FUTURA POLYSTERS LTD, MUMBAI V. INCOME TAX OFFICER 6(3)(1), MUMBAI

ITA 1460/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8596 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 08-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEBASHIS CHANDA
• Assessee Lawyers: ANUJ KISNADWALA A RS
• Keywords: Unexplained cash credit; Capital asset; Depreciation; Opportunity of being heard; Source of fund; Additional evidence; Question of law; Fair market value; Bad and doubtful debts; Valuation report; Right to appeal; Revised return; Unabsorbed depreciation; Set aside; Capital Gains
• Section: 43B; 143(3); 133(6); 143(1); 143(2); 113; 43; 13; 119; 22; 68; 37; 28; 154; 139

Judgement Text

ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NOS.1459 - 1460 /MUM/2018 (ASSESSMENT YEAR: 2013 - 14 ) FUTURA POLYSTER LIMITED B - 22, T.V. INDL ESTATE, S.K. AHIRE MARG, WORLI, MUMBAI 400 030 VS. ITO 6(3)(1) AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI 400 020 PAN AAACI3404K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIJAY MEHTA & SHRI ANUJ KISNADWALA, A.R S RESPONDENT BY: SHRI DEBASHIS CHANDA, D.R DATE OF HEARING: 15 .01.2020 DATE OF PRONOUNCEMENT: 16. 07 .2020 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS PASSED BY THE CIT(A) - 10, MUMBAI, DATED 29.12.2013, WHICH IN TURN ARISES FROM THE RESPECTIVE ORDERS PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX 1961 (FOR SHORT A CT), DATED 31.03.2016 AND UNDER SEC. 154 OF THE ACT, DATED 20.06.2016. AS THE ISSUE S INVOLVED IN THE CAPTIONED APPEAL S ARE INEXTRICABLY INTERLINKED OR IN FACT INTERWOVEN, THEREFORE, WE SHALL DISPOSE OFF THE SAME BY WAY OF A CONSOLIDATED ORDER. WE SHALL FI RST TAKE UP THE APPEAL OF THE ASSESSEE ARISING FROM THE QUANTUM ASSESSMENT, WHEREIN THE IMPUGNED OR DER HAS BEEN ASSAILED BEFORE US ON THE FOLLOWING GROUNDS OF APPEAL: ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 2 THE APPELLANT SUBMITS THAT THE BELOW MENTIONED GROUNDS ARE INDEPENDENT AND WITHOUT PREJ UDICE TO ONE ANOTHER. 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE U/S 43B OF RS. 36,66,290/ - . 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF BANK COMMISSION EXPENSES OF RS. 10,60,512/ - . 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF FOREIGN EXCHANGE LOSS OF RS. 2,20,50,511/ - 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF BAD DEBTS /ADVANCES WRITTEN OFF AND SUNDRY BALANCES WRITTEN OFF AGGREGATING TO RS. 13,83,56,806/ - 5. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ADDITIONS OF RS. 18,45,880 / - ON ACCOUN T OF CESSATION OF LIABILITIES U/ S 41(1)(A). 6. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF AUDIT FEES OF RS. 26,27,940/ - 7. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE DEED OF CANCELLATION DATED 28.09.2017' IN CONNECTION WITH LONG TERM CAPITAL GAINS ON SALE OF LAND WAS NOT GENUINE. 8. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ADDITIONS OF UNSECURED LOANS OF RS. 1,11,27,495! - U/S 68 AS UNEXPLAINED CASH CREDIT. 9. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF AO IN NOT SETTING OFF UNABSORBED DEPRECIATION BROUGHT FORWARD FROM EARLIER YEARS AMOUNTING TO RS. 66,45,52.265/ - AGAINST CAPITAL GAIN. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER BY SUBSTITUTION OR OTHERWISE THE ABOVE GROUNDS OF APPEAL BEFORE OR DURING THE HEARING OF THE APPEAL. FURTHER, THE ASSESSEE HAS RAISED BEFORE US THE FOLLOWING A DDITIONAL GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) OUGHT TO HAVE HELD THAT THERE IS NO TRANSFER OF LAND DURING THE YEAR UNDER CONSIDERATION AND HENCE NO GAIN ARISES OUT OF AMOUNT OF RS. 315,00,00,000/ - MENTIONED IN THE MOU DATED 19.12.2012 WHICH COULD BE BROUGHT TO TAX. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE SAID MOU WAS CANCELLED SUBSEQUENTLY. 2. THE LEARNED CIT (A) OUGHT TO HAVE DIRECTED THE A.O. TO CONSIDER SHORT TERM CAPITAL LOSS OF RS, 69,72,79,948/ - FOR THE PURPOSE OF SET OFF AGAINST THE INCOME OF THE ASSESSEE/ CARRY FORWARD TO SUBSEQUENT YEARS. ALSO, THE ASSESSEE HAS MOVED A LETTER DATED JA NUARY 15, 2020 SEEKING LIBERTY FOR ADMISSION OF CERTAIN DOCUMENTS AS ADDITIONAL EVIDENCE UNDER RULE 29 OF THE A PPELLATE TRIBUNAL RULES, 1963, FOR THE REASON THAT THEY ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 3 SHALL HAVE A STRONG BEARING ON THE ADJUDICATION OF CERTAIN GROUNDS OF APPEAL, AS UNDER: GR. NO. PG NOS OF P.B. 3 NATURE OF DOCUMENTS REMARKS 1. 110 - 113 DETAILS OF VAT/SALES TAX PAYABLE, JOURNAL VOUCHER AND LEDGER ACCOUNT THE ASSESSEE HAS FILED THESE DOCUMENTS TO DEMONSTRATE THAT EXCISE DUTY PAYABLE ACCOUNT HAS NOT EFFECTED PROFIT AND LOSS ACCOUNT AND HENCE NO DISALLOWANCE IS REQUIRED TO BE MADE U/S 43B OF THE ACT. 4. 114 - 127 DETAILS OF BAD DEBTS AND RELEVANT LEDGER ACCOUNTS THE DISALLOWANCE WAS CONFIRMED ON THE GROUND THAT S. 36(2) CONDITION HAS NOT BEEN SATISFIED. THE DET AILS FILED SHOWS THE YEAR IN WHICH AMOUNT HAS BEEN SHOWN AS INCOME AND THUS SATISFACTION OF S. 36(2) 7. 128 - 145 ACKNOWLEDGMENT OF RETURN OF INCOME ALONG WITH COMPUTATION OF INCOME FOR A.Y. 2018 - 19 AND 2019 - 20 THE ASSESSEE HAS FILED THESE COPIES TO DEMONST RATE THAT CAPITAL GAIN ARISING ON TRANSFER OF LAND HAS BEEN OFFERED TO TAX 8. 146 - 158 ACKNOWLEDGEMENT OF RETURN OF INCOME ALONG WITH COMPUTATION OF INCOME FOR A.Y. 2013 - 14 ALONG WITH AFFIDAVIT OF MR. SHYAM GHIA AND MR. MUKUND DALAL. THE ASSESSEE HAS FILE D THESE DOCUMENTS TO CONTEST THE ADDITION MADE U/S 68 OF THE ACT. 9. 159 - 160 ORDER GIVING EFFECT TO CIT(A)S ORDER. 2. BEFORE PROCEEDING ANY FURTHER, WE SHALL FIRST ADVERT TO THE LETTER FILED BY THE ASSESSEE SEEKING LIBERTY FOR ADMISSION OF ADDITIONAL GROUNDS OF APPEAL. ON A PERUSAL OF THE LETTER DATED 09.01.2020 FILED BY THE ASSESSEE FOR ADMISSION OF THE ADDITIONAL GROUND S OF APPEAL, WE FIND THAT THE ADDITIONAL GROUND OF APPEAL NO.1 I S MORE OR LESS IN THE FORM OF A CLARIFICATION, OR IN FACT ELABORATION OF THE GROUND OF APPEAL NO. 7 WHICH HAS BEEN RAISED IN THE MEMORANDUM OF APPEAL FILED BY THE ASSESSEE BEFORE US . IN SUM AND SUBSTANCE, THE ASSESSEE BY RAISING THE AFORESAID ADDITIONAL GROUND OF APPEAL HA S TRIED TO CLARIFY THE FACT UAL POSITION ATTENDING TO THE ISSUE UNDER CONSIDERATION. IN SO FAR, THE ADDITIONAL GROUND OF APPEAL NO. 2 IS CONCERNED, THE ASSESSEE BY RAISING THE SAME HAS SOUGHT ADJUDICATION OF AN ISSUE I.E ITS ENTITLEMENT F OR SET OFF AND/OR C/FORWARD OF SHORT TERM CAPITAL LOSS , AS CLAIMED BY IT IN ITS RETURN OF INCOME . W E FIND THAT THE ADJUDICATION OF THE AFORESAID ADDITIONAL GROUND S ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 4 OF APPEAL IS BASED ON THE FACTS BORNE FROM THE RECORD AND WOULD NOT REQUIRE ANY FRESH INVESTIGATION OR VERIFICATION INSOFAR THE FACTUAL POSITION IS CONCERNED. IN THE COURSE OF HEARING OF THE APPEAL, IT WAS SUBMITTED BY THE LD. A.R THAT AS NO NEW FACTS ARE REQUIRED TO BE LOOKED INTO FOR ADJUDICATING THE AFORESAID ADDITIONAL GROUND S OF APPEAL, HENCE, THE SAME MAY BE ADMITTED. IN SUPPORT OF HIS AFORESAID CONTENTION THE LD. A.R HAS RELIED UPON THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF VIZ. (I) N ATIONAL THERMAL POWER CORPORATION VS. CIT (1998) 229 ITR 383 (SC); AND (II) JUTE CORPORATION OF INDIA LTD. VS. CIT (1991) 187 ITR 688 (SC ) . ALSO SUPPORT WAS DRAWN BY HIM FROM THE JUDGMENT OF THE FULL BENCH OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF AHMEDABAD ELECTRICITY COMPANY LTD. VS. CIT ( 1993 ) 199 ITR 351 (BOM) (FB). PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) OBJECTED TO THE ADMISSION OF THE ADDITIONAL GROUND S OF APPEAL. 3. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FO R BOTH THE PARTIES IN CONTEXT OF THE ISSUE PERTAINING TO THE ADMISSION OF THE ADDITIONAL GROUND S OF APPEAL. IN OUR CONSIDERED VIEW THERE IS SUBSTANTIAL FORCE IN THE CLAIM OF THE LD. A.R THAT AS NO NEW FACTS ARE REQUIRED TO BE LOOKED INTO FOR ADJUDICATING T HE AFORESAID ADDITIONAL GROUND S OF APPEAL, THEREFORE, THE SAME IN ALL FAIRNESS REQUIRES TO BE ADMITTED. APART FROM THAT, AS OBSERVED BY US HEREINABOVE , AS THE ADDITIONAL GROUND OF APPEAL NO. 1 IS MERELY IN THE NATURE OF AN EXTENSIO N OF THE GROUND OF APPEA L NO. 7 RAISED BY THE ASSESSEE IN THE MEMORANDUM OF APPEAL, THEREFORE, THERE APPEARS TO BE NO JUSTIFICATION IN DECLINING THE ADMISSION OF THE SAME. ACCORDINGLY, ON THE BASIS OF OUR AFORESAID DELIBERATIONS, WE HEREIN ADMIT THE ADDITIONAL GROUND S OF APPEAL RAISED BY THE ASSESSEE BEFORE US. 4. WE SHALL NOW DEAL WITH THE LETTER FILED BY THE ASSESSEE SEEKING ADMISSION OF CERTAIN DOCUMENTS AS ADDITIONAL EVIDENCE UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULES 1963. ON A PERUSAL OF THE AFORESAID LETTER DATED 15.01.2020 , WE FIND , THAT IT IS THE CLAIM OF THE ASSESSEE THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS ITS OPERATIONS WERE STOPPED IN ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 5 JULY, 2012 AND THE OUTSTANDING DUES OF THE WORKERS REMAINED UNPAID. AS STATED BEFORE US, UNDER THE AFORESAID COMPE LLING CIRCUMSTANCES THE WORKERS DID NOT ALLOW ANYONE TO ENTER THE PREMISES OF THE ASSESSEE COMPANY. ACCORDINGLY, IT IS CLAIMED THAT DUE TO THE AFORESAID SET OF CIRCUMSTANCES PREVAILING AT THE RELEVANT POINT OF TIME, THE REQUISITE DOCUMENTS COULD NOT BE GAT HERED AND FILED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. HOWEVER, IN THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE CIT(A) THE REQUIRED DOCUMENTS WERE LOCATED AND FILED BEFORE THE APPELLATE AUTHORITY AS ADDITIONAL EVIDENCE. IN THE TOTALITY OF THE F ACTS OF THE CASE, THE CIT(A) ADMITTED THE ADDITIONAL EVIDENCE AND CALLED FOR A REMAND REPORT FROM THE A.O. ACTING UPON THE REMAND REPORT FILED BY THE A.O, THE CIT(A) PARTLY UPHELD THE ADDITIONS AND DISALLOWANCES. IN THE BACKDROP OF THE AFORESAID FACTS, IT IS CLAIMED BY THE ASSESSEE THAT DUE TO LACK OF PROFESSIONAL ADVICE CERTAIN VITAL DETAILS AND DOCUMENTS HAD REMAINED OMITTED TO BE FILE D BEFORE THE LOWER AUTHORITIES. AS SUCH, A S PER THE ADVICE OF ITS COUNSEL WHO WAS ENGAGED TO ARGUE THE PRESENT APPEAL BEFO RE THE TRIBUNAL THE ASSESSEE HAD FILED CERTAIN DOCUMENTS (FORMING PART OF APB - 3) BEFORE US, SEEKING LIBERTY TO ADMIT T H E SAME AS ADDITIONAL EVIDENCE U/RULE 29 OF THE APPELLATE TRIBUNAL RULES, 1963, AS UNDER: GR. NO. PG NOS OF P.B. 3 NATURE OF DOCUMENTS RE MARKS 1. 110 - 113 DETAILS OF VAT/SALES TAX PAYABLE, JOURNAL VOUCHER AND LEDGER ACCOUNT THE ASSESSEE HAS FILED THESE DOCUMENTS TO DEMONSTRATE THAT EXCISE DUTY PAYABLE ACCOUNT HAS NOT EFFECTED PROFIT AND LOSS ACCOUNT AND HENCE NO DISALLOWANCE IS REQUIRED TO BE MADE U/S 43B OF THE ACT. 4. 114 - 127 DETAILS OF BAD DEBTS AND RELEVANT LEDGER ACCOUNTS THE DISALLOWANCE WAS CONFIRMED ON THE GROUND THAT S. 36(2) CONDITION HAS NOT BEEN SATISFIED. THE DET AILS FILED SHOWS THE YEAR IN WHICH AMOUNT HAS BEEN SHOWN AS INCOME AND THUS SATISFACTION OF S. 36(2) 7. 128 - 145 ACKNOWLEDGMENT OF RETURN OF INCOME ALONG WITH COMPUTATION OF INCOME FOR A.Y. 2018 - 19 AND 2019 - 20 THE ASSESSEE HAS FILED THESE COPIES TO DEMONST RATE THAT CAPITAL GAIN ARISING ON TRANSFER OF LAND HAS BEEN OFFERED TO TAX 8. 146 - 158 ACKNOWLEDGEMENT OF RETURN OF INCOME ALONG WITH COMPUTATION OF INCOME FOR A.Y. 2013 - 14 ALONG WITH AFFIDAVIT OF MR. THE ASSESSEE HAS FILED THESE DOCUMENTS TO CONTEST THE ADDITION MADE U/S 68 OF THE ACT. ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 6 SHYAM GHIA AND MR. MUKUND DALAL. 9. 159 - 160 ORDER GIVING EFFECT TO CIT(A)S ORDER. IT IS THE CLAIM OF THE ASSESSEE THAT AS THE AFORESAID DOCUMENTS FILED AS ADDITIONAL EVIDENCE BEFORE US WOULD GO TO THE ROOTS OF SOME OF THE ISSUES INVOLVED IN THE PRESENT APPEAL, THEREFORE, THE SAME MAY BE ADMITTED UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULES 1963. PER CONTRA, THE LD. D.R. OBJECTED TO THE ADMISSION OF THE ADDITIONAL EVIDENCE. 5. ON A PER USAL OF THE DOCUMENTS FILED BY THE ASSESSEE AS ADDITIONAL EVIDENCE, WE FIND THAT THE SAME WOULD HAVE A STRONG BEARING ON THE ADJUDICATION OF THE ISSUE S RAISED BY THE ASSESSEE BEFORE US. IN OUR CONSIDERED VIEW, THE CIRCUMSTANCES PREVAILING AT THE END OF THE ASSESSEE, I.E AT THE TIME OF FRAMING OF THE ASSESSMENT IN ITS ELF EXPLAINS THE REASON FOR NON - FILING OF THE REQUISITE DOCUMENTS IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. IN FACT, THE FACTUAL POSITION CANVASSED BEFORE US BY THE LD. A.R CANNOT BE HELD TO BE AN EYE WASH, AS THE SAME IS SUPPORTED BY AN AFFIDAVIT OF SHRI SHYAM GHIA, MANAGING DIRECTOR OF THE ASSESSEE COMPANY . APART FROM THAT, NO FACT TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE BY THE LD. D.R WHICH WOULD PROVE OTHERWISE. ALSO, CONSIDERING THE NATURE OF DOCUMENTS VIZ. (I). COPIES OF ACKNOWLEDGMENT OF RETURN S OF INCOME OF THE ASSESSEE COMPANY FOR A.Y. 2018 - 19 AND A.Y. 2019 - 20; (II) COP IES OF ACKNOWLEDGMENT OF RETURN S OF INCOME OF S/ S HRI SHYAM GHIA AND MUKUN D DALAL , DIRECTORS FOR A.Y. 2013 - 14, ALONG WITH THEIR AFFIDAVIT S ; (III) ORDER GIVING EFFECT TO CIT(A) ORDER; (IV) DETAILS OF BAD DEBT ACCOUNTS ALONG WITH THE COPY OF LEDGER ACCOUNTS; AND (V) DETAILS OF VAT/SALES TAX PAYABLE LEDGER ACCOUNTS, ARE DOCUMENTS WHICH EITHER FORM P ART OF THE RECORD OF THE REVENUE, OR ARE IN THE NATURE OF AN EXTRACT OF THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION, WOULD THUS NOT REQUIRE ANY FURTHER VERIFICATION. IN THE TOTALITY OF THE FACTS OF THE CASE, WE ARE OF TH E CONSIDERED VIEW THAT AS THE AFORESAID DOCUMENTS FILED BY THE ASSESSEE BEFORE US BY WAY OF ADDITIONAL EVIDENCE WOULD HAVE A STRONG ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 7 BEARING ON THE ADJUDICATION OF THE RESPECTIVE GROUNDS OF APPEAL RAISED BEFORE US, THE SAME THUS MERITS TO BE ADMITTED . 6. B RIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF POLY E STER STAPLE ETC . , HAD FILED ITS RETURN OF INCOME FOR A.Y. 2013 - 14 ON 23.09.2013, DECLARING ITS TOTAL INCOME AT RS. NIL. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. THE A.O WHILE FRAMING THE ASSESSMENT INTER ALIA MADE THE FOLLOWING ADDITIONS /DISALLOWANCES: SR. NO. PARTICULARS AMOUNT (RS.) 1. DISALLOWANCE U/S. 43B 36,66,290/ - 2. DISALLOWANCE OF COMMISSION EXPENSES 10,60,512/ - 3 . DISALLOWANCE OF FOREIGN EXCHANGE LOSS 2,20,50,511/ - 4 . DISALLOWANCE OUT OF SUNDRY BALANCES WRITTEN OFF, BAD DEBT AND ADVANCES TO SUPPLIERS WRITTEN OFF : ( I). SUNDRY BALANCE WRITTEN OFF : RS. 11,99,829/ - (II). BAD DEBTS : RS. 12,42,69,569/ - (III). ADVANCE TO SUPPLIERS W/OFF : RS. 1,28,87,408/ - 13,83,56,806/ - 5 . CESSATION OF LIABILITY UNDER SEC.41(1) : (I). SUNDRY CREDITORS : RS. 4,95,23,539/ - (II). OTHER LIABILITIES : RS. 18,45,880/ - 5,13,69,419/ - 6 . UNEXPLAINED CASH CREDIT UNDER SEC. 68 10,61,27,495/ - 7. U NEXPLAINED CASH CREDIT UNDER SEC. 68 : (I). AMALFI PROPERTIES P. LTD. :RS. 4,43,84,000/ - (II). BHUPATI INVESTMENT & FINANCE P. LTD. :RS. 21,90,39,000/ - 26,34,23,000/ - 8. DISALLOWANCE OF AUDIT FEES 26,27,940/ - 9. UNEXPLAINED CASH CREDIT S 3,66,692/ - 10. SHORT TERM CAPITAL GAIN 315,00,00,000/ - ON THE BASIS OF THE AFORESAID ADDITIONS/DISALLOWANCE THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 286,02,72,980/ - , AS AGAINST ITS RETURNED INCOME OF RS. NIL . 7 . AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE PARTLY ALLOWED THE APPEAL . 8 . THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US . THE LD. A.R AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED , THAT AS INSTRUCTED , HE IS NOT PRESSING THE GROUND S OF APPEAL NOS. 2,5,6 AND 9. ACCORDINGLY, AS PER THE ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 8 CONCESSION OF THE LD. A.R THE GROUND S OF APPEAL NO. 2, 5, 6 AND 9 ARE DISMISSED AS NOT PRESSED. 9 . WE SHALL NOW ADVERT TO THE MERITS OF THE CASE. THE ASSESSEE HAS ASSAILED BEFORE US THE CONFIRMING OF THE DISALLOWANCE OF RS. 36,66,290/ - UNDER SEC. 43B BY THE CIT(A). FACTS IN BRIEF, ARE THAT THE ASSESSE IN ITS BALA NCE SHEET FOR THE YEAR ENDING 31.03.2013 HAD SHOWN VAT & T AX PAYABLE AT RS.1,47,08,432/ - . A S PER SCHEDULE 3 FORMING PART OF THE COMPUTATION OF INCOME , THE ASSESSEE HAD DISALLOW ED VAT PAYABLE AND E XCISE DUTY OF RS.1,79,305/ - AND RS.1,08,62,837/ - ,RESPECTIVELY U/S 43B OF THE ACT . OBSERVING, THAT THE ASSESSEE HAD FAILED TO DISALLOW U/S 43B THE ENTIRE AMOUNT OF VAT AND T AX PAYABLE OF RS.1,47,08,432/ - (SUPRA) , THE A.O DISALLOWED THE BALANCE AMOUNT OF RS.36,66,290/ - [RS.1,47,08,432/ - ( MI NUS ) RS.1,79,305/ - ( MINUS ) RS.1,08,62,837/ - ]. ON APPEAL, THE CIT(A) FINDING NO INFIRMITY IN THE VIEW TAKEN BY THE A.O UPHELD THE DISALLOWANCE OF RS. 36,66,490/ - MADE BY HIM U /S 43B OF THE ACT . 1 0 . AGGRIEVED, THE ASSESSEE HAS ASSAILED BEFORE US THE SUSTAIN I NG OF THE DISALLOWANCE OF RS. 36,66,490/ - U/S 43B BY THE CIT(A) . AT THE VERY OUTSET, IT WAS SUBMITTED BY THE LD. A.R THAT THE LOWER AUTHORITIES WHILE MAKING/SUSTAINING THE AFORESAID DISALLOWANCE U/S 43B HAD MISCONCEIVED THE FACTUAL POSITION . I T WAS SUBMITT ED BY THE LD. A.R , THAT THE VAT & T AX PAYABLE OF RS.1,47,08,432/ - COMPRISED OF THE CLOSING BALANCES OF THE EARLIER YEARS AS WELL. IN ORDER TO FORTIFY HIS AFORESAID CLAIM THE LD. A.R TOOK US THROUGH NOTE 4 OF THE BALANCE SHEET OF THE ASSESSEE COMPANY ON 31.03.2013 . FURTHER, THE LD. A.R TOOK US THROUGH SCHEDULE 3 I.E. DETAILS OF DISALLOWANCE OF UNPAID EXPENDITURE U/S 43B FOR THE YEAR UNDER CONSIDERATION. REFERRING TO THE SCHEDULE 3, IT WAS SUBMITTED BY THE LD. A.R THA T THE SUM TOTAL OF THE CURRENT YEAR EXPENDITURE OF RS. 5,52,74,054/ - THAT WAS NOT PAID UP TO THE DUE DATE WITHIN THE MEANING OF SEC. 43B WAS VOLUNTARILY DISALLOWED BY THE ASSESSEE IN ITS COMPUTATION OF INCOME FOR THE YEAR UNDER CONSIDERATION. IN ORDER TO DRIV E HOME HIS AFORESAID CLAIM, THE LD. A.R TOOK US THROUGH THE COMPUTATION OF INCOME OF ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 9 THE ASSESSEE COMPANY WHICH REVEALED THE SAID FACTUAL POSITION. THE LD. A.R FURTHER TOOK US THROUGH THE BIFURCATED DETAILS OF THE AFORESAID AMOUNT OF RS.5,52,74,054/ - , WHIC H INTER ALIA COMPRISED OF VAT AND EXCISE DUTY OF RS.1,79,305/ - AND RS.1,08,62,837/ - , RESPECTIVELY. I T WAS THUS SUBMITTED BY THE LD. A.R , THAT THE CURRENT YEAR VAT AND EXCISE DUTY THAT WAS NOT PAID UP TO THE DUE DATE WAS ALREADY ON A SU O MOTTO BASIS DISAL LOWED BY THE ASSESSEE UNDER SEC. 43B . ON THE BASIS OF THE AFORESAID FACTS, IT WAS SUBMITTED BY THE LD. A.R THAT AS THE BALANCE AMOUNT OF VAT AND TAX PAYABLE OF RS.36,66,290/ - PERTAINED TO THE PRECEDING YEARS , THEREFORE, THE SAME COULD NOT HAVE BEEN DISALLO WED U/S 43B OF THE ACT . PER CONTRA, THE LD. D.R RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 11 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES IN CONTEXT OF THE ISSUE UNDER CONSIDERATION. BEFORE PROCEEDING ANY FURTHER, IT WOULD BE RELEVANT TO CULL OUT SEC. 43B (RELEVANT EXTRACT), WHICH READS AS UNDER: NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF (A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE, OR] (B) TO (G) . SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEA R IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUM IS ACTUALLY PAID BY HIM: PROV IDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO ANY SUM [* * * * *] WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RETURN OF INCOME UNDER SUB - SECTION (1) OF SECTION 139 IN R ESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALONG WITH SUCH RETURN. EXPLANATION 1 . FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT WHERE A DEDUCTION IN RESPECT OF ANY SUM REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OF THIS SECTION IS ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE PREVIOUS YEAR (BEING A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1983, OR ANY EARLIER ASSESSMENT YEAR) IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE, THE ASSESSEE SHALL NOT BE ENTITLED TO ANY DEDUCTION UNDER THIS SECTION IN RESPECT OF SUCH SUM IN ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 10 COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH THE SUM IS ACTUALLY PAID BY HIM. EXPLANATION 2 . FOR THE PURPOSES OF CLAUSE (A), AS IN FORCE AT ALL MATERIAL TIMES, ANY SUM PAYABLE MEANS A SUM FOR WHICH THE ASSESSEE INCURRED LIABILITY IN THE PREVIOUS YEAR EVEN THOUGH SUCH SUM MIGHT NOT HAVE BEEN PAYABLE WITHIN THAT YEAR UNDER THE RELEVANT LAW. . ACCORDINGLY, AS PER SEC. 43B(A), DEDUCTION FOR VAT AND EXCISE DUTY SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO TH E METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) , ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUM IS ACTUALLY PAID BY HIM . AS IS DISCERNIBLE FROM SCHEDULE 3 I.E. DETAILS OF DISALLOWANCE OF UNPAID EXPENDITURE U/S 43B FOR THE YEAR UNDER CONSIDERATION, THEREIN FORMING PART OF THE REVISED STATEMENT OF INCOME, THE CURRENT YEAR EXPENDITURE TOWARDS VAT AND E XCISE DUTY OF RS.1,79,305/ - AND RS.1,08,62,837/ - , RESPECTI VELY, WAS NOT PAID BY THE ASSESSEE UP TO THE DUE DATE OF FILING OF ITS RETURN OF INCOME UNDER SUB - SECTION (1) OF SEC. 139 FOR THE YEAR UNDER CONSIDERATION. AS OBSERVED BY US HEREINABOVE, THE AFORESAID AMOUNT OF VAT & EXCISE DUTY OF RS.1,79,305/ - AND RS.1 ,08,62,837/ - , RESPECTIVELY, FORMED PART OF THE SUO MOTTO DISALLOWANCE OF RS.5,52,74,054/ - MADE BY THE ASSESSEE UNDER SEC. 43B OF THE ACT. IN THE TOTALITY OF THE AFORESAID FACTS, WE ARE IN AGREEMENT WITH THE CLAIM OF THE LD. A.R THAT AS THE BALANCE AMOUNT O F RS. 36,66,290/ - (FORMING PART OF VAT & TAXES PAYABLE OF RS.1,47,08,432/ - ) WAS THE CLOSING BALANCE OF THE EARLIER YEARS THAT WAS BROUGHT FORWARD TO THE YEAR UNDER CONSIDERATION , THE SAME COULD NOT HAVE BEEN DISALLOWED U/S 43B . ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) IN CONTEXT OF THE ISSUE UNDER CONSIDERATION AND VACATE THE DISALLOWANCE OF RS.36,66,290/ - MADE BY THE A.O U/S 43B OF THE ACT. GROUND OF APPEAL NO. 1 IS ALLOWED. 12 . WE SHALL NOW DEAL WITH THE CLAIM OF THE ASSESSEE THAT THE CIT(A) H AD ERRED IN SUSTAINING THE DISALLOWANCE OF FOREIGN EXCHANGE LOSS OF RS. 2,20,50,511/ - . AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES, ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 11 THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 2,20,50,51 1 / - IN ITS PROFIT & LOSS ACCOUNT ON ACCOUNT OF LOSS ON FLUCTUATION OF FOREIGN EXCHANGE. AS THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM OF LOSS, THE A.O DISALLOWED THE SAME. ON APPEAL, THE ASSESSEE FURNISHED THE DETAILS OF FOREIGN EXCHANGE LOSS AS ADDITIONAL EVIDENCE WITH THE CIT(A). ADMITTING THE SAID ADDITI ONAL EVIDENCE, THE CIT(A) CALLED FOR THE COMMENTS OF THE A.O. IN REPLY, IT WAS SUBMITTED BY THE A.O THAT SUFFICIENT OPPORTUNITY WAS AFFORDED TO THE ASSESSEE TO SUBSTANTIATE ITS SAID CLAIM OF LOSS IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, WHICH HOWEVER I T HAD FAILED TO AVAIL. ON MERITS, IT WAS SUBMITTED BY HIM, THAT THOUGH THE ASSESSEE IN THE COURSE OF THE REMAND PROCEEDINGS WAS CALLED UPON TO SUBSTANTIATE ITS CLAIM OF FOREIGN EXCHANGE FLUCTUATION LOSS BY SUBMITTING THE COMPLETE DETAILS ALONGWITH COPIES O F BANK STATEMENTS, LEDGER ACCOUNTS AND THE RATE OF FOREIGN EXCHANGE PAYMENTS MADE OR RECEIVED, BUT EXCEPT FOR FILING THE COPY OF THE LEDGER ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS, IT HAD FAILED TO PLACE ON RECORD ANY OTHER SUPPORTING MATERIAL. ACCORD INGLY, THE A.O NOT BEING ABLE TO VERIFY THE VERACITY OF THE AFORESAID CLAIM OF THE ASSESSEE, REJECTED THE SAME. OBSERVING, THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM OF FOREIGN EXCHANGE FLUCTUATION LOSS BY PLACING ON RECORD THE REQUISITE DOCUME NTS, THE CIT(A) CONCURRED WITH THE VIEW TAKEN BY THE A.O AS REGARDS THE INADMISSIBILITY OF SUCH CLAIM OF DEDUCTION RAISED BY THE ASSESSEE. 1 3 . THE ASSESSEE HAS ASSAILED THE CONFIRMING OF THE DISALLOWANCE OF FOREIGN EXCHANGE FLUCTUATION LOS S IN APPEAL BEFOR E US. LD. A.R FOR THE ASSESSEE TOOK US THROUGH THE CONSOLIDATED DETAILS OF THE FOREIGN EXCHANGE FLUCTUATION GAIN/LOSS WHICH HAD CULMINATED INTO A LOSS OF RS. 2,20,50,511.65 DURING THE YEAR UNDER CONSIDERATION. OUR ATTENTION WAS DRAWN TO THE COPY OF THE LED GER ACCOUNT S OF FOREIGN EXCHANGE FLUCTUATION GAIN/LOSS AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT WAS AVERRED BY THE LD. A.R, THAT THOUGH THE REQUISITE DETAILS IN SUPPORT OF THE FOREIGN EXCHANGE FLUCTUATION LOSS SUFFERED BY THE ASSESEE DUR ING THE YEAR ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 12 WAS THERE BEFORE THE LOWER AUTHORITIES, HOWEVER, THEY HAD MOST ARBITRARILY REJECTED THE ASSESSEES CLAIM FOR DEDUCTION. ON BEING CONFRONTED WITH THE OBSERVATIONS OF THE LOWER AUTHORITIES THAT THE ASSESSEE DESPITE SPECIFIC DIRECTIONS HAD FAILED TO SUBSTANTIATE ITS CLAIM OF FOREIGN EXCHANGE FLUCTUATION LOSS BY SUBMITTING THE COMPLETE DETAILS ALONGWITH COPIES OF BANK STATEMENTS, LEDGER ACCOUNTS AND THE RATE OF FOREIGN EXCHANGE PAYMENTS MADE OR RECEIVED, THE LD. A.R COULD NOT CONTROVERT THE SAME. P ER CONTRA, THE LD. D.R SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. D.R, THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM OF FOREIGN EXCHANGE FLUCTUATION LOSS, BOTH IN THE COURSE OF THE ASSESSMENT AND REMAND PROCEEDIN GS, THEREFORE, THE CIT(A) HAD RIGHTLY UPHELD THE SAID DISALLOWANCE. 1 4 . WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES IN CONTEXT OF THE ISSUE UNDER CONSIDERATION. ADMITTEDLY, THE AS SESSEE IN THE COURSE OF THE PROCEEDINGS BEFORE THE LOWER AUTHORITIES HAD FAILED TO SUBSTANTIATE ITS CLAIM OF FOREIGN EXCHANGE FLUCTUATION LOSS, TO THEIR SATISFACTION. IN FACT, WE WOULD NOT HESITATE TO OBSERVE, THAT THE ASSESSEE EXCEPT FOR FURNISHING THE CO PY OF THE LEDGER ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS, HAD DESPITE SPECIFIC DIRECTIONS OF THE A.O FAILED TO PLACE ON RECORD ANY OTHER SUPPORTING MATERIAL VIZ. COPIES OF BANK STATEMENTS, LEDGER ACCOUNTS AND THE RATE OF FOREIGN EXCHANGE PAYMENTS MADE OR RECEIVED. ADMITTEDLY, IN CASE OF REVENUE ITEMS FALLING UNDER S. 37(1), PARA 9 OF AS - 11 WHICH DEALS WITH RECOGNITION OF EXCHANGE DIFFERENCES, NEEDS TO BE CONSIDERED. UNDER THAT PARA, EXCHANGE DIFFERENCES ARISING ON FOREIGN CURRENCY TRANSACTIONS HAVE TO BE RECOGNIZED AS INCOME OR AS EXPENSE IN THE PERIOD IN WHICH THEY ARISE, EXCEPT AS STATED IN PARA 10 AND PARA 11 WHICH DEALS WITH EXCHANGE DIFFERENCES ARISING ON REPAYMENT OF LIABILITIES INCURRED FOR THE PURPOSE OF ACQUIRING FIXED ASSETS, WHICH TOPIC FALLS UNDER S. 43A. PARA 9 OF AS - 11 RECOGNISES EXCHANGE DIFFERENCES AS INCOME OR EXPENSE. BUT THEN, THE ONUS TO SUBSTANTIATE THE CLAIM OF HAVING SUFFERED A F OREIGN EXCHANGE ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 13 FLUCTUATION LOSS REMAINS ON THE ASSESSEE. ON A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE ASSESSEE DESPITE SPECIFIC DIRECTIONS HAD FAILED TO PLACE ON RECORD THE REQUISITE DOCUMENTS IN SUPPORT OF ITS CLAIM OF HAVING SUFFERED THE FOREIG N EXCHANGE FLUCTUATION LOSS VIZ. COPIES OF BANK STATEMENTS, LEDGER ACCOUNTS AND THE RATE OF FOREIGN EXCHANGE PAYMENTS MADE OR RECEIVED. IN OUR CONSIDERED VIEW, THOUGH THERE IS NO INFIRMITY IN THE DECLINING OF THE UNSUBSTANTIATED CLAIM OF THE ASSESSEE BY TH E LOWER AUTHORITIES, BUT THEN, A PERUSAL OF THE FOREIGN EXCHANGE FLUCTUATION GAIN/LOSS LEDGER ACCOUNTS FILED BY THE ASSESSEE ( PAGE 22 - 32 OF APB), DOES INSPIRE SOME CONFIDENCE AS REGARDS THE VERACITY OF SUCH CLAIM. ACCORDINGLY, IN ALL FAIRNESS, WE HEREIN RESTORE THE MATTER TO THE FILE OF THE A.O FOR FRESH ADJUDICATION. IN CASE THE ASSESSEE IS ABLE TO SUBSTANTIATE ITS CLAIM FOR FOREIGN EXCHANGE FLUCTUATION LOSS TO THE SATISFACTION OF THE A.O, THEN THE LATTER SHALL ALLOW THE DEDUCTION OF THE SAME. NEEDLESS T O SAY, THE A.O IN THE COURSE OF THE SET ASIDE PROCEEDINGS SHALL AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WHO SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE ITS AFORESAID CLAIM OF LOSS ON THE BASIS OF FRESH DOCUMENTARY EVIDENCE. GROUND O F APPEAL NO. 3 IS ALLOWED FOR STATISTICAL PURPOSES. 15 . WE SHALL NOW TAKE UP THE CLAIM OF THE ASSESSEE, THAT THE CIT(A ) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS/ADVANCES W/OFF AND SUNDRY BALANCES W/OFF, THEREIN AGGREGATING TO RS. 13,8 3,56,806/ - . AS CAN BE GATHERED FROM THE RECORDS, WE FIND, THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 13,83,56,806/ - U/S 36(1)(VII) OF THE ACT, AS UNDER: DISALLOWANCE OUT OF SUNDRY BALANCES WRITTEN OFF, BAD DEBT AND ADVANCES TO SUPPLIERS WRITTEN OFF : ( I). SUNDRY BALANCE WRITTEN OFF : RS. 11,99,829/ - (II). BAD DEBTS : RS. 12,42,69,569/ - (III). ADVANCE TO SUPPLIERS W/OFF : RS. 1,28,87,408/ - 13,83,56,806/ - OBSERVING, THAT INVOLVING IDENTICAL FACTS IN THE PRECEDING YEAR I.E A.Y 2012 - 13 THE CLAIM OF DEDUCTION RAISED BY THE ASSESSEE WAS DISALLOWED, COUPLED WITH THE FACT THAT THE ASSESSEE COULD NOT DEMONSTRATE AS TO HOW THE CONDITIONS LAID DOWN IN SEC. 36(2) OF THE ACT WERE SATISFIED, THE A.O ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 14 DISALLOWED THE AFORESAID AMOUNT OF RS. 13,83,56,806/ - . ON APPEAL, THE ASSESSEE BY WAY OF ADDITIONAL EVIDENCE SUBMITTED WITH THE CIT(A) THE DETAILS OF THE BALANCES W/OFF, BAD DEBTS , AND THE ADVANCES TO SUPPLIERS W/OFF. ALSO, SUPPORT WAS DRAWN BY THE ASSESSEE FROM THE JUDGMENT OF TE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT, (2010) 323 ITR 397 (SC). THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE WAS FORWARDED BY THE CIT(A) TO THE A.O FOR HIS COMMENTS. IN REPLY, IT WA S SUBMITTED BY THE A.O, THAT IN THE COURSE OF THE REMAND PROCEEDINGS THE ASSESSEE ON BEING CALLED UPON TO JUSTIFY ITS CLAIM FOR DEDUCTION OF BAD DEBTS/WRITE OFF OF THE AFORESAID AMOUNTS, HAD ONLY SUBMITTED THE LIST OF THE PARTIES AND CLAIMED THAT THE COPIE S OF BILLS, INVOICES AND OTHER DOCUMENTS WERE NOT AVAILABLE WITH IT, AS THE SAME HAD BEEN DESTROYED PURSUANT TO CLOSURE OF THE FACTORY IN JULY, 2012. AS SUCH, THE A.O REVERTED BACK TO THE CIT(A), THEREIN STATING THAT THE AFORESAID CLAIM OF DEDUCTION RAISED BY THE ASSESSEE WAS NOT VERIFIABLE FOR WANT OF DOCUMENTARY EVIDENCE. OBSERVING, THAT AS PER THE CBDT CIRCULAR NO. 12/2016, DATED 30.05.2016, CLAIM FOR DEDUCTION OF ANY DEBT OR PART THEREOF IN ANY PREVIOUS YEAR SHALL BE ADMISSIBLE UNDER SEC. 36(1)(VII) OF THE ACT, IF INTER ALIA IT FULFILLED THE CONDITIONS STIPULATED IN SUB - SECTION (2) OF SEC. 36 OF THE ACT, THE CIT(A) CALLED UPON THE ASSESSEE TO DEMONSTRATE SATISFACTION OF THE SAID MANDATORY CONDITION. HOWEVER, THE ASSESSEE IN THE ABSENCE OF THE REQUISITE D OCUMENTS STATED THAT IT WAS NOT POSSIBLE FOR IT DEMONSTRATE THE FULFILMENT OF THE CONDITIONS STIPULATED IN SUB - SECTION (2) OF SEC. 36. IN THE BACKDROP OF THE AFORESAID FACTS, THE CIT(A) NOT FINDING ANY INFIRMITY IN THE DECLINING OF THE ASSESSEES CLAIM FOR DEDUCTION U/S 36(1)(VII) BY THE A.O, THER E IN UPHELD HIS ORDER TO THE SAID EXTENT. 16 . THE ASSESSEE HAS ASSAILED BEFORE US THE UPHOLDING BY THE CIT(A) OF THE AFORESAID DISALLOWANCE OF RS. 13,83,56,806/ - U/S 36(1)(VII) OF THE ACT. THE LD. A.R TOOK US THROUGH THE BAD DEBT ACCOUNT OF THE ASSESSEE COMPANY ( PAGE 115 OF APB) , WHEREIN THE RESPECTIVE BAD DEBTS OF ITS ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 15 VARIOUS DIVISIONS WERE TRANSFERRED VIDE RESPECTIVE JOURNAL ENTRIES ON 31.12.2012 , AS UNDER: PARTICULARS A MOUNT FIBRE DIVISION RS. 2,55,41,586.53 POLYMER DIVISION RS. 1,04,59,346.76 PREFORM DIVISION RS. 19,40,469.86 CHEMICALS SUNDRY DEBTORS RS. 96,32,210.00 INNOVASYNTH TECHNOLOGIES PRIVATE LIMITED RS. 53,76,799.00 INNOVASYNTH TECHNOLOGIES PRIVATE LIMITED RS. 7,13,19,157.00 TOTAL RS. 12,42,69,569.15 FURTHER, THE LD. A.R SUBMITTED THAT AS THE AFORESAID DEBTS HAD EMERGED PURSUANT TO THE SALES OF THE SAID RESPECTIVE DIVISIONS IN THE PRECEDING YEARS, THUS THE SAME AS PER THE MANDATE OF SEC. 36(2) OF THE ACT WERE TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE FOR THE SAID RESPECTIVE PRECEDING YEARS. IN ORDER TO FORTIFY HIS SAID CLAIM, THE LD. A.R TOOK US THROUGH THE CORRESPONDING SALES OF ITS AFORESAID THREE DIVISIONS VIZ. (I). FUTURA FIBRE DIVISION ( PAGE 116 - 118 OF APB); (II). FUTURA POLYMER DIVISION ( PAGE 119 OF APB); AN D (III). FUTURA PREFORM DIVISION ( PAGE 120 OF APB). HOWEVER, NO SUCH SUP PORTING DOCUMENTARY EVIDENCE IN RESPECT OF THE REMAINING THREE PARTIES VIZ. (I).CHEMICAL SUNDRY DEBTORS; (II). INNOVASYNTH TECHNLOGIES PVT. LTD.; AND (III). INNOVASYNTH TECHNOLOGIES PRIVATE LIMITED, WAS BROUGHT TO OUR NOTICE. 1 7 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE AS REGARDS W/OFF OF THE BAD DEBTS BY THE ASSESSEE. AS OBSERVED BY US HEREINABOVE, THE A.O/CIT(A) HAD DECLINED THE ASSESSEES CLAIM FOR DEDUCTION U/S 36(I)(VII), AS THE ASSESSEE COULD NOT DEMONSTRATE SATISFACTION OF THE CONDITIONS CONTEMPLATED IN SEC. 36(2) OF THE ACT. ON A PERUSAL OF THE DETAILS FILED BY THE ASSESSEE BY WAY OF ADDITIONAL EVIDENCE BEFORE US, WE FIND THAT IT HAD PRIMA FACIE DEMONSTRATED THAT AS THE AMOUNT OF BAD DEBTS IN SO FAR RELATABL E TO ITS THREE DIVISIONS VIZ. (I). FUTURA FIBRE DIVISION; (II). ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 16 FUTURA POLYMER DIVISION; AND (III).FUTURA PREFORM DIVISION, HAD THEIR GENESIS IN THE RESPECTIVE SALES FOR THE PRECEDING YEARS, THEREFORE, THE CONDITION REQUIRED IN SEC. 36(2) STOOD SATISFIED. HOWEVER, AS THE SAID DETAILS HAD BEEN FILED BY THE ASSESSEE BEFORE US BY WAY OF ADDITIONAL EVIDENCE, AND WERE NEVER THERE BEFORE T HE LOWER AUTHORITIES, THEREFORE, WE REFRAIN FROM ADJUDICATING THE ISSUE AT THIS STAGE. ACCORDINGLY, IN ALL FAIRNESS WE RESTORE THE ISSUE IN SO FAR THE AFORE SAID THREE DIVISIONS ARE CONCERNED TO THE FILE OF THE A.O FOR FRESH ADJUDICATION. IN THE COURSE OF THE SET ASIDE PROCEEDINGS, THE A.O SHALL READJUDICATE THE ASSESSEES CLAIM FOR DEDUCTION OF BAD DEBTS. NEEDLESS TO SAY, THE A.O SHALL IN THE COURSE OF THE SET ASIDE PROCEEDINGS AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHO SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE ITS CLAIM ON THE BASIS OF FRESH DOCUMENTARY EVIDENCE. 18 WE SHALL NOW ADVERT TO THE CLAIM OF THE LD. A.R THAT THE CIT(A) HAD ERRED IN UPHOLDING THE DISALLOWANCES MADE BY THE A.O, VIZ. (I). SUNDRY BALANCES W/OFF : RS. 11,99,829/ - ; AND (II). ADVANCES TO SUPPLIERS W/OFF : RS. 1,28,87,408/ - . IT WAS SUBMITTED BY THE LD. A.R, THAT AS GIVING OF THE AF ORESAID AMOUNTS OF ADVANCES/SUNDRY BALANCES WAS INCIDENTAL TO CARRYING OF THE BUSINESS OF THE ASSESSEE, THEREFORE, THE IRRECOVERABILITY OF THE SAME IN ITS ORDINARY COMMERCIAL MEANING WAS TO BE CONSTRUED AS AN ALLOWABLE BUSINESS LOSS INCURRED IN THE NORMAL COURSE OF ITS BUSINESS. THE LD. A.R TOOK US THROUGH THE COMPLETE BIFURCATED PARTY VISE DETAILS, ALONGWITH THE RESPECTIVE DATES ON WHICH THE AMOUNTS AGGREGATING TO RS. 1,28,87,407/ - WERE ADVANCED IN THE PRECEDING YEARS BY ITS DIVISIONS VIZ. (I) FUTURA FIBR E DIVISION: RS. 1,17,41,598/ - ; (II). FUTURA POLYMER DIVISION: RS. 6,75,180/ - ; (III). FUTURA PERFORMS DIVISION: RS. 3,96,475/ - ; AND (IV). CHEMTAX DIVISION :RS. 74,154/ - ( PAGE 121 - 126 OF APB). ALSO, THE LD. A.R DREW OUR ATTENTION TO THE BIFURCATED PARTY V ISE/DATE VISE DETAILS OF T HE SUNDRY BALANCES W/OFF: RS. 11 ,99,829 / - ( PAGE 127 OF APB). IT WAS REITERATED BY THE LD. A.R, THAT AS THE AFORESAID AMOUNTS WERE ADVANCED/GIVEN IN THE NORMAL COURSE OF ITS BUSINESS, THE IRRECOVERABILITY OF THE SAME WAS TO BE ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 17 ALLOWED AS A BUSINESS LOSS TO THE ASSESSEE. PER CONTRA, THE LD. D.R RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 19. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES , AND ALSO PERUSED THE ORDERS OF THE LOWER AUTH ORITIES IN CONTEXT OF THE AFORESAID ISSUE UNDER CONSIDERATION BEFORE US. AS IS DISCERNIBLE FROM THE RECORDS, THE ASSESSEES CLAIM FOR DEDUCTION OF THE ADVANCES PAID TO CUSTOMERS, WHICH WERE WRITTEN OFF BY THE ASSESSEE COMPANY DURING THE YEAR, WAS DISALLOWE D, BECAUSE THE ASSESSEE WAS NOT IN THE BUSINESS OF MONEY LENDING. ON A PERUSAL OF THE OBSERVATIONS OF THE A.O, WE FIND, THAT THE ENTITLEMENT OF THE ASSESSEE FOR CLAIM OF DEDUCTION OF THE ADVANCES WRITTEN OFF DURING THE YEAR WAS ADDRESSED BY THE A.O ONLY IN THE BACKDROP OF THE SECOND LIMB OF SEC. 36(2)(I), WHICH TAKES WITHIN ITS SWEEP WRITING OFF OF MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY - LENDING CARRIED ON BY THE ASSESSEE. AS SUCH, THE A.O OBSERVING THAT NEITHER THE ADVANCES WR ITTEN OFF BY THE ASSESSEE DURING THE YEAR WERE EVER TAKEN INTO ACCOUNT BY THE ASSESSEE IN COMPUTING OF ITS INCOME, NOR THE SAME REPRESENTED MONEY LENT BY THE ASSESSEE IN THE ORDINARY COURSE OF BUSINESS OF BANKING OR MONEY LENDING, THUS, IT DID NOT SATISFY EITHER OF THE CONDITIONS CONTEMPLATED IN SEC. 36(2) OF THE ACT. ALTHOUGH, WE CONCUR WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES THAT THE ADVANCES WRITTEN OFF BY THE ASSESSEE WOULD NOT QUALIFY FOR DEDUCTION U/S 36(1)(VII) R.W SEC. 36(2), BUT THEN, THE SAME ON THE SAID STANDALONE BASIS CANNOT JEOPARDISE ITS ENTITLEMENT TO WARDS CLAIM FOR DEDUCTION OF THE SAME AS A BUSINESS LOSS U/S 37 OF THE ACT. IN FACT, WE FIND THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF HARSHAD J. CHOKSI VS. CIT (2012) 349 ITR 2 50 (BOM) , HAD AN OCCASION TO DEAL WITH THE ISSUE, THAT WHERE AN AMOUNT IS HELD TO BE NOT DEDUCTIBLE AS A BAD DEBT IN VIEW OF NON - COMPLIANCE OF THE CONDITION S PRECEDENT AS PROVIDED U/S 36(2), THEN COULD THE SAME BE CONSIDERED AS AN ALLOWABLE BUSINESS LOSS. THE HONBLE HIGH COURT WHILE ANSWERING THE SAID ISSUE, HAD OBSERVED THAT NON - SATISFACTION OF THE CONDITIONS FOR CLAIM OF BAD DEBTS, WOULD NOT PREVENT THE ASSESSEE ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 18 FROM CLAIMING DEDUCTION OF THE SAME AS A BUSINESS LOSS INCURRED IN THE COURSE OF CARRYING ON OF BUSINESS AS THAT OF A SHARE BROKE R. THE HONBLE HIGH COURT, WHILE CONCLUDING AS HEREINABOVE, HAD OBSERVED AS UNDER: 10. SECTION 28 OF THE ACT IMPOSES A CHARGE ONTHE PROFITS OR GAINS OF BUSINESS OR PROFESSION. THE EXPRESSION 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION' IS TO BE UNDERSTOOD IN ITS ORDINARY COMMERCIAL MEANING AND THE SAME DOES NOT MEAN TOTAL RECEIPTS. WHAT HAS TO BROUGHT TO TAX IS THE NET AMOUNT EARNED BY CARRYING ON A PROFESSION OR A BUSINESS WHICH NECESSARILY REQUIRES DEDUCTING EXPENSES AND LOSSES INCURRED IN CARRYING ON BUSINESS OR PROFESSION. THE SUPREME COURT IN THE MATTER OF BADRIDAS DAGA V. COMMISSIONER OF INCOME TAX, REPORTED IN 34 ITR PAGE 10, HAS HELD THAT IN ASSESSING THE AMOUNT OF PROFITS AND GAINS LIABLE TO TAX, ONE MUST NECES SARILY HAVE REGARD TO THE ACCEPTED COMMERCIAL PRACTICE THAT DEDUCTION OF SUCH EXPENSES AND LOSSES IS TO BE ALLOWED, IF IT ARISES IN CARRYING ON BUSINESS AND IS INCIDENTAL TO IT. 11. ON THE BASIS OF THE AFORESAID DECISIONS, IT CAN BE CONCLUDED THAT EVEN IF THE DEDUCTION IS NOT ALLOWABLE AS BAD DEBTS, THE TRIBUNAL OUGHT TO HAVE CONSIDERED THE ASSESSEE'S CLAIM FOR DEDUCTION AS BUSINESS LOSS. THIS IS PARTICULARLY SO AS THERE IS NO BAR IN CLAIMING A LOSS AS A BUSINESS LOSS, IF THE SAME IS INCIDENTAL TO CARRYING ON OF A BUSINESS. THE FACT THAT CONDITION OF BAD DEBTS WERE NOT SATISFIED BY THE ASSESSEE WOULD NOT PREVENT HIM FROM CLAIMING DEDUCTION AS A BUSINESS LOSS INCURRED IN THE COURSE OF CARRYING ON BUSINESS AS SHARE BROKER. 12. IN FACT THIS COURT IN THE MATTER OF COMMISSIONER OF INCOME TAX V. R.B. RUNGTA& CO. (SUPRA) UPHELD THE FINDING OF THE TRIBUNAL THAT THE LOSS COULD BE ALLOWED ON GENERAL PRINCIPLES GOVERNING COMPUTATION OF PROFITS UNDER SECTION 10 OF THE INDIAN INCOME TAX ACT, 1922 WHICH IS SIMILAR/IDENTICA L TO SECTION 28 OF THE ACT. THE REVENUE IN THAT CASE URGED THAT THE ASSESSEE HAVING CLAIMED DEDUCTION AS A BAD DEBT THE BENEFIT OF THE GENERAL PRINCIPLE OF LAW THAT ALL EXPENDITURE INCURRED IN CARRYING ON THE BUSINESS MUST BE DEDUCTED TO ARRIVE AT A PROFIT CANNOT BE EXTENDED. THIS SUBMISSION WAS NEGATIVED BY THIS COURT AND IT WAS HELD THAT EVEN WHERE THE DEBT IS NOT HELD TO BE ALLOWABLE AS BAD DEBTS YET THE SAME WOULD BE ALLOWABLE AS A DEDUCTION AS A REVENUE LOSS IN COMPUTING PROFITS OF THE BUSINESS UNDER S ECTION 10(1) OF THE INDIAN INCOME TAX ACT, 1922. 13. IN VIEW OF THE ABOVE, THE QUESTION AS REFERRED TO US IS ANSWERED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST THE RESPONDENT. NO ORDER AS TO COSTS. IN THE BACKDROP OF THE AFORESAID OBSE RVATIONS OF THE HONBLE HIGH COURT, WE FIND OURSELVES TO BE PRINCIPALLY IN AGREEMENT WITH THE CONTENTION OF THE LD. A.R, THAT THE ASSESSEES CLAIM FOR DEDUCTION OF THE ADVANCES PAID TO CUSTOMERS, WHICH WERE WRITTEN OFF BY IT DURING THE YEAR UNDER CONSIDERA TION WERE SUPPOSED TO BE LOOKED INTO U/S 37 OF THE ACT. IN OUR CONSIDERED VIEW, AS OBSERVED BY THE HONBLE HIGH COURT IN ITS AFORESAID ORDER, EVEN IF THE DEDUCTION OF THE ADVANCES WRITTEN OFF BY THE ASSESSEE DURING THE YEAR WAS NOT ALLOWABLE AS BAD DEBT, T HE SAME WOULD NOT IPSO FACTO FOR THE SAID REASON JEOPARDIZE THE ASSESSEES CLAIM FOR DEDUCTION OF THE SAME AS A BUSINESS ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 19 LOSS, PROVIDED THE SAME SATISFIED THE CONDITIONS CONTEMPLATED IN SEC. 37 OF THE ACT. AT THE SAME TIME, WE CANNOT REMAIN OBLIVIOUS OF TH E FACT, THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE BEFORE THE LOWER AUTHORITIES ITS CLAIM THAT THE WRITING OFF THE AMOUNTS ADVANCED TO ITS CUSTOMERS WAS IN THE NATURE OF A BUSINESS LOSS WITHIN THE MEANING OF SEC. 37 OF THE ACT. IN FACT, THE BIFURCATED DETAILS OF THE ADVANCES WRITTEN OFF BY THE VARIOUS DIVISIONS OF THE ASSESSEE HAD BEEN FURNISHED BEFORE US AS ADDITIONAL EVIDENCE. IN THE BACKDROP OF THE AFORESAID FACTS, WE ARE OF THE CONSIDERED VIEW, THAT THE ASSESSEES CLAIM THAT THE AMOUNT OF ADVANCES W RITTEN OFF DURING THE YEAR WAS IN THE NATURE OF A BUSINESS LOSS REQUIRES TO BE ADJUDICATED UPON BY THE A.O. ON A SIMILAR FOOTING, THE CLAIM OF THE ASSESSEE THAT THE SUNDRY BALANCES WRITTEN OFF DURING THE YEAR WERE ALSO A LOSS INCIDENTAL TO ITS BUSINESS, ON THE SAME TERMS REQUIRES TO BE VISITED BY THE A.O. ACCORDINGLY, WE HEREIN DIRECT THE A.O TO ADJUDICATE UPON THE CLAIM OF THE ASSESSEE AS REGARDS ALLOWABILITY OF ITS CLAIM FOR DEDUCTION OF, VIZ. (I) THE AMOUNTS ADVANCED TO SUPPLIERS WRITTEN OFF DURING THE YEAR: RS. 1,28,87,408/ - ; AND (II). THE SUNDRY BALANCES WRITTEN OFF DURING T H E YEAR: RS. 11,99,829/ - , AS A BUSINESS LOSS WITHIN THE MEANING OF SEC. 37 OF THE ACT. NEEDLES TO SAY, THE A.O SHALL IN THE COURSE OF THE SET ASIDE PROCEEDINGS AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHO SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE ITS AFORESAID CLAIM ON THE BASIS OF FRESH MATERIAL. GROUND OF APPEAL NO. 4 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. 20 . WE SHALL NOW TAKE UP THE GRIEVANCE OF THE ASSESEEE THAT THE CIT (A) HAD ERRED IN CONFIRMING THE ADDITION OF UNSECURED LOANS OF RS. 1,11,27,495/ - AS AN UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. FACTS IN BRIEF, ARE THAT THE A.O IN THE COURSE OF THE ASSESSMEN T PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD INTER ALIA CLAIMED TO HAVE RECEIVED LOANS AGGREGATING TO RS. 1,11,27,495/ - FROM ITS TWO DIRECTORS, VIZ. (I).SHRI. SHYAM GHIA: RS. 55,00,000/ - ; AND (II). SHRI. MUKUND DALAL : RS. 56,27,495/ - . AS THE ASSESSEE FAIL ED TO FURNISH ANY CONFIRMATION FROM THE SAID PERSONS , NOR ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 20 PLACED ON RECORD THEIR RESPECTIVE PAN NOS. AND ADDRESSES, THE A.O INTER ALIA TREATED THE SAME AS AN UNEXPLAINED CASH CREDIT WITHIN THE MEANING OF SEC. 68 OF THE ACT. BEFORE THE CIT(A), THE ASSESSEE BY WAY OF AN ADDITIONAL EVIDENCE FILED THE CONFIRMATIONS OF THE AFORESAID PERSONS, WHICH WERE FORWARDED BY THE APPELLATE AUTHORITY TO THE A.O FOR HIS REPORT. AS PER THE REMAND REPORT FILED BY THE A.O, THOUGH THE ASSESSEE HAD IN SUPPORT OF THE LOANS RECEIVE D FROM THE AFORESAID DIRECTORS FILED THEIR CONFIRMATIONS ALONGWITH THE RESPECTIVE BANK STATEMENTS, BUT IT HAD FAILED TO SUBSTANTIATE THEIR CREDITWORTHINESS ON THE BASIS OF SUPPORTING DOCUMENTARY EVIDENCE. IN THE BACKDROP OF THE AFORESAID REPORT OF THE A.O, THE CIT(A) DIRECTED THE ASSESSEE TO SUBSTANTIA T E/EXPLAIN WITH DOCUMENTARY EVIDENCE, AND BRING ON RECORD THE SOURCE OF INCOME OF THE DIRECTORS ESPECIALLY WHEN THE OPERATIONS OF THE COMPANY HAD BEEN DISCONTINUED W.E.F JULY, 2012 ON ACCOUNT OF FINANCIAL PROB LEMS AND DIFFICULTIES AND THERE WAS TOTAL SHUT DOWN OF THE BUSINESS FOR NON - PAYMENT OF THE WORKER S DUES. HOWEVER, AS THE ASSESSEE FAILED TO COME FORTH WITH ANY EXPLANATION, THE CIT(A) HOLDING A CONVICTION THAT THE ASSESSEE HAD FAILED TO PROVE THE CREDITWOR THINESS OF THE DIRECTORS, THEREIN SUSTAINED THE ADDITION OF RS. 1,11,27,495/ - MADE BY THE A.O U/S 68 OF THE ACT. 21 . AGGRIEVED, THE ASSESSEE HAS ASSAILED BEFORE US THE UPHOLDING BY THE CIT(A) OF THE ADDITION OF RS. 1,11,27,495/ - MADE BY THE A.O U/S 6 8 OF THE ACT. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD IN CONTEXT OF THE AFORESAID ISSUE UNDER CONSIDERATION. BEFORE US, THE ASSESSEE HAS FILED BY WA Y OF ADDITIONAL EVIDENCE, THE COPIES OF THE INCOME - TAX RETURNS ALONGWITH THE COMPUTATION OF INCOME FOR A.Y 2013 - 14 OF THE AFORESAID DIRECTORS, AND ALSO THE AFFIDAVITS OF THE AFORESAID DIRECTORS VIZ. S /S H RI . SHYAM GHIA AND MUKUND DALAL, WHEREIN THEY HAD ADMITTED OF HAVING ADVANCED LOANS TO THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION . IN THE COURSE OF HEARING OF THE APPEAL THE LD. A.R TOOK US THROUGH THE AFORESAID ADDITIONAL EVIDENCE VIZ. COPIES OF THE RETURNS OF ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 21 INCOME AND AFFIDAVIT S OF THE RESPECTIVE DIRECTORS, AT PAGE 146 - 158 OF THE APB. ON A PERUSAL OF THE RESPECTIVE RETURNS OF INCOME, WE FIND THAT DURING THE YEAR UNDER CONSIDERATION VIZ. A.Y 2013 - 14, THE DIRECTORS VIZ. S/SH. SHYAM GHIA AND MUKUND DALAL HAD RETURNED AN INCOME OF RS. 21,38,448/ - AND RS. 26,77,008/ - , RESPECTIVELY . AS REGARDS THE SOURCE OF ADVANCING OF THE RESPECTIVE LOANS, BOTH OF THEM HAD DEPOSED IN THEIR RESPECTIVE AFFIDAVITS THAT THE SAME WAS OUT OF THEIR PAST SAVINGS. TO SUM UP, THE AFORESAID DIRECTORS VIZ. S/SH. SHYAM GHIA AND MUKUND DALAL, AFTER PROVIDING THEIR RESPECTIVE INCOME - TAX CREDENTIALS, HAD ADMITTED OF HAVING ADVANCED LOANS TO THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION. HOWEVER, AS THE AFORESAID DOCUMENTS VIZ . COPIES OF THE RETURNS OF INCOME, AND ALSO THEIR RESPECTIVE AFFIDAVITS HAD BEEN FILED BEFORE US AS ADDITIONAL EVIDENCE, AND THE SAME WERE NOT THERE BEFORE THE LOWER AUTHORITIES, THEREFORE, IN ALL FAIRNESS WE RESTORE THE MATTER TO THE FILE OF THE A.O FOR READJUDICATION, AFTER CONSIDERING THE SAID MATERIAL. NEEDLESS TO SAY, THE A.O SHALL IN THE COURSE OF THE SET ASIDE PROCEEDINGS AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . GROUND OF APPEAL NO. 8 IS ALLOWED FOR STATISTICAL PURPOSES. 22 . WE SHALL NOW TAKE UP THE ADDITIONAL GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE ALONGWITH THE GROUND OF APPEAL NO. 7, WHEREIN THE ASSESSEE HAS ASSAILED THE OBSERVATION OF THE CIT(A), THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM THAT ASS THE MOU , DATED 19.12.2012 FOR SALE OF LAND WAS SUBSEQUENTLY CANCELLED, VIDE DEED OF CANCELLATION DATED 28.09.2017, THEREFORE, THE SALE TRANSACTION HAVING NOT MATERIALIZED , NO CAPITAL GAIN COULD HAVE BEEN BROUGHT TO TAX. FACTS IN BRIEF, ARE THAT THE ASSESS EE COMPANY VIDE A MEMORANDUM OF UNDERSTANDING (MOU), DATED 19.12.2012, HAD AGREED TO SELL ITS FACTORY AT MANALI, CHENNAI I.E LAND, BUILDING, PLANT & MACHINERY, FURNITURE & FIXTURES, VEHICLES, OFFICE EQUIPMENTS AND INVENTORY, TO M/S GOLDEN STAR PROMOTERS PVT. LTD., REGD. OFFICE AT NO. 1, 4 TH AVENUE, HARRINGTON ROAD, CHET PET, CHENNAI 600 031, FOR A TOTAL CONSIDERATION OF RS. 355 CRORES. ON A PERUSAL OF THE RECORDS, THE AFORESAID SALE CONSIDERATION WAS COMPRISED OF VIZ. (I). LAND (210 ACRES) : RS. 315 CRO RES; AND (II). ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 22 BUILDING, PLANT & MACHINERY, OFFICE EQUIPMENTS, FURNITURE & FIXTURE, INVENTORY ETC. : RS. 40 CRORES. IN ITS RETURN OF INCOME, THE ASSESSEE ADOPTING THE FAIR MARKET VALUE (F.M.V) OF THE LAND AS ON 01.04.1981 AT RS. 6.33 CRORES, HAD WORKED OUT THE LONG TERM CAPITAL GAIN (LTCG) ON THE SALE OF THE SAME AT RS. 261 CRORES. HOWEVER, AS THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FAILED TO FURNISH THE COPY OF THE PURCHASE AGREEMENT, AND ALSO COULD NOT SUPPORT THE ADOPTION OF THE F.M. V AT RS. 6.33 CRORES ON THE BASIS OF A VALUATION REPORT, THE A.O TREATED THE ENTIRE SALE CONSIDERATION OF RS. 315 CRORES AS SHORT TERM CAPITAL GAIN (STCG) IN THE HANDS OF THE ASSESSEE. ON APPEAL, THE ASSESSEE SUBMITTED BEFORE THE CIT(A) AS ADDITIONAL EVIDE NCE THE COPY OF THE PURCHASE AGREEMENT AND THE VALUATION REPORT AS ON 01.04.1981, ALONGWITH THE COPY OF THE MOU DATED 19.12.2012, WHICH WAS FORWARDED BY THE APPELLATE AUTHORITY TO THE A.O FOR HIS COMMENTS. IN REPLY, IT WAS STATED BY THE A.O THAT AS THE ASS ESSEE HAD FILED THE COPY OF THE MOU FOR SALE OF LAND, DATED 19.12.2012, COPY OF THE PURCHASE AGREEMENT AND THE VALUATION REPORT AS ON 01.04.1981, THEREFORE, THE LTCG ON THE SALE OF THE LAND, AS CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME COULD BE ADMIT TED ON THE BASIS OF THE AFORESAID DOCUMENTS. IN THE BACKDROP OF THE AFORESAID FACTS, THE CIT(A) DIRECTED THE A.O TO COMPUTE LTCG ON SALE OF LAND AS PER THE EXTANT LAW. BUT THEN, THE ASSESSEE IN THE COURSE OF THE APPELLATE PROCEEDINGS, VIDE ITS LET T ER DATED 26.09.2017 , RAISED A NEW ISSUE, THAT AS PURSUANT TO A DEED OF CANCELLATION DATED 28.09.2017 THE MOU DATED 19.12.2012 HAD BEEN CANCELLED, THEREFORE, THE SALE TRANSACTION UNDER CONSIDERATION STOOD NULLIFIED. IN ORDER TO BUTTRESS ITS SAID CLAIM, THE ASSESSEE VIDE ITS LETTER DATED 06.10.2017 PLACED ON RECORD THE DEED OF CANCELLATION, DATED 2 8 .09.2017, AND REQUESTED THAT THE SAME BE ADMITTED AS ADDITIONAL EVIDENCE. IN SUM AND SUBSTANCE, IT WAS THE CLAIM OF THE ASSE S SEE, THAT NOW WHEN THE SALE TRANSACTION HAD NO T FRUCTIFIED, NO CAPITAL GAIN COULD BE BROUGHT TO TAX ON THE BASIS OF THE MOU DATED 19.12.2012. FURTHER, THE ASSESSEE VIDE ITS LETTER DATED 22.12.2017, SUBMITTED, THAT IT WOULD BE PASSING THE REQUISITE ENTRIES IN ITS BOOKS OF ACCOUNTS FOR THE CURRENT YEAR. AS THE ASSESSEE HAD FILED THE DEED OF ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 23 CANCELLATION, DATED 28.09.2017, AS ADDITIONAL EVIDENCE IN THE COURSE OF THE APPELLATE PROCEEDINGS, THE CIT(A) FORWARDED THE SAME TO THE A.O FOR HIS REPORT. IN REPLY, THE A.O VIDE HIS REPORT DATED 27.12.2017, SUBMITTED, THAT IN THE COURSE OF THE REMAND PROCEEDINGS NOTICES U/S 133(6) WERE ISSUED TO THE ASSESSEE AND M/S GOLDEN STARS PROM O TERS PVT. LTD., WHEREIN THEY WERE CALLED UPON TO FURNISH /PRODUCE CERTAIN INFORMATION/DETAILS VIZ. (I). COMMUNICATI ON DETAILS FOR CANCELLATION OF MOU, DATED 19.12.2012 BETWEEN THE ASSESSEE AND M/S GOLDEN STAR PROMOTER; (II). DETAILS OF AMOUNT TRANSACTED; (III). COPIES OF THE BANK STATEMENT S FROM F.Y 2011 - 12 TO TILL DATE OF ALL BANK ACCOUNTS; (IV). ORIGINAL DEED OF CAN CELLATION FOR VERIFICATION; AND (V). DETAILS OF LEGAL FEES PAID BOTH FOR THE EXECUTION OF THE MOU, DATED 19.12.2012 AND THE DEED OF CANCELLATION. IT WAS STATED BY THE A.O IN HIS REPORT, THAT THE ASSESSEE VIDE HIS LETTER DAT E D 13.12.2017 (FILED IN TAPAL) HA D FILED PART REPL Y, AND HAD STATED VIZ. (I). THAT THE CANCELLATION OF MOU WAS BASED ON SEVERAL DISCUSSIONS AND DELIBERATIONS AND THERE WAS NO WRITTEN COMMUNICATION IN THIS REGARD; (II). THAT PART AMOUNT OF SALE CONSIDERATION OF RS. 25.47 CRORES WAS RECEIVE D FROM M/S GOLDEN STAR PROMOTERS PVT. LTD., OUT OF WHICH AN AMOUNT OF RS. 91 LAC WAS REPAID; AND (III). THAT TILL DATE NO LEGAL FEES WAS PAID WITHER FOR THE MOU OR THE CANCELLATION DEED. FURTHER, IT WAS STATED BY THE A.O, THAT AN E - MAIL WAS RECEIVED AT HIS OFFICE E - MAIL ID [e-mail] FROM SHRI . PARTHASARATHY RAJASEKHRAN, C.A, THROUGH HIS E - MAIL ID [e-mail] , WHEREIN IT W AS STATED THAT THE MOU OF M/S FUTURA POLYESTERS, MUMBAI AND M/S GOLDEN STAR PROMOTERS PVT. LTD HAD BEEN TERMINATED VIDE A DEED OF TERMINATION DATED 28.09.2017. IT WAS NOTICED BY THE A.O, THAT A COPY OF THE SAID E - MAIL WAS ALSO FORWARDED TO MR. ALEX CHINNAS AMY, DIRECTOR OF M/S GOLDEN STAR PROMOTERS PVT. LTD. HOWEVER, IT WAS STATED BY THE A.O, THAT AS NO REPLY AS REGARDS CANCELLATION/TERMINATION OF THE MOU WAS RECEIVED BY HIM FROM M/S GOLDEN STAR PROMOTERS PVT. LTD., THEREFORE, IN THE ABSENCE OF THE CONFIRMAT ION OF THE OTHER PARTY IT REMAINED UNPROVED THAT THE MOU WAS TERMINATED. AFTER PERUSING THE REPORT FILED BY THE A.O, IT WAS OBSERVED BY THE CIT(A) THAT THE ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 24 ASSESSEE IN THE COURSE OF THE REMAND PROCEEDINGS HAD DESPITE SPECIFIC DIRECTIONS OF THE A.O FAILED T O PLACE ON RECORD THE REQUISITE DETAILS/DOCUMENTS IN SUPPORT OF ITS CLAIM THAT THE SALE TRANSACTION WAS TERMINATED VIZ (I). DETAILS OF AMOUNT TRANSACTED; (II). COPIES OF THE BANK STATEMENTS FROM F.Y 2011 - 12 ONWARDS; (III). O RIGINAL DEED OF CANCELLATION OF THE AGREEMENT; AND (IV). DETAILS AS REGARDS THE LEGAL FEES PAID BY THE ASSESSEE FOR THE AGREEMENT AND ITS CANCELLATION, BOTH. OBSERVING, THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM THAT THE SALE TRANSACTION HAD BEEN TERMINATED, THE CIT(A) CONCUR RED WITH THE VIEW TAKEN BY THE A.O AND REJECTED THE CLAIM OF THE ASSESSEE THAT THE SALE TRANSACTION HAD NOT MATERIALIZED. ON THE BASIS OF HIS AFORESAID DELIBERATIONS, THE CIT(A) DIRECTED THE A.O TO ASSESS THE LTCG ON TRANSFER OF THE LAND IN THE HANDS OF TH E ASSESSEE. 2 3 . AGGRIEVED, THE ASSESSEE HAS ASSAILED BEFORE US THE ORDER OF THE CIT(A), TO THE EXTENT HE HAD DIRECTED THE A.O TO ASSESS THE LTCG IN RESPECT OF THE AFORESAID SALE TRANSACTION, WHICH AS PER THE ASSESSEE DID NOT SEE THE LIGHT OF THE DAY. ADMITTEDLY, THE ASSESSEE COMPANY VIDE A MOU, DATED 19.12.2012, HAD AGREED TO SELL ITS FACTORY AT MANALI, CHENNAI I.E LAND, BUILDING, PLANT & MACHINERY, FURNITURE & FIXTURES, VEHICLES, OFFICE EQUIPMENTS AND INVENTORY TO M/S GOLDEN STAR PROMOTERS PV T. LTD., REGD. OFFICE AT NO. 1, 4 TH AVENUE, HARRINGTON ROAD, CHET PET, CHENNAI 600 031, FOR A TOTAL CONSIDERATION OF RS. 355 CRORES. AS PER THE NOTES FORMING PART OF THE FINANCIAL STATEMENTS OF THE ASSESSEE COMPANY, THE AFORESAID SALE CONSIDERATION WAS COMPRISED OF VIZ.(I). LAND (210 ACRES): RS. 315 CRORES; AND (II). BUILDING, PLANT & MACHINERY, OFFICE EQUIPMENTS, FURNITURE & FIXTURE, INVENTORY ETC.: RS. 40 CRORES. IN ITS RETURN OF INCOME, THE ASSESSEE ADOPTING THE FAIR MARKET VALUE (F.M.V) OF THE LAND AS ON 01.04.1981 AT RS. 6.33 CRORES HAD WORKED OUT THE LTCG ON THE SALE OF THE SAME AT RS. 261 CRORES. FOR THE REASONS DISCUSSED AT LENGTH HEREINABOVE, THE A.O ASSESSED THE ENTIRE SALE CONSIDERATION OF RS. 315 CRORES AS STCG IN THE HANDS OF THE ASSESSEE. O N APPEAL, THE CIT(A) ACCEPTED THE CLAIM RAISED BY THE ASSESSEE ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 25 IN ITS RETURN OF INCOME, AND DIRECTED THE A.O TO ASSESS THE GAIN ARISING FROM SALE OF LAND AS LTCG IN THE HANDS OF THE ASSESSEE. BUT THEN, THE CONTROVERSY HEREIN INVOLVED FINDS ITS GENESIS IN THE CLAIM RAISED BY THE ASSESSEE IN THE COURSE OF THE PROCEEDINGS BEFORE THE CIT(A), THAT AS THE MOU, DATED 19.12.2012 WAS SUBSEQUENTLY CANCELLED AS PER THE TERMS OF THE DEED OF CANCELLATION, DATED 28.09.2017, AND THE SALE TRANSACTION WAS NULLIFIED, THERE FORE, NO CAPITAL GAIN WAS LIABLE TO BE ASSESSED IN RESPECT OF THE IMPUGNED SALE TRANSACTION WHICH DID NOT SEE THE LIGHT OF THE DAY. HOWEVER, THE CIT(A), CONCURRING WITH THE VIEW ARRIVED AT BY THE A.O IN THE COURSE OF THE REMAND PROCEEDINGS DECLINED TO ACCE PT THE SAID UNSUBSTANTIATED CLAIM OF THE ASSESSEE. 24 . IN THE BACKDROP OF THE AFORESAID FACTS, WE SHALL NOW LOOK INTO THE MAINTAINABILITY OF THE AFORESAID CLAIM OF THE ASSESSEE. AT THIS STAGE, WE MAY HEREIN OBSERVE, THAT THE ASSESSEE HAD FILED BEFORE US AS ADDITIONAL EVIDENCE THE COPIES OF THE RETURNS OF INCOME ALONGWITH RESPECTIVE COMPUTATION S OF INCOME OF THE ASSESSEE COMPANY FOR A.Y 2018 - 19 AND A.Y 2019 - 20, PAGE 128 - 145 OF APB. RELEVANCE OF THE COPIES OF THE RETURNS OF INCOME OF THE ASSESSEE COMPANY FOR THE SUCCEEDING YEARS VIZ. A.Y 2018 - 19 AND A.Y 2019 - 20, IS TO DRAW OUR ATTENTION TO THE FACT THAT PART OF THE LAND UNDER CONSIDERATION WAS THEREAFTER SOLD BY THE ASSESSEE IN THE SUCCEEDING YEARS. TO SUM UP, THE ASSESSEE BY REFERRING TO THE SALE TRANSACTION S OF THE LAND UNDER CONSIDERATION, HAD TRIED TO FORTIFY ITS CLAIM THAT THE IMPUGNED SALE TRANSACTION OF THE LAND DURING THE YEAR UNDER CONSIDERATION HAD NOT MATERIALIZED, AND STOOD CANCELLED. THE LD. A.R TOOK US THROUGH THE FACTS PERTAINING TO THE ISSUE U NDER CONSIDERATION. THE LD. A.R TOOK US THROUGH THE DEFINITION OF THE TERM TRANSFER AS ENVISAGED IN SEC. 2(47) OF THE ACT. IT WAS AVERRED BY THE LD. A.R THAT AS THE ASSESSEE HAD ONLY ENTERED INTO AN UNREGISTERED MOU, DATED 19.12.2012, WITH THE OTHER PART Y, WHICH TOO STOOD REPUDIATED VIDE A DEED OF CANCELLATION, DATED 28.09.2017, THEREFORE DE HORS TRANSFER OF THE LAND UNDER CONSIDERATION NO CAPITAL GAIN WAS LIABLE TO BE ASSESSED IN RESPECT OF THE TRANSACTION WHICH DID NOT MATERIALIZE. IN FACT, IT ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 26 WAS POINT ED OUT BY THE LD. A.R THAT THE POSSESSION OF THE LAND UNDER CONSIDERATION REMAINED WITH THE ASSESSEE, AND AT NO STAGE WAS EVER DELIVERED TO THE PURPORTED BUYER VIZ. M/S GOLDEN STAR PROMOTERS PVT. LTD. IN ORDER TO BUTTRESS HIS AFORESAID CLAIM THE LD. A.R TO OK US THROUGH THE MOU, DATED 19.12.2012 AND THE DEED OF CANCELLATION, DATED 28.09.2017. IN ORDER TO DRIVE HOME HIS CLAIM THAT THERE WAS NO TRANSFER OF THE LAND UNDER CONSIDERATION WITHIN THE MEANING OF SEC. 2(47)(V) & (VI) OF THE ACT, THE LD. A.R RELIED O N THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BALBIR SINGH MAINI (2017) 398 ITR 531 (SC) AND THAT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PCIT VS. FARDEEN KHAN (2019) 411 ITR 533 (BOM). IT WAS SUBMITTED BY THE LD. A.R, THAT BOTH OF THE LOWER AUTHORITIES HAD ERRED IN LAW AND THE FACTS OF THE CASE BY SADDLING THE ASSESSEE WITH CAPITAL GAIN INCOME IN RESPECT OF A TRANSACTION WHICH HAD NEVER FRUCTIFIED. PER CONTRA, THE LD. D.R RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 25 . W E HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD IN CONTEXT OF THE ISSUE UNDER CONSIDERATION. ADMITTEDLY, THE ASSESSEE HAD ON ITS OWN REFLECTED THE LTCG ON TR ANSFER OF THE LAND UNDER CONSIDERATION IN ITS RETURN OF INCOME. AS SUCH, BEFORE PROCEEDING ANY FURTHER, WE SHALL FIRST DEAL WITH THE ISSUE AS TO WHETHER AN ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS COULD BE PERMITTED TO RAISE A CLAIM, WHICH WOUL D LEAD TO EXCLUSION OF AN INCOME OFFERED BY HIM IN HIS RETURN OF INCOME. WE FIND THAT THE SAID ISSUE HAD BEEN DELIBERATED UPON AT LENGTH BY THE HONBLE HIGH COURT OF BOMBAY IN T H E CASE OF CIT VS. PRUTHVI BROKERS & SHAREHOLDERS (P) LTD. (2012) 349 ITR 336 (BOM) . IN ITS SAID JUDGMENT, IT WAS HELD BY THE HONBLE HIGH COURT THAT AN ASSESSEE IS ENTITLED TO RAISE ADDITIONAL GROUNDS NOT MERELY IN TERMS OF LEGAL SUBMISSIONS, BUT ALSO ADDITIONAL CLAIMS TO WIT CLAIMS NOT MADE IN THE RETURN FILED BY IT . THE HONBLE HIGH COURT WHILE CONCLUDING AS HEREINABOVE, HAD OBSERVED AS UNDER: ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 27 10. A LONG LINE OF AUTHORITIES ESTABLISH CLEARLY THAT AN ASSESSEE IS ENTITLED TO RAISE ADDITIONAL GROUNDS NOT MERELY IN TERMS OF LEGAL SUBMISSIONS, BUT ALSO ADDITIONAL CLAIMS TO WIT CLA IMS NOT MADE IN THE RETURN FILED BY IT. IT IS NECESSARY FOR US TO REFER TO SOME OF THESE DECISIONS ONLY TO DEAL WITH TWO SUBMISSIONS ON BEHALF OF THE DEPARTMENT. THE FIRST IS WITH RESPECT TO AN OBSERVATION OF THE SUPREME COURT IN JUTE CORPORATION OF INDIA LIMITED V. COMMISSIONER OF INCOME TAX, 1991 SUPP (2) SCC 744 = (1991) 187 ITR 688. THE SECOND SUBMISSION IS BASED ON A JUDGMENT OF THE SUPREME COURT IN GOETZE (INDIA) LIMITED V. COMMISSIONER OF INCOME TAX. 11(A). IN JUTE CORPORATION OF INDIA LIMITED V. CIT , FOR THE ASSESSMENT YEAR 1974 - 75 THE APPELLANT DID NOT CLAIM ANY DEDUCTION OF ITS LIABILITY TOWARDS PURCHASE TAX UNDER THE PROVISIONS OF THE BENGAL RAW JUTE TAXATION ACT, 1941, AS IT ENTERTAINED A BELIEF THAT IT WAS NOT LIABLE TO PAY PURCHASE TAX UNDER TH AT ACT. SUBSEQUENTLY, THE APPELLANT WAS ASSESSED TO PURCHASE TAX AND THE ORDER OF ASSESSMENT WAS RECEIVED BY IT ON 23 RD NOVEMBER, 1973. THE APPELLANT CHALLENGED THE SAME AND OBTAINED A STAY ORDER. THE APPELLANT ALSO FILED AN APPEAL FROM THE ASSESSMENT ORDE R UNDER THE INCOME TAX ACT. IT WAS ONLY DURING THE HEARING OF THE APPEAL THAT THE ASSESSEE CLAIMED AN ADDITIONAL DEDUCTION IN RESPECT OF ITS LIABILITY TO PURCHASE TAX. THE APPELLATE ASSISTANT COMMISSIONER (AAC) PERMITTED IT TO RAISE THE CLAIM AND ALLOWED T HE DEDUCTION. THE TRIBUNAL HELD THAT THE AAC HAD NO JURISDICTION TO ENTERTAIN THE ADDITIONAL GROUND OR TO GRANT RELIEF ON A GROUND WHICH HAD NOT BEEN RAISED BEFORE THE INCOME TAX OFFICER. THE TRIBUNAL ALSO REFUSED THE APPELLANT'S APPLICATION FOR MAKING A R EFERENCE TO THE HIGH COURT. THE HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL AND REFUSED TO CALL FOR A STATEMENT OF CASE. IT IS IN THESE CIRCUMSTANCES THAT THE APPELLANT FILED THE APPEAL BEFORE THE SUPREME COURT. THE SUPREME COURT HELD AS UNDER : - '5. IN CIT V. KANPUR COAL SYNDICATE, A THREE JUDGE BENCH OF THIS COURT DISCUSSED THE SCOPE OF SECTION 31(3)(A) OF THE INCOME TAX ACT, 1922 WHICH IS ALMOST IDENTICAL TO SECTION 251(1)(A). THE COURT HELD AS UNDER: (ITR P. 229) 'IF AN APPEAL LIES, SECTION 31 OF TH E ACT DESCRIBES THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER IN SUCH AN APPEAL. UNDER SECTION 31(3)(A) IN DISPOSING OF SUCH AN APPEAL THE APPELLATE ASSISTANT COMMISSIONER MAY, IN THE CASE OF AN ORDER OF ASSESSMENT, CONFIRM, REDUCE, ENHANCE OR ANNUL T HE ASSESSMENT; UNDER CLAUSE (B) THEREOF HE MAY SET ASIDE THE ASSESSMENT AND DIRECT THE INCOME TAX OFFICER TO MAKE A FRESH ASSESSMENT. THE APPELLATE ASSISTANT COMMISSIONER HAS, THEREFORE, PLENARY POWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER IS C O - TERMINUS WITH THAT OF THE INCOME - TAX OFFICER. HE CAN DO WHAT THE INCOME - TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO.' (EMPHASIS SUPPLIED) 6. THE ABOVE OBSERVATIONS ARE SQUARELY APPLICABLE TO THE INTERPRETATION OF SECTION 251(1)( A) OF THE ACT. THE DECLARATION OF LAW IS CLEAR THAT THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IS CO - TERMINUS WITH THAT OF THE INCOME TAX OFFICER, IF THAT BE SO, THERE APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSES SMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE INCOME TAX OFFICER. NO EXCEPTION COULD BE TAKEN TO THIS VIEW AS THE ACT DOES NOT PLACE ANY RESTRICTION OR LIMITATION ON THE EXERCISE OF APPELLATE POWER. EVEN OTHERWISE AN APPELLATE AUTHORITY WHILE HEARING APPEAL AGAINST THE ORDER OF A SUBORDINATE AUTHORITY HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATIONS IF ANY PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE APPEARS TO BE NO GOOD REASON AND NONE WAS PLACED BEFORE US TO JUSTIFY CURTAILMENT OF THE POWER OF THE APPELLATE ASSISTANT ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 28 COMMISSIONER IN ENTERTAINING AN ADDITIONAL GROUND RAISED BY THE ASSESSEE IN SEEKING MODIFICATION OF THE ORDER OF ASSESSMENT PASSED BY THE INCOME TAX OFFICER.' [EMPHASIS SUPPLIED] (B) IT IS CLEAR, THEREFORE, THAT AN ASSESSEE IS ENTI TLED TO RAISE NOT MERELY ADDITIONAL LEGAL SUBMISSIONS BEFORE THE APPELLATE AUTHORITIES, BUT IS ALSO ENTITLED TO RAISE ADDITIONAL CLAIMS BEFORE THEM. THE APPELLATE AUTHORITIES HAVE THE DISCRETION WHETHER OR NOT TO PERMIT SUCH ADDITIONAL CLAIMS TO BE RAISED. IT CANNOT, HOWEVER, BE SAID THAT THEY HAVE NO JURISDICTION TO CONSIDER THE SAME. THEY HAVE THE JURISDICTION TO ENTERTAIN THE NEW CLAIM. THAT THEY MAY CHOOSE NOT TO EXERCISE THEIR JURISDICTION IN A GIVEN CASE IS ANOTHER MATTER. THE EXERCISE OF DISCRETION I S ENTIRELY DIFFERENT FROM THE EXISTENCE OF JURISDICTION. 12. AT PAGE 694, AFTER REFERRING TO CERTAIN OBSERVATIONS OF THE SUPREME COURT IN ADDITIONAL COMMISSIONER OF INCOME - TAX V. GURJARGRAVURES P. LTD., (1978) 111 ITR 1, THE SUPREME COURT OBSERVED AT PAGE 694 AS UNDER : - 'THE ABOVE OBSERVATIONS DO NOT RULE OUT A CASE FOR RAISING AN ADDITIONAL GROUND BEFORE THE APPELLATE ASSISTANT COMMISSIONER IF THE GROUND SO RAISED COULD NOT HAVE BEEN RAISED AT THAT PARTICULAR STAGE WHEN THE RETURN WAS FILED OR WHEN THE AS SESSMENT ORDER WAS MADE, OR THAT THE GROUND BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW . THERE MAY BE SEVERAL FACTORS JUSTIFYING RAISING OF SUCH NEW PLEA IN APPEAL, AND EACH CASE HAS TO BE CONSIDERED ON ITS OWN FACTS. IF THE APPELLATE ASS ISTANT COMMISSIONER IS SATISFIED HE WOULD BE ACTING WITHIN HIS JURISDICTION IN CONSIDERING THE QUESTION SO RAISED IN ALL ITS ASPECTS. OF COURSE, WHILE PERMITTING THE ASSESSEE TO RAISE AN ADDITIONAL GROUND, THE APPELLATE ASSISTANT COMMISSIONER SHOULD EXERCI SE HIS DISCRETION IN ACCORDANCE WITH LAW AND REASON. HE MUST BE SATISFIED THAT THE GROUND RAISED WAS BONA FIDE AND THAT THE SAME COULD NOT HAVE BEEN RAISED EARLIER FOR GOOD REASONS. THE SATISFACTION OF THE APPELLATE ASSISTANT COMMISSIONER DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE AND NO RIGID PRINCIPLES OR ANY HARD AND FAST RULE CAN BE LAID DOWN FOR THIS PURPOSE.' [EMPHASIS SUPPLIED] 13. THE UNDERLINED OBSERVATIONS IN THE ABOVE PASSAGE DO NOT CURTAIL THE AMBIT OF THE JURISDICTION OF THE APPELLATE AUTHORITIES STIPULATED EARLIER. THEY DO NOT RESTRICT THE NEW/ADDITIONAL GROUNDS THAT MAY BE TAKEN BY THE ASSESSEE BEFORE THE APPELLATE AUTHOR ITIES TO THOSE THAT WERE NOT AVAILABLE WHEN THE RETURN WAS FILED OR EVEN WHEN THE ASSESSMENT ORDER WAS MADE. THE SENTENCE READ AS A WHOLE ENTITLES AN ASSESSEE TO RAISE NEW GROUNDS/MAKE ADDITIONAL CLAIMS : - 'IF THE GROUND SO RAISED COULD NOT HAVE BEEN RAISE D AT THAT PARTICULAR STAGE WHEN THE RETURN WAS FILED OR WHEN THE ASSESSMENT ORDER WAS MADE...' 'OR' IF 'THE GROUND BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW' THE APPELLATE AUTHORITIES, THEREFORE, HAVE JURISDICTION TO DEAL NOT MERELY WIT H ADDITIONAL GROUNDS, WHICH BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW, BUT WITH ADDITIONAL GROUNDS WHICH WERE AVAILABLE WHEN THE RETURN WAS FILED. THE FIRST PART VIZ. 'IF THE GROUND SO RAISED COULD NOT HAVE BEEN RAISED AT THAT PARTICULA R STAGE WHEN THE RETURN WAS FILED OR WHEN THE ASSESSMENT ORDER WAS MADE... 'CLEARLY RELATE TO CASES WHERE THE GROUND WAS AVAILABLE WHEN THE RETURN WAS FILED AND THE ASSESSMENT ORDER WAS MADE BUT 'COULD NOT HAVE BEEN RAISED' AT THAT STAGE. THE WORDS ARE 'CO ULD NOT HAVE BEEN RAISED' AND NOT 'WERE NOT IN EXISTENCE'. GROUNDS WHICH WERE NOT IN EXISTENCE WHEN THE RETURN ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 29 WAS FILED OR WHEN THE ASSESSMENT ORDER WAS MADE FALL WITHIN THE SECOND CATEGORY VIZ. WHERE 'THE GROUND BECAME AVAILABLE ON ACCOUNT OF CHANGE OF C IRCUMSTANCES OR LAW.' 14. THE FACTS IN JUTE CORPORATION OF INDIA LTD., VARIOUS JUDGMENTS REFERRED TO THEREIN AS WELL AS IN SUBSEQUENT CASES, WHICH WE WILL REFER TO, ESTABLISHES THIS BEYOND DOUBT. IN MANY OF THE CASES, THE GROUNDS WERE, IN FACT, AVAILABLE W HEN THE RETURN WAS FILED AND/OR THE ASSESSMENT ORDER WAS MADE. IN JUTE CORPORATION OF INDIA LTD., THE GROUND WAS AVAILABLE WHEN THE RETURN WAS FILED. THE ASSESSEE DID NOT CLAIM ANY DEDUCTION OF ITS LIABILITY TO PAY PURCHASE TAX AS 'IT ENTERTAINED A BELIEF THAT IT WAS NOT LIABLE TO PAY PURCHASE TAX UNDER THE BENGAL RAW JUTE TAXATION ACT, 1941'. THUS, THE GROUND EXISTED WHEN THE RETURN WAS FILED. THE ASSESSMENT ORDER WAS EVEN MADE AND RECEIVED BY THE ASSESSEE. IT IS ONLY AFTER THE APPEAL WAS FILED THAT THE AS SESSEE CLAIMED A DEDUCTION IN RESPECT OF THE AMOUNT PAID TOWARDS THE PURCHASE TAX UNDER THE SAID ACT. IT IS ALSO SIGNIFICANT TO NOTE THAT THE ASSESSEE'S ENTITLEMENT TO CLAIM DEDUCTION HAD BEEN HELD TO BE VALID IN VIEW OF AN EARLIER JUDGMENT OF THE SUPREME COURT IN KEDARNATH JUTE MANUFACTURING COMPANY LIMITED V. COMMISSIONER OF INCOME - TAX, (1971) 82 ITR 363. THIS WAS, THEREFORE, A CASE OF ERROR IN PERCEPTION/JUDGMENT. DESPITE THE SAME, THE SUPREME COURT UPHELD THE DECISION OF THE APPELLATE ASSISTANT COMMISSI ONER IN ALLOWING THE DEDUCTION. THE WORDS 'COULD NOT HAVE BEEN RAISED' MUST, THEREFORE, BE CONSTRUED LIBERALLY AND NOT STRICTLY. 15. IT IS INDEED A QUESTION OF EXERCISE OF DISCRETION WHETHER OR NOT TO ALLOW AN ASSESSEE TO RAISE A CLAIM WHICH WAS NOT RAISED WHEN THE RETURN WAS FILED OR THE ASSESSMENT ORDER WAS MADE. AS HELD BY THE SUPREME COURT THERE MAY BE SEVERAL FACTORS JUSTIFYING THE RAISING OF A NEW PLEA IN APPEAL AND EACH CASE MUST BE CONSIDERED ON ITS OWN FACTS. HOWEVER, SUCH CASES INCLUDE THOSE, WHER E THE GROUND THOUGH AVAILABLE WHEN THE RETURN WAS FILED OR THE ASSESSMENT ORDER WAS MADE, WAS NOT TAKEN OR RAISED FOR REASONS WHICH THE APPELLATE AUTHORITIES MAY CONSIDER VALID. IN OTHER WORDS, THE JURISDICTION OF THE APPELLATE AUTHORITIES TO CONSIDER A FR ESH OR NEW GROUND OR CLAIM IS NOT RESTRICTED TO CASES WHERE SUCH A GROUND DID NOT EXIST WHEN THE RETURN WAS FILED AND THE ASSESSMENT ORDER WAS MADE. 16(A). A FULL BENCH OF THIS COURT IN AHMEDABAD ELECTRICITY LIMITED V. COMMISSIONER OF INCOME - TAX, (1993) 19 9 ITR 351 CONSIDERED A SIMILAR SITUATION. IN THAT CASE, THE APPELLANT/ASSESSEE DID NOT CLAIM A DEDUCTION IN RESPECT OF THE AMOUNTS IT WAS REQUIRED TO TRANSFER TO CONTINGENCIES RESERVE AND DIVIDEND AND TARIFF RESERVE EITHER BEFORE THE INCOME TAX OFFICER OR BEFORE THE APPELLATE ASSISTANT COMMISSIONER IN APPEAL. SUBSEQUENTLY, THIS COURT HAD, IN AMALGAMATED ELECTRICITY COMPANY LIMITED V. COMMISSIONER OF INCOME - TAX, (1974) 97 ITR 334, HELD THAT SUCH AMOUNTS REPRESENTED ALLOWABLE DEDUCTIONS ON REVENUE ACCOUNT. TH E APPELLANT, THEREFORE, RAISED A NEW CLAIM AND ADDITIONAL GROUNDS BEFORE THE TRIBUNAL IN THAT CONNECTION. THE TRIBUNAL REJECTED THE SAME. THE SECOND QUESTION WHICH WAS RAISED IN THE REFERENCE BEFORE THE DIVISION BENCH WAS AS UNDER : - '(2) WHETHER, ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL ERRED IN NOT ALLOWING THE ASSESSEE LEAVE TO RAISE IN ITS OWN APPEALS ADDITIONAL GROUNDS AND IN THE DEPARTMENTAL APPEALS CROSS OBJECTIONS REGARDING THE DEDUCTIBILITY OF THE SUMS TRANSFERRED TO CONTINGE NCY RESERVE AND TARIFF AND DIVIDEND CONTROL RESERVE?' (B) THE DIVISION BENCH WHICH HEARD THE REFERENCE, FINDING THAT THERE WAS A CONFLICT OF DECISIONS, PLACED THE PAPERS BEFORE THE HON'BLE CHIEF JUSTICE FOR CONSTITUTING A LARGER BENCH TO RESOLVE THE CONTRO VERSY. THE FULL BENCH ANSWERED THE REFERENCE IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. THE FULL BENCH HELD : - ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 30 'THUS, THE APPELLATE ASSISTANT COMMISSIONER HAS VERY WIDE POWERS WHILE CONSIDERING AN APPEAL WHICH MAY BE FILED BY THE ASSESSEE. HE MAY CO NFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT OR REMAND THE CASE TO THE ASSESSING OFFICER. THIS IS BECAUSE, UNLIKE AN ORDINARY APPEAL, THE BASIC PURPOSE OF A TAX APPEAL IS TO ASCERTAIN THE CORRECT TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. HENCE AN APPELLATE ASSISTANT COMMISSIONER ALSO HAS THE POWER TO ENHANCE THE TAX LIABILITY OF THE ASSESSEE ALTHOUGH THE DEPARTMENT DOES NOT HAVE A RIGHT OF APPEAL BEFORE THE APPELLATE ASSISTANT COMMISSIONER. THE EXPLANATION TO SUBSECTION (2), HOWEVER, MAKES IT C LEAR THAT FOR THE PURPOSE OF ENHANCEMENT, THE APPELLATE ASSISTANT COMMISSIONER CANNOT TRAVEL BEYOND THE PROCEEDINGS WHICH WERE ORIGINALLY BEFORE THE INCOME - TAX OFFICER OR REFER TO NEW SOURCES OF INCOME WHICH WERE NOT BEFORE THE INCOME - TAX OFFICER AT ALL. F OR THIS PURPOSE, THERE ARE OTHER SEPARATE REMEDIES PROVIDED UNDER THE INCOME - TAX ACT.' (C) IT IS UNNECESSARY TO REFER TO ALL THE JUDGMENTS THAT THE FULL BENCH REFERRED TO WHILE ANSWERING THE REFERENCE. THE FULL BENCH REFERRED TO THE OBSERVATIONS OF THE SUP REME COURT IN JUTE CORPORATION OF INDIA LIMITED V. COMMISSIONER OF INCOME - TAX (SUPRA) SET OUT ABOVE. IT IS IMPORTANT TO NOTE THAT EVEN IN THIS CASE, THEREFORE, THE GROUND EXISTED WHEN THE RETURN WAS FILED. THE MERE FACT THAT A DECISION OF A COURT IS RENDER ED SUBSEQUENTLY DOES NOT INDICATE THAT THE GROUND DID NOT EXIST WHEN THE LAW WAS ENACTED. JUDGMENTS ARE ONLY A DECLARATION OF THE LAW. THE ASSESSEE COULD HAVE RAISED THE GROUND IN ITS RETURN ITSELF. IT DID NOT HAVE TO AWAIT A DECISION OF A COURT IN THAT RE GARD. INDEED, EVEN IF A JUDGMENT IS AGAINST AN ASSESSEE, IT IS ALWAYS OPEN TO THE ASSESSEE TO CLAIM THE DEDUCTION AND CARRY THE MATTER HIGHER. THE WORDS 'COULD NOT HAVE BEEN RAISED', THEREFORE, CANNOT BE READ STRICTLY. NEITHER THE SUPREME COURT NOR THE FUL L BENCH OF THIS COURT MEANT THEM TO BE READ STRICTLY. THEY INCLUDE CASES WHERE THE ASSESSEE DID NOT RAISE THE CLAIM FOR A REASON FOUND TO BE REASONABLE OR VALID BY THE APPELLATE AUTHORITIES IN THE FACTS AND CIRCUMSTANCES OF A CASE. 17. THE NEXT JUDGMENT TO WHICH OUR ATTENTION WAS INVITED BY MR. MISTRI IS THE JUDGMENT OF A BENCH OF THREE LEARNED JUDGES OF THE SUPREME COURT IN NATIONAL THERMAL POWER COMPANY LIMITED V. COMMISSIONER OF INCOME - TAX, (1997) 7 SCC 489 = (1998) 229 ITR 383. IN THAT CASE, THE ASSESSE E HAD DEPOSITED ITS FUNDS NOT IMMEDIATELY REQUIRED BY IT ON SHORT TERM DEPOSITS WITH BANKS. THE INTEREST RECEIVED ON SUCH DEPOSITS WAS OFFERED BY THE ASSESSEE ITSELF FOR TAX AND THE ASSESSMENT WAS COMPLETED ON THAT BASIS. EVEN BEFORE THE COMMISSIONER OF IN COME - TAX (APPEALS), THE INCLUSION OF THIS AMOUNT WAS NEITHER CHALLENGED BY THE ASSESSEE NOR CONSIDERED BY THE COMMISSIONER OF INCOME - TAX (APPEALS). THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. THE INCLUSION OF THE AMOUNT WAS NOT OBJECTED TO EVEN IN TH E GROUNDS OF APPEAL AS ORIGINALLY FILED BEFORE THE TRIBUNAL. SUBSEQUENTLY, THE ASSESSEE BY A LETTER, RAISED ADDITIONAL GROUNDS TO THE EFFECT THAT THE SAID SUM COULD NOT BE INCLUDED IN THE TOTAL INCOME. THE ASSESSEE CONTENDED THAT ON A ERRONEOUS ADMISSION, NO INCOME CAN BE INCLUDED IN THE TOTAL INCOME. IT WAS FURTHER CONTENDED THAT THE ITO AND THE COMMISSIONER OF INCOME - TAX (APPEALS) HAD ERRED AND FAILED IN THEIR DUTY IN ADJUDICATING THE MATTER CORRECTLY AND BY MECHANICALLY INCLUDING THE AMOUNT IN THE TOTAL INCOME. IT IS PERTINENT TO NOTE THAT THE ASSESSEE CONTENDED THAT IT WAS ENTITLED TO THE DEDUCTION IN VIEW OF TWO ORDERS OF THE SPECIAL BENCHES OF THE TRIBUNAL AND THE ASSESSEE FURTHER STATED THAT IT HAD RAISED THESE ADDITIONAL GROUNDS ON LEARNING ABOUT THE LEGAL POSITION SUBSEQUENTLY. THE TRIBUNAL DECLINED TO ENTERTAIN THESE ADDITIONAL GROUNDS. THE SUPREME COURT DID NOT ANSWER THE QUESTION ON MERITS, BUT FRAMED THE FOLLOWING QUESTION AND HELD AS UNDER : - '4. THE TRIBUNAL HAS FRAMED AS MANY AS FIVE QUESTIONS WHILE MAKING A REFERENCE TO US. SINCE THE TRIBUNAL HAS NOT EXAMINED THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ON ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 31 MERIT, WE DO NOT PROPOSE TO ANSWER THE QUESTIONS RELATING TO THE MERIT OF THOSE CONTENTIONS. WE REFRAME THE QUESTION WHICH ARISES FOR OUR CONSIDERATION IN ORDER TO BRING OUT THE POINT WHICH REQUIRES DETERMINATION MORE CLEARLY. IT IS AS FOLLOWS: 'WHERE ON THE FACTS FOUND BY THE AUTHORITIES BELOW A QUESTION OF LAW ARISES (THOUGH NOT RAISED BEFORE THE AUTHORITIES) WHICH BEARS ON THE TAX LIABILI TY OF THE ASSESSEE, WHETHER THE TRIBUNAL HAS JURISDICTION TO EXAMINE THE SAME.' UNDER SECTION 254 OF THE INCOME TAX ACT THE APPELLATE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREON AS IT TH INKS FIT. THE POWER OF THE TRIBUNAL IN DEALING WITH THE APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WI TH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON - TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, WE DO NOT SEE ANY REASON WHY THE ASSESSEE SHOULD BE PREVEN TED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THAT ITEM. WE DO NOT SEE ANY REASON TO RESTRICT THE POWER OF THE TRIBUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUNDS WHICH AR ISE FROM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEA1/CROSS - OBJECTIONS BEFORE THE TRIBUNAL. WE FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER.' 18. IN THE CASE BEFORE US, THE CIT(A) AND THE TRIBUNAL HAVE HELD THE OMISSION TO CLAIM THE DEDUCTION OF RS.40,00,000/ - TO BE INADVERTENT. BOTH THE APPELLATE AUTHORITIES HELD, AFTER CON SIDERING ALL THE FACTS, THAT THE ASSESSEE HAD INADVERTENTLY CLAIMED A DEDUCTION OF RS.20,00,000/ - PAID AFTER THE END OF THE YEAR IN QUESTION. WE SEE NO REASON TO INTERFERE WITH THIS FINDING. WE SEE LESS REASON TO INTERFERE WITH THE EXERCISE OF DISCRETION B Y THE APPELLATE AUTHORITIES IN PERMITTING THE RESPONDENT TO RAISE THIS CLAIM. THAT THE RESPONDENT IS ENTITLED TO THE DEDUCTION IN LAW IS ADMITTED AND, IN ANY EVENT, CLEARLY ESTABLISHED. IN THE CIRCUMSTANCES, THE RESPONDENT OUGHT NOT BE PREJUDICED. 19. THE ORDERS OF THE CIT(A) AND THE TRIBUNAL CLEARLY INDICATE THAT BOTH THE APPELLATE AUTHORITIES HAD EXERCISED THEIR JURISDICTION TO CONSIDER THE ADDITIONAL CLAIM AS THEY WERE ENTITLED TO IN VIEW OF THE VARIOUS JUDGMENTS ON THE ISSUE, INCLUDING THE JUDGMENT OF T HE SUPREME COURT IN NATIONAL THERMAL POWER CORPORATION LIMITED. THIS IS CLEAR FROM THE FACT THAT THESE JUDGMENTS HAVE BEEN EXPRESSLY REFERRED TO IN DETAIL BY THE CIT(A) AND BY THE TRIBUNAL. 20. WE WISH TO CLARIFY THAT BOTH THE APPELLATE AUTHORITIES HAVE TH EMSELVES CONSIDERED THE ADDITIONAL CLAIM AND ALLOWED IT. THEY HAVE NOT REMANDED THE MATTER TO THE ASSESSING OFFICER TO CONSIDER THE SAME. BOTH THE ORDERS EXPRESSLY DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION OF RS.40,00,000/ - UNDER SECTION 43B OF T HE ACT. THE ASSESSING OFFICER IS, THEREFORE, NOW ONLY TO COMPUTE THE RESPONDENT'S TAX LIABILITY WHICH HE MUST DO IN ACCORDANCE WITH THE ORDERS ALLOWING THE RESPONDENT A DEDUCTION OF RS.40,00,000/ - UNDER SECTION 43B OF THE ACT. 21. THE CONCLUSION THAT THE E RROR IN NOT CLAIMING THE DEDUCTION IN THE RETURN OF INCOME WAS INADVERTENT CANNOT BE FAULTED FOR MORE THAN ONE REASON. IT IS A FINDING OF FACT WHICH CANNOT BE TERMED PERVERSE. THERE IS NOTHING ON RECORD THAT MILITATES AGAINST THE FINDING. THE APPELLANT HAS NOT SUGGESTED, MUCH LESS ESTABLISHED THAT THE OMISSION WAS DELIBERATE, MALA - FIDE OR EVEN OTHERWISE. THE INFERENCE THAT THE OMISSION WAS INADVERTENT IS, THEREFORE, IRRESISTIBLE. ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 32 22. IT WAS THEN SUBMITTED BY MR. GUPTA THAT THE SUPREME COURT HAD TAKEN A DIFF ERENT VIEW IN GOETZE (INDIA) LIMITED V. COMMISSIONER OF INCOME - TAX. WE ARE UNABLE TO AGREE. THE DECISION WAS RENDERED BY A BENCH OF TWO LEARNED JUDGES AND EXPRESSLY REFERS TO THE JUDGMENT OF THE BENCH OF THREE LEARNED JUDGES IN NATIONAL THERMAL POWER COMPA NY LIMITED VS. COMMISSIONER OF INCOME - TAX (SUPRA). THE QUESTION BEFORE THE COURT WAS WHETHER THE APPELLANT - ASSESSEE COULD MAKE A CLAIM FOR DEDUCTION, OTHER THAN BY FILING A REVISED RETURN. AFTER THE RETURN WAS FILED, THE APPELLANT SOUGHT TO CLAIM A DEDUCTI ON BY WAY OF A LETTER BEFORE THE ASSESSING OFFICER. THE CLAIM, THEREFORE, WAS NOT BEFORE THE APPELLATE AUTHORITIES. THE DEDUCTION WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THERE WAS NO PROVISION UNDER THE ACT TO MAKE AN AMENDMENT IN THE RE TURN OF INCOME BY MODIFYING AN APPLICATION AT THE ASSESSMENT STAGE WITHOUT REVISING THE RETURN. THE COMMISSIONER OF INCOME - TAX (APPEALS) ALLOWED THE ASSESSEE'S APPEAL. THE TRIBUNAL, HOWEVER, ALLOWED THE DEPARTMENT'S APPEAL. IN THE SUPREME COURT, THE ASSESS EE RELIED UPON THE JUDGMENT IN NATIONAL THERMAL POWER COMPANY LIMITED CONTENDING THAT IT WAS OPEN TO THE ASSESSEE TO RAISE THE POINTS OF LAW EVEN BEFORE THE TRIBUNAL. THE SUPREME COURT HELD : - '4. THE DECISION IN QUESTION IS THAT THE POWER OF THE TRIBUNAL UNDER SECTION 254 OF THE INCOME - TAX ACT, 1961, IS TO ENTERTAIN FOR THE FIRST TIME A POINT OF LAW PROVIDED THE FACT ON THE BASIS OF WHICH THE ISSUE OF LAW CAN BE RAISED BEFORE THE TRIBUNAL. THE DECISION DOES NOT IN ANY WAY RELATE TO THE POWER OF THE ASSESSI NG OFFICER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN. IN THE CIRCUMSTANCES OF THE CASE, WE DISMISS THE CIVIL APPEAL. HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE INCOME - TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE INCOME - TAX ACT, 1961. THERE SHALL BE NO ORDER AS TO COSTS.' [EMPHASIS SUPPLIED] 23. IT IS CLEAR TO US THAT THE SUPREME COURT DID NOT HOLD ANYTHING CONTRARY T O WHAT WAS HELD IN THE PREVIOUS JUDGMENTS TO THE EFFECT THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE ASSESSING OFFICER, IT CAN BE MADE BEFORE THE APPELLATE AUTHORITIES. THE JURISDICTION OF THE APPELLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM HAS NOT BEEN NEG ATED BY THE SUPREME COURT IN THIS JUDGMENT. IN FACT, THE SUPREME COURT MADE IT CLEAR THAT THE ISSUE IN THE CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND THAT THE JUDGMENT DOES NOT IMPINGE ON THE POWER OF THE TRIBUNAL UNDER SECTION 254. 24. A DIVISION BENCH OF THE DELHI HIGH COURT DEALT WITH A SIMILAR SUBMISSION IN COMMISSIONER OF INCOME - TAX V. JAI PARABOLIC SPRINGS LIMITED, (2008) 306 ITR 42. THE DIVISION BENCH, IN PARAGRAPH 17 OF THE JUDGMENT HELD THAT THE SUPREME COURT DISMISSED THE APPEAL MAKING IT CLEAR THAT THE DECISION WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY A REVISED RETURN AND DID NOT IMPINGE ON THE POWERS OF THE TRIBUNAL. IN PARAGRAPH 19, THE DIVISION BENCH HELD THAT THE RE WAS NO PROHIBITION ON THE POWERS OF THE TRIBUNAL TO ENTERTAIN AN ADDITIONAL GROUND WHICH, ACCORDING TO THE TRIBUNAL, ARISES IN THE MATTER AND FOR THE JUST DECISION OF THE CASE. NOW, IN THE CASE BEFORE US, WE FIND THAT THE ASSESSEE HAD ASSAILED THE ASSES SING OF THE LTCG ON THE IMPUGNED TRANSFER OF LAND AND SUBJECTING OF THE SAME TO TAX, AS THE MOU, DATED 19.12.2012 I.E THE AGREEMENT TO SELL, WAS THEREAFTER CANCELLED VIDE A DEED OF CANCELLATION, DATED 28.09.2017. AS SUCH, THE SAID GROUND RAISED BY THE AS SESSEE WAS NOT AVAILABLE AT THE TIME OF FILING OF THE RETURN OF INCOME, AND IN FACT HAD BECAME AVAILABLE ON ACCOUNT OF ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 33 CHANGE OF CIRCUMSTANCES IN THE COURSE OF HEARING OF THE APPEAL BEFORE THE CIT(A). ACCORDINGLY, IN OUR CONSIDERED VIEW, THE ASSESSEE REMAI NING WELL WITHIN ITS RIGHT HAD VALIDLY ASSAILED THE ASSESSING OF THE LTCG ON THE IMPUGNED TRANSFER OF LAND B EFORE THE CIT(A). 26 . WE SHALL NOW ADVERT TO THE MAINTAINABILITY OF THE CLAIM OF THE ASSESSEE THAT IN THE ABSENCE OF TRANSFER OF THE LAND UNDER CONSIDERATION, NO LTCG COULD HAVE BEEN ASSESSED IN ITS HANDS. THE ISSUE HEREIN INVOLVED LIES IN A NARROW COMPASS I.E AS TO WHETHER OR NOT THE LAND UNDER CONSIDERATION WAS TRANSFERRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. AT THIS STAGE, WE MAY HEREIN OBSERVE, THAT THE ASSESSEE BY WAY OF AN UNREGISTERED MOU, DATED 19.12.2012, HAD SOUGHT TO TRANSFER THE PROPERTY TO THE PURPOR TED BUYER VIZ. M/S GOLDEN STAR PROMOTERS PVT. LTD. BEFORE ADVERTING ANY FURTHER, AS REGARDS THE FATE OF THE SAID MOU, WHICH AS OBSERVED BY US HEREINABOVE WAS CANCELLED VIDE A DEED OF CANCELLATION, DATED 28.09.2017, IT WOULD BE RELEVANT TO DELIBERATE UPON T HE VALIDITY OF THE MOU, DATED 19.12.2012 AS AN INSTRUMENT FOR TRANSFER OF THE LAND UNDER CONSIDERATION. AS OBSERVED BY US HEREINABOVE, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BALBIR SINGH MAINI (2017) 398 ITR 531 (SC) , HAD OBSERVED, THAT PURSUANT TO THE REGISTRATION AND OTHER RELATED LAWS (AMENDMENT) ACT, 2001 , A MENDMENTS WERE MADE SIMULTANEOUSLY IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT AND SECTIONS 17 AND 49 OF THE INDIAN REGISTRATION ACT. BY THE AFORESAID AMENDMENT, THE WORDS THE CONTRACT, THOUGH REQUIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR IN SECTION 53A OF THE 1882 ACT WERE OMITTED. SIMULTANEOUSLY, SECTIONS 17 AND 49 OF THE 1908 ACT WERE AMENDED, CLARIFYING THAT UNLESS THE DOCUMENT CONTAINING THE CONTRACT TO TRANSFER FOR CONSID ERATION ANY IMMOVABLE PROPERTY (FOR THE PURPOSE OF SECTION 53A OF 1882 ACT) IS REGISTERED, IT SHALL NOT HAVE ANY EFFECT IN LAW, OTHER THAN BEING RECEIVED AS EVIDENCE OF A CONTRACT IN A SUIT FOR SPECIFIC PERFORMANCE OR AS EVIDENCE OF ANY COLLATERAL TRANSACT ION NOT REQUIRED TO BE EFFECTED BY A REGISTERED INSTRUMENT. IT WAS OBSERVED BY THE HONBLE APEX COURT, THAT AFTER THE COMMENCEMENT OF THE AMENDMENT ACT OF 2001, IF AN AGREEMENT, WAS NOT REGISTERED, THEN IT ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 34 SHALL HAVE NO EFFECT IN LAW FOR THE PURPOSES OF SE CTION 53A. IN SHORT, THERE WOULD BE NO AGREEMENT IN THE EYES OF LAW WHICH COULD BE ENFORCED UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT. IN THE BACKDROP OF ITS AFORESAID OBSERVATIONS, THE HONBLE APE X COURT HAD CONCLUDED THAT IN ORDER TO QUALIFY AS A TRANSFER OF A CAPITAL ASSET UNDER SECTION 2(47)(V) OF THE ACT, THERE MUST BE A CONTRACT WHICH CAN BE ENFORCED IN LAW UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT. IN SUM AND SUBSTANCE, THE HONBLE APEX COURT HAD OBSERVED, THAT IN TERMS OF SEC. 2( 47)(V) OF THE ACT, TRANSFER OF ANY IMMOVABLE PROPERTY IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED IN SEC. 53A OF THE TRANSFER OF PROPERTY ACT, 1882, WILL BE COMPLETED ONLY WHEN THE AGREEMENT UNDER SEC. 53A OF THE TRANSFER OF PROPERTY ACT IS REGISTERED UNDER THE INDIAN REGISTRATION ACT. ALSO, WE FIND THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PCIT VS. FARDEEN KHAN (2019) 411 ITR 533 (BOM) , HAD FOLLOWED THE AFORESAID VIEW OF THE HONBLE APEX COURT. APART FROM THAT, WE FIND THAT IN THE AFORESAID JUDGMENTS, IT WAS FURTHER OBSERVED THAT FOR SEC. 2(47)(VI) TO BE APPLICABLE, THE TRANSFER OF THE IMMOVABLE PROPERTY SHOULD ENABLE ITS ENJOYMENT AS THE PURPORTED OWNER THEREOF I.E EVEN THOUGH THERE IS NO TRANSFER OF TITLE IN LAW, THERE IS A TRANSFER OF TITLE IN FACT. NOW, IN THE CASE BEFORE US, AS THE ASSESSEE BY WAY OF AN UNREGISTERED MOU, DATED 19.12.2012 HAD THOUGH SOUGHT TO TRANSFER THE LAND UNDER CONSIDERATION TO THE PURPORTED BUYER VIZ. M/S GO LDEN STAR PROMOTERS PVT. LTD., BUT THEN, THE VERY FACT THAT THE POSSESSION OF THE LAND WAS NEVER PARTED WITH/DELIVERED TO BY THE ASSESSEE TO THE OTHER PARTY, ON THE SAID COUNT ITSELF WOULD RENDER THE PROVISIONS OF SEC. 2(47)(V) OF THE ACT R.W.S 53A OF THE TRANSFER OF PROPERTY ACT, 1882, AS INAPPLICABLE. APART FROM THAT, EVEN OTHERWISE AS THE INSTRUMENT OF TRANSFER WAS AN UNREGISTERED MOU, DATED 19.12.2012, THE SAME IN THE BACKDROP OF THE AFORESAID JUDICIAL PRONOUNCEMENTS WOULD EXCLUDE THE APPLICABILITY OF S EC. 2(47)(V) OF THE ACT R.W SEC. 53A OF THE TRANSFER OF PROPERTY ACT. IN SO FAR THE PROVISIONS OF SEC. 2(47)(VI) ARE CONCERNED, WE FIND THAT THE ASSESSEE WHO HAD NOT EVEN PARTED WITH THE POSSESSION OF THE LAND IN FAVOUR OF THE PURPORTED BUYER, HAD NOT ENTE RED INTO ANY ARRANGEMENT OR ACTED IN ANY OTHER MANNER, WHICH HAD THE ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 35 EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF THE PROPERTY UNDER CONSIDERATION TO THE PURPORTED BUYER. RATHER, THE FACT THAT THE MOU, DATED 19.12.2012 WAS SUBSEQUENTLY CANCELLED VI DE A DEED OF CANCELLATION, DATED 28.09.2017, THEREIN PROVES TO THE HILT THAT THE IMPUGNED SALE TRANSACTION HAD NEVER CRYSTALLIZED. AS A MATTER OF FACT, THE LOWER AUTHORITIES HAD FAILED TO PLACE ON RECORD ANY MATERIAL WHICH WOULD REBUT THE AFORESAID CLAIM O F THE ASSESSEE. IN FACT, IT IS NOT EVEN THE CASE OF THE REVENUE THAT THE DEED OF CANCELLATION, DATED 28.09.2017 IS A SHAM OR A FABRICATED DOCUMENT. IN FACT, THE SUBSEQUENT SALE OF PART OF THE LAND BY THE ASSESSEE IN THE PERIOD RELEVANT TO A.Y 2018 - 19 AND A .Y 2019 - 20, FURTHER FORTIFIES THE VERACITY OF THE AFORESAID CLAIM OF THE ASSESSEE. AT THIS STAGE, WE MAY HEREIN OBSERVE THAT THE REVENUE BY ASSESSING THE LTCG IN THE HANDS OF THE ASSESSEE HAD SOUGHT TO TAX A HYPOTHETICAL INCOME, WHICH FINDS ITS ROOTS IN A TRANSACTION WHICH HAD NEVER FRUCTIFIED INTO A SALE TRANSACTION . AS OBSERVED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. SHOORJI VALLABHDAS AND CO., (1962) 46 ITR 144 (SC) , INCOME - TAX IS A LEVY ON INCOME. NO DOUBT, THE INCOME - TAX ACT TAKES INTO ACCOUN T TWO POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED ,VIZ., THE ACCRUAL OF THE INCOME OR ITS RECEIPT, BUT T H E SUBSTANCE OF THE MATTER IS THE INCOME. IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH IN BOOK - KEEPING, AN ENTRY I S MADE ABOUT A HYPOTHETICAL INCOME, WHICH DOES NOT MAT E RIALI Z E. AS OBSERVED BY THE HONBLE HIGH COURT, WHERE THE INCOME CAN BE SAID NOT TO HAVE RESULTED AT ALL, THERE IS OBVIOUSLY NEITHER ACCRUAL NOR RECEIPT OF INCOME, EVEN THOUGH AN ENTRY TO THAT EFFECT MIGHT, IN CERTAIN CIRCUMSTANCES, HAVE BEEN MADE IN THE BOOKS OF ACCOUNT . ON THE BASIS OF OUR AFORESAID OBSERVATIONS, WE ARE UNABLE TO PERSUADE OURSELVES TO CONCUR WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES, AND THEREIN VACATE THE ADDITION TOWARDS LTCG MADE BY THEM, ON THE BASIS OF THE MOU, DATED 19.12.2012. GROUND OF APPEAL NO. 7 R.W ADDITIONAL GROUND OF APPEAL NO. 1 , ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 27 . WE SHALL NOW TAKE UP THE CLAIM OF THE ASSESEE THAT THE CIT(A) HAD ERRED IN NOT DIRECTING THE A.O TO CONSIDER THE CAPITAL LOSS OF RS. 69,72,79,948/ - FOR ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 36 THE PURPOSE OF SET OFF AGAINST THE INCOME OF THE ASSESSEE/CARRY FORWARD TO THE SUBSEQUENT YEARS. AS IS DISCERNIBLE FROM THE REVIS ED STATEMENT OF IN COME FILED BY THE ASSESSEE ALONGWITH ITS RETURN OF INCOME, PAGE 7 - 8 OF APB, THE ASSESSEE HAD COMPUTED THE SHORT TERM CAPITAL LOSS (FOR SHORT STCL) FROM DEPRECIABLE ASSETS (AS PER DEPRECIATION SCHEDULE) AT ( - ) RS. 69,72,79,848/ - . IT IS SUBMITTED BY THE LD . A.R, THAT AS THE CIT(A) WHILE DISPOSING OFF THE APPEAL HAD NOT DIRECTED THE A.O TO CONSIDER THE STCL OF ( - )RS. 69,72,79,948/ - FOR THE PURPOSE OF SET OFF AGAINST THE INCOME OF THE ASSESSEE/CARRY FORWARD TO THE SUBSEQUENT YEARS, THEREFORE, THE LATTER IN HIS ORDER GIVING EFFECT TO THE ORDER OF THE CIT(A), DATED 18.12.2018, HAD NOT CONSIDERED THE STCL OF ( - ) RS. 69,72,79,948/ - . 2 8 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTIONS ADVANCED BY THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES IN CONTEXT OF THE AFORESAID ISSUE UNDER CONSIDERATION. BEFORE PROCEEDING ANY FURTHER, WE MAY HEREIN OBSERVE THAT THE A.O WHILE FRAMING THE ASSESSMENT HAD IN THE ABSENCE OF THE DETAILS OF THE ASSETS SOLD DECLINED THE ASSESSES CLAIM OF SHORT TERM CAPITAL LOSS OF RS. 69,72,79,948/ - . IN SUM AND SUBSTANCE, IN THE ABSENCE OF THE REQUISITE DETAILS AS REGARDS THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF SALE OF DEPRECIABLE ASSETS ALONG WITH WORKING AND OTHER RELEVANT DOCUMENTS, THE AFORESAID CLAIM OF STCL WAS REJE CTED BY THE A.O WHILE FRAMING THE ASSESSMENT. ELABORATING ON THE SAID ISSUE, WE FIND THAT THE A.O HAD IN THE COURSE OF HEARING OF THE APPEAL BY THE CIT(A), AGAINST THE ORDER PASSED BY HIM U/S. 154 OF THE ACT, HAD STATED THE REASON S FOR REJECTING THE CLAIM OF STCL RAISED BY THE ASSESSEE IN ITS RETURN OF INCOME, AS UNDER: IN THIS REGARD, THE ASSESSEE WAS ASKED VIDE ORDER SHEET NOTINGS DATED 28 - 7 - 2017 TO JUSTIFY THE LOSS CLAIMED ON ACCOUNT OF SALE OF DEPRECIABLE ASSETS ALONG WITH WORKINGS AND OTHER RELEVANT D OCUMENTS. THE ASSESSEE WAS FURTHER ASKED ON PERUSAL OF MOU THAT LUMPSUM AMOUNT OF RS. 40 CRS HAS BEEN SHOWN AS SALE CONSIDERATION FOR OTHER ASSETS. IN VIEW OF THIS FACT, THE ASSESSEE WAS ASKED TO SPECIFY AS TO HOW IT HAD ALLOCATED THE AMOUNT OF SALE CONSID ERATION BETWEEN VARIOUS ASSETS SOLD AND RATIO ADOPTED FOR WORKING OF LOSS ON ACCOUNT OF DEPRECIABLE ASSETS. ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 37 IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 3 - 8 - 2017 HAS SUBMITTED THAT THE TOTAL VALUE OF RS. 27.19 ORS. IN RESPECT OF SALE OF OTHER DEPRECIABLE ASSETS HAS BEEN TAKEN ON THE BASIS OF BOOK VALUE OF THESE ASSETS AS ON 31 - 12 - 2012 (52 ANNUAL REPORT 2011 - 12 PG. NO. 34) A COPY OF ANNUAL REPORT 2011 - 12 SUBMITTED. ACCORDINGLY, FROM THE OPENING WDV F OR DEPRECIABLE ASSETS AS ON 31 - 03 - 2012 HAS BEEN DEDUCTED FROM THE SALE VALUE AND THE TOTAL LOSS HAS BEEN WORKED OUT AT RS. 69,72,79,948/ - . THE SAID LOSS HAS BEEN DISCLOSED IN SCHEDULE DPM AND SCHEDULE DOA FORMING PART OF RETURN OF INCOME PG. NOS.18 & 19. IN THIS REGARD, ON PERUSAL OF TERMS AND CONDITIONS LAID DOWN IN MOU DATED 19 - 12 - 2012 ENTERED BETWEEN THE ASSESSEE COMPANY AND GOLDEN STAR PROMOTERS PVT. LTD., IT IS SEEN THAT THE PARTIES HAVE AGREED TO PURCHASE AND SELL ALL BUILDING, PLANT &MACHINERY, OFFI CE EQUIPMENT, FURNITURE AND FIXTURES, ETC., ON AN 'AS IS WHERE IS' BASIS AT FPL'S FACTORY AT MANALI, CHENNAI - RS. 40 CRS. IT CAN BE SEEN FROM THE ABOVE CONDITION MENTIONED IN THE MOU THAT THE PURCHASER PARTY HAS PURCHASED ALL THE DEPRECIABLE ASSETS FOR TOTAL CONSIDERATION OF RS. 40 CRS: WHEREAS, THE ASSESSEE HAS ALLOCATED RS. 27.20 CRS OUT OF RS. 40 CRS. FOR WORKING OUT LOSS ON ACCOUNT OF DEPRECIABLE ASSETS AS PER BOOK VALUE AND RS. 12.80 CRS HAS BEEN ALLOC A TE D AGAINST THE INVENTORIES, WHICH IS NOT PR OPER. AS PER THE FACTS DISCERNIBLE FROM THE RECORDS, WE FIND THAT THE ASSESSEE HAD CLAIMED SHORT TERM CAPITAL LOSS ON SALE OF DEPRECIABLE ASSETS, AS UNDER: BLOCK OF ASSETS RATE WDV SALE CONSIDERATION CAPITAL GAIN/LOSS BUILDING 5% 10,47,133 0 - 10,47,133 10% 1,32,85,035 1,96,63,539 63,78,504 PLANT & MACHINERY 15% 44,41,68,026 25,20,59,898 - 19,21,08,128 30% 1,06,92,601 41,500 - 1,06,51,101 60% 3,16,473 3,16,473 0 FURNITURE & FITTINGS 10% 66,57,131 4,04,833 - 62,52,298 INTANGIBLE ASSETS 25% 49,35,99,792 - - 49,35,99,792 TOTAL 96,97,66,191 27,24,86,243 - 69,72,79,948 ALTHOUGH, AS PER THE MOU, DATED 19.12.2012, A SALE CONSIDERATION OF RS.40 CRORES WAS ASSIGNED TO BUILDING, PLANT AND MACHINERY, FURNITURE AND FIXTURE , INVENTORY ETC . , WITHOUT VALUES BEING ASSIGNED TO THE INDIVIDUAL ASSETS, BUT THEN, THE ASSESSEE HAD ASSIGNED AN AMOUNT OF RS.27,24,86,243/ - TO THE ASSETS SOLD AND REMAINING AMOUNT TO THE INVENTORY SOLD. HOWEVER, THE BASIS OF SUCH ALLOCATION IS NOT APPARENT FROM RECORD. APART FROM THAT, WE FIND THAT THOUGH THE ASSESSEE HAD FURTHER ASSIGNED THE SALE CONSIDERATION TO INDIVIDUAL ASSETS WHILE WORKING OUT THE SHORT TERM CAPITAL LOSS ON SALE OF THE ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 38 DEPRECIABLE ASSETS, HOWEVER, NO JUSTIFICATION OR BASIS FOR ASSIGNING SUCH RESPECTIVE COSTS TO THE INDIVIDUAL ASSETS CAN BE GATHERED FROM THE RECORDS. IN FACT, THE SALE CONSIDERATION OF THE DEPRECIABLE ASSETS HAS NEITHER BEEN JUSTIFIED BY THE ASSESSEE O N THE BASIS OF ANY VALUATION REPORT NOR WITH THE COST ALLOCATED BY THE PURCHASER IN ITS BOOKS OF ACCOUNTS . FURTHER, WE FIND THAT THE ASSESSEE WHILE CLAIMING THE SHORT TERM CAPITAL LOSS ON SALE OF DEPRECIABLE ASSETS HAD NOT ASSIGNED ANY COSTS TO THE INTAN GIBLE ASSET IN ITS RETURN OF INCOME, AND RESULTANTLY HAD CLAIMED A LOSS OF RS.49,35,99,792/ - ON TRANSFER OF INTANGIBLE ASSETS. ON THE CONTRARY, NO SUCH LOSS IS REPORTED IN THE ANNUAL REPORT OF THE ASSESSEE COMPANY FOR 2011 - 12. AS REGARDS THE SALE CONSIDE RATION TAKEN BY THE ASSESSEE FOR THE INVENTORY SOLD, THE SAME HAD NEITHER BEEN CORRELATED WITH THE MARKET VALUE OF THE INVENTORY NOR WITH THE COST RECORDED IN THE BOOKS OF ACCOUNT OF THE PURCHASER OR ITS SUBSEQUENT SALE BY THE PURCHASER. IN THE BACKDROP OF THE AFORESAID FACTS, IT CAN SAFELY BE CONCLUDED THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE BASIS FOR ALLOCATION OF THE SALE CONSIDERATION TO THE INDIVIDUAL ASSETS, AND ALSO ITS INVENTORY, THE A.O HAD FOR THE SAID REASON DISALLOWED ITS CLAIM FOR SHORT TERM CAPITAL LOSS OF ( - ) RS.69,72,79,928/ - . IN OUR CONSIDERED VIEW, THE MATTER IN ALL FAIRNESS REQUIRES TO BE REVISITED BY THE A.O , FOR ALLOWING AN OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM OF SHORT TERM CAPITAL LOSS SO RAISED IN ITS RET URN OF INCOME . ACCORDINGLY, WE HEREIN RESTORE THE MATTER TO THE FILE OF THE A.O WITH A DIRECTION TO RE - ADJUDICATE THE SAME. AT THE SAME TIME, THE ASSESSEE IS DIRECTED TO SUBSTANTIATE ITS CLAIM OF SHORT TERM CAPITAL LOSS, AS RAISED IN ITS RETURN OF INCOME, BY JUSTIFYING THE BASIS FOR ALLOCATION OF SALE CONSIDERATION QUA THE DEPRECIABLE ASSETS AND ITS INVENTORY. ALSO, TE A.O SHALL CALL FOR THE BASIS, AS PER WHICH, THE COST ALLOCATION QUA THE INDIVIDUAL DEPRECIABLE ASSETS HAD BEEN CARRIED OUT BY THE ASSESSEE. THE A.O SHALL AFTER CALLING FOR THE REQUISITE DETAILS FROM THE ASSESSEE, AND CONSIDERING THE SAME SHALL THEREIN RE - ADJUDICATE AFRESH THE LATTERS ENTITLEMENT TOWARDS CLAIM OF SHORT TERM CAPITAL LOSS ON SALE OF DEPRECIABLE ASSETS DURING THE YEAR UNDER CONSID ERATION. THE A DDITIONAL G ROUND OF A PPEAL NO. 2 IS ALLOWED FOR STATISTICAL PURPOSE IN TERMS OF OUR AFORESAID OBSERVATION. ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 39 ITA NO. 1460/MUM/2018 A.Y. 2013 - 14 28. WE SHALL NOW TAKE UP THE APPEAL OF THE ASSESSEE WHICH IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 10, MUMBAI, DATED 29.12.2017, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 154 OF THE ACT, DATED 20.06.2016. THE ASSESSEE HAS ASSAI LED THE IMPUGNED ORDER ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF A.O IN NOT SETTING OFF UNABSORBED DEPRECIATION BROUGHT FORWARD FROM EARLIER YEARS AMOUNTING TO RS.66,45,52 ,265/ - AGAINST CAPITAL GAIN. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF BAD DEBTS/ADVANCES WRITTEN OFF AND SUNDRY BALANCES WRITTEN OFF AGGREGATING TO RS.13,83,56,806/ - . 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN CONFIRMING DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS.69,72,79,948/ - ON SALE OF DEPRECIABLE ASSETS. 29 . BRIEFLY STATED, THE ASSESSMENT IN THE CASE OF THE ASSESSEE COMPANY FOR A.Y. 2013 - 14 WAS FRAMED BY THE A.O VIDE HIS ORDER PASSED UNDER SEC. 14 3(3), DATED 31.03.2016 AT AN INCOME OF RS.286,02,72,984/ - . AFTER THE CULMINATION OF THE ASSESSMENT, THE ASSESSEE FILED A LETTER DATED 03.06.2016, THEREIN SEEKING RECTIFICATION OF CERTAIN MISTAKES IN THE BODY OF THE ASSESSMENT ORDER UNDER SEC. 154 OF THE AC T. HOWEVER, THE A.O OBSERVING THAT THE IMPUGNED MISTAKES POINTED OUT BY THE ASSESSEE IN ITS RECTIFICATION APPLICATION WERE NOT IN THE NATURE OF MISTAKE APPARENT FROM RECORD, REJECTED THE CLAIM OF THE ASSESSEE. 30. AGGRIEVED, THE ASSESSEE ASSAILED THE OR DER PASSED BY THE A.O UNDER SEC. 154, DATED 20.06.2016 IN APPEAL BEFORE THE CIT(A). AFTER NECESSARY DELIBERATIONS, IT WAS OBSERVED BY THE CIT(A) THAT THE ISSUES RAISED BY THE ASSESSEE BEFORE HIM WERE BEYOND THE SCOPE OF ADJUSTMENTS PERMISSIBLE UNDER SEC.15 4 OF THE ACT. ACCORDINGLY, THE CIT(A) DRAWING SUPPORT FROM THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.S. BALARAM, INCOME TAX OFFICER VS. VOLKART BROTHERS & ORS. (1971) 82 ITR 50 (SC) , REJECTED THE CLAIM OF THE ASSESSEE FOR THE REASON THAT THE MISTAKES ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 40 POINTED OUT IN THE RECTIFICATION APPLICATION DID NOT FALL WITH IN THE PURVIEW OF RECTIFICATION UNDER SEC. 154 OF THE ACT. ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS DISMISSED. 31. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION AND CONCUR WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES, THAT AS THE ISSUE S RAISED BY THE ASSESSEE IN ITS APPLICATION FOR RECTIFICATION UNDER SEC. 154 ARE NOT FREE FROM DO UBTS AND DEBATE, AND WOULD INVOLVE A LONG DRAWN PROCESS OF REASONING, THE SAME WOULD THUS NOT FALL WITHIN THE REALM OF RECTIFICATION WITHIN THE MEANING OF SEC. 154 OF THE ACT. AS SUCH, FINDING NO INFIRMITY IN THE VIEW TAKEN BY THE LOWER AUTHORITIES, WHO IN OUR CONSIDERED VIEW HAD RIGHTLY REJECTED THE APPLICATION FILED BY THE ASSESSEE UNDER SEC. 154, WE UPHOLD THE SAME. ALTERNATIVELY, WE FIND THAT THAT AS EVEN OTHERWISE ALL THE ISSUES RAISED BY THE ASSESSEE IN ITS PRESENT APPEAL HAD BEEN DEALT BY US WHILE DI SPOSING OFF ITS APPEAL AGAINST THE QUANTUM ASSESSMENT IN ITA NO. 1459/MUM/2018, THEREFORE, ON THE SAID COUNT ITSELF THE PRESENT APPEAL OF THE ASSESSEE WOULD BE RENDERED AS INFRUCTUOUS. BE THAT AS IT MAY, WE CONCUR WITH THE VIEW TAKEN BY THE CIT(A), WHO IN OUR CONSIDERED OPINION HAD RIGHTLY REJECTED THE APPEAL OF THE ASSESSEE, THUS UPHOLD HIS ORDER. 32. THE APPEAL FILED BY THE ASSESSEE IS DISMISSED IN TERMS OF OUR AFORESAID OBSERVATIONS. 33. BEFORE PARTING, WE MAY HEREIN DEAL WITH A PROCEDURAL ISSU E THAT THOUGH THE HEARING OF THE CAPTIONED APPEAL WAS CONCLUDED ON 15.01 .2020, HOWEVER, THIS ORDER IS BEING PRONOUNCED AFTER THE EXPIRY OF 90 DAYS FROM THE DATE OF CONCLUSION OF HEARING. WE FIND THAT RULE 34(5) OF THE INCOME - TAX APPELLATE TRIBUNAL RULES, 1 962, WHICH ENVISAGES THE PROCEDURE FOR PRONOUNCEMENT OF ORDERS, PROVIDES AS FOLLOWS: (5) THE PRONOUNCEMENT MAY BE IN ANY OF THE FOLLOWING MANNERS: (A) THE BENCH MAY PRONOUNCE THE ORDER IMMEDIATELY UPON THE CONCLUSION OF THE HEARING. (B) IN CASE WHERE THE ORDER IS NOT PRONOUNCED IMMEDIATELY ON THE CONCLUSION OF THE HEARING, THE ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 41 BENCH SHALL GIVE A DATE FOR PRONOUNCEMENT. IN A CASE WHERE NO DATE OF PRONOUNCEMENT IS GIVEN BY THE BENCH, EVERY ENDEAVOUR SHALL BE MADE BY THE BENCH TO PRONOUNCE THE ORDER WITHIN 60 DAYS FROM THE DATE ON WHICH THE HEARING OF THE CASE WAS CONCLUDED BUT, WHERE IT IS NOT PRACTICABLE SO TO DO ON THE GROUND OF EXCEPTIONAL AND EXTRAORDINARY CIRCUMSTANCES OF THE CASE, THE BENCH SHALL FIX A FUTURE DAY FOR PRONOUNCEMENT OF THE ORDER, AND SUCH DATE SHALL NOT ORDINARILY BE A DAY BEYOND A FURTHER PERIOD OF 30 DAYS AND DUE NOTICE OF THE DAY SO FIXED SHALL BE GIVEN ON THE NOTICE BOARD. AS SUCH, ORDINARILY THE ORDER ON AN APPEAL SHOULD BE PRONOUNCED BY THE BENCH WITHIN NO MORE THAN 90 DAYS FROM TH E DATE OF CONCLUDING THE HEARING. IT IS, HOWEVER, IMPORTANT TO NOTE THAT THE EXPRESSION ORDINARILY HAS BEEN USED IN THE SAID RULE ITSELF. THIS RULE WAS INSERTED AS A RESULT OF DIRECTIONS OF HONBLE HIGH COURT IN THE CASE OF SHIVSAGAR VEG RESTAURANT VS AC IT [(2009) 317 ITR 433 (BOM)] WHEREIN IT WAS INTER ALIA, OBSERVED AS UNDER: WE, THEREFORE, DIRECT THE PRESIDENT OF THE APPELLATE TRIBUNAL TO FRAME AND LAY DOWN THE GUIDELINES IN THE SIMILAR LINES AS ARE LAID DOWN BY THE APEX COURT IN THE CASE OF ANIL RAI (SUPRA) AND TO ISSUE APPROPRIATE ADMINISTRATIVE DIRECTIONS TO ALL THE BENCHES OF THE TRIBUNAL IN THAT BEHALF. WE HOPE AND TRUST THAT SUITABLE GUIDELINES SHALL BE FRAMED AND ISSUED BY THE PRESIDENT OF THE APPELLATE TRIBUNAL WITHIN SHORTEST REASONABLE TIME AND FOLLOWED STRICTLY BY ALL THE BENCHES OF THE TRIBUNAL. IN THE MEANWHILE (EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW), ALL THE REVISIONAL AND APPELLATE AUTHORITIES UNDER THE INCOME - TAX ACT ARE DIRECTED TO DECIDE MATTERS HEARD BY THEM WITHIN A PERIOD OF THREE MONTHS FROM THE DATE CASE IS CLOSED FOR JUDGMENT. IN THE RULE SO FRAMED, AS A RESULT OF THESE DIRECTIONS, THE EXPRESSION ORDINARILY HAS BEEN INSERTED IN THE REQUIREMENT TO PRONOUNCE THE ORDER WITHIN A PERIOD OF 90 DAYS. THE QUESTION THEN ARISES WHETHER OR NOT THE PASSING OF THIS ORDER, BEYOND A PERIOD OF NINETY DAYS IN THE CASE BEFORE US WAS NECESSITATED BY ANY EXTRAORDINARY CIRCUMSTANCES. 34 . WE FIND THAT THE AFORESAID ISSUE AFTER EXHAUSTIVE DELIBERATIONS HAD BEEN ANSWERED BY A COORDINATE B ENCH OF THE TRIBUNAL VIZ. ITAT, MUMBAI F BENCH IN DCIT, CENTRAL CIRCLE - 3(2), MUMBAI VS. JSW LIMITED & ORS. [ITA NO. 6264/MUM/18; DATED 14/05/2020, WHEREIN IT WAS OBSERVED AS UNDER: ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 42 LET US IN THIS LIGHT REVERT TO THE PREVAILING SITUATION IN THE COUNTR Y. ON 24TH MARCH, 2020, HONBLE PRIME MINISTER OF INDIA TOOK THE BOLD STEP OF IMPOSING A NATIONWIDE LOCKDOWN, FOR 21 DAYS, TO PREVENT THE SPREAD OF COVID 19 EPIDEMIC, AND THIS LOCKDOWN WAS EXTENDED FROM TIME TO TIME. THE EPIDEMIC SITUATION BEING GRAVE, THE RE WAS NOT MUCH OF A RELAXATION IN SUBSEQUENT LOCKDOWNS ALSO. IN ANY CASE, THERE WAS UNPRECEDENTED DISRUPTION OF JUDICIAL WOK ALL OVER THE COUNTRY. AS A MATTER OF FACT, IT HAS BEEN SUCH AN UNPRECEDENTED SITUATION, CAUSING DISRUPTION IN THE FUNCTIONING OF J UDICIAL MACHINERY, THAT HONBLE SUPREME COURT OF INDIA, IN AN UNPRECEDENTED ORDER IN THE HISTORY OF INDIA AND VIDE ORDER DATED 6.5.2020 READ WITH ORDER DATED 23.3.2020, EXTENDED THE LIMITATION TO EXCLUDE NOT ONLY THIS LOCKDOWN PERIOD BUT ALSO A FEW MORE DA YS PRIOR TO, AND AFTER, THE LOCKDOWN BY OBSERVING THAT IN CASE THE LIMITATION EXPIRED AFTER 15.03.2020 THEN THE PERIOD FROM 15.03.2020 TILL THE DATE ON WHICH THE LOCKDOWN IS LIFTED IN THE JURISDICTIONAL AREA WHERE THE DISPUTE LIES OR WHERE THE CAUSE OF AC TION ARISES SHALL BE EXTENDED FOR A PERIOD OF 15 DAYS AFTER THE LIFTING OF LOCKDOWN. HONBLE BOMBAY HIGH COURT, IN AN ORDER DATED 15TH APRIL 2020, HAS, BESIDES EXTENDING THE VALIDITY OF ALL INTERIM ORDERS, HAS ALSO OBSERVED THAT, IT IS ALSO CLARIFIED THA T WHILE CALCULATING TIME FOR DISPOSAL OF MATTERS MADE TIME - BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCORDINGLY, AND ALSO OBSERVED THAT ARRANGEMENT CONTINU ED BY AN ORDER DATED 26TH MARCH 2020 TILL 30TH APRIL 2020 SHALL CONTINUE FURTHER TILL 15TH JUNE 2020. IT HAS BEEN AN UNPRECEDENTED SITUATION NOT ONLY IN INDIA BUT ALL OVER THE WORLD. GOVERNMENT OF INDIA HAS, VIDE NOTIFICATION DATED 19TH FEBRUARY 2020, TAK EN THE STAND THAT, THE CORONAVIRUS SHOULD BE CONSIDERED A CASE OF NATURAL CALAMITY AND FMC (I.E. FORCE MAJEURE CLAUSE) MAYBE INVOKED, WHEREVER CONSIDERED APPROPRIATE, FOLLOWING THE DUE PROCEDURE. THE TERM FORCE MAJEURE HAS BEEN DEFINED IN BLACKS LAW DICTIONARY, AS AN EVENT OR EFFECT THAT CAN BE NEITHER ANTICIPATED NOR CONTROLLED WHEN SUCH IS THE POSITION, AND IT IS OFFICIALLY SO NOTIFIED BY THE GOVERNMENT OF INDIA AND THE COVID - 19 EPIDEMIC HAS BEEN NOTIFIED AS A DISASTER UNDER THE NATIONAL DISASTER MANAGEMENT ACT, 2005, AND ALSO IN THE LIGHT OF THE DISCUSSIONS ABOVE, THE PERIOD DURING WHICH LOCKDOWN WAS IN FORCE CAN BE ANYTHING BUT AN ORDINARY PERIOD. 10. IN THE LIGHT OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT RATHER THAN TAKING A PEDANTIC VIEW OF THE RULE REQUIRING PRONOUNCEMENT OF ORDERS WITHIN 90 DAYS, DISREGARDING THE IMPORTANT FACT THAT THE ENTIRE COUNTRY WAS IN LOCKDOWN, WE SHOULD COMPUTE THE PERIOD OF 90 DAYS BY EXCLUDING AT LEAST THE PERIOD DURING WHICH THE LOCKDOWN WAS I N FORCE. WE MUST FACTOR GROUND REALITIES IN MIND WHILE INTERPRETING THE TIME LIMIT FOR THE PRONOUNCEMENT OF THE ORDER. LAW IS NOT BROODING OMNIPOTENCE IN THE SKY. IT IS A PRAGMATIC TOOL OF THE SOCIAL ORDER. THE TENETS OF LAW BEING ENACTED ON THE BASIS OF P RAGMATISM, AND THAT IS HOW THE LAW IS REQUIRED TO INTERPRETED. THE INTERPRETATION SO ASSIGNED BY US IS NOT ONLY IN CONSONANCE WITH THE LETTER AND SPIRIT OF RULE 34(5) BUT IS ALSO A PRAGMATIC APPROACH AT A TIME WHEN A DISASTER, NOTIFIED UNDER THE DISASTER M ANAGEMENT ACT 2005, IS CAUSING UNPRECEDENTED DISRUPTION IN THE FUNCTIONING OF OUR JUSTICE DELIVERY SYSTEM. UNDOUBTEDLY, IN THE CASE OF OTTERS CLUB VS DIT [(2017) 392 ITR 244 (BOM)], HONBLE BOMBAY HIGH ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 43 COURT DID NOT APPROVE AN ORDER BEING PASSED BY THE TRI BUNAL BEYOND A PERIOD OF 90 DAYS, BUT THEN IN THE PRESENT SITUATION HONBLE BOMBAY HIGH COURT ITSELF HAS, VIDE JUDGMENT DATED 15TH APRIL 2020, HELD THAT DIRECTED WHILE CALCULATING THE TIME FOR DISPOSAL OF MATTERS MADE TIME BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCORDINGLY. THE EXTRAORDINARY STEPS TAKEN SUO MOTU BY THE HONBLE HIGH COURT AND HONBLE SUPREME COURT ALSO INDICATE THAT THIS PERIOD OF LOCKDOWN CANNOT BE TREATED AS AN ORDINARY PERIOD DURING WHICH THE NORMAL TIME LIMITS ARE TO REMAIN IN FORCE. IN OUR CONSIDERED VIEW, EVEN WITHOUT THE WORDS ORDINARILY, IN THE LIGHT OF THE ABOVE ANALYSIS OF THE LEGAL POSITION, THE PERIOD DURING WHICH LOCKOUT WAS I N FORCE IS TO EXCLUDED FOR THE PURPOSE OF TIME LIMITS SET OUT IN RULE 34(5) OF THE APPELLATE TRIBUNAL RULES, 1963. VIEWED THUS, THE EXCEPTION, TO 90 - DAY TIME - LIMIT FOR PRONOUNCEMENT OF ORDERS, INHERENT IN RULE 34(5)(C), WITH RESPECT TO THE PRONOUNCEMENT OF ORDERS WITHIN NINETY DAYS, CLEARLY COMES INTO PLAY IN THE PRESENT CASE. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID OBSERVATIONS OF THE TRIBUNAL AND FINDING OURSELVES TO BE IN AGREEMENT WITH THE SAME, THEREIN RESPECTFULLY FOLLOW THE SAME. AS SUCH, WE ARE OF THE CONSIDERED VIEW THAT THE PERIOD DURING WHICH THE LOCKOUT WAS IN FORCE SHALL STAND EXCLUDED FOR THE PURPOSE OF WORKING OUT THE TIME LIMIT FOR PRONOUNCEMENT ORDERS, AS ENVISAGED IN RULE 34(5) OF THE APPELLATE TRIBUNAL RULES, 1963. 35. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 1459/MUM/2018 IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS, WHILE FOR THE APPEAL IN ITA NO. 1460/MUM/2018 IS DISMISSED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE T RIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD . SD/ - SD/ - ( PRAMOD KUMAR) (RAVISH SOOD) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; 16 .07 .2020 P.S ROHIT ITA NOS. 1459 - 1460/MUM/2018 A.Y. 2013 - 14 FUTURA POLYSTER LTD. VS ITO - 6(3)(1) 44 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI