Gangadharam Appliances Limited, CHENNAI V. ACIT, CHENNAI

ITA 1185/CHNY/2012

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7722 (ITAT-CHENNAI)
• Duration Of Justice: 7 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2002-2003
• Appeal Filed On: 30-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Set aside
• Section: 143(3); 147; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NO.1185/CHNY/2012 ! / ASSESSMENT YEAR : 2002-203. GANGADHARAM APPLIANCES LTD, BY SUCCESSORS BUTTERFLY GANDHIMATHI APPLIANCES LTD, NO.377, OLD NO.272, ANNA SALAI, TEYNAMPET, CHENNAI 600 018. [PAN AAACG 1793P] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY RANGE II(2) CHENNAI 600 034. ./I.T.A. NO 1503/CHNY/2018 ! / ASSESSMENT YEAR : 2002-203. GANGADHARAM APPLIANCES LTD BY SUCCESSORS BUTTERFLY GANDHIMATHI APPLIANCES LTD, NO.143, PUDUPAKKAM VILLAGE, VANDALUR- KELAMBAKKAM ROAD, KANCHIPURAM 603 103 VS. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE 2(2) CHENNAI 600 034. [PAN AAACG 2038F] ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : MR. R. MEENAKSHISUNDARAM, ADV &' '# $ % /RESPONDENT BY : MS. R. ANITHA, IRS, JCIT ( ) $ * /DATE OF HEARING : 04-09-2019 +,! $ * /DATE OF PRONOUNCEMENT : 14-10-2019 ITA NOS.1185-12, 1503-18 :- 2 -: / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED A GAINST ORDER OF THE COMMISSIONER OF INCOME TAX I, CHENNAI DATED 09.02.2012 PASSED U/S.263 OF THE ACT AND COMMISSIONER OF INCO ME TAX (APPEALS)-13, CHENNAI (CIT(A) FOR SHORT) DATED 0 1.12.2017 FOR THE ASSESSMENT YEAR (AY) 2002-2003. 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLVED IN THESE APPEALS, WE PROCEED TO DISPOSE THE SAME VIDE THIS C OMMON ORDER. 3. FOR THE SAKE OF CONVENIENCE AND CLARITY, THE FACTS RELEVANT TO THE APPEAL IN ITA NO.1185/CHNY/2012 FOR ASSESSMENT YEAR 2002-03 ARE STATED HEREIN. 4. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEA L: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX, C HENNAI-I, DATED 29.03.2012 PASSED UNDER SECTION 263 OF THE IN COME TAX ACT, 1961 IS WITHOUT JURISDICTION, ERRONEOUS, AGAIN ST THE PROVISIONS OF LAW AND CONTRARY TO THE FACTS AND CIR CUMSTANCES OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX SHOULD HAVE FOUND THAT EXCEPT THE MARKET DEVELOPMENT EXPENSES AMOUNTING TO RS.82,55,3221- WHICH WAS DISALLOWED BY THE ASSESSIN G OFFICER AND THE SUM OF RS.19.64 LAKHS BEING INTEREST NOT DE BITED IN THE BOOKS BUT CLAIMED AS DEDUCTION UNDER THE MERCANTILE SYSTEM OF ITA NOS.1185-12, 1503-18 :- 3 -: ACCOUNTING, ALL THE OTHER ISSUES DEALT WITH BY THE COMMISSIONER IN HIS REVISION ORDER UNDER SECTION 263 OF THE ACT, DO NOT ARISE OUT OF THE ORDER OF THE ASSESSING OFFICER DATED 30- 12-2009 PASSED UNDER SECTION 143(3) OF THE ACT READ WITH SE CTION 147 OF THE ACT. 3. AS FAR AS THE INTEREST OF RS.1964 IAKHS IS CONCE RNED, THE COMMISSIONER OF INCOME TAX ERRED IN REVISING THE IS SUE UNDER SECTION 263 OF THE ACT SINCE THE ASSESSING OFFICER HAS AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE APPELLA NT IN THE REPLY SUBMITTED TO HIM, HAS ACCEPTED THE CONTENTION OF THE APPELLANT AND DROPPED THE PROCEEDING IN THE LIGHT O F THE DECISION OF THE SUPREME COURT OF INDIA RELIED UPON BY THE APPELLANT (82 ITR 63 &135 LTD (2012), 233. 4. AS FAR AS THE AMOUNT WRITTEN OFF AS BAD DEBTS CO NCERNED, THE COMMISSIONER OF INCOME TAX SHOULD HAVE FOUND THAT T HIS ISSUE DOES NOT ARISE OUT OF THE ORDER OF THE ASSESSING OF FICER DATED 30-12-2009 PASSED UNDER SECTION 143(3) OF THE ACT R EAD WITH SECTION 147 OF THE ACT AND HENCE, CANNOT BE CONSIDE RED IN A REVISION PROCEEDINGS ENUNCIATED WITH REFERENCE TO T HE SAID ORDER. 5. WITHOUT PREJUDICE TO THE ABOVE CONTENTION, IN AN Y CASE, THE COMMISSIONER OF INCOME TAX SHOULD HAVE FOUND THIS I SSUE OF BAD DEBTS WRITTEN OFF STANDS SQUARELY COVERED BY TH E DECJSION OF THE SUPREME COURT OF INDIA IN THE CASE OF VIJAYA BANK (323 IRE 166-SC) WHEREIN IT HAS BEEN HELD THAT IN WRITIN G OFF OF DEBTS AS BAD, CREDITING INDIVIDUAL DEBTORS IS NOT M ANDATORY. MALABAR INDUSTRIAL COMPANY LIMITED VS COMMISSIONER OF INCOME TAX (243ITR 83), COMMISSIONER OF INCOME TAX VS G.M MITTAL STAINLESS STEEL PRIVATE LIMITED (263 ITR 255 ) AND COMMISSIONER OF INCOME TAX VS MAX INDIA LIMITED (29 5 ITR 83(SC). 6. AS FAR AS THE WRITING OFF OF STOCK AS OBSOLETE I S CONCERNED, THE COMMISSIONER OF INCOME TAX SHOULD HAVE FOUND TH AT WHEN THE STOCKS ARE WRITTEN OFF AS ABSOLUTE, THEY CEASE TO BE STOCK IN TRADE AND HENCE, THE PROPOSITION CANVASSED BY HIM F OR REVISING THE ASSESSMENT UNDER SECTION 263 OF THE ACT DOES NO T APPLY TO THE ASSESSEES CASE. ITA NOS.1185-12, 1503-18 :- 4 -: 5. T HE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. GANGADHARAM APPLIANCES L TD, IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE CO MPANIES ACT, 1956. IT IS ENGAGED IN THE MANUFACTURE AND SALE OF PRESSURE COOKERS, PAN, VACUUM FLASKS AND OTHER UTENSILS. THE RETURN O F INCOME FOR THE AY 2002-03 WAS FILED ON 30.10.2002 DECLARING LOSS OF R S.7,35,60,900/-. APPARENTLY THERE WAS NO SCRUTINY ASSESSMENT. THE R ETURN OF INCOME WAS PROCESSED U/S.143 (1) OF THE ACT ON 17.07.2003. SUBSEQUENTLY, THE ASSESSING OFFICER HAD COME TO KNOW THAT ASSESSE E CLAIMED INTEREST EXPENDITURE OF RS.19,64,437/- WHICH IS NOT PROVIDED IN THE BOOKS OF ACCOUNTS AND MADE A CLAIM OF MARKETING DEVELOPMENT EXPENDITURE OF RS.2,22,11,254/-. BASED ON THIS INFORMATION, THE A SSESSING OFFICER ISSUED REASSESSMENT NOTICE U/S.148 OF THE ACT ON 2 7.03.2009 PROPOSING TO REOPEN THE ASSESSMENT UP CALLING UPON THE ASSESSEE TO FILE RETURN OF INCOME. ASSESSEE VIDE LETTER DATED 16.04.2009 SUBMITTED THAT ORIGINAL RETURN OF INCOME FILED BE TREATED AS RETURN OF INCOME IN RESPONSE TO NOTICE ISSUED U/S.148 OF THE ACT. AGAI NST THE SAID RETURN OF INCOME THE ASSESSMENT WAS COMPLETED BY THE ASSIS TANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(2), C HENNAI (HEREINAFTER REFERRED AS THE ASSESSING OFFICER) V IDE ORDER DATED 30.12.2009 PASSED U/S.143(3) R.W.S. 147 OF THE ACT AT TOTAL LOSS OF RS.6,53,05,577/-. WHILE DOING SO, THE ASSESSING OFF ICER DISALLOWED ITA NOS.1185-12, 1503-18 :- 5 -: MARKETING EXPENDITURE OF RS.82,55,322/- BY HOLDING THAT ASSESSEE HAD FAILED TO SUBSTANTIATE THAT THIS EXPENDITURE WAS I NCURRED FOR THE YEAR UNDER CONSIDERATION. SUBSEQUENTLY, LD. COMMISSION ER OF INCOME TAX (THE LD. CIT) ON SUO-MOTU EXAMINATION CAME TO KNOW THAT ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE ASSESSING OFFICER HAD NOT EXAMINED THE FOLLOWING IS SUES. A) THE LOSS ON SALE OF ASSET AMOUNTING TO RS.1,52 ,775/- HAS NOT BEEN ADDED BACK, THOUGH THE SAME REMAINS IN THE CAP ITAL FIELD. B) FAILURE TO CONSIDER RS.19.64 LAKHS BEING THE INT EREST PAYMENTS CLAIMED IN THE STATEMENT OF TOTAL INCOME B UT NOT PROVIDED FOR IN THE ACCOUNTS SINCE THE ITAT HAS UPH ELD THE DISALLOWANCE OF THIS INTEREST FOR A.Y. 2003-04. C) FAILURE TO ADD BACK THE INCORRECT WRITE OFF OF B AD DEBTS OF RS.345.60 LAKHS, DEBITED TO THE P/L ACCOUNT ON RECO NCILIATION WITH THE BOOKS OF THE ASSOCIATE COMPANY FOR THE F.Y . 2001-02 D) FAILURE TO DISALLOW THE INCORRECT CLAIM OF BAD D EBTS WHEN THE INDIVIDUAL DEBIT BALANCES OF THOSE ACCOUNTS HAVE NO T BEEN WRITTEN OFF TO THE EXTENT OF RS.70.48 LAKHS AND E) DISALLOWANCE OF LOSS ON VALUING THE OBSOLETE STO CK AT MARKET VALUE BY WHICH AN AMOUNT OF RS.123.84 LAKHS HAS BEE N WRITTEN OFF. ACCORDINGLY, THE LD. CIT, CHENNAI-I, CHENNAI VIDE O RDER DATED 29.03.2012 PASSED U/S.263 OF THE ACT SET ASIDE THE REASSESSMENT ORDER WITH THE DIRECTION TO THE ASSESSING OFFICER TO REDO THE ASSESSMENT IN ACCORDANCE WITH LAW. ITA NOS.1185-12, 1503-18 :- 6 -: 6. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT THE LD. CIT OUGHT NOT HAVE ASSUMED JURISDICTION U/S.26 3 OF THE ACT, IN AS MUCH AS, THE ASSESSING OFFICER HAD CONDUCTED NECE SSARY VERIFICATION ON THE ISSUES WHICH ARE SOUGHT TO BE REVISED BY THE LD. CIT. FURTHER, LD. AUTHORISED REPRESENTATIVE CONTENDED THAT IT IS NOT THE CASE OF CIT THAT NO ENQUIRY WAS CARRIED BY ASSESSING OFFICER AND THEREFORE THE LD. CIT OUGHT NOT HAVE EXERCISED JURISDICTION U/S.263 O F THE ACT. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE PLACED RELIANCE ON THE ORDERS OF THE LOWER AUTHORIT IES. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. ADMITTEDLY, ONE OF THE ISSUES WHICH ARE S OUGHT TO BE REVISED BY THE LD.CIT IS ISSUE OF ADDITION ON LOSS OF SALE OF ASSET OF RS.1,52,775/- AND ASSESSEE HIMSELF AGREED FOR RE VISION DURING THE COURSE OF REVISIONARY PROCEEDING BEFORE LD. CIT, T HEREFORE, IT WOULD RENDER THE REASSESSMENT ORDER ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE SO AS TO ENABLE THE LD. CIT TO EXERCISE THE POWERS OF REVISION U/S.263 OF THE ACT. EVEN IN RE SPECT OF OTHER ITEMS, WHICH ARE SOUGHT TO BE REVISED BY THE LD.CIT, THE L D. AUTHORISED REPRESENTATIVE COULD NOT SUBSTANTIATE BEFORE US T HAT THE ASSESSING ITA NOS.1185-12, 1503-18 :- 7 -: OFFICER HAD CARRIED NECESSARY ENQUIRIES ON THE ISS UES. IN THE CIRCUMSTANCES, WE UPHOLD THE VALIDITY ORDER OF PAS SED U/S.263 OF THE ACT THUS, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.1185/CHNY/2012 FOR ASSESSMENT YEAR 2002-2003 STANDS DISMISSED. 9. NOW, WE TAKE UP ITA NO.1503/CHNY/2018 FOR ASSESSMEN T YEAR 2002-2003. 10. PURSUANT TO THE ORDER PASSED BY THE LD. CIT-I, CHE NNAI DATED 29.03.2012 U/S.263 OF THE ACT, LD. ASSESSING OFFICE R PASSED ASSESSMENT ORDER U/S.143(3) R.W.S. 263 OF THE ACT O N 14.03.2013 AFTER MAKING FOLLOWING ADDITIONS. LOSS ON SALE OF ASSETS : 1,52,775 INTEREST PAYMENTS : 19,64,000 INCORRECT WRITE OFF OF BAD DEBTS : 3,45,60,000 INCORRECT CLAIM OF BAD DEBTS : 70,48,000 LOSS ON VALUING OBSOLETE STOCK : 1,23,84,000 11. DURING THE COURSE OF ASSESSMENT PROCEEDINGS PURSUAN T TO THE DIRECTION OF THE LD. CIT IN THE ORDER U/S.263 OF THE ACT, THE ASSESSEE COMPANY HAD NOT FURNISHED ANY INFORMATION BEFORE THE ASSESSING OFFICER AND ACCORDINGLY, THE ASSESSING OFFICER MADE THE ABOVE ADDITIONS. 12. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A) WHO VIDE IMPUGNED ORDER DISMISSED THE AP PEAL OF THE ASSESSEE, SINCE ASSESSEE HAD FAILED TO SUBSTANTIATE THE CLAIM. ITA NOS.1185-12, 1503-18 :- 8 -: 13. BEING AGGRIEVED BY THE ORDER OF THE LD. COMMISSIONE R OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL B EFORE US IN THE PRESENT APPEAL. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD DISMISSED THE APPEAL ON THE WRONG ASSUMPTION THAT THE ORDER OF THE LD. C IT IS NOT AN OPEN REMAND TO THE ASSESSING OFFICER. THEREFORE HE SUBM ITTED THAT THE MATTER MAY BE REMANDED BACK TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR FRESH ADJUDICATION IN ACCO RDANCE WITH LAW 14. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE PLACED RELIANCE ON THE ORDERS OF THE LOWER AUTHORIT IES. 15. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. WE FIND MERIT ON THE SUBMISSIONS MADE BY TH E ASSESSEE. ACCORDINGLY, WE REMAND THE ISSUE BACK TO THE FILE O F THE LD.CIT(A) FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. THUS, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.1503/CHNY/2018 FOR ASSESSMEN T YEAR 2002- 2003 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 16. TO SUMMARIZE THE RESULT, THE APPEALS FILED BY THE ASSESSEE IN ITA NO.1185/CHNY/2012 FOR ASSESSMENT YEAR 2002-2 003 STANDS ITA NOS.1185-12, 1503-18 :- 9 -: DISMISSED, WHEREAS ITA NO.1503/CHNY/2018 FOR ASSESS MENT YEAR 2002-2003 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED ON 14TH DAY OF OCTOBER, 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER - ) / CHENNAI . / DATED:14TH OCTOBER, 2019. KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF