GODFREY PHILIPS INDIA LTD, MUMBAI V. ADDL CIT 8(1), MUMBAI

ITA 5319/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2895 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NISHANT SOMAIYA
• Keywords: Opportunity of being heard; Principle of natural justice; Valuation report
• Section: 43B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO. 5319 /MUM/20 1 5 (ASSESSMENT YEAR 20 1 0 - 11 ) GODFREY PHILLIPS INDIA LTD. SAHARA ROAD, CHAKALA ANDHERI EAST MUMBAI - 400 099. PAN : AAB CG4768K VS. ADDL. CIT 8(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI YOGESH THAR DEPARTMENT BY S HRI NISHANT SOMAIYA DATE OF HEARING 1 4 . 8 . 201 8 DATE OF PRONOUNCEMENT 24 . 8 . 201 8 O R D E R PER B. R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 12.8.2015 PASSED BY THE LEARNED CIT(A) - 16, MUMBAI AND IT RELATES TO A.Y. 2010 - 11. 2. AT THE TIME OF HEARING, LEARNED AR DID NOT PRESS GROUND NO. 1 & 2 RELATING TO DISALLOWANCE MADE U/S. 14A OF THE ACT DUE TO SMALLNESS OF THE AMOUNT INVOLVED. ACCORDINGLY THOSE GROUNDS ARE DISMISSED AS NOT PRESSED. 3. GROUND NO. 3 RELATES TO DISALLOWANCE MADE U/S. 43B OF THE ACT RELATED TO DISALLOWANCE OF CLAIM RELATING TO LEAVE EN CASHMENT. THE LD A.R SUBMITTED THAT THE ASSESSEE HAD EARLIER CLAIMED PROVISION FOR LEAVE ENCASHMENT AS DEDUCTION ON THE BASIS OF ACTUARIAL VALUATION AND THE SAME WAS ALLOWED. WHEN THE PROVISION FOR LEAVE ENCASHMENT WAS BROUGHT WITHIN THE SCOPE OF SEC.43 B OF THE ACT, THE ASSESSEE HAS STARTED DISALLOWING THE PROVISION FOR LEAVE ENCASHMENT CREATED IN RESPECT OF INCREMENTAL LIABILITY. DURING THE YEAR UNDER CONSIDERATION ALSO, THE ASSESSEE DISALLOWED THE PROVISION FOR LEAVE ENCASHMENT. HOWEVER IT CLAIMED DED UCTION OF LEAVE ENCASHMENT ACTUALLY PAID BY IT. THE AO GODFREY PHILLIPS INDIA LTD. 2 NOTICED THAT, IN THE EARLIER YEARS, SIMILAR CLAIM MADE BY THE ASSESSEE WAS DISALLOWED APPARENTLY ON THE REASONING THAT THE SAME MAY RESULT IN DOUBLE DEDUCTION, I.E., ONE ON PROVISION BASIS AND ANOTHER ON ACTUAL PAYMENT BASIS. ACCORDINGLY, THE AO DISALLOWED PART OF CLAIM MADE ON ACTUAL PAYMENT BASIS. THE DISALLOWANCE WAS COMPUTED ON ESTIMATION BASIS. WHEN THE MATTER REACHED TRIBUNAL, THE ITAT RESTORED THE MATTER TO THE FILE OF THE AO FOR EXAMINING THE MATTER AFRESH WITH REGARD TO DOUBLE DEDUCTION. IN THE SET ASIDE PROCEEDINGS, THE ASSESSEE COULD NOT FURNISH DETAILS TO THE SATISFACTION OF THE AO AND HENCE AO AGAIN MADE DISALLOWANCE OF 1/3 RD OF ACTUAL PAYMENT . IN THE YEAR UNDER CONSIDERATION, THE ASSES SEE HAD CLAIMED A SUM OF RS.1,38,84,000/ - ON PAYMENT BASIS. FOLLOWING THE ORDER PASSED IN THE SET ASIDE PROCEEDINGS, THE AO DISALLOWED 1/3 RD OF RS.1,38,84,000/ - AMOUNTING TO RS.46,28,000/ - . 4. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED THAT THE QUANTUM OF LEAVE ENCASHMENT CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS RS.112.80 LAKHS AND NOT RS.1,38,84,000/ - CLAIMED BY THE ASSESSEE. ACCORDINGLY THE LD CIT(A) DIRECTED THE AO TO ADOPT THE CORRECT FIGURE AND CONFIRMED DISALLOWANCE OF 1/3 RD OF THE CLAIM. 5. BEFORE US, THE LD A.R SUBMITTED THAT THE ASSESSEE WOULD BE IN A POSITION TO FURNISH RELEVANT DETAILS TO SHOW THAT THE CLAIM SO MADE DOES NOT RESULT IN DOUBLE CLAIM. ACCORDINGLY HE SOUGHT ONE MORE OPPORTUNITY TO PROVE ITS CLAIM. 6. WE HEARD LD D.R AND PERUSED THE RECORD. WE NOTICE THAT IDENTICAL ISSUE WAS CONSIDERED BY THE CO - ORDINATE BENCH IN THE ASSESSEES OWN CASE IN EARLIER YEARS AND THE MATTER WAS SET ASIDE TO THE FILE OF THE AO. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELO W THE ORDER PASSED BY THE TRIBUNAL IN AY 2004 - 05 (ITA NO.4304/MUM/2010 DATED 31 - 05 - 2011) ON THIS ISSUE: - 3 6. GROUND NO. VIII IS AGAINST THE SUSTENANCE OF ADDITION OF LEAVE ENCASHMENT OF RS.34,03,000/ - 37. THE AO NOTED THAT THE ASSESSEE HAD BEEN CLAIMING EXPENSES ON ACCOUNT OF LEAVE ENCASHMENT ON THE BASIS OF ACTUARIAL VALUATION REPORT GODFREY PHILLIPS INDIA LTD. 3 BUT FROM A.Y.2003 - 04 THE ASSESSEE STARTED CLAIMING DEDUCTION ON T HE ACTUAL PAYMENT BASIS. THE AO OBSERVED WHEN THE ASSESSEE HAD MADE CLAIM ON THE BASIS OF ACTUARIAL VALUAT ION IN THE EARLIER YEAR, THE CLAIM NOW BEING MADE ON THE BASIS OF ACTUAL PAYMENT COULD LEAD TO DOUBLE DEDUCTION. AS PER THE AO THE ASSESSEE WAS NOT ABLE TO FURNISH THE DETAILS OF DOUBLE DEDUCTION. HE THEREFORE PROCEEDED TO MAKE DISALLOWANCE ON ESTIMATE BAS IS. IT WAS OBSERVED BY HIM THAT AN EMPLOYEE ON AVERAGE WORKED IN PRIVATE SECTOR FOR 20 - 25 YEARS. SINCE THE ASSESSEE HAD BEEN MAKING CLAIM ON THE BASIS OF ACTUARIAL VALUATION FOR THE LAST 7 YEARS HE ESTIMATED THAT 1/3RD OF ACTUAL PAYMENT MAY HAVE BEEN CLA IMED ON THE BASIS OF ACTUARIAL VALUATION. ACCORDINGLY, THE AO OUT OF TOTAL SUM OF RS.102.09 LAKHS PAID TO RETIRED EMPLOYEES DURING THE YEAR, DISALLOWED 1/3 RS.34.03 LAKHS AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LEARNED COMMISSIONER OF INCOM E TAX (A) FOLLOWING THE APPELLATE ORDERS FOR THE ASSESSMENT YEARS 2002 - 03, 2003 - 04 AND 2004 - 05, UPHELD THE DISALLOWANCE MADE BY THE AO. 38. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2003 - 04 AND 2004 - 05 (SUPRA) (PAGE 13 - 14, PARA 2.8 - 2.8.1). HOWEVER, HE SUBMITS THAT THE DIRECTIONS BE GIVEN TO RESTRICT THE DISALLOWANCE TO THE AMOUNTS ALLOWED IN THE EARLIER YEARS. 39. THE LEARNED DR SUPPORTS THE ORDER OF THE AO AND THE LEARNED COMMISSIONER OF INCOME TAX(A). 40. W E HAVE HEARD BOTH THE PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. W E FIND MERIT IN THE PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE TRIBUNAL IN THE ASSESSEE'S OWN APPEALS FOR THE ASSESSMENT YEARS 2003 - 04 AND 2004 - 05 ON THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE HAS DECIDED THE IMPUGNED ISSUE VIDE FINDING RECORDED I N PARAGRAPH 2.8.1 OF THE ORDER DATED 20.4.2011 AS UNDER : 'THE DISPUTE IS REG ARDING DISALLOWANCE OF PART OF THE CLAIM RELATING TO LEAVE ENCASHMENT. THE ASSESSEE HAD BEEN MAKING THE CLAIM EARLIER ON THE BASIS OF ACTUARIAL VALUATION BUT CONSEQUENT TO THE AMENDMENT OF SECTION 43B T HE CLAIM WAS BEING MADE ON PAYMENT BASIS FROM A.Y.2003 - 04. THE AO HAS MADE ESTIMATED DISALLOWANCE OUT OF THE CLAIM MADE ON PAYMENT BASIS ON THE GROUND THAT PART OF THE PAYMENTS MADE MAY RELATE TO EARLIER YEAR WHEN THESE WERE ALLOWED ON ACTUARIAL BASIS. THE AO HAS MADE DISALLOWANCE ON ESTIMATE WHICH CANNOT BE SUSTAINED. ONLY THE PAYMENT WHICH HAD ACTUALLY BEEN ALLOWED EARLIER CAN BE DISALLOWED. IN OUR VIEW MATTERS REQUIRE FRESH EXAMINATION AND DISALLOWANCE HAS TO BE RESTRICTED TO THE AMOUNTS ALLOWED IN THE E ARLIER YEAR. W E THEREFORE SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (A) AND RESTORE THE ISSUE TO THE FILE OF AO FOR PASSING A FRESH GODFREY PHILLIPS INDIA LTD. 4 ORDER AFTER NECESSARY EXAMINATION AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. ' IN THE ABSEN CE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA) RESTORE THIS ISSUE TO THE FILE OF THE AO TO EXAMINE THE MATTER AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL (SUPRA) AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. FROM THE ASSESSMENT ORDER, WE NOTICE THAT THE ASSES SEE COULD NOT FURNISH THE RELEVANT DETAILS IN THE SET ASIDE PROCEEDINGS AND HENCE THE ESTIMATED ADDITION MADE IN THE ORIGINAL ASSESSMENT PROCEEDINGS WAS SUSTAINED. HENCE THE AO HAS FOLLOWED THE SAME METHODOLOGY IN THE CURRENT YEAR ALSO. HOWEVER, SINCE TH E LD A.R HAS SOUGHT ONE MORE OPPORTUNITY TO PROVE THE ASSESSEES CONTENTIONS, IN THE INTEREST OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT THE PLEA OF THE ASSESSEE MAY BE ACCEPTED. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RE STORE THE SAME TO THE FILE OF THE AO FOR EXAMINING IT AFRESH ON THE BASIS OF DETAILS AND INFORMATION, IF ANY, THAT MAY BE FURNISHED BY THE ASSESSEE. THE AO MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW, AFTER AFFORDING ADEQUATE OPPORTUNITY TO T HE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 24 . 8 .201 8 . SD/ - SD/ - (RAVISH SOOD ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 24 / 8 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI GODFREY PHILLIPS INDIA LTD. 5 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI