M/S STI INDIA LIMITED,RAU PITHAMPUR,MHOW vs. DEPUTY COMMISSIONER OF INCOME TAX- 5(1), INDORE, INDORE

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ITA 611/IND/2017Status: DisposedITAT Indore13 February 2019AY 2001-0213 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal restored the issue of prior period expenses to the AO for verification, allowing the ground for statistical purposes. The Tribunal also set aside the CIT(A)'s order on other related claims and restored them to the AO for fresh adjudication after providing an opportunity of hearing.

What were the facts?

The assessee claimed prior period expenses and a reversal of quality rebate. The Assessing Officer disallowed the prior period expenses, and the CIT(A) upheld this disallowance. The assessee also claimed certain other amounts which were rejected by the CIT(A).

What were the issues?

Whether prior period expenses are allowable and whether other business expenditure claims rejected summarily by the CIT(A) require fresh adjudication by the AO.

Which sections of the Income-tax Act were involved?

Section 35D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI KUL BHARAT & SHRI MANISH BORAD

For Appellant: Shri S.S. Solanki, A.R
For Respondent: Smt. Ashima Gupta, D.R
Hearing: 17.01.2019Pronounced: 13.02.2019

आदेश / O R D E R

PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the CIT(A)-II, Indore dated 20.6.2017 pertaining to the

1.

[ ] [M/s. STI India Limited, Indore] assessment year 2001-02. The assessee has raised following grounds of appeal:

1. “That the learned CIT(A) erred in maintaining disallowance made by the A.O. on a/c of prior period expenses of Rs.65,59,774/- by passing a vague order. The addition so made and sustained being illegal and wrong, the same therefore, require to be deleted.

2. That the learned CIT(A) erred in maintaining disallowance of Rs.1,71,272/- u/s 35D. The disallowance so maintained being wrong, the same require to be deleted. 3. That the learned CIT(A) erred in confirming the non allowance of Rs.3,81,31,748/- made by the A.O. by giving another set of theory contradictory to which was used in disallowing ground no.1. The non allowance so made being illegal and wrong, the same require to be deleted. 4. That the learned CIT(A) erred in confirming the stand of the A.O. of not entertaining the claim of Rs.8,00,01,570/- in respect of reversal of quality rebate. The claim made by the assessee being legal and proper, the same require to be allowed.” 2. At the time of hearing, Ld. Counsel for the assessee stated that he does not wish to press ground No.2 of the appeal. Therefore, the ground No.2 of the assessee’s appeal is dismissed as not pressed.

3.

Facts giving rise to the present appeal are that assessee company is engaged in the manufacturing of yarn and textile products and filed a return declaring loss of Rs.15,29,07,395/- on 31.10.2001. The case of the 2

[ ] [M/s. STI India Limited, Indore] assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) was framed. The A.O. observed that the assessee claimed earlier year expenses of Rs.65,59,774/-. During the course of assessment proceedings, the assessee had intimated that the income tax return for the assessment year 2002-03 it had disallowed amount of Rs.11,81,33,318/- on account of prior period expenses. The breakup of the same was furnished as expenses related to previous year Rs.3,81,31,748/-. Income in respect of acquiring of rebate offered in the previous year but not accepted by the supplier of Rs.8,00,01,517/-. The A.O. did not accept this except the contention of the assessee and made addition of Rs.65,59,774/-. Against this, the assessee preferred an appeal before Ld. CIT(A) who after considering submissions dismissed the appeal. Now the assessee is in appeal before this Tribunal.

4.

Ground No.1 is against confirming the addition of Rs.75,59,774/- by disallowing the claim of the assessee being expenditure related to prior period expenses. Ld. Counsel for the assessee reiterated the submissions as 3

[ ] [M/s. STI India Limited, Indore] made in the written submissions. The submissions of the assessee are related to all the grounds raised in the appeal which are reproduced as under:

[ ] [M/s. STI India Limited, Indore] [ ] [M/s. STI India Limited, Indore] [ ] [M/s. STI India Limited, Indore] [ ] [M/s. STI India Limited, Indore] [ ] [M/s. STI India Limited, Indore]

5.

Ld. D.R. opposed the submissions and supported orders of the authorities below.

6.

Apropos to Ground No.1, we find that the assessing officer disallowed this claim by observing that assessee has not submitted any evidence that these expenses were crystalized during the year under appeal. The A.O. did not accept the explanation that the bills and vouchers were received late. We find that the A.O. has not made any enquiry independently where these expenses were incurred or not and what was the reason for submission of bills at later date. There is no dispute with regard to the fact that the expenses related to the previous year were only allowable. However, prior period expenditure can be allowed subject to the assessee satisfies the A.O. that the expenditure was crystalized during the year under appeal and there was sufficient reason for making belated claim.

In the absence of the same expenditure would not be [ ] [M/s. STI India Limited, Indore] allowable. The assessee has furnished various documents enclosed at paper book Nos.1 to 216. It would be interest of justice that this issue is restored to the file of the A.O.

The A.O. would verify whether this expenditure claimed to be of prior period crystalized during the year under appeal after making due enquiry. Ground No.1 of the assessee’s appeal is allowed for statistical purposes.

7.

Ground Nos.3 & 4 are inter related. The contention of the assessee is that the assessee make a claim during the assessment proceedings as this claim was not made in the regular report. We find that both of these claims of the assessee were rejected summarily by Ld. CIT(A) in para Nos.5 & 6 of his order as under:-

[ ] [M/s. STI India Limited, Indore]

[ ] [M/s. STI India Limited, Indore]

8.

Since the claim is related to business expenditure, we are of the view that the assessee should have been given sufficient opportunity to present his case. Therefore, we set aside the order of the Ld. CIT(A) on both the issues and restore to the file of the A.O. to decide it afresh after giving opportunity of hearing to the assessee. The appeal filed by the assessee is allowed for statistical purposes.

9.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order was pronounced in the open court on 13 .02.2019.

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