TOKHEIM INDIA P. LTD ( FORMELRY KNWON AS TOKHEIM KAIZEN P. LTD), NAVI MUMBAI V. ASST CIT WD 10(3), MUMBAI

ITA 7351/MUM/2010

• Counselvise Citation: 735119914 RSA 2010
• Duration Of Justice: 4 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 27-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JANGRE
• Keywords: Revised return; Bonafide mistake

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7351/M/2010 ASSESSMENT YEAR: 2007-08 M/S. TOKHEIM INDIA P. LTD. (FORMERLY KNOWN AS TOKHEIM KAIZEN P. LTD.), A-174, TTC INDUSTRIAL AREA, MIDC, KHAIRANE VILLAGE, NAVI MUMBAI 400 709 PAN: AACCK 3414F VS. ASSISTANT COMMISSIONER OF INCOME TAX, WARD 10(3), AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ARUNCHHABRA, A.R. REVENUE BY : SHRI S.K. JANGRE, D.R. DATE OF HEARING : 01.07.2015 DATE OF PRONOUNCEMENT : 01.07.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 21.07.2010 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2007-08. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) (CIT(A)) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER (AO) IN RESPECT OF PROVISION FOR WARRANTY OF RS.45,60,347 ON THE GROUN DS THAT THERE IS NO CONSISTENCY IN THE FORMULA ON THE BASIS OF WHICH PR OVISION IS MADE AND THERE IS NO REASONABLE BASIS BEHIND MAKING ESTIMATE FOR PROVISI ON FOR WARRANTY. 2. THE LEARNED CIT (A) HAS ERRED IN SUSTAINING THE ACTION OF THE LEARNED AO IN REJECTING THE CLAIM FOR DEDUCTION OF PRIOR PERIOD E XPENSES OF RS. 10,71,714 ON THE GROUND THAT THE RELIEF CAN BE CLAIMED ONLY BY FILIN G THE REVISED RETURN. ITA NO.7351/M/2010 M/S. TOKHEIM INDIA P. LTD. (FORMERLY KNOWN AS TOKHEIM KAIZEN P. LTD.) 2 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR RESCIND ANY GROUNDS OF APPEAL DURING THE COURSE OF THE HEARING. GROUND NO.1 3. THE ASSESSEE THROUGH GROUND NO.1 HAS AGITATED TH E CONFIRMATION OF DISALLOWANCE OF PROVISION FOR WARRANTY OF RS.45,60, 347/-. THE ASSESSEE IS ENGAGED IN ASSEMBLY AND SALE OF FUEL DISPENSERS. I T ALSO PROVIDES PREVENTIVE AND POST SALE MAINTENANCE SERVICES TO THE CUSTOMERS . THE ASSESSEE DURING THE YEAR CLAIMED RS.45,60,347/- ON ACCOUNT OF PROVISION FOR WARRANTY. 4. THE LD. CIT(A) UPHELD THE ASSESSING OFFICERS (H EREINAFTER REFERRED TO AS THE AO) ORDER ON THE GROUND THAT THE ESTIMATE IS CONTINGENT AND NOT AUTHENTIC. NEITHER WAS THERE ANY CONSISTENCY IN TH E FORMULA ON THE BASIS OF WHICH PROVISIONING WAS MADE NOR ANY REASONABLE BAS IS BEHIND MAKING SUCH ESTIMATE. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED BEFORE US THAT IN ORDER TO MEET ITS FUTURE OBLIGATION, THE ASSESSEE PROVIDES A PROVISION ON THE BASIS OF SALE INCURRED WHICH BROADLY VARIES 2-3% OF SALE VALUE SU BJECT TO CHANGE DEPENDING UPON THE FACTUAL SCENARIO. THE ESTIMATE IS BASED O N EXPERIENCE AND GUIDANCE OF EXPERTS. THE ACTUAL EXPENDITURE STOOD AT MORE T HAN 2% OF GROSS VALUE. PROVISION CREATED HAS BEEN AS PER ACCOUNTING POLICY BASED ON PRUDENCE AS PRESCRIBED BY AS-1. WARRANTY EXPENSES ARE ACCRUED AS SOON AS THE SALE CONTRACT IS EXECUTED, SINCE WARRANTY FORMS PART OF THE SALES CONTRACT. ALSO, SINCE THE SALES ARE RECOGNIZED, THE CORRESPONDING E XPENSES ARE ALSO RECOGNIZED WHICH SATISFIES MATCHING CONCEPT. THUS, THE ASSESS EE SATISFIES THE CONDITIONS FOR ALLOWANCE OF PROVISION I.E. OBLIGATION BASED ON PAST EXPERIENCE, PROBABILITY OF OUTFLOW OF RESOURCES AND RELIABLE ESTIMATE. PRO VISION CREATED AT 2% OF SALES ITA NO.7351/M/2010 M/S. TOKHEIM INDIA P. LTD. (FORMERLY KNOWN AS TOKHEIM KAIZEN P. LTD.) 3 BASED ON PAST EXPERIENCE AND DATA IS REASONABLE AND ALLOWABLE. PROVISION FOR WARRANTY DOES NOT REQUIRE ACTUARIAL VALUATION. WHE NEVER, PROVISION HAD BEEN MADE FOR A PARTICULAR ASSESSMENT YEAR IN EXCESS OF ACTUAL EXPENSES INCURRED IN SUBSEQUENT ASSESSMENT YEAR, THE DIFFERENCE WAS AGAI N WRITTEN BACK IN SUBSEQUENT ASSESSMENT YEAR. THE CONSISTENT APPLICA TION OF THE POLICY OF PROVISION RULES OUR ANY DOUBT OF MALAFIDES OR OF DI SHONEST INTENTION. HE HAS FURTHER SUBMITTED THAT THE PROVISION HAS BEEN CREAT ED ON THE BASIS OF REASONABLE, SCIENTIFIC AND CONSISTENT APPROACH. TH E LD. A.R. HAS FURTHER INVITED OUR ATTENTION TO PAGE 15 OF THE PAPER BOOK TO SHOW THAT AGAINST THE PROVISION OF EXPENSES MADE FOR A PARTICULAR ASSESSM ENT YEAR, THE TOTAL EXPENDITURE INCURRED IS SUBSEQUENT YEARS WAS MORE T HAN THE PROVISION AMOUNT. 6. IN VIEW OF THE ABOVE SUBMISSIONS OF THE ASSESSEE , WE FIND THAT THE PROVISION OF WARRANTY EXPENSES HAS BEEN MADE BY THE ASSESSEE ON THE BASIS OF PAST EXPERIENCE AND ON A SCIENTIFIC BASIS. EVEN TH E ACTUAL EXPENDITURE INCURRED ON SUBSEQUENT YEARS IS MORE THAN THAT FOR WHICH THE PROVISION WAS MADE. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION ON THE PAR T OF THE LOWER AUTHORITIES IN DISALLOWING THE CLAIM OF THE ASSESSEE ON THIS ISSUE . THE ORDERS OF THE LOWER AUTHORITIES ARE HEREBY SET ASIDE AND THE CLAIM OF T HE ASSESSEE ON THIS ISSUES IS ALLOWED. GROUND NO.2 7. THE ASSESSEE, VIDE GROUND NO.2, HAS AGITATED THE DISALLOWANCE OF EXPENSES AMOUNTING TO RS.10,71,714/-. CERTAIN EXPE NSES IN THE NATURE OF AUDIT FEES, INTERNAL AUDIT FEES & PROFESSIONAL FEES, RELA TING TO F.Y. 2006-07 WERE BOOKED IN F.Y. 2007-08 AS PRIOR PERIOD EXPENSES. T HE ASSESSEE DISALLOWED SUO MOTU THESE EXPENSES IN ITS RETURN OF INCOME FOR A.Y . 2008-09. HOWEVER,THE ASSESSEE RAISED THE CLAIM FOR ALLOWANCE OF THESE EX PENSES BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS. THE AO NOT ONLY RE JECTED THE CLAIM BUT ALSO ITA NO.7351/M/2010 M/S. TOKHEIM INDIA P. LTD. (FORMERLY KNOWN AS TOKHEIM KAIZEN P. LTD.) 4 MADE AN ADDITION ON THE GROUND THAT THE ASSESSEE SH OULD HAVE FILED THE REVISED RETURN OF INCOME AND CLAIMED THE DEDUCTION OF SUCH EXPENDITURE. SINCE, THE ASSESSEE HAD FAILED TO FILE THE REVISED RETURN OF I NCOME WITHIN THE TIME LIMIT, THE CLAIM WAS TO BE REJECTED. THE LD. CIT(A) , THE REFORE UPHELD THE AOS ORDER RELYING UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. VS. CIT 284 ITR 323 . 8. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEE WHILE FILING THE RETURN OF INCOME FOR A.Y. 2007-08 DID NOT CLAIM DEDUCTION OF RS.10,71,714/-. HOWEVER, THE AO AT THE TIME OF PAS SING THE ASSESSMENT ORDER ADDED BACK THE SAME AND REDUCED THE RETURNED LOSS B Y RS.10,71,714/-. THUS, ADDITION OF RS.10,71,714/- AS PRIOR PERIOD ITEM AMO UNTED TO DOUBLE DISALLOWANCE. THE AO AND THE LD. CIT(A) HAVE NOT D ISPUTED THE FACT THAT THESE EXPENSES PERTAIN TO F.Y. 2006-07 AND THUS, TH E AO WAS DUTY BOUND TO GRANT RELIEF TO THE ASSESSEE WHICH THE ASSESSEE HAS INADVERTENTLY FAILED TO CLAIM IN THE ORIGINAL OR REVISED RETURN. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V S. PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. (2012) 349 ITR 336 (BOM.), WHILE RELYING UPON THE VARIOUS DECISIONS OF THE HONBLE SUPREME COURT AND OTHER HONBLE HIGH COURTS, HAS HELD THAT EVEN IF A CLAIM IS NOT MADE B EFORE THE AO, IT CAN BE MADE BEFORE THE APPELLATE AUTHORITIES. THE JURISDICTION OF THE APPELLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM IS NOT BARRED. THE HONBLE BOMBAY HIGH COURT WHILE RELYING UPON THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF JUTE CORPORATION OF INDIA LIMITED VS. CIT 1991 SUPP (2) SCC 744 = (1991) 187 ITR 688 HAS OBSERVED THAT THE POWER OF THE APPELLAT E COMMISSIONER IS COTERMINOUS WITH THAT OF THE INCOME TAX OFFICER AND AN APPELLATE AUTHORITY WHILE HEARING APPEAL AGAINST THE ORDER OF THE SUBOR DINATE AUTHORITY, HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DEC IDING THE QUESTIONS BEFORE ITA NO.7351/M/2010 M/S. TOKHEIM INDIA P. LTD. (FORMERLY KNOWN AS TOKHEIM KAIZEN P. LTD.) 5 IT, SUBJECT TO THE RESTRICTIONS OR LIMITATIONS, IF ANY, PRESCRIBED BY STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVIS ION, THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORD INATE AUTHORITY MAY HAVE IN THE MATTER. AN ASSESSEE IS ENTITLED TO RAISE NOT M ERELY ADDITIONAL LEGAL SUBMISSIONS BEFORE THE APPELLATE AUTHORITIES BUT IS ALSO ENTITLED TO RAISE ADDITIONAL CLAIMS BEFORE THEM. THE APPELLATE AUTHO RITIES HAVE THE DISCRETION WHETHER OR NOT TO PERMIT SUCH ADDITIONAL CLAIMS TO BE RAISED. IT CANNOT, HOWEVER, BE SAID THAT THEY HAVE NO JURISDICTION TO CONSIDER THE SAME. THE APPELLATE AUTHORITIES HAVE JURISDICTION TO DEAL NOT MERELY WITH ADDITIONAL GROUNDS WHICH BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW, BUT WITH ADDITIONAL GROUNDS WHICH WERE AVAILAB LE WHEN THE RETURN WAS FILED BUT COULD NOT HAVE BEEN RAISED AT THAT STAGE OR THE GROUNDS WHICH BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW. THE WORDS COULD NOT HAVE BEEN RAISED MUST BE CONSTRUED LIBERALLY AND N OT STRICTLY. IT IS OPEN TO THE ASSESSEE TO CLAIM A DEDUCTION BEFORE THE APPELLATE AUTHORITY WHICH COULD NOT HAVE BEEN CLAIMED BEFORE THE AO. THE HONBLE BOMBA Y HIGH COURT HAS FURTHER OBSERVED THAT THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF GOETZE (INDIA) LIMITED V. CIT (2006) 157 TAXMAN 1 , REGARDING THE RESTRICTION OF MAKING THE CLAIM THROUGH A REVISED RETURN WAS LI MITED TO THE POWERS OF THE ASSESSING AUTHORITY AND THE SAID JUDGMENT DOES NOT IMPINGE ON THE POWER OR NEGATE THE POWERS OF THE APPELLATE AUTHORITIES TO E NTERTAIN SUCH CLAIM BY WAY OF ADDITIONAL GROUND. IN OUR VIEW, THE TAXING AUTHORIT IES SHOULD CHARGE THE LEGITIMATE TAXES FROM THE TAX PAYERS. THEY ARE NOT SUPPOSED TO PUNISH THEM FOR THEIR BONAFIDE MISTAKES OF NOT CLAIMING A DEDUCTION TO WHICH THEY ARE OTHERWISE ELIGIBLE UNDER THE PROVISIONS OF RELEVANT LAWS. THE LD. CIT(A) IN APPEAL WAS SUPPOSED TO LOOK INTO THE CLAIM OF THE ASSESSEE AND IF FOUND GENUINE THEN TO ALLOW THE SAME AS WHILE ADJUDICATIN G THE APPEAL, HE ALSO ACTS ITA NO.7351/M/2010 M/S. TOKHEIM INDIA P. LTD. (FORMERLY KNOWN AS TOKHEIM KAIZEN P. LTD.) 6 AS A QUASI-JUDICIAL AUTHORITY . HE THEREFORE HAS AL SO FAILED TO EXERCISE HIS JURISDICTION IN THE RIGHT MANNER. 9. IN VIEW OF THE ABOVE STATED LEGAL POSITION, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS SET ASIDE AND THE MATTER IS AGAIN RE STORED TO HIM WITH A DIRECTION TO LOOK INTO AND CONSIDER THE CLAIM OF THE ASSESSEE AN D IF THE ASSESSEE IS FOUND ELIGIBLE FOR THE SAID CLAIM, THEN TO ALLOW THE SAME ACCORDINGLY. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 01.07.201 5. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: .10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.