SUNIL ANANT PATEL, MUMBAI V. ITO 23(1)(4), MUMBAI

ITA 3847/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59679 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 10-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Assessee Lawyers: V G GINDE
• Keywords: Revision of order; Assessment record
• Section: 143(3); 145; 263

Judgement Text

1 ITA NO. 3847/MUM/2010 SHRI SUNIL ANANT PATIL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R.K. PANDA, A.M. AND SHRI VIJAY PAL RA O, J.M. ITA NO. 3847/MUM/2010 (ASST YEAR 2005-06) SHRI SUNIL ANANT PATIL, KUNAL WINES, SHOP NO. 1, GURU RAMDAS NAGAR, VILLAGE ROAD, BHANDUP (WEST), MUMBAI 400 078. VS INCOME TAX OFFICER 23(1)(4), C-10, PRATYAKSHA KAR BHAWAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI. 400 078 (APPELLANT) (RESPONDENT) PAN NO. AAGPP3595 B APPELLANT BY SHRI V.G. GINDE RESPONDENT BY SHRI B. JAYAKUMAR DATE OF HEARING 10.1.2012 DATE OF PRONOUNCEMENT 13.1.2012 ORDER PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 15.03.2010 OF THE COMMISSIONER OF INCOME TAX - 23, MUMBAI PASSED U/S 263 OF THE I.T. ACT RELATING TO ASSESSMENT YEAR 200 5-06. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE, THEY ALL RELATE TO THE ORDER OF THE LD. CIT ASSUMING THE JURISDICTION U/S 263 OF THE ACT. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS IN THE BUSINESS OF LIQUOR. HE FILED HIS RETURN OF INCOME ON 28.10.200 5 DECLARING TOTAL INCOME 2 ITA NO. 3847/MUM/2010 SHRI SUNIL ANANT PATIL OF RS. 1,17,810/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON A TOTAL INCOME OF RS. 1,75,210/-. SUBSEQUENTLY, THE CIT CAL LED FOR THE ASSESSMENT RECORDS AND EXAMINED THE SAME. ON VERIFICATION OF T HE DETAILS HE NOTED THAT THE LICENCE FEES OF RS. 4,40,644 DEBITED IN THE PRO FIT & LOSS FOR A.Y. 2005-06 ACTUALLY PERTAINED TO FINANCIAL YEAR 2005-06 RELEVA NT TO A.Y. 2006-07. ACCORDING TO HIM THIS EXPENSE OF RS. 4,40,644/- WAS LIABLE TO BE DISALLOWED WHICH WAS NOT DONE BY THE A.O. HE, THEREFORE, ISS UED NOTICE U/S 263 OF THE ACT. 3.1 IN RESPONSE TO THE NOTICE U/S 263 IT WAS STATED THAT THE LICENSE FEES PAID WERE REGULAR EXPENSES PAID EVERY YEAR ROUGHLY IN THE MONTH OF MARCH, THAT IT WAS PAID FOR THE NEXT FINANCIAL YEAR , AND THAT IT WAS REGULAR PRACTICE TO CLAIM SUCH STATUTORY LEVY/EXPENSES IN THE YEAR O F PAYMENT. THE ASSESSEE ARGUED THAT THE LIABILITY TO MAKE SUCH STATUTORY LE VY/EXPENSES CRYSTALLIZED DURING THE YEAR, AND ONLY AFTER ITS PAYMENT, THE LI CENSE TO CARRY ON THE BUSINESS WAS BEING RENEWED. ACCORDINGLY IT WAS POIN TED OUT THAT IF THE ABOVE EXPENDITURE WAS DISALLOWED, THEN THE PREVIOUS YEARS PAYMENT AS CURRENT YEAR EXPENSES WAS TO BE ALLOWED. SECONDLY, AS THERE WOULD BE NO REVENUE LOSS, EXPENDITURE BEING PAID DURING THE IMP UGNED ASSESSMENT YEAR SHOULD BE ALLOWED. 3.2 HOWEVER, THE LD. CIT WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM THE ASSESSEE FOLLOW ED MERCANTILE SYSTEM OF ACCOUNTING AND HENCE EXPENDITURE INCURRED IN THE RE LEVANT PREVIOUS YEAR FOR 3 ITA NO. 3847/MUM/2010 SHRI SUNIL ANANT PATIL PAYING LICENSE FEE RELEVANT FOR NEXT PREVIOUS YEAR CANNOT BE ALLOWED IN THE ASSESSMENT OF INCOME FOR THE CURRENT YEAR. THE PRA CTICE FOLLOWED BY THE ASSESSEE IS CONTRARY TO PROVISIONS OF SEC. 145 OF T HE I.T. ACT. THE A.O. BY ACCEPTING THE CLAIM FOR DEDUCTION OF LICENSE FEE OF RS. 4,40,176/- PAID FOR FINANCIAL YEAR 2005-06 IN THE ASSESSMENT FOR A.Y. 2 005-06, HAD ERRED IN ACCEPTING THE SAME. HENCE, THE ASSESSMENT ORDER PA SSED BY THE A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. HE ACCORDINGLY DIRECTED THE A.O. TO DISALLOW THE AFORESAID EXPENDI TURE, RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE AND REVISE THE ASSESSMENT OR DER. AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSESSEE IS IN APPEAL BEF ORE. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS FOLLOWING THIS PRACTICE SINCE LAST SO MANY YEARS. IF THE EXPENSES DEBITED IN THE P&L ACCOUNT WHICH RELATED TO A.Y. 2006-07 IS DI SALLOWED IN THIS YEAR THEN CORRESPONDING CREDIT HAS TO BE GIVEN TO THE AM OUNT WHICH HAS BEEN DEBITED IN THE PRECEDING ASSESSMENT YEAR AND WHICH RELATES TO THIS YEAR. HE SUBMITTED THAT THIS IS REVENUE NEUTRAL AND THEREFOR E THE LD. CIT WAS NOT JUSTIFIED IN CANCELLING THE ORDER PASSED BY THE A.O . 5. THE LD. D.R., ON THE OTHER HAND, REFERRED TO THE ASSESSMENT ORDER AND SUBMITTED THAT THERE IS NO WHISPER IN THE ASSESSMEN T ORDER ABOUT THE ALLOWABILITY OR OTHERWISE OF THE LICENCE FEES OF TH E SUBSEQUENT YEAR WHICH HAS BEEN DEBITED TO THE P&L ACCOUNT OF THE IMPUGNED ASSESSMENT YEAR. HE SUBMITTED THAT SINCE THE ASSESSEE IS FOLLOWING MERC ANTILE SYSTEM OF 4 ITA NO. 3847/MUM/2010 SHRI SUNIL ANANT PATIL ACCOUNTING, THEREFORE, HE SHOULD FOLLOW THE CORRECT APPROACH. MERELY BECAUSE SOME WRONG APPROACH IS BEING FOLLOWED, THE SAME CANNOT BE PERPETUATED. HE ACCORDINGLY RELIED ON THE ORDER OF THE LD. CIT. 5.1 THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOIND ER SUBMITTED THAT IF THE ORDER OF THE CIT IS UPHELD THEN A DIRECTION MAY BE GIVEN TO THE A.O. TO ALLOW THE LICENCE FEES FOR THIS YEAR WHICH HAS BEEN CLAIM ED IN THE PRECEDING ASSESSMENT YEAR. ACCORDING TO HIM, WITHOUT PAYMENT OF LICENCE FEES, THE ASSESSEE CANNOT RUN HIS LIQUOR BUSINESS. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS AND PERUS ED THE ORDERS OF THE A.O. AND CIT. ADMITTEDLY, IN THE ORDER PASSED U/S 143(3), THE A.O. HAS NOT DISCUSSED THE ALLOWABILITY OR OTHERWISE OF THE LICE NCE FEES PAID FOR A.Y. 2006- 07 WHICH WAS CLAIMED DURING A.Y. 2005-06. THE LD. COUNSEL FOR THE ASSESSEE ALSO COULD NOT PRODUCE ANY QUESTIONNAIRE I SSUED BY THE A.O. ON THIS ISSUE OR THE SUBMISSION OF THE ASSESSEE BEFORE THE A.O. ON THIS ISSUE. IT IS THE SETTLED PROPOSITION OF LAW THAT LACK OF ENQU IRY OR NO ENQUIRY ON A PARTICULAR ISSUE WILL RENDER THE ORDER OF THE A.O. ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE INSTANT CAS E, ADMITTEDLY THERE IS NEITHER ANY DISCUSSION NOR ANY QUESTION PUT BY THE A.O. AND NOR ANY REPLY GIVEN BY THE ASSESSEE REGARDING THE ALLOWABILITY OR OTHERWISE OF THE LICENCE FEES OF RS. 4,40,176/- PAID FOR FINANCIAL YEAR 2005 -06 AND CLAIMED IN THE ASSESSMENT FOR A.Y. 2005-06. THEREFORE, THE ORDER O F THE A.O., IN OUR OPINION, BECOMES ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF REVENUE. 5 ITA NO. 3847/MUM/2010 SHRI SUNIL ANANT PATIL THEREFORE, THE CIT, IN OUR OPINION, WAS JUSTIFIED I N ASSUMING THE JURISDICTION U/S 263 OF THE ACT. THE PRAYER OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE A.O. MAY BE DIRECTED TO CONSIDER THE ALLOWABILITY O F LICENCE FEES OF THE IMPUGNED ASSESSMENT YEAR CLAIMED IN THE PRECEDING A SSESSMENT YEAR CANNOT BE DECIDED HERE AND THE ASSESSEE IS AT LIBER TY TO RAISE THIS ISSUE BEFORE THE A.O. DURING ASSESSMENT PROCEEDINGS U/S 1 43(3)/263 OF THE ACT. THE A.O. SHALL DECIDE THE ISSUE IN ACCORDANCE WITH LAW. ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON 13.01.2012. SD/- (VIJAY PAL RAO) JUDICIAL MEMBER SD/- ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 13.01.2012 RK COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT, 23, MUMBAI 4 ITO WARD 23(1)(4) 28, MUMBAI 5 DR BENCH E 6 MASTER FILE /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI