M/s Kerala Small Industries Development Corpn Ltd., Trivandrum V. Income Tax Officer, Trivandrum

ITA 149/COCH/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64744 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 05-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 24-03-2009
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: PANKAJ C GOVIND
• Keywords: Bad and doubtful debts; Revised return
• Section: 37(1); 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO.149 /COCH/2009 ASSESSMENT YEAR: 2003-04 M/S. KERALA SMALL INDUSTRIES DEVELOPMENT CORPORATION LTD. P.B. NO. 50, SANTHI NAGAR, TRIVANDRUM. [PAN:AAACK 9435C] VS. THE INCOME TAX OFFICER, WARD- 1(1), TRIVANDRUM. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI PANKAJ C. GOVIND, CA REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR DATE OF HEARING 05/07/2012 DATE OF PRONOUNCEMENT 10/08/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 03-11-2008 PASSED BY THE LD. CIT(A)-I, TRIVANDRUM AND IT RELATES TO T HE ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE IS ASSAILING THE DECISION OF THE LD . CIT(A) IN NOT CONSIDERING THE REVISED RETURN FILED U/S. 139(5) OF THE ACT, THOUGH IT WAS FILED BELATEDLY AND ALSO IN CONFIRMING THE DISALLOWANCE OF EXPENSES RELATING TO PENAL INTEREST AND DAMAGES PAID TO THE GOVERNMENT OF KERALA AND VSSC RESPECTIVELY. 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE- COMPANY IS A WHOLLY-OWNED GOVERNMENT OF KERALA UNDE RTAKING ENGAGED IN THE PRODUCTION AND PROMOTION OF PRODUCTS OF SMALL SCALE INDUSTRIES IN THE STATE OF KERALA. IT IS STATED THAT IT IS HAVING A NUMBER OF MANUFACTURI NG UNITS THROUGH THE STATE OF KERALA. IT ORIGINALLY FILED ITS RETURN OF INCOME FOR THE YE AR UNDER CONSIDERATION ON 30-11-2004 I.T.A. NO.149/COCH/2009 2 DECLARING A LOSS OF RS. 1.45 CRORES. IT WAS STATE D THAT THE ORIGINAL RETURN OF INCOME WAS FILED ON THE BASIS OF PROVISIONAL ACCOUNTS, SINCE THE AUDIT WAS NOT COMPLETED BY THAT TIME. THE CASE WAS TAKEN FOR SCRUTINY BY THE ASSESS ING OFFICER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED REVISED RETURN OF INCOME ON THE BASIS OF AUDITED ACCOUNTS AND IN THE REVISED RETURN THERE WA S ENHANCEMENT OF TOTAL LOSS DECLARED BY THE ASSESSEE. IT WAS STATED THAT CERTA IN EXPENSES WERE NOT ADEQUATELY ACCOUNTED FOR WHILE PREPARING PROVISIONAL ACCOUNTS. DURING THE COURSE OF AUDIT, THE MISTAKES WERE NOTICED AND THEY WERE CORRECTED, WHIC H HAS RESULTED IN INCREASE IN SOME OF THE EXPENDITURE CLAIMS. THE DETAILS OF THE DIF FERENCE BETWEEN THE ORIGINAL RETURN OF INCOME AND THE REVISED COMPUTATION OF INCOME MADE B Y THE ASSESSEE ARE FURNISHED BELOW:- . A) ADDITIONAL PROVISION MADE ON ACCOUNT OF ENHANCEM ENTS IN STAFF/ EMPLOYEE BENEFITS SUCH AS DA, ELSS AND GRATUITY AMO UNTING TO RS. 1,22,41,975 B) ADDITIONAL PROVISION MAD EON ACCOUNT OF INTEREST PAYABLE ON UNSECURED LOANS IN THE AUDITED ACCOUNTS RS. 24,73,872 C) ADDITIONAL PROVISION MADE AGAINST BAD AND DOUBTF UL DEBTS RS. 39,34,104 D) DIFFERENCE IN VALUATION OF CLOSING STOCK RS. 7,96,28 8 TOTAL RS. 1,94,46,239 LESS: AMOUNT PROVIDED FOR AS DOUBTFUL DEBTS RECOVERED DURING THE YEAR ADJUSTED AS INCO ME RS. 1,78,981 PRIOR PERIOD ADJUSTMENTS (INCO ME) AS PER AUDITED ACCOUNTS RS. 4,82,147 RS. 6,61,128 DIFFERENCE RS .1,87,85,111 ======== 4. A REVISED RETURN HAS TO BE FILED U/S 139(5) OF THE ACT BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR O R BEFORE THE COMPLETION OF ASSESSMENT, WHICHEVER IS EARLIER. HENCE, THE REVIS ED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION SHOULD HAVE BEEN FILED BEFORE 3 1.3.2005. IN THE INSTANT CASE, I.T.A. NO.149/COCH/2009 3 HOWEVER, THE REVISED RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 14.2.2006, AS THE STATUTORY AUDIT ITSELF WAS COMPLETED ON 30.05.2005, I.E., AFTER THE STATUTORY TIME LIMIT STATED ABOVE. SINCE THE REVISED RETURN OF INCOME W AS FILED BEYOND THE STATUTORY TIME LIMIT PRESCRIBED U/S 139(5) OF THE ACT, THE AO IGNO RED THE SAME AND COMPLETED THE ASSESSMENT ON THE BASIS OF ORIGINAL RETURN OF INCOM E. 5. FROM THE TAX AUDIT REPORT FILED BY THE ASSES SEE, IT WAS NOTICED THAT THE ASSESSEE HAS PAID A SUM OF RS. 74,594/- AS PENAL INTEREST ON GOVERNMENT LOAN AND FURTHER, IT HAS PAID A SUM OF RS. 15,230/- AS DAMAGES TO VSSC. THE ASSESSING OFFICER DISALLOWED BOTH THE AMOUNTS BY HOLDING THAT THE PAYMENTS WHICH ARE PENAL IN NATURE SHOULD NOT BE ALLOWED UNDER THE INCOME TAX ACT. THE LD. CIT(A) C ONFIRMED THE ORDER OF THE ASSESSING OFFICER. HENCE, THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WITH REGARD TO THE ISSUE RELATING TO THE REVISED RETURN OF INCOME, THE LD. A.R SUBMITTED THAT THE ASSESSEE HAS CLAIMED ADDITIONAL EXPENDITURE IN THE REVISED R ETURN OF INCOME AND AS PER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE (INDIA) LTD. VS. CIT (284 ITR 323), NEW DEDUCTIONS CAN BE CLAIMED BY FILING R EVISED RETURN OF INCOME. ACCORDINGLY HE SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE ACCEPTED THE REVISED RETURN FILED BY THE ASSESSEE. HE ALSO RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF COCHIN DATED 28-07-2009 IN THE CASE OF C.W.P. TA YLOR IN I.T.A. NO. 695/COCH/2008 TO SUBMIT THAT THE LD. CIT(A) IS ENTITLED TO CONSIDER THE ADDITIONAL CLAIMS, AS THE HONBLE SUPREME COURT, IN THE CASE OF GOETTZE (INDIA) LTD, HAS PUT A BAR ONLY ON THE ASSESSING OFFICER. 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE ASSESSEE HAS FILED THE REVISED RETURN OF INCOME BEYOND THE TIME LIMIT PRESCRIBED U /S. 139(5) OF THE ACT. HENCE, THE ASSESSING OFFICER IS NOT STATUTORILY ENTITLED TO CO NSIDER THE SAID REVISED RETURN OF INCOME. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WE HAVE ALREADY EXTRACTED THE DETAILS OF ADDITIONAL CLAIMS OF EXPENDITURE IN PARAGRAPH 3 SUPRA. I.T.A. NO.149/COCH/2009 4 ON A PERUSAL OF THE SAID DETAILS, WE NOTICE THAT TH E ASSESSEE DID NOT MAKE ANY CLAIM FOR FRESH DEDUCTIONS, BUT HAS ONLY ENHANCED THE EXPENDI TURE CLAIMS, WHICH HAVE ALREADY BEEN MADE IN THE ORIGINAL RETURN OF INCOME. THE REA SON FOR MAKING SUCH ADDITIONAL CLAIMS HAS ALSO BEEN DULY EXPLAINED BY THE ASSESSEE , I.E., THE ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSESSEE ON THE BASIS OF THE PROVI SIONAL ACCOUNTS AND UPON COMPLETION OF THE STATUTORY AUDIT, THE EXACT AMOUNT OF CLAIM U NDER VARIOUS HEADS OF EXPENDITURE COULD BE FINALISED, WHICH HAS RESULTED IN ENHANCEME NT OF THE SAID CLAIMS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E IS HAVING NUMBER OF BRANCHES THROUGHOUT THE STATE OF KERALA AND THE ASSESSEE BEI NG A GOVERNMENT OWNED COMPANY, IT TOOK CONSIDERABLE TIME FOR CONSOLIDATION OF ACCO UNTS OF ALL THE BRANCHES AND FINALISATION OF AUDIT. HE FURTHER SUBMITTED THAT T HE EXACT QUANTUM OF EXPENDITURE CLAIMS COULD BE DETERMINED ONLY DURING THE COURSE OF FINAL ISATION OF AUDIT IN SUCH KIND OF COMPANIES HAVING LOT OF BRANCHES. ACCORDINGLY, HE SUBMITTED THAT THE TAX AUTHORITIES SHOULD HAVE CONSIDERED THE ADDITIONAL CLAIM OF EXPE NDITURES BY DULY CONSIDERING THE PRACTICAL DIFFICULTIES FACED BY THE ASSESSEE. 9. THE ISSUE IN THE CASE OF GOETZE (INDIA) LTD, S UPRA, WAS WHETHER THE ASSESSEE COULD MAKE A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN OF INCOME. HOWEVER, IN THE INSTANT CASE, THE ISSUE IS WHETHER THE AO COULD IGNORE THE ENHANCEMENT OF EXPENDITURE, WHICH HAS ALREADY BEEN CLAIMED. HENCE, WE ARE OF THE VIEW THAT THE DECISION RENDERED IN THE CASE OF GOET ZE (INDIA) LTD DOES NOT APPLY TO THE FACTS OF THE INSTANT CASE. IN OUR VIEW, THE DECIS ION RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHELLY PRODUCTS AND AN OTHER REPORTED IN 261 ITR 367 IS APPLICABLE. WE EXTRACT BELOW THE OBSERVATIONS MADE BY THE HONBLE SUPREME COURT AT PG. 382:- WE CANNOT LOSE SIGHT OF THE FACT THAT THE FAILURE OR INABILITY OF THE REVENUE TO FRAME A FRESH ASSESSMENT SHOULD NOT PLACE THE ASSES SEE IN A MORE DISADVANTAGEOUS POSITION THAN IN WHAT HE WOULD HAVE BEEN IF A FRESH ASSESSMENT WAS MADE. IN A CASE WHERE AN ASSESSEE CHOOSES TO DEPOSIT BY W AY OF ABUNDANT CAUTION ADVANCE TAX OR SELF-ASSESSMENT TA X WHICH IS IN I.T.A. NO.149/COCH/2009 5 EXCESS OF HIS LIABILITY ON THE BASIS OF THE RETURN FURNISHED OR THERE IS ANY ARITHMETICAL ERROR OR INACCURACY, IT IS OPEN TO HIM TO CLAIM REFUND OF THE EXCESS TAX PAID IN THE COURSE OF THE ASSESSMENT PROCEEDING. HE CAN CERTAINLY MAKE SUCH A CLAIM ALSO BEFORE THE CON CERNED AUTHORITY CALCULATING THE REFUND. SIMILARLY, IF HE HAS BY MI STAKE OR INADVERTENCE OR ON ACCOUNT OF IGNORANCE, INCLUDED IN HIS INCOME ANY AMOUNT WHICH IS EXEMPTED FROM PAYMENT OF INCOME-TAX, OR IS NOT INCO ME WITHIN THE CONTEMPLATION OF LAW, HE MAY LIKEWISE BRING THIS TO THE NOTICE OF THE ASSESSING AUTHORITY, WHICH IF SATISFIED, MAY GRANT HIM RELIEF AND REFUND THE TAX PAID IN EXCESS, IF ANY. SUCH MATTERS CAN BE BROUGHT TO THE NOTICE OF THE CONCERNED AUTHORITY IN A CASE WHEN REFUND IS DU E AND PAYABLE, AND THE AUTHORITY CONCERNED, ON BEING SATISFIED, SHALL GRAN T APPROPRIATE RELIEF. IN CASES GOVERNED BY SECTION 240 OF THE ACT, AN OBLIGATION I S CAST UPON THE REVENUE TO REFUND THE AMOUNT TO THE ASSESSEE WITHOUT HIS HAVIN G TO MAKE ANY CLAIM IN THAT BEHALF. IN APPROPRIATE CASES, THEREFORE, IT IS OPEN TO THE ASSESSEE TO BRING FACTS TO THE NOTICE OF THE CONCERNED AUTHORITY ON THE BAS IS OF THE RETURN FURNISHED, WHICH MAY HAVE A BEARING ON THE QUANTUM OF THE REFU ND, SUCH AS THOSE THE ASSESSEE COULD HAVE URGED U/S. 237 OF THE ACT. THE CONCERNED AUTHORITY, FOR ITS LIMITED PURPOSE OF CALCULATING THE AMOUNT TO BE REF UNDED U/S. 240 OF THE ACT, MAY TAKE ALL SUCH FACTS INTO CONSIDERATION AND CALC ULATE THE AMOUNT TO BE REFUNDED. SO VIEWED, AN ASSESSEE WILL NOT BE PLACED IN A MORE DISADVANTAGEOUS POSITION THAN WHAT HE WOULD HAVE BEEN, HAD AN ASSES SMENT BEEN MADE IN ACCORDANCE WITH LAW. 10. THOUGH THE HONBLE SUPREME COURT HAS MADE T HE ABOVE OBSERVATIONS IN THE CONTEXT OF SEC. 237 TO SEC. 240 RELATING TO REFUND OF TAX, YET IN OUR VIEW, THE RATIO OF THE SAID DECISION CAN BE GAINFULLY APPLIED TO THE FACTS OF THE INSTANT CASE ALSO. IT IS FOR THE REASON THAT THE COMPUTATION OF CORRECT AMOUNT OF RE FUND IS POSSIBLE ONLY IF CORRECT AMOUNT OF TOTAL INCOME IS DETERMINED. IN THE IN STANT CASE, THE ASSESSEE HAD CLAIMED CERTAIN EXPENSES ON THE BASIS OF PROVISIONAL ACCOUN TS AND THE QUANTUM OF SUCH EXPENSES GOT ENHANCED AT THE TIME OF FINALISATION O F AUDIT. THIS HAS RESULTED IN I.T.A. NO.149/COCH/2009 6 MISTAKES IN THE CLAIM OF SUCH EXPENSES AND SUCH MIS TAKES WERE SOUGHT TO BE CORRECTED OR BROUGHT TO THE NOTICE OF THE AO DURING THE COURS E OF ASSESSMENT PROCEEDINGS. ON AN ABUNDANT CAUTION, THE ASSESSEE HAS BROUGHT THE MIST AKES TO THE NOTICE OF THE AO BY FILING A BELATED REVISED RETURN OF INCOME. AS OBSE RVED BY THE HONBLE SUPREME COURT IN THE CASE OF SHELLY PRODUCTS, SUPRA, THE INABILITY O F THE DEPARTMENT TO CONSIDER THE BELATED REVISED RETURN SHOULD NOT PLACE THE ASSESSE E IN A MORE DISADVANTAGEOUS POSITION. HENCE, WE ARE OF THE VIEW THAT THE AO, W HILE FRAMING THE ASSESSMENT, IS VERY MUCH ENTITLED TO CONSIDER THE ADDITIONAL EXPENDITUR E CLAIMS, WHICH ARE IN THE FORM OF CORRECTION OF ERRORS AND MISTAKES, MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS THE AO IS DUTY BOUND TO DETERMINE THE CORRECT TO TAL INCOME. IN THE INSTANT CASE, THE FAILURE OF THE AO TO CONSIDER THE ADDITIONAL EXPEND ITURE CLAIMS MADE IN THE BELATED REVISED RETURN HAS PUT THE ASSESSEE IN A DISADVANTA GEOUS POSITION, WHICH SHOULD HAVE BEEN AVOIDED BY CONSIDERING THE PRACTICAL DIFFICULT IES OF THE ASSESSEE. HENCE, THIS ISSUE REQUIRES RE-EXAMINATION AT THE END OF THE AO. 11. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE D IRECTION TO REDO THE ASSESSMENT BY CONSIDERING THE ADDITIONAL CLAIMS MADE IN THE REVIS ED RETURN. 12. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF PENAL INTEREST AND DAMAGES PAID TO THE GOVERNMENT OF KERALA AND A CONCERN NAMED VSSC. ACCORDING TO THE LD A.R, THE SAID PAYMENTS ARE NOT IN THE NATURE OF EXPENSE INCU RRED FOR ANY PURPOSE, WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. WE NOTICE T HAT THE TAX AUTHORITIES HAVE MADE THE DISALLOWANCE BY CONSIDERING THE NOMENCLATURE PENAL AND DAMAGES. THEY HAVE NOT EXAMINED THESE PAYMENTS IN THE CONTEXT OF EXPLANATI ON TO SEC. 37(1). ACCORDINGLY, IN OUR VIEW, THIS ISSUE ALSO NEEDS RE-EXAMINATION. AC CORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE ISSUE AFRESH IN THE CONTEXT OF EXPLANAT ION TO SEC. 37(1) OF THE ACT. I.T.A. NO.149/COCH/2009 7 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY O N 10-08-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 10TH AUGUST 2012 GJ COPY TO: 1. M/S. KERALA SMALL INDUSTRIES DEVELOPMENT CORPORA TION LTD., P.B. NO. 50, SANTHI NAGAR, TRIVANDRUM. 2.THE INCOME TAX OFFICER, WARD-1(1), TRIVANDRUM. 3.THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, TRIVAN DRUM 4.THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (A SSISTANT REGISTRAR) I.T.A.T, COCHIN