Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 81202 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-10-2014
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
28-08-2014
Assessment Year
2009-2010
Appeal Filed On
13-02-2014
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , ! ' , % & BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 344/MDS/2014 ( / ASSESSMENT YEAR : 2009-10) M/S. GEORGE OAKES LTD., NEW NO.43 (OLD NO.17) GREAMS ROAD, CHENNAI-600 006. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(2), CHENNAI-600 034. PAN:AAACG1659G ( /APPELLANT) ( /RESPONDENT) & ./I.T.A.NO. 824/MDS/2014 ( / ASSESSMENT YEAR : 2009-10) THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(2), 512, NEW BLOCK, 5 TH FLOOR, CHENNAI-600 034. M/S. GEORGE OAKES LTD., NEW NO.43 (OLD NO.17) GREAMS ROAD, CHENNAI-600 006. PAN:AAACG1659G ( /APPELLANT) ( /RESPONDENT) ASSESSEE BY : MR. R.VIJAYARAGHAVAN, ADVOCATE REVENUE BY : MR. GURU BHASHYAM, JCIT / DATE OF HEARING : 28 TH AUGUST, 2014 /DATE OF PRONOUNCEMENT : 16 TH OCTOBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD , JM: ITA NO.344/MDS/2014 IS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-II, CHENNAI DATED 22.11.2013 FOR THE ASSESSMENT YEAR 2 009-10 EFFECTIVELY RAISING TWO GROUNDS OF APPEAL. ONE IS A GAINST CONFIRMING DEPRECIATION ON UPS AT 15% AND THE OTHE R GROUND 2 ITA NOS.344 & 824/MDS/2014 IS AGAINST CONFIRMING DISALLOWANCE UNDER SECTION 14 A OF THE ACT FOR EARNING DIVIDEND INCOME BY APPLYING RULE 8D . 2. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN VIEW OF THE DISPUTED AMOUNT / TAX LIABILITY INVOLVED IS VERY LO W, THE ASSESSEE IS WITHDRAWING THE APPEAL WITHOUT PREJUDI CE TO THE CLAIM IN SUBSEQUENT YEARS ON SIMILAR ISSUES. 3. THE SUBMISSION OF THE COUNSEL IS ACCEPTED AND TH E APPEAL OF THE ASSESSEE IS DISMISSED AS WITHDRAWN. 4. ITA NO.824/MDS/2014 IS FILED BY THE REVENUE AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-II, CHENNAI DATED 22.11.2013 FOR THE ASSESSMENT YEAR 2 009-10 AND THE ONLY ISSUE OF THE REVENUE IS THAT COMMISSIO NER OF INCOME TAX (APPEALS) ERRED IN DELETING DISALLOWANCE OF PRIOR PERIOD EXPENSES CLAIMED IN THE CURRENT YEAR BY THE ASSESSEE REPRESENTING AMOUNT OF VAT WRONGLY INCLUDED IN PART OF SALES IN THE EARLIER ASSESSMENT YEARS. 3 ITA NOS.344 & 824/MDS/2014 5. BRIEF FACTS ARE THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOTICED THAT IN THE PROFI T AND LOSS ACCOUNT AN AMOUNT OF ` 1,03,80,080/- HAS BEEN REDUCED FROM THE SALES AND ADJUSTMENTS WERE MADE AS SALES RETURN S PERTAINING TO PRIOR YEARS. WHEN THE ASSESSING OFFIC ER REQUIRED THE ASSESSEE TO EXPLAIN THIS, THE ASSESSEE SUBMITTED THAT DURING THE FINANCIAL YEARS 2004-05 TO 2006-07 VAT CHARGED IN THE INVOICES OF FEW LOCATIONS WERE WRONG LY TAKEN AS PART OF SALES VALUE INSTEAD OF TREATING AS VAT P AYABLE. THEREFORE, AN AMOUNT OF ` 1,03,80,080/- HAS BEEN OFFERED AS TAXABLE INCOME AND A CONTRA ENTRY WAS SHOWN AS THE AMOUNT RECEIVABLE FROM VAT AUTHORITIES. THE ASSESSEE SUBM ITTED BEFORE THE ASSESSING OFFICER THAT LATER ON VERIFIC ATION OF VAT RECEIVABLE ACCOUNT DURING THE ASSESSMENT YEAR 200 8-09, ASSESSEE CAME TO KNOW THAT THIS AMOUNT SHOWN AS RECEIVABLE FROM VAT AUTHORITIES IS NOT RECOVERABLE AND IS ARISING OUT OF WRONG ACCOUNTING AND THEREFORE, ASSE SSEE SUBMITTED THAT ` 1,03,80,080/- HAS BEEN CHARGED TO PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2009 AS ADJUST MENT PERTAINING TO PRIOR YEARS. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THIS AMOUNT EARLIER OFFERED TO TAX HA S NOW BEEN 4 ITA NOS.344 & 824/MDS/2014 WRITTEN OFF AS IRRECOVERABLE. THE ASSESSING OFFICE R REJECTED THE SUBMISSIONS OF THE ASSESSEE AND ADDED BACK THIS AMOUNT TO THE INCOME STATING THAT ANY MISTAKE MADE IN PREV IOUS YEAR CANNOT BE ADJUSTED IN THE SUBSEQUENT YEAR. THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS) AND THE COMMISSIONER AFTER CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE AND EXAMINING THE ASSES SMENT ORDER DELETED THE ADDITION MADE BY THE ASSESSING OF FICER AGAINST WHICH REVENUE IS IN APPEAL BEFORE US. 6. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND SUBMITS THAT MIS TAKES OF THE ASSESSEE IN EARLIER YEARS CANNOT BE RECTIFIED I N SUBSEQUENT YEARS. 7. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE A LL ALONG SHOWING SALES TAX SEPARATELY IN VAT ACCOUNT A ND WHENEVER IT IS PAID IT HAS DEBITED THAT ACCOUNT AND IN SOME YEARS, WRONGLY INCLUDED IN SALES. WHEN THIS WAS CA ME TO THE KNOWLEDGE OF THE ASSESSEE, IT RECTIFIED ITS MISTAKE BY DEBITING THE PROFIT AND LOSS ACCOUNT DURING THIS YEAR WHICH WAS 5 ITA NOS.344 & 824/MDS/2014 WRONGLY OFFERED AS INCOME IN EARLIER YEARS. COUNSE L VEHEMENTLY SUPPORTS THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS) IN DELETING THE ADDITION. 8. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THIS ISSUE HAS BEEN ELABORATELY CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER A ND WHILE DELETING THE SAID ADDITION, HE OBSERVED AS UNDER:- 4.3.2 I HAVE CONSIDERED THE ASSESSEE'S SUBMISSIONS AS WELL AS THE CONTENTS OF THE ASSESSMENT ORDER CAREFULLY. FROM THE PERUSAL OF THE CONTENTS OF THE ASSESSMENT ORDER AND THE ASSESSEE'S SUBMISSIONS, ONE THING IS VERY CLEAR, THAT IS, THE AMOUNT OF RS . L,03 , 80 , 080/- IS NOT AN EXPENDITURE AS SUCH . AS PER THE METHOD OF ACCOUNTANCY FOLLOWED BY THE ASSESSEE CONSISTENTLY YEAR AFTER YEAR , THE REVENUE (SALES) AR E B E IN G RECOGNISED ON 'NET OF VAT ETC PAID' BASIS. IN OTHER WORDS, THE VAT AND OTHER REL A T E D TA X ES ARE EXCLUDED WHILE RECOGNISING THE REVENUE (SALES). HOWEVER , DURING TH E F.Y S. 2004-05, 2005-06 AND 2006-07 THE ASSESSEE, BY MISTAKE , CONSIDERED TH E GR OSS AMOUNT OF SALES (I . E. INCLUSIVE OF THE VAT PAID) AS THE REVENUE IN ITS P&L ACCOUNT A ND COMP L ETED THE ANNUAL ACCOUNTS AND FILED THE RETURNS OF INCOME OF A . YS . 2005-0 6, 200 6 - 07 AND 2007- 08, ACCORDINGLY. THEREFORE, WHAT IS CONSIDERED IN THE INCOME (CREDIT) SIDE OF THE P&L ACCOUNTS IN F.YS.2004-05, 2005- 06 AND 2006-07, WAS INCLUSIVE OF THE ' VAT ' COLLECTED AND PAID. THIS 'VAT' PAID OF 6 ITA NOS.344 & 824/MDS/2014 RS.1,03,80,080/- WAS NEITHER REDUCED FROM THE SALES (ON THE CREDIT SIDE) NOR DEBITED TO THE P&L ACCOUNT IN ANY FORM, IN THE ACCOUNTS OF F.YS . 2004-05, 2005 - 06 AND 2006-07. THUS, THERE WERE AN EXCESS CREDITS IN THE P&L ACCOUNTS TO THE EXTENT OF ` 1 , 03,80,080/- DURING THE F.YS.2004-05, 2005-06 AND 2006- 07. THE YEAR-WISE DETAILS OF VAT SO INCLUDED IN THE SALES (ON THE CREDIT SID E OF TH E P&L ACCOUNT) ARE: F.Y. 2004-05 : ` 10.85 LAKHS F.Y. 2005-06 : ` 38.74 LAKHS F.Y 2006-07 : ` 54.21 LAKHS TOTAL : ` 103.80 LAKHS AS THE ABOVE AMOUNT OF VAT, WHICH WAS INCLUDED IN THE SALES AND OUTSTANDING AS DEBIT BALANCE IN THE VAT PAYABLE ACCOUNT, WAS ALREADY PAID TO THE GOVERNMENT, IT IS NOT GOING TO BE RECEIVED BACK BY THE ASSESSEE IN ANY MANNER . IN OTHER WORDS , WHAT IS DEBITED TO THE P&L ACCOUNT DURING THE CURRENT YEAR (F.Y.2008-09) IS NOTHING BUT TH E AMOUNTS WHICH ARE NOT GOING TO BE REALISED (RECOVERED) BY THE ASSESSEE IN ANY MANN E R. THUS , THE AMOUNT OF RS.1 , 03,80,080/- DEBITED IN THE P&L ACCOUNT DURING TH E F. Y . 2008-09 IS NON- RECOVERABLE AMOUNT FROM THE GOVERNMENT, AS THE AMOUNTS WE RE P A ID TO THE GOVERNMENT. THEREFORE, THE PROPER PRESENTATION IN THE BOOKS OF A C COUNT S OF F.Y.2008-09 WOULD HAVE BEEN 'BAD DEBTS WRITTEN OFF' OR 'AMOUNTS NO LONGER RECEI VA BL E WRITTEN OFF', INSTEAD OF SHOWING THEM AS 'PRIOR PERIOD EXPENSES'. 4.3.3 NO DOUBT, UNDER THE PROVISIONS OF INCOME TAX ACT, EACH ASSESSMENT YE A R IS INDEPENDENT AND THE INCOME OF EACH OF THE PREVIOUS YEARS SHOULD BE DETERMINED INDEPENDENTLY . HOWEVER, 7 ITA NOS.344 & 824/MDS/2014 THIS IS NOT AN ABSOLUTE CONDITION. THERE CAN BE CERT A IN EXCEPTIONS. ANY PRIOR PERIOD EXPENSES (OR FOR THAT MATTER EVEN THE INCOME) CAN B E CONSIDERED IN DETERMINING THE INCOME OF THE SUBSEQUENT YEARS, IF- THE LIABILITY CRYSTALISES DURING THE SAID SUBSEQUENT YEARS, OR THE LIABILITY ACCRUES / ARISES DURING THE SAID SUBSEQUENT YEARS , OR THE LIABILITY QUANTIFIED DURING THE SAID SUBSEQUENT YEARS , OR COMES TO THE NOTICE OF THE ASSESSEE DURING THE SAID SUBSEQUENT Y E ARS , OR ACKNOWLEDGED / ACCEPTED BY ASSESSEE DURING THE SAID SUBSEQUENT YEAR , ET C IN THE INSTANT CASE, THE ASSESSEE HAD NOTICED THAT IT HAD ERRONEOUSLY INCL U D E D THE 'VAT' IN ITS SALES (ON THE CREDIT SIDE) IN THE P&L ACCOUNT OF F.YS.2004-05 , 2005-06 AND 2006-07, ONLY WHEN IT WAS FINALIZING THE ACCOUNTS OF THE F.Y.2008-09 IN SEPTEMBER 2009. BY THAT TIME THE ACCOUNTS OF F.YS.2004-05, 2005-06 AND 2006 - 07 WERE FINAL I ZED AND T H E RELEVANT RETURNS OF INCOME (O F A.YS. 2005-06 , 2006-07 A ND 2007 -08) WERE A L SO FI L ED B Y CONSIDERING THE SAID 'VAT' AS PA R T OF THE SAL E S (INCOM E). THUS , THE EXCESS I N C L U S I O N OF IN COME (ON ACCO U NT OF VA T ) IN THE ACCO UN TS OF F.Y S .2004-05, 2005- 0 6 AND 2 00 6 -0 7, H AD CO M E T O T HE NOTICE O F THE AS S ESSEE IN THE MONTH OF SEPTEMBER 2 00 9 A ND H E N CE R IG HT LY CON S I D ERED THE SA M E W H I L E PR E P ARING THE A NNU A L ACCOU N TS OF F.Y.2 00 8 -0 9 AN D C L AI M E D IN THE RET U RN OF INCO M E O F A.Y.2 0 09-10 . 4.3 . 4 THE ABOVE CO N S ID ERATION CAN ALSO BE EXA M INED F R O M A DIFFERENT ANGLE . TH E A SSESSEE COM P ANY FI L E D T H E RETU R NS OF I N CO M E OF A . YS . 20 0 5- 0 6, 20 0 6 - 07 AND 2007-0 8 IN NORMAL CO U RSE WITHIN THE DUE DATE AND 8 ITA NOS.344 & 824/MDS/2014 DEC L AR I NG POSITIVE IN CO M E. THERE AR E N O EXE M P T IO N S O F INCOME S CL AI M E D BY T HE ASSESSEE IN A N Y OF T H E ASSE SS MENT Y EA RS (I .E. A.YS. 2 0 05 -0 6 T O 2 00 9 - 1 0 ). A L SO THE TAX RATES IN ALL OF T H ESE YEARS ARE ONE A ND TH E SAME. THEREFORE, THERE NO NEED F OR THE ASSESSEE TO SH I FT THE EXPE N SES OR INCOME FROM Y EAR TO THE OTHER. UNDER THESE CIRCUMSTANCES, EVEN U L TE R IOR M OTIVES CANNOT B E A TTRIBUTED IF ANY EXPENSES ARE POST P ONED TO SUBSEQUENT YEARS. T H E REVENU E CAN M A K E A CASE ONLY IF THE TAXABLE INCOME IS SHIFTE D (POSTPONED) TO THE S UB SEQUENT YEARS , A S IT RESULTS IN POSTPO N EMENT OF PAYMENT OF TAXES . IN FACT, IN T H E PR ESEN T CASE, IT IS A GA IN FOR TH E REVENUE - TO THE EXTENT OF INTEREST - SINCE THE ASSES S EE I S P AYING T HE TAXES IN TH E E ARLIE R ASSESS M ENT YEARS. THEREFORE, NO ADVERSE INFERE N CE CAN B E D RAW N IN THE PRE S ENT CASE . 4 . 3.5 IN VIEW OF THE ABOVE T HE ASSESSING OFF I CER IS NOT J US T I F IE D I N DISALLOWING TH E ABOVE A M OU N T O F RS.L, 0 3,80, 0 80J - DE B I T ED BY WAY OF ' P RIO R P E RI O D EXPENS E ' . TH E ASSESSI N G OFF I CE R IS D IRECTED T O ALLOW THE SA M E WHI L E COM P U T I N G T H E T AXABLE I NCOM E OF THE ASSESSEE . HOWEVER THE AS S ESSING OFFICER MAY VERIFY T HE F AC TU A L P OS I TION OF TH E CLA IM OF THE VAT E NT RIE S MADE IN T H E BOOKS. SUBJECT TO THESE REMA R KS , TH IS GRO U ND IS TR EA T ED A S A LLOWED. 9. ON GOING THROUGH THE ABOVE ORDER, WE DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E ADDITION. THE REVENUE ALSO DID NOT CONTROVERT THE F INDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETIN G THE 9 ITA NOS.344 & 824/MDS/2014 ADDITION MADE. IN THE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, THE 16 TH DAY OF OCTOBER, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( & () ) ( DR. O.K. NARAYANAN ) ( CHALLA NAGE NDRA PRASAD ) ,- /VICE-PRESIDENT ( . / JUDICIAL MEMBER ( /CHENNAI, / /DATED, 16 TH OCTOBER, 2014 SOMU 12 32 /COPY TO: 1. ASSESSEE 2. ASSESSING OFFICER 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .
Mehul