Ground No. 3 relates to disallowance of prior period expenses amounting to Rs. 2,33,864/-. The Ld. Counsel for the assessee submitted that expenses of petty nature have been written off during the year, details of which have been furnished during the course of assessment proceedings. The Ld. DR strongly supported the orders of lower authorities. We have considered the rival submissions and perused the orders of lower authorities. It is settled that the deductions can be permitted in respect of only those expenses which are incurred in the relevant accounting year for the purpose of computing yearly profits and gains. We find that the claim of the assessee of expenses pertaining to prior period cannot be accepted as nothing has been brought on record to substantiate its claim neither before the lower authorities nor before us. Ground No. 3 is accordingly dismissed.
INCOME TAX APPELLATE TRIBUNAL, MUMBAI
ITA No.5708/Mum/2009 – Assessment Year-2004-05
M/s. Tipco Industries Ltd. Vs. The ACIT
Date of pronouncement: 03.08.2012
O R D E R
PER N.K. BILLAIYA (AM):
This appeal by the assessee is directed against the order of Ld. CIT(A)- Central-I, Mumbai dt. 13.8.2009 pertaining to assessment year 2004-05. The assessee has raised following effective grounds:
“1. On the facts and circumstances of the case as well as in Law, the Ld. CIT(A) has erred in confirming the action of AO in disallowing claim of sundry balances written off, being the irrecoverable receivables, without considering their nature and explanation of the appellant.
2. On the facts and circumstances of the case as well as in Law, the Ld. CIT(A) has erred in confirming the action of AO in disallowing a sum of Rs. 2,97,034/- u/s. 361)(va) of the I.T. Act, 1961 being the alleged late payment of the employees’ contribution of the Provident Fund.
3. On the facts and circumstances of the case as well as in Law, the Ld. CIT(A) has erred in confirming the action of AO in making an addition of Rs. 2,33,864/- on account of prior period expenses without appreciating the fact and circumstances of the case.”
2. Briefly stated the facts of the case are that assessee is engaged in the business of manufacturing of Thermoplastic material and Phenolic Moulding Powers etc. For the year under consideration, return of income was filed on 31.10.2004 declaring total loss at Rs. 3,60,71,000/-. The return was selected for scrutiny assessment accordingly statutory notices u/s. 143(2) and 142(1) were issued and served on the assessee.
3. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee has debited an amount of Rs. 2,03,35,000/- under the head ‘administration and selling expenses on account of sundry balances written off (net). The AO sought explanation from the assessee asking it to give the details of the sundry balances written off. The assessee filed the requisite details. On going through the details so furnished, the AO observed that the assessee has claimed advances to suppliers written off amounting to Rs. 2,35,40,186/-. The AO asked the assessee to submit partywise details with complete address along with the documentary evidences for writing off the same. The AO observed that the assessee has not furnished the complete details asked during the course of the proceedings. The AO proceeded by issuing notice u/s. 133(6) of the Act in respect of following three parties:
Name of the Party Amount written off
M/s. Hindustan Inks & Resins Mfg Co, Rs. 81,07,779/-
M/s. Indian Petrochemicals Corpn. Ltd., Rs. 86,96,713/-
M/s. Maxima Corporation Rs. 1,37,982/-
4. However, only M/s. Maxima Corpn., have confirmed the amount of Rs. 1,37,982/-. In respect of other two parties, though the notices were served, but there was no response. The AO asked the assessee to file confirmations from these two parties. According to the AO, the assessee failed to comply with the requirements. It was the contention of the assessee that these amounts are unrecoverable and have been certified by the management and as these payments are made exclusively for business purpose, the write off of the same should be allowed. The AO was of the opinion that the assessee could not prove the write off by brining any evidence to show that the alleged advance made by it is part of the business and the advances were made in the ordinary course of the business. According to the AO, the assessee has claimed advances written off amounting to Rs. 2,35,40,186/- as allowable u/s. 36(1)(vii) is not tenable since advances written off cannot be treated at par with bad debts written off as the same are not rooted through P&L account and went on to disallow the entire claim of advances written off amounting to Rs. 2,34,02,204/-.
5. Proceeding further from the statement of accounts details filed, the AO found that the contributions for the month of February and March 2004 made to the PF by the employee have been deposited to the Government account beyond the due date specified. The payments are detailed as under:
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