DCIT 1(1), MUMBAI V. COLOUR CHEM LTD ( NOW KNOWN AS CLARIANT CHEMICALS (INDIA) LTD, MUMBAI

ITA 1183/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9397 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-12-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 20-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA
• Assessee Lawyers: FAROOK IRANI
• Section: 43B; 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI P M JAGTAP, ACCOUNTANT MEMBER AND SHRI R S PADVEKAR, JUDICIAL MEMBER ITA NO 1183/MUM/2009 (ASSESSMENT YEAR: 2002-03) DCIT-1(1), ROOM NO 579, AAYAKAR BHAVAN, MUMBAI-400 020 VS M/S COLOUR CHEM LTD (NOW KNOWN AS CLARIANT CHEMICALS (INDIA) LTD), RAVINDRA ANNEXE, 194, CHURCHGATE RECLAMATION, MUMBAI -400 020 PAN: AAACC 5602 P APPELLANT RESPONDENT APPELLANT BY: SHRI VIRENDRA OJHA RESPONDENT BY: SHRI FAROOK IRANI ORDER PER P M JAGTAP, ACCOUNTANT MEMBER THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT (A) I MUMBAI DATED 28.11.2008 AND IN THE SOLITARY GROUND RAISED THEREIN, THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT (A) IN DEL ETING THE ADDITION OF RS 47,38,741/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION TOWARDS LEAVE ENCASHMENT ON PAY MENT BASIS. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 20.10.2002 DECL ARING A TOTAL INCOME OF RS 12,23,61,990/-. THE SAID RETURN WAS SUBSEQUENTLY R EVISED BY THE ASSESSEE-COMPANY AND IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143( 3) VIDE AN ORDER DATED 23.3.2005, THE TOTAL INCOME OF THE ASSESSEE-COMPANY WAS DETERMINED BY THE ASSESSING OFFICER AT RS 11,34,50,360/-. SUBSEQUENT LY, IT WAS NOTICED BY THE ASSESSING OFFICER FROM THE NOTE ATTACHED TO THE COM PUTATION OF TOTAL INCOME THAT DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF LEA VE ENCASHMENT AMOUNTING TO RS 47,38,741/- ON PAYMENT BASIS WAS ALLOWED IN THE ASS ESSMENT COMPLETED U/S 143(3). HE ALSO NOTED THAT PROVISION FOR THE SAID AMOUNT WA S MADE BY THE ASSESSEE IN THE ITA 1183/M/2009 M/S COLOUR CHEM LTD NOW KNOWN AS CLARIANT CHEMICALS (INDIA) LTD 2 EARLIER YEARS, WHICH WAS ALREADY ALLOWED AS DEDUCTI ON IN THE ASSESSMENTS COMPLETED FOR THE SAID YEARS. ACCORDING TO THE ASSESSING OFF ICER, THE SUBSEQUENT PAYMENT MADE ON ACCOUNT OF LEAVE ENCASHMENT IN THE YEAR UND ER CONSIDERATION THEREFORE WAS REQUIRED TO BE ADJUSTED AGAINST THE PROVISION CREAT ED IN THE EARLIER YEARS IN VIEW OF EXPLANATION 3B TO SECTION 43B AND SINCE NO SUCH ADJ USTMENT WAS MADE IN THE ASSESSMENT COMPLETED U/S 143(3) WHILE ALLOWING ASSE SSEES CLAIM FOR DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT ON PAYMENT BASIS, THE A SSESSING OFFICER WAS OF THE OPINION THAT THERE WAS UNDER ASSESSMENT OF ASSESSEE S INCOME TO THE EXTENT OF RS 47,38,741/-. HE, THEREFORE, REOPENED THE SAID ASSE SSMENT BY ISSUING NOTICE U/S 148 AFTER RECORDING THE REASONS. IN THE REASSESSMENT C OMPLETED U/S 147 R W S 143(3) THE AMOUNT OF RS 47,38,741/- WAS ADDED BY THE ASSES SING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE BY DISALLOWING ITS CLAIM FOR DEDUCT ION ON ACCOUNT OF LEAVE ENCASHMENT ON PAYMENT BASIS HOLDING THAT DEDUCTION FOR THE SAI D AMOUNT WAS ALREADY ALLOWED TO THE ASSESSEE IN THE EARLIER YEARS ON THE BASIS OF P ROVISIONS MADE. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R U/S 143(3) R.W.S. 147, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEA RNED CIT (A) AND IT WAS SUBMITTED ON ITS BEHALF BEFORE LEARNED CIT (A) THAT THE PROVISION MADE ON ACCOUNT OF LEAVE ENCASHMENT IN THE EARLIER YEARS, IN FACT, HAD BEEN DISALLOWED AND ADDED BACK IN THE COMPUTATION OF INCOME AND, THEREFORE, THERE WAS NO QUESTION OF ADJUSTMENT OF ANY PROVISION AGAINST THE ACTUAL PAYMENT OF LEAVE E NCASHMENT MADE IN THE YEAR UNDER CONSIDERATION. THIS CONTENTION OF THE ASSESS EE WAS FOUND ACCEPTABLE BY THE LEARNED CIT (A) AND HE DELETED THE ADDITION OF RS 4 7,38,741/- MADE BY THE ASSESSING OFFICER HOLDING THE SAME TO BE UNFOUNDED. AGGRIEVED BY THIS RELIEF ALLOWED TO THE ASSESSEE BY THE LEARNED CIT (A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE AS SESSEE AT THE OUTSET HAS SUBMITTED THAT ALTHOUGH THE LEARNED CIT (A) HAS DEL ETED THE ADDITION OF RS 47,38,741/- MADE BY THE ASSESSING OFFICER ON THE GR OUND THAT THE SAID AMOUNT WAS NOT ALLOWED TO THE ASSESSEE IN EARLIER YEARS ON THE BASIS OF PROVISIONS MADE, THE ITA 1183/M/2009 M/S COLOUR CHEM LTD NOW KNOWN AS CLARIANT CHEMICALS (INDIA) LTD 3 ASSESSEE IS NOT IN POSSESSION OF THE RELEVANT DOCUM ENTARY EVIDENCE TO ESTABLISH THAT THE PROVISION MADE FOR LEAVE ENCASHMENT IN THE EARL IER YEARS HAD BEEN DISALLOWED AND ADDED BACK IN THE COMPUTATION OF TOTAL INCOME. HE HAS URGED THAT THIS MATTER MAY, THEREFORE, BE SENT BACK TO THE ASSESSING OFFIC ER TO VERIFY THE FACTUAL POSITION FROM THE RELEVANT RECORD. AS THE LEARNED DEPARTMEN TAL REPRESENTATIVE HAS NO SERIOUS OBJECTION IN THIS REGARD, WE SET ASIDE THE IMPUGNED ORDER OF LEARNED CIT (A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH AFTER VERIFYING THE FACTUAL POSITION FR OM THE RELEVANT RECORD. IF IT IS FOUND ON VERIFICATION THAT THE PROVISION ON ACCOUNT OF LEAVE ENCASHMENT IN THE EARLIER YEARS WAS DISALLOWED AND ADDED BACK TO THE TOTAL IN COME OF THE ASSESSEE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT ON PAYMENT BASIS TO THA T EXTENT. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON THE 6T H DAY OF JANUARY 2010. SD/- (R S PADVEKAR) JUDICIAL MEMBER SD/- (P M JAGTAP) ACCOUNTANT MEMBER MUMBAI, DATE: 6TH JANUARY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -I MUMBAI. 4) THE CIT-I, MUMBAI. 5) THE D.R. C, BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 1183/M/2009 M/S COLOUR CHEM LTD NOW KNOWN AS CLARIANT CHEMICALS (INDIA) LTD 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 21.12.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 22.12.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER