M/s. Sanket Food Products Pvt. Ltd. v. The Commissioner of Income Tax, Aurangabad
[Citation -2016-LL-1007-67]

Citation 2016-LL-1007-67
Appellant Name M/s. Sanket Food Products Pvt. Ltd.
Respondent Name The Commissioner of Income Tax, Aurangabad
Court ITAT-Pune
Relevant Act Income-tax
Date of Order 07/10/2016
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags revisionary jurisdiction • interest of revenue • assessment record • business activity • credit balance • written off
Bot Summary: On verification of assessment record, the Commissioner noted that in the Notes to Balance Sheet and Profit Loss Account Schedule XIII(k), it was revealed that the assessee had written back balances of creditors outstanding in 3 ITA No.1032/PN/2014 M/s. Sanket Food Products Pvt. Ltd. the books for more than three years totaling Rs.9,67,322/- and had declared the same as Income from other sources. Despite several opportunities given by the Commissioner, none appeared on behalf of the assessee before the Commissioner and since the order under section 263 of the Act could not be passed after expiry of two years from the end of financial year in which the order sought to be revised was passed, the Commissioner completed the proceedings. In view of the fact that the company did not foresee any business identical to the previous business activity in future, As per the ledger a/c of Deferred Revenue Expenses, it is seen that the assessee has debited the account by Rs.3,26,48,700/- on account of amount of Rafat Films bills for the year ending 31.03,2005. The assessee has credited the said account by Rs.65,29,740/- for F.Y. 2004-05 and F.Y. 2005-06 and debited to P and L Account. There are no entries of credit seen from F.Y. 2006-07 2007-08 and during the F.Y. 2008-09, the assessee has credited the said account by Rs.1,39,03,134/-, leaving balance of Rs.57,09,472/-. The Commissioner noted that the assessee had adjusted the credit balance of Rafat Films at Rs.1.39 crores without disclosing it as income, against TV publicity expenses at Rs.1.95 crores, which was shown under the head Miscellaneous expenses leaving the balance of Rs.56,86,086/- as on 31.03.2009. Upholding the order of Commissioner, we dismiss the grounds of appeal raised by the assessee.


IN INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM ITA No. 1032/PN/2014 Assessment Year: 2009-10 M/s. Sanket Food Products Pvt. Ltd., 4088/6, Nath Nagar, Mantha Road, Jalna - 431203 Appellant PAN: AECS0131P Vs. Commissioner of Income Tax, Aurangabad Respondent Appellant by : None Respondent by : Shri Ajit Korde, CIT Date of Hearing : 03.10.2016 Date of Pronouncement: 07.10.2016 ORDER PER SUSHMA CHOWLA, JM: This appeal filed by assessee is against order of CIT, Aurangabad, dated 18.03.2014 relating to assessment year 2009-10 passed under section 263 of Income Tax Act, 1961 (in short Act ). 2. assessee has raised following grounds of appeal :- 2 ITA No.1032/PN/2014 M/s. Sanket Food Products Pvt. Ltd. 1. Id. Commissioner of Income Tax, Aurangabad erred in passing order u/s.263 of Income Tax Act, 1961 when order passed by AO is neither erroneous nor prejudicial to interest of Revenue. 2. Ld. Commissioner of Income Tax, Aurangabad further erred in passing order u/s. 263 of I.T. Act, 1961 and setting aside issue of writing off outstanding liability in account of M/s. Rafat Films to file of Assessing Officer. 3. Ld. Commissioner of Income Tax, Aurangabad further erred in setting aside issue of writing off liability of Rs.1,39,03,134/- in account of M/s. Rafat Films and its taxability u/s. 41(1) when this amount is not claimed and allowed as deduction in earlier year. 4. Ld. Commissioner of Income Tax, Aurangabad further erred in passing order u/s.263 on account of writing off outstanding liability in account of M/s. Rafat Films when same is already examined by AO while passing order u/s 143(3) of I.T. Act, 1961 . 3. appeal was fixed for hearing from date to day. However, there was no representation on behalf of assessee except on one date i.e. 04.02.2016. Thereafter, appeal was fixed for hearing on 27.04.2016. However, none appeared on behalf of assessee. Registry was directed to issue notice to assessee. appeal was listed for hearing on 03.10.2016, on which date, none appeared on behalf of assessee nor any application was moved for adjournment. In view thereof, we proceed to decide present appeal after hearing learned Departmental Representative for Revenue. 4. issue arising in present appeal is against exercise of jurisdiction under section 263 of Act. 5. Briefly, in facts of case, assessee was engaged in business of manufacturing Gutka and scented supari, etc. at Jalna. For year under consideration, assessee had filed return of income declaring Nil income, which was picked up for scrutiny and assessment was completed under section 143(3) of Act vide order dated 14.12.2011, wherein return of income was accepted. On verification of assessment record, Commissioner noted that in Notes to Balance Sheet and Profit & Loss Account Schedule XIII(k), it was revealed that assessee had written back balances of creditors outstanding in 3 ITA No.1032/PN/2014 M/s. Sanket Food Products Pvt. Ltd. books for more than three years totaling Rs.9,67,322/- and had declared same as Income from other sources . Commissioner further observed that credit balance of Rs.1,39,03,134/- in account of Rafat Films was also written off in books and was adjusted against publicity expenses debited under head Miscellaneous Expenses . Commissioner further observed that assessee had incurred total expenditure of Rs.3,26,48,700/- under this head and till 31.03.2006, sum of Rs.1.30 crores had been written off or adjusted in Profit & Loss Account and further sum of Rs.1.39 crores was written off in books of account, which was not routed through Profit & Loss Account as income of year. Commissioner was of view that said amount was taxable for year under consideration as per provisions of section 41(1) of Act, according to him, which deserves to be added back to total income. Despite several opportunities given by Commissioner, none appeared on behalf of assessee before Commissioner and since order under section 263 of Act could not be passed after expiry of two years from end of financial year in which order sought to be revised was passed, Commissioner completed proceedings. Commissioner was of view that in view of notings in show cause notice, order of Assessing Officer was prima facie found to be erroneous and prejudicial to interest of Revenue. Commissioner vide para 3.3 at page 3 had observed as under:- 3.3 It appears from record that during year under consideration, company had written back balances of certain creditors outstanding in books for more than 3 years, totalling to Rs.9,67,322/- and is disclosed same under head income from other sources . It is also noticed from schedule-XII that assessee company had also written off credit balance of Rafat Films of Rs.1,39,03,134/- without disclosing it as Income, same was adjusted against TV publicity Expenses, of Rs.1,95,89,220/- shown under head "Miscellaneous expenditure", leaving balance of Rs.56,86,086/- as on 3l.03.2009. From record, it is also noticed that assessee company has incurred Rs.3,26,48,700/- in past for production and release of ad-film for relay through various TV channels in year. It is also seen from details of Deferred Revenue Expenses (Advt) available on record that company has written off two fifth of total expenditure i.e. amount of Rs.1,30,59,480/- on media advertisement till year ended 31-03-2006 leaving balance of Rs.1,95,89,220/-. It is also seen that said amount was carried forward by assessee company and entire outstanding liability in account of Rafat Films at Rs.1,39,03,134/- is 4 ITA No.1032/PN/2014 M/s. Sanket Food Products Pvt. Ltd. appropriated against balance in TV publicity expenses during year. In view of fact that company did not foresee any business identical to previous business activity in future, As per ledger a/c of Deferred Revenue Expenses (Advt ), it is seen that assessee has debited account by Rs.3,26,48,700/- on account of amount of Rafat Films bills for year ending 31.03,2005. assessee has credited said account by Rs.65,29,740/- for F.Y. 2004-05 and F.Y. 2005-06 and debited to P and L Account. There are no entries of credit seen from F.Y. 2006-07 & 2007-08 and during F.Y. 2008-09, assessee has credited said account by Rs.1,39,03,134/-, leaving balance of Rs.57,09,472/-. It is seen that amount of Rs.1,30,59,460/- has been written off or adjusted in P and L A/c, but credit balance of Rs.1,39,03,134/- written off during year has not been routed through P and L Account . In-spite of ample time given, assessee has not attended before me to explain this issue. assessee has written off credit balance and it adjusted it with publicity expenses shown under miscellaneous expenditure. This issue needs verification of books of accounts and also as to how said expenses have been treated in Income Tax returns filed from .Y. 2006-07 onwards. In absence of any specific details on record, I have no alternative but to set-aside said issue to file of AO for re-verification. Accordingly, AO is directed to verify issue in depth in light of above facts, and pass order in accordance with law. 6. conclusion of Commissioner was that sum of Rs.1.30 crores had been written off or adjusted in Profit & Loss Account but credit balance of Rs.1.39 crores i.e. entire outstanding liability of Rafat Films was appropriated against balance in TV publicity expenses during year but was not routed through Profit & Loss Account. In view thereof, issue as per Commissioner needed verification of books of account and as to how said expenses had been treated in income tax returns filed for assessment years 2006-07 onwards. In absence of any specific details available on record, Commissioner set aside issue to file of Assessing Officer for verification and Assessing Officer was directed to verify issue and he was asked to reframe assessment as per provisions of law after considering proper facts and submissions of assessee in this regard. 7. On perusal of assessment order passed in case which is dated 14.12.2011, we find that Assessing Officer noted that during year under consideration, assessee had not carried out any manufacturing activities. However, assessee had sold certain raw materials and packing materials lying 5 ITA No.1032/PN/2014 M/s. Sanket Food Products Pvt. Ltd. in factory. After verification of details file d, Assessing Officer accepted income of assessee at Rs.12,44,852/-, against which brought forward losses were set off and total income was completed at Nil. assessee had failed to point out any verification exercise carried out in respect of write off of credit balance of Rafat Films at Rs.1,39,03,134/-. On other hand, assessee had also written off creditors outstanding for more than five years totaling Rs.9,67,322/- which were disclosed under head Income from other sources . Commissioner noted that assessee had adjusted credit balance of Rafat Films at Rs.1.39 crores without disclosing it as income, against TV publicity expenses at Rs.1.95 crores, which was shown under head Miscellaneous expenses leaving balance of Rs.56,86,086/- as on 31.03.2009. assessee in earlier years had incurred expenditure of Rs.3.26 crores for production and release of Advt. films, out of which 2/5th was written off i.e. amount of Rs.1.30 crores on media advertisement up to 31.03.2006 leaving balance of Rs.1.95 crores. same amount was carried forward and entire outstanding liability in account of Rafat Films at Rs.1.39 crores was appropriated against balance in TV publicity expenses during year. T he perusal of records did not reveal any enquiry being made by Assessing Officer in this regard and as per Commissioner, it needed verification of books of account and also how amount was treated in earlier years in hands of assessee. For this verification, matter has been set aside to file of Assessing Officer and we find no error in exercise of jurisdiction by Commissioner under section 263 of Act. 8. Commissioner has power of revision under section 263 of Act, where assessment order passed by Assessing Officer is erroneous and also prejudicial to interest of Revenue. Both conditions laid down in section 263 of Act have to be complied with before Commissioner can exercise his jurisdiction. Commissioner in present case has observed that 6 ITA No.1032/PN/2014 M/s. Sanket Food Products Pvt. Ltd. order passed by Assessing Officer is erroneous in not considering write off of outstanding liability of Rafat Films, which has been adjusted through entries in Balance Sheet and have not been routed through Profit & Loss Account; otherwise, same was taxable under section 41(1) of Act. In view thereof, order passed by Assessing Officer is also prejudicial to interest of Revenue for not considering taxability at Rs.1.39 crores i.e. write off liability of Rafat Films. Where assessment order passed is both erroneous and prejudicial to interest of Revenue, Commissioner has power of exercising revisionary jurisdiction under section 263 of Act. Upholding order of Commissioner, we dismiss grounds of appeal raised by assessee. 9. In result, appeal of assessee is dismissed. Order pronounced on this 7th day of October, 2016. Sd/- Sd/- (ANIL CHATURVEDI ) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated : 7th October, 2016. GCVSR Copy of Order is forwarded to : 1. Appellant; 2. Respondent; 3. CIT, Aurangabad; 4. DR B , ITAT, Pune ; 5. Guard file. BY ORDER, //True Copy // Sr. Private Secretary ITAT, Pune M/s. Sanket Food Products Pvt. Ltd. v. Commissioner of Income Tax, Aurangabad
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