The Income Tax Appellate Tribunal [ITAT], Delhi Bench, has allowed the claim of staff welfare expense not a contingent liability in terms with AS-4.
The Delhi bench of ITAT including Shri H.S. Sidhu, Judicial Member and Shri L.P. Sahu, Accountant Member considered so while dismissing the appeal of D.C.I.T., Circle 11(1).
This is an appeal filed by the Revenue against the order of CIT New Delhi for the assessment year 2007-08 on some basis that CIT has erred in law for doing the reassessment proceedings and notice issued under section 148 before completion of four years.
Another basis was that CIT made mistake in deleting the addition of Rs.11, 34, 91,000/- on account of contingent liability.
The assessment made in the impugned year was completed u/s. 143(3) of the IT Act. While observation the AO found that as per note 7(n) to account, ITDC Employees welfare cum performance Incentive Scheme was discontinued by the management effective from F.Y. 2003-04. However, pending final agreement with the Union and implementation thereof, provision of Rs.11,34,91,000/- was made and charged to Staff Welfare Expenses and is shown as included in the contingent liability, which is not an allowable expenditure. On this basis AO initiated proceeding by issue of notice under section 148 of the Act and made addition of Rs.11, 34, 91,000/- to the total income of the assesse through an order.
The Assesse carried the matter in front of the CIT(A), challenged the reassessment proceedings on their validity as well as on merits of addition. CIT(A) after considering the grounds of appeal and the submission of assesse proclaimed that reassessment was invalid.
The CIT held so that the notice issued by AO was silent about the mode of dispatch and no evidence regarding whether it was issued by assessing officer to the assesse. The CIT observed that staff welfare expenses including contribution to staff welfare fund, the details of which were furnished by assesse and reopening of the same will be regarded as change of opinion. It was also observed that since the liability stood subsequently discharged and hence, such liability could not be treated as contingent.
The bench gone through both the parties contention and dismissed the appeal of Revenue. As far as the conclusion of CIT as to invalidity of impugned reassessment proceedings on the premise of change of opinion and non-issuance of notice u/s. 143(2) is concerned, ITAT found that the Revenue has not raised any specific ground in the memorandum of appeal to challenge these findings of the CIT.
The CIT after examining the memorandum of settlement submitted by assesse found that the impugned liabilities claimed by the assesse were in accordance with AS-4 and the said liabilities stood subsequently discharged by the assesse and hence, it cannot be termed as contingent liability. No contrary material is laid on record by the department to interfere with the impugned order on this count.
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