2015 (10) TMI 10 - AT - Income Tax

Revision u/s 263 - disallowance u/s 43B being provision made for liability on account of pension scheme - Held that - There is a complete lack of enquiry on the part of the Assessing Officer so far as the issue of provision towards the pension scheme liability. The lack of enquiry and non application of mind itself renders the assessment order erroneous so far as prejudicial to the interest of revenue as held by the Hon ble Supreme Court in the case of Malabar Ind. Co. Ltd. Vs. CIT (2000 (2) TMI 10 - SUPREME Court). Thus we are of the view that the Commissioner was justified in invoking the provisions of section 263 as there was a lack of enquiry and non application of mind on the part of the Assessing Officer while framing the assessment u/s 143(3) dated 16.12.2010. However, when the assessee in the revision proceedings has brought to the notice of Commissioner that the said claim is an allowable claim being ascertained liability based on actuarial valuation report and as per Accounting Standard 15 then the Commissioner was supposed to examine the claim on its own or ought to have directed the Assessing Officer to examine the same as there was no enquiry on this issue at the time of framing the original assessment u/s 143(3 ). The assessee has submitted that the pension scheme in question does not make any regular contribution to any fund or trust and, therefore, the liability on this account would not fall under the provisions of section 43B. Since this aspect has not been examined by the Assessing Officer, therefore, in the facts and circumstances of the case and in the interest of justice, we modify the impugned order of the Commissioner and set aside this issue to the record of Assessing Officer for proper verification and examination of claim of the assessee and then decided the same as per law by considering the decisions relied upon by the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
Appeal against order u/s 263 of Income Tax Act for A.Y. 2007-08 - Disallowance of provision for liability on account of pension scheme u/s 43B.

Analysis:
1. The Commissioner invoked proceedings u/s 263 due to the disallowance of &8377; 273.60 lacs made by the assessee towards the pension scheme under section 43B. The assessee argued that the provision was based on actuarial valuation and allowable as per AS 15. However, the Commissioner found the order u/s 143(3) erroneous for not disallowing the provision, prejudicial to revenue.

2. The Authorized Representative contended that the Assessing Officer accepted the claim after due consideration, and the revision order was based on a change of opinion. Citing relevant case laws, the representative argued that the Commissioner cannot overturn the decision merely due to disagreement. The DR argued that the assessment order lacked enquiry on the pension scheme liability.

3. The ITAT observed that the assessment order did not discuss the provision for the pension scheme, indicating a lack of enquiry by the Assessing Officer. The absence of any query raised by the Assessing Officer and the silence in the assessment order on this issue led to the conclusion of non-application of mind. Referring to the Malabar Ind. Co. Ltd. case, the ITAT found the assessment order erroneous and justified the Commissioner's invocation of section 263.

4. The ITAT noted that the Commissioner failed to properly examine the allowability of the claim and erroneously applied section 43B to disallow the provision. Relying on the Ranbaxy Laboratories case, the ITAT directed the issue back to the Assessing Officer for verification and examination, emphasizing that the pension scheme did not involve regular contributions to a fund or trust, hence not falling under section 43B.

5. Consequently, the ITAT allowed the appeal for statistical purposes, setting aside the Commissioner's decision and instructing a proper verification and examination of the claim by the Assessing Officer as per law and relevant case laws cited by the assessee.