Henkel Teroson India Ltd., Gurgaon v. CIT- IV, New Delhi

ITA 5874/DEL/2010 | 2006-2007
Pronouncement Date: 31-03-2011 | Result: Dismissed

Appeal Details

RSA Number 587420114 RSA 2010
Assessee PAN AAACH5216Q
Bench Delhi
Appeal Number ITA 5874/DEL/2010
Duration Of Justice 3 month(s) 7 day(s)
Appellant Henkel Teroson India Ltd., Gurgaon
Respondent CIT- IV, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 31-03-2011
Date Of Final Hearing 28-03-2011
Next Hearing Date 28-03-2011
Assessment Year 2006-2007
Appeal Filed On 23-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH NEW DELHI BENCH NEW DELHI BENCH NEW DELHI BENCH C CC C BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI K. D. RANJAN ACCOUTANT MEMBER ITA NO. 5874/DEL/2010 (ASSESSMENT YEAR 2006-07) M/S. HENKEL TEROSON INDIA LTD. VS. CIT IV 74 IDC MEHRAULI ROAD NEW DELHI GURGAON (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAACH5216Q APPELLANT BY: SHRI ANIL CHADHA C.A. RESPONDENT BY: MS. REENA S PURI CIT DR ORDER ORDER ORDER ORDER PER K. D. RANJAN AM: PER K. D. RANJAN AM: PER K. D. RANJAN AM: PER K. D. RANJAN AM: 1. THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT Y EAR 2006-07 IS DIRECTED AGAINST THE ORDER PASSED BY CIT DELHI U /S 263 OF THE ACT. THE GROUNDS OF APPEAL RAISED ARE REPRODUCED AS UNDE R: 1) THAT ON THE FACTS NEW DELHI THE LAW GOVERNING T HE CASE THE LD. CIT IS NOT JUSTIFIED IN SETTING ASIDE THE O RDER PASSED BY LD. ASSESSING OFFICER. 2) THAT ON THE FACTS AND THE LAW GOVERNING THE CAS E THE LD. CIT IS NOT JUSTIFIED IN REOPENING THE CASE U/S 263 OF THE INCOME TAX ACT 1961. 3) THAT ON THE FACTS AND THE LAW GOVERNING THE CAS E THE LD. CIT IS NOT JUSTIFIED IN IGNORING THE RATIO OF J UDGMENT OF THE APEX COURT IN THE CASE OF M/S. MALABAR INDUSTRIAL C O. LTD. VS CIT (243 ITR 83). 4) THAT ON THE FACTS AND THE LAW GOVERNING THE CAS E THE LD. CIT IS NOT JUSTIFIED IN DISALLOWING THE EXPENSE OF BONUS PAID WHICH WAS CLAIMED BY THE ASSESSEE ON PAYMENT BASIS AS PER PROVISION OF SEC. 43B OF INCOME TAX ACT 1961 AND A LSO NOT JUSTIFIED IN IGNORING THE FOLLOWING JUDGEMENTS: - HINDUSTAN LEVER LTD. (251 ITR 209) (BOM.) - CHEMICALS & PLASTICS INDIA LTD. (260 ITR 193 (MA D.) 2 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO CANC ELLATION OF ASSESSMENT U/S 263 MADE BY THE ASSESSING OFFICER U/ S 143(3) OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THA T THE ASSESSMENT U/S 143(3) WAS MADE BY THE ASSESSING OFFICER ON 26. 12.2008. SUBSEQUENTLY LD. CIT ISSUED NOTICE U/S 263 ON THE GROUND THAT THE ASSESSEE HAD CLAIMED PRIOR PERIOD EXPENSES AMOUNTIN G TO ` 40 00 444/- IN THE P & L ACCOUNT. THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE PRIO R PERIOD EXPENSES SHOULD HAVE BEEN DISALLOWED. THE CIT ALSO OBSERVED THAT THE ASSESSING OFFICER HAD FRAMED ASSESSMENT ORDER W ITHOUT MAKING ANY INQUIRY/INVESTIGATION. THEREFORE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS IN SO FAR AS PREJUDICIAL TO T HE INTEREST OF REVENUE. 3. BEFORE CIT IT WAS SUBMITTED THAT PERFORMANCE LI NKED BONUS PLAN KNOWN AS MANAGEMENT INCENTIVE BONUS PLAN (MIBP ) IS A SCHEME FOR MOTIVATING THE MANAGERS BY PROVIDING THE M AN OPPORTUNITY TO EARN PERFORMANCE BONUS IN ADDITION T O THEIR SALARIES. THE SCHEME ENVISAGES LINKING BONUS WITH THE PERFORM ANCE OF INDIVIDUAL AS A TEAM VIS-A-VIS PERFORMANCE OF THE C OMPANY INCLUDING ASSESSMENT OF THE INCOMBENT AND EFFORTS FOR SELF DE VELOPMENT AS WELL AS THAT OF OTHER EMPLOYEES. IT WAS FURTHER SU BMITTED THAT THE PROVISION FOR ` 40 00 444/- PERTAINING TO EMPLOYEES PERFORMANCE BONUS FOR THE FINANCIAL YEAR 2004-05 WAS NOT PROVID ED IN THE BOOKS AS ON 31.03.2005. BUT SINCE THE SAME WAS ACTUALLY PAID DURING THE FINANCIAL YEAR 2005-06 IT WAS CHARGED TO P & L ACC OUNT FOR FINANCIAL YEAR 2005-06 AS PRIOR PERIOD EXPENDITURE. EXPLANAT ORY NOTE 16 TO NOTES TO ACCOUNTS PROVIDED DETAILS OF PRIOR PERIOD EXPENSES CHARGED TO P & L ACCOUNT FOR THE FINANCIAL YEAR 2005-06. M OREOVER A NOTE WAS ALSO PROVIDED IN THE TAX AUDIT REPORT IN THE YE AR UNDER CONSIDERATION ACCORDING TO WHICH THE PRIOR PERIOD EXPENDITURE WAS FULLY ALLOWABLE U/S 43B IN FINANCIAL YEAR 2005-06. AS SUCH THERE WAS COMPLETE DISCLOSURE MADE BY THE ASSESSEE COMPANY IN ITS ACCOUNTS 3 AS WELL AS TAX AUDIT REPORT FOR THE ASSESSMENT YEAR 2006-07. ON THE BASIS OF ABOVE IT WAS SUBMITTED THAT ASSESSEES CL AIM FOR MIPB AT ` 40 00 444/- WAS ALLOWABLE IN THE ASSESSMENT YEAR 20 06-07 AS THE LIABILITY TO PAY WAS INCURRED IN THE EARLIER YEAR B UT AS DEDUCTION WAS TO BE ALLOWED AS PER THE PROVISIONS OF SECTION 43B THE SAME WAS CLAIMED IN ASSESSMENT YEAR 2006-07. LD. CIT AFTER CONSIDERING VARIOUS DECISIONS OBSERVED THAT THE COMPLETE SILEN CE OF THE ASSESSING OFFICER AS TO WHY HE HAD ALLOWED ASSESSEE S CLAIM WOULD MEAN THAT THERE WAS NO APPLICATION OF MIND AT HIS L EVEL. THEREFORE ORDER PASSED BY THE ASSESSING OFFICER WITHOUT MAKIN G INQUIRY IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY LD. CIT DIRECTED THE ASSESSING OFFICER TO PROVIDE THE ASSESSEE AS REASONABLE OPPORTUNITY OF BEING HEARD A ND EXAMINE THE CASE AFTER CONDUCTING PROPER INQUIRY IN THE MATTER. 4. BEFORE US LD. A.R. FOR THE ASSESSEE SUBMITTED T HAT THERE WAS COMPLETE DISCLOSURE OF FACTS. HE ALSO SUBMITTED TH AT MIPB BEING IN THE NATURE OF BONUS WAS ALLOWABLE U/S 43B ON PAYME NT BASIS AND HAS BEEN CLAIMED AS SUCH. THEREFORE THE ORDER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ON THE OTHER HAND LD. CIT DR SUPPORTED THE ORDER OF CIT. 5. WE HAVE HEARD BOTH THE PARTIES. IT IS THE FACT THA T THE ASSESSING OFFICER WHILE ALLOWING THE CLAIM OF MIPB HAS NOT EXAMINED THE ISSUE AT ALL. NO INQUIRY WAS RAISED B Y THE ASSESSING OFFICER AS TO HOW THE PRIOR PERIOD EXPENDITURE WAS ALLOWABLE IN THE YEAR UNDER CONSIDERATION. DURING THE COURSE OF HEA RING THE LD. A.R. FOR THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SUGGEST THAT ANY INQUIRY WAS MADE BY THE ASSESSING OFFICER AND R EPLY TO WHICH WAS GIVEN BY THE ASSESSEE. THEREFORE THE ASSESSIN G OFFICER HAD PASSED THE ORDER WITHOUT CONDUCTING ANY INQUIRY. H ON'BLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES VS AD DL. CIT 99 ITR 375 (DEL.) HAS HELD THAT THE ASSESSING OFFICER IS I NVESTIGATOR AS WELL 4 AS ADJUDICATOR. FAILURE TO MAKE INQUIRY WOULD REND ER THE ASSESSMENT ERRONEOUS IN SO FAR AS PREJUDICIAL TO TH E INTEREST OF REVENUE. SINCE IN THE INSTANT CASE THE ASSESSING OFFICER HAS NOT MADE ANY INQUIRY AND HAS ALLOWED DEDUCTION OF ` 40 00 444/- ON ACCOUNT OF MIPB. THEREFORE ORDER PASSED BY THE AS SESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER O F CIT SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER AND DIRECTING HI M TO CONDUCT INQUIRIES IN THE CLAIM OF THE ASSESSEE. 6. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS DISM ISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAR 2011. SD./- SD.//- (C. L. SETHI) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:31 ST MAR. 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI