TMI Blog2011 (3) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... ed then any person, who earns huge income in a particular year can inflate the provisions for expenses and in the subsequent year when there is less income or loss, can reverse the entry - This, cannot be permitted - Therefore, do not find any infirmity in the order of the ld CIT(A)upholding the addition - The ground raised by the assessee is accordingly dismissed. - ITA No. 430/Mum/2010 - - - Dated:- 16-3-2011 - R.V. Easwar, R.K. Panda, JJ. Shriram Bajai for the Appellant P.N. Devasan/DR, for the Respondent ORDER R.K. Panda: This appeal filed by the assessee is directed against the order dated 5.11.2009 of the CIT(A) - 22 Mumbai relating to assessment year 2006-07. 2. Grounds of Appeal No. 1 by the assessee reads as under: "On the facts and in the circumstances of the case, and also in law, the ld CIT(A) erred in confirming the disallowance of expenditure on performance incentives of Rs. 6,79,298/- and sales incentives of Rs. 12,09,650/-holding that the liability was contingent and it did not crystallize during the relevant previous year. The ld CIT(A) failed to appreciate, and ought to have held that the accrual of liability does not get po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hod, income, expenses, assets and liabilities are reflected in the accounts in the period in which they accrue. It was also submitted that the assessee has contractual obligation to pay since it is mentioned in the appointment letters. Appraisal takes place on the basis of earlier year and instructed to employees via e-mail. Therefore, Assessing Officer was not justified in disallowing the legitimate expenditure that is accrued in Assessment Year 2006-07. 3.1 However, the CIT(A) was not convinced with the explanations given by the assessee. According to him, contractual obligation, which is based on the performance of the official concerned, can be quantified only after achieving the target by the person concerned fixed for the year. In the case of the assessee, the offer letters do not provide for the exact amount which was to be paid by the assessee to its employees. He noted that an amount of Rs. 5,00,105/- out of provision for performance incentive and Rs. 8,58,483/- on account of sales incentive have been reversed by the assessee while accounting for these expenses. This, itself is sufficient to prove that the liability on account of these expenses did not crystallise duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that out of the total provisions of Rs.20,68,133/- towards provision for sales incentive and Rs. 11,79,403/- towards provision for performance incentive, the actual amount paid after the balance sheet date but before filing of the return has been claimed as expenditure and the balance amount has been offered itself for taxation. Therefore, no addition should have been made. 4.4 The ld DR, on the other hand, strongly relied on the order of the CIT(A). He submitted that the assessee has failed to produce the details of terms and conditions of employment either before the Assessing Officer or before the CIT(A). Therefore, it was not possible on the part of the revenue authorities to find out the terms and conditions in the appointment letter regarding the eligibility of the employees for the purpose of performance incentive and Sales incentive. He, accordingly, submitted that the order of the CIT(A) should be upheld. 5. We have considered the rival submissions made by both the parties, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. There is no dispute to the fact that the assessee is a private limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2006-07. The assessee, thereafter received bills of Rs. 18,65,573/-. Therefore, the Assessing Officer held that the assessee has made excess provision at Rs.13,45,553/-, which, according to the assessee were reversed in the subsequent year. Since the assessee has claimed the expenses, which were neither accrued nor crystallized during the year, the Assessing Officer disallowed the amount of Rs. 13,45,553/-. 6.2 In appeal, the CIT(A) confirmed the addition made by the Assessing Officer, for which the assessee is in appeal here before us. 7. We have considered the rival submissions made by both the parties, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. There is no dispute to the fact that as against the provisions of Rs. 32,11,106/- towards the provisions of bills yet to be received towards activity committed during the year, the assessee could receive bills of Rs. 18,65,573/- only. Therefore, the Assessing Officer has disallowed an amount of Rs. 13,45,553/-. In our opinion, unless the bill is received for the relevant Assessment Year, no liability can be fastened on the assessee. The assessee could have made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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