2010 (8) TMI 1118 - AT - Income Tax

Tribunal upholds CIT(A) decisions on reassessment invalidity and warrantee provision

The Tribunal dismissed the Revenue's appeal for Assessment Years 2001-02 and 2006-07, upholding the decisions of the ld. CIT(A) in finding the ... - Issues involved: Appeal against orders of ld. CIT(A) for Assessment Years 2001-02 and 2006-07, validity of reassessment proceedings u/s 148, provision for warrantee disallowed by Assessing Officer.Issue 1: Validity of reassessment proceedings u/s 148 for Assessment Year 2001-02The Revenue contended that the ld. CIT(A) held the reassessment proceedings to be invalid, arguing that production of account books or evidence does not amount to disclosure. The Revenue relied on the decision of the Hon'ble Delhi High Court in Consolidated Photo and Finvest Ltd Vs. ACIT 281 ITR 394. The assessee argued that all particulars were furnished during original assessment proceedings, and reopening was beyond four years after the relevant Assessment Year. The ld. CIT(A) found no failure on the part of the assessee to provide complete particulars during the original assessment, deeming the reassessment invalid. The Tribunal upheld the decision, emphasizing the requirement of 'reason to believe' even after the amendment to section 147, and the absence of new material supporting the change in opinion by the Assessing Officer.Issue 2: Disallowance of provision for warrantee for Assessment Year 2006-07The Revenue challenged the deletion of a provision for warrantee of &8377; 10,06,000 by the Assessing Officer, which was allowed by the ld. CIT(A). The assessee based the provision on actual expenditure for earlier years, calculating an average percentage of sales for warrantee claims. The ld. CIT(A) allowed the provision, noting the reversal of a previous decision by the Hon'ble Apex Court. The Tribunal upheld the decision, stating that if the provision was made on a scientific basis and in accordance with actual warrantee expenses, it should be allowed. The Tribunal emphasized the validity of the provision based on the decision in the case of Rotor Control Ltd and dismissed the appeal of the Revenue.The Tribunal dismissed the appeal of the Revenue for both Assessment Years 2001-02 and 2006-07, upholding the decisions of the ld. CIT(A) in both cases.