INCOME TAX ACT, 1961

Section 143(3) Section 263

Assessment - Addition to income - Provision for purchase price payable vis-a-vis direction of Pr.CIT under section 263 -

Assessee company was engaged in the business of processing of copper from copper concentrate, manufacturing/generation and/or trading of non-ferrous metals, etc. Assessment under section 143(3) was completed by AO. Subsequently, the order under section 263 was passed setting aside the issue to the file of AO. One of the issues in proceedings under section 263 was that the assessee had made a provision of Rs. 259.31 crores pending final price payable for the purchase of copper concentrate received during the year, for which actual purchase price could not be finalized before the close of the financial year but soon thereafter. Therefore, this issue was raised by AO in the assessment proceedings pursuant to order under section 263. AO raised the above query to the assessee. The assessee submitted its reply stating that in the order under section 263 passed by the Pr. CIT, Pr. CIT nowhere had said about the above sum and therefore, such disallowance now cannot be made in assessment proceedings pursuant to the order under section 263. The AO referred to the notice under section 263 and referred to para No. 3(1) of the letter and stated that same had been discussed in the show cause notice and therefore the contention of the assessee was not correct. Based on the his findings, disallowance of Rs. 259.31 crores was made by AO while completing assessment to section 263 order. CIT(A) held that AO had rightly disallowed the provision claim of Rs. 2,59.31 crores. Assessee contended that Pr. CIT had not given any direction on this issue while passing order under section 263 and therefore, the addition made by the AO in the assessment order passed in pursuance of the order under section 263 was incorrect.Held: It was apparent that the Pr. CIT invoked her powers under section 263 to verify whether the provisions made by the assessee were allowable or not. While looking at the accounts of the assessee for financial year ended on 31-3-2010, in schedule number 12, current liabilities and provisions were mentioned. The point number 2 of that schedule deals with the various provisions made by the assessee wherein under the head of the other provisions, sum of Rs. 259,31 crores was mentioned. Pr. CIT referred to the provisions of this amount in show cause notice, dealt with the issue of allowability of such provision in a her order, held that AO had not verified this aspect, clearly shows that, this issue was dealt with by the Pr. CIT. In view of this, it cannot be said that the Pr. CIT had not given any direction to the AO to verify the above deduction claimed by the assessee. Hence, Tribunal reject the argument of the authorised representative that above addition made by the AO was not emanating from the order of the Pr. CIT passed under section 263.

REFERRED :

FAVOUR : Agains the assessee.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 143(3)

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