The main legal point established in the judgment is the requirement for a definite finding on whether a provision represents an ascertained liability under the Income Tax Act, 1961.

JUDGMENT

[Physical Hearing/Hybrid Hearing (as per request)]

Rajiv Shakdher, J. (Oral)

1. This appeal concerns Assessment Year (AY) 2004-05.

2. Via the aforesaid appeal, the appellant has sought to assail the order dated 31.01.2018 passed by the Income Tax Appellate Tribunal [in short, "Tribunal"].

3. A perusal of the appeal would show that the following questions of law have been proposed:

"(i) Whether on the facts circumstances of the case and in law, ld. ITAT erred in deleting the addition of Rs.3,19,98,632/- made by the Assessing officer on account of provision for warranty?

(ii) Whether on the facts and circumstances of the case ld. ITAT erred in deleting of Rs.17,61, 99,671/- made by Assessing officer on account of provision for liquidated damages claimed in the profit and loss account by the Assessee even when the provisions are unascertained liabilities, hence were not admissible under the provision of Income Tax Act,1961?

(iii) Whether on the facts and circumstances of the case ld. ITAT erred in deleting of Rs.17,61,99,671/- made by Assessing officer on account of provision for liquidated damages claimed in the profit and loss account by the Assessee by not considering the fact that the assessee was following the mercantile systems of accounting and the law does not allow the claim of unascertained liabilities?"

4. Insofar as the proposed question no. (i) is concerned, Mr Ruchir Bhatia, learned senior standing counsel, who appears on behalf of the appellant/revenue, cannot but accept that it is covered against the appellant/revenue in the respondent/assessee's case titled, Commissioner of Income-tax, Bangalore vs. Nokia Siemens Networks India (P.) Ltd., [2011] reported in 14 taxmann.com 84 (Karnataka).

5. Thus, the only aspect that we are required to consider is indicated in the proposed question nos.(ii) and (iii).

5.1. A closer look at the proposed questions would show that they relate to the same aspect i.e., whether the Tribunal had erred in deleting the addition made by the Assessing Officer (AO) amounting to Rs.17,61,99,671/- on account of the provision created for liquidated damages?

6. According to Mr Bhatia, the Tribunal was dealing with the issue for the second time. In this context, Mr Bhatia has drawn our attention to the order dated 30.06.2017 passed in ITA No.3202/Del/2014.

6.1. Mr Bhatia submits, based on the hard copy of the order which placed before us that the Tribunal had remanded the issue to the Commissioner of Income Tax (Appeals) [in short, "CIT(A)"] with the following observations:

"17. While appreciating the above submissions, LD. CIT (A) has not dealt with the contract in the relevant clauses based on which he has agreed with the submissions of assessee that revenues and liabilities are capable of being estimated with reasonable level of certainty. Hon'ble Supreme Court in the case of Rotork Controls India (supra) has held that a provision is recognised when an enterprise has a president obligation as a result of past event; that is it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made on the amount of the obligation. If these conditions are not met no provision could be recognised.

18. Although the Ld. CIT (A) pointed out that obligation has to be seen on the basis of assurance given by assessee on in respect of services agreed to have been rendered by assessee under the contract, Ld. CIT (A) has failed to take it to the logical end while granting the relief. 19. We are therefore inclined to send this issue back to the file of Ld. CIT (A) to verify from the contracts, whether the parameters laid down by the Hon'ble Supreme Court in the case of Rotork Controls India (supra) has been fulfilled. Ld. CIT (A) is directed to analyse this issue on the basis of the terms of agreement between assessee and its customer and to grant relief as per law."

7. Furthermore, Mr Bhatia points out that the aforementioned order of the Tribunal wa