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2016 Supreme(P&H) 2255
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
S.J.VAZIFDAR and DEEPAK SIBAL, JJ.
Pr. Commissioner of Income Tax, Panchkula - Appellant
Versus
M/s Haryana Warehousing Corporation - Respondent
INCOME TAX APPEAL No. 103 of 2016 (O&M)
Decided On : 11-11-2016
For the Appellant : Mr. Yogesh Putney
For the Respondent: Mr. Rajesh Garg, with Mr. Sandeep Kumar
The liability for expenses must have definitely arisen in the accounting year and be capable of being estimated with reasonable certainty for it to be considered a proper deduction.
Headnote:
Income Tax Act - Assessment Year 2009-10 - Section 263 - Section 37 - Section 36 - Section 167B
Fact of the Case:
The appeal concerns the assessment year 2009-10 and revolves around the assessee's appeal against the order of the CIT (Appeals) regarding the cancellation of the assessment order under Section 263 of the Income Tax Act, 1961. The issues in question pertain to the provision for revision of pay scales and unabsorbed overhead on capital work under miscellaneous expenses.
Finding of the Court:
The court found that the CIT had decided the issues on merits, directing the Assessing Officer to re-compute the income in accordance with the findings. The court upheld the decision of the Tribunal on merits and dismissed the appeal.
Issues: The substantial questions of law raised in the appeal were related to the cancellation of the assessment order under Section 263 and the allowance of the appeal on the issues of revision of pay scales and unabsorbed overhead on capital work.
Ratio Decidendi: The court held that the liability for the provision of pay scales and unabsorbed overhead arose in the assessment year 2009-10 and was not contingent, thus allowing the deductions. The court also found that the order of the Tribunal did not suffer from any perversity.
Final Decision: The appeal was dismissed, and the decision of the Tribunal on merits was upheld.
S.J. VAZIFDAR, J.
This is an appeal against the order of the Tribunal partly allowing the assessee’s appeal against the order of the CIT (Appeals). The matter pertains to the Assessment Year 2009-10 (inadvertently mentioned as 1999-2000 in paragraph 1 of the Tribunal’s order).
2. According to the appellant, the following substantial questions of law arise in this appeal:-
“(i) Whether on the facts and in the circumstances of the case, the Ld. Income Tax Appellate Tribunal was right in law in cancelling the order passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 by holding that there is nothing in the aforesaid order to show that assessment order passed by the Assessing Officer was erroneous in so far as prejudicial to the interests of the revenue?
(ii) Whether on the facts and in the circumstances of the case, the order passed by the Ld. Income Tax Appellate Tribunal was right in law in allowing the appeal of the Respondent-Assessee on the issue on account of revision of pay scales as prior period expenses and not allowable under Section 37 of the Income Tax Act, 1961?
(iii) Whether on the facts and in the circumstances of the case, the order passed by the Ld. Income Tax Appellate Tribunal was right in law in allowing the appeal of the Respondent-Assessee on the issue on account of Misc. expenses of Rs.50,16,675/- being capital in nature?
(iv) Whether on the facts and in the circumstances of the case, the order passed by the Ld. Income Tax Appellate Tribunal was perverse in nature and against law as it grossly overlooked the material evidence/information on record?
(v) Whether on the facts and in the circumstances of the case, the Ld. Income Tax Appellate Tribunal was right in law in partly accepting the order passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 and examining the issues on merits of matter once it is found that invocation of particular provisions of Act is valid?
3. The appeal is admitted only with respect to question (ii) and the question is answered in favour of the assessee/respondent. The other questions do not raise a substantial question of law. In the result, we have dismissed the appeal.
4. For the relevant assessment year, the respondent filed its return of income on 30.09.2009 declaring an income of about Rs.15.57 crores. A revised return was filed on 31.03.2011 declaring an income of about Rs.19.02.crores. The assessment was ultimately completed on 19.12.2011 under section 143(3) of the Income Tax Act, 1961 (for short, “the Act”) assessing the income at about Rs.21.77 crores. On 18.01.2012, the assessee filed an appeal before the CIT (Appeals) which was dismissed by an order dated 02.04.2013.
Thereafter, it was noticed that the assessee had debited a sum of about Rs.12.88 crores in the profit and loss account in respect of “Revised Pay Scales”. The notes on account stated that this was a provision on an ad hoc basis for the payment of revised pay scales of the staff. The CIT found this to be an omission leading to the income being under assessed to the extent of about Rs.12.88 crores and observed that the Assessing Officer had been negligent in not making proper enquiry and in not examining the expenses claimed by the assessee. It was, therefore, held that the assessment was prejudicial to the interest of the Revenue.
The CIT further noted that the assessee had also debited a sum of about Rs.50 lacs in respect of unabsorbed overhead on capital works under “Miscellaneous Expenses” in the profit and loss account and observed that the expenditure being capital in nature was required to be capitalised and deduction as revenue expenditure was not allowable.
It was further noted that a sum of about Rs.22 lacs under the head “Procurement of Wheat Account” was debited which pertained to carry over charges of the Nagpur Mandi and that the recovery of this amount was doubtful but not bad and the same was, therefore, not allowable under secti
