ACIT, CIR-2(2), KOLKATA, KOLKATA vs. M/S. TATA KORF ENGINEERING SERVICES LTD., KOLKATA

The assessee in the present case is a Company. As per the order passed by the Assessing Officer under section 143(3)/147 on 21.03.2006, its total income was determined at a loss of Rs.35,02,370/-. Subsequently it was noticed by the Assessing Officer that a sum of Rs.35,69,552/- shown as unpaid by the assessee on account of cess on cost of Drawings and Designs/Technical Know-how fees had remained to be disallowed and added back to the total income of the assessee under section 43B of the Act. According to him, there was thus a mistake in the order passed under section 143(3)/147 by the Assessing Officer and to rectify the same, a notice under section 154 was issued by him to the assessee on 14.08.2007. In reply to the said notice, it was submitted by the assessee before the Assessing Officer that the provision for the said cess has already been offered to tax in assessment year 2001-02 and, therefore, any disallowance of the same in the year under consideration would result in double disallowance. This submission of the assessee was not found acceptable by the Assessing Officer and vide an order dated 28.09.2007 passed under section 154 of the Act, he disallowed the sum of Rs.35,69,552/- on account of cess payable under section 43B and added the same to the total income of the assessee.

Against the order passed by the Assessing Officer under section 154, an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the addition made by the Assessing Officer on account of cess payable for the following reason given in his impugned order:- “I have carefully gone through the submission of the A.R. of the appellant and the material before me and I am of the opinion that there has been a considerable delay of more than 3 years from the date of passing the impugned order u/s 154 [28.09.2007] and the date of serving such order to the assessee on 24.12.2010. In view of the above mentioned fact, I find that there is considerable force in the submission of the appellant and also considering the judicial pronouncement in the case laws relied upon by the assessee, I find that the order passed u/s 154 on 28.09.2007 is bad in ./2016 Assessment year: 1999-2000 Page 3 of 4

I have heard the arguments of both the sides and also perused the relevant material available on record. The ld. counsel for the assessee has reiterated before me the contention raised before the ld. CIT(Appeals) that the provision for cess in question was made by the assessee in assessment year 1998-99 and not in assessment year under consideration, i.e. 1999-2000. He has submitted that the said amount remained payable even in the year under consideration and the quantum thereof was varied only as a result of fluctuation in foreign exchange. He has also filed the audited accounts of the assessee-company for both the years under consideration to support and substantiate his contention and a perusal of the same shows that the provision for cess in question disallowed by the Assessing Officer under section 43B was actually made by the assessee in the immediately preceding year, i.e. A.Y. 1998-99 and not in the year under consideration. Moreover, as rightly held by the ld. ./2016 Assessment year: 1999-2000 Page 4 of 4 CIT(Appeals), a disallowance of such provision under section 43B involved a debatable issue and the same, therefore, was beyond the scope of rectification permissible under section 154. I, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of provision for cess under section 43B by way of rectification and upholding the same, I dismiss this appeal filed by the Revenue.