THE COTTON CORPORATION OF INDIA LTD, NAVI MUMBAI V. DCIT 15 (3)(1), MUMBI

ITA 6963/MUM/2019

AI Insights

The case involves The Cotton Corporation of India Ltd., which appealed against the order of the CIT(A), Mumbai, upholding the disallowance of prior period expenses amounting to Rs.1,04,30,265/- made by the DCIT 15(3)(1). The assessee argued that these expenses, although related to an earlier year, were materialized in the current year and thus should be allowed as per Accounting Standard 4. However, both the AO and the CIT(A) found insufficient evidence to support this claim. The Tribunal, after hearing the arguments and reviewing the submitted documents, decided to remand the case back to the AO for further verification of the evidence provided by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112978 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 17-05-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 12-11-2019
• Other Referred Cases: ACIT vs Adani Wilmar Ltd. 2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HITESH VALECHA

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH“C”, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER & SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No.6963/Mum/2019 (Assessment Year: 2016-17) The Cotton Corporation of India Ltd., Kapas Bhavan Plot No.3/A Sector 10 CBD, Belapur, Navi Mumbai, Mumbai,- Maharashtra-400614. बनाम/ Vs. DCIT-15(3)(1), Mumbai. ̾थायीलेखासं./जीआइआरसं./PAN/GIR No. : AAACT4053B (अपीलाथŎ/Appellant) (ŮȑथŎ / Respondent) अपीलाथŎ ओर से/ Appellant by : Shri Hitesh Valecha, CA ŮȑथŎ की ओर से/Respondentby: Shri Ram Prakash Rastogi, Sr.AR सुनवाई की तारीख/ Date of Hearing 18/05/2023 घोषणा की तारीख /Date of Pronouncement 29/05/2023 आदेश / ORDER PER OM PRAKASH KANT - AM: This appeal filed by the assessee is directed against the order dated 29.07.2019 passed by Ld. CIT(A), Mumbai for Assessment Year (“AY”) 2016-17. 2 | P a g e 2. The sole ground raised by the assessee is reproduced as under:- 1. “CIT(Appeals)-24 erred in upholding disallowance of prior period expenses of Rs.1,04,30,265/- made by the DCIT 15(3)(1).” 3. Briefly stated facts are that the assessee filed its return of income on 17.10.2016declaring total income of Rs.9,37,10,820/- which was subsequently, revised on 28.09.2017, though the total declared income remained the same. The return of income was selected for scrutiny and statutory notice issued u/s 143(2)/142(1)of the Income Tax Act, 1961 (“the Act”) complied with. The Assessing Officer (“AO”) noted that the assessee company was engaged in the business of cotton trading. In the final statement, the AO noted that an amount of Rs.1,04,30,265/- was debited to the Profit & Loss Account as prior period expenses. The AO asked the assessee to justify the claim of prior period expenses. It was submitted by the assessee that those expenses were regular business expenditure, though related to earlier 3 | P a g e year, but materialized in the current year and therefore, has been claimed as per the Accounting Standard (“AS”) 4. However, in absence of any documentary evidences that prior period expenses materialized in the year under consideration, the AO rejected the contention of the assessee. Before Ld.CIT(A) also, the assessee could not substantiate that the prior period expenses were crystallized in the year under consideration. The Ld.CIT(A) following the decision in the case of ACIT vs Adani Wilmar Ltd. 2014, upheld the disallowance made by the AO. 4. Aggrieved the assessee is in appeal before the Tribunal raising ground before us. The assessee has filed a Paper Book containing details of prior period expenses alongwith bills in respect of these expenses. 5. The assessee has filed a list of prior period expenses which is reproduced as under:- 4 | P a g e 5 | P a g e 6 | P a g e 6. Before the AO, the assessee contended that those expenses though related to earlier year, same were materialize in the current year under consideration. During the course of hearing before us, the assessee was asked to substantiate its claim of materialization of those expenses in the year under consideration. Ld. Counsel for the assessee however, submitted that the assessee is having many branches and bills were received in the branches and subsequently forwarded to the head office and therefore, it took time in the auditing. The Ld. Counsel for the assessee further submitted that bills from certain periods were received in the previous year relevant to the AY under consideration. 7. On the contrary, Ld.Sr.DR relied upon the order of the lower authorities and submitted that due to the failure on the part of the assessee in substantiating that those expenses materialize during the year under consideration, the order of Ld.CIT(A) may be upheld. 7 | P a g e 8. We have heard the rival contentions on the issue in dispute and perused the material available on record. Admittedly, the expenses of Rs.1,04,30,265/- characterized by the Auditor as prior period expenses relates to the earlier period. The assessee has not disputed this fact. However, the contention of the assessee is that those expenses have materialized in the year under consideration only. But we find that before us, Ld. Counsel for the assessee could not substantiate as to how the same were materialised in the year under consideration. No documentary evidences have been submitted before us as to why the bills in respect of the expenses pertaining to the earlier years, have been issued in year under consideration. In the facts of the present case, we feel appropriate to restore the matter back to the AO with a direction to assessee to produce all evidences in support of its contention that prior period expenses of Rs.1,04,30,265/- materialized in the current year under consideration. The AO after verification may decide the issue in accordance with law. 8 | P a g e The sole ground of appeal raised by the assessee is accordingly, allowed for statistical purposes. 9. In the result, the appeal filed by assessee is allowed for statistical purposes. Order pronounced in the open court on 29.05.2023. Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 29/05/2023 *Amit Kumar, Sr. PS* आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / The CIT(A) 4. आयकर आयुƅ(अपील) / Concerned CIT 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, मुंबई/ DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/BY ORDER, सȑािपत Ůित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai