Principal of res-judicata has no application in IT Act and finding of particular assessement year cannot be binding on subsequent year

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Facts, in brief, as per relevant orders are that assessment in this case was completed u/s 143(3) of the Income-tax Act, 1961 (hereafter referred to as the Act) vide order dated 30.12.2004, determining income of ``28,28,40,870/-.Subsequently, after recording reasons, in writing, the Assessing Officer (A.O. in short) reopened the assessment u/s 147 of the Act with the service of a notice dated 28.01.2008 u/s 148 of the Act. During the course of reassessment proceedings, the AO asked the assessee as to why the provision of ``11.88 crore on account of revision of pay and allowances of pilots, pending finalization of settlement be not disallowed. The assessee replied that provision amounting to ``11.88 crore for the financial year 2002-03 was towards revision of pay and allowances, which was due and accrued from 1st January, 1997 on similar line as per the 5th Pay Commission for Central Govt. Employees as well PSUs in which the revision trend was changed over from every 5 years to every 10 years from the earlier wage revision and was made effective from 01.1.1992 to 31.12.1996. An estimated provision of 35% increase in wages was made over the actual expenditure. However, later based on the Pay Commission report for PSUs and negotiations held with different Workers unions, Pilots and Engineers Guilds, the pay and allowances had been revised w.e.f. 1.1.97 in the financial year 2002-03 and 2003-04, which had net impact of 55% increase as against provision of 35% over old Pay and allowances. The said provision made was virtually lower than actual payments made during the subsequent financial year. The legitimate arrears for pay and allowance due upon revision could not be denied against which the actual payments were made subsequently in view of the settlement arrived at between the different workers unions, pilots guilds, engineers guild and executive associations in accordance with the directions and the guidelines issued by the Department of Public Enterprises vide their order No. DPE O.M. No.2(49)/98-DPE(WC) dated 25th June, 1999 and DPE O.M. No.2/11/96- DPE(WC)-GL-1 dated 11th Feb, 2004 and the approval of Board of Directors of the company. Since the company followed the mercantile system of accounting, the liability ,which had thus accrued, had to be taken into account while working out the profits and gains of the business, the assessee pleaded. However, the AO did not accept the submissions of the assessee on the ground that provision for revision of pay and allowances was an unascertained liability and accordingly, disallowed the claim.

Citation :
Assistant C. I .T. ,Circle-14(1), Room no. 415,4th Floor,CR Building,New Delhi (Appellant)V/s.M/s Pawan Hans Helicopters Ltd. ,Corporate Office,Safdarjung Airport , New Delhi[PAN: AAACP 1561 A] (Respondent)