TaxTMI 
TaxTMI 
2022 (11) TMI 670
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....(3). The order was passed after taking into consideration all relevant data, legality and arguments on the issue for the allowability of such expense. 3) The appellant prays for granting such other relief as may be deemed just and proper by your Honours considering the factual and legal aspects of the case of the appellant." 3. Succinct facts are that assessee is engaged in business of construction activity during the year under consideration for the assessment year 2017-18 and filed its return of income on 17.10.2017, declaring loss to the tune of Rs.26,27,153/-. Thereafter, assessee`s case was selected for scrutiny under CASS and scrutiny assessment u/s 143(3) of the Act was framed on 16.12.2019 by accepting the returned income. 4. Later on, Learned Principal Commissioner of Income Tax-1 (in short "ld. PCIT"), has exercised his jurisdiction under section 263 of the Income Tax Act, 1961. The ld PCIT, on perusal of records, noticed that assessee-firm had claimed provision for construction expenses of Rs.45,22,435/- under the head direct expenses in the profit and loss account as well as in Income Tax Return. The ld PCIT was of the view that such provision for construction expen....
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.... the Act was issued upon assessee, which is placed at Paper Book pages 12-14. In response to the said notice, the assessee submitted its reply during the assessment proceedings along with working of closing working-in-progress, which is placed at Paper Book pages 15-19. The assessee also submitted before assessing officer, the copy of Tax audit report for A.Y. 17-18, which is placed at Paper Book pages 20-54. The assessee also submitted copy of ledger account pertaining to provision for construction expenses for A.Y 2017-18, which is placed at Paper Book page no. 55. Therefore, ld Counsel contended that assessing officer made adequate inquiry in respect of the issue raised by ld PCIT in the revision order under section 263 of the Act. 9. The Ld. Counsel, further argues that it is not the provision for construction expenses rather it is actual expenses, which is incurred by assessee, and for such expenses the assessee had received the bills and these expenses were paid at the beginning of subsequent year, thus it is actual liability. Therefore, these expenses cannot be considered under the head 'provision', although the assessee has used the word 'provision' by mistake. These expen....
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....aid in first week of April month, which falls in next accounting year, therefore assessee makes the provision for salary expenses of Rs.1,00,000/- in March month and debits these expenses in its profit and loss account. Hence such type of provisions are allowed in accounting system as well as in taxation law. However, we are aware that certain expenses are not allowed based on 'provisions' which are mentioned under section 43B of the Act. However, the example which we have mentioned above does not fall in the ambit of the items mentioned in section 43B of the Act. Therefore, the provision for expenses which are made by the assessee with 100% reliability should be allowed under taxation law also. For example, electricity expenses incurred by the assessee for the March month, however due date for payment of electricity bill is in April month, and it is really paid by the assessee in April month, which falls in next financial year, the provision for electricity expenses should be allowed, as these type of 'provisions', are made with reliable estimate and actual payments of these expenses are made at the beginning of the next financial year. 12. With help of the above cited examples, ....
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....ent to take a note here that the said amount claimed as expenditures during the year under consideration, which is exactly the same as has been reversed and reduced from the expenditures incurred on account of construction expenditures during the subsequent year i.e.F.Y 2017-18. Project Management Service Expenses of Rs.36,00,000'- The said amount was paid to M/s Swastik Infrastructures for rendering the project management services for the project undertaken by us. Copy of bills of the same are enclosed herewith under annexure-3.iii." 15. Thus, during the assessment proceedings, these expenses have been examined and scrutinized and question was asked by the Assessing Officer and the assessee has replied to the Assessing Officer. Therefore, we note that during the assessment proceedings, the assessee has submitted its reply stating that provision for construction expenditures (Flat Sale) of Rs.45,22,435/-, represent the proportionate expenditure apportioned to the units sold and this expenditure has been really paid in the subsequent financial year 2017-18. Therefore, these are the real expenses for which the assessee has made the provision and Assessing Officer examined the issu....