Maharashtra Small Scale Industries ... vs Department Of Income Tax

ी डी. म मोहन, उपा य एवं ी संजय अरोड़ा, लेखा के सम ।

BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM

आयकर अपील सं./I.T.A. No. 3257/Mum/2013 ( नधा रण वष / Assessment Year: 2003-04)

Dy. CIT-2(2), Maharashtra Small Scale Industries Room No. 545, Aayakar Bhavan, Development Corporation Limited, बनाम/ M. K. Road, Mumbai-40020 Krupanidhi, 9, Walchand Hirachand Vs. Marg, Ballard Estate, Mumbai-400 001 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAACM 3863 A (अपीलाथ" /Appellant) : (#$यथ" / Respondent)

अपीलाथ" क% ओर से / Appellant by : Shri Love Kumar

#$यथ" क% ओर से/Respondent by : None

सनु वाई क% तार+ख / : 05.02.2015 Date of Hearing घोषणा क% तार+ख / : 10.02.2015 Date of Pronouncement

आदे श / O R D E R Per Sanjay Arora, A. M.:

This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-5, Mumbai ('CIT(A)' for short) dated 31.01.2013, partly allowing the Assessee's appeal contesting its assessment u/s.143(3) r/w s. 254 of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2003-04 vide order dated 29.12.2011.

2. None appeared for and on behalf of the assessee-respondent when the appeal was called out for hearing, nor is there any adjournment motion. This was despite the notice 2 ITA No. 3 2 5 7 /Mu m/2 0 1 3 ( A .Y.2 0 0 3 - 0 4 ) Dy. CIT vs. Maharashtra Small Scale Industries Development Corporation Limited

of hearing having been communicated to the assessee through the notice board of the Tribunal. The same, along with the listing of the cases, in the form of the cause list posted on the website of the tribunal, would in our view be an adequate notice, particularly where, as in the instant case, the notice for the first hearing, whereat though the Bench did not function, i.e., on 31.07.2014, was sent per registered post, acknowledgement of which, proving its' service, is on record. Even no power of attorney or letter of authority in favour of any counsel is on record. We, under the circumstances, proceed to decide the appeal after hearing the party before us.

3. The appeal raises two issues which, being pari materia, we take up together. It would be relevant to, however, before we proceed with the matter, delineate the background facts of the case. The assessee was found to have claimed liabilities in its accounts at a total of Rs.6,10,65,189/-, by way of provisions, which the assessee in view of the Assessing Officer (A.O.) could not substantiate, so that the same were contingent in nature, and thus not admissible in law. Accordingly, placing reliance on the decision in the case of Bharat Earth Movers vs. CIT [2000] 245 ITR 428 (SC), he disallowed the same. In appeal, it was clarified before the ld. CIT(A) that the entire of it does not relate to the additional rent payable to the Bombay Port Trust, Mumbai (BPT), as stated by the A.O. in his order, but only a sum of Rs.4,80,50,463/-. In fact, of this sum only Rs.45,87,863/- relates to the current year; the balance being in relation to the earlier years, i.e., from f.y. 1980-81 to 2001-02, so that the A.O. had disallowed brought forward outstanding liabilities, booked and claimed for the preceding years, as well. The ld. CIT(A), accordingly, deleted the disallowance qua additional rent to BPT with reference to the liabilities booked in and claimed for the earlier years. As regards the claim for the current year; it being brought to his notice that the dispute with BPT, i.e., qua the additional rent charged by the said entity, having been since resolved by the apex court, he allowed the assessee's claim with reference to the rent payable as per the decision of the hon'ble Supreme Court, i.e., as communicated to him, being at Rs.1,42,947/- per month (i.e., at Rs.17.15 lacs for the year), also including along with interest @ 6% p.a., 3 ITA No. 3 2 5 7 /Mu m/2 0 1 3 ( A .Y.2 0 0 3 - 0 4 ) Dy. CIT vs. Maharashtra Small Scale Industries Development Corporation Limited

i.e., as further allowed on the arrears by the hon'ble apex court. As regards the balance liabilities, amounting to Rs.51,26,727/-, i.e., payable to others, claimed to have been since paid, he directed for their deletion, i.e., save a sum of Rs.16,532/-, subject to the verification of the facts by the A.O., in-as-much as the subsequent payment/s validated the provision qua a subsisting liability. Aggrieved, the Revenue is in appeal before us, raising the following grounds:

1) The order of the CIT(A) is opposed to law and facts of the case.

2) On the facts and in the circumstances of the case and in law, the ld.

CIT(A) erred in deleting the addition made on account of expenses for a substantially long period overlooking the fact that same is taxable u/s.41(1) of the I. T. Act, 1961.

3) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in issuing the direction to AO to verify whether the provision for other liabilities as per paragraph 5.5 of the order, overlooking the crucial fact that with effect from 01.06.2001, setting aside on issue or the order is not permissible as per the amended provisions.

4) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in setting aside the issue of provision for other liabilities and whether the same have been written off thereby ignoring the provision of section 250(A)(*) empowering him to make further enquiries before disposal of appeal.' [(*) to be read as section 250(4)]

4. We have heard the party before us, and perused the material on record.

We find little merit in the Revenue's case. Firstly, no addition has been made by the A.O. u/s.41(1) of the Act, i.e., on account of cessation or remission of a liability, nor is one so exigible in the facts and circumstances of the case. The Revenue's case as made by the A.O. was toward the liabilities being contingent in nature, and which were in fact disputed. Rather, in-as-much as the A.O. had also disallowed the liabilities booked in and claimed by the assessee for the earlier years, his action warrants imposition of cost, which we though refrain from; he being not before us to state his case. Qua the other liabilities claimed for the current year (at Rs.51.27 lacs), the validity of the provision made stands 4 ITA No. 3 2 5 7 /Mu m/2 0 1 3 ( A .Y.2 0 0 3 - 0 4 ) Dy. CIT vs. Maharashtra Small Scale Industries Development Corporation Limited

substantiated with reference to the payment actually made subsequently. In fact, in-as- much as the provision is made on the basis of the best available information, any shortfall or excess therein - being found in excess by Rs.16,532/-, should not have warranted the confirmation of the disallowance to that extent in-as-much as any provision is, by definition, only an estimate, and as long as the same is reasonable and based on the best information available, is to be honored; the difference being liable to be adjusted in the accounts for the year on the basis of the amount/s as finally settled. With regard to the additional rent payable to BPT, we find the impugned order as only correct. The assessee has not shown any basis for booking and claiming a much higher figure of Rs.47.88 lacs, i.e., for the current year. We are in any case deciding the Revenue's appeal. We are conscious that the assessee's claim, as made, did not include interest on arrears, which stands also allowed by the ld. CIT(A). So, however, the same is in relation to the same, principal liability and, further, can only be considered as having accrued for the relevant year. To the extent therefore the total allowance does not exceed the amount claimed in its respect, i.e., the additional rent payable to BPT, its allowance is valid in law in the facts and circumstances of the case.

Finally, the Revenue's ground no. 4 with reference to section 250(4) is also in our view misplaced. The disallowance being qua a provision towards an accrued liability, the issue is essentially one of it's validity, which has both qualitative and quantitative aspects thereto. Its contours, which may keep continually changing, are to be seen in light of the information currently available. The provision of section 250(4) does not exclude the admission of and adjudication with reference to the additional evidence, i.e., that produced before the first appellate authority for the first time. The ld. CIT(A) has instead of calling for a remand report from the A.O., considered it fit to decide the issue in principle, making his order subject to the verification of primary facts by the assessing authority. Though, therefore, not strictly observing the procedure laid down u/r.46A, which though has not been impugned by the Revenue, the same would not vitiate his order in-as-much as no prejudice stands thus caused to the Revenue. Reference in this 5 ITA No. 3 2 5 7 /Mu m/2 0 1 3 ( A .Y.2 0 0 3 - 0 4 ) Dy. CIT vs. Maharashtra Small Scale Industries Development Corporation Limited

context may be profitably made to the decision in the case of Prabhavati S. Shah vs. CIT [1998] 231 ITR 1 (Bom). The onus to prove its claim, i.e., as made before the ld. CIT(A), it may be appreciated, would only be on the assessee. We decide accordingly, confirming the impugned order.

5. In the result, the Revenue's appeal is dismissed.

Order pronounced in the open court on February 10, 2015 Sd/- Sd/-

(D. Manmohan) (Sanjay Arora) उपा य / Vice President लेखा सद य / Accountant Member मुंबई Mumbai; 2दनांक Dated : 10.02.2015 व.3न.स./Roshani, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ" / The Appellant

2. #$यथ" / The Respondent

3. आयकर आयु4त(अपील) / The CIT(A)

4. आयकर आयु4त / CIT - concerned

5. 7वभागीय #3त3न:ध, आयकर अपील+य अ:धकरण, मुंबई / DR, ITAT, Mumbai

6. गाड< फाईल / Guard File आदे शानस ु ार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai