Appeal details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 314335 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-05-2025
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
E
Assessment Year
2014-2015
Judgement Text
"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 8271/Del/2019 (Assessment Year: 2014-15) M/s. Toshiba Water Solutions Pvt. Ltd. (Formerly known as M/s. UEM India Pvt. Ltd. D-19, Kalkaji, New Delhi-110019 Vs. ACIT, Circle-27(1), Delhi (Appellant) (Respondent) PAN: AAACU0043Q ITA No. 7988/Del/2019 (Assessment Year: 2014-15) DCIT, Circle-27(1), New Delhi Vs. M/s. Toshiba Water Solutions Pvt. Ltd. (Formerly known as M/s. UEM India Pvt. Ltd. D-19, Kalkaji, New Delhi-110019 (Appellant) (Respondent) PAN: AAACU0043Q Assessee by : Shri Satish Khosla, Adv Shri Manish Malik, Adv Shri Pankaj Jain, Adv Revenue by: Shri Amit Katoch, Sr. DR Date of Hearing 19/03/2025 Date of pronouncement 07/05/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeals in ITA No.8271/Del/2019 filed by the revenue and ITA No. 7988/Del/2019 for AY 2014-15, arise out of the order of ld. ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 2 Commissioner of Income Tax (Appeals)-9, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 9/10619/2017-18 dated 19.07.2019 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 29.12.2017 by the Assessing Officer, ACIT, Circle-27(2), New Delhi (hereinafter referred to as „ld. AO‟). As these are cross appeals, they are taken up together and disposed of by this common order for the sake of convenience. ITA NO. 8271/Del/2019 – Assessee Appeal 2. At the outset, we find that the assessee vide Application filed under Rule 11 of the Income Tax Tribunal Rules had filed an additional ground of appeal as under:- “That the Ld. Commissioner of Income –tax (Appeals) erred in law in enhancing the income of the appellant in respect of the matter not considered and determined by the Assessing Officer during the course of assessment proceedings.” 3. We find that this additional ground goes to the root of the matter and purely legal in nature. The facts relevant for its adjudication are already on record. Further we find that the issue raised in the additional ground is already the subject matter of Original Ground No. 1 raised before us. The additional ground is just another facet of the argument supporting the challenge of addition made on account of provision for contract loss of Rs 1,54,68,260/-. Hence the said additional ground is hereby admitted and taken up for adjudication. 4. The assessee has raised the following grounds of appeal before us:- ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 3 “1 On the facts and in law, the Ld. CIT(A) grossly erred in enhancing the income of the appellant by Rs. 1,54,68,280/- completely ignoring that:- a) The appellant has followed Accounting Standard -7 issued by the ICAI. b) The appellant has following the Accounting Standard, notified u/s. 145(2) c) The appellant has given detailed analysis on a scientific basis, which was ignored by the Ld. CIT(A). 2. The Ld. CIT(A) erred in confirming the disallowance of amounts written off in the books of account of Rs. 81,10,231/-. 3. That the appellant craves, leave to add, amend or alter any grounds of appeal either before or at the time of hearing of the appeal.” 5. We have heard the rival submissions and perused the materials available on record. The return of income for the Assessment Year 2014- 15 was filed by the assessee company on 30-11-2014 declaring loss of Rs 10,46,67,132/-. The assessee company during the relevant year was engaged in the business of design, supply, erection, commissioning & operation and maintenance of water & waste water treatment plants, machineries & equipments. The assessment was completed u/s 143(3) of the Act on 29-12-2017 determining the total loss at Rs 4,70,23,278/- after making the following disallowances / additions:- a) Disallowance u/s 14A of the Act - Rs 1,40,384/- b) Addition u/s 36(1)(va) of the Act - Rs 10,04,236/- c) Disallowance u/s 37(1) of the Act in respect of balances written off - Rs 4,14,74,122/- d) Addition of interest on refund - Rs 1,27,91,994/- e) Addition u/s 41(1) of the Act - Rs 22,33,118/- ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 4 6. The assessee preferred an appeal before the learned CITA. The learned CITA deleted the majority of the disallowances / additions and confirmed a sum of Rs 81,10,231/- in respect of balances written off which is subject matter of (c ) supra. The learned CITA however enhanced income by Rs 1,54,68,280/- on account of provision for contract loss vide page 20 para 10 of his appellate order. This issue is absolutely new source of income and hence the Original Ground No.1 read with Additional Ground of the assessee gets triggered and assumes importance. In our considered opinion, the learned CITA cannot invoke his enhancement powers in terms of section 251(2) of the Act and make addition on account of a new source of income. Reliance in this regard is rightly placed on the decision of Hon‟ble Jurisdictional High Court in the case of Gurinder Mohan Singh Nindrajog vs CIT reported in 348 ITR 170 (Del) which is directly on the issue. The relevant operative portion of the said judgement is reproduced hereunder:- “19. To the same effect is the judgment of another Division Bench of this Court in CIT v. Union Tyres [1999] 240 ITR 556 / 107 Taxman 447 reiterating that first appellate authority cannot consider new scope of income under Section 251(1) of the Act. Following question from the same judgment can aptly be: \"Section 251 of the Act prescribes the power of the Appellate Assistant Commissioner, now Commissioner (Appeals). Section 251(1)(a) of the Act empowers the Appellate Assistant Commissioner in disposing of an appeal by the assessed against an order of assessment to confirm, reduce, enhance or annul the assessment or to set aside and refer the case back to the Income Tax Officer for making fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner. \"Explanation\" to Section 251 provides that the Appellate Commissioner may hear and decide any matter arising out of the proceedings in which the order appealed against was passed notwithstanding that such a matter was not raised before the Appellate Commissioner by the appellant. The issue with regard to the scope of powers of the first Appellate Authority in disposing of an appeal has come up before the Courts umpteen times but we do not propose to burden the judgment by ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 5 making reference to all the decisions on the point. We will notice a few decisions which we consider are relevant to answer the question referred. In CIT, Bombay v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), while construing the corresponding provisions of the Indian Income Tax Act, 1922, relating to the jurisdiction of the Appellate Commissioner in such an appeal, the Supreme Court held that, in an appeal filed by the assessee, the Appellate Assistant Commissioner has no power to enhance the assessment by discovering a new source of income, not considered by the Income Tax Officer in the order appealed against. Similar views were expressed by the Apex Court in CIT (Central) Calcutta v. Rai Bahadur Hardutory Motilal Chamaria [1967] 66 ITR 443 (SC). It was held that the power of enhancement under Section 31(3) of the 1922 Act was restricted to the Subject-matter of the assessment or the source of income which had been considered expressly or by clear implication by the ITO form the point of view of taxability and that the Appellate Commissioner had no power to assess a source of income which had been processed by the Assessing Officer.\" At the same time, the Court also clarified that the power of the first appellate authority is not restricted to examine only those aspects of assessment about which the assessee makes a grievance but it covers the whole assessment to correct the order of the Assessing Officer not only with regard to the matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment. This principle can be traced to the following discussion in the said judgment: \"Thus, the principle emerging from the aforenoted pronouncements of the Supreme Court is, that the first Appellate Authority is invested with very wide powers under Section 251(1)(a) of the Act and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessed makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only with regard to a matter raised by the assessed in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment. However, there is a solitary but significant limitation to the power of revision, viz. that it is not open to the Appellate Commissioner to introduce in the Assessment a new source of income and the assessment has to be confined to those items of income which where the subject-matter of original assessment.\" The aforesaid view taken by the Division Bench was confirmed by the Full Bench of this Court in Sardari Lal & Co. (supra) observing as under:- \"Looking from the aforesaid angles, the inevitable conclusion is that whenever the question of taxability of income from a new source of ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 6 income is concerned, which had not been considered by the Assessing Officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147/148 of the Act and section 263 of the Act, if requisite conditions are fulfillled. It is inconceivable that in the presence of such specific provisions, a similar power is available to the first appellate authority. That being the position, the decision in Union Tyres' case (supra) of this court expresses the correct view and does not need reconsideration. This reference is accordingly disposed of.\" 20. Mr. Sabharwal, learned counsel appearing for the Revenue could not and did not dispute the aforesaid position in law. His submission was that the Assessing Officer had considered the issue which was clear from the questionnaire and, therefore the CIT(A) was vested with power to look into the same. As pointed out above, the Assessing Officer had issued a questionnaire on the basis of documents seized during the search. He had specifically undertaken the exercise as to whether the income has to be brought to tax or not on the basis of various seized documents. The reply of the assessee was elicited on this very aspect as well i.e. seized documents (page 21) which related to the transactions in question. It was pointed out that the document contains various notings of cash payments, advances etc. made through Mr. Tameez. The assessee was asked to furnish complete explanation thereof with sources for the same and was asked to explain with documentary evidences where it was accounted for. It was also mentioned that the document pertains to the property at Bangalore and the assessee was required to furnish full and complete details thereof. Page no. 21 reads as under:- \"i. R.T. Nagar That GMS Construction Co. Pvt. Wanted to start the development of some properties at R.T. Nagar, Bangalore along with Mr. Jeetu on joint venture basis. As per their verbal understanding 60% of built up area would go to Mr. Jeetu and the balance 40% to GMS Construction Co. Pvt. Ltd. In consideration of this under standing Mr. Jeetu was to pay Rs. 50 lacs as non-adjustable deposit. That initially a deposit of Rs. 25 lacs was received from Mr. Jeetu and the same was deposited with Canara Bank, Bangalore on 16-10-1995. The copy of Bank statement is enclosed herewith. The balance amount of Rs. 25 lacs was not received as the joint development could not be carried on due to depression in the real estate business and fall in the market prices of the properties. This amount has been adjusted against the amount due to Mr./Mrs. G.M. Singh from Soloman David holding private limited. It may however be stated that the assessee is not connected with this transaction in his individual capacity and the same are not related to his books of account. ii. Shanti Nagar This again was a joint venture proposal by GMS Construction Co. Pvt. Ltd. with Mr. Jeetu for the development of properties at Shanti Nagar. ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 7 That both Mr. Jeetu and GMS Construction Co. Pvt. Ltd, were to invest and share the profit in equal proportion as stated on the paper under reference. All the initial payments for the purchase of land were made by GMS Construction Co. Pvt. Ltd. and no contribution was received from Mr. Jeetu. This joint venture could not be finalized due to the same reason as state above i.e. recession in the real estate business and fall in the market price of the properties. The advances made for Shanti Nagar properties are not related to the assessee and hence to his block assessment.\" The assessee furnished its comments to the said page which reflected the transactions relating to property purchase at R.T. Nagar, Shanti Nagar and Chellagatta etc. It is thus clear that this very property in respect of which additions are made by the CIT(A) was the subject matter of consideration before the Assessing Officer. It is a different matter that after the reply submitted by the assessee, the Assessing Officer chose not to make any addition on this count and nothing is mentioned in the assessment order. That, however, would not mean that the Assessing Officer had not considered this matter. It was in our opinion duly considered. 7. Respectfully following the aforesaid judicial precedent, we allow the Original Ground No. 1 and Additional Ground raised by the assessee on technical ground for want of jurisdiction for the learned CITA to consider a new source of income by using his enhancement powers. No decision is rendered herein on the merits of the addition proposed by the learned CITA and it is left open. 8. The Ground No.2 raised by the assessee is challenging the disallowance of balances written off to the tune of Rs 81,10,231/-. 9. We have heard the rival submissions and perused the materials available on record. The learned AO noticed that assessee has debited provision for doubtful advances of Rs 4,14,74,122/- in its profit and loss account and claimed as deduction. The learned AO sought to disallow the same under section 37(1) of the Act on the ground that the same is in the nature of contingent liability which has not been crystallized during ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 8 the year. The assessee submitted vide reply dated 22-12-2017 that the provision against advance of Rs 3,33,63,891/- has been made against the bank guarantee invoked by ONGC, Assam amounting to Rs 14,88,46,319/-. It was submitted that it is estimated that the company may not be able to recover the fully above invoked amount against various expenses head. The company has filed legal claim against the party for recovery of the said due amount which is under arbitration. The company has assessed as per the legal opinion obtained that it has strong claims under these disputes and would be able to recover their dues amounting to Rs 14,88,46,319/- and the company has reversed the said provision in Assessment Year 2017-18. The learned AO however did not agree to the aforesaid contentions of the assessee and proceeded to disallow the same under section 37 of the Act. The learned CITA took due note of the reversal made by the assessee of this provision in Assessment Year 2017-18 in the sum of Rs 3,33,63,891/- and accordingly granted relief to the assessee to that extent. The learned CITA however sustained the remaining sum of Rs 81,10,231/- as assessee could not substantiate the allowability of the same and assessee also could not reconcile the nature and balance of the sums that were sought to be written off qua the respective parties . 10. The learned AR vehemently pleaded that this is not a provision that was made on account of doubtful advances and rather the same represents actual amounts written off. It was submitted that the advances were given in the regular course of its business and the same becoming irrecoverable, the assessee had no choice but to write off the same during the year under consideration and claim the same as deduction to the tune of Rs 81,10,231/-. The learned AR however fairly agreed for restoring this issue back to the file of learned AO for this ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 9 factual verification. No objection was raised by the learned DR before us for the same. Accordingly, we deem it fit and appropriate, in the interest of justice and fair play, to restore this issue to the file of learned AO for de novo adjudication in accordance with law only for the limited extent of Rs 81,10,231/- (4,14,74,122 – 3,33,63,891). The assessee is at liberty to furnish fresh evidences, if any, in support of its contentions. Accordingly, the Ground No. 2 raised by the assessee is allowed for statistical purposes. 11. The Ground No. 3 raised by the assessee is general in nature and does not require any specific adjudication. 12. In the result, the appeal of the assessee is allowed for statistical purposes. ITA No. 7988/Del/2019 – Revenue Appeal 13. The Ground No. 1 raised by the revenue is challenging the deletion of disallowance made under section 14A of the Act. 14. We have heard the rival submissions and perused the materials available on record. It is not in dispute that there was no exempt income claimed by the assessee during the year under consideration. Hence in view of the decision of the Hon‟ble Jurisdictional High Court in the case of PCIT Vs Era Infrastructure (India) Ltd reported in 141 taxmann.com 289 (Del HC), no disallowance under section 14A of the Act could be pressed into service. Accordingly, the Ground No. 1 raised by the revenue is dismissed. 15. The Ground No. 2 raised by the revenue is challenging the deletion of provision made on account of doubtful advances by the learned CITA. ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 10 16. We have heard the rival submissions and perused the materials available on record. Actually the learned CITA had not deleted the entire sum of provision made on account of doubtful advances of Rs 4,14,74,122/-. The learned CITA had only granted relief to the assessee to the extent of reversal of provision made by the assessee in Assessment Year 2017-18 by way of write back to profit and loss account in the sum of Rs 3,33,63,891/-, in order to avoid double taxation. Since the same issue in assessee‟s appeal to the extent of Rs 81,10,231/- is restored back to the file of learned AO, we deem it fit and appropriate, in the interest of justice and fairplay, to restore this issue also to the extent of Rs 3,33,63,891/- to the file of learned AO to verify whether the assessee had actually written back to profit and loss account by way of reversal of provision in Assessment Year 2017-18. If it had been reversed, then no interference should be made to the order of the learned CITA. With these directions, the Ground No. 2 raised by the revenue is allowed for statistical purposes. 17. The Ground No. 3 raised by the revenue is challenging the deletion of employees contribution to PF and ESI in the sum of Rs 10,04,236/-. 18. We have heard the rival submissions and perused the materials available on record. The Learned AR drew our attention to the table containing the due dates and date of actual remittance of employees contribution to PF and ESI, which in our considered opinion, requires factual verification. Hence we deem it fit and appropriate, in the interest of justice and fair play, to restore this issue to the file of learned AO for denovo adjudication in accordance with law and in the light of the decision of the Hon‟ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT reported in 448 ITR 518 (SC). We make it clear that the ITA No. 8271/Del/2019 ITA No. 7988/Del/2019 M/s. Toshiba Water Solutions Pvt. Ltd Page | 11 due date for the purpose of PF and ESI Act is to be determined based on the date of disbursement of salary to the employees. Accordingly, the Ground No. 3 raised by the revenue is allowed for statistical purposes. 19. The Ground No. 4 raised by the revenue is general in nature and does not require any specific adjudication. 20. In the result, the appeal of the assessee is allowed for statistical purposes. 21. To sum up, both the appeals of the assessee as well as the revenue are allowed for statistical purposes. Order pronounced in the open court on 07/05/2025. -Sd/- -Sd/- (ANUBHAV SHARMA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07/05/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "
AI Insights
The case involves cross-appeals by M/s. Toshiba Water Solutions Pvt. Ltd. and the ACIT, Circle-27(1), Delhi, concerning the assessment year 2014-15. The primary issues revolved around the enhancement of income by the CIT(A) on account of provision for contract loss and the disallowance of amounts written off in the books. The Tribunal found that the CIT(A) exceeded his jurisdiction by enhancing the income with a new source not considered by the AO, and thus this part of the appeal was allowed. Additionally, the Tribunal restored the issue of disallowance of balances written off to the AO for a detailed examination.
