TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 916
X X X X Extracts X X X X
X X X X Extracts X X X X
....state at the outset that Revenue's pleadings raised in the instant batch of four cases challenge the lower appellate order inter alia deleting section 271(1)(c) penalties arising from disallowances of prior period expenditure of Rs. 1,20,32,904/-, section 35D of Rs. 14,00,936/- and the one pertaining to excess remuneration paid to Managing Director amounting to Rs. 15,03,940/- in assessment year 1998-99. The second assessment year 1999- 2000 raises a solitary ground pertaining to penalty on disallowance on excess remuneration to Managing Director of a sum of Rs. 9 l acs. The third assessment year 2000-01 involves penalty arising from prior period disallowance allowance of Rs. 25,89,158/-. The last assessment year 2001-02 raises two effectiv....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The assesse strongly contested this proposal. It submitted in its written submission dated 270-03-2009 inter alia that it was already a loss making entity. And the same stood reduced on account of above stated disallowances. It denied to have concealed or furnished inaccurate particulars of income. The assessee clarified that it was a case of mere disallowance without either of the two component embedded therein. Lack of any malafide intention was also highlighted. The Assessing Officer in his penalty order dated 31-03- 2009 referred to chronology of quantum events for coming to the conclusion that the assessee's action in claiming prior period expenses, section 35D deduction and excess remuneration to its Managing Director (supra) amounte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....16,30,10,2897- - 1,20,32,904/-) in the P & L a/c. The Assessing is of the view that the assessee should have added back gross prior period expenses of Rs. 16,34,10,285/- in the computation of income instead of prior period expenses of Rs. 15,13,07,385/- and in the process it had claimed excess expenses of Rs. 1,20,32,904/-. This sum was added to the income of the assessee in the assessment order and subsequently penalty was also imposed on this sum of Rs. 1,20,32,904/-. I have considered the facts very carefully and sincerely feel that the facts are not correctly appreciated by the A.O. It is a fact that the assessee had debited a net prior period expenses of Rs. 15,13,07,385/-in the P & L a/c. and added the same back in the computation of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... given our thoughtful consideration to rival arguments. There is no dispute on facts. It appears that the assessee received a salary credit. It would accordingly debit a net prior period expenditure. The Assessing Officer held that it ought to have added back gross prior period expenses instead of net amount. The CIT(A) holds that there is revenue implication as the same is only rearrangement exercise of expenses. We further find from case 119 forming assessee's profit and loss account for the year ending on 31- 03-1998 that it has already disclosed the impugned netting exercise. We reiterate that the instant case is that of furnishing of inaccurate particulars of income as held by the Assessing Officer (supra). We observe in these facts th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....accepts consistent accounting practice claiming identical expenditure in mercantile system of accounting wherein the necessary expenditure vouchers have been received after 31st March of the relevant accounting period. Case law (2014) 221 TAXMANN 80 (Bom) CIT vs. Mahanagar Gas Ltd supports assessee's case that prior period expenditure crystallize during the year on receipt of bills is allowable. This is followed by (2010) 328 ITR 17 (Del) CIT vs. Exxon Mobil Lubricants Pvt. Ltd upholding CIT(A)'s and tribunal's view that if the assessee admits prior period income which was not excluded while working out relevant previous year income, it is unreasonable to allow one part of prior period adjustment i.e. prior period expenditure." We adopt t....