Haworth (India) Private Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 109/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3173 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-06-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 22-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVRAJ MORE
• Keywords: Transfer pricing; International transaction; Rule of consistency; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 109 /P U N/201 6 / ASSESSMENT YEAR : 20 11 - 12 HAWORTH (INDIA) PRIVATE LIMITED, C/O, AJIT R. SHETTY & CO., FLAT NO. 2, FIRST FLOOR, NORTH AVENUE ROAD, KALYANI NAGAR, PUNE 411006 PAN : AAACH8417K ....... / APPELLANT / V/S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11, PUNE / RESPONDENT ASSESSEE BY : S HRI S.P. CHIDAMBARAM REVENUE BY : SHRI SHIVRAJ MORE / DATE OF HEARING : 2 7 - 06 - 201 8 / DATE OF PRONOUNCEMENT : 21 - 0 8 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ASSESSMENT ORDER DATED 22 - 12 - 2015 PASSED U/S. 143(3) R.W.S. 144C(13) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR THE ASSESSMENT YEAR 2011 - 12. 2 ITA NO . 109/PUN/2016, A.Y. 2011 - 12 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE : THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF FURNITURE. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE ENTERED INTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES ( AES ) . THE ASSESSEE INTER ALIA PAID RS.6,51,28,097/ - AS MANAGEMENT SERVICES FEES TO ITS AES AND APPLIED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS. IN THE ABSENCE OF ANY SUPPORTING DOCUMENTS, THE TRANSFER PRICING OFFICER (TPO) DETERMIN ED ARMS LENGTH PRICE (ALP) OF MANAGEMENT SERVICES FEES AS NIL AND MADE ADJUSTMENT OF THE AFORESA ID AMOUNT. FURTHER, THE ASSESSING OFFICER WHILE PASSING DRAFT ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE HAS CREATED PROVISION FOR WARRANTY TO THE TUNE OF RS.11, 82,576/ - IN THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE HA D CREATED SI MILAR PROVISION IN THE EARLIER FINANCIAL YEAR S AS WELL. HOWEVER, THE PROVISION CREATED WAS NOT UTILIZED BY THE ASSESSEE EITHER IN THE PAST OR IN THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE HAS BEEN CARRYING FORWARD UNUTILIZED PROVISION YEAR AFTER YEAR . THE CLOSING BALANCE OF WARRANTY PROVISION IN THE FINANCIAL YEAR AFTER CREATING ADDITIONAL PROVISION IN FINANCIAL YEAR 2010 - 11 IS RS.39,05,668/ - . THE ASSESSING OFFICER ADDED BACK ENTIRE AMOUNT OF RS.37,05,668/ - TO T HE TOTAL INCOME OF THE ASSESSEE AS THE AMOUNT PROVIDED FOR WARRANTY WAS NOT ACTUALLY UTILIZED AND WAS BEING CARRIED FORWARD YEAR AFTER YEAR. AGGRIEVED BY THE ADJUSTMENT PROPOSED BY THE TPO ON ACCOUNT OF MANAGEMENT SERVICE FEE AND DISALLOWANCE OF WARRANTY PROVISION BY THE ASSESSING OFFICER , THE ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP) . THE DRP VIDE DIRECTIONS DATED 09 - 12 - 2015 UPHELD THE ADJUSTMENT PROPOSED BY THE TPO IN RESPECT OF MANAGEMENT SERVICES 3 ITA NO . 109/PUN/2016, A.Y. 2011 - 12 FEES . HOWEVER, IN RESPECT OF WARRANTY PROVISION THE DRP RESTRIC TED THE ADDITION TO THE EXTENT OF WARRANTY PROVISION MADE DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL I.E. RS.11,82,576/ - . THE ASSESSING OFFICER VIDE IMPUGNED ORDER MADE ADDITIONS IN LINE WITH THE DIRECTIONS OF DRP. THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE ADDITIONS CONFIRMED BY THE DRP AND HAS RAISED FOLLOWING GROUNDS IN APPEAL : O N THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW; I . GROUNDS PERTAINING TO TRANSFER PRICING ('TP') 1. THE LD. ASSESSING OFFICER ('A O ') PURSUANT TO THE DIRECTIONS OF THE HONOURABLE DISPUTE RESOLUTION PANEL (HON'BLE PANEL), ERRED IN MAKING A TP ADJUSTMENT OF RS .6,51,28,097 TO THE INCOME OF THE APPELLANT, BY HOLDING THAT THE APPELLANT'S INTERNATIONAL TRANSACTION PERTAINING TO THE PAYMENT OF MANAGEMENT SERVICE FEES ( MSF ) DO NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UNDER THE INCOME - TAX ACT, 1961 ('THE ACT'). ERRONEOUS COMPUTATION OF ARM'S LENGTH PRICE OF MSF PAYMENT TO ASSOCIATED EN TERPRISE ('AE') AT 'NIL' 2. THE HON'BLE DRP /LD. A O ) ERRED IN COMPUTING THE ARM'S LENGTH PRICE OF THE APPELLANT'S INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF MSF TO AE AT 'NIL'. II. GROUNDS PERTAINING TO CORPORATE TAX 3. THE HON' BLE DRP /LD . AO ERRED IN DISALLOWING THE WARRANTY PROVISION DEBITED TO PROFIT AND LOSS ACCOUNT (P & L) OF INR 1,182,576. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. YOUR APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, WITHDRAW, MODIFY AND/OR SUBSTITUTE, AND T O WITHDRAW THE ABOVE GROUNDS OF APPEAL. 3. SHRI S.P. CHIDAMBARAM APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT DURING THE PROCEEDINGS BEFORE THE TPO AND DRP , THE ASSESSEE COULD NOT FURNISH DOCUMENTS IN SUPPORT OF MANAGEMENT SERVICES RECEIVED BY THE ASSESSEE FROM ITS AE. THE LD. AR SUBMITTED THAT THE ASSESSEE IS NOW FURNISHING ADDITIONAL EVIDENCE IN THE FORM OF THIRD PARTY INVOICES, E - MAIL CORRESPONDENCE, REPORT ON MANAGEMENT CHARGES AND COS T 4 ITA NO . 109/PUN/2016, A.Y. 2011 - 12 ALLOCATION WORKINGS TO SUBSTANTIATE THE BENEFIT S RECEIVED BY THE ASSESSEE/APPELLANT. THE LD. AR ALSO FURNISHED THE AFFIDAVIT OF SHRI VASUDEVA ANAND RAO, FINANCE DIRECTOR OF THE ASSESSEE COMPANY GIVING REASONS FOR NOT FURNISHING THE SUPPORTING DOCUMENTS BEFORE THE AUTHORITIES BELOW. THE LD. AR FURTHER POINTED THAT IN ASSESSMENT YEAR 2009 - 10 , THE TPO MADE SIMILAR ADJUSTMENT IN RESPECT OF MANAGEMENT SERVICES FEES PAID BY THE ASSESSEE TO ITS AE. THE MATTER TRAVELLED UP TO THE TRIBUNAL. THE TRIBUNAL IN ASS ESSEES APPEAL IN ITA NO.281/PUN/2014 FOR ASSESSMENT YEAR 2009 - 10 DECIDED ON 30 - 10 - 2017 RESTORED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER/TPO FOR DE - NOVO ADJUDICATION OF THE ISSUE. THE LD. AR FURNISHED THE COPY OF TRIBUNAL ORDER IN ITA NO. 281/PUN/ 2014 (SUPRA). 3.1 IN RESPECT OF DISALLOWANCE OF PROVISION FOR WARRANTY , THE LD. AR POINTED THAT THE ASSESSEE HAS BEEN MAKING PROVISION FOR WARRANTY ON SCIENTIFIC BASIS. THE UNUTILIZED AMOUNT IS CARRIED FORWARD AND FURTHER PROVISION IS MADE. THE ASSESSEE HAS BEEN CONSISTENTLY CREATING PROVISION FOR WARRANTY IN SIMILAR MANNER IN THE PAST AND NO OBJECTION WAS EVER RAISED BY THE ASSESSING OFFICER. THE ASSESSEE HAS UTILIZED ENTIRE AMOUNT OF PROVISION IN FINANCIAL YEAR 2011 - 12 RELEVANT TO THE AS SESSMENT YEAR 2012 - 13. THE ASSESSEE HA D HIGHLIGHTED THIS FACT BEFORE THE DRP , H OWEVER, THE DRP AFTER RECORDING THE SAME HAS CONFIRMED THE ADDITION ON THE EXTENT OF RS.11,82,576/ - . THE LD. AR SUBMITTED THAT THE DRP OUGHT TO HAVE VERIFIED THE FACT REGARDIN G UTILIZATION OF WARRANTY PROVISION IN THE FINANCIAL YEAR 2011 - 12 BEFORE MAKING ANY DISALLOWANCE. 4. ON THE OTHER HAND SHRI SHIVRAJ MORE REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ASSESSMENT ORDER AND THE DIRECTIONS OF DRP. THE LD. DR SUBMITTE D THAT BEFORE THE AUTHORITIES BELOW THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SERVICES RENDERED BY THE AE AND THE BENEFIT RECEIVED 5 ITA NO . 109/PUN/2016, A.Y. 2011 - 12 FROM SUCH MANAGEMENT SERVICES BY THE ASSESSEE. IN THE ABSENCE OF ANY COGENT EVIDENCE THE TPO AND THE DRP HAVE RIGHTLY MADE ADJUSTMENT AFTER DETERMINING THE ALP OF MANAGEMENT SERVICES AS NIL. 4.1 IN RESPECT OF PROVISION FOR WARRANTY , THE LD. DR CONTENDED THAT THE ASSESSEE HAS BEEN MAKING PROVISION FOR WARRANTY YEAR AFTER YEAR WITHOUT THEIR BEING ACTUAL UTILIZATION OF THOSE AM OUNTS. THIS CLEARLY SHOWS THAT THERE IS NO SCIENTIFIC BASIS FOR CREATING THE PROVISION. THE PROVISION FOR WARRANTY HAS NOT BEEN MADE IN ACCORDANCE WITH THE GUIDELINES LAID DOWN BY THE HONBLE SUPREME COURT OF THE INDIA IN THE CASE OF ROTORK CONTROLS INDI A (P) LTD. VS. COMMISSIONER OF INCOME TAX REPORTED AS 314 ITR 62. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . THE ASSESSEE IN APPEAL HAS ASSAILED THE ASSESSMENT ORDER AND DIRECTIONS OF DRP ON TWO GROUNDS : I . DISALLOWANCE OF MANAGEMENT SERVICE FEES RS.6,51,28,097/ - II . DISALLOWANCE OF PROVISION FOR WARRANTY RS.11,82,576/ - . MANAGEMENT SERVICE FEES 6. THE TPO HAS MADE ADJUSTMENT IN RESPECT OF MANAGEMENT SERVICE FEES ON THE GROUND THAT THE ASSESSEE HAS FAILED TO SHOW NEED FOR SERVICES AND BENEFIT RECEIVED. THE TPO AND THE DRP HAVE CATEGORICALLY OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED ANY SUPPORTING DOCUMENTS T O SUBSTANTIATE ANY SERVICES RENDERED BY THE AE AND THE BENEFITS DERIVED BY THE ASSESSEE FROM SUCH SERVICES. THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING 182 PAGES AS ADDITIONAL EVIDENCE IN THE FORM OF THIRD PARTY INVOICES, E - MAIL CORRESPONDENCE, REPORT ON MANAGEMENT CHARGES AND COST ALLOCATION WORKINGS IN SUPPORT OF THE SERVICES RECEIVED AND TO SUBSTANTIATE THE 6 ITA NO . 109/PUN/2016, A.Y. 2011 - 12 BENEFITS DERIVED BY THE ASSESSEE/APPELLANT. THE LD. AR OF THE ASSESSEE HAS ALSO FILED AN AFFIDAVIT OF THE FINANCE DIRECTOR OF THE ASSESSEE COMPA NY CITING REASONS FOR NON - FURNISHING OF SUPPORTING DOCUMENTS BEFORE THE AUTHORITIES BELOW. THE RELEVANT EXTRACT OF THE AFFIDAVIT READS AS UNDER : 6. I UNDERSTAND THAT THE DETAILS/EVIDENCES COULD NOT BE FURNISHED DURING THE ASSESSMENT PROCEEDINGS FOR THE FOLLOWING REASONS: A . DURING THE YEAR 2012, THERE WAS LABOUR UNREST AND PROTEST BY THE LABOUR UNION IN THE PUNE FACTORY OF THE APPELLANT. B . OWING TO THE ABOVE AND ALSO DUE TO OTHER BUSINESS REASONS, THE APPELLANT DECIDED TO MOVE THE FACTORY FROM PUNE TO CHENNAI. C . DURING THE MIDDLE OF YEAR 2013, POST IDENTIFYING THE PLACE IN CHENNAI, THE APPELLANT ANNOUNCED THE CLOSURE OF THE FACTORY AT PUNE AND ALSO ANNOUNCED VOLUNTARY RETIREMENT SCHEME FOR ITS EMPLOYEES. D . POST ANNOUNCEMENT OF THE CLOSURE OF THE FACTORY AT PUNE, THE THEN FINANCE DIRECTOR AND CERTAIN OTHER EMPLOYEES RESIGNED FROM THE OFFICE OF THE APPELLANT. E . SUBSEQUENTLY, THE APPELLANT APPOINTED ANOTHER DIRECTOR, MR. ARAVIND DEVARAKONDA, DURING JULY 2013 IN PLACE OF ERSTWHILE DIRECTOR. HOWEVER, SINCE HE WAS N EW TO THE ORGANISATION AND ALSO THERE WERE NO RELEVANT SUPPORT STAFF IN PUNE OFFICE, WAS NOT IN A POSITION TO COLLATE THE NECESSARY INFORMATION. FURTHER, DUE TO LABOUR UNREST AND UNION ISSUES, ENTRY OF PEOPLE INTO THE FACTORY WAS OFTEN INTERRUPTED. F . BY DECE MBER 2014, THE APPELLANT ENTIRELY SHIFTED ITS FACTORY FROM PUNE TO CHENNAI. IT IS ALSO UNDERSTOOD THAT SEVERAL DOCUMENTS WERE MISPLACED DURING THE PROCESS OF SHIFTING THE OFFICE FROM PUNE TO CHENNAI. G . IN FACT THE STATUTORY AUDIT FOR THE FINANCIAL YEAR 2013 - 14 AND FINANCIAL YEAR 2014 - 15 WAS DELAYED AND WAS CONCLUDED ONLY IN SEPTEMBER, 2016. 7. IN THE MEANWHILE, DRP PROCEEDINGS TOOK PLACE DURING DECEMBER 2015 AND FOR THE AFORESAID REASONS THE EVIDENCES COULD NOT BE FURNISHED EVEN AT THAT STAGE AS WELL. HENCE, THE DRP CONFIRMED THE ADDITION MADE BY THE TPO AND UPHELD THE DISALLOWANCE MADE WITH RESPECT TO THE MSF CHARGES VIDE ITS DIRECTION DATED 09.12.2015. 8. DURING SEPTEMBER 2016, I WAS APPOINTED AS THE FINANCE DIRECTOR AND SUBSEQUENTLY DUE TO MY RENEWED EFFORT S WE WERE ABLE TO COLLATE THE RELEVANT DOCUMENTS. IN FACT, I HAD TRAVELLED TO THE REGIONAL HEADQUARTERS (MALAYSIA) DURING JANUARY 2017 FOR MEETING THE RELEVANT PERSONNEL AT THE REGIONAL HEADQUARTERS AND SEEKING THEIR SUPPORT THEREOF. PURSUANT TO THESE EFFO RTS UNDERTAKEN, I WAS ABLE TO COLLATE NECESSARY DOCUMENTS IN CONNECTION WITH RECEIPT OF MANAGEMENT CHARGES IN THE MID OF 2017. SINCE THE INFORMATION WAS COLLATED FOR ASSESSMENT YEARS STARTING FROM ASSESSMENT YEAR 2009 - 10, THE DETAILS RELATING TO THE PRECE DING ASSESSMENT YEARS, I.E., AY 7 ITA NO . 109/PUN/2016, A.Y. 2011 - 12 2009 - 10 AND AY 2010 - 11 WERE COLLATED AND FILED IN THE YEAR 2017. SIMILARLY, THE EVIDENCES RELATING THE SUBJECT ASSESSMENT YEAR WAS COLLATED AND WAS FILED AS ADDITIONAL EVIDENCE ON 23 MARCH 2018 BEFORE THIS HONBLE INCOME TAX APPELLATE TRIBUNAL. AFTER EXAMINING THE CONTENTS OF THE AFFIDAVIT WE ARE SATISFIED THAT THE ASSESSEE WAS PREVENTED FROM FURNISHING THE NECESSARY DOCUMENTS TO SUBSTANTIATE ITS CLAIM ON ACCOUNT OF LABOUR UNREST RESULTING IN ASSESSEE SHIFTING ITS FACT ORY FROM PUNE TO CHENNAI . IN THE LIGHT OF BONAFIDE REASONS, WE ADMIT THE ADDITIONAL EVIDENCES FILED BY ASSESSEE IN THE PAPER BOOK. WE FURTHER OBSERVE THAT IN ASSESSMENT YEAR 2009 - 10 SIMILAR ADJUSTMENT REJECTING ALP OF THE MANAGEMENT SERVICE FEES PAID BY THE ASSESSEE TO ITS AE WAS MADE. THE TRIBUNAL AFTER ADMITTING ADDITIONAL EVIDENCE RESTORED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER/TPO FOR EXAMINATION AND DECIDING THE ISSUE AFRESH. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL IN ITA NO. 281/PUN/2014 (SUPRA) READS AS UNDER : 15. THE ASSESSEE HAS PAID MANAGEMENT SERVICE FEE TO ITS AE HAWORTH HONG KONG LTD. THE MANAGEMENT TEAM OF HAWORTH GROUP IS PROVIDING GUIDELINES AND STRATEGIC DIRECTIONS TO THE GROUP AS WHOLE INCLUDING THE ASSESSEE. I T HAS BEEN CONTENDED THAT THE SALARY AND OVERHEADS ARE POOLED IN HAWORTH HONG KONG LTD. THEN THE COSTS ARE ALLOCATED TO ALL GROUP ENTITIES ON THE BASIS OF SALES. THE LD. AR POINTED THAT CHARGES ARE ALLOCATED ON COST BASIS ALONE AND NO MARK UP IS CHARGED BY HAWORTH HONG KONG LTD. THE ASSESSEE HAS GIVEN THE DETAILS OF BENEFITS DERIVED BY THE ASSESSEE FROM THE MANAGEMENT SERVICE RENDERED BY ITS AE HAWORTH HONG KONG LTD. AT PAGE 282 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO FILED ADDITIONAL EVIDENCE IN RESPE CT OF MANAGEMENT SERVICES PROVIDED BY ITS AE. IN VIEW OF FRESH EVIDENCE FURNISHED BY ASSESSEE, WITHOUT COMMENTING ON THE MERITS, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO FILE OF ASSESSING OFFICER/TPO FOR DE NOVO ADJUDICATION. THE ASSESSING OFFI CER SHALL CONSIDER FRESH DOCUMENTS FILED BY ASSESSEE AND ALL OTHER RELEVANT DOCUMENTS. THE ASSESSING OFFICER SHALL ALSO GRANT OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE ISSUE, IN ACCORDANCE WITH LAW. ACCORDINGLY, GROUND NO. 7 RAISED IN TH E APPEAL BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. THUS, IN VIEW OF THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AND THE DECISION OF CO - ORDINATE BENCH IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 - 10 , WE DEEM IT APPROPRIATE TO REMIT THIS ISS UE BACK TO THE FILE OF ASSESSING OFFICER/TPO TO RE - ADJUDICATE TH E ISSUE AFTER CONSIDERING THE 8 ITA NO . 109/PUN/2016, A.Y. 2011 - 12 ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE TRIBUNAL. NEEDLESS TO SAY , THE TPO/ASSESSING OFFICER SHALL GRANT REASONABLE OPPORTUNITY OF HEARING TO THE AS SESSEE BEFORE DECIDING THE ISSUE DE - NOVO, IN ACCORDANCE WITH LAW. THE GROUND NO. 1 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. PROVISION FOR WARRANTY 7. THE ASSESSEE HAS CREATED PROVISION FOR WARRANTY IN THE EARLIER FINANCIAL YEARS AND HAS BEEN CARRYING FORWARD THE UNUTILIZED AMOUNT YEAR AFTER YEAR. THE DETAILS OF THE PROVISION MADE IN THE LAST THREE FINANCIAL YEARS ARE AS UNDER : F.Y. OPENING BALANCE OF PROVISION FOR WARRANTY PROVISION MADE DURING THE YEAR EXPENDITURE INCURRED AND SET OFF AGAINST THE PROVISION DURING THE YEAR CLOSING BALANCE OF THE PROVISION 2008 - 09 15,65,044/ - 5,48,259/ - NIL 21,13,303/ - 2009 - 10 21,13,303/ - 6,09,789/ - NIL 27,23,092/ - 2010 - 11 27,23,092/ - 11,82,576/ - NIL 39,05,668/ - 8. WHILE PASSING DRAFT ASSESSMENT ORDER THE ASSESSING OFFICER MADE ADDITION OF THE ENTIRE CLOSING BALANCE OF THE PROVISION RS.39,05,668/ - ON THE GROUND THAT THE ASSESSEE HAS NOT UTILIZED PROVISION IN THE PAST YEAR S AND EVEN IN THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL PROVISION HAS NOT BEEN UTILIZED . THE PROVISION CANNOT BE ALLOWED TILL THE TIME IT IS ACTUALLY UTILIZED. THE DRP GRANTED PART RELIEF TO THE ASSESSEE BY RESTRICTING THE DISALLOWANCE TO T HE EXTENT OF PROVISION CREATED DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL I.E. RS.11,82,576/ - . THE LD. AR HAS POINTED THAT THE PROVISION FOR WARRANTY HAS BEEN UTILIZED TO THE EXTENT OF RS.24,66,660/ - DURING THE FINANCIAL YEAR 2011 - 12. WE FIND THAT SIMILAR SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE THE DRP. 9 ITA NO . 109/PUN/2016, A.Y. 2011 - 12 HOWEVER, THE CONTENTIONS OF THE ASSESSEE HAVE NOT BEEN VERIFIED. WE FURTHER OBSERVE THAT THOUGH THE ASSESSEE HAS BEEN CONSISTENTLY CREATING PROVISION IN THE PAST AND THE SAME (UN UTILIZED AMOUNT) HAS BEEN ALLOWED TO CARRY FORWARD IN THE NEXT FINANCIAL YEAR. WE FIND THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY COGENT REASON FOR DEVIATING FROM THE PRINCIPLE OF CONSISTENCY IN ALLOWING SUCH PROVISION IN THE PAST. IN THE BACKDROP OF T HE SE FACTS WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THIS ISSUE AFRESH. ACCORDINGLY, GROUND NO. 2 RAISED IN THE APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON TUESDAY, THE 21 ST DAY OF AUGUST, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 21 ST AUGUST, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE DISPUTE RESOLUTION PANEL - 3, MUMBAI 4. THE COMMISSIONER OF INCOME TAX 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE