Adani Agro Pvt. Ltd., Ahmedabad V. The Dy.CIT., Ahmedabad Circle-1, Ahmedabad

ITA 3417/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73041 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-02-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 27-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: P M MEHTA
• Keywords: Depreciation; Onus to prove
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 3417 /AHD/2010 (ASSESSMENT YEAR: 2005-06) ADANI AGRO PVT. LTD. 8 TH FLOOR SHIKHAR, NR. MITHAKHALI CIRCLE, NAVRANGPURA, AHMEDABAD V/S THE DCIT CIRCLE-1, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABCA3183G APPELLANT BY : SHRI P.M. MEHTA RESPONDENT BY : SHRI J.P. JHANGID, SR. D.R. ( )/ ORDER DATE OF HEARING : 18-02-20 14 DATE OF PRONOUNCEMENT : 07 -03-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-VI, AHMEDABAD DATED 12.10.2010 FOR A.Y. 2005-06. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY WHICH HAD EARNED INCOME FROM SPECULATION BUSINESS IN SHARES AND COMMODITIES IN A.Y. 05-06. A SSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 05-06 ON 28.10.2005 DECLA RING TOTAL INCOME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THE REAFTER THE ASSESSMENT ITA NO 3417 /AHD/2010 . A.Y. 2005- 06 2 WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 14 .05.2007 AND THE TOTAL INCOME WAS DETERMINED AT RS. NIL AFTER ADJUST MENT OF BROUGHT FORWARD LOSS AND DEPRECIATION. WHILE FRAMING THE A SSESSMENT, THE A.O. HAD DISALLOWED PRIOR PERIOD EXPENSES AMOUNTING TO R S. 48,40,856/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 12.10.2010 DISMISSE D THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE ASS ESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN TREATING IT AS A CASE REQ UIRING DISALLOWANCE OF SOME EXPENSES BY TREATING THEM AS PRIOR PERIOD EXPE NSES AND THEY HAVE FURTHER ERRED IN QUANTIFYING SUCH DISALLOWANCE IN A SUM OF RS. 48,40,856/-. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE PROFIT AND LOSS ACCOUNT, A.O. NOTED THAT ASSESSEE HAD DEBI TED A SUM OF RS. 48,49,902/- BEING PRIOR PERIOD EXPENSES. THE ASSES SEE WAS ASKED TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE ADDED TO T HE TOTAL INCOME AS IT PERTAINS TO EARLIER YEARS. THE ASSESSEE INTERALIA SUBMITTED THAT IN MAINLY CONSISTS TOWARDS INTEREST EXPENSES OF RS. 48,40,856 /-. IT WAS FURTHER SUBMITTED THAT IF THE EXPENSES ARE NOT CONSIDERED A S ALLOWABLE IN THE CURRENT YEAR, THEY MUST BE CONSIDERED IN EARLIER YE ARS. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O . FOR THE REASON THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING AND THEREFORE THE EARLIER YEAR EXPENSES CANNOT BE ALLOWED AS BUSI NESS EXPENSES OF THE YEAR. A.O. ALSO NOTICED THAT FOR ALLOWING AN EXPEN SES IN EARLIER YEARS, THE ASSESSEE SHOULD HAVE CLAIMED SUCH EXPENSES AND FURN ISHED THE PROOF OF PAYMENT WHICH WAS NOT DONE BY ASSESSEE. HE ACCORDING LY DISALLOWED THE PRIOR PERIOD EXPENSES OF RS. 48,40,856/- AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF A.O., THE ASSESSEE CARRIE D THE MATTER BEFORE ITA NO 3417 /AHD/2010 . A.Y. 2005- 06 3 CIT(A). CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AND UPHELD THE ORDER OF A.O. BY HOLDING AS UNDER;- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESSMENT ORDER AND APPELLANT'S SUBMISSION. PRIOR PERIOD EXPENSES ARE A LLOWABLE IN THE YEAR IN WHICH THE SAME ARE CRYSTALLIZED. AS PER THE ASSESSING OFFICER'S ORDER, HE ALLOWED OPPORTUNITIES TO THE APPELLANT TO GIVE DETAILS OF PRIOR PERIOD EXPENSES AND TO PROVE AS TO HOW THESE EXPENSES WERE CRYSTALLIZED DURING THE YEAR. APPELLANT HAS NOT GIV EN DETAILS TO THE AO AS TO HOW THESE EXPENSES WERE CRYSTALLIZED DURING T HE YEAR. NO SUCH DETAILS WERE FILED IN THE APPEAL HEARING ALSO. IN A BSENCE OF DETAILS AND VOUCHERS ETC, ONE CANNOT REACH TO THE CONCLUSIO N THAT THESE EXPENSES WERE CRYSTALLISED DURING THE YEAR. IT IS N OT AT ALL IN DISPUTE THAT ONLY THOSE EXPENSES WHICH WERE CRYSTALLISED DU RING THE CURRENT YEAR ARE ALLOWABLE BUT ONUS TO PROVE THAT PRIOR PER IOD EXPENSES WERE CRYSTALLISED DURING THE YEAR IS ON THE APPELLANT BE CAUSE APPELLANT HAS THE DETAILS AND NOT THE DEPARTMENT. IN ABSENCE OF D ETAILS OF PRIOR PERIOD EXPENSES, SIMPLE MENTION OF THE NATURE OF TH ESE EXPENSES WILL NOT SERVE THE PURPOSE. THE DECISIONS RELIED UPON BY THE APPELLANT CLEARLY INDICATE THAT ONLY THOSE EXPENSES WHICH ARE CRYSTALLISED DURING THE YE AR ARE TO BE ALLOWED. THEREFORE THERE IS NO DISPUTE OVER THIS. T HE DECISIONS OF MY LEARNED PREDECESSORS ARE ALSO NOT RELEVANT SINCE IN THOSE YEARS APPELLANT SUBMITTED DETAILS AND PROVED THAT THOSE E XPENSES WERE CRYSTALLIZED IN THAT YEAR. IN VIEW OF THE GUJARAT HIGH COURT DECISION IN THE CASE OF SAURASTRA CEMENTS AND IN THE ABSENCE OF ANY EVIDENCE TO PROVE THAT THESE EXPENSES ARE CRYSTALLIZED DURIN G THE YEAR, I FIND NO REASON TO INTERFERE WITH THE A.O.S ORDER. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. ITA NO 3417 /AHD/2010 . A.Y. 2005- 06 4 6. BEFORE US, THE LD. A.R. SUBMITTED THAT OUT OF THE T OTAL EXPENSES ON ACCOUNT OF PRIOR PERIOD, RS. 48,40,855/- REPRESENTS INTEREST PAYABLE TO ANOTHER GROUP CONCERN NAMELY GUJARAT ADANI PORT LTD . WHICH WAS PERTAINING TO F.Y. 03-04. HE FURTHER SUBMITTED THAT SINCE THERE WAS DELAY IN FINALIZING THE RATE AND AMOUNT OF INTEREST PAYAB LE BY THE ASSESSEE AND THE FINAL DECISION CAME TO BE MADE IN FINANCIAL YEA R 04-05 THEREFORE THE EXPENDITURE CRYSTALLIZED DURING THE YEAR AND THEREF ORE ASSESSEE HAD BOOKED THIS EXPENDITURE IN THE YEAR UNDER APPEAL. WITH RESPECT TO OTHER EXPENSES IT WAS SUBMITTED THAT CONSIDERING THE BUSI NESS INCOME OF THE ASSESSEE WHICH WAS IN EXCESS OF RS. 10 CRORE AND DU E TO PRACTICAL DIFFICULTIES, THERE WAS A POSSIBILITY THAT SOME ITE MS OF EXPENSES SPILL OVER TO NEXT YEAR. HE FURTHER SUBMITTED THAT IN THE EAR LIER YEARS ALSO THE EXPENDITURE ON ACCOUNT OF PRIOR PERIOD WAS DISALLOW ED BY A.O. BUT THE ADDITION WAS DELETED BY BY CIT(A) AND THE ORDER OF CIT(A) WAS ALSO UPHELD BY HONBLE TRIBUNAL. HE THEREFORE SUBMITTED T HAT SINCE THE FACTS OF THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARL IER YEARS, THE EXPENDITURE BE ALLOWED. HE FURTHER SUBMITTED THAT BY CLAIMING THE EXPENDITURE IN THE CURRENT YEAR, THERE IS NO EFFECT TO THE TAX AS THE SAME IS TAX NEUTRAL BECAUSE HAD THE EXPENDITURE BEEN CLA IMED AND ALLOWED IN THE EARLIER YEAR, THE BROUGHT FORWARD LOSSES FOR TH E CURRENT YEAR WOULD HAVE REDUCED TO THAT EXTENT. HE FURTHER SUBMITTED T HAT EVEN AFTER THE ADJUSTMENT OF BROUGHT FORWARD LOSS IN THE CURRENT Y EAR, THERE IS NO TAX PAYABLE BY THE ASSESSEE. HE FURTHER PLACED RELIANCE ON THE DECISION IN THE CASE OF BANK OF MADURAI LTD. 261 ITR 749 (MADRA S) AND THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. NAGRI MI LLS COMPANY LTD. 1958 33 ITR 681. HE THUS SUBMITTED THAT THE DISALL OWANCE MADE BY THE A.O. BE DELETED. 7. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT ASSES SEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND EVEN AS PER THE ACCOUNTING POLICIES OF THE ASSESSEE AS STATED IN ITS ACCOUNTS, ALL EXPE NDITURE AND INCOME TO THE EXTENT CONSIDERED PAYABLE AND RECEIVABLE WERE A CCOUNTED FOR ON ITA NO 3417 /AHD/2010 . A.Y. 2005- 06 5 ACCRUAL BASIS EXCEPT THOSE WITH SIGNIFICANT UNCERTA INTY. HE THEREFORE SUBMITTED THAT THE INTEREST EXPENSE WAS CERTAIN AND THEREFORE IT HAS TO BE ACCOUNTED ON ACCRUAL BASIS AND SINCE IT DID NOT PER TAIN TO THE YEAR UNDER APPEAL, THE SAME IS NOT ALLOWABLE. HE FURTHER SUBMI TTED THAT THE DECISION OF THE HONBLE TRIBUNAL IN EARLIER YEARS WAS NOT ON MERITS AND THEREFORE IT CANNOT BE SAID THAT THE FACTS OF THE CASE IN THE YE AR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS. HE FURTHER SUBMI TTED THAT THE ASSESSEE HAD NOT GIVEN DETAILS OF PRIOR PERIOD EXPENSES AND DID NOT PROVE AS TO HOW THE SAME CRYSTALLIZED DURING THE YEAR DESPITE VARIO US OPPORTUNITIES GIVEN BY THE A.O. HE ALSO POINTED TO THE FINDINGS OF CIT(A ) WHERE CIT(A) HAS NOTED THAT NO SUCH DETAILS WERE FILED BEFORE CIT(A) . HE THUS SUBMITTED THAT THE A.O. WAS FULLY JUSTIFIED IN MAKING THE DIS ALLOWANCE. HE THUS SUPPORTED THE ORDER OF A.O. AND CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DISPUTE IN THE PRESENT CASE IS ALLOWABILITY OF PRIOR PERIOD EXPENSES. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS A COMPANY AN D IS MANDATORILY REQUIRED UNDER THE COMPANIES ACT, 1956 TO FOLLOW ME RCANTILE SYSTEM OF ACCOUNTING FOR ACCOUNTING OF ITS EXPENDITURE AND IN COME. FROM THE DETAILS OF PRIOR PERIOD EXPENSES IT IS SEEN THAT MAJOR PORT ION OF PRIOR PERIOD EXPENSES IS ON ACCOUNT OF INTEREST EXPENSES. BEFOR E US, IT IS SUBMITTED BY LD. A.R. THAT THE DECISION ABOUT RATE OF INTEREST A ND OTHER TERMS OF LOANS ON WHICH THE INTEREST HAS BEEN ACCOUNTED DURING THE YEAR GOT SETTLED IN THE YEAR UNDER APPEAL BUT HOWEVER NO MATERIAL HAS B EEN PLACED ON RECORD BEFORE US IN SUPPORT OF ITS CONTENTION. BEFORE US, THE ASSESSEE HAS ALSO NOT PRODUCED ANY EVIDENCE WITH RESPECT TO THE TERMS AND CONDITIONS ON WHICH THE ASSESSEE HAD BORROWED THE AMOUNT. WE ALS O FIND THAT CIT(A) WHILE UPHOLDING THE ORDER OF A.O. HAS GIVEN A FINDI NG THAT THE A.O. HAD ALLOWED OPPORTUNITY TO THE ASSESSEE TO GIVE THE DET AILS OF PRIOR PERIOD EXPENSES AND TO PROVE AS TO HOW THOSE EXPENSES CRYS TALLIZED DURING THE YEAR BUT NO SUCH DETAILS WERE SUBMITTED BY THE ASSE SSEE EITHER BEFORE A.O. OR CIT(A). CIT(A) HAS FURTHER GIVEN A FINDING THAT IN EARLIER YEARS, THE ITA NO 3417 /AHD/2010 . A.Y. 2005- 06 6 ASSESSEE HAD SUBMITTED DETAILS AND PROVED THAT THE EXPENSES CRYSTALLIZED DURING THE YEAR BUT NO SUCH DETAILS WERE SUBMITTED BEFORE HIM AND THEREFORE THE DECISION OF EARLIER YEARS WAS NOT REL EVANT. BEFORE US, ASSESSEE HAS NOT PLACED ANY MATERIAL TO CONTROVERT THE FINDINGS OF CIT(A). WE FURTHER FIND THAT THE DECISIONS RELIED UPON BY T HE ASSESSEE ARE DISTINGUISHABLE ON FACTS AND THEREFORE CANNOT BE AP PLIED TO THE FACTS OF THE PRESENT CASE. BEFORE US ALSO NO MATERIAL HAS BE EN PLACED TO PROVE THAT THE LIABILITY OF INTEREST CRYSTALLIZED DURING THE YEAR. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF A.O. AND CIT(A) AND THUS THIS GROUND OF ASSESSEE IS DISMISSE D. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN OPEN COURT ON 07 - 03 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD