TMI Blog2017 (4) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... lar facts and circumstances of the case and that too when it is admitted that even subsequently the amount has neither been claimed by M/s OECC nor paid by Assessee. Hence the factum that it was really shown as accrued itself, become suspicious and doubtful unless Assessee show that the said accrual is genuine and followed. We find no reason to take a view in favour of Assessee. In the present case, at the time of assessment order, it is admitted position that amount of claim towards deduction, though such deduction was neither claimed by OECC nor paid by Assessee. Therefore, Assessing Authority found this amount as ingenuine or fictitious entry or inflated entry.In these facts and circumstances, we are of the considered view that even this question would justify an answer against Assessee - Income Tax Appeal No. 481-482 of 2005, Income Tax Appeal No. 694 of 2007, Income Tax Appeal No. 258 of 2016 - - - Dated:- 25-4-2017 - Hon'ble Sudhir Agarwal And Hon'ble Dr. Kaushal Jayendra Thaker, JJ. For the Appellant : Abhijit Banerjee,S.D. Singh. Manu Ghildyal For the Respondent : SC, R.K. Upadhyay, Ashish Agarwal ORDER ( Delivered by Hon'ble Sudhir Agar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly as under:- (i) Whether, the correctness or completeness of the accounts of the appellant could be questioned by the Tribunal when the assessing officer had himself not rejected the same under Section 145(2) of the Act and had not passed an order under Section 144 of the Act? 6. Assessee M/s Ema India Limited has two divisions namely Ema Division established in 1971 and Gehring Division established in 1987. Ema Division is engaged in manufacture of induction heating equipments/industrial hardening machines used in automobile industry, while Gehring Division manufactures honing machines used in manufacture of guns and other bored weapons. Gehring Division is established and located in industrially backward area of Kanpur Dehat which is a classified area for the purposes of 80-HH and 80-I of Act 1961. 7. In Assessment Years (hereinafter referred to as A.Y.'s) 1994-95, 1995-96, Ema Division earned loss while Gehring Division recorded net profit inasmuch as Ema Division showed net loss of ₹ 211.80 lacs and 41.70 lacs, respectively, while Gehring Division recorded net profit of ₹ 263.33 lacs and ₹ 211.80 lacs respectively. Assessee maintained single se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly allowed miscellaneous applications and earlier judgment dated 12.07.2005 was recalled for limited purpose for adjudicating ground nos. 5 and 3 in appeals for A.Y. 1994-95 and 1995-96 respectively. The subsequent order dated 06.07.2007 has been passed by Tribunal considering both these grounds and adjudicating the same against Assessee. Tribunal rejected appeals on these grounds also, hence remaining two appeals are in respect to the same matter though separately filed in view of aforesaid development. 15. We propose to consider substantial questions of law on which Appeals no. 258 of 2016 and 694 of 2007 have been admitted. Same relates to consideration of Section 145 which reads as under:- 145. Method of accounting (1) Income chargeable under the head Profits and gains of business or profession or Income from other sources shall be computed in accordance with the method of accounting regularly employed by the assessee: Provided that in any case where the accounts are correct and complete to the satisfaction of the Assessing Officer but the method employed is such that, in the opinion of the [Assessing] Officer, the income cannot properly be deduced there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on expenses relating to both the units were being debited irrationally more in the books of EMA Div., the argument of the acceptance of old practice does not help the case of the assessee. A Wrong cannot be claimed as 'Right merely because of the fact that it was not detected in the past. The facts and situation stands corrected from the day when the mistake is discovered. In the case of assessee, this is the situation. It had been continuing with wrong practice of debiting expenses relatable to Gehring India, only in the books of EMA Div. in the past and since the mistake has been discovered in asstt. year 1994-95, the correct facts should be brought on record now. The Authorised representative of the assessee also showed his inability to correlate each expenditure unit-wise in respect of apparently common services. Under the circumstances the vital question is as how to ascertain the reasonable expenses of each unit when most of them have been debited in the books of EMA Div. even though they are related to common services. In the given circumstances to arrive at the reasonable expenses relatable to both the units, the most reasonable method will be allocating the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonable method to arrive at the correct profits and gains. In the case of assessee, it is complete rejection of books of accounts and it is not the case where the apparent amounts mentioned in the books of account are sought to be revalued itemwise. 21. We therefore, confirm finding of Tribunal and answer substantial questions of law in Income Tax Appeal no. 258 of 2016 and Income Tax Appeal no. 694 of 2007 against Assessee. 22. Coming to the question regarding exemption under Section 80HH and 80-I in ITA no. 481 of 2005 and ITA no. 482 of 2005, we find that there is a finding recorded by Tribunal that Assessee conceded and it could not quantify actual amount of expenditure attributable to due unit it is entitled for deduction under Section 80HH and 80-I of Act 1961. That be so, the amount of deduction claimed by Assessee also has rightly been held unacceptable inasmuch as income of new unit cannot be said to have been correctly computed by Assessee. A.O., therefore after making appropriate computation has allowed deduction of modified amount. In view of admission on the part of Assessee's representative that it could not quantify actual amount of expenditure attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achines and spares etc. to various customers, the assessee company at the end financial year prepared a final list of customer wise invoices on which M/s OECC were entitled to commission and accordingly issued a credit note No. 7/93-94 dated 31.3.1994 alongwith the invoice wise detail of the calculation of commission just like neither disputed the existence of the above agency agreement nor the amount of sales affected through them. Sir, for reasons best knows to M/s OECC, they have deviated from their past practice of accounting for the gross commission receivable by them and they have relied upon an approx. figure early March 94 much before the final sale figure could be ascertained. At that time two or three of our major equipments were at the final stage; for completion of which by 31.3.1994 we were not sure and had not advised them accordingly. Even in that figure various sale or spares to various customers were not taken as they were really not material for the purpose of calculation of advance tax by M/s OECC. From the details of ₹ 14,14,735/- supplied by M/s OECC, your honour will observe that the amount of commission has been worked out at 2.70%, 2.85%, 3.60% an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not actually paid but simply 'incurred'. 30. Therefore, in normal course what has been claimed by Assessee justify an answer in its favour but in particular facts and circumstances of the case and that too when it is admitted that even subsequently the amount has neither been claimed by M/s OECC nor paid by Assessee. Hence the factum that it was really shown as accrued itself, become suspicious and doubtful unless Assessee show that the said accrual is genuine and followed. We find no reason to take a view in favour of Assessee. 31. In M/s Madras Industrial Investment Corporation Ltd. Vs The Commissioner of Income-Tax, Tamil Nadu-I, Madras, (1997) 225 ITR 802 (SC), Court said ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business, must be allowed in its entirety in the year in which it is incurred. 32. In the present case, at the time of assessment order, it is admitted position that amount of ₹ 10,26,491/- claim towards deduction, though such deduction was neither claimed by OECC nor paid by Assessee. Therefore, Assessing Authority found this amount as ingenuine or fictitious entry or inflated entry. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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