2019 (1) TMI 224 - HC - Income Tax

Addition of provision for the enhanced compensation - AO passed the order under Section 154 deleting wrong amount - Held that - We find that the error, which has crept in the impugned order dated 12.7.2017, is on account of the fact that the Tribunal failed to take into consideration the specific ground raised by the assessee pertaining to the provision for the enhanced compensation of ₹ 25.66 Crores. To be noted that at the relevant time, when the appeal was filed before the Tribunal against order passed by the CIT(A) dated 28.2.2017, the appeals filed before the Tribunal in respect of the assessment years 2009-10 and 2010-11 were pending. Unfortunately, the Tribunal, while passing the impugned order, though noted the said argument of the assessee in paragraph 9.2, failed to take into consideration the said amount. Therefore, in our considered view, the assessee is right in contending that if ₹ 16.77 Crores was never claimed as a deduction, then obviously the said amount could not be treated as income by the assessee. On account of two orders passed by the Tribunal, the impugned order dated 12.7.2017 and the subsequent order dated 24.1.2018, which granted relief to the assessee by allowing the provision of ₹ 25.66 Crores, it appears that a confusion has arisen, as a result of which, the Assessing Officer, passed the order under Section 154 of the Act dated 03.4.2018, stating that the amount of ₹ 16.77 Crores was wrongly deleted instead of ₹ 3.52 Crores. Assessing Officer cannot be blamed because the confusion has arisen on account of the impugned order passed by the Tribunal dated 12.7.2017, in which, this issue relating to ₹ 16.77 Crores was, though raised by the assessee stating that this was never claimed as a deduction, not dealt with by the Tribunal. Hence, the matter has to be redone by the Assessing Officer. The matter is remanded to the Assessing Officer to give effect to the order passed by the Tribunal dated 24.1.2018 and verify as to whether the amount of ₹ 16.77 Crores was claimed as deduction and if it is found that it was not claimed as deduction, the same cannot be added to the income of the assessee. The substantial questions of law are left open.

Summary

Issues:
1. Whether the Tribunal was right in not adjudicating the main grounds of appeal regarding the deletion of an addition made by the Assessing Officer of a provision of outstanding amount?
2. Whether the Tribunal should have directed the deletion of the said addition as it was a balance of provision carried forward and not claimed as a deduction?

Analysis:

Issue 1:
The case involves an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITA) regarding the deletion of an addition made by the Assessing Officer. The appellant raised substantial questions of law related to the provision of outstanding amount not claimed as a deduction. The Tribunal allowed the provision towards enhanced compensation debited in the profit and loss account for the assessment year 2009-10. The appellant contended that the provision was never claimed as a deduction for the assessment year 2012-13. The Assessing Officer added the amount to the income of the assessee, leading to an appeal to the CIT(A) and subsequently to the Tribunal.

Issue 2:
The Tribunal's order dated 12.7.2017 failed to consider the specific ground raised by the appellant regarding the provision for enhanced compensation. The appellant argued that the balance sheet item of the outstanding amount was never claimed as a deduction. The Tribunal's oversight in not addressing this contention led to confusion. The subsequent order dated 24.1.2018 directed the Assessing Officer to allow the entire provisions towards enhanced compensation. The High Court found that the confusion arose due to the Tribunal's failure to address the appellant's claim that the outstanding amount was not claimed as a deduction. Consequently, the High Court set aside the Tribunal's order and remanded the matter to the Assessing Officer for further review.

In conclusion, the High Court allowed the appeal, set aside the Tribunal's order, and directed the Assessing Officer to verify whether the outstanding amount was claimed as a deduction. The High Court emphasized the need for timely implementation of the directions and left the substantial questions of law open for further consideration.