TaxTMI 
TaxTMI 
2023 (10) TMI 1268
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....e of Maharashtra. The assessee had filed its return of income dated 28.09.2012, declaring loss of Rs. 1179,96,17,308/- and had filed a revised return of income dated 01.11.2013 declaring total loss of Rs. 2909,14,51,735/-. The assessee's case was selected for scrutiny and notice u/s. 143(2) and 142(1) of the Act were issued and served upon the assessee. The ld. A.O. then passed the assessment order dated 29.03.2015 determining the total income at Rs. 323,64,17,918/- by making various additions/disallowances. 4. Aggrieved, the assessee was in appeal before the ld. CIT(A) who had partly allowed the appeal filed by the assessee. 5. The assessee is in appeal before us challenging the order of the ld. CIT(A) in upholding the disallowance of net prior period expenditure debited under the head 'prior period expenses' made by the ld. A.O. on the ground that the assessee has failed to furnish the evidences to substantiate that the prior period expenses claimed by the assessee has crystallized during the impugned year. 6. The learned Authorised Representative ('ld. AR' for short) for the assessee contended that the issue of prior period expenses has been allowed in assessee'....
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....to substantiate the crystallization of the said amount during the year under consideration. 10. The ld. AR for the assessee has relied on the decision of the Tribunal in earlier years where the said claim of the assessee has been allowed on identical facts. The relevant extract of the said finding in DCIT vs. Maharashtra State Electricity Board (in ITA No. 3813/Mum/2009 vide order dated 17.02.2021 for A.Ys. 2001-02 to 2003-04) has been extracted hereunder for ease of reference: 4. We have heard rival submissions and perused the materials available on record. We find that assessee is a State Government undertaking engaged in generation and distribution of electricity. We find that the ld. AO by placing reliance on the figures mentioned in the tax audit report submitted by the assessee under the head 'prior period expenses' / 'prior period income', sought details of the same during the course of assessment proceedings. The assessee furnished the details of prior period income and prior period expenses which are duly tabulated by the ld. AO in page 5 of his order. The assessee earned prior period income of Rs. 84,48,47,317/- and prior period expenditure of Rs. 944,00,69,76....
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.... that MSEB has got a system of proper Internal, Control and pre-audit. Further, it has got separate department headed by Director of Internal Audit for regular Internal Audit and Inspection under the D.O.I.A. for Inspection work and there are number of Inspection teams attached to circle offices for carrying out regular Inspection work. Ld.AR of the appellant mentioned that appellant's audit is conducted by CAG. In spite of above at the instant of the Government Audit, certain items of expenses and Income pertaining to earlier period are required to be accounted for. These items are nothing but spill over of the earlier period and which were not considered while submitting returns for the earlier period. MSEB Accounts thus prepared in keeping with the rules of Electricity (Supply) (Annual Accounts) Rules 1985 prescribed under section 69 of the Electricity Supply Act, 1948 and C.A.G. also accepts this accounting system. 8.4 The appellant further submitted that the total income of the appellant required to be computed was in accordance with the method of accounting regularly followed by it as laid down by the provisions of sec. 145 of the Income-tax Act, 1961. In this co....
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....x / short provision - Rs. 156,66,42,865/- Documents were filed evidencing the fact that the aforesaid items have been suo-moto disallowed. 8.9. I have carefully considered the submissions of the Ld.AR and gone through the material brought before me. First of all, if the appellant has worked out the loss computed as per return of income after disallowing and adding back short provisions for income tax amounting to Rs. 156,66,42,865/- and short provision of depreciation amounting to Rs. 31,02,01,481/-, the same two items cannot be added back again to the returned loss which has been adopted by the AO. The AO is directed to verify and make necessary corrections in this regard. 8.10 So far as the other items are concerned, the treatment given to them is according to the guidelines framed for preparing the accounts of the electricity companies. The facts showing the entirety of the appellant's operations and its huge net work explains the time taken to account for various expenses. The accounts of the appellant are audited by internal auditors and statutory auditors under the Companies Act and the Income tax- Act. Further the reference to the Board's C....
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....oller of Auditor General of India. It is pertinent to note that none of them had given any adverse remarks about the aspect of prior period expenditure. We find that the ld. CIT(A) had categorically given a finding that all the expenses reflected in the prior period expenses except the one which were voluntarily disallowed by the assessee in the return of income, though debited to prior period expenditure during the year, got crystallised during the year under consideration and hence, becomes allowable expenditure. None of these findings given by the ld. CIT(A) were rebutted by the Revenue before us. We also find that the Hon'ble Jurisdictional High Court in the case of yet another Public Sector Undertaking in CIT vs. Mahanagar Gas Ltd., reported in 42 Taxmann.com 40 had an occasion to go through the same issue. The question raised before the Hon'ble Jurisdictional High Court was as under:- "B. Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in confirming the order of CIT(A) in deleting the disallowance of Rs. 92,91,343/- made by the Assessing Officer on account of prior period expenses?" 4.2. The Hon'ble Jurisdiction....
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....ssessee was allowed. (d) The Revenue's grievance is that in mercantile system of accounting the respondent assessee has to account for the expenditure in the year in which the work/service was received by them and not when the bills were received by the respondent assesses. (e) We find that the liability in respect of work/services rendered in earlier year was crystallized only on receipt of the bill in the current assessment year. Moreover, the method adopted by the respondent assesses has been accepted by the revenue for the earlier assessment year and also while accounting for the income earned in respect of the work done in earlier years. In the circumstances, the Revenue is required to adopt consistent approach and allow the expenditure which was crystallized during the assessment year under consideration as done in the earlier years. This finding of fact has not been shown to be perverse. In view of the above we see no reason to entertain question B as the same does not raise any substantial question of law as it is essentially a finding of fact arrived at by two authorities concurrently." 4.3. In view of the aforesaid observations and ....