Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI A.T. VARKEY, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Dr. A. L. Saini, AM:
The captioned appeal filed by the Revenue, pertaining to assessment year 2010-11, is directed against the order passed by the Commissioner of Income Tax (Appeal)-8, Kolkata, in appeal no. CIT(A), Kolkata-8/10141/2013-14, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the ‘Act’) dated 25/02/2013.
2 M/s Bengal Chemicals & Pharmaceuticals Limited Assessment Year:2010-11 2. The grounds of appeal raised by the revenue are as under:
1. That on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 3,96,03,000/- on account of prior period expenses made by the Assessing Officer, as the notes 1.9 (Schedule 23) states that income on expenses which arise in the current period as a result of errors of omissions in the preparation of financial statement of one or more prior period are considered in prior period adjustment account.
That the appellant craves to add delete or modify any of the grounds of appeal before or at the time of hearing.
3.The appeal filed for Assessment Year 2010-11, is barred by limitation by 63 days. The Revenue has moved a petition requesting the Bench to condone the delay. The Revenue explained the reasons for delay stating that order of the CIT(A) was received very late due to postal anomalies. We heard the party on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing.
Brief facts qua the issue are that the assessee filed its return of income on 07.10.2010 declaring total loss of Rs. 7,72,98,479/- and claimed refund of Rs. 1,45,678/-. The assessee’s case was selected for scrutiny through CASS. In course of assessment proceeding it was noticed by AO that the assessee company in its Profit and Loss account claimed a sum of Rs.3,95,52,000/-. The note No. 19 (Schedule 23) of the financial statements of the assessee company contains the details stating that income or expenses which arise in the current period as a result of errors of omissions in the preparation of financial statement of one or more prior period are considered in prior period adjustment account. The AO was of the view that the said prior period adjustment is not allowed, therefore he disallowedRs.3,95,52,000/-.
3 M/s Bengal Chemicals & Pharmaceuticals Limited Assessment Year:2010-11 The assessing officer also noticed that the assessee company debited an amount of Rs.376.46 lacs in its Profit& Loss account under the head Provision for Losses and written off. It was noted by AO that the above amount of Rs.376.46 lacs includes Rs.296.79 on account of Book Debts, amount of Rs.0.51 Lacs on account of Live Stock written off, and amount of Rs 79.16 lacs on account of stock. In computation the assessee company itself disallowed Rs.296.79 lacs being Provision for Book Debts and Rs.79.16 lac for stock. However, it has not added back provision for live stock of Rs 51,000/-. In notes to accounts (Schedule-23) CAG has mentioned that no depreciation is provided on livestock and the cost of same is written off in the year of death. The livestock is treated as capital asset by the assessee. When the livestock dies the value of capital asset should be reduced from the asset and the same cannot be debited in its Profit& Loss account, therefore AO disallowed Rs.51,000/-.
5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer observing the followings:
“5. Discussion, and, Decision.
4. Foremost - when the appellant has not claimed the expense - then disallowance just does not arise. The DCIT AO has stated that the amount had been debited to the P & L a/c - but what is the narration of that debit is not mentioned by the DCIT AO. It appears that the DCIT AO had just presumed - by reading of Note No. 1.9 of Schedule 23 - which is a usual general note to accounts. And, the issue of disallowance of prior-period expenses being a common item of disallowance in assessments. Even if it so - what matters in the end is the computation of income. When in the computation it has not been claimed/[or added back], then occasion for disallowance does not arise.
Then for alternative arguments sake - even if it were that deduction was claimed - it is allowable, as the errors of omissions in the accounts have been rectified; i.e., the liabilities had crystallized.
4 M/s Bengal Chemicals & Pharmaceuticals Limited Assessment Year:2010-11 6. Then, there are also technical deficiencies in the impugned assessment order.
5.3.1 The assessment is made u/s 143(3) — so, it is not the case of best judgment u/s 144, or,rejection of accounts u/s 145(3). That is, the return of income filed is technically not rejected. It is a valid return of income. 5.3.2 The DCIT AO has mentioned of CAG audit. [It should.be C&AG audit). Firstly, the appellant being a public sector undertaking, audit by C&AG is normal process. Then, of a revised statement of total income that was furnished during the assessment proceedings based on accounts audited by C&AG. On this aspect it was required to know what was the purpose of the C&AG audit - for usually there is specific purpose/objective of C&AG audit. In any case, from perusal of the summary comparative tableat page 1 of the impugned assessment order, it is just some interpolation between heads of accounting/income.
What matters - is the computation of income in the return of income. I direct the AO to delete the disallowance of Rs.3,96,03,000”/-
Aggrieved by the order of the ld. CIT(A), the revenue is in appeal before us.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We have gone through the findings of the ld. CIT(A), wherein the ld CIT(A) clearly stated that :
“Even if it so - what matters in the end is the computation of income. When in the computation it has not been claimed/[or added back], then occasion for disallowance does not arise.”
Therefore, ld CIT(A) rightly held that assessee had shown “prior period adjustment” in its books of accounts only but did not claim in its computation of income which he had offered for taxation purposes. Meaning thereby, that assessee has not claimed amount of “prior period adjustment”. Therefore, there is no any impact on the Revenue.That being so, we decline to interfere in the order
5 M/s Bengal Chemicals & Pharmaceuticals Limited Assessment Year:2010-11 passed by the ld. CIT(A), his order on this issue, is hereby accepted and the grounds of appeal raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 26.02.2020