K. VINOD CHANDRAN, J.

1. The above appeals are considered together though slightly different issues arise. The main issue arise on the computation of profit and loss under Section 115-J as it existed in the assessment years.

The questions of law arising in ITA No. 43/2003 are framed as follows:

1. Whether the Tribunal was justified in confirming the additions made by the assessing authority under Section 115-J of the Income Tax Act, 1961 by adding back the foreseeable loss, which is an ascertainable liability and is reflected in the Profit And Loss account accepted by the Registrar of Companies?

2. Whether the Tribunal was correct in having affirmed the addition made by the Assessing Officer going by the decision of the Hon'ble Supreme Court in Apollo Tyres v. Commissioner of Income Tax, (2002) 255 ITR 273 (SC)?

2. The assessee through one of its divisions called FEDO enters into contracts, the profit and loss of which are ascertained, according to the learned Counsel, in accordance with the accounting procedure (AS7) as produced at Annexure G. On every stage of the work in the previous year there is a computation made of the amount to be expended for that stage of the work as per the agreement and that actually incurred. If what is actually incurred is in excess of what is due to the company as per the terms of the contract, then the said amount is treated as a foreseeable loss. The Assessing Officer added back the same on the ground that the same would not be ascertained liability.

3. It is argued by the learned Counsel appearing for the assessee/appellant that the accounting procedures by AS7 specifically speaks of such computation of profit and loss at every ascertainable stage of work in accordance with the accounting principles. The same has also been accepted by the Registrar of Companies. The Profit and Loss account has also been prepared under Part II and III of Schedule VI to the Companies Act. The Hon'ble Supreme Court in Apollo Tyres (supra) has categorically stated that the Assessing Officer under the Income Tax Act cannot go behind such profit and loss computed and embark upon a rowing enquiry into the various heads under which the monies have been apportioned to effectuate a reopening of the accounts of the Company, certified by the auditors, accepted at the annual general meeting of the Company as also the Registrar of Companies. Reliance also is placed on the decision of the Hon'ble Supreme Court in Bharat Earth Movers v. Commissioner of Income Tax, (2000) 245 ITR 428.

4. The specific contention of the assessee as is noticed from the order of the Tribunal is that at the finalisation of accounts, the Company was aware of the loss going to be incurred on the completion of the existing contracts in its hand and therefore such loss worked out on the basis of the technical analysis has to be provided for in the accounts by way of provision for anticipated loss. This is a permissible deduction under Schedule VI of the Companies Act, 1956. The Tribunal on facts found that the contracts having not been completed or terminated during the previous year, amounts computed by the assessee were only anticipatory loss and could be actually ascertained only on the closure of the contracts. It was hence the additions were confirmed.

5. Bharat Earth Movers (supra) does not at all aid the assessee in advancing the case put forth, for reason of it being quite distinct on facts. Therein the assessee company had been making provision for the liability for encashment of Earned Leave by the employees. The employees were entitled to maximum of 240 days earned Leave which can be either availed or encashed periodically or at the time of superannuation. Like wise vacation leave was another eligibility with almost the same terms. Earned leave could be accumulated only up to a maximum of 240 days and vacation leave up to 126 days. The Company has a practice of making provision as ascertained liability, the amount due to each employee to