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2021 (9) TMI 694 - AT - Income TaxRevision u/s 263 - provision(s) made and debited to its P L A/c towards the varied price of natural gas supplied by M/s.Gas Authority of India Ltd. (GAIL) - HELD THAT - Assessing Officer s regular assessments forming subject matter of revision herein framed on 02-03- 2016 and 31-08-2016 had rightly not disallowed the assessee s provisions(s) qua its gas pricing. And that the learned PCIT herein therefore has erred in law and on facts in holding the same to be erroneous ones causing prejudice to the interest of the Revenue. We make it clear that the hon'ble apex court s landmark decision Malabar Industrial Co. Vs. CIT 2000 (2) TMI 10 - SUPREME COURT has settled the law that an assessment has to be both erroneous as well as causing prejudice to interest of the Revenue before the CIT or the Pr.CIT; as the case may be, assumes Section 263 revision jurisdiction. We therefore accept the assessee s sole substantive ground. Un-explained cash deposits forming part of other expenses - assessee s case before us is that the same represents cash discount than cash deposits - HELD THAT;- We are of the opinion in this factual backdrop that the instant latter issue requires afresh factual verification at the Assessing Officer s end. We therefore uphold the learned Pr.CIT s directions in principle and leave it open for the Assessing Officer to consider and examine the instant latter issue in AY.2014-15 s consequential proceedings as per law.
Issues Involved:
1. Delay in filing the appeal. 2. Validity of the provision for the differential price of natural gas. 3. Unexplained cash deposits forming part of "other expenses." Issue-wise Detailed Analysis: 1. Delay in Filing the Appeal: The assessee’s appeal ITA No.724/Hyd/2018 for AY 2013-14 suffered a 13-day delay. The delay was attributed to reasons beyond the assessee’s control as per the condonation petition/affidavit. The department did not rebut this claim, and hence, the delay was condoned. 2. Validity of the Provision for the Differential Price of Natural Gas: The primary issue in both appeals (AY 2013-14 and AY 2014-15) was the provision made by the assessee for the differential price of natural gas supplied by GAIL. The Principal Commissioner of Income Tax (PCIT) had revised the Assessing Officer’s (AO) regular assessments, terming them erroneous and prejudicial to the interest of the Revenue. The PCIT argued that the provision was based on an indicative price rise suggested by GAIL, which was not certain. The PCIT cited various judicial decisions to support the stance that the provision was a contingent liability and not an ascertained liability, and thus, not deductible. However, the assessee contended that the provision was made based on a reasonable expectation of a price increase from $4.30/MMBTU to $5.73/MMBTU, as indicated in communications from GAIL. The assessee had consistently made provisions for this differential price and debited it to the Profit & Loss Account. The matter was previously adjudicated by the ITAT in the assessee’s favor for AYs 2011-12, 2012-13, and 2015-16, where it was held that the provision was an ascertained liability and thus allowable under Section 37(1) of the Income Tax Act. The ITAT, in the current appeals, found no distinction in facts or law from the earlier decisions and held that the AO’s assessments were not erroneous or prejudicial to the interest of the Revenue. The ITAT emphasized that an assessment must be both erroneous and prejudicial to the Revenue for Section 263 revision jurisdiction to be invoked. Consequently, the ITAT allowed the assessee’s appeal for AY 2013-14 and the relevant part of the appeal for AY 2014-15. 3. Unexplained Cash Deposits Forming Part of "Other Expenses": In AY 2014-15, the PCIT also raised an issue regarding unexplained cash deposits amounting to ?5,22,416/-, which were part of "other expenses." The assessee claimed these were "cash discounts" rather than "cash deposits." The ITAT opined that this issue required fresh factual verification by the AO. Thus, the ITAT upheld the PCIT’s directions in principle and remanded the matter to the AO for further examination and consideration as per law. Conclusion: The assessee’s appeal for AY 2013-14 (ITA No.724/Hyd/2018) was allowed, and the appeal for AY 2014-15 (ITA No.1452/Hyd/2019) was partly allowed. The ITAT directed the AO to re-examine the issue of unexplained cash deposits in AY 2014-15. The order was pronounced in the open court on 9th September 2021.
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