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2019 (10) TMI 922 - AT - Income TaxRectification u/s 154 - Disallowance of Leave Encashment liability - HELD THAT - Since the CIT (A) has pointed out that the assessee itself has shown the payment as investment in the LIC and other companies and the interest accrued on such fund was credited to the Profit Loss account, therefore, the AO has to just verify the fact whether any income accruing on the policy taken by the assessee was actually received by the assessee or it is just an accounting treatment by the assessee without actual income. If the benefit accrued on the policy is only accumulated to the fund itself which is to be used for discharge of liability on account of Leave Encashment, then such income though assessee has credited in the Profit Loss account would not partake the character of real income but it would be only accumulation of the value of the policy to be used for discharge of the liability on account of leave encashment. We direct the AO to verify these facts and then allow the claim of the assessee in the above terms. Miscellaneous Application of the assessee is dismissed. While passing the subsequent order Tribunal has concurred with the findings of the Tribunal given in the impugned. Hence in view of the facts and circumstances that when no mistake apparent on record is pointed out by the assessee then the miscellaneous application for seeking the relief which was not granted by the AO is not maintainable.
Issues Involved:
1. Maintainability of the Miscellaneous Application. 2. Limitation period for filing the Miscellaneous Application. 3. Disallowance of Leave Encashment liability. Comprehensive, Issue-Wise Detailed Analysis: 1. Maintainability of the Miscellaneous Application: The Tribunal noted that the assessee did not point out any mistake in the impugned order dated 17.05.2018. The assessee's submission was based on the assertion that the AO misunderstood and misinterpreted the Tribunal's findings. The Tribunal emphasized that the proper remedy for the refusal of relief by the AO in the set-aside proceedings is an appeal before the CIT (A), not a miscellaneous application. The Tribunal stated, "The proper remedy for the refusal of relief by the AO in the set aside proceedings are the appeal before the ld. CIT (A) and not seeking the relief in the miscellaneous application." 2. Limitation Period for Filing the Miscellaneous Application: The Tribunal observed that the miscellaneous application was filed on 22nd July 2019 against the order dated 17.05.2018, which is beyond the six-month limitation period provided under section 254(2) of the IT Act. The Tribunal concluded, "Thus the miscellaneous application is barred by limitation. The assessee has also not pointed out how the miscellaneous application is not barred by limitation and maintainable." 3. Disallowance of Leave Encashment Liability: The Tribunal reviewed the issue of disallowance of the Leave Encashment liability in detail. The AO disallowed the provision made for leave encashment, stating it is not allowable under any provisions of the Income Tax Act unless it is an actual payment to employees. The AO's grounds included: - The deduction is only allowable on actual payment to employees. - Section 37(1) does not cover provisions for future liabilities. - The provisions made are not payments to employees and are not allowable under section 43B(f). - The group leave encashment fund is not an approved fund by the competent authority. The Tribunal had earlier remanded the matter to the AO for fresh adjudication, directing the assessee to submit relevant details. The Tribunal referenced the case of Jhalawar Kendriya Sahakari Bank Ltd., where the benefit of the Group Leave Encashment Scheme was allowed. The Tribunal stated, "Taking into consideration the above facts and circumstances of the case and the decisions relied upon by the ld.AR of the assessee, it will be in the interest of equity and justice to restore the issue to the file of the AO for afresh adjudication." The Tribunal also considered the subsequent order dated 03.08.2018, which directed the AO to verify the facts and decide the claim accordingly. The Tribunal stated, "The AO has to just verify the fact whether any income accruing on the policy taken by the assessee was actually received by the assessee or it is just an accounting treatment by the assessee without actual income." In conclusion, the Tribunal dismissed the miscellaneous application due to the lack of an apparent mistake in the record and the application being barred by limitation. The order was pronounced in the open court on 18/10/2019.
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