TaxTMI 
TaxTMI 
2026 (8) TMI 557
X X X X Extracts X X X X
X X X X Extracts X X X X
....-Progress and the amount capitalised during the relevant previous year; and 2. Addition of Rs. 8,62,08,410/- representing the reduction or adjustment made in the account of Pre-operative Expenses, which the Assessing Officer treated as amortisation of expenditure. The grounds raised by the Revenue are interconnected and relate to the correctness of the accounting treatment adopted by the assessee. Therefore, they are taken up together for adjudication. 3. The brief facts of the case are that the assessee, M/s.Jeppiaar Fishing Harbour Muttom Private Limited, is a company engaged in the business of fishing, operation of fish hatcheries and fish farms and rendering services incidental to fishing. The assessee filed its return of income for the AY 2016-17 on 01.07.2017, declaring a total loss of Rs. 5,49,23,797/-. The case was selected for scrutiny under CASS. The original assessment was completed u/s. 143(3) of the Act on 20.12.2018, determining the total loss at Rs. 4,27,50,709/-. 4. Subsequently, the AO noticed from the financial statements that the opening balance of Capital Work-in-Progress was Rs. 29,15,03,400/-, whereas an amount of Rs. 24,98,21,352/- had been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ited financial statements to demonstrate that the impugned entries represented either: 1. rectification or reversal of duplicate accounting entries passed in the earlier years; or 2. transfer of expenditure accumulated under Capital Work-in-Progress and Pre-operative Expenses to the respective fixed asset accounts upon capitalisation of the project. 8. It was specifically contended that none of the impugned entries had been routed through the Profit and Loss Account and no deduction had been claimed by the assessee in computing its taxable income. After examining the documentary evidence and the explanations furnished by the assessee, the ld.CIT(A) held that the AO had proceeded on an erroneous understanding of the accounting treatment. The ld. CIT(A) found that the impugned entries were balance sheet adjustments and did not result in any debit to the Profit and Loss Account or any claim of revenue expenditure. The ld. CIT(A), therefore, deleted both the additions by order dated 30.01.2026. 9. Aggrieved by the relief granted by the ld. CIT(A), the Revenue is in appeal before us. The ld.DR strongly supported the reassessment order passed by the AO. In respect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entry reversed 3,19,50,280/- 2. Chirag Ice Factories-duplicate entries reversed 5,98,16,593/- 3. Plant and machinery capitalized 4,44,72,806/- 4. Land capitalized 2,63,00,000/- 5. Office Building and Harbour capitalised 12,89,63,721/- Total 29,15,03,400/- 13. The ld. AR submitted that the amount of Rs. 3,19,50,280/- relating to Sundaram Finance Loan represented a duplicate accounting entry. It was explained that while availing a refinancing facility, the earlier loan had already been squared up. However, because of an inadvertent accounting error, the corresponding liability continued to remain reflected in the books. The error was subsequently rectified by reversing the duplicate entry. The ld.AR further submitted that the issue relating to the Sundaram Finance Loan had already been considered by the Tribunal in the assessee's own case for the AY 2015-16, wherein the corresponding addition was deleted. 14. The ld. AR further explained that the amount of Rs. 5,98,16,593/- relating to M/s.Chirag Ice Factories also represented duplicate accounting entries passed in earlier years. These errors were noticed during the process....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e factual findings recorded by the ld.CIT(A). The ld. AR therefore prayed that the order of the ld.CIT(A) be confirmed and the appeal filed by the Revenue be dismissed. 18. We have heard the rival submissions and carefully considered the orders of the authorities below, the written submissions, reconciliation statements, ledger accounts and other material placed on record. The dispute before us relates to two additions made by the AO entirely on the basis of movements or adjustments appearing in balance sheet accounts. 19. The first addition of Rs. 4,16,82,048/- arose from the difference between the opening balance of Capital Work-in-Progress and the amount which, according to the Assessing Officer, was capitalised during the year. The second addition of Rs. 8,62,08,410/- arose from the reduction in the balance of Pre-operative Expenses, which the AO presumed to be amortisation of expenditure. The primary question for consideration is whether the impugned entries resulted in any expenditure being debited to the Profit and Loss Account, any deduction being claimed by the assessee, or any income accruing or arising which could lawfully be brought to tax. 20. We first take up....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xamining the corresponding ledger entries, cannot constitute a valid basis for treating the amount as revenue expenditure or taxable income. 23. We also note that the explanation regarding the duplicate Sundaram Finance Loan entry was considered by the Tribunal in the assessee's own case for the preceding AY 2015-16. Although each assessment year is a separate unit, a factual finding concerning the nature of an accounting entry, particularly one originating in an earlier year, cannot be ignored in a subsequent year unless the Revenue brings distinguishing material on record. No such distinguishing material has been placed before us. The ld.CIT(A) examined the reconciliation statements, ledger extracts, audited financial statements and the earlier order of the Tribunal and recorded a categorical factual finding that the disputed amount represented rectification of duplicate accounting entries and transfer of Capital Work-in-Progress to fixed assets. The Revenue has not identified any error or perversity in the said factual finding. The Revenue has also not produced any contrary ledger account or accounting material to show that the explanation accepted by the ld.CIT(A) was incorr....