DCIT, CIR-1(1), KOLKATA, Kolkata V. M/s Electroteknica Switchgear Pvt. Ltd., Kolkata

ITA 1114/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1359 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 20-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH ACIT
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH KOLKATA BEFORE SHRI A. T. VARKEY, JM &DR. A.L.SAINI, AM ./ ITA NO.1114/KOL/2015 ( / ASSESSMENT YEAR: 2008-09 DCIT, CIRCLE - 1(1), KOLKATA VS. M/S ELECTROTEKNICA SWITCHGEAR PVT. LTD. 1/5B, RAJA BASANTA ROY ROAD, KOLKATA-700026 ./ ./PAN/GIR NO. : AAACE5368C (ASSESSEE) .. (RESPONDENT) ASSESSEEBY :SHRI KALYAN NATH,ACIT DR RESPONDENT BY :SHRI AMIT AGARWAL, ADVOCATE / DATE OF HEARING : 05/09/2017 /DATE OF PRONOUNCEMENT : 25/09/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAINING TO ASSESSMENT YEAR 2008-09, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)1, KOLKATA, IN APPEAL NO.871/CIT(A)-1/C-1/2014-15, DATED 07.05.2015, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT), DATED 23.12.2010. 2.THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE LIQUIDATION DAMAGES OF RS.1,30,52,009/- AS LIABILITY OF COMPENSATION ARISING OUT OF DELAY. 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF/ESI AS AN ALLOWABLE EXPENSE. M/S ELECTROTEKNICA SWITCHGEAR PVT. LTD. ASSESSMENT YEAR: 2008-09 ITA NO.1114/KOL/2015 PAGE | 2 3.THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING PROCEEDINGS OF THIS CASE. 3.GROUND NO.1 RAISED BY THE REVENUE RELATES TO ADDITION DELETED BY CIT(A) ON ACCOUNT OF LIQUIDATION DAMAGES OF RS.1,30,52,009/- AS LIABILITY OF COMPENSATION ARISING OUT OF DELAY. 3.1 THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 27.09.2008, DECLARING TOTAL INCOME OF RS.1,51,79,840/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY U/S 143(2) OF THE ACT AND ASSESSING OFFICER MADE THE ADDITION ON ACCOUNT OF LIQUIDATED DAMAGE, BREAKAGE ETC. AT RS.1,30,52,009/-. IT WAS OBSERVED BY AO THAT NET AMOUNT RS.1,56,74,167/- (GROSS AMOUNT RS.1,67,48,420/-) WAS DEBITED TO THE PROFIT & LOSS A/C UNDER THE HEAD LIQUIDATED-DAMAGE, BREAKAGE AND REJECTION. IN THE IMMEDIATE PRECEDING PREVIOUS YEAR THE EXPENDITURE WAS ONLY RS.92.28 LAKHS. FURTHER SCRUTINY OF THE ACCOUNT REVEALS THAT AN AMOUNT OF RS.1,30,52,009/- HAD BEEN SHOWN AS A LIABILITY TO HARIYANA BIDYUT PRASARAN NIGAM LIMITED. HOWEVER, NOTHING IS BROUGHT IN RECORD TO SHOW THAT THE LIABILITY WAS AN ASCERTAINED LIABILITY AND WAS CRYSTALLIZED DURING THE PREVIOUS YEAR. IN FACT, THE NATURE OF LIABILITY AND ITS GENUINENESS CANNOT BE VERIFIED IN ABSENCE OF PROPER DETAILS AND EVIDENCES. THEREFORE, THE SAID EXPENDITURE WAS DISALLOWED BY ASSESSING OFFICER. 3.2 AGGRIEVED BY THE ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE. THE CIT(A) OBSERVED THAT THE DISALLOWANCE OF RS.1,30,52,009/- TOWARDS LIQUIDATED DAMAGES, EARLY PAYMENT DISCOUNT, ETC. PAID TO HARYANA VIDYUT PRASARAN NIGAM LTD, PANCHKULA, FOR THE SAID LIABILITY THE AO HELD THAT THE AMOUNT OF RS.1,30,52,009/- HAS BEEN SHOWN AS LIABILITY TO HARYANA VIDYUT PRASARAN NIGAM LTD, HOWEVER THERE WAS NOTHING ON RECORD TO SHOW THAT THE LIABILITY WAS AN ASCERTAINED LIABILITY AND HAD CRYSTALLIZED IN THE PREVIOUS YEAR. FURTHER THAT THE LIABILITY AND THE GENUINENESS COULD NOT BE VERIFIED IN THE ABSENCE OF PROPER DETAILS, THE AO THEREFORE DISALLOWED M/S ELECTROTEKNICA SWITCHGEAR PVT. LTD. ASSESSMENT YEAR: 2008-09 ITA NO.1114/KOL/2015 PAGE | 3 THIS AMOUNT. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSEE COMPANY WAS AWARDED WITH AN ORDER FOR SUPPLY OF 33 SETS, 11 KV 12 PANEL BOARD VCBS AND 8 SETS, 11 KV 7 PANEL BOARD VCBS AGAINST TENDER ENQUIRY NO.QDP-648. THE TERMS AND CONDITIONS OF THE SAID ORDER WERE EMBODIED IN THE TENDER ACCEPTANCE LETTER ISSUED BY HARYANA VIDYUT PRASARAN NIGAM LTD (HVPN). IT WAS CLAIMED THAT IN TERMS OF CLAUSE 12 OF THE SAID TENDER ACCEPTANCE LETTER, THE ASSESSEE WAS LIABLE FOR PAYMENT OF LIQUIDATED DAMAGES IN CASE OF DELAY IN DELIVERY AND UNDER CLAUSE 11, THE ASSESSEE WAS LIABLE TO PAY DISCOUNT ON EARLY PAYMENT MADE BY THEM. FURTHER THAT THE ASSESSEE SUPPLIED THE MATERIALS FROM TIME TO TIME AND RAISED THEIR BILLS AND INCLUDED THE SAME IN THE AGGREGATE AMOUNT OF SALES. HOWEVER, HVPN DEDUCTED VARIOUS SUMS OF MONEY FROM THE BILLS ON ACCOUNT OF DELAY IN DISPATCH ETC AND THESE DEDUCTIONS WERE CLAIMED BY THE ASSESSEE AS LIQUIDATED DAMAGES. IT WAS FURTHER CLAIMED THAT THERE WAS A DEDUCTION OF RS 1,33,79,009 BY THE SAID PARTY FROM THE SALE BILLS RAISED BY THE ASSESSEE. THE DETAILED COPY OF STATEMENT OF ACCOUNT RECEIVED BY THE ASSESSEE FROM THEM SHOWS THAT THE SAID AMOUNT WAS DEDUCTIBLE FROM TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE EXPLAINED TO THE A.O THAT THE GROSS AMOUNT OF SALE WAS INCLUDED IN THE TOTAL AMOUNT OF SALES AS PER PROFIT & LOSS ACCOUNT AND THEREFORE THE DEDUCTIONS MADE BY HVPN WAS TO BE ALLOWED AS DEDUCTION. THE ASSESSEE FURNISHED THE COPY OF THE LEDGER ACCOUNT OF HVPN APPEARING IN THE BOOKS OF ACCOUNTS IN SUPPORT OF ITS CLAIM THAT SHORT AMOUNTS RECEIVED BY THE ASSESSEE DUE TO DEDUCTIONS MADE BY THEM FROM THE BILLS RAISED BY IT WERE CARRIED TO LIQUIDATED DAMAGES ACCOUNT. THE CIT(A) NOTED THAT THE AO DISALLOWED THE CLAIM OF THE ASSESSEE WITHOUT MAKING ANY QUERY OR ENQUIRY AND WITHOUT ALLOWING PROPER OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE SAID CLAIM. THE ASSESSEE ALSO RELIED ON THE DECISION OF DELHI TRIBUNAL IN THE CASE OF ACIT VS. MERCURY RUBBER MILLS IN ITA NO. 3489 (DEL) OF 2070, IN SUPPORT ITS ABOVE CONTENTION. M/S ELECTROTEKNICA SWITCHGEAR PVT. LTD. ASSESSMENT YEAR: 2008-09 ITA NO.1114/KOL/2015 PAGE | 4 DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAD SUBMITTED ADDITIONAL EVIDENCE BEFORE THE CIT(A).THE MATTER WAS REMANDED TO THE A.O FOR CONSIDERATION OF THE ADDITIONAL EVIDENCE, AS IT HAD BEEN CLAIMED THAT THE ASSESSEE WAS NOT GIVEN PROPER OPPORTUNITY TO FILE ITS SUBMISSIONS ON THIS ISSUE BY THE AO. THE CIT(A) ALSO NOTED THAT DESPITE OF SEVERAL REMINDERS TO THE AO FOR SUBMISSIONS OF HIS REMAND REPORT INCLUDING LETTERS DT.12-1-2015, 12-2-2015 AND 26-2-2015, NO REPORT WAS RECEIVED FROM THE AO DESPITE PASSAGE OF MORE THAN THREE YEARS. THEREFORE, CIT(A)ADMITTED THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE UNDER RULE- 46A. HOWEVER, THE CIT(A) OBSERVED THAT THE ASSESSEE COMPANY WAS AWARDED WITH AN ORDER FOR SUPPLY OF 33 SETS, 11 KV 12 PANEL BOARD VCBS AND B SETS, 11 KV 7 PANEL BOARD VCBS AGAINST TENDER ENQUIRY NO. QDP-648. THE TERMS AND CONDITIONS OF THE SAID ORDER WERE EMBODIED IN THE TENDER ACCEPTANCE LETTER ISSUED BY HARYANA VIDYUT PRASARAN NIGAM LTD. IT WAS NOTED BY CIT(A) THAT IN TERMS OF TENDER, THE ASSESSEE WAS LIABLE FOR PAYMENT OF LIQUIDATED DAMAGES IN CASE OF DELAY IN DELIVERY ETC, THEREFORE, HVPN DEDUCTED VARIOUS SUMS OF MONEY FROM THE BILLS ON ACCOUNT OF DELAY IN DISPATCH ETC AND THESE DEDUCTIONS WERE CLAIMED BY THE ASSESSEE AS LIQUIDATED DAMAGES. FURTHER FROM THE EVIDENCES FILED BY THE ASSESSEE IT WAS CLEAR THAT THE LIQUIDATED DAMAGES WHICH HAD ARISEN DURING THE CURRENT YEAR HAD BEEN ACCOUNTED FOR BY THE ASSESSEE. THIS ISSUE HAD ALSO BEEN CONSIDERED BY THE BOMBAY HIGH COURT IN CIT, PUNE VS. R.D SHARMA & CO 137 ITR 333 AND THE SAME HAD BEEN CONSIDERED IN HUBER AND SUHNER ELECTRONICS PVT. LTD BY THE ITAT DELHI IN ITA NO.4750/DEL/2011 DATED 11.01.2013 WHERE THE TRIBUNAL HELD AS UNDER- 17. IN THIS CONTEXT, WE RESPECTFULLY FOLLOW THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX, PUNE VS R.D. SHARMA AND CO.(SUPRA) WHEREIN IT WAS HELD THAT THE DELAY IN COMPLETION OF CONTRACT IS INCIDENTAL TO THE BUSINESS AND LIABILITY OF COMPENSATION ARISING BECAUSE OF DELAY IS AN ALLOWABLE DEDUCTION UNDER THE ACT. IN THIS CASE ALSO SUCH LIQUIDATED DAMAGES, CONFIRMATION OF WHICH HAD BEEN PROVIDED IN THE FORM OF SUPPLY ORDER OF HARYANA VIDYUT NIGARN LTD. DATED 31-3- 2006, AND DETAILS OF DEDUCTIONS MADE BY THIS ORGANIZATION FROM THE BILLS OF THE ASSESSEE RELATING TO THIS FINANCIAL .PERIOD AS PER THE STATEMENT OF LIQUIDATED DAMAGES CONFIRMED BY HVPNL& WERE THEREFORE, ALLOWABLE. THEREFORE, CONSIDERING M/S ELECTROTEKNICA SWITCHGEAR PVT. LTD. ASSESSMENT YEAR: 2008-09 ITA NO.1114/KOL/2015 PAGE | 5 THE SAME THE CIT(A) HELD THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING SUCH LIQUIDATED DAMAGES AND THEREFORE THE ADDITION WAS DELETED. 3.3 NOT BEING SATISFIED WITH THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. THE LD DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 3.4 THE LD COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY THE CIT(A). THE LD COUNSEL POINTED OUT THAT CIT(A) HAD CONSIDERED THE FACTS OF THE CASE IN DETAILS AND RELIED ON THE APPLICABLE CASE LAW SUBMITTED BY THE ASSESSEE BEFORE HIM. 3.5 HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT THE ASSESSEE COMPANY WAS AWARDED WITH AN ORDER FOR SUPPLY OF 33 SETS, 11 KV 12 PANEL BOARD VCBS AND B SETS, 11 KV 7 PANEL BOARD VCBS AGAINST TENDER ENQUIRY NO. QDP-648. THE TERMS AND CONDITIONS OF THE SAID ORDER WERE EMBODIED IN THE TENDER ACCEPTANCE LETTER ISSUED BY HARYANA VIDYUT PRASARAN NIGAM LTD(HVPN). IN TERMS OF TENDER, THE ASSESSEE WAS LIABLE FOR PAYMENT OF LIQUIDATED DAMAGES IN CASE OF DELAY IN DELIVERY ETC, THEREFORE, HVPN DEDUCTED VARIOUS SUMS OF MONEY FROM THE BILLS ON ACCOUNT OF DELAY IN DISPATCH ETC AND THESE DEDUCTIONS WERE CLAIMED BY THE ASSESSEE AS LIQUIDATED DAMAGES. FURTHER FROM THE EVIDENCES FILED BY THE ASSESSEE IT WAS CLEAR THAT THE LIQUIDATED DAMAGES WHICH HAD ARISEN DURING THE CURRENT YEAR HAD BEEN ACCOUNTED FOR BY THE ASSESSEE. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE WITHOUT MAKING ANY QUERY OR ENQUIRY AND WITHOUT ALLOWING PROPER OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE SAID CLAIM AND ALSO HE DID NOT SUBMIT REMAND REPORT TO CIT(A). THEREFORE, CONSIDERING THE FACTUAL POSITION, AS EXPLAINED ABOVE, WE CONFIRM THE ORDER PASSED BY CIT(A). 3.6 IN THE RESULT, THE APPEAL FILED BY THE REVENUE (GROUND NO.1), IS DISMISSED. 4. GROUND NO. 2 RAISED BY THE REVENUE RELATES TO DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF/ESI. 4.1 THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT AS PER SCHEDULE-C/CLAUSE-16(B) OF THE TAX AUDIT REPORT, THE M/S ELECTROTEKNICA SWITCHGEAR PVT. LTD. ASSESSMENT YEAR: 2008-09 ITA NO.1114/KOL/2015 PAGE | 6 ASSESSEE HAD NOT DEPOSITED EMPLOYEES CONTRIBUTION TO PF RS.48,826/- AND ESI RS.3,964/- TOTALING RS.52,790/- WITHIN THE DUE DATE INCLUDING GRACE PERIOD OF THE RELEVANT ACT. THEREFORE, THE AMOUNT WAS ADDED BACK TO THE INCOME OF THE ASSESSEE U/S.36(1)(VA) READ WITH SEC.2(24)(X) OF THE I.T. ACT. 4.2AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO HAS DELETED THE ADDITION MADE BY AO. THE CIT(A) OBSERVED THAT THE AO HAD MENTIONED THAT AS PER TAX AUDIT REPORT, EMPLOYEES' CONTRIBUTION TO PF OF RS.48,826/- AND ESI OF RS.3,964/- HAD NOT BEEN DEPOSITED WITHIN THE DUE DATE OF THE RELEVANT ACT. THE AO THEREFORE DISALLOWED THIS AMOUNT U/S 36(1)(VA) READ WITH SEC.2(24)(X). DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE PF/ESI AMOUNTS WERE DEPOSITED WITHIN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AND WERE THEREFORE ALLOWABLE. THE ASSESSEE RELIED ON THE DECISIONS IN CIT -VS- ALOM EXTRUSIONS LTD.319 ITR 306 AND ACIT -VS- M/S.VIJAY SHREE LTD. IN ITA NO.1091/KOL/2010 (KOL), WHEREIN IT WAS HELD THAT IF THE ASSESSEE DEPOSITS THE PF/ESI AMOUNT WITHIN DUE DATE OF FILING OF RETURN OF INCOME, THEN THERE SHOULD NOT BE ANY ADDITION UNDER SECTION 36(1) (VA) OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD CIT(A) HELD THAT THE ASSESSEE HAD CLAIMED THAT THE AMOUNT OF EMPLOYEE'S CONTRIBUTION TO PF AND ESI HAD BEEN PAID BY THE END OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR IN APPEAL,THEREFORE, CIT(A) DELETED THE ADDITION OF RS.52,790/-. 4.3 THE DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. WHEREAS, LD COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY THE CIT(A). 4.4 HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT THE ASSESSEE COMPANY HAD DEPOSITED THE PF/ESI AMOUNT BEFORE THE END OF THE RELEVANT FINANCIAL YEAR, THEREFORE, IT IS A SUFFICIENT COMPLIANCE M/S ELECTROTEKNICA SWITCHGEAR PVT. LTD. ASSESSMENT YEAR: 2008-09 ITA NO.1114/KOL/2015 PAGE | 7 MADE BY THE ASSESSEE. THAT IS, THE AMOUNT OF PF/ESI HAD BEEN DEPOSITED WITHIN THE DUE DATE OF FILING RETURN OF INCOME. THEREFORE, WE ARE OF THE VIEW THAT IF THE PF/ESI AMOUNT IS DEPOSITED WITHIN DUE DATE OF FILING RETURN OF INCOME THEN THERE SHOULD NOT BE ANY ADDITION U/S 36(1) (VA) OF THE ACT, AND FOR THAT WE RELY ON THE DECISIONS IN CIT -VS- ALOM EXTRUSIONS LTD.319 ITR 306 AND ACIT -VS- M/S.VIJAY SHREE LTD. IN ITA NO.1091/KOL/2010 (KOL), WHEREIN IT WAS HELD THAT IF THE ASSESSEE DEPOSITS THE PF/ESI AMOUNT WITHIN DUE DATE OF FILING OF RETURN OF INCOME, THEN THERE SHOULD NOT BE ANY ADDITION UNDER SECTION 36(1)(VA) OF THE ACT. THEREFORE, CONSIDERING THE FACTUAL POSITION, AS EXPLAINED ABOVE, WE CONFIRM THE ORDER PASSED BY CIT(A). 4.5 IN THE RESULT, THE APPEAL FILED BY THE REVENUE (GROUND NO.2), IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25/09/2017. SD/- (A. T. VARKEY) SD/- (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED 25/09/2017 RS, SPS . / COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/D.D.O, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. THE ASSESSEE DCIT, CIRCLE-1(1), KOLKATA 2. / THE RESPONDENT- M/S ELECTROTEKNICA SWITCHGEAR PVT. LTD. 3. ( ) / THE CIT(A), :KOLKATA. 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. / GUARD FILE.