TMI Blog2018 (6) TMI 1502X X X X Extracts X X X X X X X X Extracts X X X X ..... come, then, expenses are allowable expenditure. Assessee has offered both income as well as expenses. Therefore, AO is not correct in disallowing expenses selectively - we direct the AO delete the disallowance made on account of prior period expenditure. - decided in favour of assessee. - ITA No. 610/Hyd/2017 - - - Dated:- 27-6-2018 - Shri V. Durga Rao, Judicial Member And Shri S. Rifaur Rahman, Accountant Member Assessee by : Shri C.S. Subramanyam Revenue by : Shri M. Naveen ORDER Per S. Rifaur Rahman, A. M. This appeal filed by the assessee is directed against the orders of the learned Commissioner of Income-tax (A) 5, Hyderabad, dated 30/01/2017 for AY 2011-12. 2. Briefly the facts of the case are, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee preferred an appeal before the CIT(A), the CIT(A) following few case law as well as referring to the provisions of section 145 of the Act, confirmed the disallowance made by the AO by observing that AO restricted the disallowance of the amount against material consumed and administrative expenses of ₹ 32.20 lakhs out of prior period expenses as the very nature of these expenses indicates that these amounts are not crystalized during the year. 6. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: 1. The order of the learned Commissioner of Income Tax (Appeals) is against law, weight of evidence and probabilities of the case. 2. The order of the learned A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account were produced before him. He relied on the decision of the coordinate bench of this Tribunal in the case of Deccan Cements Ltd., in ITA No. 283/Hyd/1009 wherein it was held as under: 8. On a careful examination of the expenditure involved, we find that the expenses of the prior years claimed during this year, specifically relate to errors or omissions in the preparation of the Financial Statements of the earlier years. What is to be understood in the matter is that the basic assumption on which accounts are to be prepared is that the business is a going concern. It is not unnatural for large organizations to missout certain expense or income either inadvertently or otherwise. Whenever these omissions or errors come to the notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , raise disputes as to the year in which the deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different; but in the case of income of a company, tax is attracted at a uniform rate, and whether the deduction in respect of bonus was granted in the assessment year 1952-53 or in the assessment year corresponding to the accounting year 1952, that is in the assessment year 1953-54, should be a matter of no consequence to the Department; and one should have thought that the Department would not fritter away its energies in fighting matters of this kind. But, obviously, judging from the references that come up to us ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known, and, therefore, the liability for a bonus, and it could have been made at any time. The absence of an entry, therefore, does not appear to us to affect the question of whether the assessee was entitled to a deduction in respect of this amount of ₹ 1,80,000. The position appears to us to be made clearer when one turns to the prescribed form of return in Part IV whereof an assessee is to give particulars of income from a business, profession or vocation. The particulars consist, in the first instance, of profit or loss as per profit and loss account; then there are several items which have to be added to the figure of profits or deducted from the figure of loss; and then follow several items which are to be deducted from the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is not in dispute about the expenditure incurred by the assessee towards the concerned heads, but, his grievance is that the expenditure is not relating to the AY under consideration. We also notice that assessee has declared the net prior period adjustment as expenditure to the extent of ₹ 52.56 lakhs. At the same time, assessee has declared ₹ 87.44 lakhs as prior period revenue as sales and services , which also pertains to prior year and accordingly claimed relevant material consumption and administrative expenses to the extent of ₹ 32.20 lakhs. AO chose to disallow only the revenue expenditure as it is not incurred during current AY and accepted the income declared by the assessee, in fact, it is out of its core ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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