ACIT, Patiala V. M/s State Bank of Patiala, Patiala

ITA 397/CHANDI/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7789 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-03-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 18-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: SHRI
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 397/CHD/2011 ASSESSMENT YEAR: 2002-03 ACIT, CIRCLE, V M/S STATE BANK OF PATIALA, PATIALA. THE MALL, PATIALA. PAN: AACCS-0143D (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT.JYOTI KUMARI ASSESSEE BY : SHRI PANKAJ JAIN DATE OF HEARING : 21.03.2012 DATE OF PRONOUNCEMENT : 19.04.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.02.2011 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE TO 1/5 TH OF THE TOTAL EXPENSES CLAIMED UNDER THE HEAD PRIOR PERIOD EXPENSES AS AGAINST THE DISALLOWANCE OF 1/3 RD MADE BY THE AO, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE SUPPORTING EVIDENCE IN RESPECT OF THE CLAIM AND, THUS, THE AO WAS JUSTIFIED IN TAKING AN ADVERSE VIEW AS PER SECTION 114 OF THE INDIAN EVIDENCE ACT. 2 2. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET AS IDE AND THAT OF THE AO RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND FINALLY DISPOSED OF. 3. GROUND NOS. 2 AND 3 ARE GENERAL IN NATURE, THERE FORE, NEED NO SEPARATE ADJUDICATION. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, BOTH LD. 'DR' AND LD. 'AR' STATED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NO. 451- 455/CHD/2011 A.Y. 1996-97, 1998-99, 1999-2000, 2001 -02 AND 2002-03 VIDE ORDER DATED 21.1.2012 AND THE ISSU E WAS RESTORED TO THE FILE OF THE AO. 5. WE HAVE CAREFULLY PERUSED THE FACTUAL MATRIX OF THE CASE AND FOUND THAT THE ISSUE OF PRIOR PERIOD EXPEN SES, AS RAISED BY THE REVENUE IN GROUND NO.1 IS SIMILAR TO THE GROUND ADJUDICATED BY THE BENCH IN THE ABOVE REFERR ED TO APPEALS. HOWEVER, THE BRIEF FACTS OF THE CASE, AS CULLED OUT FROM THE RELEVANT RECORDS ARE THAT ORIGINAL ASSESSM ENT WAS COMPLETED U/S 143(3) ON 9.1.2003 AT AN INCOME OF RS.5,65,83,79,410/- AGAINST RETURNED INCOME OF RS.4,25,49,21,460/- AFTER THE AO MADE VARIOUS ADDIT IONS AS MENTIONED AT PAGE 1 OF HIS ORDER PASSED U/S 143(3)/ 254 OF THE ACT. 6. THE MATTER WENT UP IN APPEAL BEFORE CIT(A), WHO ALLOWED SOME RELIEF AND MATTER WAS FURTHER TAKEN UP IN APPEAL BEFORE ITAT, WHO VIDE ITS ORDER IN ITA NO. 3 490/CHD/2005 DATED 09.06.2008 RESTORED THE MATTER REGARDING ALLOWABILITY OF THE PRIOR PERIOD EXPENSES TO THE FILE OF THE AO. THE RELEVANT PART OF THE DECISION OF THE ITAT, CHANDIGARH BENCH, IS REPRODUCED HEREUNDER : 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITA 451/CHD/2011 ( A.Y. 1996-97)READ AS UNDER: 1. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE AO WITH REGARD TO ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENSES FOR MISCELLANEOUS AND STATIONERY EXPENSES DESPITE THE FACT THE APPELLANT HAS ASSERTED THAT THERE ARE NO PRIOR PERIOD EXPENSES OF ANY KIND DURING THE YEAR. 2. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF PRIOR PERIOD EXPENSES ON ESTIMATE BASIS INSPITE OF CLEAR DIRECTIONS OF THE HON'BLE ITAT TO IDENTIFY THE ACTUAL EXPENDITURE. 3. THAT THE LD CIT(A) HAS ERRED IN REDUCING THE DISALLOWANCE FROM 1/3 RD TO 1/5 TH OF ESTIMATED PRIOR PERIOD EXPENSES OF RS.24,00,000/- WITHOUT ANY BASIS AND THEREBY UPHOLDING THE ADDITION OF RS.4,80,000/-. 4. THAT THE LD. CIT(A) HAS ERRED IN REJECTING THE GROUND OF APPEAL CHALLENGING THE ISSUE OF NOTICE U/S 271(1)(C). 5. THAT THE WHOLE ORDER IS AGAINST THE PROVISIONS OF LAW AND FACTS OF THE CASE AND RIGHT IS RESERVED TO ASSAIL THE SAME ON SUCH OTHER GROUNDS AS MAY BE ADVANCED AT THE TIME OF HEARING FOR WHICH THE APPELLANT REQUESTS LEAVE TO AMEND, VARY FROM OR ADD TO THE GROUNDS OF APPEAL HEREINABOVE APPEARING. 4 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' CONTENDED THAT THE AO HAS NOT COMPLIED WITH TH E DIRECTIONS OF THE TRIBUNAL, AS CONTAINED IN PARA 11 OF THE ORDER DATED 19.06.2008 IN ITA NO. 785/CHD/1999 AND OTHERS, FOR THE ASSESSMENT YEAR 1996-97, IN ASSESSE E'S OWN CASE. HE NARRATED THE ISSUE IN QUESTION, IN TH E APPEAL, AS PERTAINING TO PRIOR PERIOD EXPENSES. HE, FURTHER, STATED THAT SINCE THE INCEPTION OF THE BAN K, IT HAS BEEN CONSISTENTLY FOLLOWING THE HYBRID METHOD O F ACCOUNTING AND ITEMS IN ISSUE REGARDING PAYMENT OF STATIONERY BILLS, MISC. BILLS, NO-DEPARTURE HAS BEE N MADE IN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSE E. LD. 'DR' ON THE OTHER HAND, CONTENDED THAT THE ASSE SSEE HAS FAILED TO PRODUCE REQUISITE EVIDENCE IN RESPECT OF SUCH EXPENSES TO ENABLE THE ITO TO TAKE PROPER AND APPROPRIATE VIEW IN THE MATTER. HE REFERRED TO PAG E 7 OF THE ASSESSMENT ORDER DATED 30.11.2009 FOR THE ASSESSMENT YEAR 1996-97, PASSED U/S 143(3) READ WIT H SECTION 254 OF THE ACT, WHEREBY THE AO HAS CATEGORICALLY MENTIONED HOWEVER, THE ASSESSEE FAILED TO PRODUCE ANY PROOF IN RESPECT OF STATIONERY EXPENSES AND MISC. EXPENSES ETC. AS TO ON WHAT BASIS, THEY WERE BOOKED FOR, IN THE YEAR UNDER CONSIDERATION, THOUGH THEY WERE PURCHASED IN EARLIER YEARS. THE AO, FURTHER, MENTIONED ON PERUSAL OF THE AUDIT REPORT OF THE TAX AUDITORS FURNISHED BY THE ASSESSEE WITH THE RETURN OF INCOME, IT IS CLEAR THAT THE ASSESSEE WAS REQUIRED TO PROVIDE DETAILS TO THE AUDITOR IN RESPECT OF PRI OR PERIOD EXPENSES/INCOME DEBITED TO PROFIT & LOSS ACCOUNT BUT THE ASSESSEE HAS FAILED TO DO SO STATING THE REASONS DEPICTED IN THE AUDIT REPORT AGAINST COLUMN 9(B) AS ALSO IN THE REPLY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS STATED SUPRA. ACCORDINGLY, THE LD. 'AR' WAS OF THE OPINION THAT IT IS THE FAILURE OF THE ASSESSEE WHIC H LED TO FRAME PRESENT ASSESSMENT. BOTH LD. 'AR' AND LD. 'D R' 5 WERE OF THE OPINION THAT FOR THE PROPER AND JUDICIO US DISPOSAL OF THE ISSUE IN QUESTION, IN THESE APPEALS , THE CASE(S) MAY BE RESTORED TO THE FILE OF THE AO. 4. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT MATERIAL ON RECO RD. THE GRIEVANCE OF THE ASSESSEE IS NON-COMPLIANCE WIT H THE DIRECTIONS GIVEN BY THE ITAT, IN THE ABOVE REFE RRED DECISION. THE RELEVANT PARA OF THE ITAT ORDER WHIL E RESTORING THE APPEAL TO THE AO IS AS UNDER : 11. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL CONTENTIONS. IN OUR CONSIDERED VIEW, THE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSESSEE REGARDING CERTAIN EXPENSES BOOKED ON THE BASIS OF RECEIPT OF BILLS, HAS BEEN FOLLOWED BY THE ASSESSEE RIGHT FROM THE INCEPTION. THERE IS NO CHANGE IN THE SYSTEM OF ACCOUNTING. IN OUR CONSIDERED VIEW, NO DISALLOWANCE COULD BE MADE MERELY BECAUSE THE BILLS RECEIVED IN THE YEAR UNDER APPEAL RELATED TO THE PERIOD PRECEDING TO THE YEAR UNDER APPEAL IN THE LIGHT OF SYSTEM OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE. CERTAIN EXPENDITURE SUCH AS TELEPHONE EXPENSES ELECTRICITY ETC. IS BEING BOOKED BY THE ASSESSEE ON THE BASIS OF RECEIPT OF ACTUAL BILLS. SUCH METHOD HAS BEEN FOLLOWED IN THE PAST AND WAS BEING ACCEPTED BY THE DEPARTMENT. THE CIT(A) HAS NOT DISPOSED OF THIS ISSUE ON ANY BASIS. HE HAS ADOPTED THE ARBITRARY PROCEDURE OF ALLOWING 50% AND SUSTAINING DISALLOWANCE OF REMAINING 50%. THE DEDUCTION ON ACCOUNT OF EXPENSES IS EITHER ALLOWABLE TO THE ASSESSEE ON THE BASIS OF THE METHOD OF ACCOUNTING REGULARLY ADOPTED OR IT IS NOT SO ALLOWABLE. WE DO NOT FIND ANY JUSTIFICATION FOR ALLOWING DEDUCTION AT 50% AND DISALLOWING THE REMAINING 50%. SINCE THE 6 ASSESSEE HAS BEEN FOLLOWING A REGULAR SYSTEM OF ACCOUNTING AND THERE IS NO CHANGE IN RESPECT OF BOOKING OF THE EXPENDITURE, THE DISALLOWANCE MADE BY THE AO IN OUR VIEW, IS NOT JUSTIFIED IN PRINCIPLE. HOWEVER, THE AO IS ENTITLED TO VERIFY THE CLAIM OF THE ASSESSEE AND DEMANDING DETAILS OF SUCH EXPENSES. WE RESTORE THE ISSUE TO THE FILE OF THE AO FOR FRESH DECISION IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARD TO THE ASSESSEE. 5. A REFERENCE TO THE OBSERVATIONS RECORDED BY THE AO AT PAGE 7 OF THE IMPUGNED ASSESSMENT ORDER IS PERTI NENT AND RELEVANT. SUCH OBSERVATIONS OF THE AO CLEARLY INDICATE THAT THE ASSESSEE HAD NOT COOPERATED WITH THE AO IN THE MATER OF FURNISHING THE REQUIRED DETAILS FOR PROPER APPRECIATION AND ADJUDICATION OF THE ISSUE O F PRIOR PERIOD EXPENSES. NEEDLESS TO SAY THAT THE CL AIM HAS BEEN MADE BY THE ASSESSEE AND HENCE, IT IS INCUMBENT UPON THE ASSESSEE TO ADDUCE NECESSARY EVIDENCE IN RESPECT OF SUCH CLAIM, FAILING WHICH IT IS NOT POSSIBLE FOR THE AO TO DRAW INFERENCE, AS INTENDED BY THE ASSESSEE. THEREFORE, WE ARE AWARE OF THE OPINI ON THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE A O FOR THE PURPOSE OF PROPER AND JUDICIOUS DISPOSAL OF THE ISSUE OF PRIOR PERIOD EXPENSES AFRESH, IN ACCORDANC E WITH RELEVANT PROVISIONS OF THE ACT. THE ASSESSEE IS DIRECTED TO RENDER NECESSARY COOPERATION IN THE MAT TER OF FILING EVIDENCES AND ANY OTHER DETAIL, AS REQUIR ED BY THE AO FOR THE PURPOSE OF FRAMING ASSESSMENT. THE A O IS ALSO DIRECTED TO COMPLY WITH THE NECESSARY DIRECTIO NS CONTAINED IN THE DECISION OF THE ITAT IN ASSESSEE'S OWN CASE, REPRODUCED ABOVE, AND PROVIDE PROPER AND REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 451/CHD/2011 IS ALLOWED FOR STATISTICAL PURPOSES ON LY. 7 7. RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE RE PRODUCED DECISION OF THE BENCH IN ASSESSEE'S OWN CASE, THE I SSUE IS RESTORED TO THE FILE OF THE AO, FOR FRESH ADJUDICAT ION, WITH DIRECTIONS, AS CONTAINED IN THE ABOVE REFERRED TO D ECISION. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH APRIL,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19 TH APRIL,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH