2017 (1) TMI 1808 - AT - Income Tax

Tax Appeal Dismissed for Unsubstantiated Expenditure Claim

Haryana State Electronics Development Corporation Ltd. Versus The DCIT, Panchkula

The appeal was against the addition of Rs. 7,37,186 as Prior Period Expenditure for the assessment year 2012-13. The Tribunal upheld the addition of Rs. ... Addition as Prior Period Expenditure - assessee is following mercantile system of accounting, the expenditure relating to prior period is not allowable in the current year - Prior Period Income was shown on account of excess interest as income on FDR - assessee submitted that out of Prior Period Expenses FBT expenses are not allowable expenses and this is not expenditure. Balance amount are the expenses received, have arisen, sanction, could not be estimated accurately in the previous year and have been paid during the year under consideration, hence, allowable expenditure HELD THAT:- Assessee did not argue with regard to Prior Period Expenses. In the absence of any argument and any challenge to the findings of authorities below, no interference is called for on this matter. The addition is, therefore, confirmed. Remaining addition CIT(Appeals) found from the submissions of the assessee that the claim of the assessee is based on the fact that in earlier years, the income from FDR was shown excessive, therefore, excess income declared in the earlier year was claimed as expenditure in assessment year under appeal - As admitted that assessee has not incurred any expenditure in this year on this amount and he was not able to satisfy as to how the excess income shown in earlier year can be claimed as expenditure in the current year. He has also not been able to satisfy as to under which provision of law the assessee shall be entitled for deduction on account of excess income shown in preceding assessment year. CIT(Appeals) was, therefore, justified in holding that in case any income has been shown in excess in any earlier year, the only reedy for the same is by revising the return for the said year. There is no provision under Income Tax Act to support the explanation of the assessee that such excess income can be claimed as expenditure in subsequent year. As assessee submitted that since assessee has no remedy now, therefore, assessee made a claim of reduction of the income by claiming it as expenditure. The submission of assessee is without substance and has no merit at all. Appeal of the assessee dismissed. Issues:Challenge to addition of Prior Period Expenditure.Analysis:The appeal was against the upholding of the addition of Rs. 7,37,186 as Prior Period Expenditure for the assessment year 2012-13. The assessee had debited this amount to the Profit & Loss Account. The Assessing Officer disallowed the expenditure as it related to a prior period and was not allowable in the current year under the mercantile system of accounting. The assessee submitted details of the Prior Period Expenses, including FBT expenses, and Prior Period Income from excess interest on FDR. The CIT(A) confirmed the disallowance of FBT expenses but noted that the balance expenditure lacked evidence of being arisen and sanctioned in the current year. The claim of excess income from FDR as expenditure in the current year was rejected as there was no such expenditure incurred in the current year. The CIT(A) stated that excess income shown in earlier years should be rectified by revising the return for that year and cannot be claimed as expenditure in a subsequent year.The Tribunal heard arguments from both parties and upheld the addition of Rs. 87,263 for Prior Period Expenses, as the assessee did not challenge this amount. Regarding the remaining addition of Rs. 6,49,923, the Tribunal found that the claim of excess income from FDR as expenditure in the current year was not valid. The assessee failed to provide a legal basis for claiming excess income as expenditure and could not justify the claim under any provision of the Income Tax Act. The Tribunal dismissed the appeal, stating that the claim had no merit and was filed without any valid reason. Although the Tribunal considered imposing costs due to the frivolous nature of the appeal, it refrained from doing so considering the small amount involved. Consequently, the appeal of the assessee was dismissed, and the order was pronounced in the Open Court.