M/S. MAG INDIA INDUSTRIAL AUTOMATION SYSTEMS PRIVATE LIMITED,BENGALURU vs. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4(1)(2), BANGALORE

O R D E R

Per George George K, JM :

2. The grounds raised read as follows:-

“1. The order passed by the Hon'ble Commissioner of Income Tax (Appeals)-11, Bengaluru, passed under section 250 of the Income Tax Act, 1961 ("the Act") in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case.

6. The authorities below were not justified is disallowing the provision for warranty solely on the premise that the excess provision has been reversed in subsequent years, on the facts and circumstances of the case.

7. The levy of interest under section 234B and 234C is not warranted on the facts and circumstances of the case.

9. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered.”

3. The brief facts of the case are as follows: The assessee is a company engaged in the business of marketing of industrial machinery. For the assessment year 2014-2015, the return of income was filed on 26.11.2014 declaring total income of Rs.2,57,85,360. The assessment u/s 143(3) of the I.T.Act was completed on 21.11.2016 accepting the returned income. Subsequently, the Principal Commissioner of Income-tax (PCIT) passed order u/s 263 of the I.T.Act on 06.06.2018, wherein he directed the A.O. to examine afresh the claim of provision for warranty expenses. Pursuant to the PCIT’s order, the A.O. passed order u/s 143(3) r.w.s. 263 of the I.T.Act on 31.10.2018, wherein the provision for warranty expenses amounting to Rs.1,75,81,254

M/s.MAG India Industrial Automation Systems Pvt.Ltd. was disallowed and determined the total income at Rs.4,33,66,614.

4. Aggrieved by the order passed u/s 143(3) r.w.s. 263 of the I.T.Act, the assessee preferred appeal before the first appellate authority. Before the CIT(A), since none appeared nor written submission was filed, the appeal was dismissed ex parte. The CIT(A) held that provision for warranty claim by the assessee is not based on historical data and on scientific basis and dismissed the appeal of the assessee.

5. Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal. The learned AR submitted that five hearing notices were issued by the CIT(A) and out of the five hearing notices, the AR of the assessee appeared before the CIT(A) for first four hearing and has sought for adjournment of the case (It is stated that even on the fourth hearing date fixed on 05.08.2022, the AR had appeared before the CIT(A) and sought for adjournment). It is submitted that only on the last hearing fixed on 01.09.2022, the Accountant of the assessee had missed the hearing notice and the same was not informed to the learned AR. Consequently, the matter could not be effectively represented before the first appellate authority. It was submitted that in the interest of justice and equity the matter may be restored to the CIT(A) for fresh consideration.

M/s.MAG India Industrial Automation Systems Pvt.Ltd.

8. The written submissions were also not filed and it is evident from para 3 of the impugned order of the first appellate authority. We are of the view in the interest of justice and equity one more opportunity should be provided to the assessee for an effective representation of its case before the first appellate authority. Accordingly, the matter is remitted to the CIT(A). The assessee is directed to cooperate with the CIT(A) for an expeditious disposal of the matter and shall not seek unnecessary adjournment in this case. The assessee shall provide the necessary details in support of its case that provision for warranty claimed is based on historical date and on scientific basis and is in tune with the dictum laid down by the Hon’ble Apex Court in the case of Rotork Controls India (P) Ltd. v. CIT reported in (2009) 314 ITR 62

M/s.MAG India Industrial Automation Systems Pvt.Ltd. (SC). The CIT(A) shall afford reasonable opportunity of hearing to the assessee before a decision is taken in the matter. It is ordered accordingly.

Order pronounced on this 31st day of October, 2022.