TAMILNADU INDUSTRIAL DEVELOPMENT CORPORATION LIMITED,CHENNAI vs. ACIT CORPORATE CIRCLE 3(1), CHENNAI

This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-11, Chennai in dated 20.03.2019. The assessment was framed by the ACIT, Corporate Circle 3(1), Chennai for the assessment year 2013-

The first issue raised by assessee is as regards to the order of CIT(A) confirming the action of AO in reopening the assessment u/s.147 r.w.s. 148 of the Act. For this, assessee has raised grounds that no new tangible material was available and not reason to believe or no evidence of any information that income chargeable to tax escaped assessment. The grounds raised are argumentative and exhaustive and hence, need not be reproduced.

At the time of hearing, the ld.counsel for the assessee has not made serious argument on this and hence, the same is dismissed as not argued.

The next issue on merits is as regards to the order of CIT(A) confirming the addition made by AO on account of prior period adjustment amounting to Rs.3,27,13,672/-. For this, assessee has raised various grounds which are argumentative and exhaustive and hence, need not to be reproduced.

Briefly stated facts are that the AO noticed from the financials of the assessee company that the net profit as per profit & loss account declared is Rs.78,66,83,197/-. He noted that the assessee reduced prior period adjustment of Rs.3,27,13,672/- and according to AO, prior period adjustments are not allowable. The assessee argued before the AO that as per accounting standard, the claim had to be made only in the assessment for the assessment year 2013-14 though the other party M/s. TRIL Info Park Ltd., Taramani reversed the entry in ledger account of assessee as appearing in TRIL Info Park Ltd., books to the extent of Rs.3,32,77,415/- towards excess PMC accounted earlier now reversed in the account of assessee for the remuneration from the project and such income has already been offered to tax in earlier years. Hence, according to assessee, reversal of the said amount by TRIL Info Park Ltd., has already offered to tax in earlier years was claimed as prior period adjustment to the extent of Rs.3,27,13,672/-. The AO after considering the submissions has not agreed with the claim of assessee and made addition of this prior period adjustment of Rs.3,27,13,672/- by observing in para 8 as under:- “8. I have considered the arguments. As may be seen from the e-mail, the said party had actually reversed the entry during the previous year relevant to the assessment year 2012-13 itself and not during the previous year relevant to the assessment year under consideration. As this is not (due to reversal of income) relating to the assessment year 2013-14, this is not allowed.

The CIT(A) also confirmed the action of AO by observing in para 8 as under:- “8. The assessee company does not appear to have objected to any contents of the mail and sought any clarification. The mail received has been accepted in total and the assessee seeks to reverse revenue offered to tax in earlier year. It is also interesting to note here that the mail claimed receive don 21.06.2013 is actually in Assessment year 2014-15 but claimed in the return filed for Assessment year 2013-14. The evidence brought on record by the assessee is patchy, inadequate, flimsical and grossly unacceptable. The revenue offered for tax in an earlier year cannot be reversed in a later year. This would lead to violation of matching principle of receipts and expenses. It would also result in skewed declaration of taxable income for the year. The objections of the assessee are rejected. The disallowance of prior period adjustment is seconded.”

Before us, the ld.counsel for the assessee submitted that a joint venture agreement was entered between TamilNadu Industrial Development Corporation, the assessee ie., TIDCO and M/s. TRIL Info Park Ltd., (TIPL) on 24.03.2018 and service agreement was entered into on 20.12.2010. As per this service agreement, TIPL agreed to pay service charges to the assessee @ 2% on the service

On a query from Bench, the ld.counsel for the assessee drew our attention to the copy of e-mail received by one of its executive on 21.06.2013, which is reproduced in CIT(A)’s order para 7 and the same is being reproduced as it is:- From : Biju Job [bjon@tata.com] Sent : Thursday, June 7, 2018 3:08PM To : accounts. tidco @nic. in Subject : FW: TIDCO- service charges Attachments: PMC_TIDCO.xlsx

On the other hand, the ld. Senior DR relied on the order of CIT(A) and that of the AO.

We have gone through the facts and circumstances of the case and noted that TIPL has reversed the entry in assessee’s ledger account as appearing in TIPL’s books of accounts to the extent of Rs.3,32,77,425/- towards PMC accounted earlier and now reversed. We noted that the assessee has already accounted for the remuneration from the project and such income has already been offered to tax in earlier years and subsequent to reversal of the said amount, such income was already offered to tax has been claimed as prior period adjustment. In our view, this claim is allowable

In the result, the appeal filed by the assessee is partly- allowed.