ENERCON (INDIA) LTD, MUMBAI V. DCIT CIR 8(2), MUMBAI

ITA 3408/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49087 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Assessee Lawyers: SHRI J P BAIRAGRA
• Keywords: Business income; Rule of consistency; Assessment record; Tax effect
• Section: 143(3); 263; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, AM AND SHRI V. DURGA RAO , JM I.T.A.NO.3408/MUM/2009 ASSESSMENT YEAR: 2004-05 M/S. ENERCON (INDIA) LTD., ENERCON TOWER, PLOT NO. A-9, VEERA INDUSTRIAL ESTATE, VEERA DESAI ROAD, ANDHERI (W), MUMBAI -53 PAN:AAACE 0319 D VS. THE COMMISSIONER OF INCOME - TAX , ROOM NO. 214, AAYAKR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APP ELLANT ) (RESPONDENT) APPELLANT BY : SHRI SHRI J.P. BAIRAGRA RESPONDENT BY : SHRI B. JAYA KUMAR O R D E R PER P.M. JAGTAP, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX -8, MUMBAI, DATE D 25.03.2009 PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH IS APPEAL ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING OF WIND TURBINE GENERATORS (WIND MILLS) AND THEIR ACCESSORI ES AND PARTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION FILED BY IT ON 30.10.2004 DECLARING TOTAL INCOME AT NIL UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT AMOUNTING TO RS. 5,00,88,419/- UNDER SECTION 115JA OF THE ACT. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 29.1.2006, THE TOTAL INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE ACT WAS COMPUTED BY THE ASSESSING OFFICER AT NIL AND THE BOOK PROFIT UNDER SECTION 11 5JB WAS COMPUTED AT RS. 67,54,55,468/-. THE RECORDS OF THE SAID ASSESSMENT CAME TO BE EXAMINED BY THE LEARNED COMMISSIONER OF INCOME-TAX. ON SUCH EXAMINA TION, HE FOUND THAT THE ASSESSEE COMPANY HAS DEBITED A SUM OF RS. 485.33 LAKHS ON ACCOUNT OF PROVISION ITA NO.3408/M/2009 M/S.ENERCON (INDIA) LTD.. 2 FOR REPAIRS AND MAINTENANCE TO THE PROFIT & LOSS AC COUNT. HE ALSO NOTED THAT THIS ENTIRE PROVISION ALONG WITH THE OLD PROVISION MADE FOR REPAIRS AND MAINTENANCE WAS OUTSTANDING IN THE BALANCE SHEET. ACCORDING TO THE COMMISSIONER OF INCOME- TAX, THE CLAIM OF THE ASSESSEE FOR PROVISION FOR RE PAIRS AND MAINTENANCE WAS ALLOWED BY THE ASSESSING OFFICER WITHOUT PROPER ENQ UIRY AND VERIFICATION AND HIS ORDER TO THAT EXTENT WAS ERRONEOUS AS WELL AS PREJU DICIAL TO THE INTERESTS OF THE REVENUE. HE, THEREFORE, ISSUED A NOTICE U/S.263 ON 6.3.2009 REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT MADE BY THE AO SHOULD NOT BE SET- ASIDE/MODIFIED/ENHANCED BY DISALLOWING THE PROVISI ON FOR REPAIRS AND MAINTENANCE BEING AN UNCERTAINED LIABILITY. IN REPLY TO THE SA ID NOTICE, A LETTER DATED 24.3.2009 WAS FILED ON BEHALF OF THE ASSESSEE MAKING THE FOLL OWING SUBMISSIONS. (I) THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINE SS OF MANUFACTURE AND SALE OF WIND TURBINE GENERATORS. THE ASSESSEE C OMPANY IDENTIFIES THE PLACE WHERE THE WT GENERATOR IS TO BE INSTALLED, DO ALL T HE INSTALLATION WORK OF THE SAID GENERATOR AND ALSO HANDLE THE MAINTENANCE OF THE WT GENERATOR AFTER IT IS INSTALLED AND STARTS GENERATING ELECTRICITY. (II) AS PER THE MAINTENANCE CONTRACT ENTERED WITH THE BUYERS OF THE WT GENERATORS, THERE IS A CLAUSE THAT THE ASSESSEE COM PANY WILL PROVIDE FREE MAINTENANCE FOR THE FIRST TWO YEARS FROK THE DATE O F ONE MONTH AFTER THE COMMISSIONING OF THE WT GENERATORS AND THEREAFTER, FROM THE THIRD YEAR, CHARGE OPERATION & MAINTENANCE CHARTES PER YEAR, WITH AN E SCALATION OF 5% EVERY YEAR, UPTO 10 YEARS, TO MAINTAIN THE WT GENERATORS. IT I S ALSO PROVIDE THAT AT THE END OF THE 10 TH YEAR, THE ASSESSE COMPANY WILL FURTHER NEGOTIATE F OR THE NEXT TEN YEARS. WE ARE ENCLOSED HGEREWITH PHOTOCOPY OF TWO SUCH MAI NTENANCE CONTRACTS ENTERED WITH THE CUSTOMERS (PAGE NOS. 01-7 AND 8-14) (III) SINCE THE ASSESSEE COMPANY IS FOLLOWING MERC ANTILE SYSTEM OF ACCOUNTING, PROVISION HAS BEEN MADE IN THE YEAR OF SALE OF WT GENERATORS IN ITA NO.3408/M/2009 M/S.ENERCON (INDIA) LTD.. 3 RESPECT OF FREE MAINTENANCE THAT IS TO BE PROVIDED FOR THE FIRST TWO YEARS AFTER THE GENERATOR IS INSTALLED AND COMMISSIONED. ACCORDING LY, EVERY YEAR, THE ASSESSEE COMPANY IS MAKING A PROVISION FOR FREE REPAIRS AND MAINTENANCE FOR TWO YEARS IN RESPECT OF THE WT GENERATORS SOLD DURING THAT YEAR. FURTHER, IN SUBSEQUENT TWO YEARS WHATEVER EXPENSES INCURRED ON THE FREE REPAIR S AND MAINTENANCE IS DEBITED TO THE PROVISION FOR FREE REPAIRS & MAINTENANCE AND NOT CHARGED TO THE PROFIT & LOSS A/C. (IV) FURTHER, OUT OF THIS PROVISION FOR REPAIRS AN D MAINTENANCE OF RS.485.33 LACS MADE DURING THE YEAR, THE ASSESSEE W ILL BE INCURRING THE EXPENDITURE IN THE NEXT TWO YEARS AND ACCORDINGLY, QUESTION OF DEBITING THE EXPENDITURE INCURRED DURING THE YEAR AGAINST THIS D OES NOT ARISE. SIMILARLY, THE OLD BALANCE OF RS.117.25 LACS REMAINED UNSPENT DURING T HE YEAR, IS ALSO ON ACCOUNT OF SIMILAR PROVISION MADE IN THE EARLIER YEARS, OUT OF THAT WHATEVER EXPENDITURE IS INCURRED ARE DEBITED TO THE ACCOUNT AND BALANCE AMO UNT S LYING IN THIS ACCOUNT WHICH WILL BE WRITTEN OFF IN THE P&L ACCOUNT ONCE T HE WARRANTY PERIOD IS OVER. (V) IN THE NEXT ASST.YEAR 2005-06, AS PER THE DETA ILS GIVEN TO THE A.O. THE PROVISION FOR REPAIRS AND MAINTENANCE MADE AND EXPE NDITURE INCURRED UNDER THE SAID HEAD ARE AS UNDER: (RS.IN LACS) OPENING BALANCE 662.01 LESS: PROVISION MADE DURING THE YEAR (DEBITED TO THE P&L A/C UNDER THE HEAD ADMIN ISTRATIVE SALES & DELIVERY EXPENSES 558.77 -------- ---- 1250.78 LESS: AMOUNT SPENT DURING THE YEAR ON FREE REPAIRS & MAINTENANCE DEBITED TO PROVISION FOR REPAIRS & MAINT. 326.12 -------- --- CLOSING BALANCE 924.66 (WHICH CAN BE IDENTIFIED FR OM THE SCHEDULE OF ====== PROVISIONS GIVEN IN THE BA LANCE SHEET). ITA NO.3408/M/2009 M/S.ENERCON (INDIA) LTD.. 4 WE ARE INCLOSING HEREWITH COPY OF THE P&L A/C. A ND RELEVANT SCHEDULES FOR THE YEAR ENDED 31./3.2005 RELEVANT TO ASST.YEAR 200 5-06 TO PROVE THE SAME (PAGE NOS. 15-52). 3. IN ADDITION TO THE ABOVE SUBMISSIONS, IT WAS ALS O SUBMITTED ON BEHALF OF THE ASSESSEE THAT SIMILAR PROVISION MADE FOR REPAIR S AND MAINTENANCE WAS DISALLOWED BY THE AO IN AY 2002-03 BUT THE SAME HAS BEEN ALLOWED BY THE LEARNED CIT(A) IN APPEAL. IT WAS POINTED OUT THAT NO FURTHE R APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE LEARNED CIT(A) AND THE SAME, THEREFORE, HAS BECOME FINAL. 4. THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE I N REPLY TO A NOTICE ISSUED UNDER SECTION 263 WERE NOT FOUND ACCEPTABLE BY THE LEARNED CIT FOR THE FOLLOWING REASONS GIVEN IN PARA 5 & 6 OF HIS IMPUGN ED ORDER. 5. PATENTLY, THE PROVISION CREATED BY HE ASSESSEE IS WITHOUT ANY BASIS AND IS NOT A REAL LIABILITY. THE ASSESSEES C LAIM THAT FOR A.Y. 2002-03, THE DEPARTMENT HAS NOT GONE FOR FURTHER AP PEAL IS ALSO NOT TENABLE BECAUSE THE TAX EFFECT WAS VERY NOMINAL AND FURTHER, EACH A.YRS. IS AN INDEPENDENT A.Y. THE ASSESSEES ACTION IS ALSO NOT COVERED BY THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF BHARAT EARTH MOVERS BECAUSE IN THAT THE OPENING LAN GUAGE IS THAT THERE MUST BE A DEFINITE LIABILITY WHICH HAS ARISEN TO THE ASSESSEE. HOWEVER, IN THIS CASE, NO DEFINITE LIABILITY HAS AR ISEN RELATING TO THE PREVIOUS YEAR 2003-04 RELATING TO A.Y. 2004-05 AS I S EVIDENT FROM THE RECORDS THAT THE ASSESSEE HAS NOT INCURRED EVEN A P ENNY OF EXPENSES DURING THE YEAR AND EVEN IN THE NEXT YEAR, THE OLD PROVISION CREATED HAS NOT BEEN UTILIZED. 6. THE HONBLE SUPREME COURT IN THE CASE OF RAMPYAR I DEVI SARAOGI VS. CIT 67 ITR 84 AND TARA DEVI AGGARWAL VS. CIT 88 ITR 323 HELD THAT THE ASSESSMENT MADE BY THE A.O. WOULD BE ERRON EOUS MERELY ON THE GROUND OF NOT MAKING ENQUIRIES WHICH WERE REQUI RED TO BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE A.O. HAS ACCEPTED THE CLAIM OF THE ASSESSEE IN A STEREO TYPE MANNER. IN THIS CASE ALSO, THE A.O. HAS NOT MADE ANY ENQUIRY TO FIND OUT WHETH ER THE PROVISIONS WERE ASCERTAINED OR NOT. HENCE, THE ASSESSMENT MADE BY THE A.O. IS ERRONEOUS AND THE SAME IS PREJUDICIAL TO THE INTERE ST OF REVENUE BECAUSE EXCESSIVE DEDUCTION HAS BEEN ALLOWED BY THE A.O. ITA NO.3408/M/2009 M/S.ENERCON (INDIA) LTD.. 5 5. FOR THE REASONS GIVEN ABOVE, THE ASSESSMENT MADE BY THE AO WAS MODIFIED BY THE LEARNED CIT(A) TO THE EXTENT THAT THE PROVISION OF RS. 485.33 LAKHS MADE FOR REPAIRS AND MAINTENANCE WAS DISALLOW ED BY HIM AND THE SAID AMOUNT WAS ADDED BACK TO THE TOTAL INCOME OF THE A SSESSEE AS COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT AS WELL AS TO THE BOOK PROFIT COMPUTED U/S.115JA. AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX PASSED UNDER SECTION 263, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET EXPLAINED THE NATURE OF BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY AND ALSO THE BUSINESS EXPEDIENCY OF THE PROVISION MADE FOR REPAIRS AND MAINTENANCE. HE SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE A ND SALE OF WIND TURBINE GENERATORS. IT ALSO DOES THE INSTALLATION WORK OF T HE SAID GENERATORS AND HANDLES THE MAINTENANCE OF GENERATORS FREE OF COST FOR THE FIRST TWO YEARS. HE SUBMITTED THAT SINCE THE ASSESSEE COMPANY IS FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING, PROVISION IS MADE FOR SUCH FREE MAINTENANCE PROVIDE D FOR TWO YEARS IN THE YEAR OF SALE OF GENERATORS BY ADOPTING A FORMULA WHICH IS B ASED ON THE TOTAL SALES OF GENERATORS MADE IN THE RESPECTIVE YEAR. HE SUBMITTE D THAT SIMILAR PROVISION FOR REPAIRS AND MAINTENANCE WAS MADE BY THE ASSESSEE IN ASSESSMENT YEAR 2002-03 WHICH WAS DISALLOWED BY THE AO WHILE COMPUTING THE BOOK PROFIT TRATING THE SAME AS UNASCERTAINED LIABILITY. THE LEARNED CIT(A), HOW EVER, DELETED THE SAID DISALLOWANCE MADE BY THE AO HOLDING THAT THE PROVIS ION MADE BY THE ASSESSEE FOR REPAIRS AND MAINTENANCE WAS AN ASCERTAINED LIABILIT Y. HE CONTENDED THAT IN VIEW OF THE SAID DECISION OF THE LEARNED CIT(A) FOR AY 2002 -03 ON A SIMILAR ISSUE, WHICH WAS ACCEPTED BY THE DEPARTMENT, THE PROVISION MADE BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION ON ACCOUNT OF REPAIRS AND MAINT ENANCE WAS ALLOWED BY THE AO TAKING A POSSIBLE VIEW AND THE LEARNED CIT WAS NOT JUSTIFIED IN SUBSTITUTING THE SAID POSSIBLE VIEW TAKEN BY THE AO WITH HIS OWN VIEW. ITA NO.3408/M/2009 M/S.ENERCON (INDIA) LTD.. 6 7. THE LEARNED COUNSEL FOR THE ASSESSEE THEN TOOK U S THROUGH THE P&L ACCOUNT FILED BY THE ASSESSEE COMPANY ALONG WITH IT S RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION PLACED AT PAGE NO.78 OF HIS PAP ER BOOK TO SHOW THAT PROVISION MADE FOR REPAIRS AND MAINTENANCE WAS SEPARATELY SHO WN BY THE ASSESSEE COMPANY. HE ALSO POINTED OUT THAT A SEPARATE NOTE W AS GIVEN BY THE ASSESSEE COMPANY IN THE NOTES TO ACCOUNTS GIVING THE REASONS FOR MAKING THE SAID PROVISION IN THE YEAR UNDER CONSIDERATION AS WELL AS THE BASI S THEREOF. HE CONTENDED THAT KEEPING IN VIEW ALL THESE SUBMISSIONS MADE BY THE A SSESSEE ALONG WITH ITS RETURN OF INCOME IN SUPPORT OF ITS CLAIM FOR PROVISION FO R REPAIRS AND MAINTENANCE AS WELL AS THE DECISION OF THE LEARNED CIT (A) IN AY 2002- 03 ALLOWING THE CLAIM OF THE ASSESSEE FOR SIMILAR PROVISION HOLDING THE SAME TO BE AN ASCERTAINED LIABILITY, THE AO ALLOWED THE CLAIM OF THE ASSESSEE FOR THE YEAR U NDER CONSIDERATION TAKING A POSSIBLE VIEW AND IT, THEREFORE, CANNOT BE SAID THA T THE SAID CLAIM OF THE ASSESSEE WAS ALLOWED BY HIM WITHOUT MAKING PROPER AND SUFFIC IENT ENQUIRY AS ALLEGED BY THE LEARNED CIT IN HIS IMPUGNED ORDER. 8. AS REGARDS THE OBSERVATION OF THE LEARNED CIT TH AT EVEN THE PROVISION MADE FOR REPAIRS AND MAINTENANCE IN THE EARLIER YEA R WAS OUTSTANDING IN THE YEAR UNDER CONSIDERATION, THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT ALTHOUGH THERE WAS NO EXPENDITURE REQUIRED TO BE INCURRED B Y THE ASSESSEE COMPANY ON ACCOUNT OF FREE MAINTENANCE PROVIDED TO THE PURCHAS ERS OF WIND TURBINE GENERATORS IN THE YEAR UNDER CONSIDERATION, SUCH EX PENDITURE WAS REQUIRED TO BE INCURRED IN THE SUBSEQUENT YEARS TO THE EXTENT OF R S.326.12 LAKHS AND RS. 619.03 LAKHS IN THE AYS. 2005-06 AND 2006-07 RESPECTIVELY. HE CONTENDED THAT THE SAID EXPENDITURE WAS DULY ADJUSTED BY THE ASSESSEE AGAIN ST THE PROVISION MADE FOR REPAIRS AND MAINTENANCE AND THIS QUANTUM OF EXPENDI TURE BY ITSELF IS SUFFICIENT TO SHOW THAT THE PROVISION FOR REPAIRS AND MAINTENANCE IN RESPECT OF THE CORRESPONDING SALES WAS APPROPRIATELY MADE BY THE A SSESSEE IN THE RESPECTIVE ITA NO.3408/M/2009 M/S.ENERCON (INDIA) LTD.. 7 YEARS. HE SUBMITTED THAT THE PROVISION MADE FOR REP AIRS AND MAINTENANCE IN THE YEAR 2006-07 ON SIMILAR BASIS HAS ACTUALLY BEEN ALL OWED BY THE AO IN THE ORDER PASSED U/S.143(3) EVEN AFTER THE DATE OF PASSING OF THE IMPUGNED ORDER BY THE LEARNED CIT U/S.263 . HE ALSO CONTENDED THAT ALTHOU GH THE ORDER OF THE AO PASSED UNDER SECTION 143(3) WAS HELD BY THE LEARNED CIT AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE GROUND THAT NO PROPER AND SUFFICIENT ENQUIRIES WERE MADE BY THE FORMER BEFORE ALLOWING THE CLAIM O F THE ASSESSEE FOR PROVISION FOR REPAIRS AND MAINTENANCE, THE LEARNED CIT HAS FI NALLY DECIDED THE SAID ISSUE ON MERIT HIMSELF INSTEAD OF GIVING OPPORTUNITY TO THE AO TO EXAMINE THE SAME AFRESH, WHICH IS NOT JUSTIFIABLE. HE URGED THAT THE IMPUGNE D ORDER OF THE LEARNED CIT PASSED U/S.263 MAY, THEREFORE, BE SET ASIDE AND THA T OF THE AO MAY BE RESTORED. 9. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SUP PORTED THE IMPUGNED ORDER OF THE LEARNED CIT PASSED U/S.263. HE SUBMITT ED THAT THE CLAIM OF THE ASSESSEE FOR THE PROVISION MADE FOR REPAIRS AND MAI NTENANCE WAS ALLOWED BY THE AO IN THE ASSESSMENT COMPLETED U/S.143(3) WITHOUT M AKING PROPER AND SUFFICIENT OPPORTUNITIES AS FOUND BY THE LEARNED CIT ON EXAMIN ATION OF THE ASSESSMENT RECORD. HE SUBMITTED THAT EVEN THE BASIS OF THE PRO VISION SO MADE WAS NOT ENQUIRED INTO BY THE AO WHICH MADE THE ASSESSMENT P ASSED BY HIM ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AS RIGHTLY HELD BY THE LEARNED CIT. HE SUBMITTED THAT IN THE ASSESSMENT YEAR 2003- 04, NO PROVISION WAS MADE BY THE ASSESSEE FOR REPAIRS AND MAINTENANCE AND IT, TH EREFORE, CANNOT EVEN BE SAID THAT THE RULE OF CONSISTENCY WAS FOLLOWED BY THE AO . HE CONTENDED THAT IT WAS THUS A FIT CASE TO INVOKE THE PROVISIONS OF SECTION 263 AND THE LEARNED CIT WAS RIGHT IN EXERCISING HIS POWERS UNDER THE SAID PROVI SION TO REVISE THE ASSESSMENT ORDER PASSED BY THE AO, WHICH WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ITA NO.3408/M/2009 M/S.ENERCON (INDIA) LTD.. 8 10. IN THE REJOINDER, THE LEARNED COUNSEL FOR THE A SSESSEE CLARIFIED THAT NO PROVISION FOR REPAIRS AND MAINTENANCE WAS MADE BY T HE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR 2003-04 AS THE OPENING BALANCE IN T HE PROVISION ACCOUNT ALREADY AVAILABLE WAS FOUND TO BE SUFFICIENT. HE CONTENDED THAT THE FACT THAT NO SUCH PROVISION WAS MADE FOR THE ASSESSMENT YEAR 2003-04 IN FACT SUPPORTS THE CASE OF THE ASSESSEE THAT APPROPRIATE AND REASONABLE PROVIS ION WAS BEING MADE BY IT. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE PROVISI ON FOR REPAIRS AND MAINTENANCE WAS MADE BY THE ASSESSEE COMPANY IN THE EARLIER YEA RS AS WELL AS IN THE SUBSEQUENT YEARS AND ALTHOUGH SUCH PROVISION MADE B Y THE ASSESSEE IN AY 2002- 03 WAS DISALLOWED BY THE AO WHILE COMPUTING THE BOO K PROFITS TREATING THE SAME AS UNASCERTAINED LIABILITY, THE LEARNED CIT(A) ON A PPEAL PREFERRED BY THE ASSESSEE ALLOWED THE SAME HOLDING THAT IT WAS AN ASCERTAINE D LIABILITY VIDE HIS APPELLATE ORDER DATED 30.5.2006. HE HELD IN THIS REGARD THAT THE ASSESSEE COMPANY WAS UNDER AN OBLIGATION TO INCUR THE EXPENDITURE IN TER MS OF MAINTENANCE CONTRACT IN RESPECT OF ITEMS OF GOODS MANUFACTURED AND SOLD BY IT. HE ALSO NOTED THAT THE AMOUNT OF EXPENDITURE ACTUALLY INCURRED OUT OF PROV ISIONS SO CREATED ULTIMATELY MATCHED THE FIGURE FOR WHICH THE PROVISION WAS MADE . KEEPING IN VIEW THIS DECISION OF THE LEARNED CIT(A) RENDERED IN ASSESSEE S OWN CASE ON A SIMILAR ISSUE, WHICH WAS ACCEPTED BY THE DEPARTMENT AND WHICH WAS AVAILABLE TO THE AO WHEN HE PASSED THE ORDER U/S.143(3) ON 29.12.2006, WE FI ND OURSELVES IN AGREEMENT WITH THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE VIEW TAKEN BY THE AO WHILE ACCEPTING SIMILAR PROVISION MADE BY TH E ASSESSEE COMPANY FOR REPAIRS AND MAINTENANCE IN THE YEAR UNDER CONSIDERATION WAS A POSSIBLE VIEW AND IT WAS NOT PERMISSIBLE FOR THE LEARNED CIT TO SUBSTITUTE T HE SAID POSSIBLE VIEW TAKEN BY THE AO WITH HIS OWN VIEW U/S.263. ITA NO.3408/M/2009 M/S.ENERCON (INDIA) LTD.. 9 12. MOREOVER, KEEPING IN VIEW THE FACT THAT THE DEC ISION OF THE LEARNED CIT(A) RENDERED IN A.Y. 2002-03 ON A SIMILAR ISSUE TREATIN G THE PROVISION MADE BY THE ASSESSEE COMPANY FOR REPAIRS AND MAINTENANCE AS ASC ERTAINED LIABILITY AND ACCEPTED BY THE DEPARTMENT WAS AVAILABLE AT THE TIM E OF FRAMING THE ASSESSMENT U/S.143(3) FOR THE YEAR UNDER CONSIDERATION, WE ARE OF THE VIEW THAT IT CANNOT BE SAID THAT THE ORDER OF THE AO PASSED U/S.143(3) ALL OWING A SIMILAR PROVISION MADE BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WAS ERRONEOUS ON THE GROUND THAT PROPER AND SUFFICIENT ENQUIRIES WERE NOT MADE BY HI M BEFORE ALLOWING THE SAME. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSE E, SIMILAR PROVISION MADE BY THE ASSESSEE FOR REPAIRS AND MAINTENANCE HAS BEEN A LLOWED BY THE AO IN THE SUBSEQUENT YEARS IN THE ASSESSMENT COMPLETED U/S.14 3(3) EVEN AFTER PASSING OF THE IMPUGNED ORDER BY THE LEARNED CIT U/S.263, WHIC H, IN OUR OPINION, IS SUFFICIENT TO SHOW THAT THE POSSIBLE VIEW TAKEN BY THE AO WHIL E ALLOWING THE PROVISION MADE BY THE ASSESSEE FOR REPAIRS AND MAINTENANCE IN THE YEAR UNDER CONSIDERATION WAS CONSISTENTLY FOLLOWED IN THE SUBSEQUENT YEARS. 13. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE HAS PREPARED AND FURNISHED A STATEMENT GIVING YEAR-WISE DETAILS OF OPENING BALANCE IN THE PROVISION ACCOUNT, PROVISION MADE DURING THE RE SPECTIVE YEAR AND EXPENDITURE INCURRED IN THAT YEAR AND IF ALL THESE FACTS AND FI GURES ARE TAKEN INTO CONSIDERATION ALONG WITH THE CORRESPONDING SALES MADE BY THE ASS ESSEE IN THE RESPECTIVE YEARS, WE FIND THAT THE SAID PROVISION WAS MADE FOR ASCERT AINED LIABILITY WHICH HAD ARISEN IN THE YEAR UNDER CONSIDERATION AS A RESULT OF OBLI GATION ON THE ASSESSEE TO PROVIDE FREE MAINTENANCE IN RESPECT OF GENERATORS SOLD AND QUANTIFICATION THEREOF WAS DONE ON FAIR AND REASONABLE BASIS. IN THE CASE OF B HARAT EARTH MOVERS 245 ITR 428(SC), THE HONBLE SUPREME COURT HAS HELD THAT IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUC TION SHOULD BE ALLOWED ALTHOUGH THE SAME MAY HAVE TO BE QUANTIFIED AND DISCHARGED A T A FUTURE DATE. WHAT SHOULD ITA NO.3408/M/2009 M/S.ENERCON (INDIA) LTD.. 10 BE CERTAIN IS THE INCURRING OF THE LIABILITY WHICH SHOULD ALSO BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTU AL QUANTIFICATION MAY NOT BE POSSIBLE. IT WAS HELD THAT IF THESE REQUIREMENTS AR E SATISFIED, THE LIABILITY IS IN PRESENTI AND IT DOES NOT MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAI N. KEEPING IN VIEW THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BHARAT EAR TH MOVERS (SUPRA) AS WELL AS THE FACTS OF THE PRESENT CASE AS DISCUSSED ABOVE, W E HOLD THAT THERE WAS NO ERROR IN THE ORDER OF THE AO PASSED UNDER SECTION 143(3) ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF PROVISION MAD E FOR REPAIRS AND MAINTENANCE AND THE LEARNED CIT WAS NOT JUSTIFIED IN REVISING T HE SAID ORDER BY DISALLOWING THE SAID DEDUCTION EXERCISING HIS POWERS U/S.263. THE I MPUGNED ORDER PASSED BY THE CIT U/S.263 IS, THEREFORE, SET ASIDE AND THAT OF TH E AO PASSED U/S.143(3) IS RESTORED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF JUNE, 2011. SD. SD. (V. DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED THE 3 RD JUNE, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE DCIT RANGE 8(2),MUMBAI 3. THE CIT-8, MUMBAI. 4. THE DY.CIT 8(2), MUMBAI 5. THE DR E BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI