2017 (5) TMI 1718 - AT - Income Tax

Disallowance on account of non-reconciliation of provision for Gratuity - addition on account of unpaid sales tax under section 43B - Addition of unpaid bonus u/s 43B - HELD THAT - These grounds concern certain disallowances by the Assessing Officer (AO) which were assailed before the CIT(A). On going through the order of the CIT(A) we notice that the CIT(A) has granted relief to the assessee subject to verification of attendant facts governing the issues involved as per these grounds. We find that the action of the CIT(A) is just and proper as warranted in the circumstances of the case and cannot be faulted. Thus we do not see any merit in the grievances raised by the assessee as per Ground Nos.1 to 3 of its appeal. Resultantly Ground Nos.1 2 3 are dismissed. Disallowance of prior period expenses - disallowance has been made on the ground that the expenses under various heads as noted in the assessment order pertained to earlier years and the assessee which is following system of accounting should have made provision for expenses in those respective years and claimed them as deduction - HELD THAT - Assessee is a State Government Undertaking and its accounts are subjected to review by CAG and therefore it cannot be postulated that there was any deliberateness in not furnishing relevant details before the revenue authorities. The bonafides of the Assessee is also augmented by the facts that the Assessee has reported staggering carry forward losses in its returned income. Thus there is no immediate tax advantage accrued to the assessee by the claim of impugned prior period expenses per se. We therefore deem it expedient to restore the issue back to the file of AO for examining the issue de novo after verifying facts as may be considered necessary and expedient in accordance with law. The AO shall bear in mind the ratio laid down by the Hon ble Gujarat High Court in the case of Adani Enterprises Ltd. 2016 (7) TMI 1564 - GUJARAT HIGH COURT while adjudicating the issue. Needless to say reasonable opportunity shall be provided to the assessee while adjudicating the issue. Hence all the contentions of the assessee are kept open. Ground No.4 is allowed for statistical purposes.

Summary

Issues involved:
1. Disallowance of provision for Gratuity
2. Disallowance of unpaid sales tax under section 43B of the IT Act
3. Disallowance of unpaid bonus under section 43B of the IT Act
4. Disallowance of prior period expenses
5. Dismissal of penalty proceedings under section 271(1)(c) of the IT Act

1. Disallowance of provision for Gratuity:
The appeal was against the order of the Commissioner of Income Tax(Appeals) regarding the disallowance of provision for Gratuity. The Appellate Tribunal found that the CIT(A) had granted relief to the assessee subject to verification of facts. The Tribunal considered this action just and proper, leading to the dismissal of the appeal on this ground.

2. Disallowance of unpaid sales tax under section 43B of the IT Act:
Similar to the first issue, the Tribunal upheld the CIT(A)'s decision to grant relief to the assessee subject to verification of facts. Consequently, the appeal on this ground was dismissed.

3. Disallowance of unpaid bonus under section 43B of the IT Act:
The Tribunal again supported the CIT(A)'s decision to grant relief subject to verification of facts, leading to the dismissal of the appeal on this ground.

4. Disallowance of prior period expenses:
Regarding the disallowance of prior period expenses, the Tribunal delved into the details provided by the assessee. The Tribunal observed that the expenses claimed were related to earlier years and were not adequately supported with specific details. However, considering the nature of the expenses, the Tribunal decided to set aside the issue to the Assessing Officer (AO) for a fresh examination in accordance with the law and relevant precedents. The Tribunal emphasized providing the assessee with a reasonable opportunity during this process.

5. Dismissal of penalty proceedings under section 271(1)(c) of the IT Act:
The Tribunal deemed the initiation of penalty proceedings premature and unnecessary for separate adjudication, resulting in the dismissal of this ground of appeal.

In conclusion, the Tribunal partially allowed the appeal of the assessee, setting aside the issue of prior period expenses for further examination by the AO and dismissing the penalty proceedings as premature.