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TMI Blog2023 (8) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... and restore the matter back to the file of AO for fresh adjudication on the basis of evidences to be adduced by the assessee. Assessee is directed to cooperate with the AO and advance evidences of actual payment during the year in favour of his claim. In the result this ground of appeal raised by the assessee is allowed for statistical purposes. Disallowance of depreciation towards capital assets - filing revised return and non-acceptance of the same by Revenue - Assessee claimed depreciation on the basis of figures capitalised on the directions of the C AG of India. As we already approved the filing of revise return on the given facts of the case, no disallowance can be made by the AO, if assessee claimed some allowance based on the accounts approved by the C AG of India. In the result AO is directed to delete the addition and Ground Raised by the assessee is allowed. Disallowance made u/s. 40A (3) - wrong reporting in the Tax Audit Report and actually these amount were not claimed as an expense, same is restored back to the file of AO for re-verification by AO, based on evidences advanced by the assessee. Assessee is directed to substantiate its claim with relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to delete the additions/disallowance made by the Ld. AO to the extent confirmed by the Ld. CIT(A). 2. Brief facts of the case are that assessee filed return of income on 30.09.2009 declaring total profit of Rs. 11,15,88,425/-. This return was revised on 26.09.2010 declaring loss of Rs. 1,30,59,943/-. Case of the assessee was selected for scrutiny. Assessee is a State Government PSU and subject to audit by the auditor appointed by C AG. 3. Initially the original return was filed on the basis of audit report signed by chartered accountant appointed by the management as interim measure (as no C AG auditor was appointed). In this return, assessee declared profit of Rs. 11,15,88,425/-. Thereafter, this appointment of statutory auditor nullified by the C AG under the Companies Act, 1956. It is a basic premise of law that in the case of Central and State PSUs auditor has to be appointed by C AG only. Thereafter, C AG appointed an auditor and as per the financials approved by that auditor in consultation with C AG, assessee has to filed a revised return on 26.09.2010 declaring a loss of Rs. 1,30,59,943/-. 4. The Assessing Officer (AO) was not agreed with the figures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accepted by the Ld. CIT(A) Also, Being advances written off in the revised return of income filed, which were duly approved by the shareholders in the AGM held after filing the original return of income . It means whatever may be the accounts and tax audit reports filed with the Original Return, were not duly approved by the shareholders in the AGM. There are no arguments on merits by the revenue while disallowing the same u/s. 37(1), except that the same were not claimed in the original return. As discussed in the Para 5 and 6 (supra), any accounts and audit in defiance of Companies Act, 1956 in the case of PSUs, can t be placed and approved by the shareholders in AGM, hence is of no value in the eyes of law. Until and unless accounts are duly adopted and approved by the shareholders in AGM there is no sanctity of the same. 8. In this case as discussed(supra), earlier accounts were audited and filed with original return of income and thereafter a revised return was filed with audited results of the assessee along with tax audit report duly approved and adopted by the shareholders in AGM, is a correct procedure of compliance. We don t see any fault in filing of revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors so as to disclose the correct income for the purpose of assessment, will only be taken on or after 1-4-2004. Hence whether the same is taken on 1-4-2004 or 30-9-2004 or any other date after 1-4-2004 will not change the nature and complexion of the entry. In the present case, when the due date for filing return came, the accounts had not been completely audited and finalized the Books were still subject to audit and open for any correction by the auditors. Hence any decision made before finalization of Accounts can in any manner effect and correct the Accounts and the decision so taken has in all circumstances to be considered as a method and procedure for placing correct income for assessment both as per the statutory provisions of Companies Act, 1956 and I.T. Act, 1961. 5. The Assessing Authority did not agree with the explanation/justification given by the Assessee and accordingly, add the same on the grounds that these debts were to be written off in the Financial Year 2004-05 relevant to the Assessment Year 2005-06, as the decision with regard to the said debt being bad and was irrecoverable had been taken on 30-3-2005. The First Appellate Authority w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r irrecoverable should be taken in the previous year itself. In other words, where account books are not closed and not signed by the Board of Directors and not adopted by the shareholders as per the Companies Act, it is legally permissible to make adjustments before they are finally adopted. 9. Further, it is admitted that the original return, on the basis of unaudited accounts, was filed on 1-11-2004. After audit had taken place and report of the Auditors was accepted, revised return was filed on 18-8-2005 and it is only in the revised return, the debts to the tune of Rs. 2 crores and odd had been declared as bad. The ground taken by the Assessing Authority and Appellate Authority for not accepting the said bad debts during the assessment year under consideration, i.e., 2004-05 is contrary to the provisions of Section 36 (1) (vii) of the Income-tax Act, and further in view of the interpretation as stated here-in-above. Therefore, the Tribunal has rightly allowed the appeal of the assessee. 10. The Apex Court in the case of Kerala State Industrial Development Corp. Ltd. v. CIT [2012] 349 ITR 365/25 taxmann.com 564, while dealing with the State Public Sector Undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue also had its roots in the issue of filing revised return and non-acceptance of the same by Revenue. Assessee claimed depreciation on the basis of figures capitalised on the directions of the C AG of India. As hold(supra), we already approved the filing of revise return on the given facts of the case, no disallowance can be made by the AO, if assessee claimed some allowance based on the accounts approved by the C AG of India. In the result AO is directed to delete the addition and Ground Raised by the assessee is allowed. 12. Ground No.5 pertains disallowance made u/s. 40A (3) amounting to Rs. 4,62,000/-. On this issue as claimed by the assessee that there is a wrong reporting in the Tax Audit Report and actually these amount were not claimed as an expense, same is restored back to the file of AO for re-verification by AO, based on evidences advanced by the assessee. Assessee is directed to substantiate its claim with relevant evidences that the same is not claimed as expense, hence not disallowable u/s. 40A(3). In the result this ground of appeal raised by the assessee is allowed for statistical purposes. 13. Ground No. 6 pertains to addition of Rs. 17,59,687/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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