Ita/256/2010 Of The Commissioner Of Income Tax,Cochin v. M/S.metrolla Steels Ltd.,Muvattupuzha

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN MONDAY, THE 21ST FEBRUARY 2011 / 2ND PHALGUNA 1932 ITA.No. 256 of 2010() -------------------- ITA.724/COCH/2008 OF INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH ................... APPELLANT / APPELLANT : --------------------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS. SRI.P.K.R.MENON, SR.COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, SC, INCOME TAX RESPONDENT / RESPONDENT : --------------------------------------------- M/S.MET ROLLA STEELS LTD., MUVATTUPUZHA - 61. BY ADV. SRI.A.KUMAR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 21/02/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Mn C.N.RAMACHANDRAN N AIR&K. SURENDRA MOHAN, JJ. ------------------------------------------------------------ I.T.A. NO: 256 OF 2010 ----------------------------------------------------------- Dated this the 21[st] February, 2011. JUDGMENT Ramachandran Nair, J. The question raised is whether the Tribunal was justified inallowing a provision for liability created by the respondentassessee towards differential tariff payable to the KSEB for theassessment years 2000-2001 and 2001-2002. We have heardsenior counsel appearing for the revenue and Adv A. Kumarappearing for the respondent. 2. The assessment involved is 2002-2003. The assesseewhich was entitled to concessional power tariff debited the P& Laccount with a huge amount of Rs.1,90,73,392/- said to be thearrears billed by the KSEB towards liability for the precedingtwo years 2000-2001 and 2001-2002. The case of the revenue isthat the assessee was entitled to concessional tariff and assesseehas no case that the arrear bills raised by KSEB which weredisputed by them were honoured or paid by the assessee at anytime. Further the liability for power charges debited in the profitand loss is not a liability of the previous year but based on arrear ITA 256/2010 bills of earlier years. The contention of the assessee on theother hand is that since arrear bills were raised in the previousyear provision ought to be made in the accounts in the year inwhich the bills are raised and the assessee though contested thematter by filing writ petition had in fact made part payments.However, strangely Tribunal has not considered any of thesematters and allowed the claim just by stating that if bill isreversed or cancelled the amount could be assessed underSection 41(1) of the Income Tax Act. We are unable to uphold theorder of the Tribunal because 41(1) does not justify an assesseeclaiming liability without any substance in it. However, if theassessee has made part payment and liability was pressed byK.S.E.B and disconnection was prevented by stay ordersobtained from Court then certainly assessee is entitled todeduction of at least the amount paid under interim orders of theCourt or even the full bill amount depending on the nature ofliability and the contest. Since there is no material to supportthe contention of the assessee in the findings of the Tribunal wefeel one more opportunity can be granted to the assessee tosubstantiate the case before the Assessing Officer. We make it ITA 256/2010 ITA 256/2010 clear that if recovery of the bill is not stayed by the Court thenthe necessary consequence would have been disconnection bythe Board and in the absence of any contest and interim ordersissued by the Court or disconnection the assessee has nojustification to debit P & L account merely because some arrearbills are received from the KSEB. Standing counsel submittedthat genuineness or correctness of the bills itself should bedoubted because KSEB did not raise the bills for the relevantyears namely, 2000-2001 and 2001-2002 to which the liabilityrelates. Since the facts are not on record and since the findingsof the Tribunal are not tenable, for the reasons stated above, weallow the appeal by setting aside the order of the Tribunal andthat of the first appellate authority and remand the matter to theAssessing Officer for reconsidering the developments that tookplace based on evidence to be produced by the assessee and infact the ultimate settlement of liability which would have takenplace in the course of the last eight years.The assessee is givenfreedom to produce all the records before the Assessing Officerwho will reconsider the matter and decide the issue afresh ifnecessary after collecting information from KSEB also about the ITA 256/2010 nature of liability and the progress of contest in court and theorders issued in the High Court against KSEB. C.N.RAMACHANDRAN NAIR Judge jj K. SURENDRA MOHANJudge