Shri Sunil Rathore S/o Sh. Saligram, Indore V. The ITO 2(1), Indore

ITA 98/Ind/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4075 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 24-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUNEET KUMAR
• Keywords: Revision of order; Set aside
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.98/IND/2018 ASSESSMENT YEAR: 2007-08 SHRI SUNIL RATHORE, 186, SHEETAL NAGAR, INDORE / VS. INCOME TAX OFFICER -2(1), INDORE ( APPELLANT ) ( RE VENUE ) PAN: A AZPR3624E APPELLANT BY CA PANKAJ SHAH RE VENUE BY S HRI PUNEET KUMAR , SR. DR DATE OF HEARING: 2 1. 1 0.2010 DATE OF PRONOUNCEMENT: 02 . 1 1 .20 20 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL AT THE INSTANCE OF ASSESSEE PERTAINING TO A.Y. 2007-08 IS DIRECTED AGAINST THE ORDER OF COMMISSION ER OF INCOME TAX(APPEALS)-1, INDORE (IN SHORT CIT), DATED 27.1 1.2017 WHICH IS ARISING OUT OF THE ORDER U/S 143(3)/263 OF THE INCO ME TAX ACT 1961 (HEREINAFTER CALLED AS THE ACT) FRAMED ON 18.11.2 011 BY ITO-2(1), INDORE. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPE AL: SHRI SUNIL RATHORE ITANO.98/IND/2018 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)-I ('CIT(A),,) E RRED IN CONFIRMING THE DISALLOWANCE OF LICENSE FEES PAID IN EARLIER YEAR B UT CRYSTALLIZED DURING YEAR. 2. ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LEARNED AO OUGHT TO HAVE ALLOWED THE CLAIM FOLLOWING THE PRINC IPLE OF CONSISTENCY IN NOT ASSESSING SUCH ADVANCE PAYMENT FOR LICENSE FEES . 3. WITHOUT PREJUDICE TO ABOVE THE LEARNED CIT(A) ERRED IN NOT GIVING FULL EFFECT TO THE CASH SYSTEM OF ACCOUNTING AS CONSIDER ED BY THE AO. 4. THE APPELLANT HUMBLY PRAYS THAT THE SAID DISALLO WANCE BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD / DELETE / MODIFY ANY/ ALL THE AFORESAID GROUNDS. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINE SS OF LIQUOR. RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 WA S FILED ON 30.10.2007 DECLARING INCOME OF RS. 6,93,160/-. CAS E SELECTED FOR SCRUTINY THROUGH CASS. ASSESSMENT U/S 143(3) OF TH E ACT FRAMED ON 12.02.2009. SUBSEQUENTLY LD. CIT(A)-1 VIDE HIS ORDER U/S 263 OF THE ACT DATED 17.03.2011 SET ASIDE THE ORDER OF LD. A.O U/S 143(3) OF THE ACT AND DIRECTED FOR FRAMING IT AFRESH WITH REGARD TO THE ISSUE OF CLAIM OF LICENCE FEE PAID IN THE PRECEDING YEAR. LD. A.O COMPLETED SHRI SUNIL RATHORE ITANO.98/IND/2018 3 THE ASSESSMENT U/S 143(3) R.W.S. 263 OF THE ACT AND DISALLOWED THE EXPENDITURE OF ADVANCE LICENCE FEE AT RS.12,72,096/ - AND ASSESSED THE INCOME AT RS.20,02,410/-. AGGRIEVED ASSESSEE P REFERRED APPEAL BEFORE LD. CIT(A) BUT COULD NOT SUCCEED AS LD. CIT( A) DISMISSED THE ASSESSEES APPEAL NOT TREATING IT AS MAINTAINABLE S INCE THE ASSESSEE DID NOT FILE ANY APPEAL AGAINST THE ORDER OF LD. CI T(A)-1 U/S 263 OF THE ACT. THEREAFTER ASSESSEE CHALLENGED THE FINDIN G OF LD. CIT(A) AND FILED APPEAL BEFORE HON'BLE TRIBUNAL. THE HON' BLE TRIBUNAL VIDE ITA NO.618/IND/2013 ORDER DATED 16.11.2015 SET ASID E THE FINDING OF LD. CIT(A) AND DIRECTED LD. CIT(A) TO DECIDE THE ISSUE ON MERITS. FOLLOWING THE DIRECTION OF HON'BLE TRIBUNAL LD. CIT (A) DECIDED THE ISSUE ON MERITS AND CONFIRMED THE ADDITION MADE BY LD. A.O. NOW THE ASSESSEE IS AGAIN IN APPEAL BEFORE THE TRIBUNAL . 4. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE PAPE R BOOK AND THE WRITTEN SUBMISSIONS SUBMITTED THAT AS PER THE G OVERNMENT REGULATIONS THE ASSESSEE IS REQUIRED TO PAY THE LI CENCE FEES IN ADVANCE I.E. BEFORE THE COMMENCEMENT OF THE YEAR FO R WHICH THE LICENCE IS APPLIED. IN CASE THE LICENCE IS NOT GRA NTED IT IS REFUNDED AND IN CASE IT IS GRANTED THEN IT IS CLAIMED AS AN EXPENDITURE FOR THE SHRI SUNIL RATHORE ITANO.98/IND/2018 4 YEAR TO WHICH IT PERTAINS. IT WAS SUBMITTED THAT T HE ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING BUT SINCE T HE ALLEGED AMOUNT WAS AN ADVANCE PAID FOR NEXT YEAR AND WAS AL SO SHOWN AS AN ADVANCE IN THE BALANCE SHEET AND ONLY WHEN THE L ICENCE WAS GRANTED THE EXPENDITURE GOT CRYSTALLIZED IN THE YEA R FOR WHICH IT PERTAINED AND THEREFORE THE ADVANCE LICENCE FEE FOR FINANCIAL YEAR 2006-07 PAID DURING FINANCIAL YEAR 2005-06 HAS BEEN RIGHTLY CLAIMED AS EXPENDITURE DURING THE FINANCIAL YEAR 20 06-07. 5. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF BOTH THE LOWER AUTHORITIES . 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RE CORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE WRI TTEN SUBMISSIONS AND THE DOCUMENTS FILED IN THE PAPER BO OK. THE SHORT ISSUE FOR CONSIDERATION IS THE DISALLOWANCE OF LICE NCE FEE OF RS. 12,72,096/-. ON PERUSAL OF THE AUDITED FINANCIAL S TATEMENT, THE APPLICATION FOR GRANT OF LICENCE FOR SELLING LIQUOR FOR FINANCIAL YEAR 2006-07, THE AMOUNT PAID AS ADVANCE LICENCE FEES AN D OTHER RELEVANT DOCUMENTS, WE FIND THAT IN THE DUE COURSE OF BUSNESS ASSESSEE IS OBLIGED TO PAY LICENCE FEE IN ADVANCE I .E. BEFORE THE SHRI SUNIL RATHORE ITANO.98/IND/2018 5 COMMENCEMENT OF THE YEAR FOR WHICH IT PERTAINS. THE ASSESSEE HAS SHOWN THE ALLEGED AMOUNT OF RS.12,72,096/- PAID DUR ING THE FINANCIAL YEAR 2005-06 AS AN ADVANCE LICENCE FEE FO R THE FINANCIAL YEAR 2006-07 (RELEVANT TO ASSESSMENT YEAR 2007-08) IN ITS AUDITED FINANCIAL STATEMENT. THE ADVANCE IS DULY SHOWN IN THE BALANCE SHEET ON THE ASSET SIDE. WHEN THE ASSESSEE WAS GRA NTED THE LIQUOR LICENCE FOR FINANCIAL YEAR 2006-07 I.E. ASSESSMENT YEAR 2007-08 HE HAS CLAIMED IT AS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT OF ASSESSMENT YEAR 2007-08. WE ARE OF THE CONSIDERED VIEW THAT SINCE THE EXPENDITURE OF LICENCE FEES HAS CRYSTALLIZED DU RING FINANCIAL YEAR 2006-07 (ASSESSMENT YEAR 2007-08), THE ASSESSE E HAS RIGHTLY CLAIMED IT AS AN EXPENDITURE AGAINST REVENUE OF ASS ESSMENT YEAR 2007-08. ISSUE OF CASH SYSTEM/MERCANTILE SYSTEM OF ACCOUNTING IS NOT HAVING ANY IMPACT ON THE ISSUE UNDER CONSIDERAT ION BECAUSE THE AMOUNT OF ADVANCE LICENCE FEES PAID DURING FINA NCIAL YEAR 2005-06 WAS JUST AN ADVANCE AND IT CONVERTED INTO E XPENDITURE DURING FINANCIAL YEAR 2006-07 (ASSESSMENT YEAR 2007 -08). THUS LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDI TION MADE BY LD. A.O. WE THUS SET ASIDE THE FINDING OF LD. CIT(A) A ND ALLOW THE CLAIM SHRI SUNIL RATHORE ITANO.98/IND/2018 6 OF THE ASSESSEE FOR THE EXPENDITURE OF LICENCE FEES OF RS.12,72,096/-. THE SOLE ISSUE RAISED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 02.11.20 20 SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 02/11/2020 /DEV COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR