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Facts
The revenue filed an appeal against the order of CIT(A) which allowed the assessee's appeal. The case involves an addition of Rs. 53,01,37,219/- made by the AO on account of contingent liabilities.
Held
The CIT(A) found that the impugned amount was not shown as a liability in the assessee's books of accounts, nor was it debited to the profit and loss account. Therefore, no disallowance was warranted as the contingent liability was merely a disclosure in the notes to accounts.
Key Issues
Whether the CIT(A) erred in deleting the addition made on account of contingent liability, and whether it was disallowed under section 37 of the Income Tax Act.
Sections Cited
37 of the Income Tax Act, 1961
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No.583/JPR/2023
fu/kZkj.k o"kZ@Assessment Year : 2020-21 The DCIT. cuke The Rajasthan Small Industries Circle-6, Vs. Corporation Ltd. Jaipur. Udyog Bhawan, Tilak Marg, C-scheme, Jaipur. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACR6761L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby :None jktLo dh vksjls@Revenue by: Smt. Alka Gautam (CIT-DR) lquokbZ dh rkjh[k@Date of Hearing : 26/09/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 27/09/2024 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
The present appeal is filed by the revenue and is arising out of the order of the Ld. CIT(A), National Faceless Appeal Centre, Delhi [here in after “CIT(A)/NFAC”] dated20.07.2023 for assessment year 2020-21.
DCIT vs. The Rajasthan Small Industries corporation Ltd. 2. The brief facts of the case is that in this case an intimation u/s 143(1) of the Act was issued wherein an addition of Rs. 53,01,37,219/- was added u/s 37 of the Act, vide intimation order dated 23.12.2021.
Against that intimation order the assessee preferred an appeal before the ld. CIT(A) who has allowed the appeal of the assessee vide order dated 20.07.2023 by observing as under:- “ 4. Observation, Findings and Decisions 4.1 The order of the CPC passed u/s 143(1) dated 23.12.2021 as well as grounds of the appeal, statement of facts and written submission filed by the appellant has been carefully considered. In essence, all the substantial grounds taken by the appellant relate to the action of the CPC regarding addition of Rs.53,01.37.219/-on account of Contingent Liabilities. During the course of appellate proceedings, the appellant has filed written submission relying upon the decision of the Hon'ble ITAT. New Delhi which has been respectfully considered. In the submission, it has been stated that the Contingent Liabilities which were disallowed was never been a part of P & L account or Balance Sheet of the appellant so should not be disallowed as the contingent liabilities not impacted the Profit figures of the assessee and these contingent liabilities of Rs. 53,01,37,219/- was only shown in the notes forming part of the accounts as disclosures. The Hon'ble ITAT, Delhi Bench 'B', New Delhi in the case of DCIT, Circle-10(1), New Delhi vs. Dwarikadhish Spinners Ltd. (ITA No 4782 & 4783/Del/2012 dated 06.12.2013) referred by the appellant observed as under.” We find that Ld. CIT(A) has given a finding that the impugned amount was not shown as liability in the books of accounts of the assessee. No such amount liability has been debited by the assessee in its profit and loss account. In such situation there is no question of any disallowance in this regard. The contingent liability has been mentioned in the notes of accounts which is required only for disclosure purposes. On verification of ITR for the subject assessment year, it is found that the amount of Rs. 53,01,37,219/- neither has been debited in the Profit & Loss A/c nor is appearing in the Balance Sheet of the appellant.
DCIT vs. The Rajasthan Small Industries corporation Ltd. 42 In the light of the above and respectfully following the decision of the Hon'ble ITAT, Delhi Bench 'B', New Delhi in the case of DCIT, Circle-10(1), New Delhi vs. Dwarikadhish Spinners Ltd. as referred by the appellant, all the substantial grounds taken by the appellant are allowed. 5. In the final result, appeal filed by the appellant is treated as allowed.”
Aggrieved from the above findings of the Ld. CIT(A), the Revenue has preferred has preferred the present appeal beforeus challenging the order of the Ld. CIT(A) on the following ground:- “
1. Whether in the facts and circumstances and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO CPC on account of contingent liability amounting to Rs. 53,01,37,219/- while the same is not allowed u/s 37 of the Income Tax Act, 1961.
2. The appellant craves leave to add, alter, amend, withdraw or insert any ground or grounds of appeal before or at the time of hearing of the appeal.”
5. Against filing of this appeal, notices were issued to the assessee on various occasions in as much as 13 occasions matter were listed for hearing. In this matter Learned counsel appearing on behalf of the assessee in the Month of February,2024 sought adjournment and thereafter nobody turned up in the present appeal. Today the matter was listed for arguments and the ld. DR was ready with the arguments and we proceeded to hear the appeal of the revenue with the presence of the assessee. Ld. DR appearing on behalf of the revenue submitted that the additions have been considering the return of DCIT vs. The Rajasthan Small Industries corporation Ltd. income filed by the assessee, the assessee has not demonstrated before the Bench and even in the proceedings before the Ld. CIT(A) that whether the addition is infact is required to be made or not. The Ld. DR further submitted that while allowing the appeal of the assessee being substantial amount of addition ld. CIT(A) has not given equal opportunity to the ld. AO by seeking the remand report on the factual aspect of the matter. Based on that aspect of the matter Ld. DR submitted that in the interest of justice matter be remand back to the file of the ld. Assessing Officer.
We have heard the Ld. DR and perused the material available on record. On perusal of the order of ld. CIT(A), Bench noted that though the intimation was processed based on the ITR filed by the assessee and the addition was made based on the computerized processing done by the Centralized processing center and therefore, the addition was done based on the data submitted by the assessee. The addition was made by computerized programme as appearing at page 13 column no. 50 of the intimation having page 51. The adjustment was made under the head “amount debited to the profit and loss account” to the extent disallowable u/s 37 of the Act. Since, while relying the submission of the assessee there is violation of principles of natural justice so far as the contention of the DCIT vs. The Rajasthan Small Industries corporation Ltd. Revenue is concerned. Thus, here the assessee has not substantiated that aspect of the matterin spite of various opportunity granted to the assessee, the assessee did not represent the facts of the case before us. Therefore, considering that peculiar aspect of the matter we remand the matter back to the file of the Assessing Officer who will decide the issue as to the fact that whether the assessee debited that amount under dispute in the profit and loss account or not and AO will decide the issue based on evidence and submission of the assessee. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during proceedings before the ld. AO. In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced in the open court on 27/09/2024.
Sd/- Sd/- ¼Mk0 ,l- lhrky{eh½ ¼ jkBkSM+ deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@JudcialMember ys[kk lnL;@Accountant Member Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 27/09/2024 *Santosh आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू The Appellant- DCIT, Circle-6, Jaipur. 1. 2. izR;FkhZ@ The Respondent- The Rajasthan Small Industries Corporation, Jaipur.