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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, HON’BLE & SHRI SONJOY SARMA, HON’BLE
O R D E R
PER SONJOY SARMA, JM:
This appeal of the assessee for the assessment year 2017-18 is directed against the order dated 19.12.2022 passed by the ld. Commissioner of Income-tax, Appeals, NFAC, Delhi [hereinafter referred to as ‘the ‘ld. CIT(A)’].
Brief facts of the case are that assessee filed its return of income for the A.Y. 2017-18 disclosing total income of Rs. 1,31,82,040/-. The case of the assessee was selected for scrutiny through CASS followed by notices issued u/s 143(2) and 142(1) of the Act. In response to the notices issued by AO, assessee filed its submission before the AO and the ld. AO after considering the submission of the assessee found that payment of gift not co-related with the 2 M/s. Humara India Credit Co-operative Society Limited A.Y. 2017-18 business of the assessee. Assessee had failed to provide any valid explanation with documentary evidence before the AO. Therefore, the ld. AO added Rs. 5,00,150/- to the income of the assessee. Similarly, the ld. AO noticed that assessee has paid employees contribution of provident fund late into the relevant fund. Therefore, disallowed a sum of Rs. 92,41,011/- in the hands of assessee and added to the income of the assessee. In view of the provisions of section 2(24)(x) of the Act read with section 36(1)(va) of the Act. The ld. AO also noticed that the assessee has failed to deposit TDS relating to certain expenses made during the year. During the assessment proceedings, assessee has offered 30% of alleged expenses of Rs. 2,11,22,41,001/- to tax before ld. AO by filing revised computation vide letter dated 25.10.2019 disallowance u/s 40(a)(ia) of the Act, ld. AO partly taking into consideration of revised computation filed by the assessee.
Dissatisfied with the above order, assessee went into appeal before the ld. CIT(A) where the appeal of the assessee was partly allowed. In relation with addition made by AO of Rs. 2,11,22,41,001/- u/s 40(a)(ia) of the Act stating as under: “6.2.1 It is seen from a comparison of the expenses selected by the AO for resorting to disallowance u/s 40(a)(ia) and expenses in the revised computation by the appellant, that the AO has accepted everything in the expenses disclosed by the appellant except Trademark charges amounting to Rs 11,00,000. This seems to be a typographical omission by the AO as there is no discussion about the same in the order. However, it is seen that though the AO has taken the disallowance mostly as per the appellant's revised computation, he has not accepted the revised loss. This has led to a peculiar acceptance of the appellant's revised computation. As decided in the earlier grounds, the Starting point
3 M/s. Humara India Credit Co-operative Society Limited A.Y. 2017-18 for various disallowance will be Returned income of Rs 1,31,82,040/-. However, as the cooperative educator's expenses is held as Rs. 7,64,61,912/- as per discussions above, the disallowance of 30% is to be computed on Rs. 7,64,61,912/- u/s 40(a)(ia) and not on Rs. 698,05,77,629/-. This discussion determines the total expenses for /Section 40(a)((a) to be Rs.13,77,87,620/-, accordingly the disallowance is restricted to Rs 4,13,36,286/- instead of Rs 2,11,22,41,001/- in the assessment order. Appeal is partially allowed on this ground. 6.2.2 Further, the AO is also directed to non consideration of revised computation of Income submitted during assessment proceedings and rely on the audited books of accounts for the year under consideration. Therefore, this ground of appeal of the appellant has PARTLY ALLOWED for statistical purposes.”
4. However, issue relation to expenses of revised computation filed by the assessee before the AO was dismissed by ld. CIT(A) passing his order in following manner: “5.2.3 The issue is partial acceptance of revised computation by the ld. AO in the assessment order. As discussed above, the appellant returned taxable income of Rs1.31,82,040 and then filed a revised computation reducing to a huge loss of Rs506,36,772,155. However, Honourable Supreme Court has decided in the Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC) that such revision can be done only through revised return of Income during the assessment proceedings. Therefore, the AO's decision in this regard is partially confirmed. As decided by various cases quoted above by the appellant, this can be adjudicated in the appellate proceedings. Accordingly, it is seen from the "note on accounts to the audited financial statements "for the relevant financial year 2016-17 that the appellant society follows the mercantile system of accounting and recognizes Income and Expenditure on accrual basis. This is clearly stated in Part I clause 3. In respect of the Cooperative Educators Expenses, this expense was claimed to the tune of Rs. 7,64,61,912/- in the audited books of accounts of the appellant society and the same was debited in the Profit and Loss account (P &L Account). Later during the assessment proceedings, appellant society has revised its computation of income and enhanced the aforesaid expense to Rs. 726,58,87,107/-. The additional quantum of Rs 718,94,25, 195 has been recognized as an "Cooperative educator's expenses deferred during the year" in the audited books of accounts. Once certain items are classified as assets under the head "Long term loans and advances" in the balance sheet, the same
4 M/s. Humara India Credit Co-operative Society Limited A.Y. 2017-18 cannot be claimed as "revenue" items without, convincing logic. The appellant has also not furnished any documentary evidences to corroborate such huge expenses, which is almost 100 times the claim in P & L account. It is not proved how such expenses have accrued during the relevant financial year The appellant society 's attempt to paint a picture of profit in its audited accounts which are duly disclosed to its members and then claim huge loss before Income Tax authorities cannot be accepted, If indeed such huge expenses have accrued during the relevant FY 2016- 17,nothing prevented its management and the auditor to recognize the same in its financial accounts, which by its own admission follows mercantile system of accounting. The current year proceedings cannot be compared with previous AY 2016-17 proceedings, in which case, loss returns were filed, whereas in the current year, Return showing positive income is filed. Principle of RESJUDICATA does not apply to Income Tax proceedings. Therefore the revised computation is not accepted as far as the revised claim on Cooperative Educator's expense is concerned. Accordingly, the AO is directed to consider the Cooperative Educators Expenses to the tune of Rs. 7,64,61,912/- (as per the audited books of accounts) instead of Rs.698,05,77,629/- as per revised computation submitted during assessment proceedings. Appeal is rejected on these grounds. Therefore, the Ground nos. 2, 3 & 7 are DISMISSED.”
Aggrieved by the above order, assessee is in appeal before the Tribunal raising multiple grounds of appeal. However, the main grievance of the assessee is that ld. CIT(A) has confirmed the action of the assessing officer by not considering the revised computation filed by the assessee during the course of assessment proceeding. He stated that it is the duty of the assessing officer to tax the correct income of the assessee in accordance with provisions of Income-tax Act. The contention of AR is that the assessee during the year under consideration incurred Cooperative Educator’s Expenses of Rs. 726,58,87,107/- and out of said expenses 7,64,61,912/- was debited to profit and loss account as Cooperative Educator’s Expenses and balance Rs. 718,94,25,195/- was treated as deferred
5 M/s. Humara India Credit Co-operative Society Limited A.Y. 2017-18 revenue expenditure which was capitalized in books of account under the head of long term loans and advances. During the assessment proceedings before the ld. AO, assessee has furnished revised computation of income treating the entire Cooperative Educator’s Expenses as revenue expenditure and requested the ld. AO considering the same assessed the correct income of the assessee accordingly. However, ld. AO while passing the order did not accept request made by assessee before him and after making several disallowances assessed the income of the assessee at Rs. 213,51,64,202/-. However, the ld. AO while disallowance u/s 40(a)(ia) of the Act made in the case of assessee has accepted the revised computation. Doing so, the claim of the assessee to treat the Cooperative Educators Expenses as revenue expenses was not at all considered by ld. AO while passing the assessment order. Even in the entire assessment order fact remained silent on the issue of accepting or rejecting of the revised computation of income as claimed by the assessee before him. Similarly, the ld. CIT(A) while adjudicating the issue did not consider the issue relating to the revised computation of income and simply dismissed the ground taken by the assessee. Therefore, the ld. AR stated that it has been judiciously settled that the appellate authorities are entitled to consider a claim of the assessee and adjudicate the same. Reliance is placed on the judicial pronouncements in the case of CIT vs Pruthvi Broers and Shareholders Pvt. Ltd. 349 ITR 336 (Bom) (HC) (para 14 page no. 26) of the said judgment. The ld. AR also stated that the ld. CIT(A) dismissing the ground 6 M/s. Humara India Credit Co-operative Society Limited A.Y. 2017-18 of appeal held that assessee himself treated the expenditure in its books of account as deferred expenditure and once it is classified as assets under the head “Long Term Loans and Advances” in the balance sheet, the same cannot be claimed as revenue. In this regard, ld. AR submitted that it has been judicially settled that if the assessee is entitled to treat a sum as revenue expenditure, then that legal right is not self-estopped by the treatment given to it in the books of account. He brought to our notice to the judgment rendered by the Jurisdictional High Court as in the case of CIT vs Berger Paints (India) Limited, 254 ITR 503.
We, after hearing the rival submission and perusal of material available on record find that assessee has filed revised computation of income before the AO while framing the assessment order. However, the claim of the assessee was not considered by AO. Similarly, while passing the impugned order, the ld. CIT(A) has also stated that the assessee society has revised computation of income enhancing the claim of expenses to Rs. 7,26,58,87,107/- qua Cooperative Educator’s Expenses deferred during the year. He held that once certain items are classified as assets under the head of long term loans and advances, the same cannot be claimed as revenue items without any convincing logic and even the assessee has not furnished any documentary evidence to corroborate huge expenses which was almost hundred times the claim in profit and loss account. Assessee has also failed to prove as to how such expenses have accrued during the relevant financial year.
7 M/s. Humara India Credit Co-operative Society Limited A.Y. 2017-18 7. We, therefore, considering the findings given by the authorities below and submissions of the parties, find it necessary to set aside the issue raised before the bench to the file of AO with the direction to re-consider the claim of assessee by passing a speaking order on the issue involved by considering all necessary submissions made by the assessee before him after affording reasonable opportunity of being heard to the assessee. In terms of the above, the appeal of the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 23.04.2024.