Asst. Commissioner of Income tax Cent. Cir. 2, Belgaum V. M/s. Sri. Prabhulingeshwara Sugars & Chemicals Ltd.,

ITA 341/PAN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6696 (ITAT-PANAJI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SONAL L SONKAVDE LD
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 341/PNJ/2013 : (ASST. YEAR : 2008 - 09) ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2, BELGAUM (APPELLANT) VS. M/S. SRI PRABHULINGESHWARA SUGARS AND CHEMICALS LIMITED SUKRUT BUILDING, K C PARK MAIN GATE, DHARWAD (RESPONDENT) PAN : AACCS7864B ASSESSEE BY : NONE REVENUE BY : SMT. SONAL L. SONKAVDE, LD. DR DATE OF HEARING : 1 0 /0 4 /2014 DATE OF PRONOUNCEMENT : 09 /0 5 /2014 O R D E R PER P.K. BANSAL 1. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - VI, BANGALORE DT. 28.8.2013 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. WHETHER THE LD CIT(A) IS JUSTIFIED IN DELETING AN AMOUNT OF RS.96,28,695/ - CLAIMED UNDER PRIOR PERIOD EXPENSES BY THE ASSESSEE AND DISALLOWED BY THE ASSESSING OFFICER FOR THE A Y 2008 - 0 9? 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE AMOUNT CLASSIFIED AS PRIOR PERIOD EXPENSES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE RELATING TO POWER TARIFF OF AY 2006 - 07 IS ALLOWABLE AS EXPENSES IN THE ASSESSMENT YEAR 2008 - 09. 3. WHETHER THE LD CIT(A) IS JUSTIFIED IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THAT THE SUPPLEMENTARY AGREEMENT EXECUTED ON 26/11/2007 BETWEEN THE ASSESSEE AND KPTCL/HESCOM WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER? 2 ITA NO. 341/PNJ/2013 (ASST. YEAR : 2008 - 09) 2. THE ONLY ISSUE INVOLVED IN ALL THESE GR OUNDS RELATES TO ALLOWING SUM OF RS.96,28,695/ - BY CIT(A) AS PRIOR PERIOD EXPENSES. 3. THE FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE HAS FILED ITS RETURN ELECTRONICALLY ON 29.9.2008 SHOWING AN INCOME OF RS.1,88,988,780/ - U/S 115JB. THE AO NOTED THAT THE ASSESSEE HAS CLAIMED PRIOR PERIOD EXPENSES AMOUNTING TO RS.1,04,02,620/ - . WHEN THE ASSESSEE WAS ASKED TO SUBSTANTIATE HIS CLAIM AS THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE ASSESSEE SUBMITTED THAT THE MAJOR ITEM IN THE SCHEDULE RELATES TO DIFFERENCE IN POWER TARIFF OF 2006 - 07 REVERSED IN 2007 - 08. THIS IS ON ACCOUNT OF NON - ACCEPTANCE OF BILLED POWER SELLING RATE. ON ACCEPTANCE OF THE SAID SELLING RATE, THE COMPANY HAS DEDUCTED RS.96,28,695/ - AS PRIOR PERIOD ITEM IN THIS FINANCIAL YEAR. ALONGWITH THIS OTHER ITEMS COVERED ARE WORTH RS.7,73,924/ - . THE AO DISALLOWED THE SUM OF RS.1,04,02,620/ - AS THE ASSESSEE COULD NOT SUBSTANTIATE HIS CLAIM BY FILING EVIDENCE. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). BEFORE CI T(A) THE ASSESSEE CLAIMED THAT THE SUBSTANTIAL AMOUNT COVERED IN THIS CLAIM PERTAINS TO REVISION IN THE ELECTRICITY SALE TARIFF WITH ESCALATION REVISED DOWNWARD FROM 5% TO 2% AS PER SUPPLEMENTARY AGREEMENT EXECUTED ON 26.12.2007 BETWEEN KPTCL/H ESCOM AND THE ASSESSEE COMPANY. A COPY OF THE AGREEMENT WAS ALSO FURNISHED BEFORE CIT(A). THUS, THE ASSESSEE CLAIMED THAT SINCE THERE IS DOWNWARD REVISION IN THE REVENUE RECEIVABLE BY THE ASSESSEE WHICH HAD ALREADY BEEN ACKNOWLEDGED AS ITS INCOME, THE EXPENDI TURE OF RS.96,28,695/ - , THOUGH IN TRUE SENSE RELATED TO A.Y 2007 - 08 , HAS CRYSTALLIZED ONLY IN A.Y 2008 - 09. CIT(A) AFTER HEARING THE SUBMISSION OF THE ASSESSEE AND THE FACT THAT THE ASSESSEE HAS ALREADY RECOGNIZED THE HIGHER INCOME IN THE A.Y 2007 - 08 ALLOW ED THE DEDUCTION TO THE ASSESSEE. 3 ITA NO. 341/PNJ/2013 (ASST. YEAR : 2008 - 09) 4. NONE APPEARED ON BEHALF OF THE ASSESSEE EVEN THOUGH NOTICE WAS SENT THROUGH REGISTERED POST A.D. WE, THEREFORE, DECIDED TO DISPOSE OFF THIS APPEAL AFTER HEARING THE LD. DR. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AN D CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE NOTED THAT IN THIS CASE THE ASSESSEE HAS FILED THE SUPPLEMENTARY AGREEMENT EXECUTED ON 26.12.2007 BETWEEN KPTCL/ HESCOM AND THE ASSESSEE COMPANY FOR THE FIRST TIME BEFORE THE CIT(A). COPY OF THE SAID AGREEMENT WAS NOT FILED BEFORE THE AO. THIS AGREEMENT WAS A FRESH EVIDENCE FILED BEFORE THE CIT(A). WE DO AGREE WITH THE LD. DR THAT COMPLIANCE OF RULE 46A IS ESSENTIAL FOR PRODUCING ADDITIONAL EVIDENCE BEFORE CIT(A). IN TH IS CASE, WE NOTED FROM THE ORDER OF CIT(A) THAT CIT(A) HAS NOT RECORDED ANY FINDING OR ANY REASONS FOR THE ADMISSION OF THE ADDITIONAL EVIDENCE. EVEN NO OPPORTUNITY HAS BEEN GIVEN TO THE AO FOR ADMITTING THIS ADDITIONAL EVIDENCE. ON THIS BASIS ITSELF WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF AO. WE ALSO NOTED THAT IN THIS CASE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. U/S 145(2) THE CENTRAL GOVERNMENT HAS NOTIFIED ACCOUNTING STANDARD (AS) NOS. 1 & 2. AS - 2 D EALS WITH THE DISCLOSURE OF PRIOR PERIOD AND EXTRAORDINARY ITEMS. IT REQUIRES THAT PRIOR PERIOD ITEMS SHALL BE SEPARATELY DISCLOSED IN THE PROFIT & LOSS ACCOUNT FOR THE PREVIOUS YEAR TOGETHER WITH THE NATURE AND THE AMOUNT IN THE MANNER SO THAT THEIR IMPA CT ON THE PROFIT & LOSS OF THE PREVIOUS YEAR CAN BE PROVIDED. WE ALSO NOTED THAT THE WORD ACCRUAL HAS BEEN DEFINED IN AS - 1, PARA NO. 4(B) TO MEAN ASSUMPTION THAT THE REVENUE AND COSTS ARE ACCRUED I.E. RECOGNISED AS THEY ARE EARNED OR INCURRED (AND NOT A S MONEY IS RECEIVED OR PAID) AND RECORDED IN THE FINANCIAL STATEMENTS OF THE PERIOD TO WHICH THEY RELATE. IT IS A CASE WHERE THE ASSESSEE HAS REVISED THE ELECTRICITY SALES TARIFF DOWNWARD FOR A.Y 2007 - 08. EVEN THOUGH AGREEMENT HAS BEEN EXECUTED DURING TH E IMPUGNED ASSESSMENT YEAR BUT THIS RELATES TO THE ACCRUAL OF THE REVENUE RELATING TO THE PREVIOUS YEAR, 4 ITA NO. 341/PNJ/2013 (ASST. YEAR : 2008 - 09) NOT THIS PERIOD. THE AO WHILE DECIDING THE ISSUE WHETHER THIS LIABILITY HAS ACCRUED DURING THE YEAR OR NOT SHOULD LOOK INTO THE ACCOUNTING STANDARDS AS NOTIFIED U/S 145(2) OF THE INCOME TAX ACT. THE ASSESSEE IS FREE TO SUBMIT ALL THE NECESSARY EVIDENCES AND DOCUMENTS ON WHICH HE RELIES BEFORE THE AO. NEEDLESS TO SAY , THE AO SHOULD GIVE PROPER AND SUFFICIENT OPPORTUNITY TO THE ASS ESSEE BEFORE DECIDING THE ISSUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 0 9 .0 5 .2014. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 0 9 .0 5 . 201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER