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TMI Blog2017 (12) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... f the respondent-assessee as accepted by the first appellate authority and the Tribunal is that they had accepted and admitted their liability to pay ₹ 62.99 lacs to BAPL. That facet cannot, in absence of documents, be rejected and upset by us without the said documents on record. Accordingly, we decline to answer the question of law raised by the appellant-Revenue in the absence of documents and papers on record. - ITA 324/2005 - - - Dated:- 12-12-2017 - MR. SANJIV KHANNA MS. PRATHIBA M. SINGH JJ. Appellant Through: Mr. Ruchir Bhatia, Advocate. Respondent Through: Ms. Bhakti Pasrija Sethi, Advocate. SANJIV KHANNA, J. (ORAL) The present appeal by the Revenue in the case of Narinderjit Singh relates to assessment year 1997-98 and arises from the order of the Income Tax Appellate Tribunal dated 15th September, 2004 in ITA No. 4577/DEL/2000. 2. The appeal was admitted for hearing vide order dated 9th November, 2006 on the following substantial question of law:- Whether the amount of ₹ 62,99,100/- being the provision made by the assessee on account of claim by the principal contractor due to deficiency in contract work is a contingent liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C against BAPL in the arbitration proceedings. Accordingly, the respondent-assessee had accepted liability of ₹ 62.99 lacs and, hence, the respondent s claim that ₹ 62.99 lacs was actual liability was rejected, observing that it was self-contradictory. Referring to the stand taken by the respondent-assessee, the assessment order also records that the assessee was not clear whether he was disputing the demand of ₹ 62.99 lacs. 6. Against the disallowance of ₹ 62.99 lacs as expenditure, the respondent-assessee preferred an appeal, which was allowed by the Commissioner of Income Tax (Appeals), who referred to the agreement between the respondent-assessee and BAPL, copy of the claim made by BAPL on the respondent-assessee vide letter dated 23rd September, 1996, copy of the agreement between the respondent-assessee and BAPL on the defect liability period, imperfections and rectifications. The said order also refers to several other letters exchanged between the respondent-assessee and BAPL, and BMC and BAPL. In particular, reference was made to letter dated 20th November, 1996 along with enclosures written by BAPL acknowledging confirmation of the claim of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k he may spend more or less money. Therefore, in her opinion this was a contingent liability and was not an allowable deduction. A contingent liability is certainly not admissible under the Income-tax law even if the assessee is following mercantile system of accounting. But the nature of the contingent liability is that it is not actually an existing liability of the time but is in the nature of putting aside of money which may become existent on the happening of an event. In this case the liability calculated by the appellant did not depend upon any future event. The claim was made by the BMC for deficiency in the contract work undertaken by the appellant. The main contractor had passed on this liability to the appellant who was covered by same terms of agreement as the main contractor and the appellant had accepted this liability. No future event was involved in this process. The courts have held that difficulty in ascertaining the quantum of liability does not prevent the accrual of liability. If the estimate is wrong the taxing authority would be competent to substitute his own estimate ignoring the estimate of the assessee but this fact alone would not mean that the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urselves handicapped as the appellant-Revenue has not placed on record a copy of the agreement between the respondent-assessee and BAPL as also correspondence extensively referred to by the Commissioner of Income Tax (Appeals). We may, in this connection, produce the relevant portions of the order of the first appellate authority regarding and dealing with the said aspect:- Before me learned counsel for the appellant appeared and filed written submission alongwith paper book. It is stated that the A.O. has given a finding by not properly appreciating the facts in entrity (sic). He stated that it is not the appellant who has contested the claim of the BMC but it is the principal contractor Bhasin Associates (P) Ltd. In support of the facts, the appellant filed the following documents and stated that the same were filed before the A.O. also. A. Copy of the agreement of the appellant with Bhasin Associates (P) Ltd or BAPL B. Copy of the claim made by BMC on BAPL C. Copy of the claim lodged by BAPL on the appellant vide letter dated 23.9.96. D. Copy of the clauses for defect liability period and liability for defects and imperfections and rectification thereof. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e repairs and servicing of machines and equipment at the site due to failure of the contractor. The working of this amount is given on page 82 of the claim. All these factors go to prove that the contention of the assessing officer that the appellant failed to substantiate that the work had already been completed by alternate contractors is incorrect. Can it be stated that the BMC (a government body) made false claims. It is stated that in view of the said facts the other contention of the A.O. that the liability was contingent also becomes baseless. Further it was stated that in terms of clause No. 3 of the agreement dated 1.11.91 between the appellant and the main contractor all future liabilities were to be borne by the appellant to the entire exclusion of the main contractor and therefore the same was accordingly provided in the books of account. My attention was also drawn to clause No. 76 of the Arbitration claim of the BMC which clearly stipulates the working of claim of ₹ 54.1 crores against the main contractor. This included not only erection of new work but also expenses of ₹ 1 crore incurred on repairs and servicing of the machinery equipment at site. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance work as per page 53 of the paper book. The learned counsel also stated that since the claim was made by the BMC for pending/ rectification work, the appellant conceded the same as per its own cost whereas the cost estimated and claim made for the same by BMC was of much higher amount. Thus the same items have to form part of both the figures. He fairly conceded that factually inadvertent error occurred when the claim was made for ₹ 54.1 crores whereas the same should have been for an amount lower by ₹ 62.99 lakhs and at ₹ 53.47 crores. The A.O. has discussed the same in context of the claim for ₹ 54.1 crores, an issue which is not pending in this appeal as no ground for the same has been taken in this appeal. Finally it was stated that claim of BMC is for a bigger amount yet the assessee has admitted his liability unconditionally to the extent of ₹ 62.99 lakhs only vide letter dated 15.10.99 and the said confirmation was accepted by the main contractor on 20.11.96 as per its letter of the said date. Thus the liability arose during the period under consideration only. The appellant is not liable to make any payment to BMC. His liability i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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