2021 (2) TMI 448 - AT - Income Tax

Disallowance of provision written back - CIT-A directing AO to examine the records of assessee, whether whole or part of the provision written back was disallowed in any of the A.Y. 2010-11 and 2011-12 and if so, to allow the provision to the extent it was disallowed in the assessment order for the relevant previous year - HELD THAT - Disallowances in earlier year has not been accepted by the assessee. The assessee is very much contesting the disallowances. So no impact of those disallowances can be considered in this year. The assessee in this year has written back the provisions made in earlier years as the assessee is of the view that they are no longer required. Hence, once the assessee writes back certain provisions as no longer required and takes the same into income, it cannot deduct the same from computation of income, on the ground that in the earlier year these provisions were disallowed. As the assessee is contesting the disallowances and for 1 year it has even succeeded at ITAT. In this view of the matter, the assessee is claiming double deduction during the year. Hence the order of CIT appeals to grant relief to the assessee is erroneous. The learned counsel of the assessee has fairly agreed to this. However, he has pleaded that direction may be given to the assessing officer that if the assessee loses in appeal for the matters in contest for earlier years the corresponding relief should be given to the assessee for this year. The request of the learned counsel of the assessee is not tenable. What will be the final impact of these appeals is not something which is within our domain of anticipation and any direction to consider future possibility will render the order speculative. Moreover, it is trite law that tribunal should confine itself to the matters in dispute for the assessment year under consideration and the tribunal cannot give any direction in speculation of outcome of appellate proceedings of the years not under consideration. Hence, we decline to give any direction to the assessing officer in this regard. - Decided in favour of revenue

Issues:
1. Disallowance of provision for estimated loss on contracts in assessment year (A.Y.) 2012-13.
2. Relief sought by the assessee regarding provision for losses in previous assessment years.
3. Direction to the Assessing Officer regarding the provision written back in the books for AYs 2010-11 and 2011-12.
4. Claim of double deduction by the assessee due to disallowances in previous years.

Analysis:

Issue 1: Disallowance of provision for estimated loss on contracts
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) directing the Assessing Officer to examine the provision of ?423.59 lakhs written back by the assessee and to allow it to the extent it was disallowed in the assessment order for the relevant previous year. The contention was that since the matter was pending before ITAT and CIT (Appeals) from previous years, the relief requested by the assessee could not be granted at the current stage until the finality of the matter was reached.

Issue 2: Relief sought by the assessee regarding provision for losses in previous assessment years
The CIT (A) noted that the appellant had made provisions for losses in previous years, some of which were allowed by ITAT while others were disallowed and confirmed by CIT (A). For AY 2012-13, the appellant reversed a provision of ?423.59 lakhs in its books, claiming that the provision for losses in previous years had been disallowed during assessment. The CIT (A) directed the AO to examine whether the provision written back included any disallowed amounts from AYs 2010-11 and 2011-12 and to allow the provision to the extent it was disallowed in those years.

Issue 3: Direction to the Assessing Officer regarding provision written back in the books
The ITAT observed that the assessee contested the disallowances from previous years and had written back provisions in the current year as they were deemed unnecessary. However, the ITAT held that once the provisions were written back and included in income, they could not be deducted again based on disallowances from earlier years. The ITAT declined to give a direction to the assessing officer regarding future possibilities of appeals and set aside the order of the CIT (A), restoring that of the assessing officer.

Issue 4: Claim of double deduction by the assessee due to disallowances in previous years
The ITAT concluded that the assessee's claim for double deduction during the year was not valid as the disallowances were being contested, and the final impact of the appeals from previous years was uncertain. Therefore, the ITAT allowed the Revenue's appeal and set aside the order of the CIT (A).

In summary, the ITAT Mumbai ruled in favor of the Revenue, setting aside the CIT (A) order and restoring that of the assessing officer, emphasizing that the tribunal should confine itself to the matters in dispute for the current assessment year and cannot speculate on the outcome of future appellate proceedings.

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