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सुनवाई क� तार�ख / Date of Hearing : 04-01-2017 घोषणा क� तार�ख / Date of Pronouncement : 13.01-2017 आयकर अ�ध�नयम, 1961 क� धारा 254(1) के अ�तग�त आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) Per Pawan Singh, J.M. �या�यक सद�य iou iou �संह के अनुसार: iou iou 1. The present appeal by assessee u/s 253 of the Income-Tax Act is directed against the order of ld. Commissioner of Income-tax, Mumbai (for short the CIT) u/s 263 dated 30.03.2014 for Assessment Year(AY) 2009-10. The assessee has raised the following grounds of appeal: The appellant is in receipt of the order passed by the learned Commissioner of Income- tax - 1, Mumbai ("CIT") under section 263 of the Income-tax Act, 1961 ("the Act") in connection with the order passed by the Assessing Officer ("AO") under section 143(3) of the Act. The appellant being aggrieved by the order passed by the learned CIT has preferred this appeal on the following grounds which are without prejudice to each other:
1. Proceeding under section 263 is bad in law and invalid a. The Learned CIT has erred in law and on facts in holding that order passed by the AO under section 143(3) of the Act is erroneous and prejudicial to the interest of the revenue, without appreciating that the AO had passed order after examining the facts of case and documents available on record. b. The Learned CIT has erred in law and on facts in assuming jurisdiction under section 263 even after admitting that the claim was examined by the AO during the assessment proceedings under section 143(3) of the Act. c. The Learned CIT ought to have appreciated that the appellant had disclosed all facts before the AO which has been duly considered by the AO during the assessment proceedings and hence the order of the CIT is bad in law and invalid.
2. Without prejudice to above grounds: a. The Learned CIT has erred in law and on facts in setting aside the order passed by the AO under section 143(3) and directing the AO to disallow amount of provision for leave encashment for the year under consideration disregarding the fact that the then AO has after detailed examination allowed claim of deduction of provision for leave encashment vide order under section 143(3) of the Act. b. The Learned CIT ought to have appreciated the fact that the appellant had paid the applicable taxes and had correctly claimed the deduction in respect of provision for leave encashment in return of income.
2. The brief facts of the case are that the assessee-company is engaged in the business of distribution , logistics of commercial and passenger vehicles and other automobile products, and it filed its return of income for relevant AY on 30.09.2009 declaring loss at Rs. 8,19,51,342/-. The assessment was completed u/s 143(3) on 16.12.2011 accepting the return income of the assessee at Rs. 8,19,51,343/-. Subsequently, the ld. CIT passed the order u/s 263 of the Act directing the Assessing Officer (AO) to re-frame the order disallowing the quantum of provision for leave encashment debited to the Profit & Loss Account to the year under consideration. Aggrieved, by the order of CIT the assessee filed this appeal before us.
We have heard the ld. Authorized Representative (AR) of the assessee and the ld. Departmental Representative (DR) for the revenue and perused the material available on record. The Ld. AR of the assessee argued that the return of income was filed on 30.09.2009. The assessee paid the tax by way of TDS and advance tax and claimed the deduction for allowability of leave encashment in the return of income as per interim direction passed by Apex Court in SLP No. 22889/08 while staying the order of Hon’ble Kolkata High Court in case of Exide Industries Ltd. Vs. Union of India 292 ITR 472. Thus, the assessee paid the tax by way of TDS and advance tax and claimed the deduction. The ld AR further argued that a show-cause notice u/s 263 dated 18.11.2013 was issued to the assessee. In the said notice the ld CIT disclosed that assessee made the provision of Rs. 60,61,204/- for leave encashment which is debited to the Profit & Loss Account which ought to have been disallowed for computation of income, the disallowance was required to be made in specific provision of section 43(f) of the Act. The notice further disclosed that the decision of Kolkata High Court in case of Exide Industries Ltd. vs. UOI 292 ITR 470 is stayed by Hon’ble Apex Court vide order dated 08.05.2009, the return of income was filed and the assessee would pay tax, if section 43B(f) exist in the statute book. Thus, the AO ought to have disallowed the claim of leave encashment. The assessee filed reply of show cause notice vide its reply dated 10.01.2014. The assessee furnished the details for provisions of leave encashment which is as under: Particulars Amount Rs. Liability transferred from Tata Motors Ltd in respect of 58,16,721/- employees joining the company pertaining to earlier years (Sachin B. Sathe) Less: Payment during FY 2008-09 1,01,517/- Sub-total(Rs.) 56,55,204 Add: Provision made during FY 2008-09 4,06,000/- Closing outstanding as on 31.03.2009 60,61,204/- Assessee further contended that only Rs. 4,06,000/- has been debited to the Profit & Loss Account which represent the liability for leave encashment. The ld. CIT after considering the reply concluded that the AO would have disallowed the claim of leave encashment in the return of income which has not been done. Thus, the order is erroneous and directed the AO to re-frame the order as the same is prejudicial to the interest of Revenue. The ld. AR of the assessee further argued that the order passed by AO is neither erroneous nor prejudicial to the interest of Revenue. The assessee has already paid the tax and made the claim. The assessee has made sufficient disclosure and the order passed by ld. CIT is liable to be set aside. On the merit it was argued that the assessee made sufficient discloser in the return of income. At the time of scrutiny the AO raised the specific query with regard to the provision of leave encashment and the assessee vide reply dated 23.12.2011 filed detailed submission referring the decision of the Calcutta High Court and the order of Hon’ble Apex Court in SLP No. 22889/2008 and also contended that the assessee has paid the tax. It was argued that the order is neither erroneous nor prejudicial to the interest of revenue. On the other hand, ld. DR for the Revenue supported the order of ld. CIT.
We have considered the rival contention of the parties and perused the order of ld. CIT. We have noticed that while making the claim, the assessee has paid the tax in accordance with the direction of Hon’ble Apex Court in SLP No. 2289/2008. The AO examined the allowability to the claim of leave encashment. During the assessment, the assessee furnished the sufficient information vide reply dated 22.12.2011. The AO passed the order after considering the submission in reply dated 22.12.2011. As the assessee has already paid the tax before filing of the return of income. The order is not prejudicial to the interest of Revenue. The Hon’ble Apex Court in Malabar Industrial Company vs. CIT ( 243 ITR 83) held that Commissioner has jurisdiction to revise the assessment order if twin conditions as provided in section 263 are fulfilled i.e. the order is not only erroneous but prejudicial to the interest of Revenue, both twin conditions are essential perquisite. We have noticed that the order passed by AO is not prejudicial to the interest of Revenue, as the assessee has already paid the tax on the provisions for leave encashment. Thus, as per our considered opinion, the order passed by ld. CIT was not warranted. Thus, we hold that the order passed by AO was in order. In the result the ground No.1 of the appeal is allowed.