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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI SANJAY ARORA & SHRI G. PAVAN KUMAR
आदेश /O R D E R
Per Sanjay Arora, AM:
This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-8, Chennai (‘CIT(A)’ for short) dated 21.01.2016, partly allowing the assessee’s appeal contesting it’s assessment u/s. 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the Assessment Year (AY) 2003-04.
2 Mira Textiles and Industries (India) Ltd. v. ITO 2. This is the second round before the Tribunal; it, on the earlier occasion, setting aside the order of the first appellate authority, remanded the matter back to the Assessing Officer (AO) to pass a fresh order (in ITA No.970/Mds/2009 dated 04.09.2009/copy on record). We have perused the said order; the same is an open set aside for passing a fresh order after allowing the assessee appropriate opportunity of being heard and considering the evidences/materials produced by it before the first appellate authority, and contains no specific directions as such. The issues in this appeal would, accordingly, arise for being considered on merits. We shall proceed ground-wise.
Ground 1 challenges the impugned order for being passed contravening the principles of natural justice. No contention qua this Ground stands raised before us, with the ld. AR, on being questioned in the matter, conceding the same. The same is accordingly dismissed as not pressed.
Grounds 2 & 3 are in respect of disallowances qua sales-tax and purchase- 4. tax respectively, disallowed for the reason of the same pertaining to earlier years, i.e., AYs. 2002-03 and 2001-02 respectively. The demands admittedly arising in the earlier years, whereat no provision was made by the assessee, the same came to be disallowed, and confirmed in appeal on the same basis, i.e., the expenditure being established as relating to a prior period.
We have heard the parties, and perused the material on record. We are wholly unable to appreciate the controversy. The impugned sums are admittedly taxes, an expense specified in section 43B of the Act. The same, a non obstante provision, provides for, irrespective of the method of accounting followed by the assessee, a deduction in respect of the sums specified therein only on actual payment, i.e., where they are otherwise allowable. The exception is for payments which pertain to the relevant year, in which case the payment could be, without inviting disallowance, made by the due date for filing the return of income for that year. The taxes in the present case admittedly pertain to earlier years, so that the 3 Mira Textiles and Industries (India) Ltd. v. ITO said exception is inapplicable. There is also no dispute qua the same being otherwise allowable. Deduction in their respect would, therefore, irrespective of the year to which they pertain, stand to be allowed only on payment basis. And, further, for the year/s of payment/s. The determinative fact would therefore be the year/s of payment/s and not the year/s to which the taxes pertain or even the year/s of their determination. Even as the assessee before us claims the payments to have been made during the current year, the AO, at page 3 of his order (in the first round) – and which finding has neither been confirmed nor rebutted, states that the claim even for the current year is made on due basis only. The ld. CIT(A) has also not rendered any finding in respect of the contrary assertions by the assessee and the assessing authority, and which can only be on the basis of evidence led by the assessee. We, accordingly, direct for deduction qua the impugned taxes subject to their payment – and to the extent thereof, during the relevant year, which fact the AO shall verify, issuing definite findings in the matter. The onus to prove its claims would though be clearly on the assessee. We decide accordingly.
Grounds 4 & 5 raise, again, the same issue, and are therefore taken up together for adjudication. The same is in respect of prior period expenses not covered by section 43B. The expenditure admittedly pertains to the earlier years/s, even as classified in the assessee’s audited accounts. Each year is a separate and independent unit of assessment, so that the income for that year could be/is to be brought to tax for that year alone (refer, inter alia, CIT v. British Paints India Ltd. [1991] 188 ITR 44 (SC)). The income and, consequently, expenditure in relation thereto, in-as-much as income only implies net of expenditure, relating to a particular period, could only be assessed for that year. The plea by the assessee with regard to the genuineness of the expenditure, or of the same having been determined only upon an in-depth verification of the accounts, is of no consequence; rather, confirms the expenditure as pertaining to an earlier period/s only. It is not a case, we may add, where the expenditure is disputed and the liability there-against crystallizes only in the relevant year. Rather, even in such a 4 Mira Textiles and Industries (India) Ltd. v. ITO case, the liability, to be extent admitted, would stand to be claimed and deducted for the relevant year only, with the Accounting Standard-I, notified by CBDT u/s. 145A of the Act, as well as the AS-1 issued by ICAI, stipulate, following the conservatism principle, which is a fundamental accounting assumption, provision for all known liabilities. We may also clarify that we are deciding the issue in principle, based on admitted facts. And that the rejection of the debit notes issued by one of the parties, M/s. Krishna Enterprises, which is also one of the grounds for disallowing the assessee’s claim, has not prevailed with us. The said debit notes have not been verified by the Revenue, so that their rejection, merely on the basis of their appearance, which stands explained by the assessee as on account of having been issued afresh in view of the old record being not available etc., would be of no moment. We decide accordingly, dismissing the said Grounds.