TaxTMI 
TaxTMI 
2024 (7) TMI 1018
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....stances of the case, the Ld.CIT(Appeals) ha erred in directing the AO to delete the addition of Rs. 17,65,162/- without appreciating the fact that otherwise also the prior period expenses are not an allowable expenditure unless a provision is mad for the same. The AO was therefore justified in disallowing the period expenditure amounting to Rs. 17,65,162/-. 3. Any other ground which may be taken with the permission of the Hon'ble Tribunal." 3. Facts in Brief:- The assessee is engaged in the business of manufacturing, import, export, trading and dealing in all kinds of furniture, office systems and furnishings. For the year under consideration, the assessee filed its return of income on 29/11/2013, declaring total income of Rs. 3,24,67,290. The Assessing Officer had concluded the assessment proceedings under section 143(3) vide order dated 21/03/2016 and made disallowance of expenditure in respect of detention / demurrage charges of Rs. 4,07,737. It appears that the then CIT(A)-3 had deleted the disallowance of Rs. 4,07,737, vide order dated 25/09/2017. Subsequently, the Assessing Officer has issued a show cause notice under section 154 of the Act dated 09/03/2018 proposing t....
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.... and maintenance pertaining to financial year 2011-12 were misplaced in stores Department and did not reach the accounts department before the close of financial year 2011-12. It was only when the vendor parties made reminder calls to the appellant for release of payment, efforts were made to locate the files and it was found that, the expenses amounting to Rs. 16,30,873/- inadvertently remained to be accounted during financial year 2011-12. The appellant submitted that, such expenses were considered and approval was given by the management to account for the same during financial year 2012-13 and payment was released. The appellant has argued that under the aforesaid circumstances, the expenses though related to the earlier year but the corresponding liability had crystallized during financial year 2012-13 only. Therefore, the expenses should not be treated as prior period expenses. The appellant further submitted that, there was no prejudice caused to the Income Tax 19 Department since, the appellant was chargeable to tax at maximum rates for both the relevant financial years. The appellant placed reliance on following decisions: * CIT v. Indian Petrochemicals Corporation Ltd (....
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....ed and ascertained. Therefore, I find that, disallowance of prior period expenses under the garb of rectification is beyond the ambit of section 154 since, only apparent mistakes can be rectified and not debatable issues which requires verification and analysis. The appellant's reliance on following judicial precedents have been found to be proper and supports appellant's contention: 1. ACIT v. Indian Farmer Fertilizer Co-operative Ltd (51 SOT 112) (Delhi ITAT) "It is well-settled that merely because an expense relates to a transaction of an earlier year, it does not become a liability payable in the earlier year, unless it can be said that the liability was determined and crystallized in that year on the basis of maintaining accounts on the mercantile method. In each case, where the accounts are maintained on the mercantile basis, it has to be found in respect of any claim, whether such liability was crystallized and quantified during the relevant previous year so as to be required to be adjusted in the books of account of that previous year. If any liability, though relating to the earlier year, depends upon making a payment and its acceptance by the assessee and such....
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....ecord but looking to the issue involved in this appeal, we find it proper to dispose of this appeal as well established proposition of law was involved herein. 13. It is not in dispute that prior period expenses and depreciation 60% on the computer items has been disallowed by the AO by way of order passed under sec. 154 of the Act. It is also not in dispute that originally, the assessment was completed under sec. 143(3) of the Act, which was revised in pursuance to the order passed under sec. 250 of the Act. Section 154 provides that with a View to rectifying any mistake apparent from the record an Income-tax authority referred to in section 116 may amend any order passed by it under the provisions of this Act. So, as could be seen from the provisions of sec. 154 of the Act, it is only in case if a mistake has crept into the order, which is apparent from the record, that the AO has got the authority to amend the order passed by him under the provisions of sec. 154 of the Act. It is well settled that in order to invoke the provisions of sec. 154 of the Act to rectify the mistakes, the subject matter must be beyond doubt or debate and in such circumstances, only the mistake commit....
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.... be said that the liability was determined and crystallized in that year on the basis of maintaining accounts on the mercantile method. In each case, where the accounts are maintained on the mercantile basis, it has to be found in respect of any claim, whether such liability was crystallized and quantified during the relevant previous year so as to be required to be adjusted in the books of account of that previous year. If any liability, though relating to the earlier year, depends upon making a payment and its acceptance by the assessee and such liability has been actually claimed and paid in the later years, it cannot be disallowed as a deduction merely on the basis the accounts are maintained on mercantile basis and is related to a transaction of the earlier year. 17. In these circumstances, we, therefore, hold that allowability or otherwise of prior period expenses claimed in the profit & loss account is a debatable matter and, therefore, it does not come within the purview of sec. 154 of Act." 10. The Hon'ble Supreme Court in T.S. Balram, ITO v/s Volkart Brothers, [1971] 82 ITR 50 (SC) held that for initiating proceedings under section 154 of the Act, the mistake appa....