DCIT, CHENNAI V. Dr.Agarwal'e Eye Hospital Ltd., CHENNAI

ITA 674/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6117 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-08-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 20-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHISH TRIPATHIJCIT
• Assessee Lawyers: V S JAYAKUMAR

Judgement Text

, / / / , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' #! ' $ . % & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.674/MDS./2017 / ASSESSMENT YEAR : 2011-12 THE DCIT, CORPORATE CIRCLE-1(1), CHENNAI-34. VS. M/S.DR.AGARWALS EYE-HOSPITAL LTD., 19,CATHEDRAL ROAD, GOPALAPURAM,CHENNAI-86. [PAN AAACD 2373 G ] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : MR.ASHISH TRIPATHI,JCIT, DR /RESPONDENT BY : MR.V.S.JAYAKUMAR,ADVOCATE / DATE OF HEARING : 21 - 09 - 2017 / DATE OF PRONOUNCEMENT : 27 - 09 - 2017 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHENNAI DATED 12.01.2017 PERTAINING TO ASSESSMENT YEAR 2012-13. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS FO R OUR ADJUDICATION. ITA NO.674/17 :- 2 -: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW, FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LEARNED CIT(A) ERRED IN DELETING THE ADDITI ON MADE UNDER THE HEAD PRIOR PERIOD EXPENSES WITHOUT APPRECIATING T HE FACT THAT THE EXPENSES SO CLAIMED DOES NOT BELONG TO THE RELEVANT ACCOUNTING YEAR OF THE ASSESSMENT YEAR 2012-13, BUT RELATES TO THE PREVIOUS FINANCIAL YEARS. 2.2 THE LEARNED CIT(A) ERRED IN HOLDING THAT THE PR IOR PERIOD EXPENSES ARE DEDUCTIBLE EXPENSES FOR THE RELEVANT A CCOUNTING YEAR OF THE ASSESSMENT YEAR (2012-13) WITHOUT APPRECIATI NG THE FACT THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE PRIOR PERIOD EXPENSES IF ANY OUGHT TO HAVE BEEN CLAIMED IN THE RELEVANT FINANCIAL YEARS BY WAY OF MAKING PROVISION S. 2.3 THE LEARNED CIT(A) ERRED IN LAW BY HOLDING IT C ONTRARY, IN AS MUCH AS THE SETTLED PRINCIPLE THAT DEDUCTION CAN BE ALLOWED IN RESPECT OF ONLY THOSE EXPENDITURE WHICH ARE INCURRE D IN THE RELEVANT ACCOUNTING YEAR FOR THE PURPOSE OF COMPUTING THE PR OFITS AND GAINS OF A PARTICULAR FINANCIAL YEAR. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. THE SIMILAR ISSUE CAME FOR CONSIDERATION BE FORE THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NO.2295/MDS./2016 FOR A SSESSMENT YEAR 2011-12 DATED 08.09.2017 WHEREIN THE TRIBUNAL HELD AS FOLLOWS:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT THE O UTSET, IT IS NOTICED THAT THE AY INVOLVED IS 2011-12. THE REVEN UE HAS FILED AN APPEAL IN THE ASSESSEES OWN CASE IN RESPECT OF THE IMMEDI ATELY PRECEDING AY BEING AY 2010-11 IN ITA NO.865/MDS/2017. IT IS NOT ICED THAT THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE FOR THE IMMEDIATELY PRECEDING AY IN ITA NO.865/MDS/2017 VID E ITS ORDER DATED 05.09.2017 HELD AS FOLLOWS: ITA NO.674/17 :- 3 -: FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAD B EEN FOLLOWING THIS ACCOUNTING PRACTICES CONSISTENTLY. IN THE LIGHT OF THE RATIO SETTLED BY THE DELHI HIGH COURT IN THE CASE OF CIT VS. JAGATJIT IN DUSTRIES IN ITA NO. 848/2010, THE ISSUE NO. (I), SUPRA, IS IN FAVOUR OF THE ASSESSEE. NOW, LET US EXAMINE WHETHER THE NATURE AND GENUINENESS OF TH E EXPENDITURE HAS BEEN EXAMINED OR NOT. IN THIS REGARD, THE RELEVANT PORTION OF THE ASSESSMENT ORDER IS EXTRACTED AS UNDER: 4. THE ASSESSEE FILED A REPLY DATED 12.10.2015, IN THIS REGARD WHICH IS REPRODUCED AS FOLLOWS: THE DISALLOWANCES MENTIONED IN YOUR ORDER RELATES T O PRIOR PERIOD EXPENDITURE (EXPENDITURE PERTAINING TO PREVIOUS ASS ESSMENT YEAR CLAIMED DURING AY 2010-11). THE ASSESSEE RUNS CHAIN OF OPH THALMOLOGY HOSPITALS AND HAS OVER 25 BRANCHES ACROSS INDIA. ON ACCOUNT OF THE VOLUME OF TRANSACTIONS, CERTAIN BILLS COULD BE ACCOUNTED ONLY AFTER THE YEAR END. THOUGH THE ASSESSEE IS A COMPANY AND REQUIRE TO MAI NTAIN BOOKS OF ACCOUNTS ON ACCRUAL BASIS, PROVISION FOR EXPENDITUR E CANNOT BE MADE BASED ON ESTIMATES SINCE ESTIMATE CANNOT BE ACCURAT E. IN SUCH HIGH VOLUME LOW VALUE TRANSACTION, THE LIAB ILITY IN RESPECT OF CERTAIN BILLS WOULD NOT HAVE CRYSTALLIZED AS AT THE YEAR-END ON ACCOUNT OF VARIOUS FACTORS. WE HAVE ALREADY FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS)-1 FOR AY 2012-13 ON SIMILAR GROUNDS. IN CIT VS. VISHNU INDUSTRIAL GASES (IN THE HIGH COU RT OF DELHI, ITR NO. 229/1988, DECIDED ON: 6 TH MAY, 2008) WHERE THE DEPARTMENT HAD NOT DISPUTED THAT THE EXPENDITURE WAS DEDUCTIBLE IN PRI NCIPLE BUT WAS ONLY DISPUTING THE YEAR IN WHICH THE DEDUCTION COULD BE ALLOWED HELD. 5. THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDER ED AND IS NOT ACCEPTED AS THE SAID AMOUNT IS NOT AN ALLOWABLE EXP ENDITURE UNDER THE PROVISIONS OF THE ACT. THE ASSESSEE IS FOLLOWING M ERCANTILE SYSTEM OF ACCOUNTING AND THE DEDUCTIONS CAN BE ALLOWED IN RES PECT OF ONLY THOSE EXPENSES WHICH ARE INCURRED IN THE RELEVANT ACCOUNT ING YEAR FOR THE PURPOSE OF COMPUTING THE PROFITS AND GAINS. HENCE THE SAID AMOUNT IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. FROM THE ABOVE, IT IS CLEAR THAT THE AO HAS NOT EXA MINED THE NATURE AND GENUINENESS OF THE IMPUGNED EXPENDITURE. HE HAS SI MPLY DISALLOWED FOR THE REASON THAT THE ASSESSEE IS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNTING AND THE DEDUCTION CAN BE ALLOWED IN RESPECT OF ONLY THOSE EXPENSES WHICH ARE INCURRED IN THE RELEVANT ACCOUNTING YEAR OF COM PUTING THE PROFITS AND GAINS. THUS, HE HAD NOT EXAMINED THE NATURE AND GEN UINENESS OF THE EXPENDITURE AT ALL. IN THE VIEW OF THAT WE ARE OF THE CONSIDERED OPINION THAT THE AO HAS TO EXAMINE THE NATURE AND GENUINENE SS OF THE EXPENDITURE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW FOLLOWING THE RATIO OF THE DELHI HIGH COURT (SUPRA). TO THAT EXT ENT, THE REVENUES APPEAL IS TREATED AS ALLOWED. 6. IN THE RESULT, THE REVENUES APPEAL IS TREATED A S PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. AS IT IS NOTICED THAT THE ISSUES FOR THE RELEVAN T AY ARE ALSO IDENTICAL TO THIS ISSUES IN RESPECT OF THE REVENUES APPEAL IN I TA NO.865/MDS/2017 REFERRED TO SUPRA, RESPECTFULLY FOLLOWING THE DECIS ION OF THE CO-ORDINATE ITA NO.674/17 :- 4 -: BENCH OF THIS TRIBUNAL IN ITA NO.865/MDS/2017 FOR T HE AY 2010-11 ON IDENTICAL DIRECTIONS GIVEN BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.865/MDS/2017, THE ISS UES ARE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION. WE ALSO MAK E IT CLEAR THAT THERE CAN BE IN NO CASE DOUBLE ALLOWANCE OF AN EXPENDITURE, A S, FOR EXAMPLE, THROUGH INCREASED OPENING STOCK FOR THE CURRENT YEA R (ON ACCOUNT OF THE GOODS BEING RECEIVED DURING THE PRECEDING YEAR) AND ALSO BY RECORDING THE PURCHASE IN ACCOUNTS ON THE RECEIPT OF THE CORRESPO NDING INVOICES DURING THE CURRENT YEAR. IN THESE CIRCUMSTANCES, THE APPEA L FILED BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4. IN VIEW OF THE ABOVE ORDER OF TRIBUNAL, WE REMI T THE ISSUE TO THE FILE OF LD. ASSESSING OFFICER FOR RE-ADJUDICATION ON SIM ILAR LINE. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 27 TH SEPTEMBER, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 27 TH SEPTEMBER, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF