M/s.CPG Consultants India Pvt. Ltd., Bangalore V. Deputy Commissioner of Income-Tax, Bangalore

ITA 1596/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5317 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 02-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS
• Assessee Lawyers: R SRINIVASAN
• Keywords: Bad and doubtful debts; Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI VIJAYPAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1596 /BANG/2016 (ASST. YEAR 2011-12) CPG CONSULTANTS INDIA PVT. LTD., 21/30, PRESTIGE CRAIG HOUSE, CRAIG PARK LAYOUT, M.G ROAD, BENGALURU. . APPELLANT AACCP8208P. VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 5(1)(1), BENGALURU. . RESPONDENT APPELLANT BY : SHRI R SRINIVASAN, CA RESPONDENT BY : SMT. SWAPNA DAS, JCIT DATE OF HEARING : 31-5-2017 DATE OF PRONOUNCEMENT : 31-5-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) 1, BANGALORE DATED 9/6/2016 FOR THE ASSESSMENT YEAR 2011-12. ITA NO.1596/B/16 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UND ER:- 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF ARCHITECTURAL AND ENGINEERING CONSULTANCY, FILED IT S RETURN OF INCOME FOR ASST. YEAR 2011-12 DECLARING LOSS OF (-) RS.4, 75,10,788/- THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS CO MPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT) VIDE ORDER DATED 19/3/2014; WHEREIN THE LOSS RETURNED AT RS.4, 75,10,788/- WAS ACCEPTED AND ASSESSED AS SUCH. 2.2 AGGRIEVED BY THE AFORESAID ORDER OF ASSESSMENT FOR ASST. YEAR 2011-12, DATED 19/3/2014, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-2, BANGALORE. BEFORE THE LD CIT(A)-2, THE A SSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER (AO ) IN DISALLOWING ITS CLAIM FOR BAD DEBTS AMOUNTING TO RS.4,31,73,431 /- WRITTEN OFF IN ITS BOOKS OF ACCOUNT. IT WAS SUBMITTED THAT SINCE THE CLAIM FOR ALLOWING WRITE OFF OF THE AFORESAID BAD DEBTS WAS PUT FORTH IN THE COURSE OF ASSESSMENT PROCEEDINGS BUT WAS NEITHER MADE IN THE ORIGINAL RETURN OF INCOME FILED FOR ASST. YEAR 2011-12 NOR BY WAY OF A REVISED RETURN OF INCOME, THE SAME WAS REJECTED BY THE AO. THE LD CI T(A) DISMISSED THE ASSESSEES CLAIM FOR BEING ALLOWED THE WRITE O FF OF THE SAID BAD ITA NO.1596/B/16 3 DEBTS, STATING IN VIEW OF THE DECISION OF THE HONB LE APEX COURT IN THE CASE OF GOETZE (INDIA) (284 ITR 323) (SC) THE ASSES SEES CLAIM WAS RIGHTLY DENIED BY THE AO. 3.1 THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE CIT (A)-2, BANGALORE DATED 9/6/2016 FOR ASST. YEAR 2011-12, HA S FILED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW AND AGAINST THE FACTS OF THE CASE. 2. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF RS . 4, 31,73,431/- AFTER DETERMINING THAT THE SAME WERE WRITTEN OFF IN THE BOOKS AND DETERMINING THAT THE S AME IS OTHERWISE ALLOWABLE. 3. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF BA D DEBTS WRITTEN OFF AFTER DETERMINING THE FACT THAT T HE SAID AMOUNT HAS BEEN INCLUDED IN THE INCOME OF THE APPELLANT FOR EARLIER YEARS IN ACCORDANCE WITH SECT ION 36(2) OF THE ACT. ITA NO.1596/B/16 4 4. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THE FACT THAT NO DISALLOWANCE CAN BE MADE AS THE SAID BAD DEBTS' HAV E BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. 3.2.1 ACCORDING TO THE LD AR FOR THE ASSESSEE, THE LD CIT(A), IN THE IMPUGNED ORDER, HAS DISMISSED THE ASSESSEES APPEAL MERELY STATING THAT THE ASSESSEES CLAIM FOR WRITE OFF OF BAD DEBT S WAS RIGHTLY DENIED BY THE AO IN VIEW OF THE DECISION OF THE HONBLE AP EX COURT IN THE CASE OF GOETZE (INDIA) (284 ITR 323), SINCE THE SAI D CLAIM WAS NEITHER MADE IN THE ORIGINAL RETURN OF INCOME FILED OR BY W AY OF REVISED RETURN OF INCOME. IT IS SUBMITTED THAT THE ASSESSEE HAD M ADE A PROVISION FOR BAD AND DOUBTFUL DEBTS AMOUNTING TO RS.4,31,73,431/ - IN ITS BOOKS OF ACCOUNT IN THE PERIOD RELEVANT TO ASST. YEAR 2010-1 1 AND THE SAME WAS WRITTEN OFF IN ITS BOOKS OF ACCOUNT IN THE YEAR UND ER CONSIDERATION, BUT WAS INADVERTENTLY NOT CLAIMED IN THE RETURN OF INCO ME AND COMPUTATION OF INCOME FOR ASST. YEAR 2011-12. ON R EALIZING THIS INADVERTENT MISTAKE, THE SAID CLAIM FOR WRITTEN OF BAD DEBTS OF RS.4,31,73,431/- WAS PUT FORTH BEFORE THE AO IN THE COURSE OF ITA NO.1596/B/16 5 ASSESSMENT PROCEEDINGS VIDE LETTER DATED 7/3/2014, WHICH CAME TO BE REJECTED BY THE AO BY RELYING ON THE DECISION OF TH E HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) (284 ITR 323) ( SC). 3.2.2 BEFORE US, IT IS CONTENDED THAT THE LD CIT(A) INSTEAD OF CONSIDERING THE ASSESSEES CLAIM FOR WRITE OFF OF B AD DEBTS AMOUNTING TO RS.4,31,93,431/- ON MERITS, HAS DISMISSED THE AS SESSEES APPEAL SUMMARARILY HOLDING THAT THE ACTION OF THE AO IN RE JECTING THE ASSESSEES CLAIM WAS IN ORDER IN VIEW OF THE DECIS ION OF THE HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) (SUPRA). ACCORDING TO THE LD AR, THE LD CIT(A) IGNORED AND BRUSHED ASIDE ITS WRI TTEN SUBMISSIONS DATED 13/4/2016 (PACED AT PAGE 18 TO 25 OF PAPER BO OK) WHEREIN THE ASSESSEE CONTENDED THAT THE HONBLE APEX COURT IN NTPC LTD., (229 ITR 383) HAD HELD THAT A TAXPAYER MAY MAKE A FRESH CLAIM OR MODIFY A CLAIM AT ANY STAGE OF PROCEEDINGS SO THAT THE ASS ESSING AUTHORITY CAN CORRECTLY ASSESS THE TAX LIABILITY IN ACCORDANCE WI TH LAW. IT WAS ALSO SUBMITTED THAT THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MOTOR INDUSTRIES CO. LTD., (229 ITR 137) HAS HE LD THAT WHEN THE ASSESSMENT IS NOT U/S 143(1) OF THE ACT, THE APPELL ATE AUTHORITY MAY PERMIT THE ASSESSEE TO CLAIM A DEDUCTION OR EXEMPTI ON IN APPEAL. IT IS ITA NO.1596/B/16 6 PRAYED THAT IN VIEW OF THE FACTS OF THE CASE AND IN THE LIGHT OF THE AFORESAID JUDICIAL PRONOUNCEMENTS, THE LD CIT(A)/AO BE DIRECTED TO ADMIT THE ASSESSEES CLAIM FOR WRITING OFF OF BAD D EBTS AMOUNTING TO RS.4,31,73,431/- FOR CONSIDERATION AND ADJUDICATION ON MERITS. 3.3 PER CONTRA, THE LD DR SUPPORTED THE IMPUGNED OR DER OF THE LD CIT(A). 3.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE FACTS OF TH E CASE , AS EMERGE FROM THE RECORD, ARE THAT IN THE COURSE OF ASSESSME NT PROCEEDINGS THE ASSESSEE RAISED BY WAY OF LETTER DATED 7/3/2014, A CLAIM FOR DEDUCTION OF AN AMOUNT OF RS.4,31,73,431/- AS BAD DEBTS WRITT EN OFF IN THE ASSESSEES BOOKS OF ACCOUNT IN THE YEAR UNDER CONSI DERATION. IT WAS SUBMITTED BY THE ASSESSEE, BEFORE THE AO, THAT THIS CLAIM WAS NOT MADE IN THE RETURN OF INCOME FILED FOR INADVERTENTL Y IN THE RETURN OF INCOME FILED FOR ASST. YEAR 2011-12. THE AO REJECT ED THE ASSESSES CLAIM FOLLOWING THE DECISION OF THE HONBLE APEX CO URT IN THE CASE OF GOETZE (INDIA) (SUPRA) AS THE SAID CLAIM WAS NOT RA ISED BY WAY OF FILING OF REVISED RETURN OF INCOME. ITA NO.1596/B/16 7 3.4.2 ON A PERUSAL OF THE IMPUGNED ORDER, WE FIND T HAT THE LD CIT(A) HAS DISMISSED THE ASSESSEES APPEAL WITHOUT DEALING WITH THE GROUNDS RAISED ON THE MERITS OF ISSUE OF THE AFORESAID CLAI M FOR WRITE OFF OF BAD DEBTS AMOUNTING TO RS.4,31,73,431/- BUT DISMISSED T HE APPEAL ON THE GROUND THAT THE ASSESSEES CLAIM WAS RIGHTLY REJECT ED BY THE AO IN VIEW OF THE DECISION OF THE HONBLE APEX COURT IN G OETZE (INDIA) (SUPRA). THERE IS NO DOUBT THAT THE AO HAS REJECTE D THE ASSESSEES CLAIM, FOR DEDUCTION ON ACCOUNT OF THE SAID BAD DEB TS WRITTEN OFF IN ITS BOOKS OF ACCOUNT, IN VIEW OF THE AFORESAID DECISION OF THE HONBLE APEX COURT (SUPRA). IN OUR VIEW, HOWEVER, IT WAS I NCUMBENT FOR THE LD CIT(A) TO HAVE EXAMINE THE ASSESSEES CLAIM OF T HE SAID DEDUCTION IN APPEAL IN VIEW OF GROUNDS RAISED, AND PARTICULAR LY WHEN THE RELEVANT MATERIAL IS A PART OF THE RECORDS OF ASSES SMENT, AS THIS CLAIM WAS, PUT FORTH BEFORE THE AO BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDING BY VIRTUE OF, INTER ALIA, LET TER DATED 7/3/2014. IN OUR CONSIDERED VIEW, THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) (SUPRA) DOES NOT PLACE FETTE RS ON APPELLATE AUTHORITIES TO ENTERTAIN FRESH CLAIMS PUT FORTH BY THE ASSESSEE ON ISSUES WHICH ARE A PART OF RECORD, AND/OR ARE MATERIAL FOR THE PURPOSE OF ITA NO.1596/B/16 8 ASSESSING THE CORRECT TAX LIABIITY OF AN ASSESSEE I N ACCORDANCE WITH LAW. IN COMING TO THIS FINDING WE DRAW SUPPORT FRO M THE RULING OF THE HONBLE APEX COURT IN THE CASE OF NTPC LTD. (229 IT R 383) AND OF THE HONBLE KARNATAKA HIGH COURT IT THE CASE OF CIT VS. MOTOR INDUSTRIES CO. LTD. (229 ITR 137). IN THIS FACTUAL AND LEGAL MATRIX OF THE CASE, AS DISCUSSED ABOVE, WE SET ASIDE THE IMPU GNED ORDER OF THE LD CIT(A) AND AFTER ADMITTING THE GROUNDS RAISED BY THE ASSESSEE ON ITS CLAIM FOR BEING ALLOWED WRITE OFF OF BAD DEBTS AMOUNTING TO RS.4,31,73,431/- (SUPRA) RESTORE THE MATTER TO THE FILE OF THE LD CIT(A) FOR EXAMINATION, VERIFICATION AND ADJUDICATION ON M ERITS AFTER AFFORDING BOTH THE ASSESSEE AND THE AO ADEQUATE OPP ORTUNITY OF BEING HEARD AND TO FILE DETAILS AND SUBMISSIONS REQUIRED IN THIS REGARD. CONSEQUENTLY, THE GROUNDS RAISED BY ASSESSEE ARE AL LOWED FOR STATISTICAL PURPOSES. 4. IN THE RESULT, ASSESSEES APPEAL FOR THE ASSESSM ENT YEAR 2011- 12 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1596/B/16 9 ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAY, 2017 . SD/- SD/- (VIJAYPAL RAO) (JASON P BO AZ) JUDICIAL MEMBER ACCOUNTANT M EMBER BANGALORE DATED : 31/5/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REG ISTRAR, ITAT, BANGALORE.