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13 . Th e fa c ts r e la ti n g to th e i ss ue a re tha t the a ssess ee ha d c la ime d p ri or pe r iod e xpe n d itur e of Rs .8 ,0 6 , 616 /- in t he Pr of i t & Los s Acc oun t. Th e A .O . d i sa l lo we d th e sa i d e xpe n se s on the gr oun d th a t the a sse s see f ol lowe d me r ca n ti le sys te m of a c cou nt in g and, t he re for e , t he e xpe n se s s ho ul d h a ve b ee n de b ite d i n th e ye a r in wh i ch thos e e xpe n se s we re a ctu a ll y in cur r e d . The Ld .C I T( A ) d e le te d the di sa ll ow a nce on f in d in g th a t the a sse sse e h ad ma nu fa c tur i ng u n i ts a t th r ee d i sta n t l oc a ti ons on ac cou nt of wh i ch some bi l ls of d a il y e xpe n se s we re re ce i ve d la te a n d a ccor d i ng ly b ook e d a t the ti me of re ce i p t o f b i l ls . Th e C I T( A) a ls o not e d the fac t tha t e ve n some pr i or pe r i od i ncome w a s a ls o b ook e d at a l a te r d a te to th e pe r io d to w hi c h it pe r ta ine d a nd d uri n g th e imp u gne d ye a r p ri or pe riod i n come a moun ti ng to R s.7 , 2 8, 0 6 3/- had been b ooked by the A.Ys.2012-13 & 2014-15 a sse sse e . Th e C I T( A) fu rt he r too k n ote of the f oll ow i ng de ci si ons on th e i ss ue of p r ior p e r i od e xp e n se s and d e l ete d the d i sa l lo wa n ce ma d e :

15 . We h a ve he a r d t he r iv a l co nte ntion s a nd pe r used t he or de r s of the auth or i tie s be low. Th e f a ctu a l su bmi ss io ns ma de b y th e a s se sse e t ha t the pr ior pe r iod e xpen se s were boo ke d o n a cc ou nt of la te re ce ipt o f b il l s of un it s of t he a sse sse e l oca te d a t faraway p l ace s a nd th a t ev e n p r ior pe r iod in come s we re a l so so b ook ed by th e a sse sse e , h a s not be e n con tr ove r te d by th e R e ve nue . The a sse ss ee ha s con te n de d th a t it w a s con si ste nt ly b ook i ng su ch p rio r p e r iod e xpe n se s a nd i n come f r om y e a r t o y e a r , a n d th i s has a l so not b ee n con tr ove r te d b y the Re ven ue .

52 . W e h a ve he a r d th e co nte nti on s of b oth t he pa r tie s. W e do no t f in d a n y r e a s on to i n te r fe re in the or de r of th e C I T(A ) in di sa ll ow i ng t h e pe n a l ty a mo un ti ng to Rs. 7 7 , 0 0 0/-. The fa ct r e l a tin g t o the na t ure of th e p e n a l ty, a s p oi nte d out b y the Ld . DR b e f or e u s, i s n ot d i sp u te d . Thu s R s.2 0 0 0 /- b e i ng pe na l ty le vie d fo r sl ee pi n g dr i ve r, is c le a rl y no al l ow a ble be in g i n the na tu re of pe n a l ty f or i n fr i ng e men t of l a w . Si mil a r l y, a l so, th e a mo un t of Rs .7 5 , 00 0 /- l e v ie d b y t he Ar b itr a l Tr i bu n a l on the a s se sse e to comp e ns a te the re sp on de nt in a ca s e fi le d b y i t to th e Tr i bu na l i s , we ho ld , ri gh tl y h e l d b y th e C I T( A) to b e in th e n a tu re of pe n a lt y a n d thu s di sa ll ow e d u/s 3 7( 1 ) of t h e Ac t. Mor e ov er , i t i s a n A.Ys.2012-13 & 2014-15 un di sp u te d f a ct th a t th e or de r le vy in g pe na l ty /cost b y the Tr i b un a l w a s da t e d 17 . 2. 2 0 13 . Th e re fore , we a g re e w i th the a uth or it ie s be low th a t the li a b i li ty to p a y the fi ne accr u e d in a sse ssme nt ye a r 20 1 3 -1 4 a n d , t h e re f ore , d i d n ot p e r ta i n to the i mp ugn e d yea r a t a l l. I n vie w of th e a b ove , we a gr ee w i th the Ld . C I T( A) th a t t he a mou nt o f Rs .7 7 ,0 0 0 /- w a s i n t he na tu r e of p e na l ty p a i d b y the a s se s se e a nd f ur th e r out of t he a bo ve Rs. 75 , 0 00 /- pe r ta in e d to th e e a r lie r ye a r a nd, the re fo re , f or th e a fo re sa i d r e a so ns, th e sa i d a mou nt w a s not a l l ow a bl e to. Gr ou nd of appeal N o.3 r a is e d by t he a sse sse e is , the re f ore , d i smi ss e d .

53 . G r oun d of a p p e a l N o. 4 r a is e d b y th e a sse s see r e ad s a s un de r :

"4. That the Ld. CIT (Appeals) has grossly erred in law as well as facts in confirming the disallowance of deduction of provision of warranty rejections of Rs.56162/-. The addition made on this account amounting to Rs.56162/- may please be deleted."

54 . Brief f a cts re la tin g to th e i ssue a re th a t dur i ng a sse ssme nt p r oce e d in gs th e A .O . n oti ce d th a t th e a sse ssee ha d cl a i me d e x pe nd i ture on a ccou n t of pr ov is io n u nd e r t he he a d " w a r r a n ty r e je c tio n" of Rs .7 , 82 ,3 03 /- and Rs. 3, 0 5 ,0 6 3 /- a s on 3 1. 3 .2 0 1 4. O n be i ng a ske d to s how ca us e a s to w hy th e sa me ma y n ot b e a d de d b ack to t he in come of th e a s se s see si nce th e se we re n ot a ctu a l ly A.Ys.2012-13 & 2014-15 e xpe n d itu re i n cur r e d , i t w a s con te n de d b y the a sse ssee t ha t the sa i d p ro vi sion ha d bee n re ve r se d in the sub s e q ue nt ye a r s on r e ce i p t o f ne ce s sa r y b il l s fr om th e p a r ti e s . The a sse sse e e x pl a i ne d t ha t the a mou nt s ha d b ee n b ook e d a s pr ov is io n f or w a r r a n ty r e je ct ion on r e ce i p t of r e je cte d ma te r i a l a t the fa c tor y, p e nd i n g is su e of d e b it not e f or re je cti on b y the p a r ty wh i ch ha d r e je c te d the ma te r i a l. Tha t in th e bo oks of a c cou nt , pr ov is io n ha d b e e n cl ai me d s in ce the re je ct ion h ad be e n re ce i ve d b y t he a sse ssee a s a t t he cl ose of the ye a r a nd th us t he t ra ns a cti on h a d cr ys ta ll i ze d a nd , the re f ore , a s p e r t he p re va i l in g a c cou nti n g c o nv e nt io ns a nd st a nd a r d s, th e e xpe nse s ha d a c cr ue d . Th a t on ce t he re je cti on we re v er i fi e d th r oug h d eb i t n ote b y cus tome rs , t he pr ov is io ns we re n ul l if ie d a nd re ve r se d . Th e A .O . e xa mi ne d the c onte n tio n ma d e b y the a sse ss ee a n d f oun d tha t ou t of the tota l p r ov is io ns cr e a te d, pr ov is i ons of on ly Rs. 10 , 2 9, 2 0 7/- h a d b ee n re ve r se d b y the a sse ssee i n t he sub s e q ue nt ye a r. He , th e re f ore , f ou nd t ha t th e ba l an ce a moun t o f Rs. 5 6 , 1 6 2/- w a s onl y a p r ov is io n a nd no a ctu a l e xpe n d itu re ha d b ee n i nc ur r ed by the a sse ss ee and a ccor d i ng ly , d is a ll ow e d the sa me . The Ld .C I T(A ) u ph e l d t he di sa l l ow a nc e ma de b y the A. O. A.Ys.2012-13 & 2014-15 55 . B e f ore us , the Ld . cou ns e l f or as se s se e re i te r ated t he con te n ti ons ma d e be f ore t he low e r a uth or i ti e s. H ow e ve r , t he Ld. D R r e l ie d u po n the or de r of th e CI T( A) . 56 . W e h a ve he a rd th e r i va l co nte ntion s. W e d o n ot fi n d a ny r e a son to i n te r fe re i n the or d e r of the Ld .C I T(A ). The fa ct ua l f i nd i ng s of th e lowe r a u tho ri ti e s th a t the imp u gne d pr ov is io n of Rs. 5 6 ,1 6 2/- had n ot b ee n re ve r sed in the sub s e q ue nt ye a r b y w a y of d e b t no te re ce ive d fr om a p a r ty on a cco un t of re je cte d ma te r i a l, ha s n ot be e n c ont ro ve r te d by th e a sse s see b e f ore u s. The r e for e , a s pe r the e xp la n a ti on of t he a sse ssee , a l so t he sa i d pr ovi si ons d i d n ot re la te to a ny r e je c te d ma t e r ia l re ce ive d ba c k b y the a s se s se e fr om a ny pa r ty b e ca u se a s p e r th e e xp la n ati on gi ve n b y th e a s se s se e, suc h p r ovi s ion s w e re cre a te d on r e ce i p t of re je cted ma te r i a l a s a t th e e nd o f the ye a r p e n di n g t he d e b it n ote s to b e i ss ue by t he c once r ned pa rt ie s. I n the i mp ugn e d ca se , t he f a ct tha t no de b it not e re l a ti ng to R s. 56 , 1 62 /- w a s is s u e d i n t he sub s e q ue nt ye a r s how s th a t th e re wa s n o r e ce ip t of r e je cte d ma te r i a l t o th a t e x te n t a s a t th e e nd of th e yea r an d t he a moun t di d n ot r e p re se n t any l ia b i li ty b ut wa s on l y a pr ov is io n fo r th e sa me . The d i sa l lo wa n ce o f th e sa me i s, the re fo re , r i ght ly u p he ld b y the CI T( A) . G r oun d of a p pe al N o.4 r a is e d b y the a sse ssee i s, ther e f ore , d i smi ss e d.