DCIT, CHENNAI V. M/s. Renold Chain India Pvt. Ltd., Dindigul

ITA 2259/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7650 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 29-07-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: S SWAMINATHAN
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , !'. . # $ % , ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.2259/MDS/2016 * +* /ASSESSMENT YEAR: 2011-12 THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-V(3), CHENNAI. VS. M/S.RENOLD CHAIN INDIA (P) LTD., S.F.NO.568/1A, 569/1&2, D.GUDALUR POST, VIA KARUR, VEDASANTHUR TALUK, DINDIGUL DISTRICT, TAMIL NADU. [PAN: AADCR 9839 E ] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ./ ITA NO.2286/MDS/2016 * +* /ASSESSMENT YEAR: 2011-12 M/S.RENOLD CHAIN INDIA (P) LTD., S.F.NO.568/1A, 569/1&2, D.GUDALUR POST, VIA KARUR, VEDASANTHUR TALUK, DINDIGUL DISTRICT, TAMIL NADU. [PAN: AADCR 9839 E ] VS. THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-V(3), CHENNAI. ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : MR.SHIVA SRINIVAS, JCIT ./,- 0 1 /RESPONDENT BY : MR. S. SWAMINATHAN, CA # 0 2' /DATE OF HEARING : 10.01.2017 34+ 0 2' /DATE OF PRONOUNCEMENT : 22.02.2017 ITA NOS.2259 & 2286/MDS/2016 :- 2 -: / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THESE ARE THE CROSS APPEALS FILED BY THE REVENUE & THE ASSESSEE FOR THE AY 2011-12 AGAINST THE ORDERS OF THE LD.CIT(A)- 3, CHENNAI, IN ITA NO.53/2014-15/CIT(A)-3. 2.0 ITA NO.2259/2016 THE DEPARTMENT CHALLENGED THE ORDER OF THE LD.CIT( A) ON THE FOLLOWING GROUNDS: 1) THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (AP PEALS) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESS EE HAD DISALLOWED THE PROVISION OF BONUS IN THE EARLIER YEAR AND HENCE THE SAME IS ALLOWABLE ON PAYMENT BASIS U/S.43B IN THE INSTANT YEAR. 3) THE LD.CIT(A) HAS ERRED IN NOT DIRECTING THE ASSESS ING OFFICER TO VERIFY THE CLAIM OF DISALLOWANCE OF BONUS MADE IN THE EARLIER YEAR, BEF ORE DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE OF 37,29,353/-. 4) FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME -TAX (APPEALS) MAY PLEASE BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTO RED. 3.0 ALL THE GROUNDS OF APPEAL ARE RELATED TO THE ADDIT ION OF 37,29,353/-. THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF NIL ON 28.11.2011 AND ASSESSMENT WAS COMPLETED UNDER SECT ION 143(3) OF THE ACT BY AN ORDER DATED 31.03.2014 ON A TOTAL INCOME OF 77,30,730/-. IN THE ASSESSMENT MADE U/S143(3), THE ASSESSING OFFICER (IN SHORT AO) HAS DISALLOWED A SUM OF 37,29,353/- UNDER THE HEAD PROVISIONS FOR BONUS SINCE THE SAME IS OUTSTANDING. THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. COMMISSIONER OF INCOME TAX(APPE AL) (HEREINAFTER ITA NOS.2259 & 2286/MDS/2016 :- 3 -: REFERRED TO AS LD.CIT(A)) DELETED THE ADDITION S TATING THAT THE AMOUNT OF 38,28,466/- WAS DISALLOWED BY THE ASSESSEE IN THE S TATEMENT OF COMPUTATION INCOME U/S.43B OF THE TAX ACT (IN SHORT THE ACT) IN THE PREVIOUS ASSESSMENT HENCE MAKING ADDITION WOULD AMO UNT TO DOUBLE ADDITION OF THE SAME EXPENDITURE IN TWO DIFFERENT A SSESSMENT YEARS. 4.0 AGGRIEVED BY THE ORDER OF THE AO, THE DEPARTMENT I S IN APPEAL BEFORE US. WE HEARD BOTH THE PARTIES, THE AO DISALLOWED THE B ONUS U/S.43B SINCE THE SAME WAS OUTSTANDING UNDER THE HEAD PROVI SIONS. ACCORDING TO THE AO, THE ASSESSEE HAS NEITHER DISALLOWED THE AMO UNT U/S.43B NOR PAID BEFORE FILING THE RETURN OF INCOME. THE LD.CIT(A) WITHOUT GIVING AN OPPORTUNITY TO THE AO, DELETED THE ADDITION HOLDING THAT THE AMOUNT WAS ALREADY DISALLOWED BY THE ASSESSEE IN THE STATEMENT OF COMPUTATION AND IT WAS RELATED TO THE EARLIER YEAR PROVISION. IT REQU IRES VERIFICATION AT THE LEVEL OF AO TO FIND OUT THE CORRECT ASSESSMENT YEAR AND WHETHER IT SHOULD BE BROUGHT TO TAX OR NOT? BOTH THE PARTIES, LD.AR A ND THE LEARNED DEPARTMENTAL REPRESENTATIVE (HEREINAFTER REFERRED T O AS LD.DR) AGREED TO REMIT THE MATTER BACK TO THE FILE OF AO. THEREF ORE, WE REMIT THE MATTER BACK TO THE FILE OF AO AND DIRECT THE AO TO VERIFY THE AMOUNT OF 37,29,353/- ATTRACTS PROVISIONS U/S.43B FOR ADDITIO N OR NOT AND DECIDE THIS ISSUE AFRESH ON MERITS. THE AO SHOULD GIVE OP PORTUNITY TO THE ASSESSEE. THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PUR POSES. ITA NOS.2259 & 2286/MDS/2016 :- 4 -: 5.0 ITA NO.2286/2016 FOR THE AY 2011-12 THE ASSESSEE HAS FILED AN APPEAL AGAINST THE DISAL LOWANCES OF WARRANTY EXPENSES ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-3 CHENNAI, IN ITA NO. 53/2014-15 DT. 3 1.03.2016 IS AGAINST THE PROVISION S OF LAW, FACTS AND CIRCUMSTANCES OF THE CASE AND OPPOSED TO THE PRINCIPLES OF LAW. 2. THE CIT (APPEALS) HAVE FAILED TO APPRECIATE THE FAC T THAT THE WARRANTY FORMS INTEGRAL PART OF THE SALE PRICE OF CHAINS AND THE WARRANTY E XPENSE WAS NEEDED TO BE RECOGNIZED BECAUSE THE APPELLANT WAS AN ENTERPRISE HAVING A PR ESENT OBLIGATION AS A RESULT OF PAST EVENTS RESULTING IN AN OUTFLOW OF RESOURCES. 3. THE CIT(APPEALS) WENT WRONG IN CONCLUDING THAT SUPP ORTING EVIDENCES WERE NOT PRODUCED WHEREAS THE WRITTEN SUBMISSION FILED BY TH E APPELLANT AS REPRODUCED IN THE CIT(APPEALS) ORDER CLEARLY INDICATES THAT WARRANTY CLAIM MADE PAPERS WERE FILED. 4. THE CIT (APPEALS) HAVE FAILED TO APPRECIATE THE FAC T THAT YOUR APPELLANT FOLLOWS ACCRUAL BASIS OF ACCOUNTING AND AS PER WHICH THE PROVISION FOR WARRANTY HAS TO BE MADE. 6.0 DURING THE ASSESSMENT PROCEEDINGS, THE AO DISALLOW ED A SUM OF 79,45,000/- TOWARDS WARRANTY EXPENSES. THE AO FOUN D THAT THE ASSESSEE DEBITED THE P&L A/C FOR AN AMOUNT OF 79,45,000/- UNDER THE HEAD WARRANTY EXPENSES AND NOTICED THAT THE PROVISI ONS FOR WARRANTY EXPENSES WERE OUTSTANDING AT 48,12,000/- AS ON 31.03.2011. SINCE THE ASSESSEE FAILED TO FURNISH THE DETAILS, THE AO DISA LLOWED THE ENTIRE WARRANTY EXPENSES. THE LD.CIT(A) CONFIRMED THE ADD ITION SINCE NO SUPPORTING EVIDENCES WERE FURNISHED. DURING THE AP PEAL, LD.AR ARGUED THAT THE ASSESSEE PRODUCED THE DETAILS BEFORE THE L D.CIT(A) VIDE LETTER DATED 29.10.2015, BUT THE LD.CIT(A) DECIDED THE APP EAL WITHOUT CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AN D REQUESTED TO PROVIDE AN OPPORTUNITY BY REMITTING THE MATTER BACK TO THE FILE OF THE AO ITA NOS.2259 & 2286/MDS/2016 :- 5 -: FOR FURTHER VERIFICATION AND TO PRODUCE NECESSARY E VIDENCES IN SUPPORT OF ITS CLAIM. 7.0 WE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE ASSESSEE HAS DEBITED WARRANTY EXPENSES OF 79,45,000/- TO THE P&L A/ AND THE OUTSTANDING PROVISION AS ON 31.03.20 11, WAS 48,12,000/- AND THE AO HAS ADDED THE ENTIRE AMOUNT OF 79,45,000/-. THE WARRANTY EXPENSES ARE ALLOWABLE EXPENSES SUBJECT TO THE ACTU ARIAL OR ON PAYMENT BASIS AS PER THE SYSTEM OF ACCOUNTING REGULARLY FOL LOWED BY THE ASSESSEE. THE ASSESSEE REQUIRED TO SUBMIT NECESSARY DETAILS B EFORE THE AO SUBSTANTIATING THE PROVISION MADE FOR 48,12,000/-. THE A.R CONTENDS THAT THE DETAILS WERE FILED BEFORE THE LD.CIT(A) BU T THE CIT (A) HAS NOT CONSIDERED THE EXPLANATION AND THE DETAILS FILED BY THE ASSESSEE. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E ISSUE REQUIRES FURTHER VERIFICATION AT THE LEVEL OF LOWER AUTHORITIES AND REMITTING THE MATTER BACK TO THE FILE OF AO TO VERIFY THE CORRECTNESS AND GEN UINENESS OF THE CLAIM OF THE ASSESSEE WILL RENDER THE JUSTICE. ACCORDINGLY T HE ISSUE IS REMITTED BACK TO THE FILE OF AO TO DECIDE THE CASE AFRESH ON MERI TS. AO SHOULD AFFORD AN OPPORTUNITY TO THE ASSESSEE AND THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.2259 & 2286/MDS/2016 :- 6 -: 8.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( !' . . # $ % ) (D.S.SUNDER SINGH) ' /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 22 ND FEBRUARY, 2017. TLN 0 .2$6 76+ 2 /COPY TO: 1. ,- /APPELLANT 4. # 82 /CIT 2. ./,- /RESPONDENT 5. 69 .2 /DR 3. # 82 ( ) /CIT(A) 6. '* < /GF