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M/s. Apple India Pvt. Ltd. Versus Deputy Commissioner of Income-tax, Circle 11 (1) , Bangalore.

2016 (8) TMI 1080 - ITAT BANGALORE

Revision u/s 263 - Principal Commissioner was of the view that the AO merely allowed provision for warranty expenditure without looking into the aspect of whether such provision was made on a scientific basis as per guidelines laid down by the Hon’ble Apex Court in the case of Rotork Control India Pvt.Ltd.(2009 (5) TMI 16 - SUPREME COURT OF INDIA ) - Held that:- From perusal of the assessment order it is not discernable whether the AO had applied his mind on this aspect. No doubt once it is esta .....

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a notice dated 03/12/2012 calling upon the appellant to explain and justify warranty expenditure charges debited of ₹ 14.40 cores and how the same has been calculated on any scientific basis. - The appellant only stated the policy being followed by it and also made a mere bald statement that provision was estimated following scientific method. Thus, nowhere the assessee-company has stated what is the scientific method followed by it. The AO, without looking into what scientific basis, .....

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wherein the Hon’ble Apex Court held that where AO merely accepted the claim of the assessee in absence of any supporting material without making any enquiry, exercise of jurisdiction by the CIT was held to be justified. - Decided against assessee. - ITA No.824/Bang/2015 - Dated:- 20-7-2016 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri K.R.Sekar, CA. For The Respondent : Shri Sanjay Kumar, CIT(DR) ORDER Per INTURI RAMA RAO, AM : .....

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263 of the Income-tax Act, 1961 ("the Act") without appreciating that the assessment order passed under section 143(3) of the Act was not erroneous and prejudicial to the interests of the revenue. 2. The learned CIT has erred in not relying upon the decision of the Supreme Court in the case of Malabar Industries Co Ltd v. CIT [2000] 243 ITR 83 (SC) wherein it has been held that "where two views are possible and the Income-tax Officer has taken one view with which the Commissioner .....

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his appeal to quash the order issued under section 263 of the Act. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. 3. Briefly, facts of the case are that the assessee is a company duly incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of providing marketing and related services f .....

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he assessee-company was called upon to explain as to why the assessment order cannot be treated as erroneous and prejudicial to the interests of revenue for the following reasons: During the year a net charge of ₹ 14,40,19,057/-has been charged to the P&L a/c as provision for warranty. The etails of warranty provision provided in schedule- 15 Notes on account do not disclose that the warranty provision has been charged on a scientific basis. The provision for warranty thus claimed is t .....

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possible views on the issue of provision for warranty expenditure. It was also contended that the assesseecompany has followed scientific method for arriving at the amount of provision for warranty. It was also submitted that provision for 0 warranty expenses came to be allowed by the Hon ble ITAT for the assessment years 2005-06 and 2006-07 and for the assessment year 2003-04 SLP filed by the department was dismissed by the Hon ble Supreme Court on the same issue. It was thus submitted that wh .....

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f Rotork Control India Pvt.Ltd. vs. CIT (314 ITR 62). The Principal Commissioner held that the assessment order passed by the AO is erroneous and prejudicial to the interests of revenue. Therefore, he set aside the issue of deductibility of warranty provision to the file of the AO for fresh assessment after affording due opportunity to the assessee-company. 4. Being aggrieved by this order, assessee-company is before us in the present appeal. 4.1 Learned AR of the assessee contended that the iss .....

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sions made, the AO has allowed the claim and took one of the possible views. Therefore, the assessment order is not amenable to the jurisdiction u/s 263. In this connection, he relied on the following case laws: i. Malabar Industries Co Ltd v. CIT [2000] 243 ITR 83 (SC); ii. CIT(Central) Ludhiana v. Max India Ltd (2007) [2007]295 ITR 282(SC) iii. Gokuldas Exports [2011] 333 ITR 214 (Kar.) HC); iv. CIT vs. Sunbeam Auto Ltd [2011] 332 ITR 167 (Delhi); v. CIT Vs. Gabriel India Ltd. [1993] 203 ITR 1 .....

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Court in the case of Rotork Control India Pvt.Ltd.(supra). Thus, he 10 submitted that the order of the Principal passed u/s 263 be upheld. 5. We heard rival submissions and perused material on record. The issue in present appeal is on the validity of assumption of jurisdiction by the Principal Commissioner under the provisions of sec.263 of the Act. The Principal Commissioner was of the view that the AO merely allowed provision for warranty expenditure without looking into the aspect of whether .....

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the written submissions filed before the Addl.CIT as well as the ACIT during the course of assessment proceedings wherein the Addl.CIT has sought for details of the provisions made for warranty expenditure. The Addl.CIT, Range 11, in exercise of power vested with him u/s 144A had issued a notice dated 03/12/2012 calling upon the appellant to explain and justify warranty expenditure charges debited of ₹ 14.40 cores and how the same has been calculated on any scientific basis. The relevant .....

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dditional cost to be paid at the time of purchase of the product. If a defect exists, the Company will: a. Repair the product at no charge, using new or replacement parts; b. Exchange the product with a product that is new or which has been manufactured from new or serviceable used parts and is at least functionally equivalent to the original product. 5.1 From above submissions it is clear that the appellant only stated the policy being followed by it and also made a mere bald statement that pro .....

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his aspect by the AO. The ratio laid down by the Hon ble Apex Court in the case of Malabar Industries Co. Ltd. (supra) is squarely applicable to the facts of the case wherein the Hon ble Apex Court held that where AO merely accepted the claim of the assessee in absence of any supporting material without making any enquiry, exercise of jurisdiction by the CIT was held to be justified. The relevant paragraph is as under: 10. In the instant case, the Commissioner noted that the ITO passed the order .....

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atement of the account filed by the appellant in the absence of any supporting material and wi thout making any inqui ry. On these facts, the conclusion that the order of the ITO was erroneous is irresistible. We are, therefore, of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commissioner under section 263(l) was justified. 5.2 Even the Hon ble jurisdictional High Court in the case of CIT vs. Infosys Technologies Ltd. (341 ITR 290) upheld assumpti .....

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