2012 (1) TMI 396

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....ounds have been raised: "1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The learned CIT (A) has erred in deleting the addition amounting to Rs. 1,42,01,453-00 made on account of disallowance of provision of warranty debited to P & L Account, without appreciating the facts and circumstances under which the disallowance was made by the Assessing Officer. 3. The learned CIT(A) has erred in allowing the relief based on the submissions/details filed by the assessee during the course of appellate proceedings without giving an opportunity to the Assessing Officer to verify the genuineness of the same. ....

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....at the assessee had claimed warranty provision to the tune of Rs. 1,42,01,453. The AO asked the assessee to file its objection, if any, for disallowing the same. The assessee submitted as under: "As explained to you the Institute of Chartered Accountants of India have prescribed a new Accounting Standard (AS 29) by which the warranty liability has to be recognised at the time of sale and provision has to be made at the year end on the sale affected during that year based on the past trend. Based on that year sale, the warranty provision @ 4% has to be made. After adjusting the settlement the difference between the provision and settlement, the provision in that year aggregating to Rs. 1,42,01,453/- has to be made. ....

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....    Manufacturing 2,51,90,875/-   Trading 1,16,04,994/-   Imports 1,76,04,506/-   Total 5,44,00,375/- 7. The ld. CIT(Appeals) deleted the addition made by the AO by following his earlier order dated 01.12.2009 for the A.Y. 2005-06. The relevant observations of the ld. CIT(A) as mentioned in para 6 of the impugned order reads as under: "6. The cited case laws as well as the facts supplied are examined. I find these case laws have not given a verdict that provisions for warranty as such appearing in the P & L A/c be allowed as a deduction. It has been enunciated in these case laws that provision means a contingent present liability for incurring future expenses. Therefor....

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....44,00,375/- was more than the provision made and hence the claim of Rs. 1,42,01,553/- made in the P/L a/c. In fact it is not a provision at all. It is actual claim of expenditure and hence allowable. Addition is deleted." 8. Now the department is in appeal. During the course of hearing, the ld. counsel for the assessee at the very outset stated that this issue is squarely covered in favour of the assessee by the earlier decision of the ITAT, Bangalore Bench "A" in the assessee's own case in ITA No.142/Bang/2010 for the A.Y. 2005-06 vide order dated 21.03.2011. Copy of the said order was furnished. 9. In her rival submissions, the ld. DR although supported the order of the AO, but could not controvert the aforesaid contention of the ld....