L.M.S.Gani Mohamed, CHENNAI V. ACIT, CHENNAI

ITA 1535/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9224 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 18-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-07-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: G BASKAR
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1 5 3 5 /MDS/2015 / ASSESSMENT YEAR :200 8 - 0 9 M/S. L.M.S. GANI MOHAMED, 5/2, MACFARE LANE, SAMI STREET, PERIAMET, CHENNAI 600 0 0 3 . [PAN: A A A F L 1458M ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX , BUSINESS CIRCLE XI, CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE / RESPONDENT BY : SHRI A. B . KOLI , J CIT / DATE OF HEARING : 2 4 . 0 5 .201 6 / DATE OF P RONOUNCEMENT : 31 . 0 5 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 5 , CHENNAI , DATED 11 . 03 .20 1 5 RELEVANT TO THE ASSESSMENT YEAR 200 8 - 0 9 BY RAISING FOLLOWING GROUNDS: 1. THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF RENT OF RS.2,52,000/ - INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF IT ACT. I.T.A. NO . 1 5 3 5 /M/ 15 2 2. THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF EXPORT FREIGHT TO THE EXTENT OF RS.40,36,211/ - INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE INCOME - TAX ACT. 3. THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF FORW ARDING CHARGES TO THE EXTENT OF RS.4,57,630/ - INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE INCOME - TAX ACT. 4. THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF FREIGHT CHARGES TO THE EXTENT OF RS. 6,71,438/ - INVOKING THE PR OVISIONS OF SEC. 40(A)(IA) OF THE INCOME - TAX ACT. 5. THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF SECURITY CHARGES OF RS.2,62,007/ - INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE INCOME - TAX ACT. 6. THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF EFFLUENT TREATMENT CHARGES OF RS. 2,46,762/ - INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE INCOME - TAX ACT. 7. THE COMMISSIONER OF INCOME - TAX (APPEALS) WENT WRONG IN HOLDING THAT THE DISALLOWA NCE U/S.40(A)(IA) IS APPLICABLE WHETHER OR NOT THE SUMS ARE ACTUALLY 'PAID' OR 'PAYABLE', IGNORING THE PRECEDENTS CITED BEFORE HIM. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN LEATHER AND FILED THE RETURN OF INCOME FOR T HE ASSESSMENT YEAR 2008 - 09 ON 21.11.2008 BY DECLARING TOTAL INCOME OF .7,43,640/ - . THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS COMPLETED BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT .4,73,65,650/ - BY MAKING DISALL OWANCE OF EXPENDITURE FOR NON DEDUCTION OF TDS AND CLAIM OF DEDUCTION OF BAD DEBTS. THE ADDITION MADE ON ACCOUNT OF NON DEDUCTION OF TDS WAS .3,43,22,013/ - [JOB WORK .2,57,35,702 + OTHER I.T.A. NO . 1 5 3 5 /M/ 15 3 EXPENSES .81,53,811 + RENT .4,32,500]. THE ASSESSEE WENT ON APPEA L BEFORE THE LD. CIT(A) IV, CHENNAI. THE LD. CIT(A) PASSED AN ORDER IN ITA NO. 173/10 - 11/A - IV DT. 05.12.2011 BY DELETING ENTIRE ADDITION MADE ON ACCOUNT OF BAD DEBTS. THE LD. CIT(A) DELETED ADDITION MADE ON ACCOUNT OF JOB WORK CHARGES OF .2,57,35,702/ - , F OR THE REMAINING EXPENDITURE, THE LD. CIT(A) PARTIALLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. FOR THIS GIVING EFFECT WAS GIVEN ON 21.02.2012 UNDER SECTION 155 R.W.S. 250 OF THE ACT AND GROSS NET DEMAND OF .24,13,750/ - WAS DETERMINED. THE DE PARTMENT FILED AN APPEAL BEFORE THE ITAT IN I.T.A. NO. 621/(MDS)/2012 AGAINST DELETION MADE WITH RESPECT TO BAD DEBTS AND JOB WORK CHARGES. THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL IN I.T.A. NO. 194/MDS/2012 BEFORE THE SAME BENCH WITH RESPECT TO A DDITIONS CONFIRMED BY THE LD. CIT(A) IV ON ACCOUNT OF OTHER EXPENSES AND RENT. THE ITAT VIDE ITS ORDER DATED 24.05.2012 CONFIRMED THE DELETION MADE BY THE LD. CIT(A) ON ACCOUNT OF BAD DEBT AND JOB WORK CHARGES AND DISMISSED THE APPEAL OF THE REVENUE. AT TH E SAME TIME, REVERTED THE MATTER OF DISALLOWANCE UNDER SECTION 40(A)(IA) OF OTHER EXPENSES AND SENT THE FILE TO THE ASSESSING OFFICER BY STATING AS FOLLOWS: 'IN THE APPEAL FILED BY THE ASSESSEE THE QUESTION IS REGARDING THE DISALLOWANCE MADE UNDER SECTION 40(A) (IA) FOR THE REASON OF NOT DEDUCTING TAX AT SOURCE. IN THIS CASE IT IS TO BE SEEN THAT TO WHAT EXTENT THE DUES HAVE BEEN PAID BY THE ASSESSEE AND REMAINED PAYABLE BY THE END OF THE PREVIOUS YEAR. ONCE THESE DETAILS ARE LOOKED INTO, THE ASSESSING OFFI CER HAS TO DECIDE THE ISSUE IN THE LIGHT OF THE SPECIAL BENCH DECISION OF THE INCOME - TAX APPELLATE TRIBUNAL, VISAKHAPATNAM, I.T.A. NO . 1 5 3 5 /M/ 15 4 IN THE CASE OF MERILYN SHIPPING & TRANSPORT VS. ACIT, REPORTED IN 70 DTR (VISAKHA) (SB) (TRIB) 81. THIS MATTER IS, THEREFORE, REMITT ED BACK TO THE ASSESSING OFFICER TO DECIDE AFRESH AS INDICATED ABOVE. ' 3. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER HAS ISSUED HEARING LETTER TO THE ASSESSEE ON 12.04.2013. ACCORDINGLY, THE AR OF THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND FILED WRITTEN SUBMISSIONS. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND SINCE THE ABOVE SPECIAL BENCH DECISION OF THE ITAT VISAKHAPATNAM IS UNDER INTERIM SUSPENSION BY THE ORDER OF THE HON BLE HIGH COURT OF ANDHRA PRADESH, THE ASSESSING OFFICER PROCEEDED TO DECIDE THE ISSUE AS APPLICABLE TO TDS PROVISIONS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO CONSIDERING THE TDS PROVISIONS, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 155 R.W.S. 143(3) R.W.S. 250 OF THE A CT BY SUSTAINING THE ADDITIONS ALREADY MADE UNDER SECTION 143(3) OF THE ACT AND CONFIRMED BY THE LD. CIT(A). 4 . THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) SUSTAINED THE ADDITIONS ALREADY CONFIRMED IN THE FIRST ROUND OF LITIGATION BY FOLLOWING THE DECISIONS IN THE CASE OF CIT V. CRESENT EXPORT SYNDICATE [216 TAXMAN 258 (CAL)] AND CIT V. SIKANDARKHAN N. TUNVAR [2013] 357 ITR 312 (GUJ). I.T.A. NO . 1 5 3 5 /M/ 15 5 5. ON BEING AGGRIEVED, THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUES INVOLVED IN THE APPE AL ARE SQUARELY COVERED BY VARIOUS DECISIONS OF THE COORDINATE BENCH OF THE TRIBUNAL INCLUDING THE DECISION IN THE CASE OF SHRI N. PALANIVELU V. ITO IN [2015] 40 ITR (TRIB) 325 (CHENNAI) AND THE SAME SHOULD BE FOLLOWED IN THE PRESENT CASE ALSO. 6. PER CONTRA, BY RELYING ON THE DECISIONS IN THE CASE OF CIT V. CRESENT EXPORT SYNDICATE [216 TAXMAN 258 (CAL)] AND CIT V. SIKAN DARKHAN N. TUNVAR [2013] 357 ITR 312 (GUJ), THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSING OFFICER, BY INVOKING SECTION 40(A)(IA) OF THE ACT, DISALLOWED VARIOUS EXPENSES CLAIMED BY THE ASSESSEE SINCE THE ASSESSEE FAILED TO DEDUCT TDS IN THE SECOND ROUND OF LITIGATION ALSO ON THE GROUND THAT THE ABOVE SPECIAL BENCH DECISION OF THE ITAT VISAKHAPATNAM IS UNDER INTERI M SUSPENSION BY THE ORDER OF THE HON BLE HIGH COURT OF ANDHRA PRADESH . ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER. NOW THE CASE OF THE ASSESSEE IS THAT IT HAS ALREADY PAID ALL THE AMOUNTS AND NO AMOUNT IS PENDING. ONCE ALREADY AMOUNTS ARE PAID, THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE I.T.A. NO . 1 5 3 5 /M/ 15 6 CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL.CIT (SUPRA) SQUARELY APPLIES TO THE CASE OF THE ASSESSEE. A GAINST THE DECISION OF THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. VECTOR SHIPPING SERVICES P. LTD. 357 ITR 642(ALL) , WHEREIN , THE DECISION IN THE CASE OF M ERILYN SHIPPING AND TRANSPORTS V. ADDL.CIT (SUPRA) HAS BEEN CONSIDERED AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE , THE DEPARTMENT HAS PREFERRED SLP BEFORE THE HON BLE SUPREME COURT AND THE HON BLE SUPREME COURT HAS DISMISSED THE SLP IN CC NO. 8068/2014 VIDE ORDER DATED 02.07.2014. IN VIEW OF THE DISMISSAL OF THE SLP FILED BY THE DEPARTMENT, THE ORDER PASSED BY THE HON BLE ALLAHABAD HIGH COURT HAS BEC OME FINAL. THEREFORE, IT CAN BE SAFELY CONCLUDED THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 8. UNDER THE ABOVE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE DECISION IN THE CASE OF M ERILYN SHIPPING AND TRANSPORTS V. ADDL.CIT (SUPRA) , THE SECTIO N 40(A)(IA) IS NOT APPLICABLE WHEN THERE IS NO OUTSTANDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESSMENT YEAR IN RESPECT OF THESE PAYMENTS. HOWEVER, THE ASSESSEE HAS NOT BROUGHT ON RECORD, THE DETAILS OF OUTSTANDING EXPENSES OR SCH EDULE OF SUNDRY CREDITORS SHOWING WHETHER THE IMPUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR EITHER IN THE NAME OF THE PARTY OR OUTSTANDING EXPENSES. HENCE, IN THE INTEREST OF JUSTICE, WE REMIT H E ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE I.T.A. NO . 1 5 3 5 /M/ 15 7 CLAIM OF THE ASSESSEE AND THE ASSESSEE SHALL PLACE NECESSARY EVIDENCE IN SUPPORT OF HIS CLAIM. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES . ORDER PRONOUNCED ON THE 31 ST MAY , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 31 . 0 5 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.