- (1.) THE Court: The subject matter of challenge in this appeal is a judgment and order dated 19th June, 2013 by which the Income Tax Appellate Tribunal allowed the appeal preferred by the assessee on a number of points which were under challenge before the learned Tribunal. The department has come up in appeal against the following findings of the learned Tribunal appearing from paragraph 9 of the impugned judgment and order: 9. In regard to ground no. 7 being against the disallowance of the excess of provision for replacement guarantee over the actual payment, it is noticed that this issue is squarely covered by the decision of the Co -ordinate Bench of this Tribunal in assessee's own case for A. Yr 2003 -04 in ITA No. 1075/Kol/2009 and No. 948/Kol/2009 dated 11.10.2011. In the circumstances respectfully following the decision of the Coordinate Bench of this Tribunal in assessee's own case for A.Yr. 2003 -04 referred to supra the addition as made on account of the excess of provision over the actual in respect of the replacement guarantee stands deleted.
(2.) IT would appear that the learned Tribunal did not go into the matter at all. The Appeal preferred by the assessee was allowed merely on the basis of an earlier judgment in ITA No. 1075/Kol/2009 and ITA No. 948/Kol/2009 dated 11th October, 2011. Mr. Khaitan learned Senior Advocate has produced before us a copy of that judgment in which the issue was decided as follows: 22. After hearing the rival submissions and on careful perusal of materials available on record, keeping in view of the statement filed by assessee and on careful perusal of the provisions created as well as the expenditure incurred on account of warranty, we are of the view that the provisions are based on the previous years data and based on the sales and AO himself has allowed the provisions made by the assessee in Assessment year 2004 -05 while doing the assessment U/s. 143 itself we are of the view that assessee is entitled to deduction of provisions in view of the decision of the Hon'ble Supreme Court in the case of Rotork Controls (India) Pvt. Ltd. vs. CIT (Supra). We direct AO to allow the provision on account of replacement of guarantee for assessment year involved in this appeal. It would appear that in the aforesaid earlier judgment the learned tribunal held that deductions were permissible in view of the judgment of the Apex Court in the case of Rotork Controls India Pvt. Ltd. versus CIT. The question whether the assessing officer had considered the claim of the assessee for deduction in terms of the judgment in the case of Rotork Controls India Pvt. Ltd. versus CIT was considered by the dispute resolution panel and they disposed of the matter by their direction dated 17th June, 2010 as follows: Ground No. 9 23. The assessee submitted that the excess of Provision for Replacement Guarantee over actual payment amounting to Rs. 1,65,41,000/ - was disallowed by the Assessing Officer on the ground that the same was in nature of only a provision. The assessee further submitted that in the judgment of the Apex Court in case of Rotork Controls India (P) Ltd. reported in 314 ITR 62, such provisions were allowed. 24. The Panel told the assessee that the Apex Court in case of Rotork Controls India (P) Ltd. had set the following conditions for allowing such provisions of replacement guarantee: a) There should be a present obligation as a result of past event; b) There should be a probability of outflow of resources for settling the obligation; c) A reliable estimate should be made of the amount of the obligation. Considering the above, the panel asked the assessee if any study can be shown which can demonstrate that the three conditions were ably satisfied. 25. In response, the assessee submitted on 01.06.2010 a paper book. This paper book did show that there was a mechanism but it certainly did not show whether the assessee fulfilled the three conditions as set by the Apex Court. The paper book did not show that the mechanism followed by the assessee was a scientific mechanism. Typically, the dealers make the sale and send a copy of the warranty card to the assessee company for honoring the warranty. The assessee therefore gets information which can be a basis of estimating a provision. But in the case of the assessee, the paper book failed to elaborate whether any scientific methodology was being followed by the assessee to arrive a provision. The estimate made by the assessee was therefore not reliable and scientific. It was just an estimate arrived at as a mere conjecture and not based on any reliable and scientific methodology. It had no connection with present obligation based on any data of past sales. Considering the above, the objection made by the assessee to the draft assessment order was not valid, and so the addition made by the Assessing Officer for Rs. 1,65,41,000/ - to the total income of the assessee was considered a valid addition.
(3.) THE assessee does not appear to have made any endeavour, before the DRP to demonstrate that the deductions claimed were on the basis of the condition laid down in the case of Rotork Controls, besides filing a paper book containing documents. There was no examination of the claim put forward by the assessee. The Tribunal without applying its mind allowed the appeal of the assessee.;