DCIT-1(1)(2), Mumbai V. M/S HDFC SALES PVT. LTD., Mumbai

ITA 852/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6455 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2015-2016
• Appeal Filed On: 15-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIKHIL CHAUDHARY
• Keywords: TDS
• Section: 145; 37; 6; 2; 143(3); 115JB; 40(a)(ia); 37(1); 43; 13; 20

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL H BENCH MUMB AI BEFORE SHRI PAWAN SINGH JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 852/MUM/2019 (ASSESSMENT YEAR 2015-16 ) DCIT- 1(1)(2) 579, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S HDFC SALES PVT. LTD. 169, RAMAN HOUSE, H.T. PAREKH MARG, BACKBAY RECLAMATION, MUMBAI-400020. PAN: AABCH4278H APPELLANT RESPONDE NT REVENUE BY : SHRI NIKHIL CHAUDHARY (CIT-DR) ASSESSEE BY : SHRI NIRAJ SHETH (AR) DATE OF HEARING : 17.09.2020 DATE OF PRONOUNCEMEN T : 18.09.2020 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2 [LD. CIT(A)] , MUMBAI DATED 18.12.2018 FOR ASSESSMENT YEAR (AY) 2015-16. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MARKETING AND SELLING OF HOME LOANS AND OTHER FINANCIAL PRODUCTS, CARRYING OUT OPERATIONS OF HDFC REALTY LI MITED, PROVIDING CORPORATE AGENCY SERVICES TO HDFC STANDARD LIFE INS URANCE COMPANY LIMITED. THE ASSESSEE IS PART OF HDFC GROUP. THE A SSESSEE WHILE FILING ITS RETURN OF INCOME FOR AY 2015-16 DECLARED LOSS O F RS. 6.21 CRORE. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFIC ER DURING THE ASSESSMENT NOTED THAT ASSESSEE IN THE STATEMENT OF ACCOUNTS HAS MADE A ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 2 PROVISIONS OF RS. 10.24 CRORE FOR UNDER 31 HEADS OF EXPENSES FOR ONE MONTH EXPENSES (MARCH 2015). THE ASSESSEE HAS MADE PROVISION IN RESPECT OF EXPENDITURE PERTAINING TO THE PREVIOUS Y EAR ENDING 31 MARCH 2015. THE ASSESSING OFFICER ISSUED SHOW-CAUSE NOTIC E, IF ANY TAX WAS DEDUCTED (TDS) ON SUCH PROVISIONS OR SUCH PROVISION S ARE DISALLOWED FOR COMPUTATION OF INCOME UNDER THE NORMAL PROVISION AS WELL AS UNDER THE PROVISION OF SECTION 115JB (PARA-4.2 OF ASSESSMENT ORDER). 2. THE ASSESSEE FILED ITS REPLY VIDE REPLY DATED 27.11 .2017. IN THE REPLY, THE ASSESSEE SUBMITTED THAT NONE OF THE PROVISION MADE BY ASSESSEE REPRESENTS ADHOC PROVISION OR FOR ANY UNASCERTAINED LIABILITY, THE PROVISION HAS BEEN MADE IN RESPECT OF EXPENDITURE P ERTAINING TO PREVIOUS YEAR ENDING MARCH 31 ST 2015 AND ACCOUNTED FOR IN ACCORDANCE WITH THE ACCOUNTING POLICY CONSISTENTLY FOLLOWED BY THE ASSE SSEE. THE ASSESSEE ALSO STATED THAT THESE ARE ASCERTAINED LIABILITIES WHICH ARE PAID AT ACTUAL RATE IN SUBSEQUENT YEAR AND ARE NOT SUBJECT TO DISA LLOW UNDER SECTION 37 OR FOR THE PURPOSE OF COMPUTING MINIMUM ALTERNATIVE TAX (MAT) UNDER SECTION 115JB. THE PROVISIONS ARE MADE IN CONFORMI TY WITH THE COMPANIES ACT. THE ASSESSEE ALSO FURNISHED THE QUAN TITATIVE DETAILS OF THE PROVISIONS MADE AT THE END OF YEAR (FOR THE MON TH OF MARCH 2015), VIDE LETTER DATED 14.12.2017. 3. THE REPLY FURNISHED BY ASSESSEE WAS NOT FIND FAVOUR TO THE ASSESSING OFFICER. THE ASSESSING OFFICER CONCLUDED THAT THE P ROVISION OF RS. 10.24 ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 3 CRORE REPRESENT PURE ADHOC PROVISION MADE AT THE END OF YEAR. AND THAT THIS FACT IS ADMITTED BY THE ASSESSEE THAT PROVISIO NS ARE REVERSED AT THE BEGINNING OF THE YEAR. THE TAX AUDITOR HAS CONFIRME D THIS FACT IN FORM 3CD. THE ASSESSING OFFICER CONCLUDED THAT THE PROVI SIONS ARE CONTINGENT IN NATURE AND THEREFORE, DISALLOWED THE ENTIRE PROV ISIONS OF EXPENSES IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) ON 27.12.2017. 3. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE FILED DETAILED WRITTEN SUBMISSION WHICH HAS BEEN RECORDED BY LD. CIT(A) IN PARA-5.2 OF HIS ORDER. IN WRITTEN SUBMISSION, THE ASSESSEE SPECIFIC ALLY CONTENDED THAT THE PROVISIONS MADE BY ASSESSEE DO NOT REPRESENT AN ADHOC PROVISION. THE HEADS OF EXPENSES FOR WHICH PROVISIONS WERE MADE AR E ACTUAL EXPENSES INCURRED BY ASSESSEE DURING THE YEAR AND PROVISIONS WERE MADE FOR THE EXPENSES INCURRED FOR WHICH FULL DETAILS WERE RECEI VED AND ARE AVAILABLE ON RECORD. THE FINANCIAL STATEMENT OF ASSESSEE WAS FINALIZED ON 27.04.2015 JUST 27 DAYS AFTER THE CLOSE OF FINANCIA L YEAR. KEEPING IN VIEW THE NATURE OF BUSINESS AND VOLUME OF TRANSACTI ON OF THE ASSESSEE, IT IS NOT PRACTICALLY POSSIBLE TO GET ALL INFORMATION RELATING TO QUANTUM OF EXPENSES INCURRED IN THE MONTH OF MARCH IN SUCH A S HORT SPAN OF TIME. THE ASSESSEE ALSO RELIED ON VARIOUS DECISIONS OF TR IBUNAL AND OTHER SUPERIOR COURTS IN ITS WRITTEN SUBMISSIONS. THE LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE GRANTED RELIEF TO THE ASSESSEE BY TAKING VIEW THAT THE PROVISIONS MADE BY THE ASSE SSEE CANNOT BE HELD ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 4 TO BE CONTINGENT EXPENDITURE AS THE EXPENDITURE HAV E BEEN MADE ON A CERTAIN BASIS FOR EACH HEAD OF EXPENSES SO THE ACCO UNTS ADOPTED BY THE ASSESSEE REPRESENT THE TRUE AND FAIR VIEW OF ASSESS EES BUSINESS, WHICH IS CONSISTENT WITH ACCOUNTING STANDARDS. THE ASSESSEE MADE PROVISIONS OF RS. 10.24 CRORE AND INCURRED ACTUAL EXPENSES OF RS. 10.46 CRORE. IT WAS ALSO HELD THAT NO DISALLOWANCES CAN BE MADE UNDER S ECTION 40(A)(IA) OF THE ACT SINCE THE SCHEME OF TDS PROCEEDS ON THE ASS UMPTION THAT THE PERSON WHOSE LIABILITY IS TO PAY AN INCOME KNOWS TH E IDENTITY OF THE BENEFICIARY OR THE RECIPIENT OF THE INCOME. FURTHER , THE AMOUNT OF PAYMENT SHOULD ALSO BE EXACTLY QUANTIFIED. AGGRIEVE D BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BE FORE THIS TRIBUNAL. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY A O OF RS. 10.24 CRORE BEING A PROVISION OF AVERAGE OF ONE MONTH EXPENSE O F TOTAL EXPENSES COVERED UNDER THIRTY ONE HEADS AS ON 31.03.2015, BY HOLDING THAT IT IS AN ACCRUED LIABILITY, WITHOUT APPRECIATING THE FACT THAT NO EV IDENCE WAS FURNISHED BY THE ASSESSEE BEFORE THE AO TO SUBSTANTIATE THAT THE SAM E IS AN ASCERTAINED LIABILITY AS SUCH ALLOWABLE U/S 37(1) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE AO OF RS. 10.24 CRORE TO THE BOOK PROFIT BY HOLDING THAT THE PROVISION MA DE BY ASSESSEE IS ASCERTAINED LIABILITY COVERED BY EXPLANATION 1 TO S EC. 115JB OF THE ACT. 4. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORISED REPRESENTATIVE ( AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUN D NO.1 RELATES TO DELETING THE ADDITION OF RS. 10.24 CRORE BEING A PR OVISION OF AVERAGE ONE ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 5 MONTH EXPENSES. THE LD. DR FOR THE REVENUE SUBMITS THAT THE ASSESSEE MADE A PROVISION OF EXPENSES AT THE END OF YEAR FOR UNASCERTAINED LIABILITIES. THE PROVISIONS OF 31 ITEMS OF EXPENSES WERE MADE FULLY ON ESTIMATION BASIS. THERE WAS NO JUSTIFICATION FOR MA KING SUCH ESTIMATE PROVISION ON ADHOC BASIS. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER HAS CLEARLY HELD THAT THE PROVISIO NS OF EXPENSES WERE PURELY N ADHOC BASIS AND THIS FACT WAS ADMITTED BY ASSESSEE. THE TAX AUDITOR HAS ALSO CONFIRMED THIS FACT IN THE TAX AUD IT REPORT. THE PROVISIONS ARE CONTINGENT IN NATURE AND LIABLE TO B E DISALLOWED. THE LD. DR FURTHER SUBMITS THAT THE ITEM WISE DETAILS OF EX PENSES FOR WHICH THE ASSESSEE MADE PROVISION IS RECORDED BY LD. CIT(A) O N PAGE 8,9 & 10 OF THE IMPUGNED ORDER. THE LD. DR INVITED OUR ATTENTIO N ON ITEM NO.1 WHEREIN THE ASSESSEE MADE PROVISION FOR MOTOR CAR E XPENSES AND REIMBURSEMENT OF FUEL EXPENSES OF RS. 7.84 LAKHS EA CH, HOWEVER, ACTUAL EXPENSES WERE ONLY RS. 1.64 LAKHS. SIMILARLY, THE P ROVISION FOR BROKERAGE AND CONSULTANCY FEES HSPL /HRL WAS SHOWN AT RS. 1. 12 LAKHS AND RS. 14.10 LAKHS, HOWEVER, NO ACTUAL EXPENSES WERE INCUR RED. THE LD. DR ALSO MADE SIMILAR SUBMISSION WITH REGARD TO ITEM NO.18, 20 & 21 WHEREIN PROVISIONS WERE MADE FOR RS. 55 LAKHS ON ACCOUNT OF ENTERTAINMENT EXPENSES AND INCURRED ONLY RS. 58,000/-, ON REPAIR AND MAINTENANCE PROVISION WAS MADE FOR RS. 10.18 LAKHS AND ACTUAL E XPENSES WERE INCURRED RS. 3.89 LAKHS AND FOR REPAIR AND MAINTENA NCE OF BUILDING ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 6 PROVISIONS OF RS. 7,000/- WAS MADE AND NOTHING WAS INCURRED. ON THE BASIS OF AFORESAID FIGURES, THE LD. DR SUBMITS THAT THERE WAS NO SCIENTIFIC BASIS FOR MAKING PROVISION OF THE EXPENSES, THE EST IMATION PROJECTED IS MISLEADING. THE PROVISIONS OF EXPENSES ARE WITHOUT ANY SUBSTANTIATION, PURELY ADHOC AND ARE LIABLE TO BE DISALLOWED. 5. TO BUTTRESS HIS SUBMISSION, THE LD. DR FOR THE REVE NUE RELIED UPON THE DECISION OF AHMADABAD TRIBUNAL IN HARDIK JIGISHBHA I DESAI VS. DCIT IN ITA NO. 1084/AHD/2013 REPORTED VIDE [2016] (11) TMI 668- ITAT AHMADABAD. THE LD. DR FURTHER SUBMITS THAT IF THERE WAS CERTAIN LIABILITY, THE ASSESSEE SHOULD HAVE MADE TDS. NO TDS WAS MADE, THEREFORE, THE EXPENSES IS NOT ALLOWABLE. AND RELIED UPON THE DECI SION OF COCHIN TRIBUNAL IN ABAD BUILDERS (P.) LTD. VS ACIT REPORTE D IN [2014] 43 TAXMANN.COM 128 (COCHIN TRIB.). THE LD. DR FINALLY SUBMITS THAT THE ASSESSEE WAS FOLLOWING THE SAME PRACTICE FROM LAST VARIOUS YEARS. THIS WAS A WRONG PRACTICE ADOPTED BY ASSESSEE WHICH IS N OT PERMISSIBLE UNDER THE LAW. THE POLICY AND PRACTICE WHICH IS ADOPTED B Y ASSESSEE, IF NOT PERMISSIBLE BY LAW; THE ASSESSEE CANNOT TAKE THE PL EA THAT SUCH PRACTICE WAS NEVER QUESTIONED BY THE REVENUE. THE CASE OF AS SESSEE WAS SELECTED FOR SCRUTINY FOR THE FIRST TIME IN THE YEAR UNDER C ONSIDERATION. THE LD. DR PRAYED FOR REVERSING THE DECISION OF LD. CIT(A) AND TO RESTORE THE ORDER PASSED BY ASSESSING OFFICER. ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 7 6. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. CIT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MARKETING AND SELLING OF HOME LO ANS, LIFE INSURANCE PRODUCT, CORPORATE AGENCY SERVICES AND PROMOTING AN D MARKETING OF GENERAL INSURANCE, MUTUAL FUNDS AND FINANCIAL PRODU CTS AND CARRYING OUT OPERATION OF HDFC GROUP. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE AMOUNT OF PROVISION DOES NOT REPRESENT ADH OC PROVISION. THE HEAD OF EXPENSES FOR WHICH PROVISIONS WERE MADE ARE ACTUAL EXPENSES INCURRED BY THE ASSESSEE DURING THE YEAR AND THE PR OVISIONS WERE MADE FOR EXPENSES INCURRED FOR WHICH FULL DETAILS WERE R ECEIVED. THE AUDIT OF FINANCIAL STATEMENTS OF ASSESSEE WAS FINALIZED ON 2 7.07.2015, JUST 27 DAYS AFTER THE CLOSE OF FINANCIAL YEAR. IT MAY BE A PPRECIATED THAT KEEPING IN VIEW THE NATURE AND BUSINESS ACTIVITIES AND VOLU ME OF FREQUENCY OF DIFFERENT TYPE OF TRANSACTION, IT IS NOT PRACTICALL Y POSSIBLE TO GET ALL THE INFORMATION RELATING TO THE QUANTUM OF EXPENSES INC URRED FOR THE MONTH OF MARCH IN A SHORT PERIOD OF TIME. THE ASSESSEE FU RNISHED COMPLETE DETAILS TO THE ASSESSING OFFICER. THE ASSESSEE MADE PROVISION FOR RS. 10.26 CRORE, HOWEVER, ACTUAL EXPENSES OF RS. 10.46 CRORE WAS INCURRED, WHICH CONFIRMED THE FACT THAT THE PROVISIONS WERE M ADE WITH DUE DILIGENCE AND CANNOT BE CONSIDERED AS ADHOC. THOUGH THE PROVISIONS WERE MADE ON ESTIMATION, WHICH WERE BASED ON CONSIS TENCY OVER THE YEARS KEEPING IN VIEW THE EXPENSES INCURRED ON CERT AIN BASIS FOR EACH ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 8 HEAD OF EXPENSES. THE LD. AR FURTHER EXPLAINED THAT REVERSAL OF PROVISION AND IS MERELY FOR ADMINISTRATIVE CONVENIENCE AND FO R INSURING CORRECT ACCOUNTING AS PER COMPANIES ACT AND IN ACCORDANCE W ITH SECTION 145 OF THE ACT. THE OBSERVATION OF AUDITOR IN THE TAX AUDI T REPORT IS MERELY A DISCLOSURE IN THE SAID REPORT WHICH CANNOT BE CONSI DERED AS QUALIFICATION. THE AUDITOR HAS NOT CONFIRMED ANYT HING TO GIVE AN IMPRESSION THAT PROVISION MUST BE DISALLOWED FOR CO MPUTING THE INCOME UNDER THE ACT. THE ASSESSING OFFICER WHILE ISSUING SHOW-CAUSE NOTICE HAS NOT RAISED THE ISSUE THAT NO TDS WAS MADE ON TH E PROVISION OF EXPENSES. THE LD. AR FOR THE ASSESSEE FINALLY SUBMI TS THAT WHEN THE ASSESSEE WAS REGULARLY FOLLOWING THE PRACTICE OF MA KING PROVISION ON ACCOUNT OF VARIOUS EXPENSES IN THE MONTH OF MARCH, WHICH IS REVERSED ON 1 ST APRIL IN THE NEXT YEAR AND EXPENSES ARE CONSIDERED ON THE BASIS OF ACTUAL PAYMENT IN THE SUBSEQUENT YEAR AND THE SAME HAS BEEN TAXED IN THE NEXT YEAR, THE SAME CANNOT BE HELD TO BE CONTINGENT EXPENSES. THE ASSESSEE HAS ADOPTED TRUE AND FAIR ESTIMATION FOR T HE MONTH OF MARCH, WHICH IS IN ACCORDANCE WITH THE ACCOUNTING STANDARD . THE LD. AR FURTHER REITERATE THAT NO DISALLOWANCE CAN BE MADE IN THE C ONTEXT OF SECTION 40(A)(IA) AS NO PAYMENT WAS EXACTLY IDENTIFIED OR Q UANTIFIED. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIE D ON THE FOLLOWING DECISIONS: ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 9 ADITYA BIRLA NUVO VS DCIT (ITA NO. 8427/MUM/2010 DA TED 17.09.2014), PFIZER LTD. VS ITO IN ITA NO. 1667/MUM/2010, CIT VS TRIVENI ENGINEERING AND INDUSTRIES LTD. [201 1] TAXMAN 94 (DELHI HC), BHARAT EARTH MOVERS LTD. VS CIT 245 ITR 428 (SC), ROTROCK CONTROLS INDIA (P.) LTD. VS. CIT (314 ITR 6 2 (SC), CIT VS HINDTRON SERVICES LTD. (328 ITR 263 (SC) AND CIT VS EXCEL INDUSTRIES LTD. (358 ITR 295 (SC). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE ORDERS OF LOWER AUTHORIT IES. WE HAVE ALSO DELIBERATED ON VARIOUS CASE LAWS CITED BY LD. REPRE SENTATIVE OF THE PARTIES. THE AO DISALLOWED THE PROVISION OF EXPENSE S BY TAKING VIEW THAT THE PROVISIONS MADE BY ASSESSEE ARE ADHOC PROVISIONS MADE AT THE END OF THE YEAR. THESE PROVISIONS ARE CONTINGENT IN NATURE AND HAVE TO BE DISALLOWED IN COMPUTING THE INCOME. THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE BY TAKING VIEW THAT THE ASSESSEE IS RE GULARLY FOLLOWING THE PRACTICE OF MAKING PROVISION FOR VARIOUS EXPENSES F OR THE MONTH OF MARCH, WHICH IS REVERSED ON 1 ST APRIL OF NEXT YEAR AND THAT EXPENSES ARE CONSIDERED ON THE BASIS OF ACTUAL PAYMENT IN THE S UBSEQUENT YEAR. THE LD. CIT(A) ALSO CONCLUDED THAT THESE PROVISION CANN OT BE HELD TO BE CONTINGENT EXPENDITURE AS THE EXPENDITURE HAVE ALRE ADY BEEN INCURRED AND THE PROVISION HAS BEEN MADE ON CERTAIN BASIS FO R EACH HEAD OF EXPENSES SO THAT THE ACCOUNTS ADOPTED BY ASSESSEE R EPRESENT A TRUE AND FAIR AFFAIRS OF BUSINESS AND IS WITH CONSISTENT OF ACCOUNTING STANDARD. THE ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 10 LD. CIT(A) ALSO HELD THAT THE ASSESSEE INCURRED ACT UAL EXPENSES OF RS. 10.46 CRORE AGAINST THE PROVISION OF RS. 10.24 CROR E. THE LD. CIT(A) ALSO RELIED UPON THE DECISION OF DELHI HIGH COURT IN TRI VENI ENGINEERING & INDUSTRIES LTD. (SUPRA). ON THE ISSUE OF NON-DEDUCT ION OF TDS, THE LD. CIT(A) AGREED WITH THE SUBMISSION OF ASSESSEE THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 40(A)(IA) AS THE SCHEME OF TD S PROCEED ON THE ASSUMPTION THAT THE PERSON WHOSE LIABILITY IS TO PA Y INCOME KNOWS THE IDENTITY OF BENEFICIARY OR RECIPIENT OF THE INCOME AND THAT AMOUNT OF PAYMENT SHOULD BE EXACTLY QUANTIFIED. THE OPERATIV E PART OF THE ORDER OF LD CIT(A) IS EXTRACTED BELOW; 6. DECISION: I HAVE CONSIDERED THE AO'S ORDER, THE SUBMISSIONS OF THE APPELLANT AND THE DETAILS FILED. I FIND THAT THE AP PELLANT IS REGULARLY FOLLOWING THIS PRACTICE OF MAKING PROVISIONS FOR VA RIOUS EXPENSES FOR THE MONTH OF MARCH, WHICH IS THEN REVERSED ON THE 18T O F APRIL, NEXT YEAR AND THE EXPENSES ARE CONSIDERED ON THE BASIS OF ACTUAL PAYMENT IN THE SUBSEQUENT YEAR. THE PROVISION HAS BEEN MADE, FOR T HE EXPENSES INCURRED FOR WHICH INVOICES/FULL DETAILS WERE NOT RECEIVED T ILL THE END OF THE MONTH I.E. 318T OF MARCH, BY CONSIDERING THE AVERAGE ONE MONTH EXPENSE. I AM INCLINED TO AGREE WITH THE APPELLANT'S SUBMISSION T HAT THESE PROVISIONS CANNOT BE HELD TO BE CONTINGENT EXPENDITURE SINCE T HE EXPENDITURE HAVE ALREADY BEEN INCURRED AND THE PROVISION HAS BEEN MA DE ON A CERTAIN BASIS FOR EACH HEAD OF EXPENSE SO THAT THE ACCOUNT~ ADOPT ED BY THE APPELLANT REPRESENT A TRUE AND, FAIR VIEW OF THE STATE OF AFF AIRS OF THE BUSINESS, CONSISTENT WITH THE ACCOUNTING STANDARDS. IN THIS R EGARD, IT IS NOTED THAT THE ACTUAL EXPENSES INCURRED WAS RS.10,46,13,017/ - AS AGAINST THE PROVISION OF RS.10,24,36,819/ -, FURTHER, IT IS NOT A CASE WHERE THE EXPENDITURE WOULD ACCRUE ON THE HAPPENING OF SOME SUBSEQUENT EVENT. I N THIS REGARD, RELIANCE ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 11 IS PLACED ON THE DECISION IN THE CIT VS. TRIVENI EN GINEERING AND INDUSTRIES LTD. (2011) 196 TAXMAN 94 DELHI HIGH COURT. 6.1 I FIND THAT THE AO HAS ALSO REQUIRED THE APPE LLANT TO EXPLAIN WHETHER TDS WAS DEDUCTED ON SUCH PROVISIONS AND IF NOT, WHE THER SUCH PROVISIONS HAVE BEEN DISALLOWED IN THE COMPUTATION OF INCOME. IN THIS REGARD, THE APPELLANT HAS SUBMITTED THAT NO DISALLOWANCES CAN B E MADE IN THE CONTEXT OF SEC. 40(A)(IA) OF THE ACT SINCE THE SCHEME OF TDS P ROCEEDS ON THE ASSUMPTION THAT THE PERSON WHOSE LIABILITY IS TO PA Y AN INCOME KNOWS THE IDENTITY OF THE BENEFICIARY OR THE RECIPIENT OF THE INCOME. FURTHER, THE AMOUNT OF PAYMENT SHOULD ALSO BE EXACTLY QUANTIFIED . I AM INCLINED TO AGREE WITH THE ABOVE SUBMISSION OF THE APPELLANT IN THE L IGHT OF THE DECISION OF MUMBAI ITAT IN THE CASE OF ADITYA BIRLA NUVO VS. DC IT (ITA NO.8427/MUM/2010) DATED 17.09.2014. 6.2 IN VIEW OF ABOVE DISCUSSION, I FIND THAT THE AD DITION MADE BY THE AO, BY TREATING THE PROVISIONS OF RS. 10,24,36,819/-, A S CONTINGENT IN NATURE IS NOT JUSTIFIED AND THE SAME IS HEREBY DELETED. 8. BEFORE US THE LD. DR FOR THE REVENUE IN HIS SUBMISS IONS VEHEMENTLY SUBMITTED THAT THE PROJECTED ESTIMATION OF THE PROV ISIONS OF EXPENSES IS PROJECTED PURELY ON ESTIMATION AND THAT THERE IS MI SMATCH OF PROJECTED FIGURES OF EXPENSES AND THE ACTUAL EXPENSES INCURRE D ON VARIOUS COUNTS, WHICH WE HAVE RECORDED ABOVE. SECOND CONTENTION OF THE LD. DR FOR THE REVENUE IS THAT NO TDS WAS MADE ON SUCH PROVISIONS. THE LD. DR FOR THE REVENUE ALSO RELIED ON THE DECISIONS OF AHMEDABAD T RIBUNAL IN HARDIK JIGISHBHAI DESAI (SUPRA) AND THE DECISION OF COCHIN TRIBUNAL IN ABAD BUILDERS (P.) LTD. (SUPRA). IN HARDIK JIGISHBHAI DE SAI (SUPRA), THE ASSESSEE DEBITED THE PROVISION OF COMMISSION EXPENS ES TO THE PROFIT & LOSS ACCOUNT WITHOUT MAKING TDS. THE ASSESSING OFFI CER DISALLOWED ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 12 THE EXPENSES BY TAKING VIEW THAT DEBITING THE COMMI SSION EXPENSES RESULTED IN DEDUCTION OF PROFIT AND TDS SHOULD HAVE BEEN MADE ON SUCH EXPENSES. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY ASSESSING OFFICER. ON APPEAL BEFORE THE TRIBUNAL, T HE DISALLOWANCE WAS MAINTAINED. IN THE SAID CASE, THE RECIPIENT OF COMM ISSION WAS IDENTIFIABLE. HOWEVER, FACT OF THE PRESENT CASE IS QUITE DIFFERENT. THE ASSESSEE MADE PROVISION WITH REGARD TO 31 DIFFERENT ITEMS. THE ASSESSING OFFICER HAS NOT BROUGHT ANY FACT ON RECORD THAT REC IPIENT WERE CERTAIN OR IDENTIFIABLE. THE ASSESSEE HAS MADE PROVISION IN TH E LAST MONTH THE FINANCIAL YEAR ONLY ON THE BASIS OF ESTIMATION OF E ARLIER MONTH OF THE FINANCIAL YEAR. THE ASSESSING OFFICER HAS NOT EXAMI NED WHETHER THE PROVISION MADE FOR THE MONTH OF MARCH 2015 WAS NOT A RELIABLE ESTIMATE ON ACCOUNT OF PAST OBLIGATIONS. SIMILARLY, IN CASE OF ABAD BUILDERS (P.) LTD. (SUPRA), THE ASSESSING OFFICER MADE DISALLOWAN CE UNDER SECTION 40(A)(IA) AS THE ASSESSEE HAS NOT MADE TDS ON PROVI SION OF SUNDRY CREDITOR. THE ASSESSEE CLAIMED DEDUCTION OF THE SAM E AMOUNT IN SUBSEQUENT AY. THE LD. CIT(A) CONFIRMED THE DISALLO WANCE BY TAKING VIEW THAT THE ASSESSEE CANNOT CLAIM DOUBLE DEDUCTIO N OF A VERY SAME AMOUNT ON WHICH ASSESSEE DEDUCTED AND PAID TDS. IN THE SAID CASE, THE RECIPIENT WAS IDENTIFIABLE AND THE ASSESSEE HAS NOT PLEADED THAT SUCH OBLIGATION WAS A RESULT OF PAST EVENTS. WE MAY FURT HER REITERATE THAT IN BOTH THE CASE LAW RELIED BY LD. DR FOR THE REVENUE A RECIPIENT WAS ITA NO. 852 MUM 2019-M/S HDFC SALES PVT. LTD. 13 IDENTIFIABLE, HOWEVER, IN THE CASE IN HAND, NO SUCH RECIPIENT WERE IDENTIFIABLE, MOREOVER, THE PROVISIONS WERE MADE FO R MULTIPLE PURPOSES. THE ASSESSEE MADE PROVISION OF RS. 10.24 CRORE AND ULTIMATELY MADE EXPENSES OF RS. 10.46 CRORE, WHICH CLEARLY DEMONSTR ATE THAT ASSESSEE MADE THE PROVISION AFTER DUE DILIGENCE WHICH CANNOT BE SAID TO BE AN ADHOC PROVISION. 9. IN VIEW OF THE AFORESAID DISCUSSIONS, WE DO NOT FI ND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY REVENUE; HENCE WE AFFIR M THE ORDER PASSED BY LD CIT(A). IN THE RESULT GROUND NO.1 OF APPEAL I S DISMISSED. 10. GROUND NO.2 RELATES TO DELETING THE ADDITION/ DISAL LOWANCE OF RS. 10.24 CRORE FROM BOOK PROFIT UNDER SECTION 115JB. CONSID ERING THE FACTS THAT WE HAVE AFFIRMED THE ORDER OF LD CIT(A) ON GROUND N O. 1 OF THE APPEAL, THEREFORE ADJUDICATION OF GROUND NO.2, HAVE BECOM E ACADEMIC. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18/0 9/2020. SD/- SD/- RAJESH KUMAR PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 18.09.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI