CONCORDE MOTORS (INDIA) LTD,MUMBAI vs. DCIT 6(2), MUMBAI

Rival contentions have been heard and record perused. Facts in brief are that original assessment was completed u/s.143(3), wherein assessee’s claim for provision of leave encashment was allowed. Thereafter the AO invoked provisions of Section 154 and disallowed the said claim. By the impugned order the CIT(A) confirmed the order passed by AO u/s.154, against which assessee is in further appeal before us.

It was argued by ld. AR that complete details of expenses so claimed was made during the course of scrutiny assessment u/s.143(3), 2 there was no mistake apparent from record with regard to claim of provision for leave encashment. He further contended that it is a debatable issue which cannot be subject to rectification u/s.154. He placed on record order of the Hon’ble jurisdictional High Court in the case of Universal Medicare (P) Ltd., 324 ITR 263, wherein the Hon’ble High Court has accepted substantial question of law on the issue of leave encashment as under :- “3. Whether on the facts and in the circumstances of the case, the ITAT in law is right in directing the Assessing Officer to allow the amount of provision for leave encashment without appreciating the fact that the disallowance was made as there was no proof of payment furnished to the effect that the same was paid before the due date of filing the return under section 139(1) of the Income-tax Act”.

We have considered rival contentions and found from record that original assessment was completed u/s.143(3) vide order dated 30-12- 2010. Thereafter provision made for leave encashment of Rs.17,58,000/- was disallowed u/s.154 by invoking provisions of sec.43B.The assessee had claimed deduction on account of provision for leave encashment relying upon the decision of the Hon'ble Calcutta High Court in the case of Exide Industries Ltd 292 ITR 470 wherein the Hon'b!e Court struck down the provisions of Section 43B(f), holding the same as arbitrary in nature, unconscionable and de hors the Apex Court's decision 'n the case of Bharat Earth Movers 245 ITR 428. It was not a mistake apparent from record and further the issue in dispute is still pending for adjudication before the Hon'ble Apex Court and hence it is not a case falling within the purview of Section 154 of the Act, in view of various judicial pronouncements. It is well settled proposition 3 of law that debatable issue and the issue requiring long deliberation cannot be subjected to rectification u/s.154 of the Act.

Similar view has also been accepted by Hon’ble Bombay High Court as substantial question of law, therefore, the same cannot be rectified u/s.154 of the Act.

Accordingly, we set aside the order of lower authorities on this issue, passed u/s.154 of I.T.Act.

In the result, appeal of the assessee is allowed. Order pronounced in the open court on this 02/08/2016.