Dy.CIT., Circle-3(3), Hyderabad V. M/s Someswara Cements and Chemicals Ltd.(Presently: M/s Vedam Calcimin Ltd), Hyderabad

ITA 1448/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6578 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-04-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 03-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V HEMALATHA DEVI
• Keywords: Bad and doubtful debts; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1448/HYD/2014 ASSESSMENT YEAR: 2005-06 DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(3), HYDERABAD. VS. M/S SOMESWARA CEMENTS AND CHEMICALS LTD. (PRESENTLY M/S VEDAM CALCIMIN LTD.), HYDERABAD PAN AADCS 4021 M APPELLANT RESPONDENT REVENUE BY: SMT. G.V. HEMALATHA DEVI ASSESSEE BY: SRI SAMUEL NAGADESI DATE OF HEARING: 11/04/2016 DATE OF PRONOUNCEMENT: 22/04/2016 O R D E R PER S. RIFAUR RAHMAN, AM: THIS APPEAL IS PREFERRED BY THE REVENUE IS DIRECTE D AGAINST THE ORDER OF CIT(A)-IV, HYDERABAD DATED 13/ 06/2014 FOR AY 2005-06. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A COMPANY CARRYING ON THE BUSINESS OF MANUFACTURING A ND SALE OF CEMENT. FOR THE AY 2005-06, THE ASSESSEE COMPANY FILED ITS ORIGINAL RETURN OF INCOME DECLARING TOTAL LOSS OF RS. 8,77,10,822/-. SUBSEQUENTLY, THE ASSESSEE COMPANY F ILED REVISED RETURN OF INCOME ON 31/03/2006 DECLARING NI L RECEIPTS. HOWEVER, THE ASSESSEE DECLARED OTHER INCOME OF RS. 40,64,57,071. THE AO ASSESSED THE TOTAL INCOME AT R S. 7,51,88,939/- BY MAKING VARIOUS ADDITIONS/DISALLOWA NCES. I.T.A. NO. 1448/HYD/2014 M/S VEDAM CALCIMIN LTD. 2 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL, THE CIT(A) CONFIRMED SOME ADDITIONS/DISALLOWANCES AND A LLOWED SOME OF THE ADDITIONS/DISALLOWANCES MADE BY THE AO, AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US RAISING TH E FOLLOWING GROUNDS OF APPEAL: I) THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACT S OF THE CASE. II) THE LD. CIT(A) OUGHT TO HAVE UPHELD THE DISALLO WANCE OF BAD DEBTS NAMELY INVENTORIES AND SUNDRY DEBTORS AS THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE TO SUBSTANTIATE THAT THESE AMOUNTS WERE ACTUALLY WRITT EN OFF IN THE BOOKS OF ACCOUNTS. 4. THE FACTS RELATING TO THE SAID GROUND ARE THAT T HE ASSESSEE HAS WRITTEN OFF THE FOLLOWING CURRENT ASSE TS BY DEBITING THEM TO THE P&L A/C.: 1. INVENTORIES RS. 2,75,99,599 2. SUNDRY DEBTORS RS. 30,30,250 3. LOANS AND ADVANCES RS. 79,86,000 THE AR OF THE ASSESSEE SUBMITTED THAT THE INVENTORI ES INCLUDED A CLINKER WHICH WAS LYING WITH THE ASSESSE E FOR MORE THAN 10 YEARS AND WAS NOT OF ANY USE. THE AO REJECT ED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESS EE DID NOT PRODUCE THE STOCK REGISTER SHOWING THE ENTRIES WITH REGARD TO THE WRITE OFF OF THE STOCKS AND DID NOT FURNISH ANY EXPLANATION WHY IT HAD WAITED FOR SO MANY YEARS BEFORE WRITING IT OFF NOR WHY ONLY PART OF THE INVENTORY VALUE HAD BEEN WRITT EN OFF NOR THE BASIS ON WHICH THIS FIGURE HAD BEEN ARRIVED AT. 5, BEFORE THE CIT(A), THE AR OF THE ASSESSEE SUBMIT TED THAT THE INVENTORY HAD BEEN LYING IN THE CURRENT AS SETS EVER SINCE THE COMPANY HAD BEEN DECLARED AS A SICK INDUS TRIAL COMPANY BY THE BIFR AND COULD NOT BE DEALT WITH PEN DING THE PROCEEDINGS BEFORE THE BIFR, THAT CONSEQUENT TO THE SCHEME SANCTIONED BY THE BIFR AND THE ONE TIME SETTLEMENT WITH THE I.T.A. NO. 1448/HYD/2014 M/S VEDAM CALCIMIN LTD. 3 FINANCIAL INSTITUTIONS THE CURRENT ASSETS WERE WRIT TEN OFF ON THE BASIS OF THE LOWER OF COST OR NET REALISABLE VALUE, A METHOD REGULARLY FOLLOWED BY THE ASSESSEE. THE AR ALSO SUB MITTED THAT THE ASSESSEE WAS ENTITLED TO WRITE OFF ANY DIM INUTION IN THE VALUE OF THE CURRENT ASSETS AND ALSO THAT PROFI TS WERE REQUIRED TO BE ASCERTAINED ON ORDINARY PRINCIPLES O F COMMERCIAL TRADING AND COMMERCIAL ACCOUNTING. 5.1 WITH REGARD TO THE SUNDRY DEBTORS, THE ASSESSEE SUBMITTED THAT THE AMOUNTS WERE DUE FOR MORE THAN 8 OR 9 YEARS, THAT THE FULL DETAILS WERE NOT AVAILABLE AND THAT THEREFORE THE AMOUNTS WERE WRITTEN OFF IN THE BOOKS . THE AO REJECTED THE CLAIM ON THE GROUND THAT THE ASSESSEE DID NOT FURNISH THE NAMES AND ADDRESSES OF THE DEBTORS. 5.2 WITH REGARD TO THE LOANS AND ADVANCES, THE AO R EJECTED THE CLAIM SINCE NO DETAILS WERE FURNISHED AND SINCE NO EVIDENCE HAD BEEN FURNISHED REGARDING THE EFFORTS M ADE TO REALISE THE LOANS. 6. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HELD THAT THE ASSESSEE IS ENTITLED TO WRI TE OFF OF FINISHED GOODS, WORK-IN-PROGRESS AND OTHER CURRENT ASSETS THAT MAY BECOME OBSOLETE AND MAY BECOME INCAPABLE OF BEI NG REALISED. HE OBSERVED THAT WHETHER OR NOT AN AMOUNT IS CAPABLE OF REALISED IS A BUSINESS DECISION LEFT TO THE ASSESSEE AND ALL THAT IS REQUIRED THAT THE AMOUNT SHOULD BE REVENUE IN NATURE AND SHOULD BE WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS. THESE CRITERIA APPLY TO THE WRITE OFF OF INVENTORY AND OF SUNDRY DEBTORS. AS REGARDS LOANS AND ADVANCES, HE HELD THA T SINCE THEY ARE CAPITAL IN NATURE AND THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF MONEY LENDING THE WRITE OFF OF LOAN S AND ADVANCES IS NOT PERMISSIBLE AS A DEBIT TO THE P&L A /C. I.T.A. NO. 1448/HYD/2014 M/S VEDAM CALCIMIN LTD. 4 7. AGGRIEVED BY THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE OF BAD DEBTS NAMELY INVENTORIES AND SU NDRY DEBTORS, THE REVENUE IS IN APPEAL BEFORE US. 8. LD. DR SUBMITTED THAT ASSESSEE HAD NOT PRODUCED ANY EVIDENCE TO SUBSTANTIATE THE CLAIM OF BAD DEBTS NAM ELY INVENTORIES AND SUNDRY DEBTORS. SHE SUPPORTED THE A CTION OF THE ASSESSING OFFICER AND RELIED ON THE ASSESSING O FFICERS ORDER. 9. LD. AR SUBMITTED THAT THERE IS NO ACTUAL DEMAND WITH REGARD TO INVESTMENT FOR THIS YEAR. HE BROUGHT TO O UR NOTICE THAT ASSESSING OFFICER HAS NOT RAISED ANY DEMAND U/ S 156. AS SUCH, THERE IS NO TAX LIABILITY. BY MISTAKE, ASSESS EE APPEALED AGAINST THIS ORDER AND GOT RELIEF FROM CIT(A). 10. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND MATERIAL FACTS ON RECORD. ON PERUSAL OF THE ASSESSM ENT ORDER, WE NOTICE THAT ASSESSING OFFICER HAS NOT DETERMINED ANY LIABILITY ON THE ASSESSEE AND ALSO NOT RAISED ANY T AX DEMAND U/S 156. SINCE, THERE IS NO DEMAND, THERE IS NO REQ UIREMENT OF APPEAL BEFORE APPELLATE AUTHORITY. ACCORDINGLY, WE ARE INCLINED TO QUASH THIS APPEAL. 11. MOREOVER, THERE IS NO DEMAND OF TAX IN THIS APP EAL OF THE REVENUE, AS IT IS LIABLE TO BE QUASHED AS PER CBDT CIRCULAR NO.21/2015 DATED 10 TH DECEMBER, 2015. AS PER THIS CIRCULAR, REVENUE NEED NOT FILE APPEALS BEFORE THE ITAT WHERE THE TAX DEMAND IS LESS THAN RS.10 LAKHS. SINCE, TAX DEMAND IN THIS CASE IS NIL, WHICH IS LESS THAN RS. 10 LAKHS, THIS APPEAL OF THE REVENUE IS TO BE DISMISSED IN VIEW OF THE ABOVE CIR CULAR ALSO. I.T.A. NO. 1448/HYD/2014 M/S VEDAM CALCIMIN LTD. 5 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 22 ND APRIL, 2016 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED 22 ND APRIL, 2016 KV COPY FORWARDED TO: 1. DCIT, CIRCLE 3(3), 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2. M/S SOMESWARA CEMENTS AND CHEMICALS LTD., (PRESENTLY: M/S VEDAM CALCIMIN LTD., 201, SURESH ARCADE, 7-1-235/42, PRASHANTH COLONY, NEAR NATURE CURE HOSPITAL, BALKAMPET, HYDERABAD 500 016. 3. CIT(A) - IV, HYDERABAD 4 CIT - III, HYDERABAD 5 THE DR, ITAT, HYDERABAD S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER