TaxTMI 
TaxTMI 
2016 (8) TMI 1080
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.... for short] dated 17/03/2015 for the assessment year 2009-10. 2. The assessee raised the following grounds of appeal: 1. The learned Principal Commissioner of Income-tax - Bangalore - I ("the learned CIT") has erred in initiating proceedings under Section 263 of the Income-tax Act, 1961 ("the Act") without appreciating that the assessment order passed under section 143(3) of the Act was not erroneous and prejudicial to the interests of the revenue. 2. The learned CIT has erred in not relying upon the decision of the Supreme Court in the case of Malabar Industries Co Ltd v. CIT [2000] 243 ITR 83 (SC) wherein it has been held that "where two views are possible and the Income-tax Officer has taken one view with which the Commissioner ....
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....ssee whereby the assessee-company was called upon to explain as to why the assessment order cannot be treated as erroneous and prejudicial to the interests of revenue for the following reasons: "During the year a net charge of Rs. 14,40,19,057/-has been charged to the P&L a/c as provision for warranty. The etails of warranty provision provided in schedule- 15 'Notes on account' do not disclose that the warranty provision has been charged on a scientific basis. The provision for warranty thus claimed is to e disallowed especially in view of the decision of the Supreme Court in the case of Rotork Controls India Pvt. Ltd. Vs CIT Chennai 180 Taxman 422. The assessment order passed by the Assessing Officer, thus suffers from the errors whi....
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....ctibility of warranty provision to the file of the AO for fresh assessment after affording due opportunity to the assessee-company. 4. Being aggrieved by this order, assessee-company is before us in the present appeal. 4.1 Learned AR of the assessee contended that the issue of provision for warranty was considered by the AO during the course of assessment proceedings. In this connection, he has invited our attention to the written submissions filed before the Addl.CIT, Bangalore, dated 31/12/2012 and also placed at pages 84 to 91 of the paper book. He also invited our attention to the questionnaire issued by him u/s 144A of the Act which are placed at pages 68 & 69 of the paper book Thus, learned AR of the assessee submitted that afte....
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....iture without looking into the aspect of whether such provision was made on a scientific basis as per guidelines laid down by the Hon'ble Apex Court in the case of Rotork Control India Pvt.Ltd.(supra). From perusal of the assessment order it is not discernable whether the AO had applied his mind on this aspect. No doubt once it is established that the AO had applied his mind on this issue and took one of the possible view, it is settled law that CIT cannot exercise jurisdiction u/s 263 of the Act, but in the present case, we have gone through the written submissions filed before the Addl.CIT as well as the ACIT during the course of assessment proceedings wherein the Addl.CIT has sought for details of the provisions made for warranty expendi....
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....cientific basis, merely accepted the submission and allowed deduction thereof. Therefore, it cannot be said that the assessee-company had followed the guidelines laid down by the Hon'ble Apex Court in the case of Rotork Control India Pvt.Ltd (supra). Thus, in our considered opinion, constitutes nonapplication of mind on this aspect by the AO. The ratio laid down by the Hon'ble Apex Court in the case of Malabar Industries Co. Ltd. (supra) is squarely applicable to the facts of the case wherein the Hon'ble Apex Court held that where AO merely accepted the claim of the assessee in absence of any supporting material without making any enquiry, exercise of jurisdiction by the CIT was held to be justified. The relevant paragraph is as under: "....
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....oner was not justified in assuming jurisdiction u/s 263 cannot be accepted as in the facts of the present case, the learned AR of the assessee had not demonstrated before us that 10 the AO had verified the aspect of the scientific basis followed for estimating provision for warranty expenditure and it cannot also be said that the AO made an enquiry on this aspect. Since the AO had not looked into the issue of scientific basis adopted by the assessee for estimating provision for warranty expenditure, it cannot be said that the AO took one of the possible views, as the AO had never gone into this issue at all and applied his mind on this particular aspect. Therefore, reliance placed by learned AR of the assessee on the following decisions is ....