TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1694
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....ii) reversal of warranty provision of earlier years of Rs. 87,84,696/-. Consequent to the order of the CIT (A), the Assessing Officer initiated penalty proceedings, gave opportunity of being heard, after considering all the objections and the details submitted by the assesse, levied penalty at Rs. 33,87,230/- being 100% of the tax sought to be evaded. Aggrieved, the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal. 3. Aggrieved, the assessee filed this appeal, inter alia, with the following grounds: a. The Commissioner of Income Tax (Appeals) erred in rejecting the appeal of the Appellant herein, vide order dated 16.01.2014, confirming the penalty u/s. 271(1)(c) of the Act levied vide order dated 30.03.2010. b. The Commissioner of Income Tax (Appeals) erred in confirming the levy of penalty with respect to the claim of depreciation on leased factory building in the absence of concealment or furnishing of inaccurate particulars in this regard. The provisions of Sec. 271(1)(c) are not attracted in the present case. c. The lower authorities ought to have noted that it is entitled to depreciation in respect of the factory building irrespective of whe....
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.... the disallowance, on which the AO levied the penalty and the CIT(A) confirmed the levy. The AR pleaded this issue on the lines of ground nos (b) to (d) of the appeal grounds extracted above. 4.1 Per contra, the DR relied on the C'sIT(A) finding that the assessee's claim that it had an option to offer the rental income to tax under the head 'income from other sources' where it can claim depreciation u/s. 57(ii) of the Act, is not correct. Though it is a factory building, what was let-out was only the building. There are no plant and machinery included in the said let-out. Thus ,the rental income is not a composite rent, in order to offer it under the head 'income for other sources'. The assessee's rental income from factory building is, therefore, indisputably assessable under the head income from 'house property' only. In fact the assessee, who has sufficient professional advise, itself offered the rental income under the head income from 'house property'. Therefore, assessee's explanation is devoid of ally merits. Further, if the assessee wants to offer the rental income under the head 'income for other sources' and claim depreciat....
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....c) on this issue is confirmed. 6. The next issue is that the assessee is a contractor for certain projects. In some of these projects, as per the terms and conditions, the assessee is liable for certain warranties. In its accounts (P&L account), the assessee is showing the entire income on the credit side and debiting the warranty liabilities "by way of provisions for warranties". When the warranty period is expired and where there are no warranty claims from the contractees, the assessee is recognizing the said amount as income by crediting the same by way of "warranty provisions no longer required - written back". The returns were also being filed on the same lines. This is the consistent method of accounting followed by the assessee. In the scrutiny assessments made for ays 1997 -98 to 2002-03, the Assessing Officer disallowed assessee's claims of 'provisions for warranties" debited in P&L account holding that they are unascertained liabilities. The CIT (A) confirmed the Assessing Officer's action. For the current a y 2003-04 also , the books of accounts were maintained in the same manner . However, in the 'computation of taxable income statement' , the asse....
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....gh Court for AYs.1997-98, 1998-99, 1999-2000 & 2000-01 filed and are pending even today and argued that as on the date of filing the original return of ay.2003- 04 on 24.11.2003, the assessee lost its appeals up to ITAT level. Therefore, the assessee had a reason in not offering the reversal of the provisions of earlier years, though the same was recognized as revenue and credited to the P&L account of F.Y.2002-03. Similarly, the assessee has not claimed the current year's warranty provisions, as deduction, even though they are debited in the P&L account of F.Y. 2002-03. However, the assessee company had filed miscellaneous application against the orders of ITAT in ays.1997-98 and 1998-99. The ITAT while passing the orders on miscellaneous applications for ays.1997-98 and 1998-99, on 21.07.2004, held that the warranty provisions debited in the P&L accounts are allowable deductions. Therefore, as on 21.07.2004, the issue of allowability of "provisions for warranties", has been held in favour of the assessee by the ITAT. On receipt of the orders of ITAT of ays.1997-98 and 1998-99, the assessee filed a revised return of income for a y .2003-04, in which the assessee - (i) Consi....