TMI Blog2014 (3) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter is remitted back to the CIT(A) for fresh adjudication for disallowance of expenditure – Decided in favour of Assessee. Disallowance of business expenditure – Held that:- The FCI issued certain show-cause notices and a substantial amount has already been recovered by the FCI – thus, the CIT(A) was not justified in disallowing the entire expenditure and the order of the CIT(A) on the issue is set aside to verify in respect of those expenses which have been accepted by the assessee as his liability during the year under consideration and payment thereof recovered by the FCI - In respect of the expenses, where FCI has rejected the representation of the assessee, such expenditure be allowed in the year in which representation of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notices raised by FCI during the year. Ld.CIT(A) failed to appreciate the fact that the liability being acknowledged through correct accounting entries still proceeded to enhance the returned income by disallowing the claim of expenses treating the same as contingent liability. This action of ld.CIT(A) not taking into consideration totality of the facts and enhancing the income ought to be quashed and expenses claimed be allowed. 3. Ld.CIT(A) erred in law and on facts confirming part disallowance of various expenses made by AO holding them to be personal in nature. Ld.CIT(A) ought not to have confirmed 10% of such adhoc disallowance in absence of any evidence of personal nature brought on record by AO. 4. Levy of interest u/s.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow were not justified for making the addition. He submitted that both the authorities have failed to appreciate the fact that owing to uncertainty of income, the assessee has not recognized as revenue in profit and loss and on the basis of 'real income principle' in the year under appeal. He relied on the decision of Hon'ble High Court of Delhi in the case of Devsons (P.) Ltd. vs. CIT, reported in 196 Taxman 21. He submitted that the Hon'ble High Court of Delhi in the said case has held that even if the appellant is following mercantile system of accounting, concept of real income has to be considered and to support this observations, references to the various decisions of Hon'ble High Courts and Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The ld.CIT(A) has given finding on fact that since the supplementary claim was not accepted by the FCI that the income did not accrue during the year, hence the same cannot be taxed during the current year. The Revenue has not challenged this finding by filing a cross-appeal, therefore this finding of the ld.CIT(A) remains uncontroverted. Now, we have to examine whether the ld.CIT(A) was justified in disallowing the proportionate expenditure of Rs.8.25 crores. We find that the ld.CIT(A) has observed that in the absence of the assessee providing any fair estimate of expenditure, the net profit shown in the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability. The ld.counsel for the assessee submitted that the ld.CIT(A) has misconstrued the decision of Hon'ble Gujarat High Court rendered in the case of Alembic Chemical Works vs. DCIT reported at 133 taxman.com 833 (Guj.). He submitted that ld.CIT(A) was not justified in holding that the nature of liability was contingent. 6.2. On the contrary, ld.CIT-DR submitted that the ld.CIT(A) was justified as it has been categorically observed that the assessee himself has not accepted the liability. 7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The undisputed fact remains that the FCI issued certain show-cause notices and a substantial amount of Rs.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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