DCIT, New Delhi V. M/s. ECS Ltd., New Delhi

ITA 2643/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87035 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 31-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Assessee Lawyers: BHAVITA KUMAR
• Keywords: Reopening of assessment
• Section: 143(3); 147; 148

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI N.K. SAINI , ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO. 2643 /DEL/201 2 ASSESSMENT YEAR 200 4 - 05 DCIT, CIRCLE - 11(1), VS. M/S ECS LTD. NEW DELHI. 12 , COMMERCIAL COMPLEX, G.K - II, NEW DELHI (PAN AA A C E 0279 L ) C.O. NO. 288 / DEL /201 2 (IN ITA NO. 2643/DEL / 201 2) A.Y. 2004 - 05 M/S ECS LTD. VS. DCIT, CIRCLE - 11(1) 12, COMMERIAL COMPLEX, G.K. - II, NEW DELHI. NEW DELHI. ( APPELLANT) (RESPONDENT) DATE OF HEARING : 11 .0 3 .2015 DATE OF PRONOUNCEMENT : 13 . 03 .2015 APPELLANT BY : SMT. PARWINDER KAUR, SR. DR. RESPONDENT BY : SRI GAURAV JAIN & BHAVITA KUMAR, ADVOCATES ORDER PER SHRI GEORGE GEORG E K , J M : 1. TH IS APPEAL , AT THE INSTANCE OF THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARISE OUT OF CIT(A) S ORDER DATED 05 .0 3 .201 2 . THE RELEVANT ASSESSMENT YEAR IS AY 200 4 - 05 . IT A NO. 2643 /DEL /201 2 CO NO.288/DEL/2012 2 2. T HE SOLITARY GROUND THAT IS RAISED IN REVENUE S APPEAL IS W HETHER THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.1,14,63,360/ - MADE BY THE AO ON ACCOUNT OF PROVISION OF EXPENSES. IN THE ASSESSEE S CROSS OBJECTION , THE SOLITARY GROUND THAT IS RAISED IS WITH REFERENCE TO THE VALIDITY OF REOPENING THE ASSESSM ENT BY ISSUANCE OF NOTICE U/S 148 OF THE ACT . 3. WE SHALL FIRST ADJUDICATE THE REVENUE S APPEAL. REVENUE S APPEAL (ITA NO.2643/DEL/2012) 4. BRIEF FACTS WITH REFERENCE TO REVENUE S APPEAL ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.2004 , DISCLOSING TOTAL INCOME OF RS.2,55,93,730/ - . THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 31.08.2006 , DETERMINING THE TOTAL INCOME AT RS.2,65,66,342/ - . T HEREAFTER , NOTICE U/S 148 WAS ISSUED ON 06.03.2009 AND REASSESSMENT U/S 1 47 R.W.S. 143(3) OF THE ACT WAS COMPLETED BY ORDER DATED 17.09.2009 , WHEREIN A SUM OF RS.1,14,63,360/ - WHICH WAS CLAIMED AS DEDUCTION OF EXPENSES WAS DISALLOWED BY THE AO , FOR THE REASON THAT THESE EXPENSES WERE ONLY PROVISION AND THE LIABILITY WAS CONTING ENT IN NATURE . 5. THE ASSESSEE BEING AGGRIEVED BY THE REASSESSMENT COMPLETED , PREFERRED AN APPEAL TO THE CIT(A). THE ASSESSEE CHALLENGED THE REOPENING OF ASSESSMENT AND ALSO THE ISSUE ON MERITS . THE CIT(A) REJECTED THE ASSESSEE S CONTENTION RAISED WITH RE GARD TO REOPENING OF ASSESSMENT. WITH REFERENCE TO ISSUE ON MERITS , THE APPEAL OF THE ASSESSEE WAS ALLOWED. IT A NO. 2643 /DEL /201 2 CO NO.288/DEL/2012 3 6. THE REVENUE BEING AGGRIEVED BY THE CIT(A) S ORDER IN GRA N TING RELIEF ON MERITS IS IN APPEAL BEFORE US AND THE ASSESSEE BEING AGGRIEVED BY REJECT ING ITS CONTENTION ON REOPENING OF THE ASSESSMENT IS IN CROSS OBJECTION BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CIT(A) ON MERITS HAS ALLOWED THE CLAIM OF THE ASSESSEE BY GIVING THE FOLLOWING REASONING: - I HAVE PERUSED THE DETAILS OF PROVISION FOR EXPENSES, AMOUNTING TO RS.1,14,63,360, MADE BY THE ASSESSEE AT THE END OF THE RELEVANT YEAR. THE SAME HAS BEEN MADE FOR EXPENSES, WHICH WERE INCURRED DURING THE YEAR AND FOR WHICH LIABILITIES WERE ASCERTAINED AS AT THE END OF THE YEAR. FOR INSTANCE, THE ASSESSEE HAS CREATED A PROVISION FOR ROYALTY PAYABLE TO BIOSS INTERNATIONAL, FOR THE PERIOD PERTAINING TO RELEVANT YEAR, WHICH CAN BE COMPUTED IN ACCORDANCE WITH THE AGREEMENT ENTERED WITH SUCH PARTY. THE ASSESSEE, IN FACT, EVEN DEDUCTED TDS OF RS. 49,171 AT THE END OF THE YEAR AGAINST AFORESAID EXPENSE, WHICH ESTABLISHES THE ACCRUAL OF AFORESAID EXPENSE AND CERTAINTY THE AMOUNT OF LIABILITY THERE AGAINST. SIMILARLY, THE PROVISION HAS BEEN MADE FOR STATUTORY AUDIT FE E FOR THE RELEVANT FINANCIAL YEAR, WHICH IS AN EXPENSE OF THE RELEVANT YEAR, FOR WHICH THE AMOUNT OF LIABILITY IS ASCERTAINED ON THE BASIS OF FEES AGREED WITH THE AUDITOR AND, THEREFORE, THE LIABILITY THERE AGAINST WAS PROVIDED FOR IN THE BOOKS OF ACCOUNT. TO THE SAME EFFECT IS THE PROVISION FOR BONUS PAYABLE TO EMPLOY EES IN RELATION TO SERVICE RENDERED DURIN G THE YEAR WHICH G OT ACCRUED DURING THE YEAR AND THE LIABILITY THERE AGAINST IS ASCERTAINED. IN THAT, VIEW OF THE MATTER, AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PROVISION FOR EXPENSES DEBITED BY THE ASSESSEE IS NOT AN AD - HOC PROVISION FOR NON - EXISTENT LIABILITIES, NOR THE SAME IS THE FINDING OF THE AO. THE SAID PROVISION ARE FOR EXPENSES, WHICH GOT ACCRUED DURING THE YEAR WERE ASCER TAINED LIABILITY AND THE SAME WERE CREDITED TO THE PROVISION ACCOUNT, INSTEAD OF VENDOR'S ACCOUNT, IN THE ABSENCE OF THE FINAL BILL/INVOICE BEING RECEIVED FROM THE VENDOR, WHICH CANNOT RENDER, THE AFORESAID EXPENSES AS CONTINGENT IN NATURE OR NOT ACTUAL EX PENDITURE, AS ALLEGED IN THE ASSESSMENT ORDER. IN VIEW OF THE ABOVE, I HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF PROVISION FOR EXPENSE OF RS. 1,14,63,360 AND, THEREFORE , IT A NO. 2643 /DEL /201 2 CO NO.288/DEL/2012 4 THE DI SAL LOW A NCE MA DE IN THE ASSESSME NT ORDER IS DELETED AND THE GROUND OF AP PEAL RAISED BY THE ASSESSEE IS ALLOWED. 8. THE CIT(A) HAS CATEGORICALLY HELD THAT THE EXPENSES , WHICH ARE CLAIMED AMOUNTING TO RS.1,14,63,360/ - ARE ACCRUED AND ASCERTAINED LIABILITY AND THE SAME WAS CREDITED TO THE PROVISION ACCOUNT INSTEAD OF VENDOR S ACCOUNT, IN THE ABSENCE OF THE FINAL BILL/INVOICE BEING RECEIVED FROM THE VENDOR. THE CIT(A) FURTHER HELD THAT T HESE EXPENSES ARE NOT CLAIMED ON AD HOC BASIS NOR IT A NON - EXISTING LIABILITY . THE CIT(A) WAS OF THE VIEW THESE EXPENSES HAVE ACCRUED IN THE CUR RENT YEAR AND SAME IS TO BE ALLOWED AS DEDUCTION BECAUSE THE ASSESSEE ADMITTEDLY HAS BEEN FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING . T HE REVENUE HAS NOT PLACED ON RECORD ANY MATERIAL TO DISPEL THE CATEGORICAL FINDING S OF THE CIT(A). ACCORDINGLY, WE UPH OLD THE ORDER OF THE CIT(A) AS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. IT IS ORDERED ACCORDINGLY. 9. HENCE, GROUND RAISED BY THE REVENUE IS REJECTED. ASSESSEE S C.O. NO. 288/DEL/2012 10. SINCE THE ISSUE ON MERITS IS DECIDED IN FAVOUR OF THE ASSESSEE , THE VALIDITY OF REOPENING OF ASSESSMENT RAISED IN THIS CROSS OBJECTION IS NOT ADJUDICATED AND THE SAME IS DISMISSED AS INFRUCTUOUS. IT IS ORDERED ACCORDINGLY. IT A NO. 2643 /DEL /201 2 CO NO.288/DEL/2012 5 11. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. TH E DECISION WAS PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH , 201 5 . SD/ - SD/ - ( N.K. SAINI ) (GEORGE GEORGE K.) A CCOUNTANT MEMBER J UDICIAL MEMBER DATED: 13 TH MARCH , 201 5 . AKS/ - COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST . REGISTRAR, ITAT, NEW DELHI