TaxTMI 
TaxTMI 
2022 (1) TMI 878
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.... on the following grounds: Ground 1 - Disallowance of claim of provision for losses 1.1 Based on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance of provision for losses amounting to Rs. 12,31,40,818 by holding the same as contingent in nature even though the provision was made following Accounting Standard - 7. 1.2 Based on the facts and in the circumstances of the case and in law, the learned CIT(A) has failed to appreciate that disallowance of provision for losses results in taxability of income which does not exist thereby ignoring the principle of taxability and real income. The Appellant craves leave to add, alter, omit or substitute any or all of the above grounds of appeal, at any time before or at the time of the appeal hearing." 3. The brief facts of the case are that the assessee is a company, filed its return of income for the assessment year 2012-13 declaring total income of Rs. 1,25,40,710/-. The case was selected for scrutiny through CASS. After following due procedure, an assessment was completed. In the assessment order, on perusal of the financials of the assessee, the A.O has noted tha....
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....national Airport. The project commenced in August, 2010 and was expected to be executed over more than one accounting period. Due to various unforeseen events which occurred during the course of project execution, certain unplanned costs had to be incurred by the assessee to complete the project. These costs including significant increases in necessary material, labour and other costs to address these unplanned events. Given the fixed price nature of contract with L&T Ltd., the assessee has begun to incur significant losses on the project. These losses had majorly occurred during the financial year relevant to the assessment year 2012-13 and were appropriately provided for in the profit and loss account in accordance with Accounting Standard-7, which was consistently followed by Tremco India. Thus, both during the subject assessment year and subsequent assessment years, the assessee actually incurred project losses, which is evident from the audited financial statements and accordingly, the assessee has made a provision for losses as per AS-7. 5.2 He further pointed out from the AS-7(21), against the contract revenue and expenses and recognition of expected losses, he submitted th....
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....l Representative has submitted that the assessee has not submitted any scientific method before the A.O that the loss is estimated by the assessee. He further submitted that the assessment year under consideration, the assessee has made a huge profit therefore the assessee instead of paying taxes for the year under consideration shifted to subsequent years and he strongly supported the orders passed by the other authorities below. 7. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including case law relied on by the ld. Counsel for the assessee. The case of the Assessing Officer is that the assessee has debited an amount of Rs. 12,31,40,818/- to the profit and loss account as a provision of losses. Before the Assessing Officer, the assessee has not explained the basis for the provision of losses. Therefore, the Assessing Officer has disallowed the same. On appeal, the ld. CIT(A) confirmed the order of the Assessing Officer. 7.1 In this case, we find that the assessee has not given any scientific basis for the provision made either before the Assessing Officer or before the ld. CIT(A) or even before the Tribu....
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....iture was only Rs. 5,18,554/-, the excess provision of Rs. 5,00,246/- was reversed and only the net provision was claimed. The Tribunal allowed the claim on the basis that the provision had been consistently made and on a realistic manner, which was upheld by the Hon'ble Supreme Court by reversing the decision of the Hon'ble High Court. In this case, the Tribunal has held that right from the assessment year 1983-84 the CIT (A) as well as the Tribunal had allowed the warranty claim(s) on the ground that Valve Actuators are sophisticated equipments; that in the course of manufacture and sale of Valve Actuators a reasonable warranty was given to the purchasers; that every item of sale was covered by the warranty scheme; that no purchaser was ready and willing to buy Valve Actuators without warranty and consequently every item sold had a corresponding obligation under the warranty clause(s) attached to such sales. In the above case, the provision made are for warranty and the same was made in realistic manner and therefore, the Hon'ble Supreme Court upheld the scientific method adopted by the assessee. In the present case, no scientific method was adopted by the assessee to estimate t....