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TMI Blog2022 (7) TMI 1525X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, the assessee has raised following grounds:- GROUND NO. 1 The learned CIT(A), erred in upholding the order u/s 154 of the Income Tax Act, 1961, passed by the Ld. Income Tax Officer, since it is passed without a proper consideration and appraisal of the facts of the case. An incorrect and improper order has been passed without considering the appellants contentions. It is capricious in nature and has been made ignoring the genuine facts, with an intention to punish the appellant, and should be quashed and annulled. GROUND NO. 2: The Ld. CIT (A) erred in upholding addition of Rs. 17,72,730/- on account of prior period expenses, made by the Learned Income Tax Officer, without a proper consideration of the underlying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d expenses and addition of Rs. 60,243, on account of loss of sale of RMC, by observing as under:- "On going through the records, it was observed that assessee has debited prior period expenses of Rs. 17,72,730/- to P&L Account, however, the expenses related to prior period are not allowable, Hence, the same are required to be disallowed. Further, assessee has also debited Rs. 60,243/- on account of loss on sale of RMC. The same being capital in nature is also required to be disallowed. Hence, in order to rectify the above mistakes which were inadvertently allowed, a notice u/s 154/155 of the I.T. Act was issued and served on the assessee company intimating the above proposed additions. The notice u/s 154/155 dated 30.03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n brought on record to substantiate its claim. Hence, ground of appeal no. 2 relating to the addition on account of prior period expenses of Rs. 17,72,730/- is dismissed. 8. The ground of appeal no. 3 relates to the addition on account of loss on sale of RMC amounting to Rs. 60,243/- Even though several notices are issued, the appellant has not responded and filed any written submissions in support of loss on sale of RMC of Rs 60.243/- debited to P&L A/c. It has to be mentioned here that reasonable opportunity of being heard was afforded to the appellant and there has been no proper compliance which shows that the appellant has no interest to pursue the appeal. The said notices have been duly served online on the appellant. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o one was present for the department. However, an adjournment application from the department was placed on record but looking to the issue involved in this appeal, we find it proper to dispose of this appeal as well established proposition of law was involved herein. 13. It is not in dispute that prior period expenses and depreciation 60% on the computer items has been disallowed by the AO by way of order passed under sec. 154 of the Act. It is also not in dispute that originally, the assessment was completed under sec. 143(3) of the Act, which was revised in pursuance to the order passed under sec. 250 of the Act. Section 154 provides that with a View to rectifying any mistake apparent from the record an Income-tax authority referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rior period expenses debited in the profit & loss account, the AO has to examine and verify the nature of these expenses and then to ascertain as to when the assessee's liability to pay these expenses has actually been crystallized so as to allow the same as deduction in case where the assessee follows mercantile system of accounting. In other words, the issue regarding allowability or otherwise of prior period expenses can only be decided by making full investigation and examination of the nature of expenses and then it can be decided only after a due process of reasoning given by any authority. In this view of the matter, the allowability of prior period expenses or otherwise, cannot be a subject matter of a mistake apparent from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. In these circumstances, we, therefore, hold that allowability or otherwise of prior period expenses claimed in the profit & loss account is a debatable matter and, therefore, it does not come within the purview of sec. 154 of Act." 10. The Hon'ble Supreme Court in T.S. Balram, ITO v/s Volkart Brothers, [1971] 82 ITR 50 (SC) held that for initiating proceedings under section 154 of the Act, the mistake apparent from record must be an obvious and patent mistake and not something which can be established by long drawn process of reasoning on points on which there may conceivably be two opinions. In view of the above, as is evident from the facts available on record, the issue of prior period expenses, inter-alia, on which rectificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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