TMI Blog2014 (1) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs.30 lakhs - Preparation of memoranda accounts would lend clarity in the matter – the matter remitted back to the AO for fresh adjudication - the onus to prove its case with reference to uncertainty and its resolution would be on the assessee - the offer of income pertaining to a preceding year/s on cash basis, would not justify non accounting of income for the current year, or even for a preceding year, which though not received, yet stands accrued during the current year - there could be no option for following a mixed system of accounting and, two, the income not offered to tax on accrual basis, would not preclude it being brought to tax on receipt basis (even for an assessee following accrual method) inasmuch as the same falls w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax (Appeals) erred in confirming the disallowance of the entire Prior Period expenses while fully taxing the Prior Period Income." 2. At the outset it was submitted that both the issues are covered by the earlier orders of the Tribunal. For Ground No.1, reference was made to the order of the Tribunal dated 27/02/2013 in ITA No.6832/Mum/2011, wherein the same issue was restored to the AO. The relevant portion from the said order is reproduced below: "2. The appeal raises two issues per its two grounds. Vide its first ground, the Revenue disputes the deletion of the addition in the sum of Rs.30 lakhs by the Assessing Officer (A.O.). The brief facts in respect thereof are that the assessee is a company engaged in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. We have heard the parties, and perused the material on record. The Revenue s stand that it is not permissible for the assessee to adopt different methods of accounting, but has to choose exclusively from either cash or mercantile, cannot be disputed in view of s.145 of the Act (as substituted by Finance Act, 1995). The assessee being a company is even otherwise obliged to follow only accrual method of accounting, so that even the said option is not available to it, which though stands exercised in favour of accrual method, of course with the exception of the afore-referred two items of income, and which is the subject matter of lis in the instant case. The Notes to the Accounts , forming part of the annual accounts, seek to justify th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ularly charged thereto, and for which they are contractually bound. Besides, the figures itself suggest of the payments being received in the regular course of business. Of course, the same cannot or ought not to lead to a double tax, which we find to be the basis of the order by the ld. CIT(A). However, his order in effect endorses the practice being adopted by the assessee, which again is not acceptable. Further, in the absence of any details, it is not possible to say as to how much of Rs.78.18 lakhs offered by the assessee as income for the current year on receipt basis is in relation to the current year, toward which the A.O. has estimated a sum of Rs.30 lakhs. Perhaps, preparation of memoranda accounts would lend clarity in the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ope of income u/s. 5 of the Act. We decide accordingly." 3. So as it relates to issue raised under Ground No.2, reference was made to order dated 11/2/2011 in ITA No.5761/Mum/2008 for assessment year 2004-05. The relevant portion is reproduced as under: "6. Ground No.2 relates to deletion of disallowance of Rs.92,81,341 on account of prior period expenses: 7. The Assessing Officer noted that the assessee has made prior period adjustment of Rs.61.25 lakhs during the year. In response to Assessing officer s query as to why prior period expenses should not be disallowed in entirety, it was submitted by the assessee that the details of prior period expenses and income which have been netted off is as per the ledger account and on ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2008-09 similar issue was decided in favour of the assessee vide order dated 27/02/2013 in ITA No.6832/Mum/2011 vide para.4 as under: "4. The second issue is in respect of disallowance of prior period expenses in the sum of Rs.1,83,433/-. The same being admittedly prior period expenditure, being so specified in the assessee s accounts, we do not find any infirmity in the same, i.e., in principle. However, the ld. CIT(A) has found, as a matter of fact, that the expenses stand so claimed only on the basis of crystallization. Where an expenditure is disputed or indeterminate, liability in its respect, to the extent of dispute, would arise only in the year of resolution of the dispute. In view thereof, we find no infirmity in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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