Commissioner Of Income Tax, Ajmer, Income Tax Department,Ajmer v. Ajmer Vidhyut Vitran Nigam Limited, City Power House, Jaipurroad, Ajmer

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Miscellaneous Application No. 66/2018 Commissioner Of Income Tax, Ajmer, Income Tax Department,Ajmer ----Appellant Versus Ajmer Vidhyut Vitran Nigam Limited, City Power House, JaipurRoad, Ajmer ----Respondent For Appellant(s) : Mr. K.D. Mathur with Mr. Prateek Kedawat for Mr. R.B. MathurFor Respondent(s): Mr. Sanjay Jhanwar HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS 03/04/2018 Judgment 1.By way of this application, the applicant has prayed forrecalling the judgment/order passed by this court on 29.5.2017. 2.This court while considering the matter on 29.5.2017 reliedupon the decision of Delhi High Court in case of SMCCConstruction India Ltd. vs. Assistant Commissioner of Income Taxreported in [2013] 38 taxmann.com 146 (Delhi) wherein it hasbeen held as under:- “13. The prior period expenses are eligible fordeduction during the current year provided the liabilitywas determined and crystallized during the relevantyear. 14.The reason to believe recorded by the AssessingOfficer “that the assessee has debited a sum of Rs.1,20,765 in the P & L account on account of priorperiod expenses after netting income of Rs. 30,34,463/- and expenditure of Rs. 31,55,228/- hasnot been crystallized during the year 2001-02 relevantto the assessment year 2002-03 such prior periodexpenses should have been disallowed” is not basedon any material that had come to the knowledge of theAssessing Officer. The Assessing Officer has placedreliance on the notes to the accounts that wereavailable at the time of the scrutiny assessment. Butthe notes also states that the prior period expenseshad crystallized/settled in the year. The reasons tobelieve recorded do not show as to on what basis theAssessing Officer has formed a reasonable belief thatthe said expenditure had not crystallized during theyear relevant to the assessment year. It is apparentthe Assessing Officer suspects that the income hasescaped assessment. But mere suspicion is notenough. The reasons to believe must record reasons,the reading of which should demonstrate, that such areasonable belief could be formed on somebasis/foundation and was in fact formed by theAssessing Officer that income has escapedassessment. No such reasonable belief can be formedfrom the reasons to believe recorded.” 3.While considering the case, the AO has observed as under:- “I have carefully considered the above submission ofthe assessee but do not accept the same. In theannexure II to the auditors report for finance year2002-03 at para 19 as per clause 12 of Rajasthanpower sector reforms transfer scheme 2000, if anydispute, difference or issue arises in regard to thetransfer under scheme, subject to the provision of theAct, the decision of the State Government there onshall be final. However, the Co. has shown theallocation error by way of adjustment of allocationerror in profit & loss account. Thus, expenditure hasbeen inflated by Rs. 66,87,891/-. In the managementresponse to the auditors report, the managementoffered no satisfactory explanation and deferred theissue by submitting that the matter is subject toreconciliation. In fact as per the terms & conditions ofthe transfer scheme, in case of any dispute, the StateGovernment’s decisions shall be final. However, beforeany decision or even referring the matter to the StateGovernment, the company has debited it as BadDebts which are not supposed to be allowed as adeduction. The assessee also submitted that on thisissue appeal of the assessee for assessment year2002-03 has been decided in favour of AVVNL videappeal No. 356/2004-05 by CIT(A), Ajmer. At thisjuncture I am afraid to accept the observation of theLd. CIT(A) as the revenue has filed second appeal before the Hon’ble ITAT against the order of the Ld.CIT(A), Ajmer. Therefore, I am inclined to add theamount of allocation error to the tune of Rs.66,87,891/- to the total income of the assessee.Thus, addition of Rs. 66,87,891 is hereby made.” 4.Counsel for the respondent Mr. Jhanwar has relied upon thedecision of Gujarat High Court in Commissioner of Income Tax-Ivs. Indian Petrochemicals Corporation Ltd. reported in (2016) 74taxmann.com 163 (Gujarat) wherein it has been held as under:- “4.6 So far as issue No. 3 is concerned, he submittedthat the issue is already covered by a decision of thisCourt in the case of Sarabhai M. Chemicals (P.) Ltd.vs. Commissioner of Income tax reportedin MANU/GJ/0315/1980 : [1981] 5 Taxman 57(Gujarat). 8. We have heard both the learned counsel andperused the record. We have also gone through thedecisions cited before us. The Tribunal has followedits own decision in the case of Gujarat NarmadaValley Fertilizers Co. Ltd. and held in favour of theassessee. This Court in the case of Gujarat StateExport Corporation Ltd. (supra) has held thatpayment of surtax was not an allowable deductionand that by paying the entrance fee to the sportsclub the assessee had no intention to acquire anycapital asset or take advantage for the enduringbenefit of the business and that by common sensestandards, it could be stated that it was for runningthe business or for bettering the conduct of itsbusiness and therefore the amount paid as entrancefee was deductible. In view of the said decision, wefind that the question raised is required to beanswered in favour of the assessee.“ 5.In view of the above, in our considered opinion, no case ismade out for recalling the order dt.29.5.2017. 6.The misc. application stands dismissed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J Brijesh 16.