2017 (5) TMI 1480

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..... nst revenue.
K. S. Jhaveri And Virendra Kumar Mathur, JJ. For the Appellant : Mr. K.D. Mathur for Mr. R.B. Mathur For the Respondent : Mr. Sanjay Jhanwar with Ms. Archana JUDGMENT 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the department. 2. This Court while admitting the matter framed the following question of law:- "1. Whether on the facts and circumstances of the case the Tribunal was justified in confirming the deletion of prior period expenses of ₹ 1,55,40,777/- made by the Assessing Officer which cannot allowed while following mercantile system of accounting." 3. The facts of the case are that the return of Income declari .....

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..... wever, the Co. has shown the allocation error by way of adjustment of allocation error in profit & loss account. Thus, expenditure has been inflated by ₹ 66,87,891/-. In the management response to the auditors report, the management offered no satisfactory explanation and deferred the issue by submitting that the matter is subject to reconciliation. In fact as per the terms & conditions of the transfer scheme, in case of any dispute, the State Government's decisions shall be final. However, before any decision or even referring the matter to the State Government, the company has debited it as Bad Debts which are not supposed to be allowed as a deduction. The assessee also submitted that on this issue appeal of the assessee for assessm .....

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..... r. The Assessing Officer has placed reliance on the notes to the accounts that were available at the time of the scrutiny assessment. But the notes also states that the prior period expenses had crystallized/settled in the year. The reasons to believe recorded do not show as to on what basis the Assessing Officer has formed a reasonable belief that the said expenditure had not crystallized during the year relevant to the assessment year. It is apparent the Assessing Officer suspects that the income has escaped assessment. But mere suspicion is not enough. The reasons to believe must record reasons, the reading of which should demonstrate, that such a reasonable belief could be formed on some basis/foundation and was in fact formed by the As .....

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