TaxTMI 
TaxTMI 
2024 (2) TMI 1594
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....sment Year 2014-15. ITA NO.3383/MUM/2019 -2014-15-ASSESSEE'S APPEAL: 2. The assessee in appeal has assailed the order of CIT(A) on two counts: (i) Disallowance of prior period expenditure; and (ii) Addition based on selective comments made by the Comptroller and Auditor General (CAG) on accounts of assessee /appellant. 3. Shri J.D.Mistry appearing on behalf of the assessee submitted that the assessee is engaged in the business of distribution of electricity in the State of Maharashtra. During the relevant Financial Year, the assessee debited an amount of Rs.1044,65,06,000/- to the Profit and Loss Account under the head 'Prior Period Expenses'. The assessee made a detailed submission before the Assessing Offi....
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....ffice only after the said expenses are consolidated at the head office level. Therefore, the expenditure in fact does not fall in the category of prior period expenditure. The ld. Counsel for the assessee submits that the manner of recording expenditure is not in particular related to Assessment Year under appeal, but this manner of recording expenditure is consistently followed by the assessee since inception. The expenditure even though technically treated as Prior Period Expenditure, relate to a continuous flow of expenditure and hence, disallowance on this account is not warranted. 3.1 The ld.Counsel for the assessee furnished a chart indicating components of prior period expenditure in Assessment Year 2012-13 and Assessment Year 201....
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....r the assessee submits that the accounts of the assessee are audited by CAG. During the course of said audit, the Office of CAG makes certain comments /objections. The assessee gave a detailed reply to the objections. The audit committee out of four objections accepted assessee's reply on issue No.2 and 3 but made negative comments on issue No.1 and 4 . The Assessing Officer ignored the comments given by CAG on issue No.2 and 3 and cherry picked the issue on which there were negative comments by the CAG against the assessee. The ld.Counsel for the assessee submits that the grievance of the assessee is that Assessing Officer should have taken into consideration all the four issues on which CAG has given comments. The Assessing Officer erred ....
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.... the decision of his predecessor for Assessment Year 2012-13. The assessee carried the issue in appeal before the Tribunal in ITA No.4630/Mum/2017 (supra). The Co-ordinate Bench in turn following the order of Tribunal in assessee's own case in ITA No.3813/Mum/2009 decided on 17/12/2021 for Assessment Year 2001-02 titled DCIT vs. Maharashtra State Electricity Board decided the issue in favour of assessee deleting the addition. The Tribunal further observed that in the preceding Assessment Years the method of accounting has been accepted and the expenditure rendered in earlier years was allowed when the same was crystallized on receipt of bills in the current Assessment Year. Thus, the assessee has been consistently following the method a....
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....tive comments to make addition, the Assessing Officer should have considered positive comments of the CAG to grant relief. We find merit in the submissions of the assessee. Cherry picking of items from CAG report to make addition is unjustified and arbitrary. We deem it appropriate to restore this issue back to the file of Assessing Officer for denovo examination. The Assessing Officer shall consider the comments of the CAG in whole and thereafter decide the issue by passing a speaking order. The Assessing Officer shall also grant reasonable opportunity of making submissions to the assessee before deciding the issue, in accordance with law. The ground No.2 of appeal is thus, allowed for statistical purpose. 8. In the result, appeal of as....