ITO, New Delhi v. M/s Food Corporation of India, New Delhi

ITA 191/DEL/2011 | 2006-2007
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 19120114 RSA 2011
Assessee PAN AAACF0365N
Bench Delhi
Appeal Number ITA 191/DEL/2011
Duration Of Justice 5 month(s) 26 day(s)
Appellant ITO, New Delhi
Respondent M/s Food Corporation of India, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 08-07-2011
Date Of Final Hearing 22-06-2011
Next Hearing Date 22-06-2011
Assessment Year 2006-2007
Appeal Filed On 13-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 191(DEL)/2011 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER FO OD CORPORATION OF INDIA WARD 11(3) VS. 1 6029 BARAKHAMBA ROAD NEW DELHI. NEW DELHI. PAN-AAACF0365N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KRISHNA CIT DR RESPONDENT BY : S HRI HARISH KAPOOR C.A. ORDER PER K.G. BANSAL : AM THE ONLY SUBSTANTIVE GROUND TAKEN UP BY THE R EVENUE IN THIS APPEAL IS THAT THE LD. CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS. 4 66 68 000/- BEING PRIOR PERIOD EXPENSES. 2. IT WAS THE ADMITTED POSITION OF BOTH THE PART IES THAT THE ISSUE STANDS COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF IN ITA NO. 546(DEL)/2011 AND C.O. NO. 71(DEL)/2011 FOR ASSESSMENT YEAR 2003-04 DATED 13.04.2011 A COPY OF WHICH HAS BE EN PLACED IN THE PAPER BOOK ON PAGE NOS. 28 TO 44. THE EXPENSES INVOLV ED ARE THE SAME AND THE ITA NO. 191(DEL)/2011 2 LD. CIT(APPEALS) HAS ALSO GIVEN A SPECIFIC FI NDING THAT THERE IS NO CHANGE IN THE NATURE OF BUSINESS OR METHOD ACCOU NTING FOLLOWED BY THE ASSESSEE IN THIS YEAR WHEN COMPARED WITH EARLIER YEARS. THE TRIBUNAL ALLOWED THE DEDUCTION OF PRIOR PERIOD EXPENSES B Y MAKING FOLLOWING OBSERVATIONS IN PARAGRAPH NO. 16 OF THE ORDER:- 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. IT HAS ALREADY BEEN POINTED OUT IN THIS ORDER THAT DURING THE COURSE OF ORIGINA L ASSESSMENT PROCEEDINGS THE AO HAD REQUIRED THE ASSESSEE TO FUR NISH EXPLANATION WITH REGARD TO ALLOWABILITY OR OTHERWIS E ALL THE EXPENSES RELATING TO THE PREVIOUS YEARS. THE ASSES SEE HAD SPECIFICALLY REPLIED THE SAID QUERY AND A FULL DETA IL OF FIGURES WERE GIVEN AND MENTION WAS MADE WITH REGARD TO DETA ILS AVAILABLE AT PAGES 70 TO 71 OF THE ANNUAL REPORT AP PENDED WITH THE RETURN OF INCOME. IT MAY BE MENTIONED HERE THA T SCHEDULE V HAS ALREADY BEEN REPRODUCED IN THE ABOVE PART OF TH IS ORDER WHICH IS APPEARING AT PAGE 70 & 71 OF THE ANNUAL RE PORT AND IN THE SAID DETAIL ALL ENTRIES HAVE BEEN DESCRIBED AND THE INCOME HAS BEEN COMPUTED IN THE SAID SCHEDULE AT 2 274.18 LAKHS AND EXPENSES HAVE BEEN WORKED OUT AT RS. 928.05 LAKHS L EAVING NET INCOME OF RS. 1 346.13 LAKHS. THUS WHAT HAS BEEN CLAIMED BY THE ASSESSEE WITH REGARD TO EARLIER YEARS ADJUSTMEN T IS A NET INCOME OF RS. 1 346.13 LAKH AND THUS INCOME HAS BE EN ADDED BY THE AO IN RESPECT OF PREVIOUS YEARS. IT CANNOT BE SAID THAT AO HAD REQUIRED THE ASSESSEE TO EXPLAIN THE DETAILS OF ONLY 2 93 000/- AND NO ENQUIRY WHATSOEVER WAS MADE BY TH E AO WITH REGARD TO OTHER EXPENSES INCURRED BY THE ASSESSEE R ELATING TO EARLIER YEARS. THUS THERE IS NO FORCE IN THE CONT ENTION OF LD. DR THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PR OCEEDINGS THIS ISSUE WAS NOT RAISED BY THE AO AND NO REPLY WA S GIVEN BY THE ASSESSEE IN THAT REGARD. ENTIRE DETAIL IS SUBJ ECT MATTER OF PRINTED ANNUAL REPORT OF THE ASSESSEE WHICH IS A GO VERNMENT OF INDIA UNDERTAKING AND THE ACCOUNTS ARE DULY AUDITED . IT CANNOT ITA NO. 191(DEL)/2011 3 ALSO BE SAID THAT THE VERACITY OF THESE ENTRIES WAS SUBJECT MATTER OF DOUBT BY THE AO EITHER DURING THE COURSE OF ORIG INAL ASSESSMENT PROCEEDINGS OR DURING THE COURSE OF REAS SESSMENT PROCEEDINGS. THESE HAVE BEEN ONLY DISALLOWED ON TH E BASIS THAT THESE CANNOT BE ALLOWED AS PER MERCANTILE SYSTEM OF ACCOUNTING. HERE IT HAS BEEN THE CASE OF THE ASSE SSEE THAT IT IS A HUGE ORGANIZATION AND CERTAIN ITEMS OF INCOME OR EXPENDITURE ARE NOT CRYSTALLIZED DURING THE YEAR TO WHICH THEY ARE RELATE. AS A MATTER OF PRACTICE WHEN THEY ARE CRYSTALLIZED THE Y ARE CONSIDERED AS INCOME OR EXPENDITURE WHATEVER THE CA SE MAY BE. IT IS ALSO EVIDENT FROM THE EARLIER ASSESSMENTS THA T SUCH PRACTICE IS ADOPTED BY THE ASSESSEE IN ALL THE EARLIER YEARS WHERE THE ADDITIONS WERE EVEN MADE SUBJECT MATTER OF APPEAL. DURING THE YEAR UNDER CONSIDERATION IT IS NOT THE CASE OF THE AO THAT THE CONTENTION OF THE ASSESSEE THAT THESE WERE CRYSTALL IZED DURING THE YEAR WAS NOT CORRECT. IN ABSENCE OF ANY SUCH MA TERIAL TO CONTROVERT SUCH CONTENTION OF THE ASSESSEE IT CANN OT BE SAID THAT THE ADDITION CAN BE SIMPLY MADE FOR THE REASON THAT ACCORDING TO MERCANTILE SYSTEM OF ACCOUNTING AS TH E EXPENSES DOES NOT RELATE TO THE YEAR UNDER CONSIDERATION TH EY CANNOT BE ALLOWED. IF THE SAME VIEW IS ADOPTED THEN PROBABLY THE INCOME RELATING TO EARLIER YEARS ALSO CANNOT BE CONSIDERED AS INCOME OF THE CURRENT FINANCIAL YEAR WHICH IN THE PRESENT CA SE FOR THE YEAR UNDER CONSIDERATION IS MUCH MORE THAN THE PRI OR PERIOD EXPENSES. THEREFORE NO CASE HAS BEEN MADE OUT BY THE REVENUE TO CONTEST THE DELETION MADE BY THE CIT(A). THE O RDER OF CIT(A) DELETING THE ADDITION IS UPHELD. NOW COMING TO THE CROSS OBJECTION OF THE ASSESSEE IT IS ALREADY EXPL AINED THAT THE AO HAD REQUIRED THE ASSESSEE TO EXPLAIN THE ALLOWAB ILITY OF THE EXPENSES RELATING TO EARLIER YEARS AND ASSESSEE HAD SUBMITTED THE REPLY. THE REQUISITE DETAILS WERE PLACED AT RE CORD. THUS THE CASE OF THE ASSESSEE CLEARLY FALLS UNDER THE FO UR CORNERS OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. EICHER LTD. (SUPRA). THE SAID CASE WAS RELIED UPON BY THE ASSESSEE BEFORE THE LD. CIT(A). HOWEVER LD. CIT(A ) HAS IGNORED THE SAID DECISION AND HAS UPHELD THE VALIDI TY OF REASSESSMENT PROCEEDINGS ON THE BASIS OF DECISION O F HONBLE DELHI HIGH COURT IN THE CASE OF CONSOLIDATED PHOTO & FINVEST LTD. VS. ACIT (SUPRA). AS ALREADY POINTED OUT THAT THE SAID DECISION WAS LATER ON CONSIDERED BY HONBLE DELHI H IGH COURT ITA NO. 191(DEL)/2011 4 IN THE CASE OF K.L.M. ROYAL TOUCH AIRLINES VS. ADIT (SUPRA) AND IT WAS OPINED THAT THE VIEW TAKEN IN CONSOLIDAT ED PHOTO WAS CONTRARY TO THE FULL BENCH DECISION IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) AND HENCE COULD NOT BE RELIED UPON. SIMILAR VIEW HAS BEEN EXPRESSED IN THE DECISION OF CIT VS. EICHER LTD. THEREFORE IN OUR CONSIDERED OPINION LD. CIT(A) HAS COMMITTED AN ERROR IN UPHOLDING THE VALIDITY OF REASSESSMENT PROCEEDINGS AND HIS ORDER ON THIS ISSU E IS REVERSED AND SET ASIDE. THE CROSS OBJECTIONS FILE D BY THE ASSESSEE ARE ALLOWED. 3. RESPECTFULLY FOLLOWING THIS DECISION THE APPE AL OF THE REVENUE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8 JULY 2011. SD/- SD/- (RAJPAL YADAV) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 08.07.2011. SP SATIA COPY OF THE ORDER FORWARDED TO:- FOOD CORPORATION OF INDIA NEW DELHI. ITO WARD 11(3) NEW DELHI. CIT CIT(APPEALS) THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.