2019 (10) TMI 654 - AT - Income Tax

Appeal Dismissed on Reassessment Initiation. Tribunal Remands Tax & Book Profit Issues for Reevaluation

The appeal challenging the initiation of reassessment proceedings was dismissed. Regarding the taxability of duty drawback, the Tribunal remanded the ... Accrual of income - Taxability of amount receivable towards drawback and amount of tax claimed as refund - whether refund as accrued to assessee or not - HELD THAT:- When the amount is paid, it is debited to advance account and when it is recovered from the customers, the advance amount is credited. Similarly, is the case in the case of works contracts and excise duty paid and sales tax. As regards to the duty drawback, it is submitted that the same is offered to tax as and when it is received, in the light of the decision of the CIT vs. Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT]. The explanation offered by the assessee had not been controverted by the lower authorities but merely rejected the same without giving valid reasons. On the face of the explanation in respect of Item Nos.1 to 4, no addition is warranted. The disputed tax liability paid under protest does not constitute the income in the hands of the assessee. However, the AO had not gone into the issue in detail by undertaking the due process of verification with the evidence. Similarly, as regards to the duty drawback AO had not undertaken the exercise of verifying whether the due drawback had accrued to the assessee or not. Therefore, we are of the considered opinion that the issue may be restored to the file of the AO for de novo assessment on this issue. MAT - addition of provision for disputed claims to the book profit for the purpose of computing tax liability u/s.115JB - HELD THAT:- From the details on record the provision includes that the disputed tax liability and the provision made for disputed claims for ₹ 9.50 crs. and the provision of doubtful debts of ₹ 3.25 Crs. etc., undoubtedly these provisions cannot be considered as a provision for unascertained liabilities. However, from the perusal of the Assessment Order it is clear that the AO had not looked into the details and the nature of the provision made and simply added back to the book profit. Therefore, these issues are restored to the file of the AO for the purpose of due verification of the nature of the provision and decide the issue in accordance with the law. Appeal filed by the assessee is partly allowed for statistical purposes. Issues:1. Validity of initiation of reassessment proceedings2. Taxability of duty drawback3. Addition of provision for disputed claims to book profit for tax liability u/s.115JBValidity of Initiation of Reassessment Proceedings:The appeal challenged the initiation of reassessment proceedings, but these grounds were not pressed during the appeal and were dismissed.Taxability of Duty Drawback:The AO reopened the assessment on the grounds of duty drawback not being offered to tax and provision for contingent liability not added to book profit. The appellant argued that duty drawback is taxable upon actual receipt, citing legal precedent. The Tribunal found that the AO did not verify the accrual of duty drawback to the assessee, hence the issue was remanded back for de novo assessment.Addition of Provision for Disputed Claims to Book Profit:The provision for disputed claims was contested by the appellant, stating it was not for unascertained liabilities. The Tribunal agreed that these provisions were not unascertained liabilities, and the AO did not analyze the nature of these provisions. Therefore, the issue was sent back to the AO for proper verification and decision in accordance with the law.In conclusion, the appeal was partly allowed for statistical purposes, with the Tribunal remanding both the taxability of duty drawback and addition of provision for disputed claims to the book profit issues back to the AO for reevaluation and proper assessment in line with legal principles.