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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S.SUNDER SINGH
आदेश / O R D E R
PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:
These appeals are filed by the assessee against the Orders dated 13.04.2016 of Commissioner of Income Tax (Appeals), Puducherry, in & 07 [2014-15 & 531 (2013-14)]/CIT(A)-PDY for the AYs 2008-09 to 2010-11 decided in common order. Facts of the case for the AY 2008- to 2031/Mds/2016 :- 2 -:
09 and 2009-10 are the same and for the AY 2010-11 the facts are similar. Therefore, the appeals are decided in common Order for the sake of convenience.
2.0 The assessee filed the returns of income for the AYs 2008-09 & 2009-10 in the name of M/s.F G Wilson Generators India Pvt. Ltd., and the Assessing Officer (in short ‘AO’) passed the Assessment Orders u/s.143(3) of Income Tax Act (in short ‘the Act’) on 30.12.2010 for the AY 2008-09 and on 28.10.2011 in the case of AY 2009-10. Both the assessments are re-opened u/s.147 and the revised the assessments u/s.143(3) r.w.s.147 were passed on 22.01.2014 in the same name of the company. Both the Assessments were re-opened to disallow the provisions made for warranty. During the assessment proceedings, the AO found that the assessee made provisions for warranty and the same was not disallowed in computation of income. Since, the provisions are contingent in the nature, the AO re-opened the assessment made u/s.143(3) for the AY 2008-09 and 2009-10 and the re-assessment orders were passed. For the AY 2008-09, the AO made addition of Rs.81,24,477/- and for the AY 2009-10 the addition was Rs.80,97,222/-.
3.0 Aggrieved by the Order of the AO, the assessee went on appeal before the Learned Commissioner of Income Tax(Appeals) (hereinafter referred to as ‘Ld.CIT(A)’) and the Ld.CIT(A) confirmed the addition made to 2031/Mds/2016 :- 3 -: by the AO. Against the order of the Ld.CIT(A), the assessee filed appeal before us.
4.0 The assessee raised the following grounds of appeal challenging the order of the Ld.CIT(A) for the AYs 2008-09 and 2009-10:
The Learned Assistant Commissioner of Income-Tax, Circle-1, Puducherry (“AO”) has erred in law and on facts in re-opening the assessment proceedings under section 147 of the Income-Tax Act, 1961 (“the Act”) on an entity that has ceased to exist consequent to merger even after the Appellant making full disclosure of the facts before the AO.
The Learned AO has erred in law and on facts in passing an order under section 143(3) read with section 147 of the Act on an entity that ceased to exist because the Learned AO did not have jurisdiction on a non-existent entity.
The Learned AO has erred in law and on facts in re-opening the assessment proceedings under section 147 of the Act merely based on change of opinion.
The Learned AO has erred in law and on facts in initiating the re-assessment proceedings under section 147 of the Act despite the Appellant making a true and full disclosure of the claim of deduction of warranty in the profit and loss account of the financial statement and the notes to accounts thereto which were already available with the Learned AO.
The Learned AO has erred in law and on facts in initiating the re-assessment proceedings under section 147 of the Act despite no ‘new material’ being unearthed and by merely observing that a claim of deduction had been made in relation to provision for warranty.
The learned AO has erred in law and on facts and mis-interpreted the decision of the Supreme Court in case of Rotork Controls Private Limited Vs CIT (314 ITR 62) to deny the claim of deduction in respect of provision for warranty (despite the Supreme Court decision being in favour of the Appellant).
The learned CIT(A)/AO have erred in law and on facts in disallowing the provision for warranty amounting to Rs 8,124,477/- despite the Appellant having created the provision on a scientific and reasonable basis which is also similar to industry practices.
The learned CIT(A)/AO have erred in law and on facts in not considering the decision of the Jurisdictional Madras High Court in the case of CIT vs.Hindustan Powerplus Limited (ITA Nos.1392 and 1393 of 2007) which squarely applies to the facts of the Appellant.
The learned CIT(A)/AO have erred in law and on facts in disallowing the provision for warranty amounting to Rs 8,124,477/- and allowing a deduction to the extent of actual utilization of Rs.4,124,477/- despite the Appellant following a mercantile basis of accounting and not cash basis of accounting.
The learned AO has erred in law and on facts in setting-off losses against the disallowance of deduction in relation to provision for warranty, despite the deduction being rightfully claimed by the Appellant.
to 2031/Mds/2016 :- 4 -:
The learned AO has erred in law and on facts in initiating penalty proceedings against the Appellant.
5.0 Grounds of the appeal raised by the assessee for both the Assessment Years 2008-09 & 2009-10 are common.
6.0 Ground Nos.1-5 are related to the re-opening of assessment.
These grounds of appeal are not raised by the assessee before the Ld.CIT(A). As stated earlier, the assessee filed return of income in the name of erstwhile company, M/s.F G Wilson Generators India Pvt. Ltd. which was subsequently merged with M/s.Cater Piller India Pvt. Ltd. The Ld.AR argued that as on the date of Assessment Order, there was no company in existence in the name M/s.F G Wilson Generator India Pvt. Ltd. Since the company was not in existence at the time of passing the Order, according to the Ld.AR, the Assessment Order passed in the name of erstwhile M/s.F G Generators India Pvt. Ltd. is not valid and the notice issued u/s.147 in the name of non-existing company and consequent assessment made u/s 143(3) r.w.s.147 required to be quashed. The Ld.AR relied on the decision of Hon’ble Apex Court in NTPC v. CIT, 229 ITR 383 (SC) in support of grounds of re-opening which were not raised before the Ld.CIT(A). On the other hand, the Ld.DR argued that the assessee has filed return of income in the name of erstwhile company with old PAN and the Appellant also filed the grounds of appeal, statement of facts, in the name of M/s.F G Wilson Generator India Pvt. Ltd. Therefore, merely because of the AO has issued notice u/s.147 in the name of erstwhile to 2031/Mds/2016 :- 5 -:
Company, the same cannot be held as invalid. Apart from the above, on careful reading of the re-assessment order passed u/s.143(3) r.w.s.147 clearly shows that the AO has no knowledge of merger of the M/s.F G Wilson Generator India Pvt. Ltd., with M/s.Caterpillar India Pvt. Ltd., hence the Ld.DR argued that the notice issued u/s.147 and the subsequent assessments are valid which need not be interfered with.
7.0 We heard both the parties and perused the material placed before us.
M/s.F G Wilson Generator India Pvt. Ltd., filed the return of income for the AY 2008-09 & 2009-10 and subsequently merged with M/s.Caterpillar India Pvt. Ltd. According to the Ld.AR, it has submitted necessary information to the AO and the AO was made aware of the fact regarding the merger of the company with M/s.Caterpillar India Pvt. Ltd. However, on careful perusal of the revised Assessment Order, it did not indicate any knowledge of the AO regarding the merger of the company.
These grounds are first time raised before the Tribunal but not assailed before the Ld.CIT(A) and the lower authorities had no occasion to examine the factual and legal aspects of these grounds. The Ld.AR relied on the Apex Court’s decision in the case of the NTPC v. CIT 229 ITR 383 (SC) wherein the Apex Court held that -
The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) takes too narrow a view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. to 2031/Mds/2016 :- 6 -:
The grounds raised by the Ld.AR before us with regard to making assessment in the name of non-existing company and the re-opening issue involve question of law which goes to the root of the assessment.
Therefore, in the interest of justice we admit the grounds relating to re- opening of assessment. These grounds required to be examined with relevant facts of submission of information before the AO regarding the merger of the company with M/s.Caterpillar India Ltd., before issuance of notice u/s.148 or during the assessment proceedings. Therefore, we remit the matter back to the file of the Ld.CIT(A) to examine the validity of the re-opening of the assessment and adjudicate the same on merits.
The Ld.CIT(A) is directed to give opportunity to both AO and to the assessee to submit necessary evidence and explanation to support their views. As a result, Ground Nos.1 to 5 are allowed for statistical purposes.
8.0 Ground No. 6 to 10 related to the merits of disallowance on provision for warranty. The assessee also filed petition for admission of additional evidence regarding provisions for warranty expenses. The assessee explained the reasons for non-submission of the details before the AO & Ld.CIT(A).
9.0 We heard both the parties and admit the additional evidence in the interest of justice. The issue relating to the claim of warranty expenses depend on the validity of the re-opening of assessment, Since the to 2031/Mds/2016 :- 7 -: assessee raised the issue relating to issue of notice u/s 148 in the name of non existing company which required to be addressed first and then the merits of the case. Therefore, we remit the issue relating to the merits of the disallowance also back to the file of the Ld.CIT(A) to consider the additional evidence and allowability of the expenditure on the facts of the case in the light of the above discussion made in this order and decide the issue afresh on merits.
10.0 As a result, both the appeals for the A.Ys 2008-09 and 2009-10 are set-a-side and remitted back to the file of the Ld.CIT(A) for re- consideration on merits and allowed for statistical purposes.
11.0 for the AY 2010-11:
The assessee filed return of income for the AY 2010-11 in the name of M/s.F G Wilson Generator India Pvt. Ltd., on 13.10.2010 admitting Nil income. The AO passed the orders u/s.143(3) by an Order dated 12.03.2013 on total income of Rs.5,03,84,817/- under normal provisions of the Income Tax Act and allowed set off of brought forward losses which resulted in Nil income. The profit u/s.115JB were assessed at Rs.3,48,44,952/- for the purpose of MAT in the assessment made u/s.143(3), and the AO disallowed the provisions for warranty amounting to Rs.53,98,744/-. The assessee went on appeal before the Ld.CIT(A) and the Ld.CIT(A) confirmed the addition made by the AO. to 2031/Mds/2016 :- 8 -:
12.0 Aggrieved by the order of the Ld.CIT(A), the assessee filed appeal before this Tribunal challenging on eight grounds:
13.0 Ground Nos.1 & 2 are related to the passing assessment u/s.143(3) in the name of M/s.F G Wilson Generator India Pvt. Ltd. During the appeal, the assessee argued that the company, M/s.F G Wilson Generator India Pvt. Ltd was merged with M/s.Caterpillar India Pvt. Ltd. and the assessment passed u/s.143(3) and the notice issued u/s.143(2) in the name of erstwhile company, M/s.F G Wilson Generator India Pvt. Ltd is invalid and the subsequent assessment is bad in law and required to be quashed.
14.0 On identical facts for the AY 2008-09 and 2009-10, the issue of notice u/s.148 and subsequent assessment made u/s 143(3) r.w.s.147 were remitted back to the file of the Ld.CIT(A) to re-adjudicate the issue afresh on merits as per the discussion made in the earlier paragraphs of this Order. In the instant Assessment year the assessment was passed u/s14(3) on the same facts. Therefore, the appeal for the AY 2010-11 is also require verification facts regarding the submission of information with regard to merger of the company before the AO. Therefore we are of the considered opinion that the assessment under consideration also should be remitted back to the file of the Ld.CIT(A) and for re-adjudication.
Accordingly, we set-a-side the order of the Ld.CIT(A) and remit the matter back to the file of the Ld.CIT(A) for fresh consideration. to 2031/Mds/2016 :- 9 -:
15.0 In the result, the appeal of the assessee is allowed for statistical purposes.