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2016 (7) TMI 1687 - AT - Income TaxDisallowance of prior period expenses - AO made disallowance by observing that for the prior period expenses cannot be allowed as assessee is following mercantile system of accounting and that the assessee has not submitted any basis for determination as to when they crystallized - assessee as regularly followed same system of accounting - assessee submitted that assessee has submitted all the details pertaining to the expenses claimed under the head ‘prior period expenses’. No case has been made out that any voucher is missing or that expense is not genuine, branches spread over a vast area. The assessee is debiting the expenses split over to the subsequent years and the Assessing officer had been allowing the same - HED THAT:- As system of accounting of the assessee has been regularly accepted by the Department in the past. There is no change in the facts and circumstances of the case. It has also been submitted that necessary details were duly submitted before the Assessing officer that all of the expenses are supported by proper vouchers and supporting evidence. It is not the case of the AO that any short coming has been noted in the vouchers. This is also not the case that any distortion in profit has been observed as compared to preceding year in view of the above said expenditure. In these circumstances, in our considered opinion, the Revenue has no cogent reason why the prior period expenses claimed by the assessee which have been consistently so claimed and allowed by the Department in earlier years should be disallowed in the current year. The case laws referred by assessee above duly support the above proposition. In this regard we may gainfully refer to the Hon'ble Delhi High Court decision in the case of CIT Vs. Jagjit Industries Limited [2010 (9) TMI 58 - DELHI HIGH COURT] held that if a particular accounting system has been followed and accepted and there is no acceptable reason to differ with the same, the doctrine of consistency would come into play. The said accounting system has been followed for a number of years and there is no proof that there has been any material change in the activities of the assessee as compared to the earlier years. Nothing has been brought on record to show that there has been distortion of profit or the books of account did not reflect the correct picture in the absence of any reason whatsoever, there was no warrant or justification to depart from the previous accounting system which was accepted by the department in respect of the previous years. This system of accounting has been regularly followed and the Department has not disputed about this in the past. We also agree with the contention that the Assessing Officer has clearly erred in drawing adverse inference on the crystallization of these expenditures. It is not the case of the AO that any voucher of the assessee company has been found to be Jacking credibility. Thus assessee appeal allowed.
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