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TMI Blog2022 (6) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... es to whom the assessee has claimed to pay LC discounting charges and out of that 5 notices came back unserved but he had received replies through post from two companies- M/s. Micro Electronics and Spares and M/s. KJRS Trading Pvt. Ltd. to whom notices u/s. 133(6) were not served. Thus, it is evident that the replies supposed to be furnished by above two parties were not genuine and have been filed by the assessee itself but the Ld. CIT(A) completely ignored this vital information. 3. That the Ld. CIT(A) erred in law and facts in holding that identity and creditworthiness of five creditors to whom notices were not served had been established. 4. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on the facts in deleting the disallowance of Rs. 3,07,60,733/- claimed on account of LC Discounting Charges in the Revised Return filed for the AY 2011-12 without examining the genuineness of expenses and without examining whether the ten parties(suppliers) has claimed the above expenses in their returns of income or not. 5. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the assessment year 2011-12 at a loss of Rs. 21,40,272/- on 24.03.2012. The revision was on account of claim of LC charges of Rs. 3,09,34,407/- which had not been claimed in the original return. Your honour is requested to refer to the judgment of Apex Court in the case of M/s. Kedar Nath Jute Mills Ltd. 82 ITR 363 (SC) wherein the Apex Court laid down that any liability relating to the earlier year demanded in the current year is an allowable expense (copy enclosed). The assessee obtained an opinion in writing on the issue from Mr. Devrajan, Ex. Chairman of the Board of the Institute of Chartered Accountants of India before revising the return (Copy enclosed). Further your honour is requested to refer Accounting Standard-5, which says prior period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of financial statements of one or more prior periods. Prior period items are normally included in the determination of net profit or loss for the current period. An alternative approach is to show such items in the statement of profit and loss after determination of current net profit or loss. In either case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected. The assessee relied upon the judgment of M/s. Kedar Nath Jute Mills Ltd. 82 ITR 363 (SC) which is having quite distinguishable facts with respect to matter under consideration. 4. Against the order, assessee appealed before the ld. CIT(A). 5. The Ld. CIT(A) in great detail referred to additional evidences submitted by assessee, the remand report of the Assessing Officer and rejoinder by the assessee. While making the decision, the ld. CIT(A) observed as under:- "It is seen that appellant has claimed LC discounting charges amounting to Rs. 3,09,34,407/- by filing revised return of income on 24.03.2012. These discounting charges were pertaining to the ten parties who had supplied goods to the appellant on the condition of upfront payment or in advance. The suppliers had discounted the LC from their bank and credited the account of the appellant by the net amount received after deduction of discounting charges. On the other hand, the appellant had debited the account of ten parties with the LC amount with the presumption that the cost of discounting charges of LC would be borne by the suppliers. In view of the above, none of the parties had claimed the LC discounting ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs before the Assessing Officer, Ld. CIT(A) held that the same established that the assessee has paid discounting charges for making delayed payment the suppliers. Ld. CIT(A) also noted that assessee has filed copies of return of income filed by the suppliers. Ld. CIT(A) noted that transaction with these parties have been effected through the banking channels. Purchases made from these parties have been accepted by the Assessing Officer in the assessment order passed under section 143(3) itself. The Ld. CIT(A) noted that Assessing Officer has mentioned that replies have been received in the case of five parties directly and in the remaining five parties through Ld. AR of the assessee. Ld. CIT(A) accepted the assessee's explanation and he found it very intriguing that replies of five parties did not reach the Assessing Officer. He noted that assessee has not been able to furnish any response from one supplier and that in view of which the identity of the same has not been established. The Ld. CIT(A) accepted the assessee's plea that liability has crystallized and the same is liable to be accounted for the assessment year itself. In this regard, Ld. CIT(A) referred to assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Memorandum of Understanding with the ten suppliers on 21.02.2012. The disallowance of LC Discount charges paid to M/s, Asia Telecom Ltd. of Rs. 1,73,674/- is confirmed as appellant has not been able to establish its identity. However, the disallowance of LC discount charges paid to 9 suppliers of Rs. 3,07,60,733/- is deleted. 8. Ld. CIT(A) also referred to the decision of the Hon'ble Delhi High Court as under:- (a) CIT Vs. Exxon Mobil Lubricants Pvt. Ltd. 328 ITR 17 (Del) "Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Year in which deductible - Assessment year 2003-04 - In course of its assessment, Assessing Officer found that, although assessee had entered into an agreement in August, 2002 with 'E' Ltd. with retrospective effect, i.e., from 1-1-2002, yet it had incurred expenses during period January to March, 2002 and, thus, liability thereunder had crystallized during earlier previous year - Accordingly, Assessing Officer disallowed assessee's claim in respect of said expenses -Tribunal, however, allowed assessee's claim - On revenue's appeal, it was noticed that liability of assessee under agreement had accrued in August, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be dismissed. [Para 15]" The facts of the above cited judicial pronouncements are identical to the facts of the appellant's case, therefore, the ratio of the said judgment is squarely applicable in the case of appellant's case. Hence, the discounting charges for F.Y. 2009-10 and 2010-11 liability for which arose on 21.02.2012 has to be allowed on the basis of crystallization of liability which appellant has claimed by filing revised return of income and by producing necessary evidences before AO as well as appellate authorities. Hence, the claim of the LC discounting charges pertaining to nine parties is fully allowable." 9. Thereafter ld. CIT(A) referred to certain other case laws and concluded as under:- "The facts of the above cited judicial pronouncements are identical to the facts of the appellant's case, therefore, the ratio of the said judgments is squarely applicable in the case of appellant's case and looking to the facts of these judicial pronouncements the claim of the appellant of LC discounting charges in respect of nine parties is fully justified and same is allowed. In the result, this ground of the appellant is partly allowed." 10. Agains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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