Sabri Chemicals Pvt. Ltd., Baroda V. The ACIT, Circle-2(1)(1), Baroda

ITA 1019/AHD/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5576 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: M J SHAH
• Keywords: Capital asset; Business expenditure; Bad and doubtful debts; Capital expenditure; TDS; Set aside
• Section: 40(a)(ia); 37(1); 201(1); 201; 37; 28

Judgement Text

, MH* MH*MH* MH* IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD L LL LK KK KOZJH OZJH OZJH OZJH OLHE OLHE OLHE OLHE VGEN VGEN VGEN VGEN] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; ,OA OAOA OA EK/ EK/EK/ EK/KQFERK KQFERK KQFERK KQFERK JKW; JKW;JKW; JKW;] U; ] U;] U; ] U;KF KFKF KF;D LNL; ;D LNL; ;D LNL; ;D LNL; DS LE{KA DS LE{KA DS LE{KA DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 1019/AHD/2016 ( / ASSESSMENT YEAR : 2012-13) SABRI CHEMICALS PVT. LTD., A/2/236, GIDC, NANDESARI, BARODA 391 340. / VS. ACIT, CIRCLE 2(1)(1), BARODA. ./ ./ PAN/GIR NO. : AACCS 9406 K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI M. J. SHAH, A.R. / RESPONDENT BY : SHRI LALIT P. JAIN, SR. D.R. / DATE OF HEARING 04/10/2018 !'# / DATE OF PRONOUNCEMENT 15/11/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)2, VADODARA [CIT(A) IN SHORT] VIDE APPEAL NO.CAB/(A)-2 /531/14-15 DATED 04.02.2016 ARISING IN THE MATTER OF ASSESSMENT ORDE R PASSED UNDER SEC.143(3) OF THE INCOME TAX ACT, 1961(HERE-IN-AFTE R REFERRED TO AS 'THE ACT') DATED 26.02.2015 RELEVANT TO ASSESSMENT YEAR (AY) 2012-13. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A RE AS UNDER:- 1. THE LEARNED C.I.T.(APPEALS) ERRED IN LAW IN UP HOLDING DISALLOWANCE OF LATE PAYMENT OF PF & ESIC OF RS. 1, 53,295/- MADE BY ASSESSING OFFICER U/S 36(1)(VA) OF THE I.T ACT, 1961. 2. THE LEARNED C.I.T(APPEALS) ERRED IN LAW AND FAC TS IN UPHOLDING THE DISALLOWANCE OF THE ADVANCE WRITTEN OFF RS, 200 000/- MADE U/S 36(2) AND ALTERNATIVELY U/S 28 WITHOUT APPRECIA TING THE PROVISIONS OF THE SECTION PROPERLY. 3. THE LEARNED C.I.T(APPEALS) ERRED IN LAW AND F ACTS IN UPHOLDING THE DISALLOWANCE OF THE ADVANCE WRITTEN OFF OF RS. 49,70,206/- MADE U/S 36(2) AND ALTERNATIVELY U/S 28 WITHOUT APP RECIATING THE PROVISIONS OF THE SECTION PROPERLY. 4. THE LEARNED C.I.T(APPEALS) ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF THE EXHIBITION EXPENS ES OF RS. 1,64,010/-. 5. THE LEARNED C.I.T(APPEALS) ERRED IN LAW AND FAC TS IN NOT ALLOWING THE INTEREST OF RS, 81,440/- PAID TO TATA CAPITAL LTD - NBFC. THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, ALT ER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE OR AT THE TIME OF HEARING. 3. THE FIRST ISSUE RAISED BY THE ASSESSEE IS THAT L D. CIT(A) ERRED IN DISALLOWING THE LATE PAYMENT OF PF AND ESIC OF RS. 1,53,295/- U/S 36(1)(VA) OF THE ACT. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF FINE CHEMICALS LIKE BENZYL, BENSONATE, BENZYL CYANIDE, B ENZYL ALCOHOL, NAPHTHYL ACETIC ACID, ETC. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 3 - 4.1 THE AO DURING ASSESSMENT PROCEEDINGS OBSERVED T HAT THE ASSESSEE FAILED TO DEPOSIT THE EMPLOYEE'S CONTRIBUTION TO PF /ESI WITHIN THE DUE DATE AS SPECIFIED UNDER THE RELEVANT ACT, RULE OR N OTIFICATION ISSUED THEREUNDER. THEREFORE, THE AO DISALLOWED THE SAME A FTER HAVING A RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH CO URT, IN THE CASE OF CIT VS. GSRTC REPORTED IN 41TAXMANN.COM 100 AND ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) WHO CONFIRMED THE ORDER OF AO. BEING AGGRIEVED BY ORDER OF LD. CIT(A) ASSESSEE IS IN THE SECOND APPEAL BEFORE US. 6. THE LD. AR BEFORE US CONCEDED THE FACT THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE HONBLE GUJARAT HIGH CO URT IN THE CASE OF CIT VS. GSTRC REPORTED IN 41TAXMANN.COM 100. HOWEVE R, THE LD. AR BEFORE US FURTHER SUBMITTED THAT THE DUE DATE FOR T HE DEPOSITING THE AMOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PF/ESI IS TO BE SEEN FROM THE RELEVANT MONTH, IN WHICH SALARY WAS PAID TO THE EMP LOYEES AND NOT FROM THE MONTH IN WHICH SALARY BECAME DUE. THE LD. AR IN SUPPORT OF HIS CLAIM RELIED ON THE ORDER OF THIS JURISDICTIONAL TR IBUNAL IN THE CASE OF SUZLON ENERGY LTD. VS. DCIT REPORTED IN 764 & 765/A HD/2018 VIDE ORDER DATED 27.06.2018, WHEREIN IT WAS HELD AS UNDER: ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 4 - WE MAY, HOWEVER, ADD THAT A CO-ORDINATE BENCH OF T HIS TRIBUNAL, IN THE CASE OF RAJJRATNA METAL INDUSTRIES LTD VS. ACIT (IT A NO.940/AHD/2015; ORDER DATED 22.09.2017), HAS OBSERVED AS FOLLOWS:- '3. ASSESSEE'S LATTER SUBSTANTIVE GROUND CHALLENGE S CORRECTNESS OF BOTH THE LOWER AUTHORITIES' ACTION DISALLOWING/ADDING A SUM OF RS.3,85,810/- U/S. 36(1 )(VA) R.W.S. 2(24) OF THE ACT ON ACCOUNT LATE PAYMENT OF EMPLOYE ES' CONTRIBUTION TO PF & ESI IN QUESTION. THERE IS NO D ISPUTE THAT HON'BLE JURISDICTIONAL HIGH COURT'S DECISION IN CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION (2014) 366 ITR 170 (GUJ) UPHOLDS SUCH A DISALLOWANCE IN PRINCIPLE. THE ASSES SEE'S CASE HOWEVER IS THAT RELEVANT DUE DATE HAS TO BE SEEN NO T FROM THE RELEVANT MONTH OF SALARY BUT THE ONE PERTAINING TO ITS PAYMENT. HE THEN FILES A COMPUTATION CHART INDICATING IT TO HAVE PAID ABOVE EMPLOYEES' PF/ESI CONTRIBUTIONS ON 22.05.2009 AND 28.05.2009 AS AGAINST THE DUE DATES THEREOF FOLLOWI NG ON 20.06.2009. THE REVENUE FAILS TO DISPUTE THIS FACTU AL POSITION. WE THEREFORE QUOTE THIS TRIBUNAL'S CO-ORDINATE BENCH D ECISION IN KANOI PAPER & INDUSTRIES LTD. VS. ACIT 75 TTJ 448 T HAT THE RELEVANT DATE IN SUCH CASE IS THAT OF MONTH OF THE ACTUAL PAYMENT OF WAGES/SALARIES. WE THEREFORE RELY ON THE ABOVE C O-ORDINATE BENCH DECISION AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE AS WELL. 4. IN EFFECT THUS WHILE ANY DELAYED DEPOSIT OF PF/ ESI IS TO BE DISALLOWED, IN TERMS OF HON'BLE GUJARAT HIGH COURT' S JUDGMENT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION (S UPRA), THE QUESTION AS TO WHETHER THERE IS A DELAY OR NOT MAY BE DECIDE D BY THE ASSESSING OFFICER IN THE LIGHT OF ABOVE OBSERVATIONS BY THE C OORDINATE BENCH. THE ASSESSEE WILL GET RELIEF, IF FOUND ADMISSIBLE, ON T HAT BASIS. 5. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALL OWED FOR STATISTICAL PURPOSES. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 5 - IN VIEW OF THE ABOVE, THE LD. AR OF THE ASSESSEE BE FORE US SUBMITTED THAT THE MATTER SHOULD BE RESTORED TO THE FILE OF AO FOR FRESH ADJUDICATION IN TERMS OF THE ABOVE. 7. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE JUR ISDICTIONAL ITAT IN THE CASE OF SUZLON ENERGY LTD. (SUPRA) HAS RELIED ON THE ORDER OF HONBLE ITAT, KOLKATA BENCHES IN THE CASE OF KANOI PAPER & INDUSTRIES LTD. VS. ACIT REPORTED IN 75 TTJ 448, WHEREIN, THE ISSUE WAS DECIDED ABOUT EMPLOYEES PROVIDENT FUND. AS SUCH, THERE WAS NO ISS UE ABOUT THE PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS ESI. THE REFORE, THE DISALLOWANCE OF THE CONTRIBUTION TOWARDS ESI SHOULD BE SEEN FROM THE MONTH IN WHICH IT BECAME DUE. THEREFORE, THE CLAIM OF THE ASSESSEE IN THE CASE OF DELAY IN THE PAYMENT OF EMPLOYEES CONTRIBU TION TOWARDS ESI, CANNOT BE DECIDED/ ALLOWED BY THE DATE OF PAYMENT. 7.1 THE LD. DR FURTHER SUBMITTED THAT THE PAYMENT O F WAGES ACT, 1936 REQUIRES THAT THE PAYMENT SHOULD BE MADE BEFORE THE EXPIRY OF THE 7 TH DAY AFTER THE LAST DAY OF THE WAGE PERIOD, WHERE THE SA LARY IS LESS THAN THOUSAND RUPEES AND IN OTHER CASES, IT SHOULD BE TH E 10 TH DAY. THE PAYMENT OF WAGES ACT REQUIRES THAT THE PAYMENT SHOU LD BE MADE WITHIN THE PERIOD AS SPECIFIED. THUS, IF THE ASSESSEE CAN CLAIM A DEDUCTION OF THE EMPLOYEES CONTRIBUTION TOWARDS PF/ESI ON THE PAYME NT BASIS, THEN THERE IS A POSSIBILITY THAT THE ASSESSEE WILL DELAY IN TH E PAYMENT OF WAGES TO THE WORKERS. THUS, IF THE DEDUCTION FOR CONTRIBUTION TO WARDS PF / ESI IS ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 6 - ALLOWED TO THE ASSESSEE BY DATE OF PAYMENT OF SALAR Y, THEN THE PURPOSE OF WAGE ACT, 1936 WILL BE DEFEATED. THE LD. AR IN HIS REJOINDER SUBMITTED THAT NO REFER ENCE SHOULD BE MADE TO THE PAYMENT OF WAGES ACT WHILE DECIDING THE ISSUE U NDER THE INCOME TAX ACT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSES SEE HAS DELAYED IN MAKING THE PAYMENT OF EMPLOYEES CONTRIBUTION OF PF / ESI AS SPECIFIED UNDER THE RELEVANT ACT. THEREFORE, THE DISALLOWANCE WAS MADE BY THE AO U/S 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT. THE LD. C IT-A SUBSEQUENTLY CONFIRMED THE VIEW TAKEN BY THE AO. THE LD. AR BEFO RE US HAS NOT CHALLENGED THE PROPOSITION LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GSRTC (SUPRA), WHEREIN IT WA S HELD AS UNDER: IN VIEW OF THE ABOVE AND FOR THE REASONS STATED AB OVE, AND CONSIDERING SECTION 36(1)(VA) OF THE INCOME TAX ACT, 1961 READ WITH SUB-CLAUSE (X) OF CLAUSE 24 OF SECTION 2, IT IS HELD THAT WITH RES PECT TO THE SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH PROVISIONS OF SUB- CLAUSE (X) OF CLAUSE (24) OF SECTION (2) APPLIES, T HE ASSESSEE SHALL BE ENTITLED TO DEDUCTION IN COMPUTING THE INCOME REFER RED TO IN SECTION 28 WITH RESPECT TO SUCH SUM CREDITED BY THE ASSESSEE T O THE EMPLOYEES' ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE 'DUE DATE' MENTIONED IN EXPLANATION TO SECTION 36(1)(VA). CONS EQUENTLY, IT IS HELD THAT THE LEARNED TRIBUNAL HAS ERRED IN DELETING RES PECTIVE DISALLOWANCES BEING EMPLOYEES' CONTRIBUTION TO PF ACCOUNT / ESI A CCOUNT MADE BY THE AO AS, AS SUCH, SUCH SUMS WERE NOT CREDITED BY THE RESPECTIVE ASSESSEE TO THE EMPLOYEES' ACCOUNTS IN THE RELEVANT FUND OR FUNDS (IN THE PRESENT CASE PROVIDENT FUND AND/OR ESI FUND ON OR BEFORE TH E DUE DATE AS PER ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 7 - THE EXPLANATION TO SECTION 36(1)(VA) OF THE ACT I.E . DATE BY WHICH THE CONCERNED ASSESSEE WAS REQUIRED AS AN EMPLOYER TO C REDIT EMPLOYEES' CONTRIBUTION TO THE EMPLOYEES' ACCOUNT IN THE PROVI DENT FUND UNDER THE PROVIDENT FUND ACT AND/OR IN THE ESI FUND UNDER THE ESI ACT. HOWEVER, THE LD. AR BEFORE US HAS SUBMITTED THAT TH E DUE DATE FOR DEPOSITING THE EMPLOYEES CONTRIBUTION TOWARDS PF/E SI SHOULD BE SEEN FROM THE DATE OF THE PAYMENT AND NOT FROM THE DUE D ATE. IN THIS REGARD, WE NOTE THAT THE JURISDICTIONAL TRIBUNAL IN THE IDE NTICAL FACTS AND CIRCUMSTANCE IN THE CASE OF SUZLON ENERGY LTD. (SUP RA) HAS RESTORED THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE ARE INCLINED TO RESTORE THE ISSUE ON THE HAND TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE TO THE PROVISION OF LAW AS WELL AS AFTER CONSIDERING THE ORDER OF THIS TRIBUNA L IN THE CASE OF SUZLON ENERGY LTD. (SUPRA). THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 9. THE SECOND ISSUE RAISED BY THE ASSESSEE IS THAT LD. CIT(A) ERRED IN DISALLOWING THE ADVANCE WRITTEN OFF RS. 2,00,000/- U/S 36(2) OF THE ACT. 10. THE ASSESSEE DURING THE YEAR HAS MADE A PAYMENT OF RS. 5,00,000/- TO M/S. SAILESH NAIR & ASSOCIATES FOR THE PREPARATI ON OF LAYOUT PLAN FOR RENOVATION AND ALTERNATION OF FACTORY & OFFICE BUIL DING. HOWEVER, DUE TO SOME DISPUTE BETWEEN THE ASSESSEE AND SAILESH NAIR & ASSOCIATES THE ASSIGNED WORK WAS NOT MATERIALIZED. ACCORDINGLY, SA ILESH NAIR & ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 8 - ASSOCIATES RETURNED A SUM OF RS.3,00,000/- TO THE A SSESSEE BUT FORFEITED A SUM OF RS.2,00,000/-. THEREFORE, THE ASSESSEE HAS S HOWN THE SUM OF RS. 2,00,000/- AS BAD DEBTS IN ITS PROFIT AND LOSS ACCO UNT. HOWEVER, THE AO WAS OF THE VIEW THAT THE BAD DEBTS OF RS. 2,00,000/- CONCERNING THE PAYMENT MADE TO SAILESH NAIR & ASSOC IATES IS NOT ALLOWABLE FOR DEDUCTION IN VIEW OF THE PROVISION OF SECTION 36(2) OF THE ACT. ACCORDINGLY, THE AO DISALLOWED THE SAME AND AD DED TO THE TOTAL INCOME OF THE ASSESSEE. 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE E XPENSES WERE INCURRED IN THE COURSE OF THE BUSINESS. THEREFORE, THE SAME SHOULD BE ALLOWED AS A DEDUCTION. HOWEVER, THE LD. CIT(A) DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE AMOUNT PAID TO M/S. SAILESH NAIR & ASSOCIATES WAS NOT OFFERED TO TAX IN THE EARLIER YE ARS. THEREFORE, THE SAME CANNOT BE ALLOWED AS BAD DEBTS UNDER THE PROVISION OF SECTION 36(2) OF THE ACT. ACCORDINGLY, THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO BY OBSERVING AS UNDER: 4.3. GROUND NO. 4 PERTAINS TO DISALLOWANCE OF BAD DEBT AMOUNTING TO RS.51,70,206/-. IT IS NOTICED BY THE ASSESSING OFFI CER THAT THE ASSESSEE COMPANY HAS CLAIMED BAD DEBT OF RS.2,00,000/- ON AC COUNT OF ADVANCES GIVEN TO SHAILESH NAIR & ASSOCIATES, BEING AN ARCHI TECT AND RS.49,70,206/- IN THE NAME OF M/S. SABARI AROMATICS PVT. LTD. BEING A SISTER CONCERN. SINCE THE GENUINENESS OF THE BAD DE BT BESIDES CONDITIONS PRESCRIBED U/S. 36(2) WERE NOT SATISFIED, THE ASSES SING OFFICER MADE THE DISALLOWANCE. DURING THE COURSE OF APPELLATE PROCEE DINGS, VIDE ORDER ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 9 - SHEET ENTRY DATED 08.01.2016, THE LD. AUTHORIZED RE PRESENTATIVE WAS SPECIFICALLY REQUIRED TO PROVE THAT THE CONDITION O F SECTION 36(2) ARE SATISFIED IN RESPECT OF BOTH THE BAD DEBTS. HE WAS ALSO REQUIRED TO FURNISH SUPPORTING DOCUMENTARY EVIDENCE ALONG WITH COPY OF ACCOUNT. ON PERUSAL OF THE DETAILS FURNISHED, IT WAS NOTICED THAT THE SUM OF RS.2,00,000/- WAS GIVEN TO SHAILESH NAIR & ASSOCIAT ES AND THE SAME WAS NEVER CONSIDERED IN THE PROFIT OF THE APPELLANT COMPANY. THUS, CONDITION OF SECTION 36(2) WAS NOT SATISFIED IN THI S REGARD PARTICULARLY WHEN THE APPELLANT WAS NOT ENGAGED IN THE BUSINESS OF ADVANCING LOAN. THE LD. AUTHORIZED REPRESENTATIVE HAS MADE AN ALTER NATIVE CLAIM OF LOSS U/S. 28 DURING THE COURSE OF HEARING. ACCORDIN GLY, HE WAS ASKED TO FURNISH CONFIRMATION FROM SHAILESH NAIR & ASSOCIATE S IN ORDER TO ESTABLISH NATURE OF TRANSACTION AND GENUINENESS OF THE CLAIM AS TO WHETHER SAME HAS ACTUALLY BECOME BAD OR NOT. HOWEVE R, NO CONFIRMATION WAS FURNISHED. ACCORDINGLY, I HOLD THA T THE CONDITIONS OF SECTION 36(2) AS WELL AS SECTION 28 WERE NOT SATISF IED AND HENCE DISALLOWANCE TO THIS EXTENT OF RS.2,00,000/- IS CON FIRMED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 12. THE LD. AR BEFORE US SUBMITTED THAT THE EXPENSE S WERE INCURRED IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE. THERE FORE, THE SAME SHOULD BE ALLOWED AS DEDUCTION. THE LD. AR IN SUPPORT OF H IS CLAIM RELIED ON VARIOUS ORDERS AS DETAILED BELOW: -(2012) 26 TM.COM.15 (JAR) CIT V/S. TATA ROBINS FRA SER LTD. (PG 14 TO 18) -(2016) 76 TM.COM.77 (BOM) CIT V/S. IDEA CELLULAR L TD. (PG 19 TO 21) -(2016) 380 ITR 116 (CAL) BENANI CEMENT LTD (PG 2 2 TO 25) ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 10 - 13. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE CLAIM OF THE ASSESSEE FOR BAD DEBTS OF RS.2,00,000/- WAS DENIED BY THE LOWER AUTH ORITIES ON ACCOUNT OF NONCOMPLIANCE OF THE PROVISION OF SECTION 36(2) OF THE ACT. FROM THE PRECEDING DISCUSSION, WE NOTE THAT THE GEN UINENESS OF THE EXPENSES HAS NOT BEEN DOUBTED BY THE AUTHORITIES BE LOW. IT IS ALSO UNDISPUTED THAT THE AMOUNT WRITTEN OFF AS BAD DEBTS WAS NOT OFFERED TO TAX IN THE EARLIER YEAR. THEREFORE, THE CONDITIONS STIP ULATED UNDER THE PROVISION OF SECTION 36(2) OF THE ACT WERE NOT COMP LIED WITH. HOWEVER, THE ARGUMENT OF THE LD. AR FOR THE ASSESSE E THAT THE EXPENSES WERE INCURRED IN CONNECTION WITH THE RENOVATION/ALT ERNATION OF FACTORY BUILDING AND OFFICE BUILDING WERE NOT DOUBTED. THER EFORE, AN INFERENCE CAN BE DRAWN THAT THE EXPENSES CLAIMED BY THE ASSES SEE WERE INCURRED EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THEREF ORE, THE SAME SHOULD HAVE BEEN ALLOWED UNDER THE PROVISION OF SECTION 37 (1) OF THE ACT. IN HOLDING SO, WE FIND SUPPORT AND GUIDANCE FROM THE J UDGMENT OF HONBLE HIGH COURT OF JHARKHAND IN THE CASE OF CIT VS. TATA ROBINS FRASER LTD. REPORTED IN 26 TAXMANN.COM 15 WHEREIN IT WAS HELD AS UNDER: ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 11 - 16. SUBSTANTIALLY THIS IS ALSO A QUESTION OF FACT WHER E AN EXPENDITURE INCURRED BY THE ASSESSEE WAS OF THE REVENUE IN NATU RE OR IT WAS A CAPITAL EXPENDITURE. HOWEVER, IN VIEW OF THE FACT THAT QUES TION HAS BEEN FRAMED AND WE HAVE NARRATED THE FACTS OF THE CASE INCLUDIN G THE BREAK-UP OF THE EXPENDITURE WHICH INCLUDES THE FEE OF RS. 2,57,335/ - PAID TO THE ARCHITECT AND SOME EXPENSES OF RS. 46,379/- INCURRE D ON OLD CAPITAL WORK IN PROGRESS WHICH WAS ABANDONED AND COST OF DA MAGED CABINETS AND THAT TOO, AMOUNTING TO RS. 12,776/-, TOTAL EXPE NDITURE INCLUDING ALL THREE OF THE HEADS IS RS. 3,16,490/-. IT IS NOT IN DISPUTE THAT THE PROJECT COULD NOT BE ACCOMPLISHED BECAUSE OF THE REASON THA T THE PLACE WHERE IT WAS TO BE UNDERTAKEN HAD A POOR QUALITY OF SOIL AND ALL THE CONSTRUCTION ALREADY DAMAGED. THE OTHER ARTICLES BOUGHT BY THE A SSESSEE ALSO GOT DAMAGED AND, THEREFORE, IN THAT FACT SITUATION, THE TRIBUNAL WAS FULLY JUSTIFIED IN HOLDING THAT SUCH EXPENDITURE WHICH MA Y BE PRE-OPERATIONAL EXPENDITURE FOR A PROJECT CAN BE TREATED TO BE A RE VENUE EXPENDITURE ACTUALLY AND NOT A CAPITAL EXPENDITURE. 14.1 WE ALSO EXTEND OUR RELIANCE ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. IDEA CELLULAR LTD ., REPORTED IN 76 TAXMANN.COM 77 WHEREIN IT WAS HELD AS UNDER: 9. WE HAVE CAREFULLY PERUSED THE MEMO OF THE APPEAL. WE HAVE ALSO PERUSED THE ORDER OF THE ASSESSING OFFICER AND THAT OF THE FIRST APPELLATE AUTHORITY. MR. MALHOTRA HAS ELABORATELY TAKEN US TH ROUGH THESE ORDERS TO SUBMIT THAT THE ASSESSING OFFICER FOUND FROM THE RECORD ITSELF AND PARTICULARLY FROM A DOCUMENT, NAMELY, A LETTER OR R ESPONSE FROM THE ASSESSEE THAT THE PURPOSE OF THE EXPENDITURE CANNOT BE SAID TO BE OTHER THAN BRINGING UP A CAPITAL ASSET INTO EXISTENCE. TH E FACT THAT LATER ON THE SITE WAS NOT CHOSEN FOR HOISTING THE TOWER IS IMMAT ERIAL. HOWEVER, WE FIND THAT THE TRIBUNAL APPLIED THE CORRECT TEST. TH E TRIBUNAL FOUND THAT THERE IS NO DISPUTE THAT THE EXPENDITURE IN QUESTIO N WAS INCURRED FOR THE PURPOSE OF CONSTRUCTION OF A CELLULAR TOWER, BUT TH E PROJECT WAS THEN ABANDONED DUE TO THE REASON THAT THE SITE WAS NOT S UITABLE. THE REASONS ASSIGNED BY THE ASSESSING OFFICER AND THE FIRST APP ELLATE AUTHORITY ARE UNSUSTAINABLE, ACCORDING TO THE TRIBUNAL FOR THE SI MPLE REASON THAT CELLULAR TOWERS WERE BEING ERECTED FOR THE PURPOSE OF ASSESSEE'S OWN BUSINESS OF PROVIDING CELLULAR SERVICES TO THE CUST OMERS. THE TOWERS ARE ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 12 - MEANT FOR THE BUSINESS OF PROVIDING CELLULAR SERVIC ES. IT IS BY UTILISING THESE TOWERS THAT SUCH SERVICES ARE PROVIDED. IT IS NOT AN INDEPENDENT SOURCE OF INCOME. IT IS ONLY TO MAKE THE CELLULAR S ERVICES PROVIDED MORE EFFICIENT, CONVENIENT AND PROFITABLE. WHEN THE TOWE RS ARE NOT EXCLUSIVELY MEANT FOR LEASING OUT TO THIRD PARTIES FOR EARNING THE REVENUE, BUT USED FOR TRANSMISSION OF TELEPHONE SIGNALS OF ASSESSEE'S OWN CELLULAR SERVICES, THEN, IT CANNOT BE SAID THAT THE TOWERS, WHICH ARE USED FOR THE ASSESSEE'S OWN BUSINESS, ARE NEW SOURCE OF INCOME. A CELLULAR TOWER CAN BE A NEW INDEPENDENT SOURCE OF INCOME, IF IT IS ERE CTED EXCLUSIVELY FOR LEASING OUT TO THE OTHER OPERATORS. HOWEVER, ON FAC TS, THIS WAS NOT THE POSITION AND THE TRIBUNAL, THEREFORE, RIGHTLY CONCL UDED THAT IN SERIES OF DECISIONS, THE HIGH COURTS AND THE HON'BLE SUPREME COURT OF INDIA HAS LAID DOWN THE PRINCIPLE THAT IF AN EXPENDITURE IS I NCURRED FOR DOING THE BUSINESS IN A MORE CONVENIENT AND PROFITABLE MANNER AND HAS NOT RESULTED IN BRINGING ANY NEW ASSET INTO EXISTENCE, THEN, SUCH EXPENDITURE IS ALLOWABLE BUSINESS EXPENDITURE. IN THE PRESENT C ASE, NO NEW BUSINESS WAS SET UP, BUT TOWERS IN ADDITION TO WHICH WERE AL READY SET UP WERE PROPOSED AT SITE, WHICH PROJECT WAS LATER ON ABANDO NED. 14.2 WE ALSO EXTEND OUR RELIANCE ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF MOHAN MEAKIN LTD. VS. CIT REPORTED IN 11 TAXMANN.COM 141 WHEREIN IT WAS HELD AS UNDER: 10. APPLYING THE PRINCIPLES OF LAW AS REGARD INTERPRET ATION OF SECTIONS 28, 29, 36(1)(VII), 36(2) AND SECTION 37 OF THE ACT AS ENUNCIATED BY THE DIVISION BENCH OF J&K HIGH COURT AND THE APEX COURT IN THE AFORE- CITED CASES, WE ARE OF THE CONSIDERED VIEW THAT IT WAS IN THE TOTALITY OF OVERALL SITUATION OF THE MATTER THAT THE ASSESSEE D ECIDED TO WRITE OFF THE ADVANCES MADE TO M/S. KANPUR BOOT HOUSE AS BAD DEBT . THE REASON AS GIVEN BY THE ASSESSEE WAS APPARENTLY WELL-FOUNDED A ND WAS ABRUPTLY REJECTED BY THE ASSESSING OFFICER AND THE TRIBUNAL. THEY DID NOT APPRECIATE THE FACT THAT THE CONTINUITY OF SUPPLY W AS ESSENTIAL TO HONOUR THE AGREEMENT WITH THE CORPORATION AND THAT IT WAS TO CONTINUE THE BUSINESS WITHOUT ANY BREAK THAT THE ADVANCES WERE M ADE TO THE MANUFACTURER, M/S. KANPUR BOOT HOUSE. IT WAS ONLY O N ACCOUNT OF NON- RECOVERY OF THE HUGE AMOUNT FROM THE CORPORATION TH AT THE WORK HAD TO BE CANCELLED AND THE SUPPLIES HAD TO BE ABRUPTLY ST OPPED BY THE ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 13 - ASSESSEE AND CONSEQUENTLY PRODUCTION WAS NECESSARIL Y REQUIRED TO BE STOPPED. IT IS KNOWN PRACTICE THAT USUALLY MANUFACT URER GIVES ADVANCES TO THE WORKERS WHICH ARE ADJUSTED OR CARRIED FORWAR D IN THE COMING TIMES AGAINST THE WORKS DONE BY THEM. THIS WAS NOT AN UNUSUAL PRACTICE WHICH WAS LIABLE TO BE OUTRIGHTLY REJECTED BY THE D EPARTMENT. WHEN THE ASSESSEE HAD WRITTEN OFF THE DUES RECOVERABLE FROM THE CORPORATION AND THE SAME WERE ACCEPTED BY THE DEPARTMENT AND IT HAD ALSO SO WRITTEN OFF, THE ADVANCES MADE TO M/S. KANPUR BOOT HOUSE IN ITS BOOKS OF ACCOUNT, WHAT ELSE COULD BE THE PROOF WITH THE ASSE SSEE FOR ITS BEING UNABLE TO RECOVER THE SAME. THE OTHER REASON FOR WR ITING OFF WAS THE DEMISE OF THE PROPRIETOR, BHAGWAN DAS, OF M/S. KANP UR BOOT HOUSE AND THE ASSESSEE IN ITS WISDOM DID NOT CHOOSE TO TA KE THE MATTER TO THE COURT APPREHENDING COUNTER CLAIM AND THIS DECISION OF THE ASSESSEE SEEMS TO BE WELL REASONED. IN ANY CASE, THE REVENUE COULD NOT COMPEL THE ASSESSEE TO HAVE RECOURSE TO LITIGATION TO RECO VER THE AMOUNT AGAINST DEAD PERSON OR HIS LEGAL HEIRS WHEN IN THE GIVEN CI RCUMSTANCES, THE SAME MAY NOT BE RECOVERABLE. THE CIT(A) RIGHTLY REC ORDED THAT THE DEBT HAD BECOME BAD AND NOT RECOVERABLE AND IT WOULD BE A FUTILE EXERCISE TO TAKE ANY ACTION AGAINST THE LEGAL HEIRS OF THE DECE ASED. IN VIEW OF THE DISCUSSION AS MADE BY THE DIVISION BENCH OF J&K HIG H COURT AND THE HONBLE SUPREME COURT, AS QUOTED ABOVE, THAT THE AD VANCES MADE BY THE ASSESSEE IN THE CASE WERE CERTAINLY OF A TYPE W HICH WOULD BE WITHIN THE CONTEMPLATION OF THE WORDS 'LAID OUT OR EXPENDE D WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS'. AS N O PORTION OF THE SAID ADVANCES COULD BE STATED TO BE LOSS OF CAPITAL EXPE NDITURE, BUT IT BEING A PLAIN CASE OF BUSINESS LOSS, IT WOULD CERTAINLY BE ALLOWABLE TO BE DEDUCTED UNDER THE PROVISIONS OF SECTION 37 OF THE ACT. 14.3 IN ADDITION TO THE ABOVE, WE ALSO NOTE THAT TH E CLAIM OF THE ASSESSEE UNDER THE SECTION 36(2) OF THE ACT DOES NOT DISENTI TLE THE ASSESSEE FOR DEDUCTION OF ITS CLAIM UNDER SECTION 37(1) OF THE A CT. AS SUCH THE CLAIM OF THE ASSESSEE IS NOT DEPENDENT ON THE CLASSIFICAT ION OF THE EXPENSES UNDER A PARTICULAR HEAD. THERE CANNOT BE A TEST FOR THE ALLOWABILITY OF CLAIM BASED OB ITS CLASSIFICATION. THE AO IS REQUIR ED TO ALLOW THE RIGHTFUL ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 14 - CLAIM MADE BY THE ASSESSEE THOUGH IT WAS CLASSIFIED UNDER THE WRONG HEAD. IN THIS REGARD, WE ALSO NOTE THAT THE CBDT IN ITS CIRCULAR ISSUED IN JUNE, 1955 HAS INSTRUCTED TO THE DEPARTMENT NOT TO DISALLOW THE RIGHTFUL CLAIM OF THE ASSESSEE. THE RELEVANT EXTRACT OF THE CIRCULAR READS AS UNDER: 'OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DU TIES TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SH OULD TAKE THE INITIATIVE IN GUIDING TAXPAYER WHERE PROCEEDINGS OR OTHER PART ICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT, FOR, IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FR OM THE DEPARTMENT. ALTHOUGH, THEREFORE, THE RESPONSIBILITY FOR CLAIMIN G REFUNDS AND RELIEFS RESTS WITH THE ASSESSEES ON WHOM IT IS IMPOSED BY L AW, OFFICERS SHOULD (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS T O THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED F OR CLAIMING REFUNDS AND RELIEFS.' IN VIEW OF ABOVE, WE HOLD THAT THE ASSESSEE IS VERY MUCH ELIGIBLE FOR DEDUCTION ON ACCOUNT OF PAYMENT MADE TO SAILESH NAI R AND ASSOCIATES FOR THE RENOVATION/ALTERATION OF THE FACTORY AND OF FICE BUILDING UNDER THE PROVISION OF SECTION 37(1) OF THE ACT. HENCE, WE RE VERSE THE ORDER OF AUTHORITIES BELOW AND DIRECT THE AO TO DELETE THE A DDITION MADE BY HIM. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED . 15. THE NEXT ISSUE RAISED BY THE ASSESSEE IS THAT LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 49,70,206/- U/S 36(2) OF THE ACT. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 15 - 16. THE ASSESSEE DURING THE YEAR HAS CLAIMED BAD DE BTS OF RS. 49,70,206/- ONLY WHICH WAS DEBITED IN THE NAME OF M /S. SABRI AROMATICS PVT. LTD. THE ASSESSEE CLAIMED THAT THE FINANCIAL C ONDITION OF M/S. SABRI AROMATICS PVT. LTD. WAS NOT SOUND. ACCORDINGLY, THE MANAGEMENT DECIDED TO SHUT DOWN THE COMPANY M/S. SABRI AROMATI CS PVT. LTD. THUS M/S. SABRI AROMATICS PVT. LTD. SURRENDERED VARIOUS GOVERNMENT REGISTRATIONS SUCH AS FACTORY LICENSE, VAT REGISTRA TION, CENTRAL EXCISE REGISTRATION, SERVICE TAX, ESI, PF, ELECTRICITY CON NECTION ETC. THEREFORE, THE ASSESSEE DECIDED TO WRITE OFF THE AMOUNT DUE FR OM M/S. SABRI AROMATICS PVT. LTD. AMOUNTING TO RS.49,70,206/- ONL Y. HOWEVER, THE AO DURING THE ASSESSMENT PROCEEDINGS O BSERVED CERTAIN FACTS AS DETAILED UNDER: I. M/S. SABRI AROMATICS PVT. LTD. IS A SISTER CONCERN OF THE ASSESSEE AND THEREFORE IT IS DULY COVERED UNDER THE PROVISION OF SECTION 40A(2)(B) OF THE ACT. II. THE ASSESSEE HAS MADE TRANSACTIONS WITH ITS ASSOCIA TED CONCERNS FOR THE LAST SEVERAL YEARS, BUT THE ASSESSEE FAILED TO JUSTIFY THE REASONS FOR NON-RECOVERY OF THE AMOUNT FROM THE SIS TER CONCERN. III. THE ASSESSEE HAS NOT FILED THE DETAILS OF THE NATUR E OF THE TRANSACTIONS CARRIED OUT WITH M/S. SABRI AROMATICS PVT. LTD. IV. THE COPY OF THE LEDGER OF M/S. SABRI AROMATICS PVT. LTD. WAS NOT FURNISHED BY THE ASSESSEE. V. SIMILAR DISALLOWANCE WAS MADE BY THE LD. CIT(A) IN THE OWN CASE OF THE ASSESSEE PERTAINING TO THE A.Y. 2010-11 . THE ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 16 - SUBMISSIONS MADE BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WERE IDENTICAL AS MADE IN THE A.Y. 20 10-11. IN VIEW OF ABOVE, THE AO DISALLOWED THE DEDUCTION C LAIMED FOR RS. 49,70,206/- AND ADDED TO THE TOTAL INCOME OF THE AS SESSEE. 17. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT M/S. SABRI AROMATICS PVT. LTD. BELONGS TO THE SAME MANAGEMENT, BUT THAT CANNO T BE THE REASON FOR DISALLOWING THE CLAIM MADE BY THE ASSESSEE U/S 36(1 )(VII) R.W.S. 36(2) OF THE ACT. 17.1 THE ASSESSEE ALSO SUBMITTED THAT THERE IS NO R EQUIREMENT UNDER THE PROVISION OF SECTION 36(2) OF THE ACT TO PROVE THAT THE DEBTS HAVE BECOME BAD DEBTS. THEREFORE MERELY THE AMOUNT WRITTEN OFF IN THE BOOKS OF ACCOUNTS IS SUFFICIENT ENOUGH FOR ALLOWING THE DEDU CTION U/S 36(1)(VII) & 36(2) OF THE ACT. HOWEVER, THE LD. CIT(A) DISREGARD ED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSER VING AS UNDER: 3.1. AS REGARDS THE BAD DEBT CLAIM OF RS.49,70,206 /- IN THE NAME OF SABARI AROMATICS PVT. LTD., I FIND THAT THE APPELLA NT HAS BEEN MAKING VARIOUS PAYMENTS TO THIS CONCERN BEING A ASSOCIATES CONCERN. SINCE SABARI AROMATICS PVT. LTD. IS INCURRING HUGE LOSS, THE APPELLANT IS CLAIMING BAD DEBT AND NO TAX IS PAID BY SABARI AROM ATICS PVT. LTD. ON THE LIABILITY CEASED U/S. 41(1). SINCE THE APPELLAN T COMPANY HAD MADE PAYMENT TO SABARI AROMATICS PVT. LTD. BY ACCOUNT PA YEE CHEQUE AND THE APPELLANT IS NOT ENGAGED IN THE BUSINESS OF ADVANCI NG MONEY, THE CONDITION OF SECTION 36(2) ARE NOT SATISFIED. MOREO VER, IT HAS CLAIMED DEDUCTION OF THE BAD DEBTS, BUT SABARI AROMATICS PV T. LTD. HAS NOT PAID ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 17 - ANY TAXES ON THE LIABILITY CEASED U/S. 41(1) DUE TO HEAVY LOSSES. THUS, THE TRANSACTION OF ADVANCING MONEY TO SABARI AROMATICS PVT. LTD. AND CLAIMING BAD DEBT ARE PART OF A COLOURABLE DEVICE A DOPTED BY THE APPELLANT. UNDER THE ALMOST SIMILAR FACTS AND CIRCU MSTANCES, CIT(A)- III, BARODA VIDE HIS ORDER DATED 21.10.2013 CONTAIN ED IN APPEAL NO. CAB/III-263/12-13 (A.Y. 2010-11) IN THE CASE OF APP ELLANT ITSELF HAS CONFIRMED THE DISALLOWANCE OF BAD DEBT. THE RELEVANT PORTION OF THE ORDER OF THE CIT(A)-III, BARODA IS REPRODUCED AS UNDER:- '4.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSIONS MADE BY THE AR OF THE APPELLANT. THE AO HAS STATED IN HI S ORDER THAT M/S SABARI AROMATICS PVT. LTD WAS A CONCERN COVERED UND ER PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. DESPITE THIS, IN THE AUDIT REPORT THIS FACT HAD BEEN NOT MENTIONED. THIS FACT HAS NOT CONTROVER TED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS. THE AO HAS ALSO STATED THAT WRITING OFF OF DEBT DUE FROM THE CONCERN AS BA D DEBT BY THE APPELLANT WAS A COLOURABLE DEVICE TO REDUCE THE TAX ABLE INCOME OF THE APPELLANT AND TO EVADE THE INCOME TAX. HE HAS ALSO STATED THAT THIS RELATED CONCERN WAS INCURRING LOSSES FOR SEVERAL YE ARS AND HAD NEVER PAID TAXES INCLUDING THE A.Y 2010-11. DESPITE THIS, THE APPELLANT HAD BEEN MAKING THE PAYMENTS OF THIS CONCERN DESPITE TH E FACT THAT THERE, WAS NO POSSIBILITY OF RECOVERY FROM THE SAID PARTY. THE APPELLANT HAS NOT GIVEN ANY SUBMISSION ON ALL THESE FACTS AND INF ERENCES DRAWN BY THE AO FROM THE DETAILS SUBMITTED BY THE APPELLANT. THE ONLY SUBMISSION OF THE APPELLANT IS THAT ONCE IT HA S WRITTEN OFF A DEBT AS BAD DEBT AS PER THE PROVISIONS OF SECTIO N 36(1)(VII) AND THE JUDICIAL PRONOUNCEMENTS IN THIS REGARD / IT CANNOT BE ASKED TO ESTABLISHED THAT DEBT HAS BECAME BAD AND SUCH CLAIM HAS TO BE ALLOWED BY THE AO. IN NORMAL CIRCUMSTANCES, THE APP ELLANT'S CLAIM ARE ADMISSIBLE BUT NOT IN THE PRESENT SITUATION WHERE T HE APPELLANT HAS CONCEALED THE FACTS THAT THE DEBTOR IS A PARTY COVE RED UNDER THE PROVISIONS OF SECTION 40A(2)(B)AND HAS SUBMITTED NO THING REGARDING CONCLUSION OF THE AO THAT THE ACTION OF THE APPELLA NT IS NOTHING BUT COLOURABLE DEVICE TO EVADE TAXES. THE ONLY SUBMISSI ON MADE BY THE APPELLANT IS THAT FOR THE PROVISIONS OF SECTION 36( 1)(VII) R.W.S 32, NO DISTINCTION HAD BEEN PROVIDED BETWEEN THE PARTIES C OVERED BY THE PROVISIONS OF SECTION 40A(2)(B) AND THOSE WHO ARE N OT COVERED. BUT ABSENCE OF SUCH DISTINCTION CANNOT BE TAKEN TO MEAN THAT THE AO CANNOT LIFT THE CORPORATE VEIL AND LOOK INTO THE RE AL NATURE OF TRANSACTION TO ESTABLISH THAT THE APPARENT IS NOT R EAL AND THE TRANSACTION ENTERED INTO BY AN ASSESSEE IS NOTHING BUT A COLOURABLE ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 18 - DEVICE TO EVADE TAXES. SINCE THE APPELLANT HAS NOT BEEN ABLE TO CONTRADICT THE CONCLUSION OF THE AO IN THIS REGARD, HENCE THE DISALLOWANCE MADE BY THE AO IS UPHELD. 4.3.1. THE DISALLOWANCE MADE BY THE AO IS CORRECT ON ANOTHER ACCOUNT ALSO. DURING THE COURSE OF APPELLATE PROCEE DINGS, THE APPELLANT HAD NOT SUBMITTED ANY DETAILS OF THE TRAN SACTIONS ENTERED INTO IT WITH M/S SABARI AROMATICS PVT. LTD. A COPY OF THE LEDGER ACCOUNT OF M/S SABARI AROMATICS PVT. LTD., SUBMITTE D BY THE APPELLANT BEFORE THE AO WAS OBTAINED BY THIS OFFICE, A PERUSA L OF THE LEDGER ACCOUNTS SHOWS THAT DURING THE F.Y 2009-10, THE OPE NING DEBIT BALANCE IN THE ACCOUNTS OF THIS PARTY WAS RS.2,37,7 8,443/-. DURING THE F.Y 2009-10 THERE WERE SEVERAL TRANSACTIONS IN THE NATURE OF SALES MADE BY THE APPELLANT TO THIS PARTY, PURCHASE MADE BY THE APPELLANT FROM THIS PARTY, AND ALSO THE PAYMENTS MADE BY THE APPELLANT TO THIS PARTY BY TAKING OVERDRAFT FROM ITS BANK OF BARODA C ASH CREDIT ACCOUNT. THE CLOSING DEBIT BALANCE AS ON 31/03/2010 WAS RS.2 ,34,09,499/- OUT OF WHICH AN AMOUNT OF RS.40,68,421/- WAS WRITTEN OF F AS BAD DEBT FOR THE CURRENT YEAR IN THE BOOKS OF ACCOUNTS OF THE AP PELLANT. THE ANALYSIS OF THIS LEDGER ACCOUNT SHOWS THAT DESPITE THE OPENI NG DEBIT BALANCE OF RS.2,37,78,443/-, THE APPELLANT HAS FURTHER MADE OP ENING DEBIT BALANCE OF RS.2,37,78,443/-, THE APPELLANT HAS FURT HER MADE PAYMENTS OF RS.68,74,178/- TO THE SISTER CONCERN. BESIDES, T HE APPELLANT HAS ALSO MADE SALES TO THIS CONCERN DURING THIS YEAR. THUS, THE INCREASE IN DEBIT BALANCE DURING THIS YEAR IS ON ACCOUNT OF BOTH THES E ACTIVITIES. BESIDES DURING THE F.Y 2008-09, THE OPENING DEBIT BALANCE W AS RS.2,35,78,443.96 AND CLOSING DEBIT BALANCE AS ON 3 1/03/2009 WAS RS.2,37,78,443.96. THESE OPENING AND CLOSING BALANC ES ARE TABULATED AS FOLLOWS: FY 2008-09 FY 2009-10 OPENING DEBIT BALANCE RS,2,35,78,443.96 RS.2,37,78,443.96 CLOSING DEBIT BALANCE RS.2,37,78,443.96 RS.2,34,09,499.00 (INCLUDING BAD DEBT WRITTEN OFF RS.40,68,421/-. 4.3.2. THUS, THE CLOSING BALANCE AS ON 31/03/2010 WAS ALMOST ENTIRELY OUT OF THE OPENING BALANCE AS ON 01/04/2008. NO LED GER ACCOUNT OF A ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 19 - DATE PRIOR TO 01/04/2008 HAS BEEN SUBMITTED BEFORE THE AO ALSO AND HENCE, THE NATURE OF TRANSACTIONS MADE PRIOR TO THI S DATE ARE NOT KNOWN. THE AO HAS ALSO STATED IN HIS ORDER THAT THE NATURE OF TRANSACTIONS FOR WHICH THE AMOUNT WAS BAD WAS NOT S UBMITTED SUCH AS DETAILS OF TRANSACTIONS, DATE OF TRANSACTIONS, AND SINCE HOW LONG IT IS OUTSTANDING. THUS/ BEFORE THE AO, THE APPELLANT HAD NOT ESTABLISHED THAT ITS CLAIM OF WRITING OFF OF BAD DEBT IS AS PER THE PROVISIONS OF SECTION 36(2) OF THE IT ACT, 1961. HENCE, VIDE NOTI CE OF THIS OFFICE DATED 31/07/2013, THE APPELLANT WAS CATEGORICALLY A SKED TO EXPLAIN, ON THE BASIS OF ITS BOOKS OF ACCOUNTS AND SUPPORTING E VIDENCES, AS TO HOW THE BAD DEBT WRITTEN OFF BY IT SATISFIED THE PROVIS IONS OF SUB SECTION 2 OF SECTION 36 OF THE IT ACT, 1961, THE HEARING FOR THE PURPOSE WAS FIXED ON 12/08/2013, BUT ON THAT DAY NEITHER ANY PERSON A PPEARED ON BEHALF OF THE APPELLANT NOR ANY WRITTEN SUBMISSION WAS MAD E. A FURTHER HEARING WAS FIXED ON 05/09/2013 VIDE NOTICE DATED 2 9/08/2013. AGAIN, NO COMPLIANCE WAS MADE. ANOTHER HEARING WAS FIXED O N 18/09/2013 VIDE NOTICE DATED 10/09/2013. ON THAT DAY A LETTER WAS SUBMITTED REQUESTING FOR ADJOURNMENT OF THE PROCEEDINGS. ACCO RDINGLY, THE HEARING WAS ADJOURNED TO 07/10/2013. BUT, AGAIN, ON THAT DAY NO COMPLIANCE WAS MADE ON BEHALF OF THE APPELLANT. THU S, DESPITE BEING ACCORDED SEVERAL OPPORTUNITIES OF BEING HEARD, THE APPELLANT HAS FAILED TO ESTABLISH, OR FILE ANY EXPLANATION TO THE QUERY RAISED BY THIS OFFICE AS TO HOW THE BAD DEBT WRITTEN OFF BY IT SATISFIES THE PROVISIONS OF SUB SECTION 2 OF SECTION 36 OF THE IT ACT, 1961. UNDER SUCH CIRCUMSTANCES, THE DISALLOWANCES MADE BY THE AO IS UPHELD ON THIS ACCOUNT ALSO BY HOLDING THAT THE APPELLANT HAS NOT FULFILLED THE CO NDITIONS LAID DOWN BY THE PROVISIONS OF SECTION 36(2) WHILE CLAIMING DEDU CTION ON ACCOUNT OF WRITING OFF OF BAD DEBT.' 4.3.2. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THUS I HOLD THAT THE TRANSACTIONS WITH THE SISTER CONCERN REGARDING GIVING ADVANCES AND THEN CLAIMING BAD DEBT, ARE SHAM TRANS ACTIONS. MOREOVER, CONDITIONS OF SECTION 36(2) ARE NOT SATISFIED. THUS THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AT RS.49,70,206/- IS CONFIRMED. ACCORDINGLY, APPELLANT FAILS IN RESPECT OF GROUND N O, 4. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 20 - 18. THE LD. AR BEFORE US SUBMITTED THAT THE DISALLO WANCE WAS MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) AFTER HAVING RELIANCE IN THE OWN CASE OF THE ASSESSEE PERTAINING TO THE A.Y. 2010-11 . HOWEVER, THE HONBLE ITAT, AHMEDABAD HAS DELETED THE ADDITION MA DE BY THE AO IN ITA NO. 24/AHD/2014 VIDE ORDER DATED 12.04.2017. AC CORDINGLY, THE LD. AO FOR THE ASSESSEE PRAYED TO ALLOW THE CLAIM MADE BY THE ASSESSEE. 19. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT TH E ITAT IN THE IDENTICAL FACTS AND CIRCUMSTANCES HAS DECIDED THE ISSUE IN FA VOR OF THE ASSESSEE IN ITS CASE IN ITA NO.24/AHD/2014 PERTAINING TO THE A. Y. 2010-11 VIDE ORDER DATED 12.04.2017. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW: 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW QUA THE ISSUE. THE CLAIM OF THE WRITE OFF OF THE BA D DEBTS HAVE TO BE ALLOWED IF THE BAD DEBTS IS WRITTEN OFF AS IRRECOVE RABLE IN THE ACCOUNTS OF THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. IN 323 ITR 397 HAS HELD 'AFTER THE AMENDMENT OF SECTION 36 (1)(VII) OF THE INCOME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1,1989 , IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECES SARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECO VERABLE: IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE'. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 21 - 9. SINCE, THE ASSESSEE HAS ACTUALLY WRITTEN OFF TH E DEBT IN ITS BOOKS OF ACCOUNTS, DRAWING SUPPORT FROM THE RATIO LAID DO WN BY THE HON'BLE SUPREME COURT, WE DIRECT THE A.O. TO DELETE THE DIS ALLOWANCE OF RS. 40,68,421/-. 10. APPEAL FILED BY THE ASSESSEE IS ALLOWED. RESPECTFULLY FOLLOWING THE SAME, WE HAVE NO HESITAT ION IN REVERSING THE ORDERS OF AUTHORITIES BELOW. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. HENCE, THE GROUND OF APPEAL O F THE ASSESSEE IS ALLOWED. 21. THE NEXT ISSUE RAISED BY THE ASSESSEE IS THAT L D. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF EXHIBITION EXPENSES F OR RS. 1,64,010/-. 22. THE ASSESSEE DURING THE YEAR HAS CLAIMED EXHIBI TION EXPENSES TO BE HELD IN CROPWORLD AT LONDON FROM 6 TH TO 8 TH NOVEMBER, 2012. THE ASSESSEE FOR THE SAME HAS PAID BOOKING FEES OF GBP OF 2130.00 EQUIVALENT TO INDIAN RS.1,64,010/- WHICH WAS CLAIME D AS A DEDUCTION IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, THE AO OBSERVED THAT THE EXHIBITION WOULD TAKE PLACE IN THE F.Y. 2012-13 RELEVANT TO A.Y. 2013-14. THEREFORE, T HE PAYMENT MADE FOR PARTICIPATION IN THE EXHIBITION REPRESENTS THE ADVA NCE PAYMENT WHICH CANNOT BE ALLOWED IN THE YEAR UNDER CONSIDERATION. THEREFORE THE SAME WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 22 - 23. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) CONCEDED THE FACT TH AT THE EXPENDITURE WAS CLAIMED IN THE YEAR UNDER CONSIDERATION BY MISTAKE. THE ASSESSEE FURTHER SUBMITTED THAT THE SAME EXPENDITURE WAS NOT CLAIMED IN THE NEXT YEAR. THEREFORE, IF IT IS DISALLOWED FOR THE YEAR UNDER C ONSIDERATION, THEN THE SAME SHOULD BE ALLOWED IN THE SUBSEQUENT YEAR. 23.1 WITHOUT PREJUDICE TO THE ABOVE THE ASSESSEE AL TERNATIVELY SUBMITTED THAT THE EXPENSES ARE ELIGIBLE U/S 37 OF THE ACT IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE ALSO SUBMITTED THAT THE GENUINENESS OF THE EXPENSES HAD NOT BEEN DOUBTED. HOWEVER, THE LD. CIT (A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 4.4. GROUND NO. 5 PERTAINS TO DISALLOWANCE OF EXHIBITION EXPENSES OF RS.1,64,010/-. IT IS NOTICED THAT THE APPELLANT COM PANY HAS PAID ADVANCE OF RS.1,64,010/- IN RESPECT OF CONTRACT FOR EXHIBIT ION TO BE HELD IN CORPWORLD AT LONDON FROM 6 TH TO 8 TH NOVEMBER, 2012. SINCE THE EXPENDITURE PERTAINS TO THE SUBSEQUENT YEAR, AS PER THE MATCHING PRINCIPLE, THE EXPENDITURE HAS NOT BEEN INCURRED FO R THE BUSINESS OF THE YEAR UNDER CONSIDERATION. ACCORDINGLY, I HOLD THAT THE ASSESSING OFFICER HAS RIGHTLY MADE THE DISALLOWANCE OF RS.1,64,010/-. THUS, APPELLANT FAILS IN RESPECT OF GROUND NO. 5. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 23 - 24. THE LD. AR BEFORE US SUBMITTED THAT THE EXPENSE S CLAIMED BY THE ASSESSEE ARE ELIGIBLE ON ACCRUAL BASIS. THE LD. AR FOR THE ASSESSEE IN SUPPORT OF HIS CLAIM RELIED ON THE JUDGMENT OF BOMB AY HIGH COURT IN THE CASE OF CIT VS. NAGRI MILLS CO. LTD. REPORTED IN 33 ITR 681. 25. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 26. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSES SEE HAS MADE THE PAYMENT FOR PARTICIPATING IN THE EXHIBITION WHICH W ILL TAKE PLACE IN THE SUBSEQUENT YEAR. HOWEVER, THE ASSESSEE CLAIMED THE DEDUCTION IN THE YEAR UNDER CONSIDERATION. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE PAYMENT MADE BY THE ASSESSEE REPRES ENTS THE ADVANCES. THE VIEW TAKEN BY THE AO WAS SUBSEQUENTLY CONFIRMED BY THE LD. CIT(A). 26.1 IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS MADE THE PAYMENT FOR PARTICIPATING IN THE EXHIBITION IN CROPWORLD AT LON DON. THE EXHIBITION WILL TAKE PLACE ON 6 TH TO 8 TH NOVEMBER, 2012 RELEVANT TO THE PREVIOUS YEAR 2012-13. THUS, THERE IS NO AMBIGUITY THAT THE PAYME NT MADE BY THE ASSESSEE REPRESENTS AN ADVANCE PAYMENT. AS THE EXPE NSE DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION, THEREFORE, THE SAM E CANNOT BE ALLOWED AS DEDUCTION. IT IS BECAUSE THE ASSESSEE WILL EARN INC OME OUT OF SUCH ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 24 - EXHIBITION IN THE SUBSEQUENT YEAR BUT THE ASSESSEE IS CLAIMING THE CORRESPONDING COST IN THE YEAR UNDER CONSIDERATION. THEREFORE, THERE IS NO MATCH BETWEEN THE INCOME TO BE BOOKED BY THE ASSESS EE AND THE CORRESPONDING EXPENDITURE. THE PRINCIPLE OF MATCHIN G REQUIRES THAT THE ASSESSEE SHOULD BOOK ITS EXPENSES CORRESPONDING TO ITS INCOME. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO INFI RMITY IN THE ORDER OF AUTHORITIES BELOW. AS THE GENUINENESS OF THE EXPENSES HAS NOT BEEN DOU BTED, THEREFORE WE ARE OF THE VIEW THAT THE SAME IS ELIGIBLE FOR DEDUC TION UNDER SECTION 37(1) OF THE ACT IN THE SUBSEQUENT YEAR. THE ARGUMENT OF THE LD. AR FOR THE ASSESSEE THAT THERE WAS NO CLAIM IN THE SUBSEQUENT YEAR FOR SUCH EXPENSES HAS NOT BEEN CHALLENGED. THEREFORE, WE DIRECT THE A O TO ALLOW THE CLAIM OF THE ASSESSEE IN THE SUBSEQUENT YEAR FOR SUCH EXP ENSES AS PER THE PROVISIONS OF LAW. HENCE, THE GROUND OF APPEAL OF T HE ASSESSEE IS DISMISSED. 27. THE LAST ISSUE RAISED BY THE ASSESSEE IS THAT L D. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST PAYMENT OF RS. 81,440/- TO TATA CAPITAL LTD NBFC. 28. THE ASSESSEE DURING THE YEAR HAS INCURRED INTER EST EXPENSES OF RS.81,440/- WITHOUT DEDUCTING THE TDS, THEREFORE, T HE SAME WAS ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 25 - DISALLOWED U/S 40(A)(IA) OF THE ACT AND ADDED TO TH E TOTAL INCOME OF THE ASSESSEE. 29. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A) WHO HAS CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 4.2. GROUND NO. 3 PERTAINS TO DISALLOWANCE OF RS. 81,440/- U/S. 40(A)(IA) ON ACCOUNT OF NON DEDUCTION OF TDS U/S. 1 94A. UNDISPUTEDLY, THE APPELLANT COMPANY HAS PAID INTEREST OF RS.81,44 0/- TO TATA CAPITAL LTD. WITHOUT DEDUCTING THE TAX AND HENCE PROVISIONS OF SECTION 40(A)(IA) ARE CLEARLY ATTRACTED. HOWEVER, DURING THE COURSE O F APPELLATE PROCEEDINGS, THE LD. AUTHORIZED REPRESENTATIVE HAS HEAVILY ARGUED THAT THE RECIPIENT COMPANY HAD ALREADY INCLUDED THE INTE REST RECEIVED FROM THE APPELLANT IN ITS RETURN OF INCOME AND HENCE NO DISALLOWANCE IS CALLED FOR IN THE CASE OF APPELLANT IN VIEW OF THE DECISION OF HON'BLE ITAT, AGRA IN THE CASE OF RAJEEV KUMAR AGRAWAL VS. CIT (ITA NO. 337/AGRA/2013) DATED 29.05.2013. THIS DECISION HAS BEEN FOLLOWED BY OTHER ITAT'S ALSO. THE ARGUMENTS OF THE LD. AUTHORI ZED REPRESENTATIVE ARE FOUND TO BE ACCEPTABLE. I HAVE GONE THROUGH THE CASES RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE AND IT IS NOTI CED THE HON'BLE ITATS HAVE HELD THAT THE SECOND PROVISO INSERTED W. E.F. 01.04.2013 IS REMEDIAL/CURATIVE IN NATURE AND ACCORDINGLY IT WOUL D APPLY RETROSPECTIVELY W.E.F. 01.04.2005. FURTHER IT IS HE LD THAT IF DEDUCTOR HAS NOT BEEN TREATED AS AN ASSESSEE IN DEFAULT U/S. 201 (1) AND THE DEDUCTEE HAS INCLUDED THE AMOUNTS RECEIVED FROM THE DEDUCTOR IN HIS RETURN OF INCOME AND ALSO PAID THE TAXES THEREON, THEN NO DIS ALLOWANCE U/S, 40(A)(IA) IS CALLED FOR. 4.2.1. IN VIEW OF THE ABOVE FACTS AND LEGAL POSITIO N, THUS THE ASSESSING OFFICER IS DIRECTED TO VERIFY AS TO WHETHER THE APP ELLANT HAS BEEN TREATED AS ASSESSEE IN DEFAULT U/S. 201(1) OR NOT AND IF AP PELLANT HAS BEEN TREATED AS AN ASSESSEE IN DEFAULT U/S. 201(1), THEN THE DISALLOWANCE WILL STAND CONFIRMED. HOWEVER, IF APPELLANT HAS NOT BEEN TREATED AS AN ASSESSEE IN DEFAULT U/S, 201(1) AND THE DEDUCTEE HA S INCLUDED THE AMOUNTS RECEIVED FROM THE APPELLANT IN HIS RETURN O F INCOME AND ALSO PAID THE TAXES THEREON, THEN NO DISALLOWANCE U/S. 4 0(A)(IA) IS CALLED FOR. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 26 - HENCE, THE ASSESSING OFFICER IS FURTHER DIRECTED TO VERIFY THE FACTUAL POSITION AND ALLOW CONSEQUENTIAL RELIEF ACCORDINGLY . NEEDLESS TO MENTION, THE APPELLANT WILL PROVIDE ALL NECESSARY D OCUMENTS TO THE ASSESSING OFFICER IN THIS REGARD INCLUDING CERTIFIC ATE IN FORM NO. 26A. THUS, APPELLANT PARTLY SUCCEEDS IN RESPECT OF GROUN D NO. 3. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 30. THE LD. AR BEFORE US SUBMITTED THAT THE PAYEE H AD INCLUDED THE AMOUNT OF INTEREST INCOME IN ITS INCOME TAX RETURN ON WHICH PAYEE HAS PAID TAX. THE LD. AR IN SUPPORT OF HIS CLAIM FILED A COPY OF THE CA CERTIFICATE WHICH IS PLACED ON RECORD. 31. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 32. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT TH E COPY OF CA CERTIFICATE WAS NOT FILED BY THE ASSESSEE BEFORE THE LOWER AUTH ORITIES. THE CERTIFICATE ISSUED BY THE CA IS AN ADDITIONAL DOCUMENT WHICH RE QUIRES TO BE CONSIDERED BY THE AO. THEREFORE IN THE INTEREST OF THE JUSTICE AND FAIR PLAY WE ARE INCLINED TO SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE TO THE PROVISION OF LAW AND AFTER CONSIDERING THE CA CERTIFICATE AS DISCUSSED ABOVE. HENCE, THE G ROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1019/AHD/2016 SABRI CHEMICALS PVT.LTD VS. ACIT A.Y. 2012-13 - 27 - 33. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 15/11/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 15/11/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-2, VADODARA. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD. 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD