THE SUPREME INDUSTRIES LIMITED,MUMBAI vs. MUM-C-1, RANGE-334, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(4), MUMBAI

Aggrieved by the assessment order, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) [hereinafter "the Ld. CIT(A)"] and also sought admission of additional evidence under Rule 46A of the Income-tax Rules, 1962. After calling for and considering the remand report of the Assessing Officer, the Ld. CIT(A) partly allowed the appeal. However, in so far as the claim relating to deduction of expenditure actually incurred during the relevant previous year against provisions created and disallowed in an earlier assessment year was concerned, the Ld. CIT(A), after considering the remand report, declined to grant the relief sought and dismissed the relevant grounds.

We have heard the rival submissions, perused the orders of the authorities below and examined the material available on record. It emerges from the record that during Assessment Year 2017-18, the assessee had debited a sum of ₹4,48,45,845/- to its Profit and Loss Account by way of provision. The said provision was disallowed by the Assessing Officer in the assessment completed under section 143(3) of the Act on the ground that it represented an unascertained liability. The assessee challenged the aforesaid disallowance in appeal, which, according to the assessee, is still pending adjudication before the Ld. CIT(A)/NFAC. During the appellate proceedings for the year under consideration, the assessee produced evidence to demonstrate that a part of the aforesaid provision had crystallised into actual expenditure and had been

The Ld. CIT(A), however, declined to examine the claim on merits primarily on the ground that the appeal for Assessment Year 2017-18 involving the disallowance of the original provision was still pending, and, therefore, no direction could be issued in the present proceedings. The relevant finding of the Ld. CIT(A) is reproduced as under:-

Before us, the learned counsel for the assessee submitted that the issue may appropriately be restored to the file of the Ld. CIT(A) for adjudication after the disposal of the appeal for Assessment Year 2017-18. It was submitted that the allowability of the expenditure claimed in the present year is intrinsically linked with the outcome of the appeal relating to the earlier year and, therefore, a

We find considerable force in the aforesaid submission. The assessee's claim for the year under consideration is admittedly an alternative claim. If the provision created in Assessment Year 2017- 18 is ultimately held to be an allowable deduction in that year, the assessee cannot again claim deduction of the very same expenditure in the present assessment year, as such a course would result in double deduction, which is impermissible in law. Conversely, if the disallowance of the provision for Assessment Year 2017-18 is ultimately sustained, the assessee would be entitled to have its claim for deduction examined in the year in which the liability actually crystallised and the expenditure was incurred, subject, of course, to verification of the relevant facts and fulfilment of the conditions prescribed under the Act.

In our considered opinion, therefore, the adjudication of the assessee's alternative claim for the present assessment year cannot be undertaken in isolation and must necessarily be aligned with the final outcome of the proceedings for Assessment Year 2017-18. Such an approach alone would ensure consistency, prevent double allowance of the same expenditure, and at the same time safeguard the assessee from being denied a deduction otherwise admissible under law.

In view of the foregoing discussion, we deem it appropriate to set aside the impugned findings of the Ld. CIT(A) on this issue and restore the matter to his file for fresh adjudication. If the appeal for Assessment Year 2017-18 is still pending, the Ld. CIT(A) shall endeavour to adjudicate both matters in a coordinated manner so that the allowability of the assessee's claim is determined in the correct assessment year. However, if the appeal for Assessment Year 2017-18 has already been disposed of, the Ld. CIT(A) shall adjudicate the assessee's claim for the present assessment year in the light of the findings recorded in that appellate order and after carrying out such verification as may be considered necessary.

The assessee shall be afforded adequate and effective opportunity of being heard and shall be at liberty to place on record such documentary evidence, including any additional evidence admissible in law, as may be necessary in support of its claim. The grounds raised by the assessee on this issue are, accordingly, allowed for statistical purposes.

In the result, the appeal of the assessee is allowed for statistical purposes.

The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.