Ganges International Pvt. Ltd, Delhi vs Assessee

This is an appeal filed by the assessee against the order dated 23.02.2013 of CIT(A)-XV, New Delhi pertaining to 2009-10 assessment year on the following grounds:-

1. ""On the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.18,83,858/- made by the Assessing Officer on account of prior period expenses.

2. On the facts and circumstances of the case and in law, the Commissioner of Income tax (Appeal) erred in not allowing the set off of prior period expenses against prior period income.

3. On the facts and circumstances of the case and in law, the disallowance of expense of Rs.18,83,858/- confirmed by Commissioner of Income Tax (Appeal) is erroneous and the CIT(A) should have deleted the same."

2. The relevant facts of the case are that the assessee in the year under consideration returned an income of Rs.4,08,92,224/- by way of filing its return. The assessee is stated to be engaged in the business of manufacturing, Erecting & Commissioning of steel towers and structures. Considering the information available in the Tax Audit report clause 22(b), the AO required the assessee to explain the claim of prior period amounting to Rs. 21,73,839/-. Not convinced with the explanation, addition of the said 2 I.T.A .No.-3167/Del/2013

amount was made. In appeal before the First Appellate Authority the CIT(A) granted relief to the extent of Rs.2,89,981/-, consisting of the following expenses covered u/s 43B:-

(i) Taxes & duty Rs.2,00,783/- (ii) Professional Tax Rs.1,810/- (iii) Sales tax Rs.80,383/-

3. However the claim that if prior period expenses were to be disallowed than prior period income should not be taken into consideration was not accepted.

4. Aggrieved by this the assessee was in appeal before the Tribunal. Ld. AR inviting attention to copy of the ITR acknowledgement for the year under consideration available at pages 1 & 2 and also borne out from assessment order itself submitted that the assessee had returned an income of Rs.4.8 lacs odd in the year under consideration and in the immediately preceding assessment year 2008-09, the assessee had returned an income of Rs.7.88 crores odd as would be borne out from the copy of the ITR acknowledgement placed at page 3. On the basis of these facts it was his submission that Paper Book page 9 which is annexure 11 referred to in his disclosure of information as per clause No.-22(b) in the Tax Audit Report, it was his submission that it would show that the assessee had earned prior period income of Rs.14,22,710/- and incurred prior period expenses of Rs.21,73,839/- out of which part relief has been granted by the CIT(A). However looking at the nature of assessee's business it was his submission that a very small percentage of expenses has spilled over in the year and since they were incurred in the year under consideration the assessee has accordingly disclosed them. Inviting attention to judgement of the Jurisdictional High Court in the case of CIT vs Exxon Mobil Lubricant P. Ltd. [2010] 328 ITR 17 (Delhi High Court) copy placed at pages 1 to 4 of the Paper Book. On the basis of which it was his contention that similar treatment to prior period income and expenses should have been given. Inviting attention to CIT vs Vishnu Industrial Gases (Delhi High Court) 229 ITR 1988 dated 06.05.2008, it was his submission that once the tax rate was similar in both the years the Hon'ble High Court has held that the department should not fritter away its 3 I.T.A .No.-3167/Del/2013

energy as raising question to the year of taxability. Reliance was also placed upon DCIT vs Pasupati Spinning and Weaving Mills Ltd. (Delhi ITAT) ITR (Trib) 689 (Del) placed at pages 7-10 of Paper Book also for a similar proposition wherein the reliance was placed upon the decision of the Mumbai High Court in the case of CIT vs Nagri Mills. It was his submission that the expense should be allowed in the year under consideration and if it is held that they pertain to 2008-09 assessment year then the assessee would stand to gain a refund on which interest would have been payable for almost a year.

5. Ld. Sr. DR, Sh. Vivek Dudeja inviting attention to the impugned order submitted that the CIT(A) on facts has considered the plea of the assessee and in para 6.2 considering the prayer set out in para 5.2 allowed the relief. No such claim in regard to prior period income was set up by the assessee.

6. We have heard the rival submissions and perused the material available on record. A perusal of the same shows that at page 11 the assessee did set up its claim of similar treatment qua the prior period income and prior period expenses in para 5.2 and the CIT(A) at page 13 vide para 6.2 without going into any reasoning has rejected the claim. Considering the judicial precedent cited and the fact on record that in 2008-09 the assessee returned income of Rs.7.88 crores and in the year under consideration it is Rs.4.80 crores, we find looking at the peculiar facts and circumstances of the case that the claim of the assessee deserves to be allowed. Nothing has been placed on record to show why prior period expenses should be disallowed when prior period income has been taken into consideration. The tax rates for both the years under consideration continue to remain the same. In view of the above, we allow the grounds raised by the assessee and direct the AO to grant necessary relief.

In the result the appeal of the assessee is allowed.

The order is pronounced in the open court on 19th of February 2015.

Sd/- Sd/- (J.S.REDDY) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19/02/2015 *Amit Kumar* 4 I.T.A .No.-3167/Del/2013

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI