Shri. Vivekanand, V. D.C.I.T.Central Circle - 1(1),

ITA 157/BANG/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7716 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-03-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 27-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K V ARVIND SR STAND DEPART
• Assessee Lawyers: PRASHANTH G
• Keywords: Business income; Principle of natural justice; Bad and doubtful debts
• Section: 44AD; 143(3); 142(1); 234B; 37(1); 250; 132; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BENCH: BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA. NO. 157/BANG/2014 ASSESSMENT YEAR: 2011 - 12 SHRI VIVEKANAND, PROP. M/S. JANADEVI MINERALS, FLAT NO.9, ASWATHI APARTMENTS, VIVEKANAND NAGAR, BEHIND RTO OFFICE, HOSPET 583203. PAN: ADKPV 0365 J VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), BANGALORE. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SRI PRASHANTH G.S. FOR REVENUE : SRI K.V. ARVIND, SR. STAND COUNSEL FOR DEPARTMENT. DATE OF HEARING : 09 .04.2019 DATE OF PRONOUNCEMENT : 25 .04.2019 ORDER PER PAVAN KUMAR GADALE, JM . THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF CIT (A) - VI, BANGALORE PASSED U/S 1 53C R.W.S 143(3) AND U/S 250 OF THE INCOME TAX ACT, 1961. 2. AT THE TIME OF HEARING LD AR HAS FILED A PETITION FOR ADMITTING ADDITIONAL GROUNDS OF APPEAL AND HAS NOT PRESSED THE GROUND NO.1 OF 2 ADDITIONAL GROUNDS OF APPEAL AND THE SAME IS TREATED AS WITHDRA WN AND DISMISSED. THE LD DR HAS NO SPECIFIC OBJECTION ON ADMISSION OF THE ADDITIONAL GROUNDS OF APPEAL AND ACCORDINGLY ADDITIONAL GROUNDS OF APPEAL ARE ADMITTED AS UNDER: - 1. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT A VALID SEARCH IS A SINE QUA NON FOR MAKING A VALID ASSESSMENT U/S 153C OF THE ACT ON THE PARITY OF THE RATIO OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF UOI VS. AJIT JAIN, REPORTED IN 260 ITR 80 . 2. THE ASSESSMENT IS BAD IN LAW AS REASONS FOR ISSUE OF NOTICE U/S 153C OF THE ACT HAVE NOT BEEN GIVEN AND THE APPELLANT HAS REASONS TO BELIEVE THAT THE SAME HAS NOT BEEN RECORDED AND CONSEQUENTLY THE ASSESSMENT IS BAD IN LAW. THE APPELLANT SUBMITS THAT MANDATORY CONDITIONS TO ASSUME JURISDICTION IS TO RECORD REASONS AND IN THE ABSENCE OF THE SAME THE ASSESSMENT IS BAD IN LAW AND LIABLE TO BE CANCELLED. 3. THE ORDER OF THE ASSESSMENT IS FURTHER BAD IN LAW AS THE MANDATORY CONDITION OF RECORDING OF SATISF ACTION IS NOT COMPLIED WITH OR HAVING COMPLIED, COPY OF SATISFACTION NOTE HAS NOT BEEN PROVIDED TO THE APPELLANT AND THUS THE ASSESSMENT HAS NO LEGS TO STAND THE TEST OF LAW. 4. THE ASSESSMENT IS FURTHER BAD IN LAW AS THE APPROVAL FROM THE JOINT COMMISSION ER WAS NOT OBTAINED OR HAVING OBTAINED THE COPY OF THE SAME HAS NOT BEEN PROVIDED TO THE APPELLANT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE ASSESSEE HAS RAISED THE GROUNDS OF APPEAL WHICH ARE AS UNDER: - 1. THE ORDER OF THE AUTHORITIES BELOW IN SO FAR A S IT IS AGAINS T THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE. 2. THE APPELLANT DENIES HIMSELF LIABLE TO ASSESSED ON A TOTAL INCOME OF RS. 3,80,57,370/ - AS AG AINST RS. 58,01,450/ - RETURNED BY THE APPELLANT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE ORDERS OF THE AUTHORITIES BELOW ARE BAD IN LAW AS THE MANDATORY CONDITIONS TO INVOKE THE JURISDICTION DID NOT EXIST, OR 3 HAVING NOT BEEN COMPLIED WITH AND CONSEQUENTLY THE ORDERS OF THE AUTHORITIES BELOW ARE BAD IN LAW FOR WANT OF REQUISITE JURISDICTION. 4. THE CENTRALIZATION OF THE CASE IS BAD IN LAW AND THUS THE ORDERS PASSED NEED TO BE CANCELLED ON THE FACTS OF THE CASE. 5. THE AUTHORITIES BLOW ERRED IN A DDING A SUM OF RS. 2,22,55,916/ - BEING TRADE ADVANCES WRITTEN OFF UNDER THE FACTS OF THE CASE. 6. WITHOUT PREJUDICE, THE AMOUNT ADDED IS WRONG AND REQUIRES TO BE MADE AS NIL ON THE FACTS OF THE CASE. 7. WITHOUT PREJUDICE THE SUM OF RS. 2,22,55,916/ - NEEDS TO BE ALLOWED AS A BUSINESS LOSS / EXPENSE U/S 28 OR SECTION 37(1) OF THE ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE LD CIT (A) OUGHT TO HAVE GIVEN A FINDING ON THE VALIDITY OF THE SEARCH. RELIANCE IS PLACED ON THE DECISION OF THE JURISDICT IONAL HIGH COURT IN THE CASE OF C. RAMAIAH REDDY VS. ACIT REPORTED IN 339 ITR 210. 9. THE APPELLANT DENIES HIMSELF LIABLE TO BE LEVIED TO INTEREST U/S 234A, 234B AND 234C OF THE ACT AND FURTHER THE COMPUTATION OF INTEREST WAS NOT PROVIDED TO THE APPELLANT S REGARDED TO THE RATE, PERIOD AND METHOD OF CALCULATION OF INTEREST UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT EXPRESSLY URGES TH A T THE PERIOD OF LEVY OF INTEREST IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORTATION AND THERE WAS A SEARCH AND SEIZU RE OPERATION U/S 132 OF THE ACT IN THE CASE OF SHRI K. SOM ASHEKAR & OTHERS GROUP OF CASES ON 25/10/2010 , WHERE THE ASSESSEE IS CONNEC TED TO THE GROUP AND THE ASSESSEE WAS ISSUED NOTICE U/S 142(1) OF THE ACT. IN RESPONSE LD AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED THE DETAILS AND THE CASE WAS DISCUSSED. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PLYING, HIRING AND LEASI NG HEAVY GOODS VEHICLE AND TRANSPORTATION AND HAS BECAME THE MAIN SOURCE OF BUSINESS INCOME AND 4 ALSO DERIVES SALARY FROM M/S. INTEGRATED LOGISTIC COMPANY (P) LTD AND THE ASSESSEE HAS AGRICULTURAL LAND S AND AGRICULTURAL INCOME. THE ASSESSING OFFICER ON EXA MINATION OF THE PROFIT & LOSS ACCOUNT FOUND THAT THE ASSESSEE HAS DEBITED RS. 2,22,55,916/ - AS BAD DEBTS WRITTEN - OFF (LEGAL CASE). THE AO HAS CALLED FOR THE DETAILS OF WRITTEN - OFF AND FOUND THAT THE ASSESSEE HAS ADVANCED FOR SUPPLY AND TRANSPORTATION OF I RON ORE RS. 5 CRS BY CHEQUE ON 22/06/2010 TOWARDS PURCHASE OF 25,000 MTS OF IRON ORE FINES 63.5 GRADE AND A FTER ADJUSTING THE BILLS TOWARDS TRANSPORTATION CHARGES THE ASSESSEE HAS DEBITED RS. 1,77,44,083 / - IN THE BOOKS OF ACCOUNT AS THE CONCERNED PARTY HAS NOT SUPPLIED THE IRON ORE OR ANY TRANSPORTATION WORKS AS THE KARNAKATA STATE GOVERNMENT BANNED THE EXPORT OF IRON ORE BY THE END OF MONTH OF JULY, 2010 AND SINCE THE AMOUNT BECOME IRRECOVERABLE AND THE PENDING CHEQUES ISSUED FOR BALANCE OF AMOUNT PAYABLE W ERE RETURNED UNENCASHED DUE TO INSUFFICIENT FUNDS IN THE ACCOUNT. 5. THE ASSESEE RELIED ON THE PROVISIONS OF SECTION 36(2) OF THE IT ACT AND SUBMITTED THAT THE ADVANCES WERE MADE FOR SUPPLY OF GOODS AND SINCE NO SUPPLY WAS MADE AND RECOVERY IS DIFFICULT , THE RELEVANT LOSS HAS TO BE ALLOWED UNDER BAD DEBTS . FURTHER IT WAS PLEADED ALTERNATIVELY THAT THE AMOUNT CAN BE TREATED AS BUSINESS LOSS. LD AO DEALT ON THE FACTS AND CIRCUMSTANCES AT PARA 5.5 OF THE ASSESSMENT ORDER WERE THE 5 ASSESSEE HAS MADE PAYMENTS TOWARDS ADVANCE FOR SUPPLY OF GOODS IN THE SAID YEAR UNDER CONSIDERATION AND AO FINALLY CONCLUDED AS PREMATURE AND REFERRED TO CASES FILED BY THE ASSESSEE FOR RECOVERY . T HE ORIGINAL RETURN OF INCOME WAS TO BE FILED FOR THE ASSESSMENT YEAR 2011 - 12 ON OR B EFORE 30/09/2011 BUT THE RETURN OF INCOME FOR THE FINANCIAL YEAR ENDING 31/03/2011 WAS FILED BY THE ASSESSEE ON 30/09/3012 AND EVEN TAX AUDIT REPORT U/S 44AD WAS OBTAINED ON 30/09/2012 BEYOND THE PRESCRIBED TIME LIMIT AND THE LD AO HAVING CONSIDERED ALL TH E FACTS WAS NOT SATISFIED WITH THE SUBMISSIONS O N R ECOVERY OF THE A MOUNT AND DISALLOWED THE CLAIM AND DETERMINED THE TOTAL INCOME OF RS. 13,80,57,370/ - VIDE ORDER DATED 12/03/2013. 6 . AGGRIEVED BY THE ORDER THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT (A) WHEREAS THE CIT (A) HAS CONSIDERED THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE JUDICIAL PROCEEDINGS BETWEEN THE ASSESSEE AND THE PARTY TO WHOM THE ADVANCE WAS MADE. FURTHER CIT (A) OBSERVED THAT TO CLAIM BUSINESS LOSS THE LOSS HAS TO BE CRYSTALLIZED DURING THE FINANCIAL YEAR AND UPHELD THE ACTION OF THE ASSESSING OFFICER AND DISMISSED THE ASSESSEES APPEAL. AGGRIEVED BY THE ORDER, ASSESSEE HAS FILED AN APPEAL WITH THE TRIBUNAL AND THE LD AR MADE SUBMISSIONS ON CLAIM AND F ILED PAPER BOOK . CONTRA, LD DR RELIED ON THE CIT (A) ORDER. 6 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY DISPUTE D ISSUE TH E LD AR HAS VEHEMENTLY ARGUED THAT FOR ALLOWING THE WRITTEN - OFF CLAIM WHICH IS NOT RECOVERABL E BY THE ASSESSEE WHERE THE COURT CASES ARE PENDING. WE FOUND THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT FOR SUPPLY OF IRON ORE AND TRANSPORTATION AND DUE TO BANNING OF MINING ACTIVITY IN JULY 2010 THE ASSESSEE COULD NOT DO THE BUSINESS OF IRON ORE A ND THE ADVANCES GIVEN EARLIER TO M/S. TIRUMALA MINERALS AND TRADING COMPANY COULD NOT BE RECOVERED AND THEREFORE, THE ASSESSEE HAS INITIATED CRIMINAL CASES AND CIVIL CASES FOR RECOVERY OF THE AMOUNT. FURTHER, THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 30/09/2012 BY CONSIDERING THE WRIT E - OFF OF THE AMOUNT INTO THE BOOKS OF ACCOUNT. WHEN A QUERY WAS RAISED TO THE LD AR FOR THE BASIS OF INCORPORATING THE TRANSACTION INTO THE BOOKS OF ACCOUNT W H I C H ARE EFFECTED IN SUBSEQUENT ASSESSMENT YEARS, AND THE LD ARS SU BMISSIONS ARE NOT SATISFACTORY. WHEREAS THE LD DR VEHEMENTLY OBJECTED TO THE SUBMISSIONS AND MENTIONED THAT IT IS AN AFTER - THOUGHT AS THE ASSESSEE HAS INCORPORATED THE WRITE - OFF INTO THE BOOKS OF ACCOUNT AND S U C H ADVANCE WHETHER CONSIDERED IN THE SUNDRY DEBTOR S OR LOANS AND ADVANCES COULD NOT BE BROUGHT ON RECORD. WE FIND THE CLAIM COULD NOT BE SUBSTANTIATED AND THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS OF APP EAL WHICH WERE NOT DEALT BEFORE THE APPELLATE AU THORITY. HENCE WE 7 ARE OF THE CONSIDERED VIEW THAT THE ADDITI ONAL GROUND BEING A LEGAL ISSUE HAS TO BE DECIDED FIRST AND MERIT S SUBSEQUENTLY. WE FIND S INCE THE ADDITIONAL GROUND WAS RAI SED FOR THE FIRST TIME BEFORE THE ITAT WE ARE OF THE SUBSTANTIVE OPINION THAT CIT (A) HAS PASSED THE ORDERS WITHOUT CONSI DERING THE GROUNDS OF LEGALITY. ACCORDINGLY WE ARE OF THE OPINION TO RESTORE ADDITIONAL GROUND S OF APPEAL TO THE FILE OF THE CIT (A) TO DECIDE FIRST ON THE LEGALITY AND THEN ON MERIT S WITH THE EVIDENCES FILED IN THE COURSE OF HEARING. ACCORDINGLY, WE RES TORE THE ADDITIONAL GROUNDS OF APPEAL TO THE FILE OF THE CIT (A) FOR ADJUDICATION ON THE LEGAL ISSUE AND THE MERITS SUBSEQUENTLY AND PASS A SPEAKING AND REASONED ORDER . FURTHER ASSESSEE SHALL BE PROVIDED AN ADEQUATE OPPORTUNITY OF BEING HEAR D AND ASSESSEE SHALL COOPERATE IN SUBMITTING THE DETAILS FOR DISPO SAL OF THE APPEAL AND ALLOW THE GROUND OF APPEAL FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 2 5 T H APRIL, 2019. S D / - S D / - (A.K. GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 5 T H APRIL , 2019 . OKK, SR.PS 8 COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE