Tribunal Dismisses Application, Emphasizes Appeal Process

The Tribunal dismissed the Miscellaneous Application due to lack of an apparent mistake in the record and being barred by limitation. The Tribunal emphasized that the proper remedy for refusal of relief by the AO in set-aside proceedings is an appeal before the CIT (A). The issue of disallowance of Leave Encashment liability was reviewed in detail, with the Tribunal remanding the matter to the AO for fresh adjudication based on relevant details submitted by the assessee. The Tribunal considered previous orders and directed the AO to verify facts regarding income accruing on policies.

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Issues Involved:
1. Maintainability of the Miscellaneous Application.
2. Limitation period for filing the Miscellaneous Application.
3. Disallowance of Leave Encashment liability.

Comprehensive, Issue-Wise Detailed Analysis:

1. Maintainability of the Miscellaneous Application:
The Tribunal noted that the assessee did not point out any mistake in the impugned order dated 17.05.2018. The assessee's submission was based on the assertion that the AO misunderstood and misinterpreted the Tribunal's findings. The Tribunal emphasized that the proper remedy for the refusal of relief by the AO in the set-aside proceedings is an appeal before the CIT (A), not a miscellaneous application. The Tribunal stated, "The proper remedy for the refusal of relief by the AO in the set aside proceedings are the appeal before the ld. CIT (A) and not seeking the relief in the miscellaneous application."

2. Limitation Period for Filing the Miscellaneous Application:
The Tribunal observed that the miscellaneous application was filed on 22nd July 2019 against the order dated 17.05.2018, which is beyond the six-month limitation period provided under section 254(2) of the IT Act. The Tribunal concluded, "Thus the miscellaneous application is barred by limitation. The assessee has also not pointed out how the miscellaneous application is not barred by limitation and maintainable."

3. Disallowance of Leave Encashment Liability:
The Tribunal reviewed the issue of disallowance of the Leave Encashment liability in detail. The AO disallowed the provision made for leave encashment, stating it is not allowable under any provisions of the Income Tax Act unless it is an actual payment to employees. The AO's grounds included:
- The deduction is only allowable on actual payment to employees.
- Section 37(1) does not cover provisions for future liabilities.
- The provisions made are not payments to employees and are not allowable under section 43B(f).
- The group leave encashment fund is not an approved fund by the competent authority.

The Tribunal had earlier remanded the matter to the AO for fresh adjudication, directing the assessee to submit relevant details. The Tribunal referenced the case of Jhalawar Kendriya Sahakari Bank Ltd., where the benefit of the Group Leave Encashment Scheme was allowed. The Tribunal stated, "Taking into consideration the above facts and circumstances of the case and the decisions relied upon by the ld.AR of the assessee, it will be in the interest of equity and justice to restore the issue to the file of the AO for afresh adjudication."

The Tribunal also considered the subsequent order dated 03.08.2018, which directed the AO to verify the facts and decide the claim accordingly. The Tribunal stated, "The AO has to just verify the fact whether any income accruing on the policy taken by the assessee was actually received by the assessee or it is just an accounting treatment by the assessee without actual income."

In conclusion, the Tribunal dismissed the miscellaneous application due to the lack of an apparent mistake in the record and the application being barred by limitation. The order was pronounced in the open court on 18/10/2019.

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