State Bank of Patiala, Patiala V. ACIT, Patiala

ITA 451/CHANDI/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7411 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-01-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 03-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: PANKAJ JAIN; D K GOYAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 451 TO 455/CHD/2011 A.Y. 1996-97,1998-99,1999-2000 2001-02 & 2002-03 STATE BANK OF PATIALA, V ACIT, CIRCLE, HEAD OFFICE-THE MALL, PATIALA. PATIALA. PAN: AACCS-0143D (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI PANKAJ JAIN & D.K.GOYAL RESPONDENT BY : SHRI S.K.MITTAL DATE OF HEARING : 23.01.2012 DATE OF PRONOUNCEMENT : 25.01.2012 ORDER PER BENCH THESE CAPTIONED APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST ORDER OF THE CIT(A) PATIALA, DATE D 25.02.2011, RELATING TO ASSESSMENT YEARS 1996-97, 1 998-99, 1999-2000, 2001-02 AND 2002-03. ITA NO. 451/CHD/2011 (A.Y. 1996-97) 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 2 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 IT AT 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. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' CONTENDED THAT THE AO HAS NOT COMPLIED WITH THE DIR ECTIONS OF THE TRIBUNAL, AS CONTAINED IN PARA 11 OF THE ORD ER DATED 19.06.2008 IN ITA NO. 785/CHD/1999 AND OTHERS, FOR THE ASSESSMENT YEAR 1996-97, IN ASSESSEE'S OWN CASE. H E NARRATED THE ISSUE IN QUESTION, IN THE APPEAL, AS P ERTAINING TO PRIOR PERIOD EXPENSES. HE, FURTHER, STATED THAT SINCE THE INCEPTION OF THE BANK, IT HAS BEEN CONSISTENTLY FOL LOWING THE HYBRID METHOD OF ACCOUNTING AND ITEMS IN ISSUE REGA RDING PAYMENT OF STATIONERY BILLS, MISC. BILLS, NO-DEPART URE HAS 3 BEEN MADE IN THE METHOD OF ACCOUNTING FOLLOWED BY T HE ASSESSEE. LD. 'DR' ON THE OTHER HAND, CONTENDED TH AT THE ASSESSEE HAS FAILED TO PRODUCE REQUISITE EVIDENCE I N RESPECT OF SUCH EXPENSES TO ENABLE THE ITO TO TAKE PROPER A ND APPROPRIATE VIEW IN THE MATTER. HE REFERRED TO PAG E 7 OF THE ASSESSMENT ORDER DATED 30.11.2009 FOR THE ASSESSMEN T YEAR 1996-97, PASSED U/S 143(3) READ WITH 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 EARLIE R 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 THA T THE ASSESSEE WAS REQUIRED TO PROVIDE DETAILS TO THE AUD ITOR IN RESPECT OF PRIOR PERIOD EXPENSES/INCOME DEBITED TO PROFIT & LOSS ACCOUNT BUT THE ASSESSEE HAS FAILED T O DO SO STATING THE REASONS DEPICTED IN THE AUDIT REPORT AGAINST COLUMN 9(B) AS ALSO IN THE REPLY FILED DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS AS STATED SUPRA. ACCORDINGLY, THE LD. 'AR' WAS OF THE OPINION THAT I T IS THE FAILURE OF THE ASSESSEE WHICH LED TO FRAME PRESENT ASSESSMENT. BOTH LD. 'AR' AND LD. 'DR' WERE OF THE OPINION THAT FOR THE PROPER AND JUDICIOUS DISPOSAL OF THE I SSUE IN QUESTION, IN THESE APPEALS, THE CASE(S) MAY BE REST ORED TO THE FILE OF THE AO. 4 4. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT MATERIAL ON RECORD. T HE GRIEVANCE OF THE ASSESSEE IS NON-COMPLIANCE WITH TH E DIRECTIONS GIVEN BY THE ITAT, IN THE ABOVE REFERRED DECISION. THE RELEVANT PARA OF THE ITAT ORDER WHILE 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 SYST EM 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 DISALLOWANC E COULD BE MADE MERELY BECAUSE THE BILLS RECEIVED IN THE YEAR UNDER APPEAL RELATED TO THE PERIOD PRECEDI NG 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 THI S 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 A T 50% AND DISALLOWING THE REMAINING 50%. SINCE THE 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 PRINCIPL E. HOWEVER, THE AO IS ENTITLED TO VERIFY THE CLAIM OF THE 5 ASSESSEE AND DEMANDING DETAILS OF SUCH EXPENSES. WE RESTORE THE ISSUE TO THE FILE OF THE AO FOR FRES H 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 PERTINEN T AND RELEVANT. SUCH OBSERVATIONS OF THE AO CLEARLY INDI CATE THAT THE ASSESSEE HAD NOT COOPERATED WITH THE AO IN THE MATER OF FURNISHING THE REQUIRED DETAILS FOR PROPER APPRECIA TION AND ADJUDICATION OF THE ISSUE OF PRIOR PERIOD EXPENSES. NEEDLESS TO SAY THAT THE CLAIM HAS BEEN MADE BY THE ASSESSEE AND HENCE, IT IS INCUMBENT UPON THE ASSESSEE TO ADDUCE NECESSARY EVIDENCE IN RESPECT OF SUCH CLAIM, FAILIN G WHICH IT IS NOT POSSIBLE FOR THE AO TO DRAW INFERENCE, AS IN TENDED BY THE ASSESSEE. THEREFORE, WE ARE AWARE OF THE OPINI ON THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE AO FOR THE PURPOSE OF PROPER AND JUDICIOUS DISPOSAL OF THE ISS UE OF PRIOR PERIOD EXPENSES AFRESH, IN ACCORDANCE WITH RE LEVANT PROVISIONS OF THE ACT. THE ASSESSEE IS DIRECTED TO RENDER NECESSARY COOPERATION IN THE MATTER OF FILING EVIDE NCES AND ANY OTHER DETAIL, AS REQUIRED BY THE AO FOR THE PUR POSE OF FRAMING ASSESSMENT. THE AO IS ALSO DIRECTED TO COMP LY WITH THE NECESSARY DIRECTIONS 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. ITA NO. 452/CHD/2011 (A.Y. 1998-99) 6 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 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 IT AT 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.304,00,000/- WITHOUT ANY BASIS AND THEREBY UPHOLDING THE ADDITION OF RS.6,00,000/-. 4. THAT THE LD. CIT(A) HAS ERRED IN NOT DIRECTING THE AO TO REDUCE THE INTEREST CHARGED U/S 243C TO RS.2,62,602/- FROM RS.1,70,64,931/- AS PER THE ORDER OF THE CHIEF COMMISSIONER OF INCOME-TAX DATED 31.3.2004 WAVING THE INTEREST OF RS.1,68,02,329/-. 5. THAT THE LD. CIT(A) HAS ERRED IN REJECTING THE GROUND OF APPEAL CHALLENGING THE ISSUE OF NOTICE U/ S 271(1)(C). 6. 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. 7 7. IN GROUND NO.4, THE ASSESSEE CONTENDED THAT LD. CIT(A) HAS FAILED IN DIRECTING THE AO TO REDUCE INTEREST C HARGED U/S 234C TORS.2,62,602/- FROM RS.1,70,64,931/- AS PER T HE ORDER OF CHIEF COMMISSIONER OF INCOME-TAX DATED 31. 3.2004 WAVING INTEREST OF RS.1,68,02,329/-. A PERUSAL OF THE RELEVANT ORDER PASSED BY THE CIT(A) ON 25.2.2011 RE VEALS THAT NO SUCH GROUND HAS BEEN RAISED BY THE ASSESSEE BEFORE THE CIT(A). BEFORE CIT(A), THE ASSESSEE HAS RAISED THE GROUND AS GROUND NO.3 IS WITH REGARD TO AOS ACTION IN WRONGLY CHARGING INTEREST U/S 234C AMOUNTING TORS.1,70,64,932/- . ON APPRECIATION OF THE SUBMISSIONS AND REMAND REPORT FILED BY THE AO, LD. CIT(A) RECOR DED FINDING AS PARA 6.3- IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO IS DIRECTED TO VERIFY THE CONTE NTION OF THE APPELLANT AND ALLOW THE CONSEQUENTIAL RELIEF, IF TH E SAME IS FOUND CORRECT. THE ASSESSEE, BEFORE THE BENCH HAS REFERRED TO THE ORDER PASSED BY THE CCIT IN THE MATTER, WHER EAS NO SUCH REFERENCE HAS BEEN MENTIONED BEFORE THE CIT(A) . HOWEVER, THE CONTENTION RAISED BY THE ASSESSEE IN G ROUND NO.4 IS REQUIRED TO BE COMPLIED WITH BY THE AO IN T ERMS OF THE ORDER PASSED BY THE CCIT AS CONTENDED BY THE AO . THE ISSUE IN QUESTION, IN THIS GROUND OF APPEAL IS CONS EQUENTIAL IN NATURE AND, HENCE, THE ISSUE IS RESTORED TO THE FILE OF THE AO FOR TAKING APPROPRIATE ACTION IN THE MATTER. 8. GROUND NO.5 RAISED BY THE ASSESSEE IS PERTAINING TO THE ISSUE OF REJECTION BY THE CIT(A), CHALLENGING THE V ERY ISSUE OF NOTICE U/S 271(1)(C) OF THE ACT . IN OUR CONSIDERE D OPINION, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE BEFORE THE 8 CIT(A), CANNOT BE THE SUBJECT MATTER OF THE APPEAL, AS MERE ISSUANCE OF NOTICE CANNOT BE CHALLENGED BY THE ASSE SSEE. THEREFORE, ACTION OF THE LD. CIT(A), IS AS PER STAT UTORY PROVISIONS OF THE ACT AND THIS ISSUE CANNOT BE REST ORED TO THE FILE OF THE AO, AS CONTENDED BY THE LD. 'AR'. 9. IN REPLY OF GROUND NO. 1 TO 3 RAISED BY THE ASSE SSEE, THE ISSUE HAS ALREADY BEEN RESTORED TO THE FILE OF THE AO, WHILE ADJUDICATING THE APPEAL IN ITA NO. 451/CHD/20 11. THEREFORE, IN THIS CASE ALSO, THE ISSUE IS RESTORED TO THE FILE OF THE AO. 10. IN VIEW OF THE ABOVE DISCUSSIONS, THE ISSUE OF PRIOR PERIOD EXPENSES, AS ADJUDICATED IN ITA NO. 451/CHD/ 2011, IS ALSO APPLICABLE TO OTHER APPEALS OF THE ASSESSEE BEARING NO. 453, 454 AND 455/CHD/2011. 11. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JAN.,2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT ME MBER DATED: 25 TH JAN.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH