SIMRONE PHARMACEUTICALS INDUSTRIES LTD., MUMBAI V. ACIT CIR 9(30, MUMBAI

ITA 1219/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48935 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 11-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 23-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASHIMA GUPTA
• Keywords: Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, E BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER I.T.A NO.1219/ MUM/2009 ASSESSMENT YEAR: 2004-05 SIMRONE PHARMACEUTICALS IND. LTD. .. APPELLANT SUITE NO.101, ATLANTA ESTATE, OFF, WESTERN EXPRESS HIGHWAY, GOREGAON(E), MUMBAI-63 PA NO.AAACS 0775P VS ACIT, CIRCLE 9(3) ,. RESPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: NONE, FOR THE APPELLANT ASHIMA GUPTA, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 10 TH DECEMBER, 2008, IN THE MATTER OF ASSESSMENT UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMEN T YEAR 2004-05. 2. NONE APPEARED FOR THE ASSESSEE. WE HAVE PERUSED THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO APPL ICABLE LEGAL POSITION. WE PROCEED TO DISPOSE OF THE MATER EXPARTE QUA-ASSESSEE. 3. IN FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: I.T.A NO.1219/ MUM/2009 SIMRONE PHARMACEUTICALS IND. LTD. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD AO HAS ERRED IN DISALLOWING THE DEBTS WRITTEN OFF IN RESPECT OF M/S. SNEH ANTIBIOTICS PVT LTD., ` .1,19,79,488 ON THE REASONING THAT THE ADVANCE WAS OF CAPITAL NATURE AND WAS NOT FOR BUSINESS PURPOSE. LD CIT(A) HAS ERRED IN CONFIRMING THE SAME. 4. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSE E HAS CLAIMED DEDUCTION OF ` . 11,979,488 IN RESPECT OF ADVANCE WRITE OFF OF MADE TO SNEH ANTIBIOTICS PVT LTD. THE AO ALSO NOTED THAT THE SAID SNEH ANTIBIOTICS PVT LTD, AS EVIDENT FROM THE STATEMENTS MADE BY THE ASSESSEE, WAS A SUPPLIER OF RAW MATERIAL TO THE ASSESSEE AND THAT THE ASSESSEE HAD ALSO PAID ` .46 LAKHS TOWARDS EQUITY PARTICIPATION IN THE SAID COM PANY. IT WAS FURTHER NOTED THAT SNEH ANTIBIOTICS PVT LTD HAD P ROBLEMS WITH THE BANKERS, AS A RESULT OF WHICH ITS BUSINESS OPERATIONS ARE CLOSED FOR T HE LAST FOUR YEARS AND THE LEGAL PROCEEDINGS IS INITIATED BY THE LENDERS TO SNEH ANTIBI OTICS PVT LTD, ARE IN PROGRESS BEFORE THE DEBTS RECOVERY TRIBUNAL. THE AO WAS OF TH E VIEW THAT THE WRITE OFF OF ` .1,19,79,488 AS ADVANCE TO SNEH ANTIBIOTICS PVT LTD, COULD NOT BE ALLOWED FOR THE REASON THAT THE ASSESSEE HAD GIVEN ` .46 LAKHS TO THE SAID COMPANY AS A PART OF EQUITY PARTICIPATION AS AN ADVANCE GIVEN FOR ALLOTMENT OF SHARES, AND WAS SUBSEQUENTLY SUPPORTING SNEH ANTIBIOTIC PVT LTD BY WAY OF ADVANCING MONEY FOR PURCHASE SOLELY FOR ACQUIRING INTEREST IN THE COMPANY SO AS TO BECOME THE MAJOR SHAREHOLDING IN THAT COMPANY. THUS, ACCORDING TO THE AO, AMOUNTS TO CAPI TAL INVESTMENT. THE CONCLUSIONS DRAWN BY THE ASSESSING OFFICER, THUS WAS THAT NOT ONLY ` .46 LAKHS, WHICH WAS GIVEN FOR EQUITY PARTICIPATION AMOUNTS TO CAPITAL INVESTMENT BUT EVEN SUBSEQUENT ADVANCE, WHETHER OR NOT IN THE COURSE OF BU SINESS, ARE TO BE TREATED AS CAPITAL EXPENDITURE IN NATURE. THE ASSESSING OFFICER W AS OF THE VIEW THAT ON THE GIVEN FACTS, LOSS INCURRED BY THE ASSESSEE BY WRITING OFF ADVANC E GIVEN TO SNEH ANTIBIOTICS PVT LTD, EVEN IF FOR PURCHASE OF MATERIAL, WAS CAPITA L IN NATURE. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER THOUGH ON A DIFFERENT GROUND BUT THE STAND TAKEN BY THE CIT(A) W AS THAT THE CLAIM FOR DEDUCTION ON ACCOUNT OF LOSS WAS PRE-MATURE AS THE LOSS HAD NOT AC TUALLY INCURRED. IN DOING SO, THE CIT(A) OBSERVED AS FOLLOWS:- I HAVE CAREFULLY CONSIDERED THE REASONING OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS MADE BEFORE ME. AS REGA RDS, THE I.T.A NO.1219/ MUM/2009 SIMRONE PHARMACEUTICALS IND. LTD. 3 ADVANCE WRITTEN OFF BY THE APPELLANT IN RESPECT OF M /S. SNEH ANTIBIOTICS PVT LTD., I AM OF THE CONSIDERED VIEW THA T THE SAME IS NOT ALLOWABLE AS TRADING LOSS AS THE SAME IS NOT ESTABLISHED TO HAVE BECOME BAD AND ACTUAL LOSS TO THE APPELLANT. IT IS NO T A CLAIM OF ALLOWANCE OF BAD DEBT WHICH IS GOVERNED BY THE PROVI SIONS OF SECTION 36(1)(VII) OF THE ACT. SINCE, THE CONDITIONS LAID DO WN IN PROVISIONS OF SECTION 37(1) HAVE NOT BEEN FULFILLED IN THE APPELL ANTS CASE, AS SUCH THE APPELLANTS CASE FOR ALLOWANCE OF SECTION 37(1) CA NNOT BE CONSIDERED. THE APPELLANT IN ITS SUBMISSIONS ITSELF HAS ME NTIONED THAT IT IS A TRADING LOSS THEN THE CLAIM IS TO BE CONSIDERED WITH REFERENCE TO U/S.37(1). HOWEVER, FOR THE ALLOWABILITY OF LOSS U/S.3 7(1), THE APPELLANT HAS TO PROVE THAT THE LOSS HAS ACTUALLY BEE N INCURRED BEFORE THE SAME IS ALLOWABLE AS DEDUCTION. THE AO HAS PUT ON R ECORD THAT M/S. SNEH ANTIBIOTICS PVT LTD., IS THE CONCERN WHERE IN THE APPELLANT COMPANY HAS ITS OWN INTEREST AND APPELLANT HAS MAJOR SH ARE HOLDING IN M/S. SNEH ANTIBIOTICS PVT LTD. MOREOVER THE APPEL LANTS BANKER M/S. SYNDICATE BANK HAS FILED SUIT BEFORE THE DEBT REC OVERY TRIBUNAL AND THE CASE IS PENDING WITH THE DRT. THE APPELLANT HAS NOT FILED ANY EVIDENCE WHICH COULD PROVE THAT THE APPELLANT HAD F ILED A CASE AGAINST THE COMPANY M/S. SNEH ANTIBIOTICS PVT LTD., FOR RECOV ERY OF ITS DUES BEFORE THE DRT. THEREFORE, UNDER SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT THE APPELLANT HAD INCURRED LOSS TO THE EXTEN T WHICH HAS BEEN CLAIMED AND WRITTEN OFF THE AMOUNT BY THE APPELLANT IN ITS BOOKS OF ACCOUNT AND THE SAME IS RATHER PREMATURE TO BE CONSID ERED FOR ALLOWANCE. THEREFORE, ACCORDINGLY, I HOLD THAT THE APPELLANT IS NOT ENTITLED FOR WRITING OFF THE AMOUNT OF ` .1.19 CRORES IN RESPECT OF M/S. SNEH ANTIBIOTICS PVT LTD. THE ACTION OF THE AO IN M AKING ADDITION IS HEREBY CONFIRMED SINCE THE APPELLANT FAILS TO PROVE T HAT LOSS HAS ACTUALLY INCURRED. THE APPELLANT FALLS ON ITS GROUNDS OF APPEAL. 5. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL B EFORE US. 6. THE BASIC THRUST OF ASSESSEES SUBMISSIONS, AS EVIDENT FRO M PAGES 1 TO 5 OF PAPER BOOK FILED BEFORE US, IS THAT THE AMOUNT OF ` .1,19,79,488 WAS FOR PROCUREMENT OF RAW MATERIAL ONLY AND THIS ADVANCE IS INDEPENDENT OF ADVANCE OF ` .46 LAKHS FOR BUYING SHARES IN THE SAID COMPANY, WHICH WAS GIVEN EARL IER. IT IS THUS CONTENDED THAT THE TWO TRANSACTIONS SHOULD BE SEEN AS INDEPENDENT OF EACH OTHER AND AS LONG AS THE ADVANCE HAVING BEEN MADE IN THE COURSE OF BUSINESS IS NOT DISPUTED, THE LOSS OF SUCH ADVANCE HAS TO BE CONSIDERED AS BUSINESS LOSS IN NATUR E. IT IS ALSO CONTENDED THAT THE FINANCIAL POSITION OF SNEH ANTIBIOTICS PVT L TD WAS SO PRECARIOUS THAT THE CHANCE OF RECOVERY OF ADVANCE MADE BY THE ASSESSEE WERE NEGLIGIBLE. THE ASSESSEE I.T.A NO.1219/ MUM/2009 SIMRONE PHARMACEUTICALS IND. LTD. 4 HAS ALSO FILED FINANCIAL STATEMENT OF M/S. SNEH ANTIBIO TICS PVT LTD., AS ALSO THE CORRESPONDENCE WITH THEIR BANKERS AND LENDERS. 7. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENT ATIVES SUBMISSIONS WAS THAT ONCE IT IS NOT DISPUTED THAT THE ASSESSEE HAD ADVA NCED TOWARDS PURCHASE OF SHARES IN M/S SNEH ANTIBIOTICS PVT LTD., ALL THE ADVAN CES GIVEN BY THE ASSESSEE ARE TO BE TREATED AS CAPITAL IN NATURE. IT IS ALSO PLEADED THAT THE QUESTION OF DEDUCTION IS ONLY ARISES WHEN THE LOSS HAS ACTUALLY INCURRED AND THAT , ON THE GIVEN FACTS, INCURRING OF THE LOSS HAS NOT ATTAINED FINALITY INASMUCH AS THE ASSE SSEE HAD AN OPTION TO TAKE LEGAL RECOURSE FOR RECOVERING THE ADVANCE. 8. WE HAVE NOTICED THAT THE ONLY REASON FOR WHICH TH E CIT(A) HAS CONFIRMED THE IMPUGNED DISALLOWANCE IS THAT APPELLANT HAS FILED ANY EVIDENCE WHICH COULD PROVE THAT THE APPELLANT HAS FILED A CASE AGAINST THE COMPAN Y M/S. SNEH ANTIBIOTICS PVT LTD., FOR RECOVERY OF ITS DUES BEFORE THE DRT AND, T HEREFORE, IT CANNOT BE SAID THAT THE APPELLANT HAD INCURRED THE LOSS. WE ARE UNABLE T O SEE ANY MERITS IN THIS APPROACH. THE ASSESSEE HAS MADE ELABORATE SUBMISSIONS IN SU PPORT OF ITS CONTENTIONS THAT THE SPENDING MONEY ON LEGAL PROCEEDI NGS AGAINST M/S. SNEH ANTIBIOTICS PVT LTD., ON THE FACTS OF THE PRESENT CASE, WILL AMOUNT TO AVOIDABLE WASTAGE INASMUCH AS THERE ARE NO REASONABLE PROSPECTS OF RECOVERY OF THE DUES. THIS DECISION OR THIS STAND OF THE ASSESSEE HAS NOT BEEN QUE STIONED OR DOUBTED BY THE LEARNED CIT(A). IN SUCH A SITUATION, THE MERE F ACT THAT THE LEGAL PROCEEDINGS HAVE NOT BEEN INITIATED AGAINST M/S. SNEH ANTIBIOTICS PVT LTD., CANNOT BE A GOOD REASON TO DISALLOW THE DEDUCTION IN RESPECT OF WRITE OFF. AS EV IDENT FROM THE MATERIAL FILED BEFORE US, M/S. SNEH ANTIBIOTICS PVT LTD., WAS IN A DIF FICULT FINANCIAL POSITION AND AS SUCH, BONAFIDES IN NOT INITIATING LEGAL ACTION TO REC OVER THE SAID DUES CANNOT BE DOUBTED. ALL THAT IS REQUIRED TO BE SEEN IS WHETHER F ROM A COMMERCIAL POINT OF VIEW THE LOSS CAN BE SAID TO HAVE OCCURRED, AND THAT ASPECT OF THE MATTER HAS NOT BEEN QUESTIONED BY ANY OF THE LOWER AUTHORITIES. THE BASIC PRINCIPLE OF CONSERVATION IN ACCOUNTING, WHICH HAS THE SANCTION OF CUSTOM AND HONB LE COURTS, REQUIRES THAT ALL REASONABLY ANTICIPATED LOSSES HAVE TO BE TAKEN INTO AC COUNT WHILE ASCERTAINING COMMERCIAL PROFITS. THE ONLY EXCEPTION TO THIS PRIN CIPLE IS IN RESPECT OF CONTINGENYT LOSSES WHICH DEPEND ON HAPPENING OR NON HAPPENING OF A FUTURE EVENT. THAT IS NOT I.T.A NO.1219/ MUM/2009 SIMRONE PHARMACEUTICALS IND. LTD. 5 THE CASE HERE. UNDER SUCH CIRCUMSTANCES, IN OUR CONSIDE RED VIEW, THE DEDUCTION COULD NOT BE DECLINED ON THE GROUND THAT THE LEGAL PROCEEDINGS AGAINST M/S. SNEH ANTIBIOTICS PVT LTD., WERE NOT INITIATED. 9. COMING TO THE CORE OBJECTION WHICH WAS RAISED BY T HE ASSESSING OFFICER I.E. IN ADVANCING TO M/S. SNEH ANTIBIOTICS PVT LTD., IS TO BE TREATED AS CAPITAL IN NATURE SINCE THE ASSESSEE HAS INTEREST IN OWNERSHIP OF THE SAID COMPANY, WE ARE UNABLE TO SEE ANY MERITS IN THIS APPROACH. JUST BECAUSE THE ASSESSEE ENT ERS INTO BUSINESS TRANSACTION WITH A SISTER CONCERN, ALL THE ADVANCES TO THE SISTER CONCERN CANNOT BE TREATED AS FOR CAPITAL PURPOSES. THE LINE OF DEMARCAT ION BETWEEN THE REVENUE EXPENDITURE AND CAPITAL EXPENDITURE MUST BE DRAWN ON THE BASIS OF NATURE OF TRANSACTION AND NOT ON THE BASIS OF FINANCIAL RELATIO NSHIP OR COMMON OWNERSHIP OF TWO CONCERNS. QUITE TO THE CONTRARY TO THE PROPOSITIO N CANVASSED BY THE ASSESSEE, EVEN WHEN ASSESSEE HAS MADE INVESTMENTS IN SISTER CONCERNS A ND ASSESSEE INCUR EXPENSES FOR THE BUSINESS PURPOSES OF SISTER CONCERN IN WH ICH INVESTMENTS SO MADE, THE EXPENSES INCURRED FOR THE BUSINESS PURPOSES OF SUCH SISTE R CONCERNS ARE TO BE ALLOWED AS DEDUCTION IN THE HANDS OF THE ASSESSEE WHICH HOLDS INVESTMENTS IN SISTER CONCERN. THIS IS THE UNDERLYING LEGAL PROPOSITION LAI D DOWN BY HONBLE SUPREME COURT IN THE CASE OF S.A.BUILDERS VS CIT, 288 ITR 1(SC ). IN VIEW OF THESE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE SU STAINED BY THE CIT(A) OUGHT TO HAVE BEEN DELETED. WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE OF ` .1,19,79,488. 10. GROUND NO.1 IS THUS ALLOWED. 11. IN GROUND NO.2, THE ASSESSEE HAS RAISED THE FOLLOWIN G GRIEVANCE: ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD AO HAS ERRED IN DISALLOWING THE DEBTS WRITTEN OFF IN RESPE CT OF M/S.ZILLON FINANCE ` .12,33,725 ON THE REASONING THAT THE ADVANCE WAS OF C APITAL NATURE AND WAS NOT FOR BUSINESS PURPOSE. LEARNED CIT HA S ERRED IN CONFIRMING THE SAME. 12. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THIS DISALLOWA NCE WAS MADE FOR THE REASON THAT EXPENDITURE OF ARRANGING INITIAL PUBLIC OFFER ISSUE, IN CONNECTION WITH THE I.T.A NO.1219/ MUM/2009 SIMRONE PHARMACEUTICALS IND. LTD. 6 SAID ADVANCE GIVEN, WAS CAPITAL OF CAPITAL NATURE. T HE STAND WAS TAKEN THAT WHEN EXPENDITURE ITSELF IS OF CAPITAL NATURE, ADVANCE FOR SUCH ADVANCE, WHICH IS WRITTEN OFF, MUST ALSO BE CONSTRUED AS OF CAPITAL NATURE. AGGRIEVED , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) CON FIRMED THE STAND TAKEN BY THE ASSESSING OFFICER AND HELD THAT BY NO STRETCH OF IMAGIN ATION THE EXEGESES CAN BE TERMED AS REVENUE EXPENDITURE AND WRITE OFF IN CON NECTION WITH THAT ADVANCE, ACCORDINGLY BE TREATED AS CAPITAL LOSS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 13. THE STAND OF THE ASSESSEE IS, AS SET OUT IN THE WRITTE N SUBMISSION FILED BEFORE US, IS THAT THE ADVANCES WERE FOR CONSULTANCY PURPOSES A ND, THEREFORE, WRITE OFF OF SUCH ADVANCE IS TO BE ALLOWED FOR THE PURPOSE OF BUSINE SS. IT IS ALSO POINTED OUT THAT THERE IS NO INCREASE IN ASSESSEES CAPITAL BASE AND, THER EFORE, THE EXPENDITURE CANNOT BE TREATED AS IN CAPITAL FIELD. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE REITERATES THE STAND OF THE AUTHORITIES BELOW AND SUBMITS THAT THE IPO EXPENSES ARE INHERENTLY IN THE NATURE OF CAPITAL EXPENDITURE BECAUSE THIS NEEDS TO BE EXPANSION OF CAPITAL BASE. 14. WE FIND THAT THERE IS NO MATERIAL BEFORE US TO IN DICATE THE NATURE OF EXPENDITURE AND IN SUPPORT OF FACTUAL CONTENTION EMB EDDED IN ASSESSEES ARGUMENTS. IN SUCH CIRCUMSTANCES, WE SEE NO REASONS TO IN TERFERE IN THE MATTER. ACCORDINGLY, WE REJECT GROUND NO.2 TAKEN BY THE ASSESSE E AND DECLINE TO INTERFERE IN THE MATTER. 15. GROUND NO.2 IS THUS DISMISSED. 16. IN GROUND NO.3, THE ASSESSEE HAS RAISED THE FOLLOWIN G GRIEVANCE: ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD AO HAS ERRED IN DISALLOWING THE DEBTS WRITTEN OFF IN RESPECT OF M /S. LABORATORIES ENARAI PVT LTD. ` .50,000 ON THE REASONING THAT RETURN OF ADVANCE COUL D NOT BE VERIFIED. LD CIT(A) HAS ERRED IN CONFIRMING THE SAME. I.T.A NO.1219/ MUM/2009 SIMRONE PHARMACEUTICALS IND. LTD. 7 17. THIS WRITE OFF PERTAINS TO ADVANCE GIVEN TO LABOR ATORIES ENARAI PVT LTD. THE CASE OF THE ASSESSEE WAS THAT THE AMOUNT WAS GIVEN AS ADVA NCE FOR THE RAW MATERIAL AND THE ASSESSEE ALSO PRODUCED COPIES OF LEGAL NOTICE SERV ED ON THE ASSESSEE BUT THE AO DECLINED THE DEDUCTION IN RESPECT OF THIS WRITE OF F SINCE AUTHENTICITY OF DOCUMENTS I.E. LEGAL NOTICE CANNOT BE VERIFIED SINCE THE SAME IS NOT ACKNOWLEDGED BY THE RECEIVING PARTY, NEITHER THE DETAILS OF ADVANCE I.E. DATE, CHEQUE NO. BY WHICH BANK THIS AMOUNT HAS BEEN ADVANCED, CANNOT BE VERIFIED. A GGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT SUCCESS. THE ASSESSEE IS IN APPEAL BEFORE US. 18. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSESSEE H AS ISSUED LEGAL NOTICE IN RESPECT OF THIS ADVANCE BUT THE SHORT REASON FOR WHICH THE DEDUCTION IS DECLINED IS THAT THE LEGAL NOTICE IS NOT ACKNOWLEDGED BY THE PAR TY TO WHICH IT IS ADDRESSED AND THAT BASIC DETAILS SUCH AS DATE OF TRANSACTION, CHEQUE D ETAILS ETC, ARE NOT FURNISHED TO THE ASSESSING OFFICER. AS FOR THE OBJECTION TO THE EFFEC T THAT THE LEGAL NOTICE IS NOT ACKNOWLEDGED BY THE PARTY TO WHICH IT IS ADDRESSED, WE ARE UNABLE TO SEE ANY SUBSTANCE IN THIS OBJECTION AND AS LONG AS THE ASSESSEE HAS E VIDENCE OF HAVING SENT LEGAL NOTICE, IT IS NOT OPEN TO THE ASSESSING OFFICER TO DOUBT THE AUTHENTICITY OF THE SAID NOTICE ONLY ON THE GROUND THAT IT IS NOT ACKNOWL EDGED THE PARTY TO WHICH IT IS ADDRESSED. AS REGARDS THE DETAILS OF TRANSACTION, IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE DETAILS WERE REQUISITIONED BUT NOT F URNISHED. IN SUCH CIRCUMSTANCES, WE DEEM IT FIT AND PROPER TO REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO FURNISH THE NECESSARY DETAILS INCLUDING OF CHEQUE T O WHICH THE ADVANCES ARE MADE AND IN CASE THE AO DOES NOT FIND ANY INFIRMITY IN THI S ASPECT OF MATTER, HE WILL ALLOW DEDUCTION IN RESPECT OF WRITE OFF OF ` .50,000. IT IS ONLY FOR THIS LIMITED PURPOSE THAT THE MATTER IS REMITTED TO THE FILE OF THE ASSESSING OFFI CER. 19. GROUND NO.3 IS THUS TREATED AS ALLOWED FOR STATISTIC AL PURPOSES. 20. GROUND NO.4 READS AS UNDER:- I.T.A NO.1219/ MUM/2009 SIMRONE PHARMACEUTICALS IND. LTD. 8 ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD AO HAS ERRED IN MAKING ADDITION OF ` .3,37,312 U/S.41(1) ON REASONING OF CESSATION/REMISSION OF LIABILITY. LD CIT(A) HAS ERRED I N CONFIRMING THE SAME. 21. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS IN RESPECT OF M/S. NEW GLOBE AIR SERVICE AMOUNTING TO ` .3,37,312. IT WAS ALSO NOTICED FROM THE LEDGER ACCOUNT OF M/S. NEW GLOBE AI R SERVICE LTD., THAT THE SAID AMOUNT WAS TREATED AS BAD DEBTS WRITTEN OFF ON 1.11.19 93. WHEN THIS WAS CONFRONTED TO THE ASSESSEE, IT WAS EXPLAINED THAT THEY H AVE PAID AN AMOUNT OF ` .1,95,000 TILL DATE BUT THE BANK STATEMENT DID NOT SH OW THAT THE AMOUNT HAS BEEN PAID TO M/S GLOBE AIR SERVICE NOR ANY CONFIRMATION T O THIS EFFECT WAS FURNISHED BEFORE THE AO. IT WAS IN THIS BACKDROP THAT THE ASSESSIN G OFFICER MADE AN ADDITION OF ` .3,37,312 ON ACCOUNT OF CESSATION OF LIABILITY/REMISSIO N OF LIABILITY AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S.41(1) OF THE ACT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT SUCCESS. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 22. WE FIND THAT THE CLAIM HAS BEEN DECLINED AS THE A SSESSEE HAS NOT BEEN ABLE TO FURNISH COPIES OF ACCOUNT AS APPEARING IN THE BOOKS O F ACCOUNT OF M/S. NEW GLOBE AIR SERVICES. IT IS UNREASONABLE TO EXPECT THE ASSESSEE T O PRODUCE THE BOOKS OF ACCOUNT OF OTHER PARTY. IN ANY EVENT, IT IS CLEAR T HAT THERE IS AT BEST UNILATERAL WRITE OFF BUT THAT CERTAINLY CANNOT BE A LEGALLY SUSTAINABL E REASON TO MAKE ADDITION IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAS EVEN MADE PART PAYME NT AMOUNTING TO ` .1,95,000 IN THE FINANCIAL YEAR 2004-05 AND 2005-06 IN RESPECT OF THE AMOUNT WHICH IS SAID TO HAVE ASSESSEES INCOME ON ACCOUNT REMISSION OF LIABILITY. ALL THESE CLEARLY SHOW THAT THE ADDITION WAS INDEED NOT SUSTAINAB LE IN LAW. WE, THEREFORE, DIRECT THE AO TO DELETE THE SAME. 23. GROUND NO.4 IS THUS ALLOWED. 24. GROUND NO.5 RELATES TO CONFIRMATION OF ADDITION OF ` .8,121 AS UNACCOUNTED PURCHASE. I.T.A NO.1219/ MUM/2009 SIMRONE PHARMACEUTICALS IND. LTD. 9 25. HAVING HEARD THE LEARNED DEPARTMENTAL REPRESENTA TIVE AND HAVING PERUSED THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, WE FIND THAT THE DIFFERENCE OF ` .8,121 IS ON ACCOUNT OF DISCOUNT GIVEN TO THE ASSESSEE BY M/S. M ANISHA ANALYTICAL LABORATORIES PVT LTD. THEREFORE, WE UPHOLD THE GRIE VANCE OF THE ASSESSEE AND DIRECT THE AO TO DELETE ` .8,121 MADE ON ACCOUNT OF UNACCOUNTED PURCHASES. 26. THIS GROUND IS THUS ALLOWED. 27. GROUND NO.6 READS AS UNDER: ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED AO HAS ERRED IN MAKING ADDITION OF ` .1,07,633 IN RESPECT OF DELAYED DEPOSIT OF EMPLOYEES PROVIDENT FUND U/S.36(1)(VA). L D CIT(A) HAS ERRED IN CONFIRMING THE SAME. 28. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER NOTICED THAT THE ASSESSEE HAS DEPOSITED AN AMOUNT OF ` .1,07,633 IN RESPECT OF EMPLOYEES CONTRIBUTION TO PF BEYOND THE DUE DATE. ACCORDINGL Y, HE DISALLOWED ` .1,07,633 AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ASSE SSEE CARRIED THE MATTER IN APPEAL BUT WITHOUT SUCCESS. 29. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIV E AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE HONBLE SUPREME CO URT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. [(2009) 319 ITR 306 (SC)] HAS HELD THAT THE OMISSION OF THE SECOND PROVISO TO SECTION 43B OF THE ACT BY THE FINANCE ACT, 2003 OPERATED RETROSPECTIVELY AND NOT PROSPECTIVELY. ALTHOUGH SECTION 43B APPLIES TO THE EMPLOYERS CONTRIBUTION TOWARDS EPF AND ESI, YET IN THIS JUDGMENT THE HONBLE SUPREME COURT UPHELD THE JUDGEMENT OF THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF CIT VS. SABARI ENTERPRISES [(2008) 298 ITR 141 (KARN)] IN WHICH THE QUESTION WAS ALSO ABOUT THE CONTRIBUTION MADE BY THE EMPLOYEES TOWARDS EPF AND ES I ETC. VIS--VIS DISALLOWANCE U/S.36(1)(VA) R.W.S. 2(24)(X), IN WHICH THE CONTROVE RSY WAS DECIDED IN ASSESSEES FAVOUR. IT IS NOTED THAT THE DELHI HIGH COURT IN CIT VS. AIMIL LIMITED [2010] 188 TAXMAN 265 (DELHI) HAS HELD THAT THE EMPLOYEES CONTRIBUTION TOWARDS EPF AND ESI ETC. DEPOSITED AFTER THE DUE DATE BUT BEFORE THE TIME ALL OWED FOR FILING THE RETURN I.T.A NO.1219/ MUM/2009 SIMRONE PHARMACEUTICALS IND. LTD. 10 U/S.139(1) WILL NOT CALL FOR ANY DISALLOWANCE U/S.36(1 )(VA). IN THE LIGHT OF THESE LATER JUDICIAL PRONOUNCEMENTS, WE HOLD THAT THE LEARNED C IT(A) WAS NOT JUSTIFIED IN SUSTAINING THE AFORESAID DISALLOWANCE REPRESENTING THE E MPLOYEES CONTRIBUTION TO EPF WHICH AMOUNTS WERE ADMITTEDLY PAID BEFORE THE DU E DATE U/S 139(1). IN VIEW OF THIS, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DI RECT THE AO TO ALLOW DEDUCTION OF RS. 1,06,633. 30. THIS GROUND IS THUS ALLOWED. 31. IN THE RESULT, APPEAL IS PARTLY ALLOWED AS PER TER MS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 31 ST MAY 2011. SD/- (V. DURGA RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 31 ST MAY, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),C-1, MUMBAI 4. COMMISSIONER OF INCOME TAX, C-1. MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI