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2016 (3) TMI 916 - ITAT AHMEDABAD

2016 (3) TMI 916 - ITAT AHMEDABAD - TMI - Penalty u/s 271(1)(c) - disallowance from prior period expenditure - CIT(A) deleted the penalty - Held that:- There is no dispute on facts. It appears that the assessee received a salary credit. It would accordingly debit a net prior period expenditure. The Assessing Officer held that it ought to have added back gross prior period expenses instead of net amount. The CIT(A) holds that there is revenue implication as the same is only rearrangement exercise .....

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any new evidence being discovered in the course of scrutiny, the same cannot be perceived as an instance of furnishing of inaccurate particulars of income. CIT(A) has rightly deleted the impugned penalty arising from disallowance from prior period expenditure. - Decided in favour of assessee

Section 35D disallowance - Held that:- It is to be seen that this amount has arisen because of giving consequential effect to appeals and revisions in assessee’s own case in the preceding assessm .....

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an act of furnishing of inaccurate particulars of income.- Decided in favour of assessee

Excess remuneration paid to assessee’s Managing Director - Held that:- The assessee had claimed total remuneration of ₹ 68,23,940/- pending approval from the Govt. of India. The relevant particulars pertaining to the relevant post facto approval aspect already forms the part of the paper book at page 130. The ld. authorized representative states in the course of argument that this approval o .....

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e Act. - Decided in favour of assessee - ITA Nos. 2668 to 2671/Ahd/2011 - Dated:- 18-2-2016 - Shri Anil Chaturvedi, Accountant Member and Shri S. S. Godara, Judicial Member For The Revenue : Shri Anil Kr. Bhardwaj, Sr. D.R. For The Assessee : Shri S.N. Soparkar with Shri Himanshu Shah, A.R. ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- These four Revenue s appeals for A.Y. 1998-99 to 2001-02, arise from order of the CIT(A)-XI, Ahmedabad dated 19-08-2011 in appeal no. CIT(A)-XI/179, 180, 181 & .....

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; 15,03,940/- in assessment year 1998-99. The second assessment year 1999- 2000 raises a solitary ground pertaining to penalty on disallowance on excess remuneration to Managing Director of a sum of ₹ 9 l acs. The third assessment year 2000-01 involves penalty arising from prior period disallowance allowance of ₹ 25,89,158/-. The last assessment year 2001-02 raises two effective grounds of penalty emanating from disallowances of prior period expenditure of ₹ 42,92,983/- and u/s .....

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nction on facts is pointed out. We treat ITA 2668/Ahd/2011 as the lead case. The relevant facts are set out as under. We have heard rival contentions. The ld. representatives reiterate their respective pleadings for and against the impugned penal action. 4. The assessee-company manufactures IV fluids and syringes. The Assessing Officer completed reassessment in its case on 28-02- 2005 disallowing prior period expenditure adjustment of ₹ 1,20,32,904/-, section 35D deduction of ₹ 14,00 .....

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270-03-2009 inter alia that it was already a loss making entity. And the same stood reduced on account of above stated disallowances. It denied to have concealed or furnished inaccurate particulars of income. The assessee clarified that it was a case of mere disallowance without either of the two component embedded therein. Lack of any malafide intention was also highlighted. The Assessing Officer in his penalty order dated 31-03- 2009 referred to chronology of quantum events for coming to the c .....

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on of a claim of expenditure or deduction does not amount to furnishing of inaccurate particulars of income. He proceeds to deal with each of the three disallowances. The lower appellate discussion on the issue of penalty qua prior period expenses disallowance of ₹ 1,20,32,904/- reads as follows:- (B) Disallowance of prior period expenses of ₹ 1,20.32,904/- It is seen that the Assessing Officer has made this addition of ₹ 1.20,32,904/- vide Para No.7 of the assessment order dat .....

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he assessee has received a credit of ₹ 1,20,32,904/- under the head salary. In view of these facts, the assessee has debited a net prior period expenses of ₹ 15,13,07,385/- ( 16,30,10,2897- 1,20,32,904/-) in the P & L a/c. The Assessing is of the view that the assessee should have added back gross prior period expenses of ₹ 16,34,10,285/- in the computation of income instead of prior period expenses of ₹ 15,13,07,385/- and in the process it had claimed excess expenses .....

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accepted that the gross prior period expenses of ₹ 16,34,10,289/- needs to be added back in the computation. The natural fall back of this exercise will be that gross prior period expenses of ₹ 16,34,10,289/- should be debited in the P&L a/c. and credit receipts of ₹ 1,20,32,904/- should go in the credit side of the P&L a/c. This credit of ₹ 1,20,32,904/- is set off by the fact that the assessee has added Net prior period expenses of ₹ 15,13,77,385/- in the .....

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d expenses of ₹ 15,13,77,385/-. Thus, this tantamount to disallowance of expenses of ₹ 1,20,32,904/-. ; The penal provisions are not attracted on the disallowance of expenses as discussed in para 5 of this order. Since, no new income, has come into existence as a result of this exercise, and at best it is a disallowance of expenses, accordingly penalty is not attracted on this addition. In view of above, penalty imposed on an addition of ₹ 1,20,32,904/- is ordered to be deleted .....

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nt for the year ending on 31- 03-1998 that it has already disclosed the impugned netting exercise. We reiterate that the instant case is that of furnishing of inaccurate particulars of income as held by the Assessing Officer (supra). We observe in these facts that once the assessee has disclosed all the true and correct particulars leading to mere re-computation of disallowance of prior period expenditure without any new evidence being discovered in the course of scrutiny, the same cannot be per .....

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ts reveals that the same have been recognized on various dates from 01-04-2005 to 31-03-2006. There is hardly any dispute on genuineness aspect of the above stated expenditure heads. This is not the Revenue s case that the same is capital expenditure otherwise not allowable u/s. 37 of the Act. Both the lower authorities nowhere rebut assessee s case that it has been following past practice or the issue stands decided in its favour in earlier assessment years. Case law (1958) 33 ITR 681 (Bom) CIT .....

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) 221 TAXMANN 80 (Bom) CIT vs. Mahanagar Gas Ltd supports assessee s case that prior period expenditure crystallize during the year on receipt of bills is allowable. This is followed by (2010) 328 ITR 17 (Del) CIT vs. Exxon Mobil Lubricants Pvt. Ltd upholding CIT(A) s and tribunal s view that if the assessee admits prior period income which was not excluded while working out relevant previous year income, it is unreasonable to allow one part of prior period adjustment i.e. prior period expenditu .....

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ceding assessment years. The same relate to preliminary and preoperative expenditure written off. The initial claim was for ₹ 1,11,62,284/-. The Assessing Officer took clue from appeal orders and revisions for re-computing the same to be of ₹ 14,00,936/- after allowing expense of ₹ 97,61,348/-. We hold in these facts that the assessee s books raised the impugned claim in tune with that made in the earlier assessment years. We are of the view that such a course of action cannot .....

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