DCIT, BANGALORE vs. M/S SRI. SIVAPRIYA SHELTERS PVT. LTD.,, BANGALORE

The Revenue is aggrieved by the decision of ld CIT(A) in granting relief in respect of disallowance of Probable development expenditure of 115.77 lakhs.

We heard the parties and perused the record. This is second round of proceedings. The AO has passed the impugned order in pursuance of order passed by the ITAT setting aside the matter to his file. In the first round, the coordinate bench of the Tribunal had remitted the matter relating to disallowance of claim of Probable development expenses of Rs.115.77 lakhs to the file of the AO vide its order dated 29/6/2012. We notice that the Tribunal had directed that the disallowance has to be made after examining the question as to whether the liability is ascertained one and further it is quantified on a reasonable basis, since the AO or CIT(A) had not examined this aspect. Accordingly the matter was remanded to the file of the AO.

Consequent thereto, the AO has passed the impugned order again confirming the additions by observing that the assessee has claimed the expenditure only in the return filed u/s 153A of the Act and not in the original return. Thus we noticed that the AO has not examined the question as to whether the liability is ascertained one and further it is quantified on a reasonable basis, as observed by the Tribunal in the first round of proceedings. The ld CIT(A) however allowed the claim with the observations that the above said expenditure was allowed in the succeeding year i.e asst. year 2006- 07.

The assessee has filed written submissions. On a perusal of the same, we noticed that the assessee is creating provision for “Probable development expenditure” every year and the same is reversed in the succeeding year. The following table explains the same.

However, the question that is required to be considered, as per the observation made by the co-ordinate bench of Tribunal in the first round of proceedings, is whether the labiality for expenses claimed by the assessee is an ascertained liability and further estimation of the same is being made on a reasonable basis. We noticed that neither the AO nor the ld CIT(A) has examined this aspect. Under these set of facts, we are of the view that this issue requires fresh examination at the end of the ld CIT(A). Accordingly we set aside the order passed by the CIT(A) on this issue and restore the same to his file for adjudicating this issue afresh in the light of observations made by the Tribunal in the first round of proceedings, after affording adequate opportunity of being heard to the assessee.

In the result, the appeal filed by the Revenue is treated as allowed for statistical purposes.