2014 (3) TMI 527

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....on 28.10.2005 declaring total income at Rs. Nil. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 14.05.2007 and the total income was determined at Rs. Nil after adjustment of brought forward loss and depreciation. While framing the assessment, the A.O. had disallowed prior period expenses amounting to Rs. 48,40,856/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) vide order dated 12.10.2010 dismissed the appeal of the Assessee. Aggrieved by the order of CIT(A), the Assessee is now in appeal before us and has raised the following ground:- 1. On the facts and in the circumstances of the case, the departmental authorities have erred in treati....

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....ppellant's submission. Prior period expenses are allowable in the year in which the same are crystallized. As per the assessing officer's order, he allowed opportunities to the appellant to give details of prior period expenses and to prove as to how these expenses were crystallized during the year. Appellant has not given details to the AO as to how these expenses were crystallized during the year. No such details were filed in the appeal hearing also. In absence of details and vouchers etc, one cannot reach to the conclusion that these expenses were crystallised during the year. It is not at all in dispute that only those expenses which were crystallised during the current year are allowable but onus to prove that prior period exp....

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....tted that considering the business income of the Assessee which was in excess of Rs. 10 crore and due to practical difficulties, there was a possibility that some items of expenses spill over to next year. He further submitted that in the earlier years also the expenditure on account of prior period was disallowed by A.O. but the addition was deleted by by CIT(A) and the order of CIT(A) was also upheld by Hon'ble Tribunal. He therefore submitted that since the facts of the year under appeal are identical to that of earlier years, the expenditure be allowed. He further submitted that by claiming the expenditure in the current year, there is no effect to the tax as the same is tax neutral because had the expenditure been claimed and allow....

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....indings of CIT(A) where CIT(A) has noted that no such details were filed before CIT(A). He thus submitted that the A.O. was fully justified in making the disallowance. He thus supported the order of A.O. and CIT(A). 8. We have heard the rival submissions and perused the material on record. The dispute in the present case is allowability of prior period expenses. It is an undisputed fact that Assessee is a company and is mandatorily required under the Companies Act, 1956 to follow mercantile system of accounting for accounting of its expenditure and income. From the details of prior period expenses it is seen that major portion of prior period expenses is on account of interest expenses. Before us, it is submitted by ld. A.R. that the decis....