DCIT (LTU), New Delhi V. M/s. Hero Auto Ltd., New Delhi

ITA 4025/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82042 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-11-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 28-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A .NO. - 4025 /DEL/2013 (ASSESSMENT YEAR - 200 4 - 0 5 ) DCIT (LTU) VS. M/S HERO MOTORS LTD. NBBC PLAZA, PUSHP VIHAR, SECTOR - III, 601, INTERNATIONAL TRADE NEW DELHI - 17 TOWER, NEHRU PLACE NEW DELHI - 110014 PAN: AAACH8459F (APPELLANT) (RESPONDENT) REVENUE BY: - SH. SATPAL SINGH, SR. DR. ASSESSEE BY: - SH. SUMIT BANSAL, CA ORDER PER C. M. GARG, JM. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT (APPEALS) - X, NEW DELHI DATED 18 /0 2 /2013 IN APPEAL NO. 160 / 09 - 1 0 FOR THE ASSESSMENT YEAR 2004 - 0 5 . THE SOLE GROUND RAISED BY THE REVENUE READS AS UNDER: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN TREATING THE ASSESSMENT ORDER PASSED U/S 143(3) / 263 AS CANCELLED IGNORING THE FACT THAT THE ISSUE RELATIN G TO DISALLOWANCE OF RS.1,45,55,493/ - OF NON RECURRING ITEMS WAS UPHELD BY THE HON BLE HIGH COURT. 2. WE HAVE HEARD ARGUMENT OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. 2 3. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBM ITTED THAT THE LD. CIT(A) HAS ERRED IN TREATING THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S . 26 3 OF THE INCOME TAX ACT, HAS CANCELLED AND IGNORING THE FACT THAT THE ISSUE RELATING TO DISALLOWANCE OF RS.1,45,55,493/ - . O N NON - RECURRING ITEMS WAS UPHELD BY T HE TRIBUNAL IN THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) PASSED U/S 263 OF THE ACT , AND THE SAID ISSUE WAS NOT A SUBJECT MATTER OF THE APPEAL BEFORE THE HON BLE HIGH COURT. 4. REPLYING TO THE ABOVE, THE LD. COUNSEL FOR THE ASSES SEE S REPRESENTATIVE (AR) FAIRLY ACCEPTED THAT THE ISSUE RELATING TO DISALLOWANCE OF NON - RECURRING ITEMS AMOUNTING TO RS.1.45 CRORES WAS UPHELD BY THE TRIBUNAL IN APPEAL OF THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) PASSED U/S 263 OF THE INCOME TAX ACT, AND THE SAID ISSUE WAS NOT A SUBJECT MATTER OF THE APPEAL BEFORE THE HON BLE HIGH COURT. 5. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AND PERUSED THE IMPUGNED ORDER. WE OBSERVED THAT THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE WITH FOLLOWING OBSERVATION: 3. AFTER GOING THROUGH THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE AR REGARDING CANCELLATION OF THE ORDER U/S 263 BY THE HON BLE HIG H COURT VIDE ITA NO. 146/2012 DATED MARCH 12, 2012, THIS ASSESSMENT ORDER U/S 143(3) / 263 HAS NO LEGS TO STAND UPON AND AUTOMATICALLY BECOME INFRUCTUOUS. THIS ASSESSMENT ORDER IS, THEREFORE, TREATED AS NULLITY AND DOES NOT DESERVE ANY ADJUDICATION ON MERI TS. THE ASSESSMENT ORDER IS, THEREFORE, TREATED AS CANCELLED IN VIEW OF THE DECISION OF THE HON BLE HIGH COURT CANCELLING THE BASIS OF THIS ORDER I.E. ORDER U/S 263 OF THE I.T. ACT. 3 THEREFORE, THE GROUNDS OF THE APPELLANT ON MERITS BECOME INFRUCTUOUS AND A RE DISMISSED. 6. IN VIEW OF ABOVE, WE NO TE THAT THE LD. CIT(A) DISMISS THE APPEAL OF THE ASSESSEE BY PASSING THE BRIEF AND CRYPTIC ORDER AND THE SAME WAS BASED ON THE OBSERVATION THAT THE ASSESSMENT ORDER IS TREATED AS CANCELLED. IN VIEW OF THE DECISION O F HON BLE HIGH COURT . A T THE SAME TIME FROM PARA 7 OF THE ITAT ORDER IN ITA NO.1878/DEL/2009 FO R A.Y. 2004 - 05 DATED 08.07.2011, W E OBSERVE THAT THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE MADE U/S 35DDA OF THE ACT I N ACCORDANCE WITH PROVISIONS OF LA W AND FURTHER HELD THAT THE LD. CIT(A) WAS NOT JUSTIFIED TO TREAT THE ASSESSMENT ORDER PASSED BY THE AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IN RESPECT OF THIS CLAIM. IN THE ORDER OF THE TRIBUNAL IN THE LATER PART OF PARA 7 IT HAS BE EN HELD THAT THE ORDER PASSED U/S 263 OF THE ACT , IN RESPECT OF NON - RECURRING EXPENDITURE CLAIM BY THE ASSESSEE WAS ERRONEOUS AND THE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE RELEVANT PARA 7 OF THE ORDER OF THE TRIBUNAL READS AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD FILED DETAILS OF WARRANTY CLAIM BEFORE THE ASSESSING OFFICER. THE WARRANTY CLAIM HAS BEEN ALLOWED IN THE CASE OF THE ASSESSEE BY HON BLE DELHI HIGH COURT VID E ORDER DATED 21.11.2007 FOR ASSESSMENT YEAR 1999 - 2000. THE ASSESSEE HAS ALSO FILED A COPY OF CERTIFICATE ISSUED BY THE ASSISTANT REGISTRAR OF COMPANIES CERTIFYING THAT M/S HERO AUTO LTD. WAS ORIGINAL INCORPORATED UNDER THE NAME OF HERO BRIGGS & STRATTON A UTO PVT. LTD. IT HAS BEEN HELD THAT ITAT HAD COME TO CONCLUSION THAT WARRANTY CLAUSE WAS A PART OF SAID DOCUMENT 4 AND, THEREFORE, CAST A LIABILITY ON THE ASSESSEE. IT WAS CAPABLE OF BEING ASCERTAINED IN DEFINITE TERMS ON THE BASIS OF CERTAIN PARAMETERS INCL UDING SALES OF THE ASSESSEE DURING THE YEAR. THE DECISION RENDERED BY THE TRIBUNAL WAS FOUND TO BE IN CONFORMITY WITH THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS LTD. VS. CIT, 245 ITR 428. THE DECISION OF ITAT WAS CONFIRMED BY THE HON BLE DELHI HIGH COURT. SINCE WARRANTY CLAIM IS ALLOWABLE, IN OUR CONSIDERED OPINION CIT(A) WAS NOT JUSTIFIED IN TREATING THE CLAIM ON ACCOUNT OF WARRANTY AS DISALLOWABLE. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IN RESPECT OF WARRANTY CLAIM CANNOT BE TREATED AS ERRONEOUS INSOFAR AS PREJUDICIAL TO THE INTERESTS OF REVENUE. AS REGARDS 1/5 TH CLAIM OF VOLUNTARY RETIREMENT U/S 35DDA IS CONCERNED, THE VOLUNTARY RETIREMENT SCHEME WAS INTRODUCED IN ASSESSMENT YEAR 2002 - 03 AND THE CLAIM OF THE ASSESSEE HAS BEEN ALLOWED BY THE ASSESSING OFFICER IN EARLIER YEARS. ASSESSMENT YEAR 2004 - 05 WHICH IS UNDER CONSIDERATION IS THE THIRD YEAR OF THE CLAIM. THE ASSESSING OFFICER HAD NOT DISALLOWED ANY AMOUNT IN ASSESSMENT YEARS 2005 - 06 AND 2006 - 07. S INCE THE CLAIM OF THE ASSESSEE U/S 35DDA IS IN ACCORDANCE WITH THE PROVISIONS OF LAW, IN OUR CONSIDERED, OPINION, CIT(A) WAS NOT JUSTIFIED TO TREAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IN RESPECT OF THIS CLAIM. AS REGARDS NON - RECURRING EXPENDITURE ALLOWED BY THE ASSESSING OFFICER, THE LD. AR OF THE ASSESSEE HAS ADMITTED THAT AGREEMENT WAS ARRIVED AT ON 17.07.2004 RELEVANT TO ASSESSMENT YEAR 2005 - 06. THE ASSESSEE HAD DEBITED THE EXPENDIT URE IN THE BOOKS OF ACCOUNT FOR ASSESSMENT YEAR 2005 - 06. HOWEVER THE CLAIM HAS BEEN MADE IN ASSESSMENT YEAR 2004 - 05; BECAUSE THE LIABILITY TO PAY CRYSTALLIZED IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 5 2005 - 06 AND NOT IN ASSESSMENT YEAR 2004 - 05. IN VIEW OF THESE FA C TS, WE ARE OF THE CONSIDERED VIEW THAT ASSESSING HAD ALLOWED THE CLAIM OF THE ASSESSEE WITHOUT MAKING PROPER ENQUIRIES. THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER ALLOWING THE CLAIM IN RESPECT OF NON - RECURRING EXPENDITURE IN ASSESSMEN T YEAR 2004 - 05 IS ERRONEOUS INSOFAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. IN VIEW OF ABOVE FACTS, THE ORDER PASSED BY THE CIT(A) CANCELLING THE ASSESSMENT IS JUSTIFIED IN RESPECT OF NON - RECURRING EXPENDITURE CLAIMED BY THE ASSESSEE IN THE YEAR UNDER C ONSIDERATION. WE UPHOLD THE ORDER OF CIT(A) TO THIS EXTENT. 7. FROM RESPECTFUL PERUSAL OF THE ORDER OF THE HON BLE HIGH COURT IN ITA NO.146/ 2012 DATED 12 TH MARCH 2012 , WE OBSERVE THAT THE HON BLE HIGH COURT HAS UPHELD THE ORDER OF THE TRIBUNAL BY DISMISSING THE APPEAL OF THE REVENUE . I N THE SITUATION , IT CAN SAFELY BE PRESUMED THAT THE ORDER OF THE TRIBUNAL (SUPRA) HAS BEEN CONFIRMED AND UPHELD BY THE HON BLE JURISDICTIONAL HIGH COURT OF DELHI. 8. UNDER THESE CIRCUMSTANCES, WE ARE INCLINED TO HOLD THAT THE LD. CIT ( A) HAS GROSSLY ERRED IN TREATING THE AY PASSED U/S 143(3) / R.W.S. 263 OF THE INCOME TAX ACT AS CANCELLED AND IGNORING THE FACT THAT THE ISSUE RELATING TO DISALLOWANCE NON - RECURRING ITEMS WAS UPHELD BY THE TRIBUNAL AND APPEAL AGAINST THE SAID ORDER OF THE TRIBUNAL WAS NOT A SUBJECT MATTER OF THE APPEAL BEFORE HON BLE HIGH COURT . A S THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST THE ORDER OF THE TRIBUNAL BY WHICH A PART ACTION OF THE LD. CIT(A) PERTAINING TO DISALLOWANCE OF NON - RECURRING I TEMS WAS UPHELD BY THE TRIBUNAL BY UPHOLDING THAT THE 6 ASSESSMENT ORDER WAS NOT ONLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THIS COUNT. 9. ON THE BASIS OF AFOREMENTIONED DISCUSSION, WE HOLD THAT THE LD. CIT ( A) PASSED A CRYPTIC ORDER I GNORING THE AFOREMENTIONED MATERIAL, FACTS AND THE ISSUE OF DISALLOWANCE OF NON - RECURRING ITEMS WAS DECIDED AGAINST THE ASSESSEE AND APPEAL OF THE ASSESSEE WAS TO BE HEARD ON MERITS BY ADJUDICATING ENTIRE ISSUE RAISED BY THE ASSESSEE. ACCORDINGLY SOLE GROU ND OF THE REVENUE IS ALLOWED AND IMPUGNED ORDER IS SET ASIDE BY RESTORING THE FIRST APPEAL OF THE ASSESSEE TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION BY AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE REVE NUE IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 01 /1 2 /2014. SD/ - SD/ - (R. S. SYAL) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01 /1 2 /2014 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR