M/s Kitex Childrenwear Ltd, Cochin V. ACIT, Ernakulam

ITA 1018/COCH/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64790 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 11-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 23-12-2008
• Court: TRIBUNAL
• Department Lawyers: B SAJJIEVE
• Assessee Lawyers: R KRISHNA IYER
• Keywords: Opportunity of being heard; Revenue expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 1018/COCH/2008 ASSESSMENT YEAR: 2005-06 M/S. KITEX CHILDRENSWEAR LTD., KIZHAKKAMBALAM, ALUVA, ERNAKULAM-683 562. [PAN: AABCK 3905C] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI R. KRISHNA IYER, CA REVENUE BY SHRI B. SAJJIEVE, JR. DR DATE OF HEARING 11/09/2012 DATE OF PRONOUNCEMENT 14/09/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 24.10.2008 PASSED BY LD CIT(A) II, KOCHI AND IT RELATES TO TH E ASSESSMENT YEAR 2005-06. FOLLOWING TWO ISSUES ARE URGED IN THIS APPEAL:- (A) CLAIM FOR DEDUCTION OF RS.5,48,825/- AS BAD DEBT, B EING THE BALANCE OUTSTANDING IN THE NAME OF M/S ANDREA SHIAKOSE. (B) CLAIM FOR DEDUCTION OF RS.15,13,684/- AS BAD DEBT/E XPENDITURE, BEING THE BALANCE OUTSTANDING IN THE NAME OF M/S STITCHING PO INT. 2. THIS APPEAL WAS ORIGINALLY DISPOSED OF BY TH E CO-ORDINATE BENCH OF THE TRIBUNAL, VIDE ITS ORDER DATED 04-08-2010. THE REVENUE PREFE RRED APPEAL BEFORE THE HONBLE HIGH COURT OF KERALA AND THE HIGH COURT, VIDE ITS ORDER DATED 23-11-2011, RESTORED THE MATTERS BACK TO THE TRIBUNAL FOR CONSIDERING THEM A FRESH. HENCE THIS APPEAL WAS POSTED FOR HEARING AND PARTIES WERE HEARD. I.T.A. NO.1018 /COCH/2008 2 3. WITH REGARD TO THE FIRST ITEM REFERRED ABOVE, THE AO DISALLOWED THE CLAIM OF BAD DEBT OF RS.5,48,825/- PERTAINING TO M/S ANDREA SHIA KOSE, AS THE ASSESSEE FAILED TO PROVE THAT THE SAID AMOUNT WAS TAKEN AS INCOME IN E ARLIER YEARS. BEFORE LD CIT(A) ALSO, THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE T O PROVE THAT THE SAME WAS OFFERED AS INCOME IN THE EARLIER YEARS AND HENCE THE FIRST APPELLATE AUTHORITY CONFIRMED THE SAID ADDITION. 4. NOW, THE ASSESSEE HAS FILED A PHOTOSTAT COPY OF INVOICE NO.7/1994-95 DATED 30- 06-94 TO PROVE THAT THE SAID AMOUNT WAS TAKEN AS SA LES IN THE ACCOUNTING YEAR 1994-95 RELEVANT TO THE ASSESSMENT YEAR 1995-96. AS THIS D OCUMENT IS FILED FOR THE FIRST TIME BEFORE THE TRIBUNAL, THE SAME REQUIRES VERIFICATION AT THE END OF THE AO. ACCORDINGLY THE INSTANT ISSUE OF CLAIM OF BAD DEBT OF RS.5,48,825/- ALSO REQUIRES FRESH CONSIDERATION AT THE END OF THE AO IN THE LIGHT OF DOCUMENT NOW PROD UCED BEFORE US. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF AO WITH THE DIRECTION TO EXAMINE THE CLAIM OF BAD DEBT BY CONSIDERING THE FRESH DOCUMENT AND/OR ANY OTHER DOCUMENT THAT MAY BE FURNISHED BEF ORE HIM AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW, AFTER AFFORDIN G NECESSARY OPPORTUNITY OF BEING HEARD. 5. THE NEXT ISSUE RELATES TO THE CLAIM OF RS.15 ,13,684/- PERTAINING TO M/S STITCHING POINT AS BAD DEBT/TRADING LOSS. BEFORE THE AO, THE ASSESSEE SUBMITTED THAT IT HAD PURCHASED THE EXPORT QUOTA FROM M/S STITCHING POINT , SINCE THE EXPORT QUOTA ALLOTTED TO THE ASSESSEE WAS NOT SUFFICIENT TO MEET ITS EXPORT OBLIGATIONS. IT WAS FURTHER STATED THAT THE SAID PAYMENT WAS MADE DURING THE YEAR 1997-98. BY PLACING RELIANCE ON THE DECISION REPORTED IN 32 ITR 313, IT WAS CONTENDED B EFORE THE AO THAT THE PAYMENT MADE FOR THE QUOTA CHARGES IS ALLOWABLE AS REVENUE EXPENDITURE. IT WAS FURTHER SUBMITTED THAT THOUGH THE AMOUNT WAS CLAIMED AS BA D DEBT IN THE PROFIT AND LOSS ACCOUNT, THE SAME IS ALLOWABLE AS REVENUE EXPENDITU RE U/S 37(1) OF THE ACT. THE AO, THOUGH CONVINCED THAT THE PAYMENT OF QUOTA CHARGES IS ALLOWABLE AS REVENUE EXPENDITURE, YET HE NOTICED THAT THE SAID PAYMENT W AS EFFECTED DURING THE YEAR 1997- 98. ACCORDINGLY THE AO HELD THAT THE SAID PAYMENT IS NOT AN EXPENDITURE PERTAINING TO I.T.A. NO.1018 /COCH/2008 3 THE ASSESSMENT YEAR 2005-06. ACCORDINGLY, THE AO H ELD THAT THE SAID CLAIM IS NOT ALLOWABLE EITHER AS BAD DEBT OR AS REVENUE EXPENDIT URE. THE LD CIT(A) ALSO HELD THAT THE SAID PAYMENT IS ALLOWABLE AS DEDUCTION ONLY IN THE ASSESSMENT YEAR 1998-99 AND ACCORDINGLY CONFIRMED THE ADDITION MADE BY THE AO. 6. BEFORE US, THE ASSESSEE HAS FURNISHED ACCOUN T COPIES OF M/S STITCHING POINT AS AVAILABLE IN ITS BOOKS OF ACCOUNT, FROM WHICH WE NO TICE THAT THE ASSESSEE HAD PAID A SUM OF RS.17.00 LAKHS TO M/S STITCHING POINT IN DIF FERENT INSTALMENTS ON VARIOUS DATES VIZ., ON 31.3.1997 RS.8.00 LAKHS, ON 24.4.97- RS. 3.00 LAKHS, ON 3-5-97 RS.3.00 LAKHS, ON 14.5.97 RS.3.00 LAKHS, ALL AGGREGATING TO RS.17.00 LAKHS. DURING THE FINANCIAL YEAR 2001-02, THE ASSESSEE RECEIVED DEMAN D DRAFTS FROM THE ABOVE SAID CONCERN TO THE EXTENT OF RS.86,316/- AND THE BALANC E AMOUNT OF RS.15,13,684/- WAS CARRIED FORWARD. THE SAID BALANCE WAS CLAIMED AS E XPENDITURE DURING THE YEAR UNDER CONSIDERATION. 7. WE NOTICE THAT THE EXPLANATION OF THE ASSESS EE THAT THE PAYMENTS WERE MADE FOR PURCHASE OF EXPORT QUOTA IS NOT GETTING CORROBORAT ED WITH THE ACCOUNT COPY FILED BY THE ASSESSEE. THE TRANSACTIONS ENTERED WITH M/S ST ITCHING POINT GIVES AN IMPRESSION THAT THE ASSESSEE HAS GIVEN ADVANCES TO THAT CONCER N AND PART OF THE SAID ADVANCE WAS RECOVERED DURING THE FINANCIAL YEAR 2001-02. IF PA YMENT IS MADE FOR PURCHASE OF EXPORT QUOTA IN THE FINANCIAL YEAR 1996-97 AND 1998-99, WE ARE UNABLE TO UNDERSTAND AS TO HOW THE ASSESSEE IS GETTING BACK REFUND FROM THAT C ONCERN IN THE FINANCIAL YEAR 2001- 02. HENCE, IN OUR VIEW, THE ASSESSEE HAS NOT SUBST ANTIATED ITS EXPLANATION WITH ANY CREDIBLE EVIDENCE AND IT HAS ALSO NOT PROVED THAT T HE SAID CLAIM IS ALLOWABLE AS DEDUCTION DURING THE YEAR UNDER CONSIDERATION. UND ER THESE CIRCUMSTANCES, AS OPINED BY THE TAX AUTHORITIES, THIS PAYMENT CANNOT BE CONS IDERED AS EXPENDITURE RELATABLE TO THE ASSESSMENT YEAR 2005-06, I.E., THE YEAR UNDER C ONSIDERATION. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. I.T.A. NO.1018 /COCH/2008 4 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 14-09-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 14TH SEPTEMBER, 2012 GJ COPY TO: 1. M/S. KITEX CHILDRENSWEAR LTD., KIZHAKKAMBALAM, A LUVA, ERNAKULAM-683 562. 2.THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE- 1(3), ERNAKULAM. 3.THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCHI . 4.THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN