The Pune Bench of the Income Tax Appellate Tribunal ( ITAT ), quashed disallowance of customs duty drawback written-off relating to preceding assessment years ‘as prior period item’.
The grounds raised in the present appeal are inconsonance with rule 8 of Income Tax Appellate Tribunal Rules, 1963, the sole and substantive ground is directed against the disallowance of customs duty drawback written-off relating to preceding assessment years ‘as prior period item’.
The appellant, Parry Phytoremedies Private Limited, filed its return of incomedeclaring total income at Rs Nil with a carry forward loss of Rs three crores, which by service of notice u/s 143(2) of the Act, was subjected to scrutiny and the assessment was finally culminated by solitary disallowance as prior period item / expenditure debited to profit and loss account representing the balance of unabsorbed customs duty drawback written-off pertaining to financial year 2008-09 to 2010-11.
The assessee company carried the matter before first appellate authority wherein theCIT(A) upheld the disallowance ingeminating that, the information for writing-off of such unabsorbed customs duty drawback was crystallised when the order of denial of refund was passed by the customs authorities which was much before the impugned assessment year and for the reason same is ineligible for allowance as it amounts to prior period item/expense.
In Lord’s Dairy Farm Ltd. v. CIT, it was held that the Court was entitled to presume that the amount became irrecoverable when the assessee wrote it off in its books of account. Therefore, even if duty drawbackwas available for the previous assessment year, what will be relevant was when the same is treated as bad debt by the assessee in his books of account.”
A Coram consisting of SS Viswanethra Ravi, Judicial Member and GD Padmahshali, Accountant Member observed that “We leaving no iota of doubt hold the orders of both the Ld. TAB as contra legem; ergo we set aside the order of FAA and quash the order of assessment.”
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