TaxTMI 
TaxTMI 
2019 (10) TMI 908
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....lant for the relevant Assessment Year ("AY") at Rs. 988,61,12,327/- after making disallowance of Rs. 259,31,00,000 being expenditure incurred under the head provision for copper concentrate purchase. 3 That on facts and circumstances of the case and in law, the CIT(A) erred in holding that the ratio of the order passed by the CIT(A) and Hon'ble Income Tax Appellate Tribunal in the Appellant's own case for AY 2004-05 was not applicable, without appreciating that the findings rendered therein were directly applicable to the facts and circumstances of this case. 4. That on facts and circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO by disallowing the provision for purchase of copper by erroneously holding that the Appellant had simply relied upon the guidelines of accounting standards without appreciating that the Appellant had also established that the provision was in-fact in the nature of an ascertained liability. 5. That on facts and circumstances of the case and in law, the CIT(A) erred in upholding the interpretation of the AO that provision for purchase of copper was in the nature of an unascertained liab....
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....rocessing of copper from copper concentrate, manufacturing /generation and / or trading of non-ferrous metals, phosphoric acid, sulphuric acid, power slime, dore etc. It filed its return of income on 08.10.2010 declaring total income of Rs. 3158744760/- which was subsequently revised on 18.10.2010 of Rs. 3246648940/-. Subsequently, assessment u/s 143(3) of the Act was completed on 02.052014 determining total income of Rs. 7293012330/-. Thereafter , action u/s 263 of the Act was taken and the order passed by the ld AO was found to be erroneous and prejudicial to the interest of revenue. Subsequently, the order u/s 263 was passed setting aside the issue to the file of the ld AO. One of the issues in proceedings u/s 263 of the act was that the assessee has made a provision of Rs. 259.31 crores pending final price payable for the purchase of copper concentrate received during the year , for which actual purchase price could not be finalized before the close of the financial year but soon thereafter. Therefore, this issue was raised by ld AO in the assessment proceedings pursuant to order u/s 263 of the act. 4. Therefore, the ld AO raised the above query to the assessee. The as....
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.... for the FY 2010-11:- The Company has recognized liability based on substantial degree of estimation for: Final price payable on purchase of copper concentrate for which the quotation period price was not finalized as on 31st March 2009, a provision of Rs. 140.68 Cr based on forward LME rate of copper and LBMA rate of precious metals was made. /Is against it, during the year Rs. 153.31 Cr has been incurred towards final price settlement The additional amount of Rs. 12.63 Cr has been charged to Profit and Loss Account under raw-materials consumption. Liability recognized under this class for the year is Rs. 259.31 Cr which is outstanding as on 31st March 2010. Actual outflow is expected on finalization of quotation period price in the next financial year." In this context the note which appears in the Books of Accounts of the Assessee Company for the FY 2010-11 also is reproduced below:- The Company has recognized liability based on substantial degree of estimation for:- Final price payable on purchase of copper concentrate for which the quotational period price was not finalised as on 31st March 2010, a provision of Rs. 259.31 Cr based o....
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.... needs to be allowed. Since the liability discussed above is of highly unascertainable nature, depending on the future prospects of the market of the commodity. The order of Pr. CIT while setting aside the order has also, clearly distinguished the said arguments judgments . the relevant portions are reproduced here: Hon'ble High Court of Madras staying the assessment proceedings would also bar the proceedings currently initiated u/s.263 of the I.T. Act, 1961 is not acceptable. 9. In view of the facts narrated above, also taking into account that the issue on hand gets time barred by limitation on 31.03.2017, coupled with the fact that the assessee has failed to furnish any details w.r.t. the present proceedings, 1 am constrained to pass this order u/s.263 of the 1.1. Act. 1961 based on facts of the case. The issues involved have been narrated, in detail, in the notice issued on 01.02.2017.10. In respect of the issue on hand, it is pertinent to mention that a provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: i. an enterprise has a present obligation as a result of a past event. ....
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.... (P) Ltd. Vs. CIT (SC) 37 ITR 66, wherein it was clearly held that contingent liabilities do not constitute expenditure and cannot be the subject matter of deduction even under the Mercantile System of accounting. Expenditure which is deductible (or Income lax purposes is towards a liability actually existing al the time hut setting apart money which might become expenditure on the happening of events is nol expenditure AM these verdicts clearly reinforce the stand of the Department in so Tar as the issue in the assessee's case is concerned In the assessee company's case, certain deductions towards provisions made by it. were lo be allowed only on actual payment basis and since some of these amounts have not been paid by it within the specified time, a disallowance u/s.43 B of the I.T Act, 1961 was called for. 11. It is accordingly evident that the AO was required to conduct a proper verification and/or enquiry in respect of above mentioned issue. His failure to do so has resulted in an assessment order which is not only erroneous but is also prejudicial to the interest of revenue. It is placed on record that there is no right of appeal which is available to the Revenue ag....
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....ICE and UNDER PROTEST, we submit that even if your honor proceeds to make the disallowance in this regard, then the disallowance should be done only on Net provision basis. During the previous A Y 2009-10 as on March 31, 2009, the Provision under the same head of Final Price Payable for copper concentrate was Rs. 140,67,55,306 and during the impugned AY 2010-11 as on March 31, 2010, the provision under the head was Rs. 259,31,35,883. Hence, the net amount of Rs.l 18,63,80,577 only can be disallowed if at all your honor proceed to disallow the same. The relevant page of the financials for the FY 2009-10 (Assessment Year 2010-11) showing the amounts of the provision for both the FY 2009-10 and FY 2008- 09 is attached herewith in Annexure I. " However, it is to be noted that the assessee in its reply itself has stated that the said provision are made for copper purchases in transit. Therefore, the said provision in its entirety has been made for copper purchases in transit during the year and therefore, is liable to be disallowed during the year. (Disallowance: Rs. 259,31,00,000/-) 6. Based on the above findings, disallowance of Rs. 259.31 Crores was made and tota....
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....and Point 12 gives direction to AO to pass the necessary orders in respect of 43B disallowance after giving opportunity. The relevant paras are as below:- "Para 10 In the assessee company's case, certain deductions towards provisions made by it, were to be allowed only on actual payment basis and since some of these amounts have not been paid by it within the specified time, a disallowance U/s. 43 B of the IT Act, 1961 was called for." Para 12. In this backdrop the assessment order dated 02.05.2014, passed in this case u/s. 143(3) and section 92 CA r.w.s 144C of the IT Act, 1961 for AY 2010-11 it set aside within the meaning of Sec.263 of the IT Act, 1961. The Assessing Officer is directed to complete the reassessment proceedings afresh, after making necessary enquiry/ Verification in respect of the above mentioned issue and after affording the assessee an opportunity of being heard before passing a fresh assessment order in accordance with law. In so far as the issues considered by the assessing authority in the order dated 02.05.2014, which is presently stayed by the Hon'ble High Court of Madras vide its order dated 20.06.2014 are concerned suitable action will ....
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.... beyond his jurisdiction. " Geometric Software Solutions Co. Ltd. vs ACIT 32 SOT 428 ITAT, Mumbai held that "10. Having heard both the parties and having considered the rival contentions, we find that the CIT has revised the assessment order u/s 143(3) by issuing show cause notice only with regard to not reducing the expenditure incurred in the foreign currency for the total export turnover whole computing the deduction u/s 10A of the I. T. Act. But in the revised order, the assessment was set aside also on the other ground that some of the sale proceeds was yet to be received by the assessee. The revision u/s 263 is not like the reopening of the assessment where once the assessment is reopened entire assessment is open before the Assessing Officer to be reconsidered in accordance with law " 5.3 I have considered the facts of the case, the grounds of appeal, the order of the AO and the submissions of the appellant. The appellant vide these grounds of appeal, has challenged the legal validity of the assessment order, by claiming that the assessment order seeks to make an addition which is in contrast with the directions issued by the Pr CIT vide order u/s 263. The ....
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....ing the order u/s 263, the Pr CIT is found to have passed order u/s 263 mentioning and referring the notice dated 01.02.2017 wherein issues pertaining to provision of Rs. 259.31 crore on account of purchases of copper concentrate and Rs. 24243308/- relating to difference of customs duty, gratuity and leave encashment u/s 43B have been mentioned explicitly and thereon, made a clear observation as under: "Since these and other related aspects were not examined by the AO during the course of the assessment proceedings he failed to adhere to the provisions of the Income Tax Act, 1961. Accordingly the order passed by the AO is found to be erroneous in so far as it is prejudicial to the interest of Revenue." The Pr. CIT categorically stated that: "The Assessing Officer is directed to complete the reassessment proceedings afresh, after making necessary enquiry/verification in respect of the above mentioned issue...." The above extract more than clearly states that the Pr CIT had directed the AO, to proceed ith the assessment order afresh, but with also considering the infirmities pointed therein in the order u/s 263 of the Act. The order no where direct....
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....t the present proceedings, I am constrained to pass this order u/s.263 of the IT Act, 1961 based on facts of the case. The issues involved have been narrated in detail in the notice issued on 01.02.2017. 10. In respect of the issue on hand, it is pertain to mention that a provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognised when: i. an enterprise has present obligation as a result of past event ii. it is probable that an outflow of resources will be required to settle the obligation; and iii. a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognised. Liability is defined as a present obligation arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. A past event that leads to present obligation is called as an obligation event. The obligation event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing i....
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....aid by it within the specified time, a disallowance u/s.43B of the IT Act, 1961 was called for. 11. It is accordingly evident that the AO was required to conduct a proper verification and / or enquiry in respect of above mentioned issue. His failure to do so has resulted in an assessment order which is not only erroneous but is also prejudicial to the interest of revenue. It is placed on record that there is no right of appeal which is available to the Revenue against such erroneous assessment orders passed by the AOs, to compensate which the revisionary power u/s.263 of the IT ACT,1961. have been conferred on the PCIT/CIT in the statute. Furthermore, such powers were held to be of wide amplitude by the Hon'ble Supreme Court in the case of CIT vs. Shree Manjunathesware packing products & Camphor works (1998) 231 ITR 53/96 Taxman 1. Therefore, normally when an AO has not conducted a proper enquiry on particular issue leading to a loss of revenue. Moreover, in terms of the specific language of explanation 2 to section 263(1) of the IT Act,1961 an order passed by the AO is deemed to be erroneous and prejudicial to the interest of revenue if the order is passed without mak....
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....n transit. Therefore the said provision in its entirety has been made for copper purchases in transit during the year and therefore, is liable to be disallowed during the year." 6.1 During the course of appellate proceedings, the appellant filed written submission on dated 19.07.2018. The relevant portion is reproduced under:- "Appellant Submissions that provision for copper concentrate purchases is allowable expense : 3.3.1 The Appellant Company carries on the business of Manufacturing Copper Rods, Copper Cathodes, Dore Anode, Sulphuric Acid and Phosphoric Acid. The raw material copper concentrate is imported which is processed at the smelter division of the company at Tuticorin into a product called Copper Anode. This is further refined by Electrolyte process at Tuticorin and Silvassa works into a product called cathode which may further be drawn into Cast Copper Rods depending on the market requirement. 3.3.2 The Appellant Company purchases copper concentrate for production of copper anode/ copper cathode. 3.3.3 The copper concentrates are initially invoiced at a Provisional price and provisional metal content. Subsequently, ....
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....& Loss Account under rawmaterial consumption. Liability recognised under this class for the year is Rs. 152.77 Crore which is outstanding as on 31 March 2011. Actual out flow is expected on finalisation of quotational period price in the next financial year. 3.3.7 Thus, your honour will appreciate that the provision is actualised every year and the differential amount is debited / credit to profit & loss account in accordance with the stated policy of the appellant company. Provision for copper concentrate provided is as per notified accounting standards: 3.3.8 The Appellant's accounting in respect of Copper concentrate purchases which were outstanding as on 31st March to Mark them to market to take into account the effect of the increase in the liability of the Appellant which was ascertained. From financial year 2003-04 onwards company consistently following this practice. In this regard, your honour may please note the provisions of Section 145 and Section 145A of the Income-tax Act, 1961 which stood as follows:- [Method of accounting. 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Inco....
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.... The term regularly followed by the Appellant doesn't mean that once a method is adopted, it can never be changed. The statute stipulates that the income shall be computed on the basis of the system of accounting "regularly" followed by the appellant. It should mean during the period under consideration. However, the provisions cannot be interpreted to mean that once a system of accounting is adopted, it can never be changed. "Regular" cannot in the present context mean permanent. There is no provision that a change is impermissible or barred even when it is warranted by the existing situation. Reliance in this regard is placed on the decision of Punjab & Haryana High Court judgement in the case of Commissioner of Income-tax Vs. Punjab State Industrial Development Corporation Ltd reported at 255 ITR 351. ii. The Appellant had followed this policy consistently and the Audited balance sheet of the Appellant can be referred to in this regard. 3.3.11 As per the Income-tax Act, 1961 there are certain Accounting Standards which are mandatorily required to be followed by the Assessee while computing the Income under the heading business and profession. As per Notificatio....
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....tements should disclose all material items, the knowledge of which might influence the decisions of the user of the financial statements. v. If the fundamental accounting assumptions relating to Going Concern, Consistency and Accrual are followed in financial statements, specific disclosure in respect of such assumptions is not required. If a fundamental accounting assumption is not followed, such fact shall be disclosed. vi. For the purposes of the paragraphs (1) to (5), the expressions,- (a) "Accounting policies" means the specific accounting principles and the methods of applying those principles adopted by the assessee in the preparation and presentation of financial statements; (b) "Accrual" refers to the assumption that revenues and costs are accrued, that is, recognised as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate; (c) "Consistency" refers to the assumption that accounting policies are consistent from one period to another; (d) "Financial Statements" means any statement to provide information about the financial position,....
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....ably expected to have a material effect in years subsequent to previous year shall also be disclosed. vi. If a question arises as to whether a change is a change in accounting policy or a change in an accounting estimate, such a question shall be referred to the Board for decision. vii. For the purposes of above, the expressions,- (a) "Accounting estimate" means an estimate made for the purpose of preparation of financial statements which is based on the circumstances existing at the time when the financial statements are prepared; (b) "Accounting policies" means the specific accounting principles and the method of applying those principles adopted by the assessee in the preparation and presentation of financial statements; (c) "Extraordinary items" means gains or losses which arise from events or transactions which are distinct from the ordinary activities of the business and which are both material and expected not to recur frequently or regularly. Extraordinary items include material adjustments necessitated by circumstances which though related to years proceeding to the previous years are determined in the previous year: Pr....
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....esented on the basis of such accounting policies. 3.3.15 Thus, as per AS-1, the accounts have to be prepared so as to present a True and fair view and as per the AS-1 itself, the accounts cannot be said to have been true and fair unless it follows the principles of Prudence as mentioned in point No. 1 hereinabove. 3.3.16 Therefore, the Appellant having knew that the its liability to pay on account of copper concentrate having gone up substantially with a view to declare true and fair results of the Appellant and correct ascertainment of Income under the heading Business and profession. The liability to pay this increased amount had been accrued as per the Contracts which the Appellant was having with the Vendors for Copper concentrate and this being the case, the Appellant was bound to account for this increase in the liability. Reliance in this regard is also placed on the decision of Hon'ble Supreme Court in CIT vs Woodward Governor India (P) Ltd. and Honda Siel Power Products Ltd (312 ITR 254). "21. In conclusion, we may state that in order to find out if an expenditure is deductible the following have to be taken into account (i) whether the system of....
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....t in accordance with the method of accounting regularly followed and the Appellant having shown that the method of accounting has been regularly followed by him , the Ld. AO had no power to reject the same in view of the mandatory provisions of Section 145A which takes precedence over Section 145 in view of the non-obstante clause. Thus, the addition of Rs. 259.31 crores was totally wrong. Provision for copper concentrate allowable as per judicial decisions 3.3.20 It is not in dispute as per the disclosures in financial statements that provision is in respect of purchases of copper concentrate made by the appellant company. Thus, same is an ascertained liability & to be allowed as an expense under section 37 of the Act. 3.3.21 As per settled law, it follows that while computing business income chargeable to tax under section 28 of the Act, the Mercantile System of Accounting has to be followed and provision for anticipated losses and foreseeable liabilities will have to be taken into account. To substantiate the claim that ascertained liability even on accrual basis could be allowed under section 28 of the Act, the appellant relies on the decisio....
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....on and the change in the method of accounting having been followed consistently and having not been demonstrated to be malafide the addition in this regard was wrong. The Appellant's detailed reasoning in this regard has been seen and analysed. The Appellant in the last para of his written submission that the provisions of section 145A in respect of method of valuation of purchases and sales and the said 145A starts with non-obstante clause and therefore supersedes all other provisions of the Income Tax Act and has to be read in isolation. In the instant case, the Appellant had valued his purchases in accordance with method of accounting which has been shown to have been regularly followed, the provision of Section 145A should prevail over section 145 of the Income Tax Act, 1961." Copy of CIT(A) order for AY 2004-05 enclosed at page no... to ... of paper book. 3.3.24 The Hon'ble ITAT, Chennai bench in the above referred case confirmed CIT(A) order and held that "18. We have considered the rival submissions on either side and perused the relevant material available on record. As rightly submitted by the Ld. Counsel for the assessee, a company can adopt....
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....harged to profit and loss account under raw-material consumption. Liability recognised under this class for the year is Rs. 259.31 Crore which is outstanding as on 31 March 2010. Actual outflow is expected on finalisation of quotational period price in the next financial year." The said Note forms part of the Annual report and is reproduced at Page No.... to ... of the Paper book 3.3.27 From the above, it can be seen that the Ld. AO completely ignored the detailed submissions made by the Appellant in this regard and did not even refer to the same in the Assessment order while framing his order. The Ld. AO wrongly and arbitrarily made this addition ignoring opening coper concentrate provision reversed during the year. Without prejudice, opening copper concentrate provision reversed during the year need to be adjusted." 6.2 I have considered the facts of the case, the grounds of appeal, the order of the AO and the submissions of the appellant. The AO has disallowed the provision of Rs. 259,31,00,000/- on account of provisional accounting for purchases of copper concentrate. 6.3 The appellant has submitted that the copper concentrate purcha....
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....ove the ascertainability of an expenditure. Therefore, to this extent, the contention of the appellant fails. 6.5 Coming to the aspect of the ascertainably of the provision so created by the appellant, it has been stated that the purchase price of copper keeps on fluctuating. It is on account of this fluctuation that the seller does not sell the copper with a final price tag. However, what is essential to note in this entire process is that the appellant, indeed has accepted the volitality and the excessive fluctuations in the price's of copper, and hence, the appellant itself has accepted the unascertainableness of the cost towards such purchases. As a matter of fact, the stand of the appellant that the increase in the prices of LME has led to the excessive provision being created by it goes on to prove that the purchase price is inturn unascertainable and not predictive. This infirmity has rightly been observed and pointed out by the AO, in his assessment order. At the cost of repetition, it is essential to state that this infirmity is actually apparent from the submissions of the appellant itself. Here, it is also an utmost significant fact to....
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....nt under raw-material consumption. Liability recognized under this class for the year is Rs. 259.31 Crore, which is outstanding as on 31 March 2010. Actual outflow is expected on finalization of quotational period price in the next financial year. He submitted that this is the provision made by the assessee, which has been disallowed by the revenue. He explained that how the provisions are made looking at the provision made in the year ended on 31/3/2009, how it was settled in next year when the prices were finalized, how the excess amount of liability was debited to the purchase account and how for the year 2010 the further liability is created. He stressed that this method of accounting is followed by the assessee on year to year basis, accepted by revenue in earlier years, based on sound principles of prudent, accepted by the auditors, MCA, Vat authorities, Shareholders etc. He also referred to industrial practice and cited other companies' annual accounts to show that such provision is mandatory in view of the difference between the prices agreed as per shipment date, contract date and actual receipt of goods date. He also referred to the accounting standards of The ICAI, which....
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.... dated 14/11/2007 for assessment year 2004 - 05 wherein identical addition was made by the learned assessing officer was challenged. He referred to para number 4 of the order where the grounds of appeal were raised. He specifically referred to ground number 3 to show that the identical issue was raised. He further referred to page number 242 of the paper book para number 7 wherein ground number 3 of the appeal was decided by the learned CIT - A. Thereafter he referred to para number 7.6 of the order at page number 263 of the paper book wherein the learned CIT - A has deleted the addition. He then submitted that revenue preferred an appeal before the coordinate bench who passed an order for assessment year 2004 - 05, 2005 - 06 and 2006 - 06 by consolidated order dated 29/3/2017. He referred to para number 18 of the order of the coordinate bench wherein the appeal of the learned assessing officer is discussed and the order of the learned CIT - A deleting the above addition was upheld. He further referred to para number 52 of the order of the coordinate bench for assessment year 2005 - 06 wherein at para number 64 - 67 the identical issue was considered for assessment year 2005 - 06 a....
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....ellant is reproduced in para number 4 of the order of 263. The PCIT has mentioned in para number 5 of the order of that the honourable High Court of Madras has only passed an order of interim stay of demand on the conditional payment in interim stay on penalty. This fact is also ascertainable from page number 42 and 43 of the paper book filed by the appellant where the order of the Honourable High Court of madras in MP number 1 of 2014 in WP 15937 of 2014 is enclosed. The CIT has further stated in para number 7 of the order that in this proceedings new issue has been considered which was not the subject matter of the writ petition filed by the appellant of the stay granted by the honourable High Court of madras. The CIT has also mentioned in para number 12 of the order that insofar as the issue is considered by the authority in the order, which is presently stayed by the honourable High Court of madras vide order dated 20/6/2014 , suitable action will be taken in accordance with the direction of the honourable High Court, as and when the writ petitions are disposed. Further, in para number 8 and 9 of the order of the CIT, it is clearly mentioned that the appellant has not furnished....
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....ncome tax act, in para number 10 the order , learned principal Commissioner of income tax has categorically held that in respect of the issue on hand the provision is a liability which can be measured only by using a substantial degree of estimation and if certain conditions are not met the provisions cannot be recognised. Further, in para number 11 the learned CIT - A referring to the provisions made by the assessee directed the learned assessing officer to conduct a proper verification. It was also found that the learned AO in the original assessment proceedings did not make adequate enquiry and therefore it was held that the order passed by the learned assessing officer is erroneous and prejudicial to the interest of revenue in para number 12 the learned Principal Commissioner Of Income Tax also directed the learned assessing officer to complete the reassessment proceedings of fresh after making necessary enquiry verification in respect of the issues mentioned. Therefore it is apparent that the learned principal Commissioner of income tax invoked her powers u/s 263 of the income tax act to verify whether the provisions made by the assessee are allowable or not. While looking ....
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....n for treatment charges and refinement charges, which are negotiated with the suppliers. The assessee makes the initial payment to the suppliers based on provisional invoices, which are prepared based on the appropriate weight, quality, and purchase price prevailing at the time of loading the copper concentrate. Final invoicing is done after considering the weight of the cargo at the port, the quality of the copper concentrate and adjustment for treatment charges and refinement charges. The assessee also undertakes the hedging function for any price differentiation between the price at the time of shipment and at the time of final invoicing. Thus if the goods are purchased during the year and final prices are not finalized at the end of the year, assessee makes a provision of those purchases based on LME rates as at the end of the accounting year. For this year, provision was made accordingly. In the notes to schedule 12 of the annual accounts, the assessee has also disclosed the methodology by which the purchase price is being finalized. Copper concentrate are normally traded in open market based on London metal exchange (LME) prices with an appropriate deduction for treatment cha....
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.... treatment charges and refinement charges this methodology of the pricing is scope and in known as 1 MAMA. Further the court national. May also be 2nd month average following the month of arrival. In such cases the court national. Shall be the 2nd month following the month of arrival of the shipment. Accordingly the price payable shall be the London metal exchange month average price of the payable copper for the 2nd month following the month of arrival of the shipment as reduced by the treatment charges and refinement charges. This methodology of the pricing is nominally known as 2- MAMA. The assessee has created the provision in the books of accounts of the assessee based on the price of the copper concentrate at the London metal exchange which is actually been received by the assessee before the end of the relevant financial year and created on the basis of the price of copper concentrate on the last date of the financial year. The liability is therefore awkward and crystallised. Slight variation in the price at the end of the court national. Does not mean that the liability is contingent. The assessee is following this method since financial year 2003 - 04 and has been accep....
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....d losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of available information. It is not in dispute that the assessee is not making the above provisions on the basis of industry accepted standards on year to year basis. If there is a difference in the provisioning made by the assessee in one year is in excess of the actual liability later realised, the resultant sum always goes to the credit of the profit and loss account and further if there is an excess, the same is also debited to the purchase account. On careful analysis of the note placed at 12 of the annual accounts it is apparent that as on 31st of March 2009 the assessee made a provision of INR 1,406,800,000 based on the above methodology. The above provision was short as the actual liability was INR 1,533,100,000 towards the final settlement price. Thus the balance sum of INR 126,300,000 was charged to the profit and loss account under material consumption. Therefore if there is an excess over the estimate made by the assessee same is charged to the raw material consumption account when prices are finalised. Similarly if the provision made is higher and the li....
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....,31,00,000. The above provision has been made on the basis of the London metal exchange prices and certified by the auditors as well as approved by the shareholders of the company. Further, the identical issue has arisen in the case of the company in earlier years when the assessee chain the method of accounting with respect to the purchase price and the matter reached to the level of the coordinate bench which did not find any infirmity in the accounting treatment made by the assessee for provisions for purchases. In the result we do not find any reason to uphold the order of the lower authorities wherein the disallowance made by the learned assessing officer is upheld by the learned CIT - A. Accordingly we direct the learned assessing officer to delete the disallowance of rupees to 59,31,00,000 made on account of the provision for purchases. Accordingly ground number 2, 3, 4, 5 and ground number 7 to the extent of the addition confirmed by the learned CIT - A of rupees to 593100000/- towards the provisions for copper purchase price is allowed. 18. Ground number 6 of the appeal was not argued by the parties before us and therefore same is dismissed. 19. In view of our findin....