Tribunal Orders Deletion of Disallowed Provision in Tax Appeal

The Tribunal allowed the appeal, directing deletion of the disallowance of excess provision of Rs. 70,99,758. The Tribunal noted the consistency in accounting treatment of excise duty provision, stating it was correctly made as it related to outstanding liabilities and followed a consistent accounting system. The re-opening of assessment under section 147 was not addressed as the disallowance was deleted.

---

---

Issues:
1. Validity of re-opening of assessment u/s. 147 of the Act.
2. Disallowance of excess provision of Rs. 70,99,758/-.

Analysis:

Issue 1: Validity of re-opening of assessment u/s. 147 of the Act
The original assessment was completed under section 143(3) of the Act, accepting the returned income. However, the assessment was re-opened under section 147 of the Act due to a perceived duplication in the treatment of excise duty in the accounts. The Assessing Officer contended that there was no justification for reducing excise duty collected from gross sales, leading to a potential escape of taxable income. The assessee argued that the excise duty provision was made in accordance with Accounting Standard-2 and was allowable under section 43B as it was paid before filing the return. The CIT(A) upheld the addition, citing the absence of the provision in the balance sheet. However, the Tribunal noted that the provision was part of outstanding liabilities and the system of accounting was consistent over the years, ultimately directing the deletion of the disallowance.

Issue 2: Disallowance of excess provision of Rs. 70,99,758/-
The Assessing Officer disallowed the provision of Rs. 70,99,758/- as he believed it related to the succeeding year and hence not allowable under section 43B. The CIT(A) also confirmed this disallowance based on the absence of the provision in the balance sheet. However, the Tribunal found that the provision was included in outstanding liabilities and the system of accounting followed by the assessee was consistent and accepted by the department in earlier years. As the excise duty was included in the closing stock value and the liability arose upon manufacturing, the Tribunal held that the provision was correctly made and directed the assessing officer to delete the disallowance.

In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the deletion of the disallowance and highlighting the consistency in the accounting treatment of excise duty provision. The Tribunal did not address the validity of the re-opening of assessment as the disallowance was deleted.

---