Premier Ltd, Mumbai vs Assessee
- CitationI.T.A. No.3097/Mum/2012
Ratio decidendi
The rule this decision rests on
The assessee's claim for deduction of prior period expenses cannot be decided on the material before the tribunal, because the assessee failed to furnish copies of the bills before the Assessing Officer to show that they were received only in the year under consideration, and failed to establish that the amount was immaterial so as to excuse the absence of a provision for known liabilities. Where a claimed deduction rests on the timing of receipt of bills for services availed in earlier years, the claimant must substantiate that timing with the relevant documents before the assessing authority. In the interest of natural justice, where the claimant has had no adequate opportunity to substantiate such a claim before the Assessing Officer and the revenue does not object, the appellate authority may set aside the order of the first appellate authority on the issue and restore the matter to the Assessing Officer with a direction to examine the claim afresh in light of the explanations and documents the assessee furnishes.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
BEFORE HON'BLE S/SHRI H.L. KARWA, PRESIDENT AND B.R.BASKARAN (AM) सव ी एच.एल. कावा, अ य एवं बी.आर.बा करन, लेखा सद य
आयकर अपील सं./I.T.A. No.3097/Mum/2012 ( नधारण वष / Assessment Year :2008-09)
PREMIER LIMITED, बनाम/ Dy. Commissioner of Income Tax 58 Nariman Bhavan, Vs. Circle 3(2), Nariman Point, Mumbai. Mumbai-400021 (अपीलाथ /Appellant) .. ( यथ / Respondent)
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIRNo. :AAACT5523G
अपीलाथ ओर से / Assessee by : Shri Jayesh Dodia यथ क ओर से/Respondent by : Shri Neil Phlip.
सन ु वाई क तार ख / Date of Hearing : 31.12.2014 घोषणा क तार ख /Date of Pronouncement : 07.01.2015
आदे श / O R D E R Per B.R.BASKARAN, Accountant Member:
The assessee has filed this appeal challenging the order dated 14.03.2012 passed by Ld CIT(A)-4, Mumbai and it relates to the assessment year 2008-09. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the disallowance of prior period expenses of Rs.14,15,000/-.
2. The Ld Counsel appearing for the assessee submitted that the assessee had claimed a sum of Rs.14,15,000/- as 'Prior period expenses' in its Profit and Loss account and the same related to the services availed by the assessee from some of the parties. He submitted that the assessee had, in fact, received the bills during the year under consideration and hence it claimed the same as expenditure of the current year. However, since the services were availed in the immediately preceding year, the assessee had categorized it as "Prior period 2 ITA No.3097/M/12
expenses' in the Profit and Loss account. He submitted that the assessee should be allowed deduction, since the relevant bills were received during the year under consideration and hence it got crystallized only during the year under consideration.
3. The Ld D.R, however, submitted that the assessee could not substantiate its claim that the relevant bills were received during the year under consideration only. He further submitted that the assessee had availed the services in the earlier years and hence this expenditure relates to those years only and not to the year under consideration.
4. We have heard the rival contentions and perused the record. The undisputed fact remains that the assessee had availed services relating to the impugned claim of Rs.14.15 lakhs in the earlier years and hence, in the normal course, the assessee should have claimed the same in the relevant years. It is also quiet possible that the assessee could not have received the bills at that point of time. In this kind of situation, the accounting prudence requires making of necessary provisions for known liabilities. It appears that the assessee has failed to make provisions also. Now the claim of the Ld A.R is that the assessee had received the relevant bills only during the year under consideration. It is also the claim of the assessee that the volume of business of the assessee is huge and hence the amount of Rs.14.15 lakhs turns out to be a very small amount vis- à-vis its magnitude of expenses. Hence, according to Ld A.R, the assessee had accounted for the expenses whenever the bills were received. In accounting practice the materiality concept is also one of the main ingredients in making provisions for known liabilities and losses. However, we notice that the assessee has failed to substantiate its claim by furnishing copies of bills before the AO in order to substantiate its claim that the bills were received by it only during the year under consideration and further the above said amount was also not material enough warranting making of provisions. When these aspects were pointed out, the Ld A.R submitted that the assessee may be given one more opportunity to substantiate these points. The Ld D.R did not object to the plea made by Ld A.R. 3 ITA No.3097/M/12
5. In view of the above, we are of the view that the assessee may be, in the interest of natural justice, be provided with one more opportunity to substantiate its claim. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the matter to the file of the AO with the direction to examine the claim afresh by duly considering the information and explanations that may be furnished by the assessee and take appropriate decision in accordance with the law.
6. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
The above order was pronounced in the open court on 7th Jan,2015.
घोषणा खुले यायालय म दनांकः 7th Jan 2015 को क गई ।
sd sd (एच.एल. कावा/ H.L. KARWA) (बी.आर. बा करन,/ B.R. BASKARAN) अ य / PRESIDENT लेखा सद य/Accountant Member मब ंु ई Mumbai: 7th Jan, 2015.
व. न.स./ SRL , Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु त(अपील) / The CIT(A)- concerned
4. आयकर आयु त / CIT concerned
5. वभागीय त न ध, आयकर अपील य अ धकरण, मब ुं ई / DR, ITAT, Mumbai concerned
6. गाड फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई /ITAT, Mumbai
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