AO must decide issue after considering material on record held ITAT
AO must decide issue after considering material on record held ITAT
Assessee mfd. bakery products. In assessment it declared loss. AO noticed, assessee credited less in P&L a/c though recieved more. AO treated amt. as income of assessee. On appeal CIT(A) held, corresponding exp. capitalized by assessee should also be allowed as revenue exp. On appeal ITAT held, AO must decide issue after considering all material & evidence brought on record by assessee & only after providing adequate opportunity of being heard.-501279
Facts in Brief:
1. Assessee a partnership firm is engaged in the business of manufacturing of bakery products.
2. For the assessment year under consideration, it filed its return of income on 30th September 2009, declaring loss of ` 1,62,99,358.
3. In assessment, it was noticed by the Assessing Officer, though during the relevant previous year, assessee had received an amount of ` 5,59,78,139, towards conversion charges, however, in the Profit & Loss account, it has credited only an amount of ` 3,30,70,265.
4. AO treated the amount of ` 2,08,45,737, as income of the assessee for the relevant assessment year.
On appeal CIT(A),
5. Agreed with the assessee that corresponding expenditures capitalized by it should also be allowed as revenue expenditure. However, while observing so, he directed the Assessing Officer to allow expenditure of ` 33,62,423, which according to him, was capitalized by the assessee.
On appeal ITAT held,
6. In our view, revenue accepts the fact that corresponding expenditure for earning the income of ` 2,08,45,737, has to be allowed. That being the case, it requires to be examined whether learned Commissioner (Appeals) was justified in quantifying the expenditure allowable at ` 33,62,423.
7. It is observed that in course of assessment proceedings itself, the assessee while justifying its claim that conversion charges of ` 2,08,45,737, is not a revenue receipt has stated that while capitalizing the expenditure, assessee has reduced the amount of ` 2,08,45,737 from the gross expenditure and had capitalized the net expenditure.
8. If the aforesaid claim is correct then the expenditure cannot be quantified at ` 33,62,423, which as per the assessee's claim, is the net expenditure capitalized after reducing the amount of ` 2,08,45,737, from the gross expenditure.
9. As the learned Commissioner (Appeals) has not considered the facts in correct Shah Bector And Sons perspective, we are inclined to restore this issue back to the file of the Assessing Officer for verifying assessee's claim of expenditure for earning the income of ` 2,08,45,737.
10. The Assessing Officer must decide the issue after considering all material and evidence brought on record by the assessee and only after providing adequate opportunity of being heard to the assessee. Ground no. 1(b), 1(c) and 1(d), are allowed for statistical purposes.
1. As we have directed the Assessing Officer to verify assessee's claim of expenditure in respect of conversion charges, dispute raised by the assessee in grounds no.2 and 3 relating to certain disallowances made by Assessing Officer are also restored back to the file of the Assessing Officer for fresh adjudication after due opportunity of being hard to the assessee.
12. In the result, appeal is partly allowed for statistical purposes.
Case reference-Shah Bector And Sons, Mumbai vs Assessee
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