2010 (8) TMI 784 - AT - Income Tax

Summary

Issues:
1. Validity of reassessment proceedings for the assessment year 2001-02.
2. Allowability of provision for warranty for the assessment year 2006-07.

Issue 1: The validity of reassessment proceedings for the assessment year 2001-02 was challenged by the Revenue, contending that the learned Commissioner of Income-tax (Appeals) erred in holding the reassessment proceedings as invalid. The Revenue argued that the assessee failed to disclose material facts during the original assessment, leading to income escaping assessment. The Assessing Officer reopened the assessment under section 148 of the Act, citing undisclosed expenditure on 'product development expenses' as capital in nature. The assessee objected to the reopening, asserting that all details were provided during the original assessment proceedings. The Tribunal noted that the assessee had furnished complete details, including a break-up of expenses, during the original assessment. The Tribunal held that the reassessment was merely a change of opinion without fresh material, contravening the proviso to section 147. Relying on the decision in CIT v. Kelvinator of India Ltd., the Tribunal upheld the Commissioner's decision, deeming the reassessment invalid and dismissing the Revenue's appeal.

Issue 2: The second issue pertained to the allowability of a provision for warranty for the assessment year 2006-07. The Revenue contested the deletion of the provision by the Assessing Officer, citing the decision in Rotork Controls India P. Ltd. v. CIT. The assessee had based the provision on actual expenditure for previous years, justifying it as a realistic estimate. The Commissioner allowed the provision, noting the reversal of the earlier decision by the apex court. The Tribunal observed that the provision was made scientifically and on actual warranty expense figures, in line with the apex court's decision in Rotork Controls India P. Ltd. The Tribunal emphasized that the absence of similar provisions in earlier years did not preclude the assessee from making a provision based on legitimate grounds. Therefore, the Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeals for both assessment years, affirming the Commissioner's decisions. The judgments were delivered on 18th August 2010.