RICOH INDIA LTD., MUMBAI V. ADDL. C.I.T. RG.3(3), MUMBAI

ITA 2438/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8961 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 09-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 28-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SASIKALA INGALE
• Assessee Lawyers: R SANTHAN AM; SUR ESH MALIK
• Keywords: Depreciation; Bad and doubtful debts; Revised return
• Section: 43B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI G.E. VEERABHADRAPPA, PRESIDENT AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 2438/MUM/2011 (ASSESSMENT YEAR: 2005-06) M/S. RICOH INDIA LTD., 1201, FIRST FLOOR, BUILDING NO.12, SOLITAIRE CORPORATE PARK, ANDHERI GHATKOPAR LINK ROAD, ANDHERI EAST, MUMBAI -400 093 ...... APPELLANT PAN: AAACR 4151 J VS ADD. COMMISSIONER OF INCOME-TAX RANGE 3(3), MUMBAI ..... RESPONDENT APPELLANT BY: SHRI R. SANTHANAM & SHRI SURESH MALIK RESPONDENT BY: MS. SASIKALA INGALE DATE OF HEARING: 09.08.2012 DATE OF PRONOUNCEMENT: 05.09.2012 O R D E R PER VIVEK VARMA , JM: THE INSTANT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (A)-7, MUMBAI, DATED 20.01.2011, WHEREIN, THE ASSES SEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITIES BELOW ERRED, BOTH ON FACTS AND IN LAW, IN MAKING/SU STAINING DISALLOWANCE OF RS. 43,479/- BEING THE AMOUNT WRITT EN-OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNTS OF THE APPEL LANT AS A BUSINESS LOSS/BAD DEBTS WHICH OUGHT TO HAVE BEEN ALLOWED TO THE APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITIES BELOW OUGHT TO HAVE ALLOWED DEDUCTION OF RS. 13,18, 747/- WHICH WAS RIGHTLY CLAIMED BY THE APPELLANT AS ADMISSIBLE AND THE CIT (A) SHOULD HAVE ALSO ALLOWED THE CLAIM OF THE APPELLANT WITHOU T DIRECTING THE A 0 TO VERIFY THE CLAIM ONCE AGAIN PARTICULARLY IN VIEW OF THE FACT THAT THE FACTS AND FIGURES WERE NOT IN DISPUTE AND THE A0 HA S ALREADY ACCEPTED THIS FACT IN PARA 72 OF THE ASSESSMENT ORDER THAT E XPENDITURE HAS BEEN INCURRED IN THE CURRENT YEAR. M/S. RIOCH INDIA LTD. ITA 2438/MUM/2011 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITIES BELOW OUGHT TO HAVE ALLOWED EXEMPTION FROM TAX ON D IVIDENDS OF RS. 14,65,034/- U/S 10(34) AND ACCEPTED THE SHORT- TERM CAPITAL GAIN AS RS. 5,18,783/- AND THE SAME DID NOT WARRANT RECONSI DERATION BY THE A0 AS THE FACTS AND FIGURES WERE NOT IN DISPUTE AND THE NECESSARY DOCUMENTS IN THIS REGARD WERE ALREADY ON RECORD BOT H BEFORE THE A 0 AS WELL AS BEFORE THE CIT(A). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITIES BELOW HAVE ERRED IN NOT ACCEPTING AND ADOPTING THE CORRECTIONS MADE IN THE RETURN OF INCOME FILED WHICH WERE NECESSARY AND DULY COMMUNICATED TO THE A0 BY LETTER DATED 25.09.2008 E NCLOSING THE REVISED COMPUTATION OF INCOME. THE APPELLANT OUGHT NOT TO BE PLACED AT ANY DISADVANTAGE BY MAKING ILLEGAL ADDITIONS AND DI SALLOWANCES AS IF AN ASSESSEE CANNOT CORRECT MISTAKES OR OMISSIONS AT ANY TIME BEFORE THE ASSESSMENT IS COMPLETED BY FURNISHING CORRECT D ETAILS/RECORDS. 5. THE AUTHORITIES BELOW ALSO ERRED IN TAKING A HYP ER-TECHNICAL VIEW AND IN NOT FOLLOWING THE DECISIONS OF THIS TRIBUNAL BROUGHT TO THEIR NOTICE SOLELY TO JUSTIFY THE ILLEGAL ADDITION OR DI SALLOWANCE MADE, THEREBY PERPETUATING THE ERRORS WHICH IS NOT PERMIS SIBLE IN LAW AND THE ACTION AND ORDERS OF THE A0 IN THIS REGARD OUGHT TO HAVE BEEN VACATED BY THE FIRST APPELLATE AUTHORITY BY DECIDING THE IS SUES ON MERITS AND FAILURE TO DO SO HAS VITIATED THE IMPUGNED ORDER. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN CONFIRMING THE ILLEGAL ADDITION OF RS. 58, 86,542/- MADE BY THE A0 IN COMPUTING THE ADJUSTED BOOK PROFITS INSTEAD O F DELETING THE SAME. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN NOT ALLOWING RS. 8,78,427/- RIGHTLY CLAIMED BY THE APPELLANT AS LIABLE TO BE EXCLUDED FROM ADJUSTED BOOK PROFITS, I NSTEAD OF DIRECTING THE A0 TO VERIFY THE SAME AGAIN AS THE FACTS AND FIGURE S WERE NOT IN DISPUTE AND THE NECESSARY DOCUMENTS IN THIS REGARD WERE ALREADY ON RECORD. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITIES BELOW HAVE ERRED IN NOT ACCEPTING THE REVISED COMPU TATION OF MAT U/S 115JB FILED DURING SCRUTINY ASSESSMENT PROCEEDINGS BY LETTER DATED 25.09.2008 AND IN TREATING RS. 3,46,56,650/- AS UNA SCERTAINED LIABILITY AS ON 31.03.2005 AND IN IGNORING THE FACT UM OF PAYMENT OF CUSTOMS DUTY OF RS. 48,44,801/- PAID BEFORE THE DUE DATE FOR FILING OF THE RETURN ADMISSIBLE AS DEDUCTION U/S 43B AND THE ORDERS OF THE LOWER AUTHORITIES THUS CANNOT BE SUSTAINED, BOTH ON FACTS AND IN LAW. 9. THE AUTHORITIES BELOW ALSO ERRED IN IGNORING THE FACT THAT THE SUM OF RS. 3,46,56,650/- REPRESENTED CUSTOMS DUTY PAID ALL OWABLE U/S 43B WHICH THE ASSESSEE HAD RIGHTLY ADJUSTED AND SOUGHT CLAIM FOR ALLOWANCE TO THE EXTENT OF RS. 48,44,801/- PAID IN THE CURRENT YEAR, IN THE NORMAL COMPUTATION OF INCOME, BUT THE REMAINING AMOUNT OF RS. M/S. RIOCH INDIA LTD. ITA 2438/MUM/2011 3 2,98,11,849/- CANNOT BE TREATED AS UNASCERTAINED LI ABILITY AS IT IS ACTUAL LIABILITY WHICH HAD CRYSTALLISED MUCH BEFORE THE ASSESSMENT AND THE SAME CANNOT, THEREFORE, BE ADDED BACK FOR COMPU TING THE ADJUSTED BOOK PROFITS. 2. AT THE TIME OF HEARING, SENIOR COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED AS UNDER: 3. THEREFORE, THE EFFECTIVE GROUNDS, LEFT FOR OUR A DJUDICATION ARE GROUNDS NO. 4, 5, 8 AND 9. 4. GROUND NO. 4 & 5 ARE BASICALLY ON THE ISSUE THAT THERE WERE CERTAIN CLAIMS, WHICH THE ASSESSEE, INADVERTENTLY OMITTED T O CLAIM/INCLUDE IN THE RETURN OF ITS INCOME. THE ASSESSEE, THEREFORE, IN A LETTER DATED 25.09.2008, POINTED OUT DURING ASSESSMENT PROCEEDINGS, IT WAS F OUND THAT FOLLOWING ERRORS AND OMISSIONS HAVE OCCURRED IN THE RETURN OF INCOME FOR AY 2005-06 :- (1) THE APPELLANT HAS DUE TO OVERSIGHT ADDED BACK R S. 67,64,969/- AS PROVISION FOR DOUBTFUL DEBTS AND ADVANCES PERTAININ G TO ERSTWHILE GESTETNER (INDIA) LTD. WHEREAS ONLY RS. 58,86,542/- SHOULD HA VE BEEN ADDED. THUS, AN EXTRA AMOUNT OF RS. 8,78,427/- HAS BEEN ADDED BACK BY OVERSIGHT. (2) THE APPELLANT HAS DUE TO OVERSIGHT ADDED BACK R S. 7,86,564/- AS PRIOR PERIOD EXPENSES WHEREAS THE SAME IS NOT IN THE NATU RE OF PRIOR PERIOD EXPENSES. GROUND NO.1 NOT PRESSED GROUND NO.2 AO ALLOWED IN THE APPEAL EFFECT ORDER, HENCE FOR THE INSTANT APPEAL THE GROUND BECOMES INFRUCTUOUS GROUND NO.3 AO ALLOWED IN THE APPEAL EFFECT ORDER, HENCE FOR THE INSTANT APPEAL THE GROUND BECOMES INFRUCTUOUS GROUND NO.6 AO ALLOWED IN THE APPEAL EFFECT ORDER, HENCE FOR THE INSTANT APPEAL THE GROUND BECOMES INFRUCTUOUS GROUND NO.7 AO ALLOWED IN THE APPEAL EFFECT ORDER, HENCE FOR THE INSTANT APPEAL THE GROUND BECOMES INFRUCTUOUS M/S. RIOCH INDIA LTD. ITA 2438/MUM/2011 4 (3) THE APPELLANT HAS DUE TO OVERSIGHT ADDED BACK RS. 3,58,16,000/- AS AMORTIZATION OF GOODWILL WHEREAS DEPRECIATION ON GO ODWILL AND OTHER INTANGIBLE ASSETS IS AN ADMISSIBLE DEDUCTION. ACCORDINGLY, REVISED COMPUTATION OF INCOME WAS FILE D BEFORE THE A.O. WHICH THE A.O. IGNORED ON THE GROUND THAT THERE WAS NO PROVIS ION UNDER THE ACT FOR CONSIDERING SUCH REVISED COMPUTATION OF INCOME. TO HAVE THE CLAIMS ACCEPTED, THE ASSESSEE SUBMITTED, ....THAT THE LAW IS WELL SETTLED THAT THE POWERS O F APPELLATE AUTHORITY TO ENTERTAIN ANY CLAIM FOR GRAN T OF RELIEF OR DEDUCTION ADMISSIBLE IN LAW ARE VERY WIDE AND THE WHOLE ASSES SMENT IS OPEN BEFORE THE FIRST APPELLATE AUTHORITY WHO HAS ALL THE POWERS IN RELATION THERETO INCLUDING ALSO ENHANCEMENT OF LIABILITY AND ALLOWING RELIEF I N ACCORDANCE WITH LAW. VARIOUS DECISIONS WERE QUOTED AND SPECIFIC RELIANCE WAS PLACED ON THE DECISION OF HONBLE MUMBAI ITAT IN THE CASE OF ASIA N PAINTS LTD. VS. ADDL. CIT (2010) TIOL 377 ITAT (MUM.) WHEREIN THE OBSERVATION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) AND ALSO THE POWERS OF FIRST APPELLATE AUTHORITY AS EXAMINED BY THE SUPREME COUR T IN CIT VS. NIRBHERAM DELURAM, (224 ITR 610) (SC) HELD AS UNDER: (1) THE APEX COURT CLARIFIED IN GOETZE (INDIA) LTD . (SUPRA) ITSELF THAT THEIR FINDING DOES NOT IMPINGE ON THE POWER OF THE INCOME TAX APPELLATE TRIBUNAL U/S. 254 OF THE ACT. WE FIND THAT THE CIT (A) HAS A LSO SIMILAR POWER U/S 251(1)(C) OF THE ACT. (2) THE A.O. HAS NO POWER TO ADMIT FRESH CLAIM OTH ERWISE THAN REVISED RETURN BUT APPELLATE AUTHORITIES INCLUDING THE CIT (A) AND ITAT HAVE POWER TO ADMIT SUCH CLAIM. 5. THE CIT (A) DID NOT FIND FAVOUR WITH THE ADJUSTM ENTS OF THE ASSESSEE AND REJECTED THE GROUND, HOLDING THAT THE ASSESSEE CANNOT BE ALLOWED TO USE THE RATIO LAID DOWN BY SUPERIOR FORA TO ITS ADVANTA GE. THE CIT (A) ALSO OBSERVED THAT THE ASSESSEE IS REQUIRED TO MAKE ITS CLAIM ONLY IN THE RETURN OF INCOME OR THROUGH PROPER REVISED RETURN. 6. THE SENIOR AR SUBMITTED THAT THE OBSERVATION OF THE CIT(A) WERE NOT IN ACCORDANCE WITH THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD., REPORTED IN 284 ITR 323 AND OT HER JUDICIAL FORA. THE HONBLE SUPREME COURT OF INDIA MADE IT CLEAR THAT T HE AO IS RESTRICTED TO ENTERTAIN THE CLAIM, BUT THAT POWER DID NOT IMPINGE UPON THE POWER OF THE APPELLATE TRIBUNAL UNDER SECTION 254. THE SENIOR AR REFERRED TO THE CASE OF CIT VS JAI PARABOLIC SPRINGS LTD. REPORTED IN 306 I TR 42 (DEL), WHEREIN A CLAIM WAS MADE BY WAY OF ADDITIONAL GROUND IN APPEA L, THE HONBLE DELHI HIGH COURT HELD, TRIBUNAL HAD POWER TO ALLOW DEDUCTION FOR EXPENDIT URE TO ASSESSEE TO WHICH IT WAS OTHERWISE ENTITLED EVEN TH OUGH NO CLAIM WAS MADE M/S. RIOCH INDIA LTD. ITA 2438/MUM/2011 5 ASSESSEE IN THE RETURN . THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS PRUTHVI BROKERS AND SHAREHOLDERS (P) LTD. IN ITA NO. 3908 OF 2010, HELD, THE QUESTION THAT ARISES IN THIS APPEAL IS WHETH ER THE CIT (A) AND / OR ITAT HAD THE JUSTIFICATION TO CONSIDER A NEW / A DDITIONAL CLAIM / DEDUCTION SUBSEQUENTLY RAISED BEFORE THE AO WHICH, THROUGH INADVERTENCE, WAS NOT CLAIMED IN THE RETURN FILED B Y THE RESPONDENT. THE QUESTION IS ANSWERED IN THE AFFIRMATIVE BY SEVE RAL JUDGMENTS.. 7. THE SENIOR AR, THEREFORE PLEADED THAT THE CLAIMS AS MADE, WHICH DID NOT FORM PART OF THE RETURN, WERE BONAFIDE CLAIMS, AND WHICH MUST BE ALLOWED TO THE ASSESSEE. 8. THE DR, STRONGLY DEFENDED THE ORDERS OF THE REVE NUE AUTHORITIES AND SAID THAT THE RETURN IS THE DOCUMENT FROM WHICH THE CLAIMS ARE EITHER MADE OR ACCEPTED OR EVEN REJECTED. HE THEREFORE, PLEADED THAT THE ORDER OF THE REVENUE AUTHORITIES OF THE ISSUE OF CLAIMS NOT TAKE N INTO ACCOUNT IN THE RETURN CANNOT BE ALLOWED. 9. WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED THE CASE LAWS CITED BEFORE US, THOUGH, WE ARE IN A POSITION TO ADJUDICA TE ON THE ISSUE, BUT IN THE FITNESS OF THINGS, WE THINK IT MUST APPROPRIATE TO RESTORE THE ISSUE TO THE FILE OF THE AO, WHO SHALL CONSIDER THE CLAIMS MADE BY TH E ASSESSEE VIDE ITS LETTER DATED 25.09.2008 AND ADJUDICATE ON THE ISSUES BROUG HT IN THERE, AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 10. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT ( A) AND DIRECT THE AO TO ADJUDICATE IN ACCORDANCE WITH LAW, ONLY THE ISSUES RAISED BY THE ASSESSEE IN ITS LETTER/SUBMISSIONS DATED 25.09.2008 . 11. GROUNDS NO. 8 & 9 ARE INTERLINKED ARE BEING TAK EN UP TOGETHER. THE FACTS AS REPRODUCED BY THE CIT (A) ARE AS FOLLOWS: 9.3 A.R. CONTENDED THAT THE APPELLANT IMPORTS GOODS FROM RICOH COMPANY LIMITED, JAPAN AND PAYS CUSTOM DUTY AT THE TIME OF IMPORT. THERE WAS DISPUTE REGARDING THE RATE OF CUSTOM DUTY APPLICABLE TO THE GOODS BEING IMPORTED BY THE ASSESSEE COMPANY. AS PE R THE APPELLANT, THE CUSTOM DUTY WAS PAYABLE AT A LOWER RATE WHEREAS THE CUSTOM AUTHORITIES WERE DEMANDING CUSTOM DUTY AT A HIGHER RATE. THE CUSTOMS M/S. RIOCH INDIA LTD. ITA 2438/MUM/2011 6 AUTHORITIES INSISTED ON PROVISIONAL DUTY BOND, BEIN G SUBMITTED BY THE APPELLANT, FOR THE DIFFERENTIAL AMOUNT BEFORE CLEAR ING THE IMPORT CONSIGNMENTS FROM CUSTOMS. IN THE COMPUTATION OF IN COME FILED WITH THE RETURN OF INCOME BY THE APPELLANT, IT ADDED BACK A SUM OF RS. 3,46,56,650/- U/S 43B TOWARDS CUSTOM DUTY AND SIMUL TANEOUSLY CLAIMED A DEDUCTION OF RS. 48,44,801/- U/S 43B FOR CUSTOM DUTY PAID BY THE ASSESSEE COMPANY. THUS IN A NUT SHELL, A SUM OF RS. 2,98,11,849/- (RS. 3,46,56,650 RS. 48,44,801) WAS ADDED AS INCOME AND OFFERED FOR TAX IN THE COMPUTATION OF INCOME. T HE AMOUNT OF RS. 2,98,11,849/- (RS. 2,03,79,537/- FOR M/S RICOH INDI A LTD. AND RS. 94,32,312/- FOR M/S GESTETNER (INDIA) LTD.) WAS TOW ARDS PROVISIONAL DUTY BOND EXECUTED BY THE APPELLANT BASED ON EXACT CALCULATION OF THE DIFFERENCE IN CUSTOM DUTY AS WORKED OUT BY THE APPE LLANT BASED ON EXACT CALCULATION OF THE DIFFERENCE IN CUSTOM DUTY AS WORKED OUT BY THE APPELLANT AND AS WORKED OUT BY THE CUSTOMS AUTHORIT IES. THE AMOUNT OF RS. 2,98,11,849/- IS CLEARLY A PROVISION FOR ASC ERTAINED LIABILITY FOR WHICH ACTUAL WORKING AND DETAILS WERE MADE AVAILABL E FOR VERIFICATION TO THE ASSESSING OFFICER BY LETTER DATED 25.09.2008 AND, THEREFORE, THE SAME CANNOT BE ADDED UNDER CLAUSE (C) OF EXPLANATIO N 1 TO SECTION 115JB OF THE INCOME TAX ACT, 1961 FOR COMPUTATION O F BOOK PROFITS AS AN UNASCERTAINED LIABILITY. TO SUPPORT ITS CASE, TH E APPELLANT COMPANY PLACED RELIANCE ON THE JUDGEMENT DATED 23.01.2008 O F HONBLE ITAT, MUMBAI IN THE MATTER OF INDIAN OIL TANKING LTD. VS ITO (2009) 120 TTJ (MUM) 61: (2009) 120 ITD 237: (2008) 16 DTR 154 WHE REIN IT WAS HELD THAT PROVISION FOR WARRANTY IS AN ASCERTAINED LIABI LITY AND CANNOT BE ADDED BACK FOR COMPUTING BOOK PROFIT U/S.115JB. THE APPELLANT PLEADED THAT FROM THE ABOVE IT IS ABSOLUTELY CLEAR THAT THE ASSESSEE COMPANY HAD WRONGLY ADDED A SUM OF RS. 3,46,56,650/ - IN THE COMPUTATION OF MAT FILED WITH THE RETURN OF INCOME. CORRECT COMPUTATION OF MAT FILED DURING APPELLATE PROCEEDINGS AND ALSO BEFORE THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS SHO WS THAT THE CORRECT BOOK PROFITS AS PER LEGAL PROVISIONS WORKS OUT TO RS. 12,70,45,000/- ON WHICH TAX OF RS. 99,61,916/- WAS PAYABLE BY THE APPELLANT. 9.4. THE COUNSEL FURTHER SUBMITTED THAT THE SUBMISS IONS FOR GROUND NO.9 ARE WITHOUT PREJUDICE TO THE SUBMISSIONS MADE EARLIER FOR GROUND NO.8 WHEREIN THE APPELLANT HAS SUBMITTED THAT THE E NTIRE AMOUNT OF RS. 3,46,56,650/- IS TOWARDS ASCERTAINED CUSTOM DUTY LI ABILITY AND, THEREFORE, SHOULD NOT HAVE BEEN ADDED BACK FOR COMP UTATION OF BOOKS PROFITS KEEPING IN VIEW THE PROVISIONS OF EXPLANATI ON 1 TO SECTION 115JB. DURING A.YR.2005-06, THE APPELLANT, IN THE R ETURN OF INCOME FILED, HAD ADDED BACK A SUM OF RS. 3,46,56,650/- U/ S.43B TOWARDS PROVISIONAL DUTY BOND AND SIMULTANEOUSLY CLAIMED A DEDUCTION OF RS. 48,44,801/- U/S 43B FOR CUSTOM DUTY PAID BY THE APP ELLANT BEFORE THE DUE DATE FOR FILING RETURN FOR A.Y. 2005-06. THUS, A SUM OF RS. 2,98,11,849/- ONLY (RS. 3,46,56,650 RS. 48,44,801 ) WAS ADDED AS INCOME AND OFFERED FOR TAX IN THE COMPUTATION OF IN COME. HOWEVER, IN THE COMPUTATION OF MAT, THE ASSESSEE COMPANY BY OVE RSIGHT ADDED BACK THE GROSS AMOUNT OF RS. 3,46,56,650/- INSTEAD OF NET AMOUNT OF RS. 2,98,11,849/-. ASSUMING WITHOUT ADMITTING, THAT IF AT ALL, THE AMOUNT OF LIABILITY TOWARDS PROVISIONAL DUTY BONDS GIVEN TO CUSTOM M/S. RIOCH INDIA LTD. ITA 2438/MUM/2011 7 AUTHORITIES IS TO BE REGARDED AS UNASCERTAINED LIAB ILITY AND, THEREFORE, AS PART OF BOOK PROFIT, THE AMOUNT OF CUSTOM DUTY P AID OF RS. 48,44,801/- SHOULD HAVE BEEN REDUCED THERE FROM AS REFLECTED IN THE TAX AUDIT REPORT AND ONLY THE NET FIGURE OF RS. 2,9 8,11,849/- COULD ALONE HAVE BEEN CONSIDERED AND FAILURE OF THE A.O. TO CORRECTLY APPRECIATE THE FACTUAL POSITION, FIGURE AND DETAILS HAD LED TO THE ERRONEOUS ORDER WHICH IS LIABLE TO BE QUASHED EVEN FOR THIS PURPOSE. 9.5 I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISS IONS FILED BY THE APPELLANT ON THIS ISSUE AND OTHER MATERIAL AVAILABL E ON RECORD. THE DECISION VIDE PARA 62 AND 6.3 APPLIES THIS GROUND O F APPEAL ALSO. MOREOVER, IT IS EVIDENT THAT THE AMOUNT OF RS. 3,46 ,56,650/- IS AN UNASCERTAINED LIABILITY AS ON 31.03.2005 AND THEREF ORE RIGHTLY NOT ALLOWED AND ADDED BACK WHILE DETERMINING THE INCOME U/S.115JB. THE PLEA OF THE APPELLANT THAT THE DUTY PAID AT RS. 48, 44, 801/- BEFORE DUE DATE OF FILING OF THE RETURN U/S 43B SHOULD BE ALLO WED AND ONLY THE NET FIGURE OF RS. 2,98,11,849/- SHOULD BE ADDED IS NOT ACCEPTED AS THE PROVISIONS OF SEC.115JB RELATE TO THE INCOME AS PER THE BOOKS AS ON 31.03.2005 SUBJECT TO THE ADJUSTMENTS REGARDING INC OME/EXPENDITURE AS PER SECTION 115JB. THERE IS NO PROVISION FOR GIV ING EFFECT TO SECTION 43B IN THIS REGARD. THE GROUND OF APPEAL IS DECIDED AGAINST THE APPELLANT. 12. THE CIT (A), THEREFORE, REJECTED THE GROUND, HO LDING THAT LIABILITIES, AS CLAIMED BY THE ASSESSEE WERE UNASCERTAINED, HENCE W ERE OUT OF SPHERE OF CALCULATION OF MAT COMPUTATION. 13. BEFORE US THE SENIOR AR SUBMITTED THAT THE CONC EPT OF ASCERTAINED AND UNASCERTAINED LIABILITY HAD BEEN DEALT WITH AND EXP LAINED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF KEDAR NATH JU TE VS. CIT REPORTED IN 82 ITR 363, WHICH WERE ONCE AGAIN REFERRED TO TESTE D BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. BHARAT CARBON AND RIBB ON MANUFACTURING CO. (P). LTD. REPORTED IN 239 ITR 506. 14. THE SENIOR COUNSEL ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS LTD. VS. C IT REPORTED IN 245 ITR 428, WHEREIN THE HONBLE SUPREME COURT REVERSED THE DECISION OF THE ASSESSEE. IN THIS CASE, THE ISSUE WAS WITH RESPECT OF PROVISION FOR MEETING THE LIABILITY FOR ENCASHMENT OF EARNED LEAVE BY THE EMPLOYEE, WHETHER IT IS AN ADMISSIBLE DEDUCTION. THE HONBLE SUPREME COURT, A FTER VISITING A HOST OF CASES CITED BEFORE THEM CAME TO THE CONCLUSION: M/S. RIOCH INDIA LTD. ITA 2438/MUM/2011 8 APPLYING THE AFORESAID SETTLED PRINCIPLES TO THE F ACTS OF THE CASE AT HAND WE ARE SATISFIED THAT THE PROVISION MADE BY TH E APPELLANT- COMPANY FOR MEETING THE LIABILITY INCURRED BY IT UN DER THE LEAVE ENCASHMENT SCHEME PROPORTIONATE WITH THE ENTITLEMEN T EARNED BY EMPLOYEES OF THE COMPANY, INCLUSIVE OF THE OFFICERS AND THE STAFF, SUBJECT TO THE CEILING ON ACCUMULATION AS APPLICABL E ON THE RELEVANT DATE, IS ENTITLED TO DEDUCTION OUT OF THE GROSS REC EIPTS FOR THE ACCOUNTING YEAR DURING WHICH THE PROVISION IS MADE FOR THE LIA BILITY. THE LIABILITY IS NOT A CONTINGENT LIABILITY. THE HIGH COURT WAS NOT RIGHT IN TAKING THE VIEW TO THE CONTRARY. THE AR, PRAYED FOR AN APPROPRIATE RELIEF. 15. THE DR RELIED ON THE OBSERVATION OF THE REVENUE AUTHORITIES. 16. WE HAVE HEARD THE ARGUMENT FROM EITHER SIDE AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. THE ENTIRE ISSUE OF NON ACCEPTANCE OF REVISED MAT COMPUTATION EMERGED WHEN RS. 3,46,56,650/- WAS TREA TED AS UNASCERTAINED LIABILITY IN THE ORIGINAL COMPUTATION. BUT DURING T HE ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT AN APPARENT MISTAKE HAD CREPT IN, THE ISSUE WAS SOUGHT TO BE RESTORED & THE ASSESSEE APPROACHED THE AO FOR CORRECTION. IT WAS POINTED OUT THAT EVEN THE APEX COURT IN THE CASE OF PULLONGODE RUBBER PRODUCE CO. LTD. VS. ITAT OF KERALA, REPORTE D IN 91 ITR 18 HELD THAT THE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY TO SHOW THAT THE CLAIM AND FIGURES GIVEN EARLIER DO NOT DISCLOSE THE CORRECT F ACTUAL POSITION AND DETAILS AND THE HONBLE SUPREME COURT OBSERVED THAT THE ASS ESSEE WAS AT LIBERTY TO DEMONSTRATE THAT IT WAS INCORRECT. THAT EXACTLY, WH AT THE ASSESSEE DID, WHEN IT WAS POINTED OUT THAT CUSTOMS LIABILITY BEING ASC ERTAINED LIABILITY HAS TO BE TAKEN INTO CONSIDERATION FOR MAT COMPUTATION. THE S ENIOR AR HAD RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS I.G. GANDHI SILK MILLS LTD. 274 ITR 274 (GUJ), WHERE IT WAS A C ASE OF EXCISE LIABILITY, WHICH IS PARI MATERIA TO THE CUSTOMS DUTY. 17. HAVING MADE A COMBINED READING OF THE ENTIRE CI RCUMSTANCES AND THE CASE LAWS CITED, WE ARE IN FULL AGREEMENT WITH THE ARGUMENTS OF THE SENIOR AR THAT THE MAT COMPUTATION SHOULD HAVE BEEN REVISE D AND CORRECTED, ONCE M/S. RIOCH INDIA LTD. ITA 2438/MUM/2011 9 IT WAS BROUGHT TO THE NOTICE OF THIS REVENUE AUTHOR ITY BY THE ASSESSEE ITSELF. IT IS IMMATERIAL AS TO WHAT THE RESULT SHOULD HAVE BEEN, BECAUSE LAW SHALL HAVE TAKEN ITS OWN COURSE, BUT THE LAW ALSO FOLLOWS THE FACTUAL POSITION, WHICH WAS INDEED DISTORTED, AS DEMONSTRATED BY THE ASSESSEE TO THE REVENUE AUTHORITY. 18. IN THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO REVISE THE MAT COMPUTATION AS PER LAW. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 05/09/2012. SD/- (G.E. VEERABHADRAPPA) PRESIDENT SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE: 05/09/2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-7, MUMBAI. 4) THE CIT-3, MUMBAI. 5) THE D.R. D BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN