Abhyudaya Housing & Constructions Private Limited Vs ACIT (ITAT Delhi)
Delhi ITAT Allows Prior Period Expenditure on Crystallisation Basis & Upholds Quashing of Reassessment as Mere Change of Opinion
The Delhi ITAT granted relief to the assessee by deleting the disallowance of ₹50 lakh out of prior period/exceptional expenditure of ₹1.49 crore, holding that the liability had crystallised during the relevant previous year. The Tribunal observed that although the assessee followed the mercantile system of accounting, the expenditure had not crystallised in the earlier years and was actually paid on 31 March 2012 pursuant to an agreement. Accordingly, the claim could not be disallowed merely because it related to an earlier period.
The Tribunal also dismissed the Revenue’s appeal against the order quashing the reassessment under sections 147/148. It agreed with the CIT(A) that the reopening was based on a mere change of opinion, as the Assessing Officer had already examined the relevant details during the original scrutiny assessment. Relying on the Supreme Court’s decision in CIT v. Kelvinator of India Ltd., the Tribunal held that the reassessment was invalid.
Accordingly, the assessee’s appeal challenging the disallowance was allowed, its separate appeal against the section 263 order was dismissed as not pressed, and the Revenue’s appeal against the quashing of reassessment was dismissed.
Cases Discussed
- Commissioner of Income Tax v. Kelvinator of India Ltd. (SC), (2010) 320 ITR 561
- Collector, Land & Acquisition vs. Mst. Katiji & Others (SC), (1987) 167 ITR 471
- Chainrup Sampatram vs. CIT (SC), (1953) 24 ITR 481
FULL TEXT OF THE ORDER OF ITAT DELHI
These assessee’s twin appeals ITA Nos. 1001 & 2548/Del/2026 & Revenue’s cross appeal ITA No. 2973/Del/2026; for assessment year 201213, arise against the Commissioner of Income Tax (Appeals), Delhi-1, Commissioner of Income Tax (Appeals)-32, New Delhi & Commissioner of Income Tax(Appeals)/Addl. JCIT(A)-3, Mumbai (for short, ‘the CIT(A)’), orders dated 31.03.2017, 09.04.2019 & 09.01.2026, passed in order no. Pr. CIT, Delhi-1/263/2016-17/2953, 178-19/18-19 & DIN & Order no. ITBA/APL/S/250/2025-26/108599506(1); respectively, involving proceedings u/s 143(2), 143(3) r.w.s. 263, & 147 r.w.s. 144 of the Income Tax Act, 1961; hereinafter referred to as, ‘the Act’.; respectively.
Heard both the parties at length. Case files perused.
2. For the reasons stated in the assessee’s condonation averments, delay of 3166 days in filing of its appeal ITA No. 1001/Del/2026 is condoned in light of Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC).
3. We advert to the basic relevant facts first of all. The assessee/appellant appears to have filed its return on 26.09.2012 stating loss of Rs. 2,88,61,741/-. Learned Assessing Officer thereafter framed his regular assessment on 26.03.2015 u/s 143(3) of the Act. Learned PCIT sought to revise the same in exercise of his section 263 revision jurisdiction on the ground that the assessee was not entitled to claim “exceptional items/ prior period items” amounting to Rs. 1,49,51,077/-; and, therefore, the Assessing Officer’s aforesaid regular assessment allowing the same was an erroneous one causing prejudice to interest of the revenue. He accordingly directed the Assessing Officer to examine the same afresh in consequential proceedings. Both the Assessing Officer as well as the CIT(A) have accordingly disallowed a sum of Rs. 50Iakhs out of Rs. 1,49,51,077/-in the assessment framed in consequence to the PCIT’s revision directions in the order dated 18.12.2017 which stands upheld in the lower appellate discussion.
4. There is further no denial to the fact that the Assessing Officer in the meantime recorded, his reasons to believe that the assessee’s taxable income liable to be assessed at escaped assessment. He, therefore, set into motion section 148/147 proceedings finally culminating in the reassessment framed in its case on 04.12.2019 which stands quashed in the CIT(A) lower appellate discussion.
It is in this factual backdrop that the assessee has filed its twin appeals ITA Nos. 1001/Del/2026 against the PCIT’s section 263 revision directions and ITA No. 2548/Del/2026 preferred in case of both the learned lower authorities’ assessment and lower appellate findings in section 143(3) r.w.s. 263 proceedings. The Revenue’s case in ITA no. 2793/Del/2026 on the other hand, is directed against the CIT(A) action quashing the aforesaid reopening in the assessee’s case; respectively.
5. We have given our thoughtful consideration to the assessee’s and the Revenue’s respective submissions. Suffice to say, be it the assessee’s former appeal or the latter one; as the case may be, the sole substantive issue herein is that of allowability of the exceptional items/prior period items expenses of Rs. 1,49,51,077/- which stood disallowed to the extent of Rs. 50 lakhs in the Assessing Officer’s consequential assessment(supra) . We make it clear that this assessee appears to have assessed at the same maximum marginal rate all along. And also that it had paid the impugned sum on 31.03.2012 as per the corresponding agreement with the recipient in question which has nowhere been doubted in principle in light of the fact that the Revenue’s stand all along is once it is following accrual method, such an item of prior period expenditure is not allowable in the impugned latter assessment year.
6. We have given our thoughtful consideration to the assessee’s and the revenue’s vehement submissions against and in support of the impugned disallowance of Rs. 50 lakhs. We are of the considered view that given the fact that the impugned expenditure had not crystallized, in the earlier assessment year(s), the same could not have been disallowed. We thus conclude in this factual backdrop that the impugned prior period expenditure disallowance of Rs. 50 lakhs made in the assessee’s hands is not sustainable since based on reasonable probability there of as per Chainrup Sampatram vs CIT(1953) 24 ITR 481(SC), the same is directed to be deleted therefore. This assessee’s latter appeal ITA no. 2548/Del/2026 succeeds.
Mr. Sampat submits the assessee does not wish to press for former appeal 1001/Del/2026 in light of our preceding detailed discussion allowing its claim on merits. Rejected accordingly subject to just exceptions.
7. Next comes the Revenue’s appeal ITA No. 2793/Del/2026. Suffice to say, learned CIT(A) has quashed the impugned reopening (supra) herein that the same was that a mere change of the opinion as not only the assessee had filed all the relevant details but also the Assessing Officer’s had examined the same at length during scrutiny. The CIT(A) has placed reliance on Commissioner of Income Tax v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC). We thus see no reason to revive the impugned reopening at the Revenue’s behest. Its instant appeal ITA No. 2973/Del/2026 fails in very terms therefore.
8. To sum up, the assessee’s former appeal No. 1001/Del/2026 is dismissed as not pressed & latter case ITA No. 2548/Del/2026 is allowed. The Revenue’s appeal ITA No. 2973/Del/2026 is dismissed in above terms. A copy of this common order be placed in the respective case files.
Order Pronounced in the Open Court on 16.07.2026.
