HARYANA AGRO INDUSTRIES CORPORATION LTD vs. COMMISSIONER OF INCOME TAX, PANCHKULA

Whether Reporters of local papers may be allowed to see the judgment?

To be referred to the Reporters or not? YES

Whether the judgment should be reported in the Digest? Present: Mr. H.N.Mehtani, Advocate for the appellant. Ajay Kumar Mittal,J.

We have heard learned counsel for the appellant-assessee. 4. the Tribunal as under:- “8. From the reading of the above, it is quite clear that reopening made by the Assessing Officer on the basis of audit objection is as per law. The case of Locus T.V.S.Limited (supra) relied upon by the assessee is not applicable to the present case as in GURBAX SINGH 2016.05.10 11:23 integrity of this document High Court Chandigarh an earlier decision of the Hon'ble Supreme Court in the case of Indian & Eastern Newspaper Society (supra), it was held that no reopening can be made on the basis of audit objection which is on some interpretation of law. This judgment of the Hon'ble Supreme Court has been followed by the Hon'ble Punjab and Haryana High Court in the case of Sant Ram Mangat Ram (supra). In the judgment of P.V.S.Beedies Pvt. Limited (supra), it was held that reopening of the assessment on the basis of error pointed out by the audit party is valid. From the conjoint reading of all these judgments given by the Hon'ble Supreme Court, it infers that reopening on the basis of an audit objection can be done if some error is pointed out by the audit party, however, no reopening on the basis of audit objection can be done if the objection pertains to some interpretation of law. In this background, we now analyze the facts of the present case. It is noted that the audit party has raised an objection that certain expenses which pertained to earlier years have been claimed in the current assessment year, which are not so allowable as per law. This information in the form of objection raised by the audit party to the Assessing Officer, only provides the background for forming a belief that the income had escaped assessment. This is not an interpretation of law made by the audit party. This is just a factual error pointed out by the audit party. In this background, we hold that reopening on the basis of audit objection is as per law in the given facts and circumstances of the case and the learned CIT(Appeals) has very aptly analyzed the validity of notice under section 148 of the Act and we do not find any infirmity in the findings recorded by the learned CIT(Appeals). Therefore, we uphold the order of the learned CIT(Appeals) on this account.

On the merits of the case, the learned counsel for the assessee submitted that the assessee is paying service charges for the purchase of gunny bags to the Food & Supply Department of Government of Haryana, who buys the gunny bags for use of State of Haryana at lower rates and charges at 1% of the GURBAX SINGH 2016.05.10 11:23 integrity of this document High Court Chandigarh purchase. It is submitted that it is not a tax, by whatever name called. Since the expenditure has been accepted by the assessee during the year under consideration and accordingly, risen during the year under consideration, in this view, it was prayed that the same may be allowed in the year under consideration. In the alternative, it was submitted that same expenses may be allowed in the year in which they have arisen.

We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. We see that the learned CIT(Appeals) has given very detailed findings on this issue, which are recorded at page 13, paras 6.2 and 6.3 of his order which read as under:- “6.2 I have gone through the facts of the case, written submissions filed by the appellant and the assessment record. It is noted that the AO has disallowed the amount considering it as prior period expenses as per annual report after issue of show cause notice and consideration of appellant's reply. Though, the appellant has submitted that the service charge liability on account of purchase of gunny bags arose during the year but the appellant has not provided any evidence in support of its claim except the copy of ledger account. The AO has given its finding in the assessment order. Therefore, I am not in agreement with the submissions made by the appellant and the payment made on account of prior period expenses as quantified by its auditors is disallowable as per provisions of section 37(1) of the Act.

3 Regarding the non disputed nature of expenditure it is noted that the expenses on account of service charge payable on purchase of gunny bags have been disallowed on account of being prior period expenses. However, any expense incurred by the appellant during the year on this account is allowable. The AO is directed to verify and grant relief to the extant the expense on this account for which the expenses were incurred during the year under consideration and GURBAX SINGH 2016.05.10 11:23 integrity of this document High Court Chandigarh provide relief to that extent of expenditure. This ground of appeal is partly allowed.”

Learned counsel for the appellant-assessee has not been able to show any error in the findings recorded by the Tribunal on appreciation of evidence and relevant case law on the point, warranting interference by this Court. Thus, no substantial question of law arises. Consequently, the appeal stands dismissed. (Ajay Kumar Mittal) Judge April 26, 2016