DCIT, Circle-1(1), Kolkata, Kolkata V. M/S. Betterman Enggineers Pvt. Ltd., Kolkata

ITA 2139/KOL/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8446 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 25-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: ANKIT JALAN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 2139/KOL/20 14 ASSESSMENT YEAR : 2010- 11 DCIT, CIRCLE-1(1), KOLKATA -VS- M/S BE TTERMAN ENGINEERS PVT. LTD. [PAN: AABCB 9453 G] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI ROBIN CHO UDHURY, ADDL. CIT SR. DR FOR THE RESPONDENT : SHRI ANKIT JALAN, A R DATE OF HEARING : 06.12.2018 DATE OF PRONOUNCEMENT : 31.12.2018 ORDER PER S.S. GODARA, JM 1. THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010- 11 ARISES AGAINST THE CIT(A)-I, KOLKATAS ORDER DATED 23.07.2014 PASSED IN CASE NO . 90/CIT(A)-I/W-1(1)/2013-14, INVOLVING PROCEEDING U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GROUND PLEADED IN THE INSTANT APPEAL READS THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN REVERSI NG THE ASSESSING OFFICERS ACTION DISALLOWING ASSESSEES WARRANTY EXPENDITURE PROVISI ON OF RS. 78,26,928/- IN 2 ITA NO.2139/KOL/2014 M/S BETTERMAN ENGINEERS PVT. LTD. A.YR.2010-11 2 ASSESSMENT ORDER DATED 22.03.2013. THE CIT(A)S D ETAILED DISCUSSION TO THIS EFFECT READS AS UNDER: 3 ITA NO.2139/KOL/2014 M/S BETTERMAN ENGINEERS PVT. LTD. A.YR.2010-11 3 4 ITA NO.2139/KOL/2014 M/S BETTERMAN ENGINEERS PVT. LTD. A.YR.2010-11 4 5 ITA NO.2139/KOL/2014 M/S BETTERMAN ENGINEERS PVT. LTD. A.YR.2010-11 5 6 ITA NO.2139/KOL/2014 M/S BETTERMAN ENGINEERS PVT. LTD. A.YR.2010-11 6 7 ITA NO.2139/KOL/2014 M/S BETTERMAN ENGINEERS PVT. LTD. A.YR.2010-11 7 8 ITA NO.2139/KOL/2014 M/S BETTERMAN ENGINEERS PVT. LTD. A.YR.2010-11 8 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTION. CASE FILE PERUSED. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONT ENDS DURING THE COURSE OF HEARING THAT THE ASSESSEES IMPUGNED WARRANTY PROVI SION CLAIM OF RS. 78,26,928/- RELATES TO JOB RECTIFICATION WORK CHOSE ON THE BASI S OF ESTIMATION WITHOUT ANY REASONABLE BASIS OR SUPPORTIVE EVIDENCE OR APPROPRI ATE QUANTIFICATION OF LIABILITY. THE SAME IS STATED TO BE A PROVISION OF LOSS IN THE NA TURE OF A CONTINGENT LIABILITY ONLY NOT ALLOWABLE. WE FIND NO MERIT IN REVENUES INSTANT GR IEVANCE. THIS ASSESSEE IS A COMPANY ENGAGED IN FABRICATION OF SHEET MATERIAL BU SINESS. WE NOTICE FIRST OF ALL THAT THE IMPUGNED ASSESSMENT YEAR IS NOT THE FIRST YEAR OF THIS TAXPAYER ADOPTING THE METHOD IN ISSUE OF PROVISION FOR WARRANTY LOSS BROU GHT FORWARD FROM EARLIER ASSESSMENT YEARS. THE REVENUE FAILS TO REBUT THE FA CT OF THE ASSESSEE HAVING ADOPTED AS-9 IN RECOGNIZING REVENUE ARISING FROM GAINS IN C ASE OF CURRENT YEARS WARRANTY LOSS FOR RECTIFICATION (ASCERTAINED AT THE END OF Y EAR). IF TURNING OUT TO BE LESS THAN THE CORRESPONDING PROVISION AND BOOKS. EXCESS OF TH E FORMER THAN THE LATTER RESULTED IS A REVERSED ENTRY TO THIS EFFECT. THIS FOLLOWED ASSESSEES QUANTIFICATION OF THE IMPUGNED PROVISION AMOUNTING TO RS. 78,26,928/- COM PRISING OF ACTUAL COST PAID ON ACCOUNT OF REPAIRS / RECTIFICATION TILL THE DATE OF FINALIZATION AS WELL AS ESTIMATED COST OF REPAIRS/ RECTIFICATION INVOLVING RESPECTIVE SUMS OF RS. 26,26,928/- AND RS. 52,00,000/-. THE SAID LATTER HEAD IS PASSED ON M/S LIMESTONE COMMERCIAL PVT. LTD. (ENGINEERING HOUSE). WE WISH TO REITERATE HERE THAT FORMER HEAD READS ACTUAL COST ONLY. HONBLE APEX COURTS LAND MARK DECISION IN R OTARK CASE LAW (SUPRA) ADMITTEDLY ACCEPTS SUCH KIND OF A WARRANTY PROVISIO N BASED ON SCIENTIFIC ESTIMATION FOR LIABILITIES IN VIEW OF PAST EVENTS. THE ASSESSE ES RELEVANT WARRANTY FIGURES RIGHT FROM ASSESSMENT YEAR 2009-10 TO ASSESSMENT YEAR 201 2-13 (SUPRA) ADOPT THE VERY METHOD OF ESTIMATION OF WARRANTY EXPENSES. THE SAME HAS BEEN ACCEPTED THROUGHOUT EXCEPT IN THE IMPUGNED ASSESSMENT YEAR. THE REVENU E FAILS TO DISPUTE ALL THIS CLINCHING BACKDROP OF FACTS. WE THUS AFFIRM THE LD. CIT(A)S FINDINGS UNDER 9 ITA NO.2139/KOL/2014 M/S BETTERMAN ENGINEERS PVT. LTD. A.YR.2010-11 9 CHALLENGE ACCEPTING ASSESSEES WARRANTY PROVISION O F RS. 78,26,928/- ACCORDINGLY. THE REVENUE FAILS IN ITS SOLE SUBSTANTIVE GROUNDS A S WELL AS MAIN APPEAL. 4. THIS REVENUES APPEAL IS DISMISSED ACCORDINGLY. ORDER PRONOUNCED IN THE COURT ON 31.12.2018 SD/- SD/- [M. BALAGANESH] [ S.S.GODARA ] ACCOUNTANT MEMBER JUDICIAL MEM BER DATED : 31.12.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-1(1), KOLKATA, AAYAKAR BHAWAN, ROOM -7/7, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. 2. M/S BETTERMAN ENGINEERS PVT. LTD., 8D, CHALTA BA GAN LANE, KOLKATA-700006. 3..C.I.T(A).- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASS ISTANT REGISTRAR ITAT, KOLKATA BENCHES