DCIT, CIR-2(2), KOLKATA, Kolkata V. M/s Rangi International Pvt. Ltd., Kolkata

ITA 1003/KOL/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1513 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 13-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOWDHURY
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

I.T.A. NO. 1003/KOL/2015 ASSESSMENT YEAR: 2010 -11 RANGI INTERNATIONAL PVT. LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A, KOLKATA [BEFORE SHRI P.M. JAGTAP, AM & SHRI S.S. VISWANETHRA RAVI, JM] I.T.A. NO. 1003/KOL/2015 ASSESSMENT YEAR: 2010-11 D.C.I.T. CIR 2(2)...............................APPELLANT KOLKATA M/S. RANGI INTERNATIONAL PVT. LTD. RESPONDENT 34, G.C. AVENUE, KOLKATA 700 013 [PAN NO. AACCR0658L] APPEARANCES BY: SHRI ROBIN CHOWDHURY, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. NONE APPEARING ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : JULY 25, 2017 DATE OF PRONOUNCING THE ORDER : JULY 31, 2017 ORDER PER P.M. JAGTAP, AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT (APPEALS) 1, KOLKATA DATED 24.03.2015 AND IN THE SOLITARY GROUND RAISED THEREIN, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN DIRECTING THE AO TO VERIFY THE EXPENDITURE OF RS. 88,81,878/- FROM THE BANK ACCOUNT OF THE ASSESSEE AND ITS PARTY AND ALLOW THE CLAIM. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF GARMENTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 14.10.2010 DECLARING A TOTAL INCOME OF RS. 97,24,759/-. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS. 88,81,878/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF SETTLEMENT OF PAYMENT WITH SUPPLIER AS PER COURT ORDER. DURING THE COURSE OF ASSESSMENT I.T.A. NO. 1003/KOL/2015 ASSESSMENT YEAR: 2010 -11 RANGI INTERNATIONAL PVT. LTD. 2 PROCEEDINGS, THE ASSESSEE WAS CALLED UPON BY THE AO TO EXPLAIN THE NEXUS OF THE SAID EXPENDITURE WITH ITS BUSINESS. IN REPLY, THE RELEVANT COURT ORDER WAS PRODUCED BY THE ASSESSEE TO SHOW ITS OBLIGATION TO MAKE THE PAYMENT OF RS. 88,81,878/- TO THE CONCERNED SUPPLIER. ON GOING THROUGH THE SAID ORDER, THE AO HOWEVER FOUND THAT IT WAS NOT ASCERTAINABLE AS TO HOW THE AMOUNT IN QUESTION REPRESENTED THE EXPENDITURE RELATING TO THE BUSINESS OF THE ASSESSEE COMPANY. ACCORDING TO HIM, THE ASSESSEE COMPANY ALSO FAILED TO PRODUCE ANY OTHER EVIDENCE TO SUPPORT AND SUBSTANTIATE ITS CLAIM FOR THE DEDUCTION ON ACCOUNT OF THE AMOUNT IN QUESTION BEING BUSINESS EXPENDITURE. HE ALSO NOTED THAT THE AMOUNT PAID BY THE ASSESSEE AS PER THE COURT ORDER OF THE CONCERNED SUPPLIER, M/S. UMESH YARN AGENCY WAS RS. 86,00,000/- AS AGAINST THE DEDUCTION OF RS. 88,81,878/- CLAIMED BY THE ASSESSEE. HE, THEREFORE, DISALLOWED THE DEDUCTION OF RS. 88,81,878/- CLAIMED BY THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 23.03.2013. 3. THE DISALLOWANCE OF RS. 88,81,878/- MADE BY THE AO WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT (A). DURING THE COURSE OF APPELLATE PROCEEDING BEFORE THE LD. CIT (A), IT WAS SUBMITTED BY THE ASSESSEE THAT M/S. UMESH YARN AGENCY WAS ITS SUPPLIER FROM MARCH, 2004 AND AS A RESULT OF THE TRANSACTIONS OF PURCHASES AND PAYMENTS ENTERED INTO WITH THEM, THERE WAS OPENING BALANCE OF RS. 3,89,56,061/-. IT WAS SUBMITTED THAT THE SAID PARTY HOWEVER HAD FILED THE CASE AGAINST THE ASSESSEE FOR RECOVERY OF RS. 6.99 CRORE. IT WAS SUBMITTED THAT BOTH THE PARTIES FINALLY SETTLED THE DISPUTE BEFORE THE MEDIATION CENTRE AND AGREED TO SETTLE THE MATTER FOR RS. 4,51,00,000/-. ON THE BASIS OF THE SETTLEMENT, THE HIGH COURT I.T.A. NO. 1003/KOL/2015 ASSESSMENT YEAR: 2010 -11 RANGI INTERNATIONAL PVT. LTD. 3 VIDE ORDER DATED 18.03.2008 DISPOSED OF THE MATTER AND THE ASSESSEE ACCORDINGLY PAID THE ADDITIONAL LIABILITY OF RS. 88,81,878/- (RS. 4,51,00,000/- MINUS RS. 3,89,56,061/-). A COPY OF COURT ORDER ALONG WITH DETAILS OF PAYMENTS MADE TO M/S. UMESH YARN AGENCY WAS FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT (A) TO SUPPORT AND SUBSTANTIATE ITS CASE ON THIS ISSUE AND AFTER CONSIDERING THE SAME, THE LD. CIT (A) RENDERED HIS DECISION VIDE PARAGRAPH NO 6.2 OF ITS ORDER. THE SUBMISSIONS OF THE APPELLANT AS ABOVE HAVE BEEN CONSIDERED. IN VIEW OF THE DETAILS FILED BY THE APPELLANT INCLUDING THE DECISION OF THE COURT ON THE CASE FILED BY M/S. UMESH YARN AGENCIES AGAINST THE APPELLANT IN THE DELHI HIGH COURT, SETTLING THE DUES PAYABLE BY THE APPELLANT TO THIS CONCERN AT RS. 4,51,00,000/- VIDE ITS ORDER DATED 18.03.2008. FURTHER THE DETAILS OF PAYMENTS MADE BY THE APPELLANT HAVE ALSO BEEN SUBMITTED AND IT IS CLAIMED THAT SINCE THE APPELLANT HAD ACCOUNTED FOR DUES OF ONLY RS. 3,62,18,122/- IN ITS BOOKS OF ACCOUNT, THEREFORE, THE AMOUNT PAID OVER AND ABOVE THIS WAS ALLOWABLE TO THE APPELLANT DURING THE YEAR. IT IS SEEN THAT THE APPELLANT HAD A LIABILITY OF RS. 88,81,878/- OVER AND ABOVE THE AMOUNT IN ITS BOOKS OF ACCOUNTS AS THE AMOUNT PAYABLE AS PER THE COURT ORDER DATED 16.01.2008 WAS SETTLED AT RS. 4,51,00,000/- IN FAVOUR OF UMESH YARN AGENCIES. THEREFORE, CONSIDERING THE SAME, THE ADDITIONAL LIABILITY OF RS. 88,81,878/- WAS CORRECTLY CLAIMED BY THE APPELLANT, CONSIDERING THE DOCUMENT FILED BY THE APPELLANT IN SUPPORT OF ITS CLAIM, THE AMOUNT OF RS. 88,81,878/- IS HELD TO BE ALLOWABLE IN PRINCIPLE, HOWEVER THE AO IS DIRECTED TO GO THROUGH THE WORKING OF THIS AMOUNT SUBMITTED IN APPEAL AND VERIFY THE SAME FROM THE ENTRIES IN THE BOOKS OF ACCOUNT / LEDGER ACCOUNT OF THIS PARTY AND AFTER DOING ALLOW THE CLAIM. AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. AT THE OUTSET, IT IS NOTED THAT THERE IS A DELAY OF 3 DAYS ON THE PART OF THE REVENUE IN FILING THIS APPEAL BEFORE THE TRIBUNAL. IN THIS REGARD, APPLICATION HAS BEEN FILED BY THE REVENUE SEEKING CONDONATION OF THE SAID DELAY AND KEEPING IN VIEW THE REASONS GIVEN THEREIN WHICH I.T.A. NO. 1003/KOL/2015 ASSESSMENT YEAR: 2010 -11 RANGI INTERNATIONAL PVT. LTD. 4 ARE DULY SUPPORTED BY AN AFFIDAVIT FILED BY THE CONCERNED ASSESSING OFFICER, WE ARE SATISFIED THAT THERE WAS A SUFFICIENT CAUSE FOR THE DELAY OF 3 DAYS ON THE PART OF THE REVENUE IN FILING THIS APPEAL BEFORE THIS TRIBUNAL. THE SAID DELAY IS ACCORDINGLY CONDONED AND THIS APPEAL OF THE REVENUE IS BEING DISPOSED OF ON MERIT. 5. AT THE TIME OF HEARING, NONE HAS APPEARED ON BEHALF OF THE ASSESSEE. THIS APPEAL OF THE REVENUE IS THEREFORE, BEING DISPOSED OF AFTER HEARING THE ARGUMENTS OF THE LD. DR AND PERUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS IS EVIDENT FROM PARAGRAPH NO 6.2 OF THE IMPUGNED ORDER OF THE LD. CIT (A) WHICH IS EXTRACTED ABOUT, HE HAS DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS. 88,81,878/- AFTER VERIFYING THE WORKING FURNISHED BY THE ASSESSEE FROM THE ENTRIES IN THE BOOKS OF ACCOUNTS / LEDGER ACCOUNT OF THE PARTIES. AS RIGHTLY CONTENDED BY THE LEARNED DR, THIS ACTION OF THE LD. CIT (A) VIRTUALLY AMOUNTS TO SETTING ASIDE THE MATTER TO THE AO WHICH IS NOT PERMISSIBLE. AS FURTHER POINTED OUT BY HIM FROM THE IMPUGNED ORDER OF THE LD. CIT (A), THE HIGH COURT ORDER SETTLING THE DISPUTE WAS PASSED IN MARCH, 2008 WHILE THE LAST TWO PAYMENTS AGGREGATING TO RS. 51,00,000/- WERE MADE BY THE ASSESSEE TO M/S. UMESH YARN AGENCY IN APRIL, 2010. AS THESE TWO IMPORTANT AND RELEVANT EVENTS DID NOT OCCUR DURING THE YEAR UNDER CONSIDERATION AND THE SAME HAVE A DIRECT BEARING ON THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS. 88,81,878/-, THE NON CONSIDERATION OF THE SAME BY THE LD. CIT (A) FOR DECIDING THE ISSUE IN PRINCIPLE ALSO MAKES HIS ORDER ON THIS ISSUE NOT WELL FOUNDED OR TENABLE. WE, THEREFORE, FIND MERIT IN CONTENTION OF THE LD. DR THAT THE MATTER SHOULD BE REMITTED BACK TO THE LD. CIT (A) FOR DECIDING THE SAME AFRESH ON MERIT. ACCORDINGLY, THE IMPUGNED ORDER OF THE LD. CIT I.T.A. NO. 1003/KOL/2015 ASSESSMENT YEAR: 2010 -11 RANGI INTERNATIONAL PVT. LTD. 5 (A) ON THIS ISSUE IS SET ASIDE AND THE MATTER IS REMITTED BACK TO HIM FOR DECIDING THE SAME AFRESH IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2017. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31/07/2017 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. RANGI INTERNATIONAL PVT. LTD., 34, G.C. AVENUE, KOLKATA 700 013. 2. DCIT, CIRCLE 2(2), KOLKATA 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA