Tade Powertech Private Limited, Sangli V. The Principal Commissioner of Income Tax-1, Pune

ITA 379/PUN/2023

AI Insights

The case involves Tade Powertech Private Limited, which appealed against the order of the Pr. Commissioner of Income Tax-1, Pune, concerning an assessment for the year 2018-19. The primary issue was the disallowance of an interest expenditure of Rs. 44,39,675, categorized as 'prior period expenditure' by the PCIT. The PCIT contended that the expenditure, although crystallized during the relevant assessment year, pertained to a prior period and thus should not be allowed. The Tribunal examined whether the PCIT was justified in exercising the revisionary powers under section 263 of the Income Tax Act, 1961, and concluded that the original assessment was based on a plausible view and thus not erroneous.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137446 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-06-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 02-04-2023
• Other Referred Cases: Malabar Industrial Co. Ltd. vs. CIT, CIT vs. Max India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMOL R. KULKARNI
• Keywords: Revision of order
• Section: 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.379/PUN/2023 िनधाᭅरण वषᭅ / Assessment Year : 2018-19 Tade Powertech Private Limited, J-91, MIDC, Kupwad Block, Kupwad, Sangli- 416436. PAN : AABCP1363K Vs. PCIT-1, Pune. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Pr. Commissioner of Income Tax-1, Pune [‘PCIT’] dated 15.03.2023 passed u/s 263 of the Income Tax Act, 1961 (‘the Act’) for the assessment year 2018-19. 2. Briefly, the facts of the case are that the appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing of Electrical Equipments and RMU Panels. The Return of Income for the assessment year 2018-19 was filed on 26.10.2018 declaring total Assessee by : Shri Amol R. Kulkarni Revenue by : Shri Prakash Mane Date of hearing : 21.06.2023 Date of pronouncement : 11.07.2023 ITA No.379/PUN/2023 2 income of Rs.Nil. Against the said return of income, the assessment was completed by the Assessing Officer vide order dated 23.02.2021 passed u/s 143(3) of the Act accepting the returned income. Subsequently, the ld. PCIT, on review of the assessment record, formed an opinion that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue, as the Assessing Officer had failed to examine the allowability of prior period of expenditure of Rs.44,39,675/-. Accordingly, a show-cause notice u/s 263 was issued on 27.02.2023. In response to the said show-cause notice, the appellant had filed a detailed explanation saying that the expenditure of Rs.44,39,675/- though shown as “prior period expenditure” was actually liability for the said expenditure was materialized during the previous year relevant to the assessment year 2018-19. The appellant also explained the circumstances as to how the interest expenditure of the period from 01.07.2016 to 09.05.2017 had crystallized during the previous year relevant to the assessment year under consideration, as extracted by the ld. PCIT vide para 5 of the impugned order. However, the ld. PCIT had opined that merely because the liability had crystallized during the previous year ITA No.379/PUN/2023 3 relevant to the assessment year 2018-19 does not alter the fact that the liability pertaining to the period from 01.07.2016 to 09.05.2017 and, accordingly, directed the Assessing Officer to disallow the interest expenditure of Rs.44,39,675/-. 3. Being aggrieved, the appellant is in appeal before us in the present appeal contending that the ld. PCIT ought not to have exercised the jurisdiction u/s 263 of the Act, inasmuch as, the assessment was taken up for limited scrutiny assessment. The ld. PCIT ought not to have passed the impugned order without considering the fact that the liability for expenditure was crystallized during the previous year relevant to the assessment year under consideration. 4. Without prejudice to the above, he further submits that the ld. PCIT, without giving any finding that the liability was not crystallized during the previous year relevant to the assessment year under consideration, ought not to have exercised the jurisdiction u/s 263 of the Act placing certain judicial precedents. 5. On the other hand, ld. CIT-DR supports the order of the ld. PCIT. 6. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the validity of ITA No.379/PUN/2023 4 assumption of jurisdiction u/s 263 by the ld. PCIT. The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC). The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim took one of the plausible views, the assessment order cannot be termed as an “erroneous”. 7. Now, we proceed to examine whether the assessment order passed by the Assessing Officer is erroneous or not. Admittedly, the interest expenditure of Rs.44,39,675/- was shown as a part of prior period expenditure in the Profit & Loss Account. It is settled position of law that the treatment given in the books of account does not determine the allowability or otherwise of expenditure under the provisions of Income Tax Act. It is contention of the appellant that the interest expenditure of Rs.44,39,675/- though pertaining to the ITA No.379/PUN/2023 5 period from 01.07.2016 to 09.05.2017 liability was crystallized on 09.05.2017 by virtue of the agreement entered with Phoenix ARC Pvt. Ltd.. The facts relating to the crystallization of liability was explained by the assessee company, which are set out by the ld. PCIT in the impugned order. The ld. PCIT had not disputed this fact of crystallization of liability but he only opined that it would have not any impact, as it does not change the situation as that the expenditure belonging to the period prior 01.04.2017. The fact that the ld. PCIT had not disputed with the contentions of the appellant that the liability had crystallized during the previous year relevant to the assessment year under consideration is apparent from the observation made by him in para 6 of his order that the assessee’s contention that said liability of Rs.44,39,675/- was materialized, quantified in A.Y. 2018-19 does not alter the fact that the said liability pertained to the period 01.04.2017 to 09.05.2017 i.e. prior to the A.Y. 2018-19 which even the assessee has admitted. It is settled position of law that a liability arising on a contractual obligation is entitled to be deduction in the assessment year relevant to the previous year in which the liability is crystallized. Therefore, there is no material on record to show that in the absence of any material on record, to show that the interest expenditure of ITA No.379/PUN/2023 6 Rs.44,39,675/- is not allowable expenditure and the assessment order cannot be termed as “erroneous”. Therefore, in the absence of satisfaction of conditions stated supra, the ld. PCIT cannot exercise the power of revision u/s 263 of the Act. Thus, the grounds of appeal filed by the assessee stand allowed. 8. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 11 th day of July, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 11 th July, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT-1, Pune. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.