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Issues involved: Appeal against addition of provision for bonus to book profits u/s 115JB for assessment year 2007-08.
Summary: The appeal was directed against the order of the Ld. Commissioner of Income-tax (Appeals)-VI, Baroda for the assessment year 2007-08. The assessee contested the addition of Rs. 1,218,627 as provision for bonus to the book profits u/s 115JB. The Assessing Officer deemed this amount as an unexplained liability and made the addition while computing the book profit. The assessee argued that the provision was made in accordance with the Payment of Bonus Act and applicable accounting standards, with no uncertainty. The matter was brought before the ITAT for further appeal. The ITAT noted that the assessee failed to provide evidence to establish the provision for bonus as a certain liability. The assessee was required to demonstrate the allocable surplus as per the Payment of Bonus Act to prove that the provision was for an ascertained liability. Despite the equal amount being paid in the subsequent year, it was deemed insufficient to establish certainty at the time of making the provision. However, considering the lack of proper representation before the authorities below and the absence of relevant queries from the Assessing Officer, the ITAT granted the assessee another opportunity to substantiate the provision as a certain liability. The burden was placed on the assessee to provide necessary evidence, and the matter was remanded back to the Assessing Officer for a fresh decision. In conclusion, the appeal of the assessee was allowed for statistical purposes, and the order was pronounced in Open Court on 09/12/2011.
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