DCIT, Hisar V. Dakshin Haryana Bijli Vitran Nigam Ltd., Hisar

ITA 3217/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0491 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 02-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S KRISHNAN
• Keywords: Reopening of assessment; Depreciation; Revenue expenditure; Reassessment proceedings
• Section: 43B; 143(3); 48; 13; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI ! , ' # $!% &' . , () # ( * BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER %. / ITA NO. 3217/DEL/2016 ' , !, / ASSESSMENT YEAR: 2006-07 DCIT, HISAR CIRCLE, HISAR VS DAKSHIN HARYANA BIJLI VITRAN NIGAM LTD. THE CHIEF ACCOUNTS OFFICER, D237-238, FIRST FLOOR, VIDYUT SADAN, VIDYUT NAGAR, DELHI ROAD, HISAR (HARYANA) PAN-AABCD0033C -#! / REVENUE ' ,/0 /ASSESSEE %. / ITA NO. 3411/DEL/2016 ' , !, / ASSESSMENT YEAR: 2006-07 DAKSHIN HARYANA BIJLI VITRAN NIGAM LTD. THE CHIEF ACCOUNTS OFFICER, D237- 238, FIRST FLOOR, VIDYUT SADAN, VIDYUT NAGAR, DELHI ROAD, HISAR (HARYANA) VS DCIT, HISAR CIRCLE, HISAR PAN-AABCD0033C ' ,/0 /ASSESSEE -#! / REVENUE -#! 1 2 ( / REVENUE BY MS. NIDHI SRIVASTAVA CIT-DR ' ,/0 1 2 ( / ASSESSEE BY SHRI S. KRISHNAN & SHRI V. RAJAKUMAR, ADVOCATE ! 1 0) / DATE OF HEARING : 01.10.2019 34 1 0) / DATE OF PRONOUNCEMENT: 24.12.2019 ITA NO.3217 & 3411/DEL/2016 PAGE | 2 (5 / ORDER PER SUSHMA CHOWLA, JM: THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REV ENUE ARE AGAINST THE ORDER OF CIT(APPEALS), FARIDABAD, DATED 30/03/2 016, RELATING TO ASSESSMENT YEAR 2006-07, PASSED U/S 147 R.W.S. 143( 3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.5,87,86,644/- MADE BY T HE AO ON ACCOUNT OF PRIOR PERIOD EXPENSES OF FIXED ASSETS; IGNORING THE FACT THAT TH ESE EXPENSES ARE CAPITAL IN NATURE AND, THEREFORE, NOT ALLOWABLE AS DEDUCTION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.7,65,83,965/- MADE BY T HE AO ON ACCOUNT OF PRIOR PERIOD'S EXPENSES UNDER THE HEADS PURCHASE OF POWER , EMPLOYEES COST AND INTEREST EXPENSES; IGNORING THE FACT THAT THE ASSESSEE HAS B EEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND, THEREFORE, THE PRIOR PERIOD'S EX PENSES ARE NOT ALLOWABLE AS DEDUCTION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.48,70,125/- MADE BY THE AO ON ACCOUNT OF EXPENSES CLAIMED UNDER THE HEAD 'LOSS DUE FLOOD, CYCLONE & F IRE'; IGNORING THE FACT THAT THE LOSS SUSTAINED PERTAINS TO LOSS OF POLES, WIRES ETC . AND THESE ASSETS ARE CAPITAL IN NATURE ON WHICH THE ASSESSEE HAS BEEN CLAIMING DEPR ECIATION AND, THEREFORE, THE LOSS IF ANY, IS REQUIRED TO BE REDUCED FROM THE WDV OF THE ASSETS INSTEAD OF DEBITING IT TO THE P&L ACCOUNT. 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE FOLLOWING ACTIONS OF THE ASSESSING OFFICER- (I) INITIATING PROCEEDINGS U/S 148 OF THE INCOME-TAX A CT, 1961 AND PASSING ORDER U/S 143(3)/L 48 OF THE ACT; (II) CONFIRMING DISALLOWANCE ON ACCOUNT OF OUTSTANDING MUNICIPAL TAX LIABILITY IN A SUM OF RS. 11,62,98,617/- BY INVOKING PROVISIO NS OF SECTION 43B OF THE ACT. ITA NO.3217 & 3411/DEL/2016 PAGE | 3 BOTH THE ACTIONS OF THE AO BEING ARBITRARY, ERRONEO US AND UNTENABLE, IT IS PRAYED THAT THE SAME MUST BE QUASHED. 4. THE CROSS APPEAL FILED BY THE ASSESSEE AND THE R EVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 5. FIRST, WE SHALL TAKE UP THE APPEAL OF THE ASSESS EE. THE FIRST ISSUE RAISED BY THE ASSESSEE IS AGAINST THE REASSESSMENT PROCEEDINGS INITIATED U/S 147/148 OF THE ACT. THE SECOND ISSUE WHICH IS RAISE D BY THE ASSESSEE IS AGAINST THE DISALLOWANCE MADE ON ACCOUNT OF OUTSTAN DING MUNICIPAL TAX LIABILITY OF RS.11.63 CRORES BY INVOKING THE PROVIS ION OF SECTION 43B OF THE ACT. 6. THE REVENUE IS AGGRIEVED BY THE ORDER OF CIT(A) IN DELETING THE ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENSES OF FIX ED ASSETS TOTALING RS.5.88 CRORES; ON ACCOUNT OF PRIOR PERIOD EXPENDITURE OF R S.7.66 CRORES AND ON ACCOUNT OF EXPENSES CLAIMED UNDER THE HEAD LOSS DUE TO FLOOD, CYCLONE AND FIRE, TOTALING RS.48,70,125/-. 7. BRIEFLY IN THE FACTS OF THE CASE, THE ASSESSEE H AD FURNISHED THE RETURN OF INCOME ON 29/11/2006. ORIGINAL ASSESSMENT WAS C OMPLETED U/S 143(3) OF THE ACT ON 22/12/2008. THEREAFTER, THE AO RECORD ED THE REASONS FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT AND ISS UED NOTICE U/S 148 OF THE ACT DATED 11/02/2013. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY BY ISSUE OF NOTICE U/S 143(2)/142(1) OF TH E ACT. THE ASSESSEE WAS GOVERNMENT UNDERTAKING, ENGAGED IN THE BUSINESS OF DISTRIBUTION OF ITA NO.3217 & 3411/DEL/2016 PAGE | 4 ELECTRICITY IN HARYANA. THE FIRST REASON RECORDED F OR REOPENING THE ASSESSMENT WAS DEBIT OF RS.5.88 CRORES TO PRIOR PER IOD EXPENSES BY CREDITING THE SAME AMOUNT TO FIXED ASSETS BEING ASSETS TRAN SFERRED TO THE ASSESSEE BY HVPNL BUT NOT PHYSICALLY IN EXISTENCE. THE EXPL ANATION OF THE ASSESSEE IN THIS REGARD WAS NOT ACCEPTED BY THE AO AND HENCE THE DISALLOWANCE IN THE HANDS OF THE ASSESSEE. THE SECOND ISSUE WHICH WAS T HE BASIS OF REOPENING THE ASSESSMENT WAS THE EXPENDITURE DEBITED AS PRIOR PERIOD EXPENDITURE OF RS.7.66 CRORES. THE AO WAS OF THE VIEW THAT WHERE T HE ASSESSEE WAS MAINTAINING ITS BOOKS OF ACCOUNTS ON MERCANTILE SYS TEM OF ACCOUNTING THEN THE DEDUCTION ON ACCOUNT OF EXPENSES RELEVANT TO PE RIOD OTHER THAN THE RELEVANT ASSESSMENT YEAR, WAS NOT ALLOWABLE. THE PL EA OF THE ASSESSEE THAT IT WAS A CONTINGENT LIABILITY FOR EXPENSES WHEREIN THE SAME ACCOUNTING TREATMENT WAS BEING FOLLOWED, WAS NOT ACCEPTED AND SUM OF RS.7.66 CRORES WAS DISALLOWED IN THE HANDS OF THE ASSESSEE. THE TH IRD ITEM OF DISALLOWANCE WAS LOSS ON SALE OF FIXED ASSETS TOTALING RS.48,70, 125/-. THE EXPLANATION OF THE ASSESSEE WAS THAT THE SAME WAS ON ACCOUNT OF LO SS OCCURRING DUE TO FIRE, ACCIDENT AND NATURAL CALAMITIES AND WAS NOT A CAPIT AL LOSS. THE ASSESSEE EXPLAINED THAT THE SAID EXPENDITURE WAS SIMILAR TO THAT OF REPAIR AND MAINTENANCE. HOWEVER, THIS PLEA OF THE ASSESSEE WA S ALSO NOT ACCEPTED AND HENCE THE ADDITION. THE NEXT ITEM WHICH WAS RECORDE D AS REASONS FOR REOPENING THE ASSESSMENT WAS THE LIABILITIES OF RS. 11.62 CRORES WHICH WAS DEBITED UNDER THE HEAD MUNICIPAL TAXES AND OTHER LI ABILITIES. THE AO NOTED ITA NO.3217 & 3411/DEL/2016 PAGE | 5 THAT THE AFORESAID AMOUNT WAS NOT DEPOSITED AND HEN CE WAS REQUIRED TO BE DISALLOWED U/S 43B OF THE ACT. 8. THE CIT(A) ACCEPTED THE EXPLANATION OF THE ASSES SEE AND DELETED THE ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENSES OF RS. 5.88 CRORES, PRIOR PERIOD EXPENDITURE OF RS.7.66 CORES AND LOSS ON SALE OF FI XED ASSETS OF RS.48,70,125/-. HOWEVER, THE ADDITION ON ACCOUNT OF MUNICIPAL TAXES AND OTHER LIABILITIES TOTALING RS.11.62 CRORES HAS BEEN UPHELD IN THE HANDS OF THE ASSESSEE. 9. BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL AGAINST THE RESPECTIVE PORTION OF THE ORDER OF THE CIT(A). 10. THE LD. AR FOR THE ASSESSEE TOOK US THROUGH THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, COPY OF WHICH WAS FILED D URING THE COURSE OF HEARING AND POINTED OUT THAT THIS WAS THE CASE WHER EIN THE REASONS WERE RECORDED AFTER THE PERIOD OF FOUR YEARS FROM THE EN D OF THE ASSESSMENT YEAR AND IN SUCH CASES, THE REOPENING OF ASSESSMENT WAS POSSIBLE ONLY IF THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO MAKE FUL L AND TRUE DISCLOSURE. HE STRESSED THAT WHERE THE ASSESSEE HAD DISCLOSED ALL THE FACTS AT THE FIRST INSTANCE ITSELF I.E. IN THE AUDITED BALANCE SHEET, DIRECTORS REPORT AND THE AUDIT REPORT AND WHICH WAS AVAILABLE BEFORE THE ASS ESSING OFFICER, AS THE SAID DOCUMENTS WERE PART OF THE RETURN OF INCOME FI LED BY THE ASSESSEE, THEN NO INITIATION OF REASSESSMENT PROCEEDINGS COULD BE CARRIED OUT AGAINST THE ASSESSEE. HE TOOK US THROUGH THE ANNUAL REPORT OF T HE ASSESSEE FOR THE ITA NO.3217 & 3411/DEL/2016 PAGE | 6 FINANCIAL YEAR 2005-06 AND EACH OF THE ITEMS, WHICH WERE THE BASIS OF RECORDING THE REASONS FOR REOPENING THE ASSESSMENT AND STRESSED THAT WHEN THERE WAS CLEAR DISCLOSURE IN THE RETURN OF INCOME, THEN NO REASSESSMENT PROCEEDINGS COULD BE INITIATED. HE FAIRLY ADMITTED THAT IN CASE THE REASSESSMENT WAS MADE WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, THEN THE SITUATION IS DIFFERENT; B UT WHEN THE REASSESSMENT WAS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, THEN IT HAS TO BE ESTABLISHED THAT THERE WAS FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS. HE AGAIN REFER RED TO THE REASONS RECORDED FOR REOPENING THE ASSESSMENT AND POINTED O UT THAT THE ASSESSING OFFICER HIMSELF REFERS TO THE MATERIAL FACTS DISCLO SED BY THE ASSESSEE. HE ALSO POINTED OUT THAT THOUGH THE ASSESSING OFFICER SAYS THAT EVEN AUDITOR DID NOT DISCLOSE THE MATERIAL FACTS, BUT THE AUDITORS REPO RT IS ALREADY THERE ON RECORD AND ALL THE EVENTS WERE CLEARLY REPORTED. 11. COMING TO THE MERITS OF THE ADDITION I.E. AGAIN ST THE DISALLOWANCE MADE U/S 43B OF THE ACT, THE LD. AR FOR THE ASSESSE E STRESSED THAT THE ASSESSEE WAS ONLY A COLLECTING AGENT ON BEHALF OF T HE STATE GOVERNMENT AND THE AMOUNT HAD TO BE PAID BY THE STATE AUTHORITY. H E FURTHER POINTED OUT THAT THE SAID ITEM HAD NOT BEEN DEBITED TO PROFIT & LOSS ACCOUNT BUT THE ASSESSEE HAD DECLARED WHATEVER AMOUNT WAS NOT COLLE CTED AS RECEIVABLE AND WAS SHOWN AS PAYABLE TO THE STATE. IN SUCH CIRCUMST ANCES, HE STRESSED THAT THE PROVISIONS OF SECTION 43B OF THE ACT WERE NOT A TTRACTED. HE FURTHER REFERRED TO THE ORDER OF THE CIT(A) AND POINTED OUT THAT HE WAS INCORRECT IN ITA NO.3217 & 3411/DEL/2016 PAGE | 7 COMING TO CONCLUSION THAT THE ASSESSEE HAD FAILED T O RELY ON ANY CASE LAWS. HE STRESSED THAT BEFORE THE CIT(A) AND EVEN BEFORE US, STRONG RELIANCE IS PLACED ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CESC LTD. VS CIT, KOLKATA, (2015) 125 DTR 41; (2015 ) 235 TAXMAN 6(CAL.) AND ALSO PLACED RELIANCE ON ANOTHER DECISION OF KER ALA HIGH COURT IN THE CASE OF KERALA STATE ELECTRICITY BOARD VS DCIT (201 1-ITS-69-HC-KERL). HE STRESSED THAT FROM ASSESSMENT YEAR 1999-2000, NO AD DITION ON THIS ACCOUNT WAS MADE. 12. THE LD. DR FOR THE REVENUE, ON THE OTHER HAND, STRESSED THAT GROUNDS AGAINST REOPENING OF ASSESSMENT WAS NOT RAISED BEFO RE THE CIT(A). THE LD. DR FOR THE REVENUE HAS PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER/CIT(A). 13. THE LD. AR FOR THE ASSESSEE IN REPLY STATED THA T THIS GROUND WAS TAKEN AS PART OF ORIGINAL GROUND OF APPEAL BEFORE THE TRI BUNAL BUT YES IT WAS ADDITIONAL GROUND WHICH MAY BE ADMITTED FOR ADJUDIC ATION. 14. WE HAVE HEARD RIVAL CONTENTION AND PERUSED THE RECORD. THE FIRST ISSUE WHICH IS RAISED IN THE PRESENT APPEAL IS AGAINST IN VOKING OF JURISDICTIONAL U/S 147 OF THE ACT. WE FIND THAT THE ISSUE AGAINST THE RE-OPENING OF ASSESSMENT U/S 147 OF THE ACT HAS BEEN RAISED BEFOR E US BY WAY OF AN ADDITIONAL GROUND OF APPEAL, THOUGH IT IS MENTIONED AS PART OF THE ORIGINAL GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL. THE S AID SO-CALLED ADDITIONAL ITA NO.3217 & 3411/DEL/2016 PAGE | 8 GROUND OF APPEAL DO NOT REQUIRE ANY ADJUDICATION ON FACTS, HENCE THE SAME IS ADMITTED AS ADDITIONAL GROUND OF APPEAL. 15. THE ORIGINAL ASSESSMENT UNDER CASE WAS COMPLETE D U/S 143(3) OF THE ACT. THE ASSESSEE WAS A GOVERNMENT ORGANIZATION AN D HAD DECLARED INCOME ON THE BASIS OF AUDITED BALANCE SHEET AND P&L A/C A ND OTHER ANNEXURES. THE COPY OF THE BINDED AUDITED ACCOUNTS ARE ALSO PL ACED BEFORE US. THE PERUSAL OF REASONS RECORDED FOR RE-OPENING THE ASSE SSMENT REFLECTS THAT THE ASSESSING OFFICER REFERS TO THE SAID AUDITED ACCOUN TS OF THE ASSESSEE FOR RECORDING THE REASONS, WHICH ACCORDING TO HIM WERE MATERIAL FOR RE-OPENING THE ASSESSMENT. THE QUESTION WHICH ARISES IN SUCH CIRCUMSTANCES WHERE THE ORIGINAL ASSESSMENT HAS BEEN COMPLETED U/S 143( 3) OF THE ACT AND THEREAFTER, FOUR YEARS HAVE PASSED, IS THE ASSESSIN G OFFICER JUSTIFIED IN RE- OPENING THE ASSESSMENT ON THE BASIS OF ENTRIES WHIC H WERE DULY REFLECTED IN THE AUDITED BALANCE SHEET AND P&L A/C AND ALSO PART OF THE AUDITORS REPORT? ANSWER TO THE SAME IS NO. IN CASE, PERIO D OF FOUR YEARS HAS LAPSED FROM THE END OF THE ASSESSMENT YEAR THEN IN SUCH CA SES, THE SECTION ITSELF DEMANDS, THAT THE RE-OPENING OF THE ASSESSMENT CAN BE MADE ONLY IF THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO MAKE FUL L AND TRUE DISCLOSURE. IN THE PRESENT FACTS, WE FIND THAT THE ASSESSEE HAD DI SCLOSED ALL THE ITEMS WHICH WERE CONSIDERED AS REASONS FOR RE-OPENING THE ASSESSMENT, IN ITS AUDITED ACCOUNTS AND EVEN THE AUDITOR HAD GIVEN A R EPORT OF THE SAME. IN SUCH A SCENARIO, WE HOLD THAT THERE IS NO MERIT IN THE RE-ASSESSMENT PROCEEDINGS CARRIED OUT AGAINST THE ASSESSEE WHERE THE ASSESSING OFFICER ITA NO.3217 & 3411/DEL/2016 PAGE | 9 REFERS TO THE FACTS DISCLOSED BY THE ASSESSEE AND T HEN RECORD THE REASONS FOR RE-OPENING THE ASSESSMENT, SUCH AN ACTION CANNOT BE UPHELD UNDER THE PROVISION OF SECTION 147 OF THE ACT, IN CASE WHERE FOUR YEARS HAVE LAPSED FROM THE END OF THE ASSESSMENT YEAR. ACCORDINGLY, WE FIND NO MERIT IN THE RE-ASSESSMENT PROCEEDINGS CARRIED OUT U/S 147 OF TH E ACT AGAINST THE ASSESSEE. 16. COMING TO THE MERITS OF THE ADDITION UPHELD BY THE CIT(A) I.E. IN RESPECT OF OUTSTANDING MUNICIPAL TAX LIABILITY OF R S.11.63 CRORES. THE RELEVANT FACTS OF THE ISSUE ARE THAT THE GOVERNOR O F HARYANA HAD NOTIFIED THAT THE COMMITTEE SHALL IMPOSE TAX ON THE CONSUMPT ION OF ELECTRICITY @ 5 PAISE FOR EVERY UNIT OF ELECTRICITY CONSUMED BY ANY PERSON WITHIN THE LIMITS OF THE MUNICIPALITY IN THE STATE OF HARYANA. THE S AID TAX HAD TO BE COLLECTED BY HARYANA VIDYUT PRASARAN NIGAM LTD. (IN SHORT HV PNL) AND PAID AS AN ELECTRICITY DUTY PAYABLE TO THE STATE GOVERNMENT UN DER THE PUNJAB ELECTRICITY (DUTY) ACT, 1958. SIMILAR PRACTICE WAS ADOPTED IN CASE OF MUNICIPAL TAXES BY THE MUNICIPAL COMMITTEE/COUNCIL WHILE PAYING THEIR DUES ON ACCOUNT OF CONSUMPTION OF ELECTRICITY TO TH E NIGAM AS PER GOVERNMENT OF HARYANA CIRCULAR DATED 16.05.2000. T HE ASSESSING OFFICER DID NOT ACCEPT THE PLEA OF THE ASSESSEE AND HELD TH AT SINCE THE SAID AMOUNT OF MUNICIPAL TAXES COLLECTED BY IT, HAVE NOT BEEN D EPOSITED BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, THE SAME IS LIA BLE TO BE DISALLOWED U/S 43B OF THE ACT. THE CIT(A) HAS UPHELD THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD. THE QUESTION WHICH ARISES IS WHETHER THE S AME IS TO BE ALLOWED AS ITA NO.3217 & 3411/DEL/2016 PAGE | 10 DEDUCTION IN THE HANDS OF THE ASSESSEE OR NOT. THE CASE OF THE ASSESSEE IS THAT IT WAS NOT THE LIABILITY OF THE ASSESSEE TO DE POSIT THE SAID MUNICIPAL TAXES COLLECTED BY IT ON BEHALF OF THE STATE AUTHOR ITIES. THE ASSESSEE WAS ACTING AS COLLECTING AGENT AND THE AMOUNT HAD TO BE PAID BY THE STATE AUTHORITY. THE ASSESSEE AFTER COLLECTING THE AMOUN T HAD NOT DEBITED IT TO THE P & L ACCOUNT AND WHATEVER AMOUNT WAS NOT COLLECTED , WAS SHOWN AS RECEIVABLE AND CONTRA ENTRY WAS PASSED AS PAYABLE T O THE STATE. ONCE THE AMOUNT HAD BEEN DEBITED TO THE P&L ACCOUNT OF THE A SSESSEE, THEN THE PROVISION OF SECTION 43B OF THE ACT WERE NOT ATTRAC TED. IN ANY CASE, THE ASSESSEE WAS ONLY A COLLECTING AGENT ON BEHALF OF T HE STATE AND IT WAS THE AMOUNT WHICH WAS NOT COLLECTED, WHICH WAS SHOWN AS RECEIVABLE AND ALSO ON THE OTHER SIDE SHOWN AS PAYABLE TO THE STATE. T HE LIABILITY IF ANY, WOULD ARISE AFTER THE AMOUNT IS COLLECTED AND THAT ALSO O F THE STATE. IN SUCH CIRCUMSTANCES, THE PROVISION OF SECTION 43B OF THE ACT COULD NOT BE APPLIED AND THE AMOUNT COULD NOT BE DISALLOWED IN THE HANDS OF THE ASSESSEE. SIMILAR ACCOUNTING HAS BEEN CARRIED OUT BY THE ASSE SSEE IN ITS BOOKS OF ACCOUNTS FROM ASSESSMENT YEAR 1999-2000 AND NO DISA LLOWANCE HAS BEEN MADE IN ANY OF THE YEAR. 17. FURTHER, THE HONBLE CALCUTTA HIGH COURT IN TH E CASE OF CESC LTD. VS CIT (SUPRA) HAS HELD THAT WHERE THE ASSESSEE MERELY ACTS AS COLLECTING AGENT FOR THE STATE GOVERNMENT AND PAYS THE SAME TO THE S TATE GOVERNMENT ON COLLECTION, THEN, THE LICENCEE MERELY ACTS AS A CON DUIT AND THE ELECTRICITY DUTY WAS NOT CHARGEABLE TO THE LICENCEE. IT WAS CO NCLUDED BY HOLDING THAT ITA NO.3217 & 3411/DEL/2016 PAGE | 11 ELECTRICITY DUTY NOT BEING A SUM PAYABLE BY THE ASS ESSEE AS A PRIMARY LIABILITY BY WAY OF TAX, DUTY, CESS OR FEE, THEN PR OVISIONS OF SECTION 43B OF THE ACT WERE NOT ATTRACTED TO THE LICENCEE/ASSESSEE IN RESPECT OF THE ELECTRICITY DUTY COLLECTED BY IT FOR BEING PASSED O N TO THE STATE GOVERNMENT. 18. APPLYING THE SAID PROPOSITION TO THE ISSUE BEFO RE US, WE HOLD THAT THERE IS NO MERIT IN THE ORDERS OF THE AUTHORITIES BELOW IN MAKING THE AFORESAID DISALLOWANCE U/S 43B OF THE ACT. WE REVE RSE THE SAME AND ALLOW GROUND NO.2 RAISED BY THE ASSESSEE ON MERITS. 19. NOW COMING TO THE APPEAL OF THE REVENUE WHEREIN THE FIRST ISSUE WHICH IS RAISED IS AGAINST THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.5.87 CRORES MADE BY THE ASSESSING OFFICER ON ACC OUNT OF PRIOR PERIOD EXPENSES OF FIXED ASSETS. THE REVENUE IS AGGRIEVED THAT WHERE THE FIXED ASSETS WERE CAPITAL IN NATURE, THE SAID EXPENDITURE COULD NOT BE ALLOWED IN THE HANDS OF THE ASSESSEE. 20. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE POINTED OUT BEFORE THE ASSESSING OFFICER THAT IT WAS NOT PRIOR PERIOD EXPENDITURE BUT THE AMOUNT RELATED TO NON-EXISTING FIXED ASSETS WHICH W ERE WRITTEN OFF IN THE YEAR UNDER CONSIDERATION. IT WAS EXPLAINED THAT DU RING THE DIVISION OF HVPNL INTO TWO UNITS EVENTS WERE AS UNDER:- SIR, DURING THE DIVISION OF HVPNL INTO TWO UNITS N AMED DHBVNL AND UHBVNL, HVPNL HAS TRANSFERRED FIXED ASSE TS TO DHBVNL AMOUNTING TO RS.709.90 CRORES THROUGH OPENIN G BALANCE SHEET ALONG WITH ACCUMULATED DEPRECIATION T HEREON UP TO 30.06.1999. OUT OF THE SAME, CONSTRUCTED ASSETS AMOUNTING ITA NO.3217 & 3411/DEL/2016 PAGE | 12 TO RS.10.82 CRORES FOUND INCLUDED IN THE ABOVE REFE RRED FIGURES WITHOUT DETAILS IN THE FIXED ASSETS REGISTER (FAR). THE MATTER WAS TAKEN UP WITH THE HVPNL FOR TRANSFER BACK OF THESE AMOUNTS OF ASSETS WITHOUT DETAILS. T HEY DID NOT AGREE AND INSTEAD INSISTED ON TO ADJUST THE SAME IN TERNALLY. THEREUPON PHYSICAL VERIFICATION/FIXED ASSETS REPORT S OF VARIOUS DIVISIONS WAS RECEIVED AND VARIOUS ASSETS EXISTING UPTO 01/07/1999 TO THE TUNE OF RS.4.94 CRORES WERE NOT F OUND ADJUSTED IN RESPECT OF CERTAIN OTHER DIVISIONS. TH E SAME HAVE BEEN ADJUSTED AGAINST THE ABOVE ASSETS ALONG WITH A PPLICABLE DEPRECIATION DURING F.Y.2003-04 LEAVING A BALANCE O F RS.5.88 CRORES. THE SAME HAVE BEEN ADJUSTED IN F.Y.2005-06 . 21. IN SUPPORT, THE ASSESSEE FILED THE MINUTES OF M EETING ALONGWITH THE LIST OF FIXED ASSETS WRITTEN OFF. THE ASSESSEE OFF ERED THE EXPLANATION THAT THOUGH IT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUN TING BUT BECAUSE OF NON- RECEIPT OF DETAILS AND PENDING LITIGATION, ETC., TH E LIST OF FIXED ASSETS GOT CRYSTALLIZED DURING THE YEAR AND HENCE, THE SAME WA S BOOKED AS AN EXPENDITURE. UNDOUBTEDLY, THE ASSESSEE HAD NOT CL AIMED ANY DEPRECIATION ON THE FIXED ASSETS AS THE ASSETS WERE FOUND SHORT. THE ASSESSING OFFICER DENIED THE CLAIM OF THE ASSESSEE ON THE GROUNDS THA T IT HAD CLAIMED DEPRECIATION ON THE SAID ASSETS, AS AGAINST THE PLE A OF THE ASSESSEE, IT HAD NEVER CLAIMED ANY DEPRECIATION ON SUCH ASSETS. THE CIT(A) ACCEPTED THIS PLEA OF THE ASSESSEE AS THE ORIGINAL COST AS WELL A S THE NET BOOK VALUE WAS THE SAME. THE CIT(A) ALSO PERUSED THE FIXED ASSETS REGISTER IN THIS REGARD AS ON 31.03.2005. THE STATUTORY AUDITOR HAD ALSO REPO RTED THAT THE ASSESSEE HAD NOT CLAIMED ANY DEPRECIATION ON THE FIXED ASSET S OF RS. 5.88 CRORES TILL THE FINANCIAL YEAR 2004-05. IN SUCH SCENARIO, THE CLAIM OF THE ASSESSEE WAS ALLOWED. ITA NO.3217 & 3411/DEL/2016 PAGE | 13 22. THE LD. DR FOR THE REVENUE HAS FAILED TO REBUT THE FINDINGS OF THE CIT(A). IN THE ABSENCE OF THE SAME AND WHERE THE A SSESSEE IN THE AUDITED ACCOUNT HAD NOT CLAIMED ANY DEPRECIATION ON SUCH AS SETS, THE ORDER OF THE ASSESSING OFFICER CANNOT BE UPHELD. THE ASSESSEE H AS WRITTEN OFF THE ASSETS WHICH WERE NOT FOUND/TRACEABLE AND AS THE ASSETS WE RE SCATTERED OVER DIFFERENT AREAS, THE ENTIRE EXERCISE OF LISTING OF SUCH FIXED ASSETS GOT CRYSTALLIZED DURING THE YEAR AND HENCE, THE BOOKING OF THE EXPENDITURE UNDER HEAD PRIOR PERIOD EXPENSES OF FIXED ASSETS, M ERITS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. WE CONFIRM THE ORDER OF CIT (A) AND DISMISS GROUND OF APPEAL NO.1 RAISED BY THE REVENUE. 23. THE ISSUE VIDE GROUND OF APPEAL NO.2 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.7.66 CRORES MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. THE CASE OF THE ASSESSING OFFICER WAS TH AT WHERE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, NO SUCH EXPENDITURE ON ACCOUNT OF PRIOR PERIOD EXPENDITURE COULD BE ALLOWE D IN THE HANDS OF THE ASSESSEE. THE CASE OF THE ASSESSEE BEFORE US IS TW O-FOLD. FIRST OF ALL, IT IS CLAIMED FROM THE DETAILS OF THE PRIOR PERIOD EXPENS ES TOTALING TO RS.7.66 CRORES WHICH IS PLACED AT PAGE 61 OF THE PAPER BOOK , THAT THE SUM OF RS.7.66 CRORES INCLUDES THE PROVISION OF RS.5.88 CRORES WHI CH WAS SEPARATELY ADDED BY THE ASSESSING OFFICER. WE HAVE IN THE ABOVE PAR AS ALREADY UPHELD THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS. 5.88 CRORES. WE FURTHER HOLD THAT ONCE AN ADDITION WAS MADE UNDER THE HEAD PROVISION OF PRIOR PERIOD EXPENSES OF FIXED ASSETS, NO FURTHER ADDITIO N COULD BE MADE UNDER ITA NO.3217 & 3411/DEL/2016 PAGE | 14 THE GARB OF PRIOR PERIOD EXPENSES. THIS ADDITION I S DOUBLE ADDITION, WHICH IS NOT ALLOWABLE. NOW COMING TO THE BALANCE EXPENDITU RE WHICH IS CLAIMED BY THE ASSESSEE; THE CIT(A) VIDE PARA 19 OF PAGE 10 OF APPELLATE ORDER HAS DULY CONSIDERED THE TOTALITY OF THE FACTS. THE FIRST FA CT IS THAT AS AGAINST THE PRIOR PERIOD EXPENSES OF RS.7.66 CRORES, THE ASSESSEE HAS ALSO SHOWN THE PRIOR PERIOD INCOME OF RS.7.74 CRORES AND THE NET AMOUNT WHICH IS CREDITED TO THE P&L A/C WAS RS.8,79,015/-. SECONDLY, DUE TO POWER PURCHASE OF PRIOR PERIOD, THE SUM INVOLVED WAS RS.1.64 CRORES WHICH W AS PAID BECAUSE THERE WAS DIFFERENCE IN QUANTITY AS RECORDED BY DHBVN AND HPGCL FROM THE TOTAL PURCHASE 2227 CRORES. THE RECONCILIATION ERROR AMOU NTS TO ONLY 0.07%, WHICH IS ACCEPTABLE, WHEN THE QUANTITY PURCHASED IS SO HIGH. THE ASSESSE HAD SHOWN THIS CONTINGENT LIABILITY IN ITS BALANCE SHEET AND SINCE THE LIABILITIES CRYSTALLIZED DURING THE YEAR UNDER CONS IDERATION, THE SAID PRIOR PERIOD EXPENSES WAS ALLOWABLE IN THE YEAR UNDER APP EAL. FURTHER, EXPENDITURE BOOKED BY THE ASSESSEE WAS ARREAR PAID OF RS.7,15,062/-, INTEREST OF RS.20,160/- AND REFUND OF RS.1,61,915/- . ALL THESE AMOUNTS AS PER THE FINDINGS OF CIT(A) CRYSTALLIZED DURING THE YEAR. THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS OF THE CIT(A) IN THIS REGARD; UPHOLDING THE SAME, WE DISMISS GROUND OF APPEAL NO.2 RAISED BY T HE REVENUE. 24. NOW, COMING TO THE LAST ISSUE IN GROUND OF APPE AL NO.3 RAISED BY THE REVENUE I.E. EXPENDITURE BOOKED ON LOSS OF SALE OF ASSETS. THE CASE OF THE ASSESSING OFFICER WAS THAT NO SUCH LOSS COULD BE DE BITED TO THE P&L A/C. THE EXPLANATION OF THE ASSESSEE ON THE OTHER HAND W AS THAT THE AFORESAID ITA NO.3217 & 3411/DEL/2016 PAGE | 15 LOSSES WERE ON ACCOUNT OF FLOOD, CYCLONE, FIRE ETC. AND IT WAS A CASE OF REPAIRS AND REPLACEMENT AND NOT THE CASE OF LOSS OF FIXED A SSETS PER SE. WE FIND MERIT IN THE PLEA OF THE ASSESSEE AND THE NOMENCLAT URE OF THE EXPENDITURE CANNOT DECIDE THE NATURE OF EXPENSES. WHAT IS TO B E SEEN IS THE NATURE OF EXPENDITURE AND SINCE THE SAME WAS IN THE FIELD OF REVENUE EXPENDITURE, THE SAME MERITS TO BE ALLOWED IN THE HANDS OF THE ASSES SEE. GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS THUS DISMISSED. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF DECEMBER, 2019. SD/- SD/- (DR. B.R.R. KUMAR) (SUSHMA CHOWL A) () # /ACCOUNTANT MEMBER ' # /JUDICIAL MEMBER / % DATED : 24 TH DECEMBER, 2019 . F{X~{T F{X~{T F{X~{T F{X~{T 9 T| 9 T| 9 T| 9 T|? ?? ? FA FA FA FA P.S P.SP.S P.S (5 1 6'078 9(80/ COPY OF THE ORDER IS FORWARDED TO : 1. :; / THE APPELLANT; 2. 6<:; / THE RESPONDENT; 3. =0 ( ) / THE CIT(A) 4. 8!@A 6'0' , , / DR, ITAT, DELHI 5. A&, B / GUARD FILE. (5 / BY ORDER , <80 6'0 // TRUE COPY // C D-#E /ASSISTANT REGISTRAR, , / ITAT, DELHI