M/s Tata Hitachi Construction Machinery Company Private Limited , Bangalore V. The Deputy Commissioner of Income Tax LTU , Bangalore

ITA 04/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1341 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-06-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 01-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SHANKAR PRASAD
• Assessee Lawyers: PERCY PARADIWALA
• Keywords: Principle of natural justice; Bad and doubtful debts; Set aside
• Section: 143(3); 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V VASUDEVAN, VICE PRESIDNET AND SHRI B.R BASKARAN, ACCOUNTANT MEMBER ITA NO.04/BANG/2018 ASSESSMENT YEAR : 2011-12 M/S TATA HITACHI CONSTRUCTION MACHINERY CO. PVT. LTD., BENGALURU. PAN AAACT 9077B. VS. THE DY. COMMISSIONER OF INCOME-TAX LTU, BENGALURU. . APPELLANT RESPONDENT APPELLANT BY : SHRI PERCY PARADIWALA, SR. ADVOCATE RESPONDENT BY : DR. SHANKAR PRASAD, ADDL. CIT DATE OF HEARING : 12.06.2019 DATE OF PRONOUNCEMENT : .06.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING T HE REVISION ORDER PASSED BY LD CIT(LTU), BENGALURU U/S 263 OF T HE ACT FOR ASST. YEAR 2011-12. 2. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE, PURCHASE AND SALE OF HYDRAULIC EXCAVATORS, LOADERS, MECHANICAL S HOVELS, CRANES, DUMPERS AND SPARE PARTS THEREOF. THE ORIGINAL ASST . U/S 143(3) ITA NO.04/BANG/2018 PAGE 2 OF 9 R.W.S 144C OF THE ACT WAS COMPLETED BY THE AO ON 17 /4/2015. THE LD CIT, UPON EXAMINATION OF THE RECORD, TOOK THE VI EW THAT ORDER PASSED BY THE AO IN NOT ADDING PROVISION FOR DOUBT FUL DEBTS DEBITED TO THE PROFIT AND LOSS ACCOUNT TO THE NET P ROFIT WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT IS ERRON EOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THE PROVI SION FOR DOUBTFUL DEBTS DEBITED TO PROFIT AND LOSS ACCOUNT WAS RS.832 .23 LAKHS. THE LD CIT TOOK THE VIEW THAT THE PROVISION FOR DOUBTFU L DEBTS SHOULD HAVE BEEN ADDED TO THE NET PROFIT AS REQUIRED UNDER CLAUSE (I) OF EXPLANATION 1 TO SEC. 115JB, AS THE SAME IS NOT ACT UAL WRITE OFF. THE LD CIT ALSO TOOK THE VIEW THAT THE PROVISION FO R DOUBTFUL DEBTS IS ONLY A PRUDENTIAL WRITE OFF AND THE SAME CANNOT B E EQUATED WITH IRREVOCABLE WRITE OFF AS ENVISAGED IN SEC. 36(1) (VII) OF THE ACT. 3. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED THAT TH E CLAIM, THOUGH MENTIONED AS PROVISION FOR DOUBTFUL DEBTS, Y ET IT WAS ACTUALLY REDUCED FROM THE AMOUNT OF SUNDRY DEBTORS IN THE BALANCE SHEET. ACCORDINGLY, BY PLACING RELIANCE ON THE DE CISION RENDERED BY HONBLE SC IN THE CASE OF VIJAYA BANK 323 ITR 166, IT WAS SUBMITTED THAT THE REDUCTION OF PROVISION FOR DOUBT FUL DEBTS FROM THE DEBTORS BALANCE IN THE BALANCE SHEET AMOUNTED TO ACTUAL WRITE OFF WITHIN THE MEANING OF SEC. 36(1)(VII) OF THE AC T. THE ASSESSEE ALSO SUBMITTED THAT THIS ISSUE IS COVERED BY THE DE CISION OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE ASSESSEES CAS E IN ITA NO.244/BANG/2015 FOR ASST. YEAR 2000-01 AND ITA NO. 245/2015 FOR ASST. YEAR 2001-02. IT ALSO SUBMITTED THAT THI S ISSUE IS COVERED BY THE DECISION RENDERED IN THE CASE OF YOKOGAWA IN DIA LTD., (2012) 204 TAXMANN.COM 305 (KAR). THE LD CIT OBSERVED THA T THE DECISION ITA NO.04/BANG/2018 PAGE 3 OF 9 RENDERED BY THE HONBLE APEX COURT IN THE CASE OF V IJAYA BANK PERTAINED TO ASST. YEAR 1993-94 AND 1994-95 AND THE SAME WAS DISTINGUISHED BY LD CIT(A) IN THE CASE OF VIJAYA BA NK ITSELF, WHILE PASSING ORDER FOR ASST. YEAR FOR ASST. YEAR 2009-10 . THE LD CIT ALSO EXPRESSED THE VIEW THAT THE DECISION RENDERED BY HO NBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAA INDIA LTD., WAS I N THE CONTEXT OF ITEM (C) OF THE EXPLANATION (I) TO SEC. 115JB. ACC ORDINGLY THE LD CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE ASST. ORDER PASSED WITHOUT ADDING BACK THE PROVISIO N FOR DOUBTFUL DEBTS OF 832.27 LAKHS TO THE NET PROFIT WHILE COMPU TING BOOK PROFIT U/S 115JB IS ERRONEOUS. ACCORDINGLY THE LD CIT SET ASIDE THE ASST. ORDER AND REMITTED THE SAME TO THE FILE OF THE AO F OR EXAMINING THE ABOVE SAID ISSUE AFRESH AFTER GIVING DUE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. 4. AGGRIEVED, THE ASSESSE HAS FILED THIS APPEAL BEF ORE US. 5. THE LD AR SUBMITTED THAT THE ASSESSEE HAD ALSO C LAIMED THE IMPUGNED AMOUNT OF PROVISION FOR DOUBTFUL DEBTS AS DEDUCTION UNDER NORMAL PROVISIONS OF THE ACT U/S 36(1)(VII) O F THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT THE PROVISION FOR D OUBTFUL DEBTS HAS BEEN REDUCED FROM THE VALUE OF SUNDRY DEBTORS IN T HE BALANCE SHEET AND THE SAME WOULD AMOUNT ACTUAL WRITE OFF IN TERMS OF PROVISIONS OF SEC. 36(1)((VII) AS PER THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF VIJAYA BANK (SUPRA). HE SUBMITTED THE AO HAS ACCEPTED THE SAME WITHOUT MAKING ANY ADD ITION AND THE LD CIT ALSO DID NOT FIND FAULT WITH THE SAME. HOWEVER, THE LD CIT, IN THE IMPUGNED ORDER, HAS HELD THAT THE PROVI SION FOR DOUBTFUL ITA NO.04/BANG/2018 PAGE 4 OF 9 DEBTS SHOULD BE ADDED TO NET PROFIT AS PER CLAUSE ( I) OF EXPLANATION 1 TO SEC. 115JB, WHICH IS CONTRARY TO THE VIEW TAKE N WHILE COMPUTING TOTAL INCOME UNDER NORMAL PROVISIONS OF T HE ACT. HE SUBMITTED THAT THE LD CIT, HAVING ACCEPTED THE FACT THAT THE SAME WAS ACTUAL WRITE OFF WHILE COMPUTING TOTAL INCOME U NDER NORMAL PROVISION OF THE ACT, SHOULD NOT HAVE TAKEN DIFFER ENT VIEW FOR THE PURPOSE OF SEC. 115JB OF THE ACT. ACCORDINGLY THE LD AR SUBMITTED THAT THE VIEW TAKEN BY THE AO IS ONE OF THE POSSIBL E VIEWS AND THE LD CIT WAS NOT WRITE IN LAW IN INVOKING PROVISION OF S EC. 115JB OF THE ACT. THE LD AR FURTHER SUBMITTED THAT THIS ISSUE W AS CONSIDERED BY COORDINATE BENCH IN THE ASSESEES OWN CASE IN ASST. YEAR 2000-01 AND 2001-02 WHEREIN IT WAS HELD THAT THE PROVISION FOR DOUBTFUL DEBTS IS NOT REQUIRED TO BE ADDED TO THE NET PROFIT ONCE DEBTORS AMOUNT IS NETTED OFF AGAINST PROVISIONING AND IN TH IS REGARD, THE COORDINATE BENCH HAS FOLLOWED THE DECISION RENDERED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF YOKOGAWA I NDIA LTD., (SUPRA) AND THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF VIJAYA BANK (SUPRA). THE LD AR FURTHER SUBMITTED T HAT THE HONBLE KARNATAKA HIGH COURT HAS HELD IN THE CASE OF CIT VS . KIRLOSKAR SYSTEMS LTD (2013)(40 TAXMANN.COM 124) THAT THE PRO VISION FOR DOUBTFUL DEBTS NEED NOT BE ADDED TO THE NET PROFIT UNDER CLAUSE (I) OF EXPLANATION (1) TO SEC. 115JB OF EH ACT. ACCORD INGLY THE LD AR SUBMITTED THAT THE VIEW TAKEN BY THE AO GETS SUPPOR T FROM THE DECISION RENDERED BY HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF KIRLOSKAR SYSTEMS LTD (SUPRA) AND HENCE THE ASST. O RDER CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA NO.04/BANG/2018 PAGE 5 OF 9 6. ON THE CONTRARY, THE LD DR SUBMITTED THAT THE LD CIT(A) HAS PASSED REASONED ORDER AND SHE HAS TAKEN SUPPORT OF THE DECISION RENDERED BY LD CIT(A) IN THE CASE OF VIJAYA BANK FO R ASST. YEAR 2009- 10 WHEREIN THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF VIJAYA BANK (SUPRA) WAS DISTINGUISHED. ACC ORDINGLY THE LD DR SUBMITTED THAT THE ORDER PASSED BY LD CIT(A) SHO ULD BE SUSTAINED. 7. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE R ECORD. BEFORE GOING INTO THE MERITS OF THE ISSUE, WE WOULD LIKE TO DISCUSS ABOUT THE LEGAL POSITION WITH REGARD TO THE POWER O F LEARNED CIT TO INVOKE REVISION PROCEEDINGS UNDER SECTION 263 OF TH E ACT. THE SCOPE OF REVISION PROCEEDINGS INITIATED UNDER SECTI ON 263 OF THE ACT WAS CONSIDERED BY HON'BLE BOMBAY HIGH COURT, IN THE CASE OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92) BY TAKING INTO ACCOUNT THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN T HE CASE OF MALABAR INDUSTRIAL CO LTD (243 ITR 80). THE RELEVA NT OBSERVATIONS MADE BY HONBLE BOMBAY HIGH COURT ARE EXTRACTED BEL OW: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS T HE COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD O F ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSE SSEE AND AFTER AN ENQUIRY AS IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSME NT AND DIRECTING A FRESH ASSESSMENT. THE KEY WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERED BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMENTS TO WHICH IT IS N OW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LTD. V . CIT ITA NO.04/BANG/2018 PAGE 6 OF 9 [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSI NG OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT H ELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORREC T APPLICATION OF LAW, WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATIO N OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY. T HE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REV ENUE, THE SUPREME COURT HELD, IT IS OF WIDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. WHAT IS PREJUDICIAL TO T HE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMEN T OF THE SUPREME COURT (HEADNOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS O RDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF RE VENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFIC ER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND I T HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIE WS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLES S THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR INDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BE EN FOLLOWED AND EXPLAINED IN A SUBSEQUENT JUDGMENT O F THE SUPREME COURT IN CIT V. MAX INDIA LTD. [2007] 295 I TR 282. 8. THE HONBLE SUPREME COURT HAS HELD THAT THE EXISTENCE OF TWIN CONDITIONS, VIZ., THE ASSESSMENT ORDER SHOU LD BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTER ESTS OF ITA NO.04/BANG/2018 PAGE 7 OF 9 REVENUE, SHOULD BE SHOWN IN THE REVISION ORDER PASS ED U/S 263 OF THE ACT. THE HONBLE APEX COURT HAS FURTHER HELD THAT WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURS ES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFF ICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUD ICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 9. IN THE INSTANT CASE, THE VIEW TAKEN BY THE AO IN NOT ADDING THE PROVISION FOR DOUBTFUL DEBTS IS SUPPORTE D BY THE BINDING DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF KIRLOSKAR SYSTEMS LTD (SUPRA). THE ORD ER PASSED BY HONBLE KARNATAKA HIGH COURT IS BINDING ON THE A UTHORITIES BELOW IT. ACCORDINGLY, THE VIEW TAKEN BY THE AO C ANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. IN THIS VIEW OF THE MATTER, WE ARE UNABLE TO SUSTAIN THE REVISION ORDER PASSED BY LD CIT. ACCORDINGLY W E SET ASIDE THE SAME. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2019. SD/ - (N.V VASUDEVAN) VICE PRESIDENT SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 14 TH JUNE, 2019. /VMS / ITA NO.04/BANG/2018 PAGE 8 OF 9 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3 . THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER A SST. REGISTRAR, ITAT, BANGALORE. ITA NO.04/BANG/2018 PAGE 9 OF 9 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..