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ITO, Ward 2(1), C.R.bldg. New Delhi vs. M/s Apogee Investments P.Ltd. B 3/226, Paschim Vihar New Delhi
September, 25th 2012
                     DELHI BENCHES: "A" NEW DELHI

                    BEFORE SHRI AD JAIN, JM
                AND SHRI J.SUDHAKAR REDDY, A.M.

                        ITA No: 1523/Del/2011
                        Assessment Year : - 2008-09

M/s Bharat Gears Ltd.   vs.     DCIT, Central Circle 11
1009, Surya Kiran bldg.         New Delhi
19, K.G.Marg, New Delhi

(Appellant)                                      (Respondent)

                       Appellant by : Shri VM Jha, Adv.
                     Respondent by : Shri Pirthi Lal, Sr.D.R.



      This is an appeal filed by the Revenue against the order          dt.

8.2.2011 passed under Section 263 of the Income Tax Act, 1961 by the

Ld.CIT, New Delhi for Assessment Year 2008-09.

2.    Facts of the case:- The assessee in this case has filed its return of

income for the AY 2008-09 on 25.9.2008. Order u/s 143(3) was passed

by the AO on 20.4.2010. In the order report in form 3CD, the auditor

has not suggested any disallowance of provision for leave encashment

u/s 43B(f) of the Income Tax Act, 1961 by giving a Note that this section

was struck down as arbitrary and unconscionable by the Hon'ble High

Court.   The AO in his order u/s 143(3), has not discussed this issue.

The CIT passed an order u/s 263, directed the AO to disallow the claim

of the assessee and modify the assessment. Aggrieved the assessee is in

appeal before us.

3.    We have heard rival contentions and perused the material available

on record.

The Hon'ble Supreme Court while admitting a Special Leave Petition in

SLP 22889/2000 judgement dt. 8th May,2009 in the case of M/s Exide

Industries Ltd. and another (supra) has observed as follows:-

      "We further make it clear that the assessee would, during the
      pendency of the Civil Appeal. Pay tax as if S.43B(f) is on the
      Statute Book but at the same time it would be entitled to make
      a claim in its returns".

4.    As the AO has not applied his mind to this issue during

assessment proceedings, it cannot be said that the A.O. has taken a

possible view. Non application of mind warrants exercise of power u/s

263 of the Act by the CIT.     Thus the case laws relied upon by the

assessee are not applicable.

5.    Thus we uphold the order u/s 263 of the Act.

6.    Coming to the direction of the CIT(A) that the AO has to disallow

the claim of allowance of provision for leave encashment, we vacate these

directions in view of the interim orders of the Hon'ble Spume Court

extracted above.    The AO is directed to follow the directions of the

Hon'ble Supreme Court and dispose of the matter de novo in accordance

with law, without being influenced by the order of the C.I.T.

7.        In the result the appeal of the assessee is allowed in part.

Order pronounced in the Open Court on 21st September, 2012.

                   Sd/-                                         Sd/-

               (AD JAIN)                             (J.SUDHAKAR REDDY)
            JUDICIAL MEMBER                          ACCOUNTANT MEMBER

Dated: the 21st September, 2012


Copy of the Order forwarded to:

     1.   Appellant; 2.Respondent; 3.CIT; 4.CIT(A); 5.DR; 6.Guard File

                                                               By Order

                                                               Dy. Registrar

     1.   Date of Dictation:14/09/2012
     2.   Draft placed before the Author on: 18/09/2012
     3.   Draft proposed and placed before Second Member on:
     4.   Draft discussed/approved by the Second Member on:
     5.   Approved draft came to Sr.P.S. on: 21/09/2012
     6.   Date of Pronouncement : 21/09/2012
     7.   File sent to Bench Clerk on : 21/09/2012
     8.   Date on which file given to Head Clerk on:
     9.   Date of dispatching the Order on:
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