TMI Blog2012 (1) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the fact that assessment was completed under scrutiny u/s 143(3) of the Act after the due application of mind, making detailed enquiries and after examination of various replies/information and discussion with the AO during the course of assessment proceedings. As such, the version of the worthy CIT-I. Ludhiana that the order is not only erroneous but also prejudicial to the interest of the revenue as same has been passed due to lack of Enquiry and application of mind on the part of the AO, is not correct. 3. That without prejudice to the above grounds of appeal even otherwise on merits, that the Worthy CIT-I, Ludhiana has erred in holding that the Premium paid on Keyman Insurance policy is to be allowed on accrual basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- out of insurance premium paid related to the year under appeal while the remaining sum, i.e., ₹ 26,38,356/- related to subsequent years. After hearing the assessee, the CIT disallowed a sum of ₹ 26,38356/- with the following observations:- 4.4 As regards the next argument raised by the assessee that a premium paid cannot be bifurcated on accrual basis the same is also found to be not valid. In this case policies have been issued on 15.2.2005 or 18.2.2005 for a validity of one year subject to payment of further premium. Since expense has been incurred for the period beyond 31.3.2005 the same cannot be held to be allowable in AY 2005-06 relevant to previous year 2004-05. In mercantile system of accounting only those ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is an allowable expense however, it is reiterated that it is only allowable to the extent it is relatable to the period falling in the relevant previous year under assessment as discussed in para 4.4 above. 5 From the above discussion it has been found that order of the AO is erroneous as far as it is made on incorrect assumption of facts as well as incorrect application of law. Further, since the same has resulted into allowance of expenses which were not allowable otherwise, the same is prejudicial to the interest of revenue also. Hence, proceedings u/s 263 are held to be maintainable and as discussed in para 4 above expenses of ₹ 26,38,356/- are hereby held to be not allowable and thus added to the total income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
