YKK INDIA PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

This is an appeal filed by the assessee and is directed against the order dated 15th October 2012 passed by the CIT(A) in the matter of assessment under section 154 r.w.s. 143(3) of the Income Tax Act, 1961, for the assessment year 2005-06.

Grievances raised by the assessee, in substance, is that the learned CIT(A) erred in upholding the addition of Rs 43,33,881, made by the Assessing Officer under section 154, to the income assessed under section 143(3) read with Section 115JB of the Act.

The relevant material facts are like this. The assessee before us is a wholly owned subsidiary of YKK Corporation Japan, and is engaged in the business of zippers, metallic and non metallic, in India. The assessment under section 143(3), in Assessment year: 2005-06 Page 2 of 3 this case, was completed on book profits of Rs 22,05,16,731. Subsequently, however, rectified this assessment by holding that the following amounts not being added back to the book profits was a mistake apparent on record:

Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us.

Having heard the rival contentions and having perused the material on record, we find that the assessee does indeed deserve to succeed in the appeal. It is for the reason that, beyond any dispute or controversy, as per Explanation 1(c) of Section 115 JB what is to be added back for arriving the book profit is “the amount or amounts set aside for provisions made for meeting liabilities, other than ascertained liabilities” but then whether or not the provisions are for the purposes of ascertained liabilities or unascertained liabilities is something which cannot be decided unilaterally by the Assessing Officer, unless, of course the provisions are such that these can inherently only be for unascertained liabilities. That is not even the case before us. It is a matter to be probed and examined. What can be added under section 154 r.w.s 115 JB is in respect of which, only on the basis of material on record, an adverse inference against the assessee can be drawn. As held by Hon’ble Supreme Court in the landmark case of ITO vs Volkart Brothers [(1971) 82 ITR 50 (SC)], “A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions”. Whether the provision is on the basis of ascertained liability or not is something to be examined on the facts of the case. In the present case, it has been uncontroverted stand of the assessee that the provisions are for ascertained liabilities and the assessee has even given the details on the basis of which the liabilities are ascertained as such. In these circumstances, the Assessing Officer was clearly in error in holding that not adding back these provisions was a mistake apparent on record. That conclusion could have been arrived at only after rejecting the explanation of the assessee on merits, regarding the liabilities being ascertained, which was very much on record; the copies of these explanations have been filed before us also. However, these explanations have not even been considered or rejected by the Assessing Officer or even by the CIT(A). In view of these discussions, the impugned adjustments are clearly beyond the inherently limited scope of Section 154 of the Act. We, therefore, delete the impugned adjustments. Assessment year: 2005-06 Page 3 of 3 6. As we have decided the matter on the short technical point as explained above, we see no need to deal with the matter on merits. That aspect of the matter, given the facts of this case, will be wholly academic.

In the result, the appeal is allowed. Pronounced in the open court today on 25th day of July, 2016.