DCIT, New Delhi V. M/s Sapient Corporation Pvt. Ltd., New Delhi

ITA 1374/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58813 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 12-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 17-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROHIT GARG
• Assessee Lawyers: ROHIT GARG; NEERAJ JAIN
• Keywords: Reassessment proceedings
• Section: 147; 154

Judgement Text

ITA NO.1374/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A.NO.1374/DEL/2011 ASSESSMENT YEAR : 2004-05 DY.COMMISSIONER OF INCOME TAX, VS M/S SAPIENT COR PORATION PVT.LTD., CIRCLE 7(1), 104, ASHOKA ESTATE, NEW DELHI. BARAKHAMBA ROAD, NEW DEL HI. (PAN: AAECS6286M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GARG, DR RESPONDENT BY : SHRI NEERAJ JAIN & ROHIT GARG O R D E R PER K.D. RANJAN, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE FOR AY 2004-05 ARISES OU T OF THE ORDER OF CIT(A)-X, NEW DELHI. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) ERRED IN LAW AS WELL AS ON MERITS IN RESTRIC TING THE ADDITION OF RS.50935/- IN PLACE OF RS.3731971/- MAD E BY THE AO BY DISALLOWING THE CLAIM MADE FOR PROVISION IN RESPECT OF LEAVE ENCASHMENT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) ERRED IN LAW AS WELL AS ON MERITS IN FURTHER DIRECTING THAT THE ASSESSEE WOULD PRODUCE PROOFS OF PAYMENTS TOWARDS LEAVE ENCASHMENT FOR EXAMINATION A ND WILL GIVE EFFECT TO THIS ORDER ONLY AFTER SATISFYIN G HIMSELF ABOUT SUCH PAYMENTS WITHIN THE TIME LIMITS PRESCRIB ED U/S ITA NO.1374/DEL/2011 2 43B. THESE DIRECTIONS AMOUNT TO SETTING ASIDE OF T HIS ISSUE TO AO, WHICH IS NOT POWER OF CIT(A). 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO REST RICTING THE ADDITION OF RS. 50,935/- IN PLACE OF RS. 37,31,971/- MADE BY TH E AO ON ACCOUNT OF LEAVE ENCASHMENT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT ORIGINAL ASSESSMENT WAS MADE U/S 143(3), ASSESSING TOTAL INCOME AT RS. 3,48,00,551/-. SUBSEQUENTLY, THE AO FOUND THAT THE AMOUNT OF RS.37 ,31,971/- SHOWN AS INCURRED ON LEAVE ENCASHMENT IN THE PREVIOUS YEAR H AD REMAINED UNPAID TILL THE DATE OF FILING OF RETURN AND, THEREFORE, THE SA ME WAS NOT ALLOWABLE AS DEDUCTION UNDER INCOME TAX ACT, 1961. THE AO, ACCO RDINGLY, RE-OPENED ASSESSMENT U/S 147 OF THE ACT. 3. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, T HE REPLY WAS SUBMITTED BY THE ASSESSEE. HOWEVER, THE SAME WAS R EJECTED ON THE GROUND THAT LEAVE ENCASHMENT REMAINED UNPAID TILL THE DATE OF FILING OF RETURN AND, THEREFORE, THE SAME WAS TO BE ADDED TO THE TOTAL IN COME OF THE ASSESSEE. 4. ON APPEAL, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE COMPANY HAD MADE PROVISION OF RS.37,31,971/- FOR LEAVE ENCA SHMENT DURING THE RELEVANT PREVIOUS YEAR. HOWEVER, SINCE THE AMOUNT CREATED AS A PROVISION WAS NOT ACTUALLY DISBURSED TILL THE DATE OF FILING OF THE RETURN, THE SAME WAS DISALLOWED BY THE ASSESSEE. HOWEVER, DURING THE PR EVIOUS YEAR, OUT OF THE PROVISION CREATED IN PREVIOUS YEAR, I.E. FINANCIAL YEAR 2002-03, THE AMOUNT OF ITA NO.1374/DEL/2011 3 RS.37,26,812/- WAS ACTUALLY PAID DURING THE YEAR. SINCE THIS AMOUNT HAS BEEN PAID DURING THE FINANCIAL YEAR RELEVANT TO ASS ESSMENT YEAR IN QUESTION, THE SAID AMOUNT SHOULD BE ALLOWED ON PAYMENT BASIS U/S 43B(F) OF THE ACT. THE LD. CIT(A), ON CONSIDERATION OF THE SUBMISSIONS MADE BY THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAS CREATED A PROVISION OF RS.37,31,971/- FOR F.Y. 2003-04, WHICH REMAINED UNPAID. THE ASSESSEE MADE PAYMENT OF RS. 37,26,812/- DURING THE YEAR OUT OF THE EARLIER YEAR S PROVISIONS. ACCORDINGLY, WHILE THE PROVISION CREATED DURING THE YEAR WAS TO BE DISALLOWED IN TOTO, THE SAME HAD NOT BEEN PAID UPTO THE DATE OF FILING OF THE RETURN. HOWEVER, THE AMOUNT OF RS.37,26,812/- WAS PAID OUT OF PROVISIONS MADE FOR F.Y. 2002-03, THEREFORE, THE SAME WAS ALL OWED U/S 43B(F) OF THE ACT. LD. CIT(A), THEREFORE, CAME TO THE CONCLUSION THAT NET DISALLOWANCE COULD HAVE BEEN MADE AT RS.5,159 (RS. 37,31,971 R S. 37,26,812). LD. CIT (A) FURTHER NOTED THAT THE ASSESSEE, INSTEAD OF ADD ING BACK THE SUM OF RS.5,159/-, HAD CLAIMED DEDUCTION OF RS.45,746 IN T HE STATEMENT OF TAXABLE INCOME. AS A RESULT, THE NET IMPACT ON TAXABLE INCO ME WAS RS.50,935/- TO WHICH EXTENT, THE TAXABLE INCOME HAD GOT REDUCED. LD. CIT(A), ACCORDINGLY, DIRECTED THE AO TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF RS.50,935/-. HOWEVER, HE ALSO DIRECTED THE AO TO VERIFY THE FACT S AND AFTER SATISFYING HIMSELF ABOUT SUCH PAYMENTS WITHIN THE TIME PRESCRI BED U/S 43B, THE AO ITA NO.1374/DEL/2011 4 WILL GIVE EFFECT TO THE DIRECTIONS CONTAINED IN HIS ORDER. IT WAS ALSO CLARIFIED THAT IF ANY DISCREPANCY WAS BROUGHT TO THE NOTICE O F CIT(A), A RECTIFICATORY ORDER U/S 154 WOULD BE PASSED BY HIM. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 6. DURING THE COURSE OF HEARING, IT WAS SUBMITTED B Y THE LD. SR. DR THAT CIT(A) HAS NO POWER TO SET ASIDE ASSESSMENT AND, TH EREFORE, THE ORDER PASSED BY CIT(A), SETTING ASIDE THE ISSUE IS NOT IN ACCORD ANCE WITH LAW. LD. SR. DR STRONGLY SUPPORTED THE ORDER OF THE AO. ON THE OTH ER HAND, LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ORDER OF THE CIT(A), IT IS CLEAR THAT PROVISION MADE DURING THE YEAR AT RS.37,31,971 WAS NOT CLAIME D AS DEDUCTION ON THE GROUND THAT PAYMENT WAS NOT MADE. HOWEVER, OUT OF PROVISION FOR F.Y. 2002-03, PAYMENT OF RS.37,26,812 WAS MADE. LD. CIT (A), AFTER EXAMINING THE DETAILS, HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF RS.50,935/-, WHICH, IN OUR CONSIDERED OPINION, IS JUSTIFIED. AS REGARDS THE CONTENTION OF THE REVENUE THAT CIT(A) HAS SET ASIDE THE ISSUE TO THE FILE OF AO, IN OUR CONSIDERED OPINION, IS INCORRECT. LD. CIT(A) HAS G IVEN A CLEAR CUT FINDING. HE HAS DIRECTED THE AO TO ALLOW THE CLAIM OF ASSESS EE AFTER PROPER ITA NO.1374/DEL/2011 5 VERIFICATION. IN A CASE WHERE A DECISION IS GIVEN AND AO IS DIRECTED TO VERIFY THE FIGURES AND AFTER VERIFICATION, THE EFFECT TO T HE DIRECTIONS OF CIT(A) SHOULD BE GIVEN, SUCH A DIRECTION CANNOT BE TREATED AS SET ASIDE OF ASSESSMENT ORDER. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), GIVING THE DIRECTION FOR VERIFICATION OF FACTS AND ALLOWANCE OF THE CLAIM OF THE ASSESSEE. ACCORDINGLY, ORDER PASSED BY LD. CIT (A) IS UPHELD. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.2.2012. SD/- SD/- (DIVA SINGH) ( K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 29TH FEBRUARY, 2012 GS COPY FORWARDED TO:- 1. DCIT, CIRCLE 7(1), NEW DELHI. 2. SAPIENT CORP. P. LTD., NEW DELHI 3. CIT(A)-X, NEW DELHI. 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR