DCIT, New Delhi V. M/s. Delhi Power Co. Ltd., New Delhi

ITA 5493/DEL/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4051 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 10-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH GOEL
• Keywords: Opportunity of being heard; Retrospective amendment
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. K. N. CHARY , JM ITA NO. 5493 /DEL/201 4 : ASSTT. YEAR : 2010 - 11 DY. COMMISSIONER OF INCOME TAX, CIRC LE - 10(1) , N EW DELHI VS M/S DELHI POWER CO. LTD., 2 ND FLOOR, PRE - FABRICATED BUILDING, RAJGHAT POWER HOUSE, NEW DELHI - 110002 (APPELLANT) (RESPONDENT) PAN NO. AA BCD5265G ASSESSEE BY : SH . ASHISH GOEL, CA R EVENUE BY : MS. RACHNA SINGH, CIT DR DATE OF HEARING : 11 .10 .201 8 DATE OF PRONOUNCE MENT : 17 .10 .201 8 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE DEP ARTMENT AGAINST THE ORDER DATED 21.07.2014 OF LD. CIT(A) - XI II , DELHI . 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. WHETHER THE LD. CIT(APPEALS) IS JUSTIFIED IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE GROUND THAT DISALLOWANCE OF RS. 87,90,64,625 / - HAS BEEN MADE BY THE A.O. ON ACCOUNT OF PRIOR PERIO D EXPENSES AND RELYING ON DECISIONS OF LD. CIT(APPEALS) ON THIS ISSUE IN ASSESSEE'S OWN CASE FOR EARLIER YEAR, WITHOUT CONSIDERING THAT IN THE A.Y. 2010 - 11, THE A.O. HAD WHILE FRAMING EX - PARTE ASSESSMENT DISALLOWED LOSS OF RS. 87,90,64,625/ - CLAIMED BY THE ASSESSEE AS NO EXPLANATION REGARDING SUCH LOSS WAS FORTHCOMING FROM THE ASSESSEE AND NO DISALLOWANCE FOR PRIOR PERIOD EXPENSE WAS MADE BY HIM. 2. WHETHER THE LD. CIT(APPEALS) IS JUSTIFIED IN ALLOWING THE APPEAL OF THE ASSESSEE IN RESPECT OF EX - PARTE ITA NO . 5493 /DE L/2014 DELHI POWER CO. LTD. 2 AS SESSMENT FRAMED UNDER SECTION 144 OF THE INCOME TAX ACT, 1961 WITHOUT CALLING FOR ANY REMAND REPORT FROM THE A.O. ON THE SUBMISSION MADE BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS? 3. THE APPELLANT CRAVES TO LEAVE, TO ADD, ALTER OR AMEND ANY GROUN D OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 4. THE ORDER OF THE LD CIT(A), BEING CONTRARY TO THE FACTS ON RECORD AND THE SETTLED POSITION OF LAW, BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. FACTS OF THE CASE IN BRIEF ARE T HAT THE ASSESSEE E - FILED THE RETURN OF INCOME DECLARING LOSS OF RS.87,90,64,245/ - ON 11.10.2010 WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE AO MADE THE A DDITION OF THE SAME AMOUNT WHICH WAS CLAIMED BY THE ASSESSEE AS A RETURNED LOSS AND ASSESSED THE INCOME BY OBSERVING AS UNDER: 4. THE ASSESSEE HAS CLAIMED LOSS OF RS.879064245/ - FOR THE CURRENT YEAR. THE BASIS FOR LOSS HAS NOT BEEN GIVEN AND MORE SO, THE EXPENDITURE CLAIMED IN THE BALANCE SHEET WHICH IS DOWNLOADED FROM THE NET ARE NOT SUBSTANTIATED BY ANY DOCUMENT. IN THESE CIRCUMSTANCES THE LOSS CLAIMED IS HEREBY DISALLOWED AND ADDITION OF RS.879064245/ - . WITH THESE REMARKS INCOME FOR THE YEAR IS COMPUT ED AS UNDER: RETURNED LOSS RS.87,90,64,245/ - ADDITION AS DISCUSSED ABOVE RS.87,90,64,245/ - INCOME NIL ITA NO . 5493 /DE L/2014 DELHI POWER CO. LTD. 3 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND FURNISHED THE WRITTEN SUBMISSIONS, WHICH HAS BEEN INCORPORATED IN PARA 3 OF THE IMPUGNED ORDER READS AS UNDER: 3. THE GROUND NO. 1 TO 9 HAVE BEEN RAISED BY THE APPELLANT REGARDING THE DISALLOWANCE OF THE EXPENDITURE OF RS.87,90,64,625/ - . THE SUBMISSIONS OF THE COUNSEL IN THIS REGARD ARE REPRODUCED AS UNDER: - 'THE ID AO HAS FAILE D TO APPRECIATE THAT AS PER ACCOUNTING STANDARD - 5 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 'NET PROFIT OR LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS AND CHANGE IN ACCOUNTING POLICIES' THE PRIOR PERIOD ITEMS ARE INCOME OR EXPENSES WHICH ARISE IN THE CURRENT PERIOD AS RESULT OF ERROR OR OMISSIONS IN THE PREPARATION OF THE FINANCIAL STATEMENTS OF ONE OR MORE PRIOR PERIOD. THE ACCOUNTING STANDARD FURTHER STATE THAT THE PRIOR PERIOD ITEMS DOES NOT INCLUDE OTHER ADJUSTMENTS NECESSITATED BY CIRCUMSTA NCES, WHICH THOUGH RELATED TO PRIOR PERIOD ARE DETERMINED IN THE CURRENT PERIOD FOR EXAMPLE ARREAR PAYABLE TO WORKERS AS A RESULT OF REVISION OF WAGES WITH RETROSPECTIVE EFFECT DURING THE CURRENT PERIOD. THE ACCOUNTING STANDARD FURTHER STATE THAT ERROR IN THE PREPARATION OF FINANCIAL STATEMENTS OF ONE OR MORE PRIOR PERIOD MAY BE DISCOVERED IN THE CURRENT PERIOD. ERROR MAY OCCUR AS A RESULT OF MATHEMATICAL MISTAKES, IN APPLYING ACCOUNTING POLICIES, MISINTERPRETATION OF FACTS, OR OVER SIGHT. THE ACCOUNTING ST ANDARD STATES THAT ACCOUNTING ESTIMATES BY THEIR NATURE ARE APPROXIMATIONS THAT MAY NEED REVISION AS ADDITIONAL INFORMATION BECOMES KNOWN E.G. INCOME EXPENSES RECOGNIZED ON THE OUTCOME OF A CONTINGENCY WHICH PREVIOUSLY COULD NOT BE ESTIMATED RELIABLY DOES NOT CONSTITUTE A PRIOR PERIOD ITEM. 2. THE LD ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THE EXPENSE RELATED TO DBV PERIOD I.E. THE PERIOD IN WHICH ITA NO . 5493 /DE L/2014 DELHI POWER CO. LTD. 4 THE DBV WAS IN EXISTENCE BEFORE UNBUNDLING WAS NOT DUE TO ERROR OR OMISSIONS, E.G. THE BILL GENERATED B Y POWER GENERATING UNIT AT THE TIME OF RAISING THE BILLS WAS AT PROVISIONAL ELECTRICITY UNITS (TARIFF) RATE AND RAISED THE SECOND / FINAL BILL AFTER FINALIZING THE TARIFF BY CONTROLLING AUTHORITY VIZ CENTRAL ELECTRICITY REGULATORY COMMISSION SUBSEQUENT TO UNBUNDLING OF DVB IS NOT AN ERROR OR OMISSIONS, AS THIS IS THE PRACTICE OF ENTIRE ELECTRICITY GENERATING UNITS THAT THE BILLS ARE RAISED ON PROVISIONAL BASIS AND THE FINAL BILLS RAISED ONLY AFTER FINALIZING THE TARIFF RATE BY THE ELECTRICITY REGULATING AUT HORITY. THEREFORE TREATING THE ABOVE AS PRIOR PERIOD ITEMS IS INCORRECT AND CONTRARY TO ACCOUNTING STANDARD, COMPANIES ACT AND ACCOUNTING PRINCIPLES. 3. THE LD ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THIS IS THE NORMAL ACCEPTED PRACTICE OF THE ENTI RE POWER GENERATING COMPANIES AND POWER DISTRIBUTION COMPANIES THAT THE POWER GENERATING COMPANIES RAISED THE BILLS ON PROVISIONAL BASIS AND ISSUED THE SECOND OR FINAL BILLS ON FINALIZATION OF TARIFF BY THE CONTROLLING AUTHORITIES CENTRAL ELECTRICITY REGUL ATORY COMMISSION. THE LD ASSESSING OFFICER IN HIS ORDER HAS ADMITTED HIMSELF THAT THE POWER PURCHASES MADE BY DVB WAS ON PROVISIONAL BASIS SUBJECT TO FINAL ASSESSMENT AS PER ORDER OF THE CONTROLLING AUTHORITIES SUCH AS CENTRAL ELECTRICITY REGULATORY COMMIS SION AND OTHER REGULATOR. IN THE YEAR THE ASSESSEE COMPANY HAS MADE PAYMENTS OF RS. 8,59,41,000 TO POWER GENERATION COMPANIES. 4. (1) THE LD ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THE EXPENDITURE AMOUNTING TO RS.8,59,41,000.00 WHICH HE HAS DISALL OWED CONSIDERING THE SAME AS PRIOR PERIOD ITEM CONSIST RS.8,59,41,000.00 ON ACCOUNT OF REVISION OF TARIFF FOR WHICH THE BILLS ARE RECEIVED BY THE ASSESSEE DURING THE YEAR 2004 - 05 AND BEFORE RECEIVING THE ABOVE STATED FINAL BILLS THERE WAS NO DEMAND / INTIM ATION ON THE BASIS OF WHICH THE LIABILITY / DEMAND CAN BE CRYSTALLIZED. THEREFORE THIS IS NOT THE ERROR AND OMISSION OF PREVIOUS PERIOD THEREFORE SHOULD NOT BE TREATED AS PRIOR PERIOD EXPENDITURE. ITA NO . 5493 /DE L/2014 DELHI POWER CO. LTD. 5 5. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: SAU RASHRA CEMENT & CHEMICAL INDUSTRIES LTD. VS CIT (1995) 213 ITR 523 (GUJ.) CIT VS KAHAITAN CHEMICALS AND FERTILIZERS LTD. (2008) 307 ITR 0150 (DEL.) CIT VS MODIPON LTD. (NO.1) 334 ITR 102 (DEL.) CIT VS SHRIRAM PISTON & RINGS LTDD. 008 DTR (DEL.) 209 6. IT W AS FURTHER SUBMITTED AS UNDER: 6. THE LD ASSESSING OFFICER HAS FAILED TO VERIFY THE ACTUAL NATURE OF EXPENSES AND DISALLOWED THE EXPENSE MERELY ON THE PRESENTATION OF THE AMOUNT IN THE BALANCE SHEET & PROFIT & LOSS ACCOUNT I.E. EXPENSE RELATING TO DVB PER IOD (PRIOR TO UNBUNDLING) OR DPCL PERIOD. THE ASSESSEE HAS ADOPTED THIS PRESENTATION IN BALANCE SHEET & PROFIT & LOSS ACCOUNT I.E. SHOWING THE EXPENSES AS RELATING TO DVB PERIOD OR OTHERWISE IS ONLY FOR THE BETTER UNDERSTANDING OF THE STAKEHOLDER WHICH IN THIS CASE IS GOVERNMENT. THE LD ASSESSING OFFICER HAD FAILED TO APPRECIATE THAT THE ASSESSEE COMPANY IS NOT ENGAGED IN ANY COMMERCIAL ACTIVITY I.E. SALE OR PURCHASE OF POWER AFTER UNBUNDLING OF ERSTWHILE DVB AND DEBITING THE EXPENSES OF DVB PERIOD WITHOUT SPECIFICALLY MENTION IN PROFIT & LOSS ACCOUNT MAY CONFUSE THE READER FOR EXPENDITURE OF MATERIAL AMOUNT ON ACCOUNT OF PURCHASE OF POWER ETC. WHEN THERE IS NO SALE / PURCHASE AFTER UNBUNDLING OF DVB. IN VIEW OF THE SUBMISSION HEREIN ABOVE, IT IS RESPECTFULL Y SUBMITTED THAT THE DISALLOWANCE ERRONEOUSLY MADE OF THE IMPUGNED SUM OF RS. 8,59,41,000/ - M AY KINDLY BE ADJUDICATED TO BE DELETED. IT WOULD ALSO BE WORTHWHILE TO MENTION HERE THAT THE ADDITIONS/ DISALLOWANCES MADE ON SIMILAR GROUNDS IN RESPECT OF THE ASS ESSMENT YEARS 2009 - 10 & 2008 - 09 HAVE BEEN DELETED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - XIII (APPEAL NO. 307/2011 - 12), COMMISSIONER OF INCOME TAX (APPEALS) - XVII (APPEAL NO. 769/11 - 12) RESPECTIVELY IN RESPECT OF ASSESSMENT ITA NO . 5493 /DE L/2014 DELHI POWER CO. LTD. 6 YEAR 2009 - 10 & 2008 - 09. THE COPIES OF THE APPELLATE ORDER IN RESPECT OF SUCH APPEAL NUMBERS ARE ENCLOSED WITH THIS SUBMISSION FOR YOUR PERUSAL AND NECESSARY ACTION.' 7. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY OBSERVI NG IN PARA 3.1 WHICH READ AS UNDER: 3.1 I HAVE CAREFULLY PERUSED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE COUNSEL OF THE APPELLANT. THE GROUND NO. 1 TO 9 HAVE BEEN RAISED BY THE APPELLANT REGARDING THE DISALLOWANCE OF THE EXPENDITURE OF RS. 8 7,90,64,625/ - . THE ASSESSING OFFICER HAD DISALLOWED THESE EXPENSES TREATING THE SAME AS BELONGING TO THE PRIOR PERIOD. THE CIT(A) - XIII, NEW DELHI FOR THE ASSESSMENT YEAR 2009 - 10 IN APPELLANT'S OWN CASE ON THE SIMILAR ISSUE HELD AS UNDER: 'I HAVE CONSIDERE D THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER. IT IS SEEN THAT APPELLANT COMPANY IS A HOLDING COMPANY OF THE COMPANIES ENGAGED IN THE BUSINESS OF GENERATION, TRANSMISSION AND DISTRIBUTION OF ELECTRICITY IN THE NCT OF DELHI. THE APPELLANT COMPANY ALSO ACQUIRED AND UNDER TOOK LIABILITIES AND ASSETS IN THE FORM OF RECEIVABLES FROM SALE OF POWER TO CONSUMERS OF THE ERSTWHILE DELHI VIDYUT BOARD. AS PER THE SCHEME OF TRANSFER APPROVED BY THE GOVT. OF NCT OF DELHI, ALL LIABILITIES ON A CCOUNT OF POWER PURCHASE OF ERSTWHILE ENTITIES LIKE DVB ARE VESTED WITH THE APPELLANT COMPANY. IT IS SUBMITTED BY THE APPELLANT THAT BILLS RECEIVED FOR THE POWER PURCHASES MADE BY THE DVB WERE RECEIVED ON PROVISIONAL BASIS AND THE FINAL BILL ARE ISSUED ON FINALIZATION OF TARIFF BY THE CONTROLLING AUTHORITIES LIKE CENTRAL ELECTRICITY REGULATORY COMMISSION OR OTHER REGULATORS. DURING THE YEAR, THE APPELLANT COMPANY AS A SUCCESSOR OF DVB RECEIVED FINAL BILL OF POWER PURCHASED BY DVB AFTER THE DECISION ON TARIF F MADE BY THE CENTRAL ELECTRICITY REGULATORY COMMISSION. AS A RESULT, THE APPELLANT COMPANY HAS MADE PAYMENT OF RS. 40,39,00,003/ - TO NTPC AND POWER GRID ITA NO . 5493 /DE L/2014 DELHI POWER CO. LTD. 7 CORPORATION OF INDIA LTD. AND OTHER AGENCIES AS PER DEMAND NOTICE RECEIVED FROM NTPC AND HPSED AND PGC IL. IT IS SUBMITTED BY THE APPELLANT THAT THE AMOUNT PAID TO NTPC AND HPSED IS NOT PRIOR PERIOD EXPENSES BUT LIABILITY TO PAY THESE EXPENSES WAS CRYSTALLIZED DURING THE YEAR AND DEMAND NOTICE WAS RECEIVED DURING THE YEAR. THEREFORE, IT IS NOT THE ERROR OR OMISSION OF EARLIER YEARS AND AS SUCH NOT THE PRIOR PERIOD EXPENSES. THE DEMAND NOTICE OF RS. 40,39,00,003/ - WAS ON ACCOUNT OF REVISION OF TARIFF FOR WHICH BILLS ARE RECEIVED BY THE APPELLANT DURING F.Y. 08 - 09. BEFORE RECEIPT OF THESE FINAL BILLS THERE WAS NO DEMAND/INTIMATION ON THE BASIS OF WHICH LIABILITY/DEMAND COULD BY CRYSTALLIZED. SINCE LIABILITY HAS ARISEN BECAUSE OF REVISION OF TARIFF DURING THE YEAR AND SUCH LIABILITY HAS BEEN CRYSTALLIZED DURING THE YEAR, THEREFORE THE SAME CANNOT BE TREATED AS P RIOR PERIOD ITEM. HENCE, THE EXPENSES PAYABLE ON ACCOUNT OF REVISION OF TARIFF FOR THE POWER PURCHASED BY ERSTWHILE DELHI VIDYUT BOARD ARE ALLOWABLE IN THE YEAR OF CRYSTALLIZATION OF LIABILITY. THEREFORE, DISALLOWANCE OF EXPENSES MADE BY THE ASSESSING OFFI CER WAS NOT JUSTIFIED AND SAME IS DELETED. 8 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. CIT DR SUBMITTED THAT THE LD. CIT(A) WHILE PASSING THE IMPUGNED ORDER HAS NOT APPLIED HIS MIND, THEREFORE, THE MATTER REQUIRES MORE VERIFICATION AT THE LEVEL OF THE A O. 9 . IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE FURNISHED HIS WRITTEN SUBMISSIONS STATED THAT THERE ARE FEW MISTAKES IN THE ORDER OF THE LD. CIT(A) WHICH REQUIRES CORRECTION AND GAVE IN WRITING AS UNDER: W HILE ADJUDICATING THE GROUND OF THE ASSESSES IN PAGE 9 PARA 3.1 LEARNED CIT(A) HAS RELIED UPON THE ORDER PASSED BY CIT(A) - XIII FOR THE ASSESSMENT YEAR 2009 - 10 WHICH IS ENCLOSED IN THE PAPER BOOK PAGE 51 - 64 AND QUOTED THE FINDING OF THE CIT(A) OF A.Y. 2009 - 10 UPTO PAGE 15 OF THE IMPU GNED CIT(A) ORDER. ITA NO . 5493 /DE L/2014 DELHI POWER CO. LTD. 8 A PERUSAL OF THE CIT(A) OF A.Y. 2009 - 10 AT PAPER BOOK PAGE 51 - 64 CLEARLY SHOWS THAT THE ISSUE RELATES TO ADDITION MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES WHICH IS NO T THE ISSUE IN THE PRESENT CASE. THEREFORE, THERE IS AN ERROR CREPT IN THE ORDER PASSED BY THE LEARNED CIT(A) AND THEREFORE ASSESSEE PRAYS BEFORE YOUR HONOUR TO KINDLY SET ASIDE THE MATTER TO CIT(A) FOR RE - ADJUDICATION . 10 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD , IN THE PRESENT CASE, BOTH THE PARTIES AGREED TO SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR THE REASON THAT THE FACTS NEED VERIFICATION . WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER TO THE FILE OF THE AO TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11 . IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRON OU NCED IN T HE COURT ON 17 /10 /2018) SD/ - SD/ - ( K. N. CHARY ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 /10 /2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT RE GISTRAR