FROM THE RECORD THA T BEFORE INITIATING PROCEEDINGS U/S 263 OF THE ACT, NOTICE U/S 154 OF THE ACT WAS ISSUED ON 5.2.2013, WHICH READS AS UNDER:- LETTER NO. 9000 OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE, PANCHKULA DATED: 05/02/2013 TO, M/S HARYANA WAREHOUSING CORPORATION LTD., BAY NO. 15-18 SECTOR-2 PANCHKULA DEAR SIR, THE ORDER UNDER SECTION 143(3) FOR THE ASSESSMENT Y EAR 2009-10 MADE ON 19.12.2011 AND UNDER SECTION 154 DA TED 28/12/2011 IN YOUR CASE (IT) REQUIRES TO BE AMENDED AS THERE IS A MISTAKE APPARENT FROM THE RECORD WITHIN THE MEANING OF SECTION 154/155 OF THE INCOME TAX ACT, 1961. THE RECTIFICAT ION OF THE 12 MISTAKE AS PER DETAILS GIVEN BELOW WILL HAVE THE EF FECT OF ENHANCING THE ASSESSMENT / REDUCING THE REFUND/INCR EASING YOUR LIABILITY AND, THEREFORE, IF YOU WISH TO BE HEARD I N THIS CONNECTION YOU ARE REQUESTED TO APPEAR IN PERSON OR BY AN AUTH ORIZED REPRESENTATIVE IN MY OFFICE ON 15/02/2013 AT 12:00 AM/PM. IF HOWEVER, YOU INTEND SENDING A WRITTEN REPLY TO THIS OFFICE AND DO NOT WISH TO BE HEARD IN PERSON, YOU ARE REQUESTED T O ENSURE THAT YOUR REPLY REACHES ME ON OR BEFORE THE DATE MENTION ED ABOVE. YOURS FAITHFULLY, SD/- ABHISHEK NARANG DY. COMMISSIONER OF INCOME TAX CIRCLE, PANCHKULA DETAILS OF MISTAKE FROM THE PERUSAL OF RECORD IT IS NOTICED THAT THE A SSESSEE FILED ITS RETURN IN THE CAPACITY OF TRUST AND CLAIMED EXEMPTI ONS UNDER SECTION 11(1) OF INCOME TAX ACT BOTH OF WHICH WERE CANCELLED DURING THE ASSESSMENT PROCEEDING. THE ASSESSEE HAS DEBITED AMOUNT OF RS. 12,88,15,000/- ON ACCOUNT OF REVISED PAY SCALE IN PROFIT AND LOSS ACCOUNT AND MADE THE PROVISIONS FOR THE SAME AMOUNT IN THE BALANCE SHEET UNDER OTHER LIABILITIES . AS PER POINT 9 OF NOTES ON ACCOUNT THE AUDITOR HAS MENTIONED THAT THESE PROVISIONS HAVE BEEN MADE ON AD-HOC BASIS. AD-HOC P ROVISIONS MADE FOR LEAVE ENCASHMENT HAS BEEN ADDED TO THE TAX ABLE INCOME BY THE ASSESSEE ITSELF WHEREAS THE ABOVE SAID PROVI SIONS HAD NOT BEEN ADDED TO THE TAXABLE INCOME AND THEREFORE SAME IS TO BE DISALLOWED. HAVING A TAX EFFECT OF 5,82,33,010+ INT EREST UNDER SECTION 234B FOR RS. 1,44,48,792/-. SD/- ABHISHEK NARANG DY. COMMISSIONER OF INCOME TAX CIRCLE, PANCHKULA 13 IN RESPONSE TO THE ABOVE NOTICE THE ASSESSEE SUBMIT TED ITS REPLY ON 3.12.2013, COPY OF WHICH IS AVAILABLE AT PAGES 9 & 10 OF THE P APER BOOK. THE PARTICULAR OF MISTAKE IS PROPOSED TO BE RECTIFIED WAS THE SAME AS THE ASSESSEE HAD DEBITED AMOUNT OF RS. 12,88,15,000/- ON ACCOUNT OF REVISED PAY SCALE IN THE PROFIT AND LOSS ACCOUNT AND MADE THE PROVISIONS FOR THE SAME A MOUNT IN THE BALANCE SHEET UNDER OTHER LIABILITIES. LD. COUNSEL FOR THE ASSES SEE DREW OUR ATTENTION TO THE AUDIT OBJECTION MADE IN THE PRESENT CASE AND SUBMIT TED THAT THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE COMMISSIONER OF INCOME TAX. HE ALSO SUBMITTED THAT THE AUDIT OBJECTIONS ARE NOT RECORD FOR INVOKING JURISDICTION U/S 263 OF THE ACT. THE COMMISSIONER OF INCOME-TAX WHIL E EXERCISING HIS JURISDICTION U/S 263 OF THE ACT IS EMPOWERED TO CALL FOR AND EX AMINE THE RECORD OF ANY PROCEEDINGS UNDER THE INCOME TAX ACT. 1961 AND WHER E THE THINKS THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE, HE MAY AFTER GIVING AN OPPORTUNITY OF HEAR ING TO THE ASSESSEE AND AFTER MAKING ENQUIRES PASS SUCH ORDER WHICH DEEM NECESSAR Y IN THE CIRCUMSTANCES OF THE CASE. ACCORDING TO LD. COUNSEL FOR THE ASSESSEE THE CIT HAS ISSUED SHOW CAUSE NOTICE U/S 263 OF THE ACT ON ACCOUNT OF AUDIT OBJECTIONS RAISED IN THE PRESENT CASE. IN THE INSTANT CASE, IT IS STATED THA T NO ORDER U/S 154 / 155 OF THE ACT HAS BEEN PASSED TILL DATE. 8. AT THIS STAGE WE MAY REFER TO THE DECISION OF TH E HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V SOHANA WOOLLEN MIL LS [2008] 296 ITR 238, WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER:- A REFERENCE TO THE PROVISIONS OF SECTION 263 OF TH E INCOME-TAX ACT, 1961, SHOWS THAT JURISDICTION THERE UNDER CAN BE EXERCISED IF THE COMMISSIONER FINDS THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. A MERE AUDIT OBJECTIO N AND 14 THE FACT THAT A DIFFERENT VIEW COULD BE TAKEN, ARE NOT ENOUGH TO SAY THAT THE ORDER OF THE ASSESSING OFFIC ER WAS ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. WHETHER SATISFACTION OF THE COMMISSIONER FOR EXERCI SING JURISDICTION WAS CALLED FOR OR NOT, HAS TO BE DECID ED HAVING REGARD TO THE GIVEN FACT SITUATION. IN THE PRESENT CASE, THE TRIBUNAL HAS HELD THAT THE ASSESSEE HAD DISCLOSED THAT OUT OF SALE CONSIDERATION, A SUM OF RS. 1 LAKH WAS TO BE RECEIVED FOR SALE OF PERMIT. IT THAT IS SO, THERE WAS NO ERROR IN THE VIEW TAKEN BY THE ASSESSI NG OFFICER AND NO CASE WAS MADE OUT FOR INVOKING JURIS DICTION UNDER S. 263. 9. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS T AKEN A VIEW WHICH IS DULY SUPPORTED BY THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT (SUPRA). AT THE SAME TIME IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V SOH ANA WOOLLEN MILLS (SUPRA), IT CAN SAFELY BE HELD THAT MERE AUDIT OBJECTION AND ME RELY BECAUSE A DIFFERENT VIEW COULD BE TAKEN , ARE NOT ENOUGH TO HOLD THAT THE OR DER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE WHICH IS FULLY SUPPORTED BY THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT EA RTH MOVERS REFERRED TO ABOVE. ON THE OTHER HAND, THE CIT HAS TAKEN A DIFFERENT VI EW IN THE MATTER. IN THE CASE OF MALABAR INDUSTRIAL CO. LTD VS CIT [2000] 243 ITR 83 (SC), THE HON'BLE SUPREME COURT HELD THAT IF THE ASSESSING OFFICER H AS TAKEN ONE OF THE POSSIBLE VIEW WITH WHICH CIT DOES NOT AGREE, THE ASSESSMENT ORDER CANNOT BE TREATED ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. ON THIS SCORE ALONE, WE SET ASIDE THE ORDER OF THE CIT AND RESTORE THAT OF ASSE SSING OFFICER. 15 10. WE MAY ALSO MENTION HERE THAT SHRI S.K.MITTAL, LD. DR RELIED UPON THE DECISION OF HON'BLE GAUHATI HIGH COURT IN THE CAS E OF CIT VS. B & A PLANTATION & INDUSTRIES LTD & ANR. [2012] 346 ITR 43 (GAUHATI) WHICH IS CONTRARY TO THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V SOHANA WOOLLEN MILLS (SUPRA). THE DECISION OF HON'BLE JURISDICTIONAL HI GH COURT IS BINDING UPON THIS BENCH OF THE TRIBUNAL AND, THEREFORE, WE HAVE FOL LOWED THE SAME IN PREFERENCE TO THE DECISION OF THE HON'BLE GAUHATI HIGH COURT ( SUPRA) RELIED UPON BY THE LD. DR. 11. AS REGARDS THE UNABSORBED OVERHEAD ON CAPITAL WORKS UNDER MISC. EXPENSES, SHRI B.K NOHRIA, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT IT IS ACCOUNTING POLICY OF THE ASSESSEE SINCE ITS INCEPTI ON THAT ADMINISTRATIVE EXPENSES INCURRED ON CONSTRUCTION STAFF @ 14% IS TO BE CHAR GED TO CAPITAL WORK AND REPAIR AND MAINTENANCE RESPECTIVELY AS PER SYSTEM IN VOGUE IN PWD. HE FURTHER SUBMITTED THAT REMAINING AMOUNT OF EXPENSES IS CHAR GED TO REVENUE EXPENDITURE AS UNABSORBED OVERHEAD ON CAPITAL WORKS UNDER MISC . EXPENSES IN PROFIT AND LOSS ACCOUNT. SHRI B.K. NOHRIA, LD. COUNSEL FOR THE ASSE SSEE POINTED OUT THAT THE ASSESSEE IS FOLLOWING THE ABOVE ACCOUNTING SYSTEM A LSO SINCE INCEPTION AND THERE WAS NO CHANGE IN THE ACCOUNTING POLICY, NO ADDITION WAS MADE TILL DATE IN ANY OF THE ASSESSMENT ORDER IN THE PAST. HE FURTHER SUBMIT TED THAT DETAILS OF TOTAL EXPENDITURE OF THE CONSTRUCTION CELL WAS FURNISHED TO THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE AFTER CONSIDERING THE PROVISIONS OF SECTION 37 OF THE ACT BY TREATING THE SAME AS INCOME OF THE ASSESSEE ON MERCANTILE SYSTEM OF ACCO UNTING AND, HENCE, THE PROVISIONS OF SECITON 263 ARE NOT ATTRACTED IN THE PRESENT CASE. HE ALSO SUBMITTED THAT THERE WAS NO INDEPENDENT APPLICATION OF MIND B Y THE COMMISSIONER OF INCOME-TAX AND THE REVISIONARY PROCEEDING WERE INIT IATED ON THE BASIS OF AUDIT OBJECTIONS. 16 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE L D. COMMISSIONER HAS HELD THE ORDER OF THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT THIS ISSUE HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER. THE LD. COMMISSIONER HAS NOT REJECTED THE SUBMISSIONS MADE BY THE ASSESSEE. ON THE OTHER HAND, THE CASE OF THE ASSES SEE IS THAT THE RELEVANT DETAILS OF TOTAL INCOME, EXPENDITURE OF THE CONSTRUCTION ST AFF WAS FURNISHED TO THE ASSESSING OFFICER. ON THE PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT LD. CIT(A) HAS NOT POINTED OUT ANY DEFECT IN ACCOUNTING POLICY OF THE ASSESSEE, WHICH WAS BEING REGULARLY FOLLOWED SINCE INCEPTION. AS PER TH E SAID ACCOUNTING POLICY, ADMINISTRATIVE EXPENSES INCURRED AT CONSTRUCTION CE LL STAFF @ 14% HAS BEEN CHARGED TO THE CAPITAL WORK, REPAIR AND MAINTENANCE RESPECTIVELY AS PER THE SYSTEM IN VOGUE IN PWD. REMAINING AMOUNT OF EXPENSE S IS CHARGED TO REVENUE EXPENDITURE AS UNABSORBED OVERHEAD ON CAPITAL WORKS UNDER THE MISC. EXPENSES IN PROFIT AND LOSS ACCOUNT. THIS FACT HAS BEEN DIS CLOSED IN SCHEDULE P NOTES OF ACCOUNT AT PAGE 77 OF THE ANNUAL REPORT. IT IS NOT THE CASE OF THE LD. COMMISSIONER THAT THE ACCOUNTING SYSTEM REGULARLY F OLLOWED BY THE ASSESSEE DOES NOT DISCLOSE THE TRUE AND PROPER INCOME. THEREFORE, THE ACTION OF THE CIT(A) CANNOT BE HELD PROPER AND TENABLE. IN THE CASE OF C IT V BRITISH PAINTS INDIA LTD. (1991) 188 ITR 44, THE HON'BLE SUPREME COURT HAS O BSERVED THAT IT IS INCORRECT TO SAY THAT THE OFFICER IS BOUND TO ACCEPT THE SYST EM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE THE CORRECTNESS OF WHICH H AD NOT BEEN QUESTIONED IN THE PAST. THERE IS NO ESTOPPELS IN THESE MATTERS AND TH E OFFICER IS NOT BOUND BY THE METHOD FOLLOWED IN THE EARLIER YEARS. IN THE INSTA NT CASE, AS WE HAVE ALREADY HELD HEREIN ABOVE THAT IF ACCOUNTING SYSTEM ADOPTED BY T HE ASSESSEE DOES NOT DISCLOSE TRUE AND PROPER INCOME THE ASSESSING OFFICER IS EN TITLED AND HAS DUTY TO ADOPT APPROPRIATE COMPUTATION TO DETERMINE TRUE INCOME. IN THIS CASE, THE LD. CIT HAS MERELY OBSERVED THAT THE SUBMISSIONS MADE BY THE AS SESSEE HAS BEEN CONSIDERED AND FOUND THAT THESE ISSUES WERE NOT EXAMINED BY TH E ASSESSING OFFICER. ON THE CONTRARY, THE CONTENTION OF THE ASSESSEE IS THAT TH E ASSESSING OFFICER HAS ACCEPTED 17 THE CLAIM AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE WHICH WERE SUPPORTED BY THE DOCUMENTARY EVIDENCE. IN OUR VIEW, THE CIT WAS NOT JUSTIFIED IN HOLDING THAT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. SECONDLY, LD. CIT HAS N OT APPLIED HIS MIND AND INITIATED THE PROCEEDINGS U/S 263 OF THE ACT ON TH E BASIS OF AUDIT OBJECTIONS. IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V SOHANA WOOLLEN MILLS (SUPRA) REFERRED TO ABOVE, M ERE AUDIT OBJECTION AND MERELY BECAUSE A DIFFERENT VIEW COULD BE TAKEN ARE NOT ENOUGH TO HOLD THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE. THE AUDIT OBJECTIONS DATED 22.10.2012 ARE AVAILABLE AT PAGES 120 OF THE ASSESSEES PAPER BOOK ON THE BASIS OF WHICH PROCEED INGS U/S 263 HAVE BEEN INITIATED. IT IS ALSO APPARENT FROM THE RECORDS TH AT NOTICE U/S 154 / 155 OF THE ACT WAS ISSUED TO THE ASSESSEE, COPY OF WHICH IS AVAILA BLE AT PAGE 11 OF THE ASSESSEES PAPER BOOK. RELEVANT PORTION OF NOTICE DATED 25.6.2 013 READS AS UNDER: PARTICULARS OF MISTAKE TO BE RECTIFIED: I) A PERUSAL OF THE ASSESSMENT RECORD REVEALS THAT YOU HAVE MADE PROVISIONS FOR PAY SCALE EXPENSES OF RS. 12,88,1500 0/- AND ALLOWED BY THIS OFFICE. THESE LIABILITIES BEING UNC ERTAIN WERE NOT BE ALLOWED. IT IS PROPOSED TO RECTIFY THIS MIST AKE BY ADDITION OF THIS AMOUNT TO ASSESSED INCOME AND CHAR GE TAX THEREON. II) FURTHER IT IS SEEN THAT A SUM OF RS. 50,16,675/- HA S BEEN DEBITED AS OVERHEAD ON CAPITAL WORKS SHOWN IN SCH EDULE 1 UNDER MISC. EXPENSES IN PROFIT AND LOSS ACCOUNT. TH IS EXPENDITURE IS OF CAPITAL NATURE AND NEEDS TO BE CA PITALIZED. DEDUCTIONS AS REVENUE EXPENDITURE ARE NOT ALLOWABLE . IT IS PROPOSED TO DISALLOW THIS DEDUCTION OF RS. 50,16,67 5/- AND CHARGE TAX THEREON SD/- ACIT. 18 13. THE ASSESSEE SUBMITTED A DETAILED REPLY TO THE ABOVE NOTICE ON 3.7.2013. SHRI B.K. NOHRIA, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE DEPARTMENT HAS NOT CONVEYED ANY ORDER PASSED U/S / 154/155 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION AND ALSO KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V SO HANA WOOLLEN MILLS (SUPRA), WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND ALL OW THE GROUND OF APPEAL TO THE ABOVE EXTENT. THE ASSESSING OFFICER HAS CORRECTLY ALLOWED THE CLAIM OF THE ASSESSEE REGARDING UNABSORBED OVERHEAD ON CAPITAL W ORKS AND UNDER MISC. EXPENSES AMOUNTING TO RS. 50,16,675/-. 14. AS REGARDS THE ISSUES OF RS. 22,21,000/- WHICH RELATES TO PROVISION FOR DOUBTFUL RECOVERY UNDER THE HEAD WHEAT ACCOUNT A ND CHARGING OF INTEREST AT MINIMUM MARGINAL RATE U/S 167B OF THE ACT, NO ARG UMENTS WERE ADVANCED ON BEHALF OF THE ASSESSEE, THEREFORE, TO THE ABOVE EXT ENT WE UPHOLD THE ORDER OF LD. CIT AND REJECT THE CLAIM OF THE ASSESSEE. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D PARTLY. ORDER PRONOUNCED IN THE OPEN COURT ON 21/10/2015 SD/- SD/- (ANNAPURNA MEHROTRA) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 21 ST OCTOBER, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR