DCIT, Ranchi V. M/s MECON Ltd., Ranchi

ITA 315/RAN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2185 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SSH S K PODDAR M K CHOWDHARY
• Keywords: Corroborative evidences; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: RANCHI BENCH, RANCHI BEFORE SH. SHAMIM YAHYA, ACCOUNTANT MEMBER AND SH. PARTHA SARTHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 315/RAN/2014 ASSESSMENT YEAR: 2008-09 DEPUTY COMMISSIONER OF INCOME- TAX, CIRCLE-2, CENTRAL REVENUE BUILDING ANNEXE, 1 ST FLOOR, 5A MAIN RAOD, RANCHI VS. M/S. MECON LTD., DORANDA, RANCHI (PAN:AACCM2119B) (APPELLANT) (RESPONDENT) AND C.O. NO. 01/RAN/2015 [ARISING OUT OF ITA NO. 315/RAN/2014] ASSESSMENT YEAR: 2008-09 M/S. MECON LTD., RANCHI (PAN:AACCM2119B) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2, CENTRAL REVENUE BUILDING ANNEXE, 1 ST FLOOR, 5A MAIN RAOD, RANCHI (APPELLANT) (RESPONDENT) DEPARTMENT BY SH. DEEPAK ROSAN, SR. STANDING COUNS EL ASSESSEE BY S/SH. S.K. PODDAR, M.K. CHOWDHARY & DEVESH PODDAR, ADVOCATES DATE OF HEARING 01.03.2016 DATE OF PRONOUNCEMENT 04.03.2016 O R D E R PER SHAMIM YAHYA, AM : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARISE OUT OF THE ORDER OF LD. CIT(A), RANCHI, DATED 12.08 .2014 AND PERTAINS TO ASSESSMENT YEAR 2008-09. GROUNDS OF APPEAL IN REVEN UES APPEAL READ AS UNDER: 2 ITA NO. 315/RAN/2014 & C.O. NO. 01/RAN/2015 AY: 2008-09 1. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEAL ), RANCHI, ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER TOTALLING TO RS. 1,04,23,877/- UNDER FOLLOWING HEADS:- SALARY AND WAGES : RS. 81,706/- INTEREST : RS. 25,00,397/- MEDICAL EXPENSES : RS. 24,000/- PAYMENT MADE TO CONTRACTOR : RS. 3,72,674/- INCOME FROM SERVICE RENDER : RS. 57,83,360/- SHARE OF TOWNSHIP MAINT. COST : RS. 2,87,904/- LEAVE ENCASHMENT : RS. 32,405/- TRAVELLING EXPENSES : RS. 61,803/- SALES TAX : RS. 12,79,877/- 2. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEAL ), RANCHI, HAS ERRED BY ALLOWING CLAIM OF DEDUCTION MADE/DEBITED T O THE P&L ACCOUNT AMOUNTING TO TOTAL RS. 1,04,23,877/- WITHOUT TAKING INTO CONSIDERATION THE JUSTIFICATION OF ADDITION MADE BY THE ASSESSING OFF ICER. 2. THE ASSESSEE IN THIS CASE IS A PUBLIC SECTOR UN DERTAKING ENGAGED IN CONSULTANCY BUSINESS. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON PERUSAL OF PROFIT AND LOSS ACCOUNT H AD OBSERVED THAT THE ASSESSEE HAD DEBITED PRIOR PERIOD EXPENSES AMOUNTING TO RS. 34,50,88,296/- FOR THE ASSESSMENT YEAR SHOWN UNDER ADJUSTMENT RELATING TO THE EARLIER YEARS:- SALARY AND WAGES : RS. 81,706/- INTEREST : RS. 25,00,397/- MEDICAL EXPENSES : RS. 24,000/- PAYMENT MADE TO CONTRACTOR : RS. 3,72,674/- INCOME FROM SERVICE RENDER : RS. 57,83,360/- SHARE OF TOWNSHIP MAINT. COST : RS. 2,87,904/- LEAVE ENCASHMENT : RS. 32,405/- TRAVELLING EXPENSES : RS. 61,803/- SALES TAX : RS. 12,79,877/- TOTAL : RS. 1,04,23,877/- IN THE ABSENCE OF ANY SUPPORTING EVIDENCE/DOCUMENT S, THE EXPENSES DEBITED UNDER THE HEAD PRIOR PERIOD EXPENSES AS A BOVE WERE DISALLOWED BY THE 3 ITA NO. 315/RAN/2014 & C.O. NO. 01/RAN/2015 AY: 2008-09 ASSESSING OFFICER AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. UPON ASSESSEES APPEAL, THE LD. CIT(A) DELETED THE ADDIT ION BY HOLDING AS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSION OF THE COUNS EL OF THE APPELLANT AND PERUSED THE ASSESSMENT ORDER PASSED BY THE LD. AO. IT IS NOTED THAT THE LD. AO HAD ADDED TOTAL 1,08,80,408/- OUT OF WHICH A N AMOUNT OF RS. 1,04,23,877/- WAS ADDED PERTAINED TO PRIOR PERIOD. IT IS NOTED THAT THE ASSESSEE MAINTAINS BOOKS AS PER THE MERCANTILE SYST EM OF ACCOUNTING AND IT HAD DIFFERENT CLIENTS AND OFFICES SPREAD THROUGHOUT THE COUNTRY AND HENCE, AT THE END OF THE FINANCIAL YEAR, IT WAS NOT POSSIB LE TO ACCOUNT FOR ALL THE EXPENDITURE INCURRED BY THE VARIOUS OFFICES AND BRA NCH OFFICES. IT IS ALSO NOTED THAT THERE MAY BE CERTAIN INCREASE IN RATE AN D, HENCE, THE DIFFERENCE WAS PAID TO THE SUBSEQUENT YEAR. VOUCHERS HAVE BEEN RECEIV3ED FROM THE EMPLOYEES AFTER 31 ST MARCH OF THE FINANCIAL YEAR FOR THE EXPENSES INCUR RED IN THE PREVIOUS YEAR. IT IS ALSO NOTED THAT LOOKING INTO THE TURNOVER OF SEVERAL HUNDRED CRORES OF ASSESSEE, SUCH AN EXPENDI TURE WHICH HAD SPILLED OVER OTHER FINANCIAL YEARS COULD NOT BE DEBITED FOR VALID REASONS. AS REGARDS THE BUSINESS PRACTICE OF THE ASSESSEE AND K EEPING IN VIEW THE ACCOUNTING SYSTEM REGULARLY EMPLOYED BY ASSESSEE, T HE ADDITION UNDER THE PRIOR PERIOD EXPENSES OF RS. 1,04,23,877/- CANNOT B E SUSTAINED IN APPEAL AND DIRECTED TO BE DELETED. ACCORDINGLY, THIS GROUN D OF APPEAL OF THE ASSESSEE IS ALLOWED. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE BY OBSE RVING THAT THE ABOVE ITEMS OF PRIOR PERIOD EXPENSES WERE NOT COVERED UNDER ACT UARIAL VALUATION REPORT OBTAINED BY THE COMPANY. HE ALSO OBSERVED THAT NECE SSARY SUPPORTING VOUCHERS WERE NOT SUBMITTED. IN THIS REGARD, IT IS THE CONTE NTION OF THE ASSESSEE THAT THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING WHOSE ACCOU NTS ARE AUDITED BY STATUTORY AUDITOR AS WELL AS THE COMPTROLLER AND AUDITOR GENE RAL OF INDIA. IT IS NOT NECESSARY THAT ALL EXPENDITURES HAVE TO BE COVERED BY ACTUARIAL VALUATION REPORT. FURTHERMORE, IT HAS BEEN ASSESSEES CLAIM THAT THE ASSESSEE HAS VAST ORGANIZATION AND EXPENDITURES WHEN NOT REPORTED OR IDENTIFIED UP TO CLOSE OF THE YEAR ARE 4 ITA NO. 315/RAN/2014 & C.O. NO. 01/RAN/2015 AY: 2008-09 SUBSEQUENTLY BOOKED UNDER PRIOR PERIOD EXPENDITURE. THIS SYSTEM OF ACCOUNTING OF THE ASSESSEE HAS BEEN REGULARLY ACCEPTED BY THE DEPARTMENT IN THE PAST. THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IT HAS ALSO BEEN SUBMITTED THAT NECESSARY DETAILS WERE DULY SUBMITTE D BEFORE THE ASSESSING OFFICER. IT HAS ALSO BEEN SUBMITTED THAT THE RELEVA NT VOUCHERS OF THE EXPENDITURES CONTAINED THE SUPPORTING EVIDENCE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY SHORT-COMING HAS BEEN NO TED IN THE VOUCHERS MAINTAINED BY THE ASSESSEE. IN THESE FACTS AND CIRC UMSTANCES, IT IS ASSESSEES CLAIM THAT THE ASSESSING OFFICER HAS ERRED IN MAKIN G THE DISALLOWANCE AND LD. CIT(A) IS QUITE CORRECT IN DELETING THE DISALLOWANC E. 4. UPON CAREFUL CONSIDERATION AND HEARING BOTH THE PARTIES, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEES SUBMISSIONS ARE COGENT. THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING AND IT HAS GOT A VAST ORG ANIZATION. IN ITS SYSTEM OF ACCOUNT WHEN EXPENDITURES ARE NOT REPORTED OR IDENT IFIED UPTO THE CLOSE OF THE YEAR ARE SUBSEQUENTLY ACCOUNTED FOR UNDER PRIOR PER IOD EXPENSES. THIS SYSTEM OF ACCOUNTING HAS BEEN REGULARLY FOLLOWED AND THE DEPA RTMENT HAS NOT DISPUTED ABOUT THIS IN THE PAST. WE ALSO AGREE WITH THE CONT ENTION THAT THE ASSESSING OFFICER HAS CLEARLY ERRED IN DRAWING ADVERSE INFERE NCE THAT THESE EXPENDITURES WERE NOT COVERED BY ACTUARIAL VALUATION. THE ASSESS ING OFFICERS PLEA THAT SUPPORTING EVIDENCES HAVE NOT BEEN PRODUCED IS ALSO NOT COGENT AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THE PARTICULARS SUPPORTING AGAINST EXPENDITURES ARE DULY ATTACHED WITH THE CONCERNED V OUCHERS. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY VOUCHER OF THE ASSES SEE COMPANY HAS BEEN FOUND 5 ITA NO. 315/RAN/2014 & C.O. NO. 01/RAN/2015 AY: 2008-09 TO BE LACKING CREDIBILITY. FURTHERMORE, WE ALSO NOT E THAT ITAT, RANCHI BENCH, IN ASSESSEES OWN CASE IN ITA NO. 17 & 05/RAN/2013 FOR AY 2007-08, VIDE ORDER DATED 07.05.2013, HAD UPHELD THE ASSESSEES CLAIM O F PRIOR PERIOD EXPENDITURE FOR ASSESSMENT YEAR 2007-08. 5. IN THE BACKGROUND OF THE AFORESAID DISCUSSION A ND PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. C.O. NO. 01/RAN/2015 6. IN THE CROSS OBJECTION, THE ASSESSEE HAS SUPPOR TED THE ORDER OF LD. CIT(A) ON THE ISSUE OF PRIOR PERIOD EXPENSES. 7. SINCE WE HAVE ALREADY UPHELD THE ORDER OF LD. C IT(A) ON THE ABOVE ISSUE, THE CROSS OBJECTION BY THE ASSESSEE HAS NOT BECOME INFRUCTUOUS. ACCORDINGLY, THE CROSS OBJECTION STANDS DISMISSED AS SUCH. 8. IN THE RESULT, THE REVENUES APPEAL AS WELL THE ASSESSEES CROSS OBJECTION STAND DISMISSED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH, 2016. SD/- SD/- (PARTHA SARTHI CHAUDHURY) (SHA MIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 4 TH MARCH, 2016. RAJESH, SR.PS/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 6 ITA NO. 315/RAN/2014 & C.O. NO. 01/RAN/2015 AY: 2008-09 4. THE CIT(A) - 5. THE DR, ITAT, RANCHI 6. GUARD FILE BY ORDER SR. P.S., ITAT, RANCHI