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TMI Blog2016 (8) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... n the appellant to explain and justify warranty expenditure charges debited of ₹ 14.40 cores and how the same has been calculated on any scientific basis. The appellant only stated the policy being followed by it and also made a mere bald statement that provision was estimated following scientific method. Thus, nowhere the assessee-company has stated what is the scientific method followed by it. The AO, without looking into what scientific basis, merely accepted the submission and allowed deduction thereof. Therefore, it cannot be said that the assessee-company had followed the guidelines laid down by the Hon’ble Apex Court in the case of Rotork Control India Pvt.Ltd (supra). Thus, in our considered opinion, constitutes nonapplication of mind on this aspect by the AO. The ratio laid down by the Hon’ble Apex Court in the case of Malabar Industries Co. Ltd. (2000 (2) TMI 10 - SUPREME Court ) is squarely applicable to the facts of the case wherein the Hon’ble Apex Court held that where AO merely accepted the claim of the assessee in absence of any supporting material without making any enquiry, exercise of jurisdiction by the CIT was held to be justified. - Decided against a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 was filed on 25/09/2009 declaring total income of ₹ 69,67,78,028/-. After processing the return of income under the provisions of section 143(1) of the Act, the case was selected for scrutiny and the assessment was finally completed u/s 143(3) r.w.s. 144C of the Act accepting the returned income. Subsequently, the Principal Commissioner issued a show cause notice to the assessee whereby the assessee-company was called upon to explain as to why the assessment order cannot be treated as erroneous and prejudicial to the interests of revenue for the following reasons: During the year a net charge of ₹ 14,40,19,057/-has been charged to the P L a/c as provision for warranty. The etails of warranty provision provided in schedule- 15 Notes on account do not disclose that the warranty provision has been charged on a scientific basis. The provision for warranty thus claimed is to e disallowed especially in view of the decision of the Supreme Court in the case of Rotork Controls India Pvt. Ltd. Vs CIT Chennai 180 Taxman 422. The assessment order passed by the Assessing Officer, thus suffers from the errors which have caused prejudice to the interest of the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relied on the following case laws: i. Malabar Industries Co Ltd v. CIT [2000] 243 ITR 83 (SC); ii. CIT(Central) Ludhiana v. Max India Ltd (2007) [2007]295 ITR 282(SC) iii. Gokuldas Exports [2011] 333 ITR 214 (Kar.) HC); iv. CIT vs. Sunbeam Auto Ltd [2011] 332 ITR 167 (Delhi); v. CIT Vs. Gabriel India Ltd. [1993] 203 ITR 108 (Bombay HC); and vi. CIT vs. Vikas Polymers [2012] 341 ITR 537 (Delhi HC) 4.2 On the other hand, learned Departmental Representative vehemently contended that the AO had failed to examine the basis adopted for calculating provision for warranty expenditure. Provision for warranty expenditure was allowed without application of mind by the AO on the aspect of basis adopted by the assessee for calculating provision for warranty expenditure in terms of the guidelines laid down by the Hon ble Apex Court in the case of Rotork Control India Pvt.Ltd. (supra). Thus, he 10 submitted that the order of the Principal passed u/s 263 be upheld. 5. We heard rival submissions and perused material on record. The issue in present appeal is on the validity of assumption of jurisdiction by the Principal Commissioner under the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y accepted the submission and allowed deduction thereof. Therefore, it cannot be said that the assessee-company had followed the guidelines laid down by the Hon ble Apex Court in the case of Rotork Control India Pvt.Ltd (supra). Thus, in our considered opinion, constitutes nonapplication of mind on this aspect by the AO. The ratio laid down by the Hon ble Apex Court in the case of Malabar Industries Co. Ltd. (supra) is squarely applicable to the facts of the case wherein the Hon ble Apex Court held that where AO merely accepted the claim of the assessee in absence of any supporting material without making any enquiry, exercise of jurisdiction by the CIT was held to be justified. The relevant paragraph is as under: 10. In the instant case, the Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellantcompany was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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