M/s. Aisin NTTF Private Limited, Bangalore V. Deputy Commissioner of Income Tax, Bangalore

ITA 1212/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57436 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARCHANA CHOWDHRY CITII; SUSAN THOMAS JOSE JT
• Assessee Lawyers: R SATHYANARAYANA MURTHI
• Keywords: Avoidance of tax

Judgement Text

ITA.1212/BANG/2010 PA GE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE BEFORE SHRI. N. K. SAINI, ACCOUNTANT MEMBER AND SHRI. GEORGE GEORGE K. JUDICIAL MEMBER I.T.A NO.1212/BANG/2010 (ASSESSMENT YEAR : 2005-06) AISIN NTTF P. LTD., NO.40/41A, ELECTRONIC CITY, HOSUR ROAD, BANGALORE -560 100 .. APPELLANT AACCA3497N V. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 11(1), BANGALORE .. RESPONDENT APPELLANT BY : SHRI. R. SATHYANARAYANA MURTHI, CA RESPONDENT BY : SMT. ARCHANA CHOWDHRY, CIT-II & SMT. SUSAN THOMAS JOSE, JT.CIT DATE OF HEARING : 25/01/2012 DATE OF PRONOUNCEMENT : 25/01/2012 O R D E R PER GEORGE GEORGE K, JUDICIAL MEMBER : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE COMMISSIONER OF INCOME-TAX (APPEALS)'S ORDER DATED. 27.08.2010. THE RELEVANT ASSESSMENT YEAR IS 2006-07. THE SOLITARY ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE COMMISSIONER OF INCOME -TAX (APPEALS) IS ITA.1212/BANG/2010 PA GE - 2 JUSTIFIED IN HOLDING THAT THE PROVISION FOR WARRANT Y TO THE EXTENT OF RS.10,84,176/- WAS NOT REQUIRED AND THE SAME IS CON TINGENT LIABILITY. 2) BRIEFLY STATED THE FACTS ARE AS FOLLOWS. THE AS SESSEE IS A COMPANY. IT HAD FILED ITS RETURN OF INCOME FOR THE CONCERNED ASSESSMENT YEAR ON 23.11.2006 DECLARING TOTAL INCOM E OF RS.3,35,31,364/-. SCRUTINY ASSESSMENT WAS INITIATE D BY ISSUANCE OF NOTICE U/S.143(2) OF THE ACT ON 08.10.2007 AND ASSE SSMENT U/S.143(3) OF THE ACT WAS COMPLETED VIDE ORDER DATED.17.12.200 8 FIXING A TOTAL INCOME OF RS.3,46,15,540/-. THE ASSESSING OFFICER ADDED BACK THE PROVISIONS OF WARRANTY AMOUNTING TO RS.10,84,176/-, CONSIDERING THE SAME AS UNASCERTAINED LIABILITY. THE REASONING OF ASSESSING OFFICER READS AS FOLLOWS : 'FROM THE FINANCIAL STATEMENTS FILED, IT IS OBSERVE D THAT THE ASSESSEE COMPANY HAS MADE PROVISIONS TO THE TUNE OF RS.19,96,149/-, WHEREAS IT HAS ACTUALLY INCURRED WA RRANTY EXPENSES DURING THE YEAR TO THE TUNE OF RS.9,11,973 /-. AS SUCH THERE IS ADDITIONAL WARRANTY MADE OVER AND ABOVE TO THE TUNE OF RS.10,84,176/-. IN THIS CONNECTION THE AR HAS E XPLAINED THAT THE PROVISION IS MADE ON THE BASIS OF THE SALE S MADE DURING THE YEAR. FROM THE ABOVE FACTS, EXPLANATION AND THE PROVISIO NS MADE AS 31.03.2006 IT IS CLEAR THAT THE PROVISIONS FOR W ARRANTY MADE IS ONLY ON THE BASIS OF AN ESTIMATION WHICH IS ON S ALES. THE ASSESSEE COMPANY HAS NEITHER MADE THE PROVISIONS ON SCIENTIFIC BASIS NOR IT IS ON ACTUALS. FROM THESE FACTS IT MUST BE ITA.1212/BANG/2010 PA GE - 3 CONCLUDED THAT IT IS ONLY AN UNASCERTAINED LIABILIT Y. HENCE THE PROVISIONS MADE IN THE P & L ACCOUNT TO THE TUNE OF RS.10,84,176/- IS DISALLOWED AND BROUGHT TO TAX.' 3) AGGRIEVED BY THE ASSESSMENT, ASSESSEE CARRIED T HE MATTER BEFORE THE FIRST APPELLATE AUTHORITY. 4) THE FIRST APPELLATE AUTHORITY DISTINGUISHED THE HON'BLE SUPREME COURT'S DECISION IN THE CASE OF ROTORK CONTROL IND IA (P) LTD., V. CIT (2009) 314 ITR 62 AND FOLLOWED HIS ORDER IN THE CAS E OF M/S. GE INDIA EXPORTS (P) LTD., THE FIRST APPELLATE AUTHORITY WA S OF THE VIEW THAT THE OPENING BALANCE PROVISION AMOUNTING TO RS.19,01.078 /- IS ON THE HIGH SIDE AND IT IS FURTHER INFLATED BY THE PROVISION FO R THE CURRENT YEAR AMOUNTING TO RS.19,96,149/-. THEREFORE, THE CREATI ON OF PROVISION IS NOT REASONABLE NOR ON ANY SCIENTIFIC BASIS. IT WAS FURTHER HELD THAT THE ACTUAL EXPENDITURE OF RS.9,11,973/- WHICH HAS BEEN INCURRED DURING YEAR COULD ITSELF HAVE BEEN SPENT FROM THE OPENING OUTSTANDING AT THE BEGINNING OF THE YEAR I.E., 19,01,078/-. IT WAS FI NALLY CONCLUDED BY OBSERVING THUS : 'IN A NUTSHELL, MAKING OF FURTHER PROVISION, WHEN I T IS FACTUALLY PROVED TO BE NOT NECESSARY, COULD BE ASCRIBED TO ON E INTENTION I.E., REDUCTION OF PROFIT AND AVOIDANCE OF TAX THER EON WHICH CANNOT BE ALLOWED AS IT TANTAMOUNT TO LAW BREAKING. THUS IN THE LIGHT OF FACTS I FIND A.O. IS JUSTIFIED IN MAKING T HE DISALLOWANCE HOLDING THE SAME AS CONTINGENT LIABILITY.' THE ASSESSEE BEING AGGRIEVED, IS IN APPEAL BEFORE U S. ITA.1212/BANG/2010 PA GE - 4 5) THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HE ISSUE WAS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN AS SESSEE'S OWN CASE FOR A.Y.2004-05 IN ITA.823/BANG/2007, DATED.08.02.2 008. IT WAS ALSO PLEADED THE ORDER RELIED ON BY THE COMMISSIONE R OF INCOME-TAX (APPEALS), NAMELY, M/S. GE INDIA EXPORTS P. LTD., H AS NOT BEEN PUT TO THE ASSESSEE FOR REBUTTAL. 6) THE LEARNED DR SUPPORTED THE ORDERS OF THE IT AU THORITIES. 7) WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE COMMISSIONER OF INCOME-TAX (APPEALS ) DISMISSED THE APPEAL OF THE ASSESSEE WITHOUT GIVING ADEQUATE OPPO RTUNITY TO REBUT THE REASON STATED IN THE IMPUGNED ORDER. THE COMMISSIO NER OF INCOME- TAX (APPEALS) HAS RELIED ON AN ORDER IN CASE OF M/S . GE INDIA EXPORTS P. LTD., THIS ORDER OF M/S. GE INDIA EXPORTS P. LT D WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE FOR ITS REBUTTAL. THE T RIBUNAL IN ASSESSEE'S OWN CASE FOR A.Y.2004-05, HAS DECIDED AN IDENTICAL ISSUE IN FAVOUR OF ASSESSEE COMPANY. IT WAS ASSERTED BY THE ASSESSEE' S COUNSEL THAT THE FACTS OF THE CONCERNING A.Y.2004-05 ARE IDENTICAL T O THE FACTS OF THE CONCERNED ASSESSMENT YEAR, NAMELY, A.Y.2005-06. I N IMPUGNED ORDER, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOT REFERRED TO TRIBUNAL ORDER IN ASSESSEE'S OWN CASE FOR A.Y.2004- 05 (THOUGH ITAT ORDER IS DATED.8.02.2008). THEREFORE, IN THE INTERE ST OF JUSTICE, WE ARE OF THE VIEW THAT THE MATTER NEEDS TO BE RESTORED T O THE FILES OF THE ITA.1212/BANG/2010 PA GE - 5 COMMISSIONER OF INCOME-TAX (APPEALS) FOR DENOVO CON SIDERATION. THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTU NITY OF HEARING BEFORE FRESH ORDERS ARE PASSED BY THE FIRST APPELLA TE AUTHORITY. IT IS ORDERED ACCORDINGLY. 08. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 25.01.2012. SD/- SD/- (N. K. SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER