DCIT, New Delhi V. Mr. Food Corporation of India, New Delhi

ITA 4731/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5501 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 05-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARISH KAPOOR
• Assessee Lawyers: SAMEER SHARMA
• Section: 143(3); 147; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI) BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER AND SHRI J. S. REDDY, ACCOUNTANT MEMBER I.T.A. NO.4731 & 4732/DEL/2012 (ASSESSMENT YEAR 2007-08 & 2008-09) DCIT, CIRCLE 11(1), VS. FOOD CORPORATION OF INDIA , NEW DELHI 16-20, BARAKHAMBA LANE, NEW DELHI PAN/GIR NO.: AAACF0365N (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI SAMEER SHARMA, SR. DR DEPARTMENT BY: SHRI HARISH KAPOOR, CA ORDER PER U B S BEDI, JUDICIAL MEMBER: THESE TWO APPEALS OF THE DEPARTMENT ARE DIRECTED A GAINST SEPARATE ORDERS PASSED BY LD. CIT(A) XIII, NEW DELHI BOTH D ATED15.06.2012 RELEVANT TO ASSESSMENT YEAR 2007-08 & 2008-09 RESPE CTIVELY WHEREBY THE DEPARTMENT HAS CHALLENGED THE DELETION OF ADDITION OF RS.2,22,24,010/- AND RS.36,13,000/- MADE ON ACCOUNT OF PRIOR PERIOD EXPE NSES. 2. AT THE VERY OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE AROSE BEFORE THE B BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 IN I.T.A. NO. 5226/DEL/ 2010 (DEPARTMENTS APPEAL) AND C.O. NO.88/DEL/2011 (ASSESSEES CROSS OB JECTION) AND THIS BENCH VIDE ORDER DATED 19.07.2013 HAS CONCLUDED TO UPHOLD THE ORDER OF LD. CIT(A) WHILE DISMISSING THE CROSS OBJECTION OF THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THERE WAS A VERY ELABORATE ORDER IN WHICH EARLIER DECISION HAS I.T.A. NO. 4731, 4732/DEL/2012 2 BEEN CONSIDERED AND THE HONBLE HIGH COURTS DECISI ON IN THE CASE OF THE ASSESSEE WAS ALSO DISCUSSED AND RELIED UPON TO CONF IRM THE ORDER OF LD. CIT(A). BY FILING COPY OF THE SAID ORDER OF THE TR IBUNAL, IT WAS PLEADED FOR CONFIRMATION OF THE IMPUGNED ORDER OF LD. CIT(A) FO R BOTH THE YEARS. 3. LD. D.R. VERY FAIRLY SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER DECISION OF THE T RIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05, THEREFORE, IT WAS PLEADED FOR DECIDING THE APPEALS OF THE DEPARTMENT IN ACCORDANCE WITH LA W AND PRECEDENT RELIED UPON BY THE LD. A.R. 4. WE HAVE HEAD BOTH THE SIDES, CONSIDERED THE MATE RIAL ON RECORD AS WELL AS PRECEDENT RELIED UPON BY THE LD. A.R. OF TH E ASSESSEE. IN I.T.A. NO. 5226/DEL/2010 (DEPARTMENTS APPEAL) AND C.O. NO.88/ DEL/2011 (C.O. OF THE ASSESSEE), THE ENTIRE ISSUE HAS BEEN DISCUSSED IN DETAIL AND DECIDED IN FAVOUR OF THE ASSESSEE WHILE CONSIDERING HON'BLE DE LHI HIGH COURT DECISION IN ASSESSEES OWN CASE ALSO. SINCE THE ISSUE IS SQ UARELY COVERED IN FAVOUR OF THE ASSESSEE, THEREFORE, WE WOULD LIKE TO REPRODUCE THE ENTIRE ORDER FROM PAGE 1-9 DATED 19.07.2013 AS UNDER FOR THE SAKE OF READY REFERENCE: THE APPEAL OF THE REVENUE AND THE CROSS-OBJECTION FILED BY THE ASSESSEE ARISE OUT OF THE ORDER DATED 24.09.2010 OF CIT(A)-XIII, NEW DELHI PERTAINING TO 2004-05 ASSESSMENT YEAR. A PER USAL OF THE RECORD SHOWS THAT THE APPEAL WAS DECIDED BY A CO-ORDINATE BENCH VIDE ORDER DATED 30.04.2011 WHEREIN THE RE-OPENING WAS UPHELD AND ON MERITS THE ADDITION ON ACCOUNT OF DEMURRAGE CHARGES AND PU RCHASE OF UNCONNECTED WAGONS THE ACTION OF THE CIT(A) WAS UPH ELD. CONSEQUENTLY THE CROSS OBJECTION CHALLENGING THE RE -OPENING OF ASSESSMENT IN RESPECT OF THESE TWO ITEMS WAS UPHELD . THE CHALLENGE OF THE REVENUE QUA THE DELETION OF THE ADDITION OF RS.593.09 LACS ON ACCOUNT OF PRIOR PERIOD EXPENSES WAS DISPOSED SAYI NG THAT SINCE THE RE-OPENING OF ASSESSMENT HAS NOT BEEN UPHELD IN RE SPECT OF PRIOR PERIOD EXPENSES THE GROUND OF REVENUE BECOMES INFRU CTUOUS AS SUCH DISMISSED. I.T.A. NO. 4731, 4732/DEL/2012 3 2. THIS ORDER OF THE CO-ORDINATE BENCH DATED 30.09. 2011 WAS CHALLENGED BY THE REVENUE BEFORE THE JURISDICTIONAL HIGH COURT. THE HONBLE HIGH COURT VIDE ITS JUDGEMENT AND ORDER DAT ED 22.03.2012 IN ITA NO.-462/2012 AND 463/2012 REMANDED THE ISSUE QU A THE PRIOR PERIOD EXPENSES BACK TO THE TRIBUNAL HOLDING THAT O NCE THE RE-OPENING HAD BEEN UPHELD ON TWO GROUNDS, THE AO WAS NOT PRE- CLUDED FROM EXAMINING THE PRIOR PERIOD EXPENSES. RELIANCE WAS PLACED ON V.JAGMOHAN RAO AND OTHERS VS. COMMISSIONER OF INCOM E TAX AND EXCESS PROFITS TAX, ANDHRA PRADESH, (1970) 75 ITR 3 73. ACCORDINGLY, THE PARTIES WERE HEARD IN TERMS OF TH E DIRECTIONS OF THE HONBLE HIGH COURT. 3. THE LD. CIT DR, MS. SUDHA KUMARI INVITED ATTENTI ON TO THE ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 147 D ATED 22.12.2009 TO UN-NUMBERED PAGES 2 & 3 IN THE CONTEXT OF THE FO LLOWING GROUND OF THE REVENUE:- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWA NCE OF RS.593.09 LACS. ON ACCOUNT OF PRIOR PERIOD EXPENSES. 3.1. REFERRING TO THE RELEVANT OBSERVATION IN THE A SSESSMENT ORDER IT WAS SUBMITTED THAT NO EVIDENCE HAS BEEN GIVEN BY TH E ASSESSEE TO SHOW WHEN THE EXPENDITURE CRYSTALLIZED AS SUCH THE ISSUE SHOULD BE REMANDED FOR VERIFICATION AND PLACING OF NECESSARY EVIDENCES. FOR READY-REFERENCE, WE REFLECT THE RELEVANT PORTION FR OM THE ASSESSMENT ORDER:- PRIOR PERIOD EXPENSES:- FOOD CORPORATION OF INDIA IS ESTABLISHED UNDER FOOD CORPORATION ACT, 1964 ENTRUSTED WITH ONEROUS R ESPONSIBILITY OF EXECUTION OF THE FOOD POLICIES OF THE GOVT. OF INDI A AND HAS BEEN UNDERTAKING PROCUREMENT, STORAGE, MOVEMENT AND DIST RIBUTION OF FOOD- GRAINS. IT IS ALSO ENGAGED IN DISTRIBUTION OF SUGA R IN SOME STATES. THE GOVT. OF INDIA FIXES THE PROCUREMENT AND ISSUE PRICES OF FOOD- GRAINS, DIFFERENCE BETWEEN THE ECONOMIC ACCOST AND SALES REALIZATION IS REIMBURSED BY THE GOVT. OF INDIA AS FOOD SUBSIDY. THE GOVT. ALSO REIMBURSE CARRYING CAST OF BUFFER STOCKS MAINTAINED BY THE CORPORATION. THERE HAS NEVER BEEN A PROFIT OF LOSS IN THE PROFIT & LOSS ACCOUNT OF THE CORPORATION AS THE NET DEFICIT IS MET BY THE GOVT. OF INDIA IN THE FORM OF SUBSIDY. THE BASIC PURPOSE OF FOLLOWING A SYSTEM OF ACCOUNT ING IS TO DETERMINE THE ACTUAL PROFIT OR LOSS OF A PREVIOUS Y EAR. KEEPING IN VIEW THE NATURE OF ORGANIZATION WHERE THE DEFICIT IS MET BY THE GOVT. OF INDIA BY WAY OF SUBSIDY AND NO PROFIT/LOSS IS SHOWN IN THE P ROFIT & LOSS ACCOUNT, THE BOOKING OF AN EXPENSES, IF ANY, RELATED TO THE PREVIOUS ACCOUNTING YEARS WILL HAVE NOT IMPACT ON ITS ULTIMATE PROFIT/L OSS. I.T.A. NO. 4731, 4732/DEL/2012 4 THE ASSESSEE HAS DEBITED PRIOR PERIOD EXPENSES OF RS.593.09 LACS. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCO UNTING. HENCE, THE SAME SHOULD HAVE BEEN ADDED BACK. 4. THE LD. AR, SH. HARISH KAPOOR, CA ON THE OTHER H AND CONTENDED THE ISSUE IS COVERED IN ASSESSEES FAVOUR BY VIRTUE OF THE CONSISTENT ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS AND SUBSEQUENT YEARS. INVITING ATTENTION TO THE IMPUGNED ORDER IT WAS SUBMITTED THAT COGNIZANCE OF THIS FACT WAS T AKEN BY THE CIT(A). SPECIFIC REFERENCE WERE MADE TO THE FOLLOWING FACTS ADDRESSED BEFORE THE CIT(A):- FOOD CORPORATION OF INDIA IS ESTABLISHED UNDER FOO D CORPORATION ACT, 1964 ENTRUSTED WITH ONEROUS RESPON SIBILITY OF EXECUTION OF THE FOOD POLICIES OF THE GOVT. OF INDIA AND HAS BEEN UNDERTAKING PROCUREMENT, STORAGE, MOVEMENT AND DISTRIBUTION OF FOOD-GRAINS. IT IS ALSO ENGAGED IN DISTRIBUTION OF SUGAR IN SOME STATES. THE GOVT. OF INDIA FIXES THE PROCUREMENT AND ISSUE PRICES OF FOOD-GRAINS, DIFFERENCE BETWEEN THE ECONOMIC COST AND SALES REAL IZATION IS REIMBURSED BY THE GOVT. OF INDIA AS FOOD SUBSIDY. THE GOVT. A LSO REIMBURSES CARRYING COST OF BUFFER STOCKS MAINTAINED BY THE CORPORATION . THERE HAS NEVER BEEN A PROFIT OR LOSS IN THE PROFIT & LOSS ACCOUNT OF TH E CORPORATION AS THE NET DEFICIT IS MET BY THE GOVT. OF INDIA IN THE FORM OF SUBSIDY. THE BASIC PURPOSE OF FOLLOWING A SYSTEM OF ACCOUNTI NG IS TO DETERMINE THE ACTUAL PROFIT OR LOSS OF A PREVIOUS YEAR. KEEPING IN VIEW THE NATURE OF ORGANIZATION WHERE THE DEFICIT IS MET BY THE GOVT. OF INDIA BY WAY OF SUBSIDY AND NO PROFIT/LOSS IS SHOWN IN THE PROFIT & LOSS ACCOUNT, THE BOOKING OF AN EXPENSES, IF ANY, RELATED TO THE PREV IOUS ACCOUNTING YEARS WILL HAVE NO IMPACT ON ITS ULTIMATE PROFIT/LOSS. ANNUAL ACCOUNTS ARE MAINTAINED BASED ON THE ACCOUN TING ENTRIES PASSED AT THE DISTRICT LEVEL ON DAY TO DAY BASIS. IT IS TRUE THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, H OWEVER, THE SAID SYSTEM ALSO PROVIDES THE TRUE PROFIT/GAIN OF THE PR EVIOUS YEAR ARE REQUIRED TO BE COMPUTED FOR THE PURPOSES OF DETERMINING THE TAX LIABILITY. IF THE NECESSARY MATERIAL, CRYSTALLIZING THE EXPENSES/INCO ME IS NOT IN EXISTENCE IN A PARTICULAR YEAR, MERCANTILE SYSTEM OF ACCOUNTING DOES NOT CALL FRO AN ADJUSTMENT IN THE BOOKS OF ACCOUNTS ON ESTIMATE BAS IS. IT IS INFACT, ALL KNOWN LIABILITIES OR INCOME HAS TO BE TAKEN INTO ACCOUNT UNDER MERCANTILE SYSTEM OF ACCOUNTING AND E STIMATED INCOME OR LIABILITY WHICH CANNOT BE CRYSTALLIZED BASED ON THE MATERIAL AVAILABLE AS ON DATE OF CLOSING OF ACCOUNTS CANNOT BE ADJUSTED I N THE ACCOUNTS AND THE SAME HAS BEEN TAKEN CARE IN THE YEAR WHEN SUCH MATE RIAL IS AVAILABLE WITH THE ASSESSEE. A LIABILITY ACTUALLY CLAIMED AND PAI D IN THE LATER/PREVIOUS YEAR CANNOT BE DISALLOWED AS DEDUCTION MERELY ON TH E BASIS THAT THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS. IF TH E CLAIM OF AN EXPENSE I.T.A. NO. 4731, 4732/DEL/2012 5 RELATING TO EARLIER YEARS IS RAISED DURING THE CURR ENT YEAR THE SAME HAS BEEN RECORDED IN THE CURRENT YEAR BOOKS HOWEVER, IN ORDER TO DEPICT THE CORRECT CURRENT YEAR POSITION, A SEPARATE HEAD IN T HE BOOKS OF ACCOUNT IS OPERATED INCOME/EXPENSE RELATING TO THE PREVIOUS Y EAR. WE WOULD LIKE TO SUBMIT THAT THE TOTAL EXPENSES INC URRED DURING THE YEAR BY THE CORPORATION IS TO THE EXTENT OF RS.65630.82 CRORES, AND THE CORPORATION HAS DEBITED RS.5.35 CRORES TO ADJUSTME NT RELATING TO PREVIOUS YEAR WHICH DOES NOT COME EVEN 0.01% OF TH E TOTAL EXPENSES INCURRED BY THE CORPORATION. FURTHER, WE SUBMIT THAT IN FACT THE CORPORATION HAS BOOKED RS.5.83 CRORES AS INCOME UNDER THE HEAD ADJUSTMENT RELATION TO PR EVIOUS YEAR. WE PRAY THE SIMILAR TREATMENT SHOULD BE GIVEN TO BOTH INCOME/EXPENSE, IF ONE SO STRICTLY TRIED TO ASSESS THE INCOME OF THE CORPO RATION OF THE YEAR UNDER ASSESSMENT. IT IS SUBMITTED THAT THE ALLOWABILITY OF EXPENSE/I NCOME RELATING TO PREVIOUS YEAR WAS CONSIDERED BY THE ASSESSING OFFI CER IN THE ASSESSMENT YEAR 2002-03 ALSO. DETAILS OF THE EXPENSES WERE FI LED WITH THE TEN ASSESSING OFFICER. BASED ON THE EXPLANATIONS (I.E PECULIAR NATURE OF OPERATION OF THE CORPORATION, VAST OPERATION, BOOKI NG OF LIABILITY ON MATERIAL AVAILABLE WITH THE CORPORATION, NO PROFIT/ NO LOSS ORGANIZATION) THE ASSESSING OFFICER HAD MADE ADDITION ONLY RELATI NG TO AMOUNT BOOKED UNDER THE SUB HEAD ADJUSTMENTS RELATING TO MISSING AND UNCONNECTED WAGONS UNDER THE HEAD ADJUSTMENT RELATING TO PREV IOUS EARS. THE CORPORATION CONTESTED THE SAID ADDITION AND THE HONBLE ITAT AS PER ORDER DATED 21.09.07 IN ITA NO.-4508/DEL/05 DELETED THE SAID ADDITION. IT IS SUBMITTED THAT THERE IS NO DEVIATION/CHANGE I N THE SYSTEM OF BOOKING EXPENSE UNDER THE HEAD ADJUSTMENTS RELATING TO PRE VIOUS YEARS WHETHER IN ONE SUB-HEAD OR ANOTHER SUB-HEAD. FURTHER S YSTEM/PRACTICE FOLLOWED BY THE CORPORATION IS SAME AS IN THE PRECE DING YEARS AND IN A YEAR UNDER ASSESSMENT. BASED ON THE DECISION OF TH E HONBLE ITAT ON THE SUBJECT, NO ADDITION IS CALLED FOR UNDER THE HEAD PRIOR PERIOD ADJUSTMENTS. WE ARE ENCLOSING HEREWITH THE DETAILS OF THE EXPENS ES BOOKED UNDER THE HEAD ADJUSTMENTS RELATING TO PREVIOUS YEARS AND Y OUR HONOUR WILL OBSERVE THAT THESE EXPENSES HAVE BEEN BOOKED BASED ON CRYSTALLIZATION OF LIABILITY ON RECEIPT OF MATERIAL (CLAIM/BILL) BY TH E CORPORATION DURING THE YEAR UNDER ASSESSMENT AND CANNOT BE RELATED TO THE PREVIOUS PERIODS. BASED ON THE CRYSTALLIZATION OF EXPENSE AS PER MATE RIAL/INFORMATION/CLAIM RAISED DURING THE YEAR, ACCOUNTING ENTRIES HAVE BEE N PASSED. 4.2. THE FOLLOWING FACTS ARGUED BEFORE THE CIT(A) A ND CONSIDERED BY HIM BROUGHT OUT IN THE IMPUGNED ORDER WERE ALSO ADD RESSED:- THE CORPORATION UNDERTAKES PROCUREMENT, MOVEMENT, STORAGE AND DISTRIBUTION OF FOOD GRAINS. THE ORGANIZATION OF T HE CORPORATION CONSISTS OF THE FOLLOWING:- HEAD OFFICE AT NEW DELHI I.T.A. NO. 4731, 4732/DEL/2012 6 FIVE (50 ZONAL OFFICES TWENTY TWO (22) REGIONAL OFFICES ONE HUNDRED SIXTY SIX (166) DISTRICT OFFICES, AND NUMEROUS GODOWNS AND BUFFER STORAGE CENTERS (RUNNIN G INTO THOUSANDS) ALL OVER THE COUNTRY. KEEPING IN VIEW THE VAST OPERATION OF THE ASSESSEE ALL OVER INDIA, IT IS IMPOSSIBLE AND IMPRACTICAL TO HAVE CONTROL ON THE M ATERIAL WHICH MAY RESULT IN CRYSTALLIZATION OF LIABILITY AS AT THE CL OSE OF THE YEAR. AS AND WHEN THESE MATERIALS ARE AVAILABLE AT THE OFFICES OF THE CORPORATION, THE SAME IS ACCOUNTED FOR IN THE ACCOUNTS. 4.3. RELIANCE WAS PLACED ON THE OBSERVATION OF THE HONBLE HIGH COURT IN CIT VS SHRI RAM PISTONS & RINGS LTD. (2008 ) 174 TAXMAN 147 (DELHI) AS UNDER :- IN THE REFERENCE THAT IS BEFORE US THERE IS NO DOU BT THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE. THE ONLY DISP UTE IS REGARDING THE DATE ON WHICH THE LIABILITY HAD CRYSTALLIZED. IT A PPEARS THAT THERE WAS NO CHANGE IN THE RATE OF TAX FOR THE ASSESSMENT YEAH W HICH WE ARE CONCERNED. THE QUESTION, THEREFORE, IS ONLY WITH REGARD TO THE YEAR OF DEDUCTION AND IT IS A PITY THAT ALL OF US HAVE TO EXPEND SO MUCH TIM E AND ENERGY ONLY TO DETERMINE THE YEAR OF TAXABILITY OF THE AMOUNT. 4.4. SIMILAR ARGUMENTS IT WAS SUBMITTED WAS EXPENSE S BY THE HONBLE BOMBAY HIGH COURT IN CIT VS NAGRI MILLS CO. LTD (1958) 33 ITR 681 (BOMBAY) AS UNDER:- WE HAVE OFTEN WONDERED WHY THE INCOME-TAX AUTHORIT IES, IN A MATTER SUCH AS THIS WHERE THE DEDUCTION IS OBVIOUSL Y A PERMISSIBLE DEDUCTION UNDER THE INCOME TAX ACT, RAISE DISPUTES AS TO THE YEAR IN WHICH THE DEDUCTION SHOULD BE ALLOWED. THE QUESTION AS T O THE YEAR IN WHICH A DEDUCTION IS ALLOWABLE MAY BE MATERIAL WHEN THE RAT E OF TAX CHARGEABLE ON THE ASSESSEE IN TWO DIFFERENT YEAR IS DIFFERENT; BU T IN THE CASE OF INCOME OF A COMPANY, TAX IS ATTRACTED AT A UNIFORM RATE, AND WHETHER THE DEDUCTION IN RESPECT OF BONUS WAS GRANTED IN THE ASSESSMENT Y EAR 1952-53 OR IN THE ASSESSMENT YEAR CORRESPONDING TO THE ACCOUNTING YEAR 1952, THAT IS IN THE ASSESSMENT YEAR 1953-54, SHOULD BE A MATTER OF NO CONSEQUENCE TO THE DEPARTMENT; AND ONE SHOULD HAVE THOUGHT THAT THE DE PARTMENT WOULD NOT FRITTER AWAY ITS ENERGIES IN FIGHTING MATTERS OF TH IS KIND. BUT, OBVIOUSLY, JUDGING FROM THE REFERENCES THAT COME UP TO US EVER Y NOW AND THEN, THE DEPARTMENT APPEARS TO DELIGHT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFECT THE TAXABILITY OF THE ASSESSEE OF THE TA X THAT THE DEPARTMENT IS LIKELY TO COLLECT FROM HIM WHETHER IN ONE YEAR OR T HE OTHER. 5. IT WAS SUBMITTED THAT CONSIDERING THESE FACTS AN D LEGAL PROPOSITION, THE CIT(A) GAVE A DETAILED FINDING ON WHICH HEAVY I.T.A. NO. 4731, 4732/DEL/2012 7 RELIANCE IS BEING PLACED. FOR READY-REFERENCE, SAM E IS REPRODUCED HEREUNDER :- 6.1. FINDING ON GROUND OF APPEAL NO.-4:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AR ON THE ISSUE VIS--VIS OF THE FACTS OF THE CASE. AN ADDITION OF RS.593.09 LACS HAS BEEN MADE BY THE ASSESSING OFFICER PICKING UP THE DEBITS IN VARIOUS SUB-HEAD UNDER THE HEAD ADJUSTMENT RELATING TO PREVIOUS YEARS. ON GOING THROUGH THE DETAILS, IT REVEALS THAT THE APPELLANT BOOKED RS.583.38 LACS (NET) AS INCOM E TOWARDS ADJUSTMENTS RELATING TO PREVIOUS YEARS. THE NATU RE AND METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT IS UNIFORM FOR BOTH INCOME AND EXPENSE. THE ASSESSING OFFICER HAS APPARENTLY, I NSTEAD OF CONSIDERING BOTH INCOME AND EXPENSE BOOKED UNDER THE SAID HEAD, MADE ADDITION RELATING TO EXPENSE BOOKED UNDER THE SAID HEAD. IF THE APPELLANT IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, IT I S FOR BOTH INCOME AND EXPENSE. IN ANY CASE, THE APPELLANT HAS SHOWN INCO ME (NET) UNDER THE HEAD ADJUSTMENTS RELATING TO PREVIOUS YEARS. MOREOVER IN A PRECEDING YEAR I.E ASSESSMENT YEAR 20 02-03 THE ASSESSING OFFICER DISALLOWED AN EXPENSE CLAIMED UNDER A SUB-H EAD ADJUSTMENTS RELATING TO MISSING AND UNCONNECTED WAGONS BOOKED UNDER THE HEAD PRIOR PERIOD ADJUSTMENTS AS THE ASSESSING OFFICER WAS OF THE VIEW THAT AS THE EXPENSE DID NO CRYSTALLIZED OR ACCRUED DURIN G THE YEAR. THE APPELLANT WENT IN APPEAL BEFORE THE HONBLE TRIBUNA L AND THE HONBLE TRIBUNAL KEEPING IN VIEW THEE NATURE OF TRANSACTION S BEING UNDERTAKEN BY THE CORPORATION DELETED THE SAID ADDITION BY MAKING THE FOLLOWING OBSERVATIONS:- THE GAIN/LOSS IS BOOKED UNDER THE HEAD ADJUSTMENT RELATED TO PREVIOUS PERIOD EXPENDITURE/INCOME. THIS IS ACCOU NTED FOR ON CRYSTALLIZATION OF THIS EXPENSES/INCOME. THE DIFFE RENCE BETWEEN THE QUANTITY DISPATCHED VIS--VIS, QUANTITY RECEIVED IS SHOWN AS ADJUSTMENT RELATING TO PREVIOUS PERIOD- AS THE TR ANSACTION WAS INITIATED IN THE PREVIOUS PERIOD, HOWEVER CONCLUDED IN THE YEAR UNDER CONSIDERATION. THAT THE RECONCILIATION IS A ON GOIN G PROCESS AND CANNOT BE DONE AT THE YEAR END KEEPING IN VIEW THE VOLUME OF TRANSACTION, SPREAD OF THE CENTERS AND INVOLVEMENT OF A THIRD PARTY I.E. RAILWAYS. THE CORPORATION HAS FOLLOWED THE SA ME PRACTICE IN ALL THE EARLIER YEARS AND THERE WAS NO DISALLOWANCE. T HE ACCOUNTING ENTRIES ARE POSSIBLE ONLY ON RECONCILIATION AND ALL ENTRIES BOOKED UNDER THIS HEAD RELATES TO THE RECONCILIATION CARRI ED/LINKAGE ESTABLISHED OUT DURING THE YEAR, RELATING TO THE TR ANSACTIONS FOR THE PREVIOUS YEAR. DURING THE COURSE OF ASSESSMENT, TH E AO WITHOUT APPRECIATING THE FACTS OF THE CASE, DISALLOWED THE LOSS CRYSTALLIZED DURING THE YEAR THROUGH RECONCILIATION OF ACCOUNT. FURTHER THERE HAS NO CHANGE IN THE NATURE OF BUSINE SS OR METHOD/SYSTEM OF ACCOUNTING BEING FOLLOWED BY THE APPELLANT IN THE Y EAR UNDER APPEAL OR IN I.T.A. NO. 4731, 4732/DEL/2012 8 THE PRECEDING YEARS. THE SAME HAS BEEN DULY ACCEPT ED IN ALL THESE YEARS. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECI FIC INSTANCE AS TO WHY THE SAME IS NOT ALLOWABLE AS AN EXPENSE U/S 37 OF T HE INCOME TAX ACT. AS SUBMITTED, THE APPELLANT IS A NO PROFIT/NO LOSS ORGANIZATION, AND ANY SHORTFALL IN OPERATIONS OF THE APPELLANT IS MET BY SUBSIDY FROM GOVT. OF INDIA., THE APPELLANT HAS CLAIMED ADJUSTMENT RELA TING TO PREVIOUS YEARS AS A PART OF SUBSIDY FROM GOVT. OF INDIA, AND THIS SUBSIDY FORM PART OF INCOME OF THE APPELLANT. IF A DEBIT (EXPENSE) IS D ISALLOWED BY THE ASSESSING OFFICER THEN THE CORRESPONDING SUBSIDY FO RMING PART OF INCOME NEEDS TO BE REDUCED FROM INCOME. IN VIEW OF THE ABOVE, AND ALSO EXAMINATION OF THE D ETAILS OF THE EXPENSES BOOKED UNDER THE HEAD PRIOR EXPENSES AND RELYING ON THE PRINCIPLES LAID DOWN BY HONBLE COURTS ON THE ISSUE (JUDGEMENT CITE D BY THE APPELLANT) THE ADDITION MADE BY THE ASSESSING OFFICER FOR AN A MOUNT OF RS.5,93,09,000/- TOWARDS EXPENSES RELATED TO PREVIO US YEAR IS DELETED. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. 6. ATTENTION WAS ALSO INVITED TO THE ORDERS OF THE TRIBUNAL ON THE VERY SAME ISSUE AND VERY SAME METHODOLOGY FOLLOWED BY THE ASSESSEE WHICH HAS BEEN APPROVED OF BY THE HONBLE HIGH COUR T. THE TRIBUNAL IN THE IMMEDIATELY PRECEDING ASSESSMENT YEARS NAMEL Y 2003-04 AND 2002-03 VIDE ORDERS DATED 13.04.2011 AND 21.09.2007 HAS ALLOWED THE APPEALS OF THE ASSESSEE. THE DETAILED FINDINGS IT WAS SUBMITTED ARE PLACED AT PAGES 19 TO 25 OF THE PAPER BOOK FILED WH ICH CONTAINS THE COPY OF 2002-03 ASSESSMENT YEAR. IN THE IMMEDIATEL Y SUBSEQUENT ASSESSMENT YEAR, SINCE THE RELIEF GIVEN BY THE ITAT WAS CHALLENGED BY THE REVENUE BEFORE THE HONBLE HIGH COURT THE VIEW OF THE TRIBUNAL WAS AFFIRMED AND THE DEPARTMENTAL APPEAL WAS DISMIS SED. COPY OF THE SAID JUDGEMENT AND ORDER IN ITA 163/2012 DATED 22.0 3.2012 WAS FILED. THE SAME IS REPRODUCED HEREUNDER:- IN THE HIGH COURT OF DELHI AT NEW DELHI ITA-163/2012 CIT.APPELLANT THROUGH MR. SANJEEV SABHARWAL, SR. STANDING COUNSE L. VERSUS FOOD CORPORATION OF INDIA..RESPONDENT THROUGH CORAM: HONBLE MR. JUSTICE SANJIV KHANNA HONBLE MR. JUSTICE R.V.EASWAR ORDER 22.03.2012 I.T.A. NO. 4731, 4732/DEL/2012 9 THE RESPONDENT-ASSESSEE FOOD CORPORATION OF INDIA I N THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 HAD MADE ADJ USTMENTS RELATING TO THE PREVIOUS YEAR AND AN AMOUNT OF RS.4.68 CRORES W AS DEBITED. THE AFORESAID AMOUNT WAS DISALLOWED BY THE ASSESSING OF FICER ON THE GROUND THAT THE RESPONDENT-ASSESSEE IS FOLLOWING THE MERCA NTILE SYSTEM OF ACCOUNTING AND, THEREFORE, PRIOR PERIOD EXPENSES CA NNOT BE BOOKED IN THE SAID YEAR. 2. THE CIT(APPEALS) DELETED THE SAID ADDITION AFTER RE FERRING TO THE FACT THAT THE RESPONDENT-ASSESSEE HAD BOOKED RS.6.7 2 CRORES AS INCOME UNDER THE HEAD ADJUSTMENTS RELATING TO PREVIOUS YE AR. BY THE SAME LOGIC AND REASONING, THE INCOME SHOULD HAVE BEEN AL SO EXCLUDED. THE CIT(APPEALS) REFERRED TO THE EXPLANATION GIVEN BY T HE ASSESSEE AND IT WAS OBSERVED THAT THE ASSESSEE THOUGH FOLLOWING THE MER CANTILE SYSTEM OF ACCOUNTING. BUT COULD HAVE BOOKED EXPENSES ONLY AFT ER ASCERTAINING THE SAME. REFERENCE WAS MADE TO ACCOUNTING STANDARD-V ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS, WHICH PERMITS A DJUSTMENTS RELATING TO PREVIOUS YEAR. KEEPING IN VIEW THE NATURE OF ACTIV ITIES AND THE NATURE OF THE TRANSACTIONS UNDERTAKEN BY THE FOOD CORPORATION OF INDIA, THE CIT(APPEALS) ACCEPTED THE STAND OF THE ASSESSEE THA T THE LIABILITY CANNOT BE TAKEN INTO CONSIDERATION TILL IT WAS CRYSTALLIZE D. IT WAS ACCORDINGLY HELD THAT THE EXPENSES WERE NOT, THEREFORE, STRICTLY PRI OR PERIOD EXPENSES BUT HAD CRYSTALLIZED IN THE YEAR IN QUESTION. WE MAY N OTE THAT THE ASSESSEE HAS BEEN CONSTANTLY FOLLOWING THE SAID METHOD OF A CCOUNTING. 3. THE TRIBUNAL HAS AFFIRMED THE SAID VIEW IN VIEW OF THE FACTUAL POSITION. 4. IN VIEW OF THE FACTS FOUND, WE DO NOT FIND ANY REAS ON TO INTERFERE WITH THE IMPUGNED ORDER. NO SUBSTANTIAL QUESTION O F LAW ARISES. THE APPEAL IS DISMISSED WITHOUT ANY ORDER AS TO COSTS. SANJIV KHANNA, J. R.V.EASWAR, J. MARCH 22, 2012 6.1. IT WAS SUBMITTED THAT ALL DETAILS WERE BEFORE THE AO AND SPECIFIC QUERY NO-17 WAS RAISED AND RESPONDED TO BY THE ASSE SSEE IN THE ORIGINAL ASSESSMENT AND FURTHER CLARIFIED. THESE F ACTS IT WAS SUBMITTED ARE EVIDENT FOR PAGES 79, 83 AND 86 OF TH E PAPER BOOK. 6.2. IN REPLY THE LD. CIT DR THOUGH PLACED RELIANCE UPON THE ASSESSMENT ORDER HOWEVER NO ARGUMENT CANVASSING A C ONTRARY VIEW THEN THE ONE TAKEN BY THE ITAT IN THE EARLIER YEARS AND SUBSEQUENT YEAR WHICH HAD BEEN UPHELD BY THE HONBLE HIGH COUR T WAS REFERRED TO FOR OUR CONSIDERATION. 7. ACCORDINGLY IN THE LIGHT OF THE ARGUMENTS ADVANC ED BEFORE THE BENCH AND CONSIDERING THE FACTS AND MATERIAL AVAILA BLE ON RECORD. WE ARE OF THE VIEW THAT IN THE PECULIAR FACTS AND C IRCUMSTANCES OF THE I.T.A. NO. 4731, 4732/DEL/2012 10 CASE WHEREIN THE ASSESSEE ADMITTEDLY AND UNDISPUTED LY HAS BEEN FOLLOWING THE SAME METHOD OF ACCOUNTING CONSISTENTL Y KEEPING IN VIEW THE NATURE OF ACTIVITIES AND THE NATURE OF TRANSACT IONS UNDERTAKEN BY IT, THE LIABILITY CANNOT BE TAKEN INTO CONSIDERATION TI LL IT IS CRYSTALLIZED. WE SEE NO MERIT IN THE ARGUMENTS OF THE LD. CIT DR FOR RESTORING THE ISSUE FOR VERIFICATION AS WE HAVE GONE THROUGH THE PAPER BOOK AND THE RELEVANT RECORDS THEREIN AND FIND OURSELVES IN HARM ONY WITH THE DETAILED FINDINGS OF THE CIT(A). ACCORDINGLY IN TH E ABSENCE OF ANY ARGUMENT ADDRESSING FACTUAL INACCURACY THE SETTLED LEGAL POSITION OR THE ISSUE IS RESPECTFULLY FOLLOWED AND THE DEPARTME NTAL GROUND IS DISMISSED. 8. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. CONSEQUENT TO THE ORDER OF THE TRIBUNAL DATED 30.09.2011 WHICH HAD UPHELD THE RE-OPENING ON TWO GROUNDS WHICH HAD BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT. THE CROSS-OBJECTION FIL ED BY THE ASSESSEE CHALLENGING THE RE-OPENING IS DISMISSED. 5. RELYING UPON THE ORDER OF LD. CIT(A), WE UPHOLD THE IMPUGNED ORDER AND DISMISS BOTH THE APPEALS OF THE REVENUE. 6. AS A RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT SOON AFTER TH E CONCLUSION OF THE HEARING ON 24 TH MARCH, 2014. SD./- SD./- (J.S. REDDY) (U.B.S.BEDI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 24 TH MARCH, 2014. SP. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XXV, NEW DELHI AR, ITAT, 5. CIT(ITAT), NEW DELHI NEW DELHI