High Court Of Punjab & Haryana
CIT vs. Gemi Motors India (P) Ltd.
Section 115JA, 154
Asst. Year 2000-01
Adarsh Kumar Goel & Mrs. Daya Chaudhary, JJ.
IT Appeal No. 386 of 2009
2nd September, 2009
Counsel appeared :
Rajesh Katoch, for the Appellant
ORDER
By the court :
Revenue has preferred this appeal under s. 260A of the IT Act, 1961 (for short, “the Act”) against order dt. 24th Nov., 2008 of the Tribunal, Delhi Bench-C, Delhi in ITA No. 686/Del/2008 for the asst. yr. 2000-01, proposing to raise following substantial questions of law :
“(i) Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in upholding the order of the learned CIT(A) in deleting the addition of Rs. 30,00,000 made by the AO to the book profit under s. 115JA of the IT Act, 1961 declared by the assessee company on account of provision of ITA No. 386 of 2009 warranty claims debited in the P&L a/c even though the provisions for warranty claims form part of unascertained liability as the actual warranty after sales services expenditure was being debited in the P&L a/c on year to year basis ?
(ii) Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in confirming the order of the learned CIT(A) in holding that there was no mistake apparent from record which could be rectified under s. 154 of the IT Act, 1961 even though the error was patent and obvious and did not involve any set of reasons ?”
2. After making assessment for the assessment year in question, the AO passed order of rectification dt. 5th July, 2004 on the ground that the assessee wrongly debited warranty claims which was uncertain liability. On appeal, the CIT(A) upheld the plea of the assessee that warranty expenses were debited, as per accounting principle, on accrual basis and in any case, the issue being debatable, order under s. 154 of the Act was not justified. The Tribunal upheld the view of the CIT(A). The findings of the Tribunal are as under : “5. On consideration of the decisions in the case of Bharat Earth Movers vs. CIT (2000) 162 CTR (SC) 325 : (2000) 245 ITR 428 (SC) and CIT vs. Vinitech Corporation (2005) 196 CTR (Del) 369, it is clear that if any expenditure is undertaken to be borne by the assessee in respect of services received, sales made etc., the same is a liability in present even though it may not be capable of exact quantification. In such a circumstance, a provision made on reasonable basis, for example, by having regard to the facts of earlier years or the report of an expert in the matter, will be deductible in computing the income. There is no evidence on record that the provision made not of a reasonable amount. In law, such a provision is deductible in computing the income. Therefore, we are of the view that the learned CIT(A) was right when he held that there was no mistake apparent from record which could be recrified under s. 154 of the Act.”
3. It is well-settled that power under s. 154 of the Act for rectification could not be exercised on a debatable issue. The said power can be exercised only when there is an error apparent on the face of record. Reference may be made to T.S. Balaram, ITO vs. Volkart Brors. (1971) 82 ITR 50 (SC)
4. In view of above, no substantial question of law arsies.
5. The appeal is dismissed.
[Citation : 327 ITR 443]
