Gujarat Industrial Investment Corporation, Gandhinagar V. The ACIT.,Gandhinagar Circle, Gandhinagar

ITA 1672/AHD/2009

• Counselvise Citation: 167220514 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-01-2012
• Assessment Year: 1994-1995
• Appeal Filed On: 21-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Additional evidence; Bad and doubtful debts; Corroborative evidences; Revenue expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AN D SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.1672/AHD/2009 ASSESSMENT YEAR: 1994-95 GUJARAT INDUSTRIAL INVESTMENT VS. ASSTT. COMMISSIO NER OF INCOME-TAX, CORPORATION LIMITED, GANDHI NAGAR CIRCLE, 6 TH FLOOR, BLOCK NO.11, GANDHINAGAR. UDHYOG BHAVAN, SECTOR 11, GANDHINAGAR. (PAN: AAACG 5304 Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJAY R. SHAH, A.R. RESPONDENT BY : SHRI ALOK JOHRI, C.I.T. (D.R.) DATE OF HEARING : 11.01.2012 DATE OF PRONOUNCEMENT : 16.03.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 06.03.2009 PASSED BY THE CIT(A), GANDHINAGAR FOR THE ASSESSMEN T YEAR 1994-95. 2. THE ASSESSEE HAS RAISED AS MANY AS 6 GROUNDS, BU T THE EFFECTIVE GROUND IS IN RESPECT OF DISALLOWANCE OF 80,64,458/- ON ACCOUNT O F PENAL INTEREST. THE OTHER GROUNDS ARE EITHER SUPPORTING OR CONSEQUENTIAL TO T HE MAIN GROUND. ITA NO.1672/AHD/2009 A.Y.: 1994-95 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A GOVERNMENT COMPANY ENGAGED IN THE BUSINESS OF PROVIDING LONG TERM FINA NCE FOR INDUSTRIAL PROJECTS. IT IS THE SECOND ROUND OF LITIGATION. IN FIRST ROUND OF LITIGATION THE I.T.A.T. IN ITA NO.1116/AHD/2001 VIDE ORDER DATED 12.03.2007 SENT B ACK THE MATTER TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE WHETHER IT IS ALLOWABLE UNDER SECTION 37(1) OF THE INCOME TAX ACT , 1961 (THE ACT HEREINAFTER) OR ALLOWABLE AS BAD DEBTS. THE ASSESSING OFFICER, IN COMPLIANCE TO THE DIRECTION OF THE I.T.A.T. ISSUED NOTICE AND ASKED THE ASSESSEE T O FURNISH NECESSARY DETAILS. ORIGINALLY THE DISALLOWANCE WAS 1,14,20,531/- ON AC COUNT OF WAIVER OF INTEREST. THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE HAS WAI VED/REVERSED THE INTEREST INCOME CHARGED IN THE EARLIER YEAR, THEREFORE, THE CLAIM O F ASSESSEE IS EITHER ALLOWABLE AS EXPENDITURE UNDER SECTION 37(1) OF THE ACT OR ALLOW ABLE AS BAD DEBTS. DURING THE REMAND PROCEEDINGS, THE ASSESSING OFFICER SATISFIED THAT THE AMOUNT OF 33,56,073/- IS ALLOWABLE AS REVENUE EXPENDITURE UNDER SECTION 3 7(1) OF THE ACT AS THE ASSESSEE HAS SUBMITTED THE SATISFACTORY EXPLANATION AND EVID ENCE. HOWEVER, THE ASSESSING OFFICER CONFIRMED THE ADDITION OF 80,64,458/- AS THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE IN SUPPORT OF ITS CONTENTION THAT THE AMOUNT WAS PENAL INTEREST. THE ASSESSING OFFICER DID NOT ACCEPT THE ALTERNATE CLAI M OF THE ASSESSEE TO ALLOW AS BAD DEBTS OBSERVING AS UNDER :- ITA NO.1672/AHD/2009 A.Y.: 1994-95 3 4.1 ON PERUSAL OF THE RECORDS AND CLAUSE (VIIA) OF SECTION 36(1) IT IS SEEN THAT THE SUB CLAUSE (C) OF CLAUSE (VIIA) APPLI ES UPON THE ASSESSEE COMPANY. THE ASSESSEE HAS ALSO CLAIMED AND ALLOWED DEDUCTION UNDER SECTION 36(1)(VIIA) @ 5% AT ` 73,01,353/- DURING THE YEAR. THEREFORE THE ASSESSEES CLAIM CANNOT BE ACCEPTED. AS SUCH THE ADDITION OF ` 80,64,458/- IS MADE TO ITS INCOME. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFF ICER. 4. THE LD. AUTHORISED REPRESENTATIVE REITERATED THE SUBMISSIONS WHICH WERE MADE BEFORE THE CIT(A) AND SUBMITTED THAT THE ASSES SEE HAS FURNISHED COPY OF JOURNAL VOUCHER NO.312 DATED 31.03.1994 FOR WAIVER OF THE AMOUNT. THE ASSESSEE VIDE ITS LETTER DATED 15.12.2008 SUBMITTED TO THE A SSESSING OFFICER THAT THE ASSESSEE IS A GOVERNMENT COMPANY AND BEING MANAGED BY THE GO VERNMENT APPOINTED MANAGING DIRECTOR. MOREOVER, THE COMPANY BEING WHO LLY OWNED BY THE GOVERNMENT OF GUJARAT IS SUBJECT TO THE SEVERE GOVE RNMENT REGULATIONS AND FREQUENT REVIEW AS WELL AS AUDIT BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA. THE LD. AUTHORISED REPRESENTATIVE, WHILE EXPLAINING THE NATURE OF CLAIM, SUBMITTED THAT IN CASE OF DEFAULTER, THE ASSESSEE C HARGED PENAL INTEREST AND THE SAID PENAL INTEREST HAS BEEN OFFERED TO TAX IN RESPECTIV E YEARS. HOWEVER, ON SETTLEMENT OF THE OUTSTANDING AMOUNT IN RESPECT OF BIFR OR OTH ERWISE THE ASSESSEE COMPANY WAIVED PENAL INTEREST PORTION AND ACCORDINGLY THE A SSESSEE CLAIMED EXPENSES UNDER SECTION 31(1) OF THE ACT. THE LD. AUTHORISED REPRE SENTATIVE SUBMITTED THAT WAIVER ITA NO.1672/AHD/2009 A.Y.: 1994-95 4 OF INTEREST HAS BEEN THERE IN EARLIER YEAR AND HAS BEEN ALLOWED BY THE REVENUE. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THIS A CCOUNTING PRACTICE HAS BEEN FOLLOWED BY THE ASSESSEE CONSISTENTLY. THE BOOKS O F ACCOUNTS ARE SUBJECT TO VARIOUS AUDITS. AS REGARDS THE DETAILS AS REQUIRED BY THE REVENUE COULD NOT BE FURNISHED AS THE ASSESSEE BEING A GOVERNMENT COMPAN Y AND THE INFORMATION IS IN RESPECT OF OLD RECORDS. HOWEVER, CERTAIN INFORMATI ON WHICH HAS BEEN COLLECTED BY THE ASSESSEE WAS FURNISHED. THE LD. AUTHORISED REP RESENTATIVE SUBMITTED THAT SAME MAY BE ACCEPTED AS ADDITIONAL EVIDENCE AT THIS STAG E. 5. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED UPON THE ORDER OF CIT(A). 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. AS REGARDS ADDITIONAL EVIDENCE FILED BY THE LD. AUT HORISED REPRESENTATIVE, IT IS TO STATE THAT SINCE MATTER IS VERY OLD AND ADMISSION O F SUCH EVIDENCE AT THIS STAGE DOES NOT SERVE THE PURPOSE, WE THEREFORE, REJECT THE SAM E. THE CASE IS DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE ADMITTE D FACTS OF THE CASE ARE THAT THE ASSESSEES IS A GOVERNMENT COMPANY ENGAGED IN THE BU SINESS OF PROVIDING LONG TERM FINANCE FOR INDUSTRIAL PROJECTS. THE ASSESSEE FOLLOWED A SYSTEM OF ACCOUNTING IN RESPECT OF PENAL INTEREST ON ACCRUAL BASIS AND A S AND WHEN IT IS CHARGED FROM THE ITA NO.1672/AHD/2009 A.Y.: 1994-95 5 CUSTOMER, THE SAME IS SHOWN AS INCOME OF THE ASSESS EE. HOWEVER, SUBSEQUENTLY ON SETTLEMENT WITH THE PARTIES THE PENAL INTEREST IS E ITHER WAIVED OR REDUCED. THE CASE OF THE ASSESSEE THAT EITHER SUCH CLAIM WAS ALLOWABL E AS REVENUE EXPENSES UNDER SECTION 37(1) OR IT MAY BE ALLOWED AS BAD DEBTS. T HE I.T.A.T. IN THE FIRST ROUND OF LITIGATION VIDE ORDER DATED 12.03.2007 SENT BACK TH E MATTER TO THE FILE OF THE ASSESSING OFFICER TO VERIFY WHETHER ASSESSEES CLAI M THAT THE AMOUNT OF ` 1,14,20,531/- IS PENAL INTEREST OR NOT IS FACTUALL Y CORRECT OR NOT. THE ASSESSING OFFICER MAY ALSO EXAMINE THE ALTERNATE CLAIM OF THE ASSESSEE THAT WHETHER THE SAME HAS TO BE ALLOWED AS BAD DEBTS. IN THE IMPUGNED AS SESSMENT ORDER, WE NOTICED THAT OUT OF ` 1,14,20,531/-, THE ASSESSING OFFICER HIMSELF HAS AL LOWED ` 33,56,073/- UNDER SECTION 37(1) OF THE ACT. IT IS PERTINENT TO NOTE THAT THE DISALLOWANCE OF ` 80,64,458 IS AS PER THE BOOKS OF ACCOUNTS AND CLAIM OF THE ASSESSEE IS SIMILAR NATURE AS THE NATURE OF THE TRA NSACTION FOR ` 33,56,073/-. IN OTHER WORDS, IN PRINCIPLE, IT CAN BE HELD THAT THE CLAIM OF THE ASSESSEE OF PENAL INTEREST IS ALLOWABLE EXPENDITURE UNDER SECTION 37( 1) OF THE ACT, AS THE ASSESSING OFFICER HIMSELF ALLOWED ` 33,56,073/- IN THE YEAR UNDER CONSIDERATION AND THE CONTENTION OF THE ASSESSEE THAT SUCH CLAIM HAS BEEN ALLOWED IN EARLIER YEARS. CONSIDERING THE CLAIM OF THE ASSESSEE IS BAD DEBT A S HAS BEEN RELIED BY THE ASSESSING OFFICER, WE THINK THAT IT IS NOT NECESSAR Y TO GO INTO ALTERNATE CONTENTION OF THE ASSESSEE TO ALLOW THE CLAIM OF THE ASSESSEE AS BAD DEBTS. AS HELD ABOVE THAT ITA NO.1672/AHD/2009 A.Y.: 1994-95 6 IN PRINCIPLE THE REVENUE HAS ACCEPTED THAT WAIVER O F PENAL INTEREST AS ALLOWABLE EXPENSES UNDER SECTION 37(1), THE ONLY OBJECTION OF THE REVENUE THAT THE ASSESSEE HAS FAILED TO FURNISH THE SUPPORTING EVIDENCE IN RE SPECT OF ` 80,64,458/-. AS STATED ABOVE THAT THIS AMOUNT IS PART AND PARCEL OF ` 1,14,20,531/- OUT OF WHICH ` 33,56,073/- HAS ALREADY BEEN ALLOWED BY THE ASSESSI NG OFFICER, THE ENTIRE AMOUNT OF ` 1,14,20,531/- HAS BEEN ACCOUNTED FOR IN ONE ACCOUNT IN BOOKS OF ACCOUNTS. THE ASSESSEE HAS FURNISHED RELEVANT COPY OF JOURNAL VOUCHER. THE CLAIM OF THE ASSESSEE THAT ` 1,14,20,531/- IS PENAL INTEREST IS FULLY SUPPORTED BY BOOKS OF ACCOUNTS, THOUGH THE ASSESSEE HAS FAILED TO FURNISH ENTRY-WISE AND SPECIFIC DETAILS REQUIRED BY THE ASSESSING OFFICER. MERELY ON THE B ASIS THAT THE ASSESSEE DID NOT FURNISH SPECIFIC DETAILS, THE ACTION OF THE ASSESSI NG OFFICER CANNOT BE SUSTAINED PARTICULARLY UNDER THE CIRCUMSTANCES WHERE THE MATT ER IS OLD AND IT IS PRACTICALLY IMPOSSIBLE FOR THE ASSESSEE TO BRING THE MATERIAL A S REQUIRED BY THE ASSESSING OFFICER. IF WE SEE THE CASE PRIMA FACIE ON THE BAS IS OF MATERIAL AVAILABLE ON RECORD AND AS PER ABOVE DISCUSSIONS, WE NOTICE THAT RS.80, 64,458/- IS SIMILAR IN NATURE TO ` 33,56,073/- AS BOTH THE AMOUNTS ARE PART OF ` 1,14,20,531/-. IT IS ALSO PERTINENT TO NOTE THAT, ON EXAMINATION BY THE ASSESSING OFFICER, NO CONTRARY MATERIAL WAS PRIMA FACIE FOUND THAT THE CLAIM OF THE ASSESSEE IS NOT A LLOWABLE AS EXPENSES UNDER SECTION 37(1) OF THE ACT. UNDER THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, ONE HAS TO APPRECIATE THE PRIMA FACIE EVIDENCE AND MATERIAL AVAILABLE ON RECORD. ITA NO.1672/AHD/2009 A.Y.: 1994-95 7 CONSIDERING THIS ASPECT, WE NOTICE THAT THE CLAIM O F THE ASSESSEE OF ` 80,64,458/- IS ALSO ALLOWABLE AS THIS CLAIM IS SIMILAR TO THE CLAI M OF ` 33,56,073/- WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER UNDER SECTION 37(1 ) OF THE ACT. WE, THEREFORE, ARE OF THE CONSIDERED VIEW THAT THE ASSESSEES CLAI M OF ` 80,64,458/- IS ALLOWABLE UNDER THE PECULIAR FACTS AND CIRCUMSTANCES OF THE C ASE AND ACCORDINGLY WE ALLOW THE SAME. HOWEVER, KEEPING IN VIEW THE INTEREST OF THE REVENUE, WE MAY MENTION THAT IF THE ASSESSING OFFICER FINDS ANY EVIDENCE OR MATERIAL THAT THE ASSESSEE HAS CLAIMED THIS AMOUNT TWICE AS EXPENDITURE UNDER SECT ION 37(1) OF THE ACT OR AS BAD DEBTS OR THERE IS A RECOVERY OF THIS AMOUNT IN SUBS EQUENT YEARS, SUCH AMOUNT IS TAXABLE UNDER SECTION 41(1) OF THE ACT IN ACCORDANC E WITH LAW. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. SD/- SD/- (MUKUL KUMAR SHRAWAT) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 16 TH MARCH, 2012 PBN/* ITA NO.1672/AHD/2009 A.Y.: 1994-95 8 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT (APPEALS)- 4. THE CIT CONCERNED 5. THE D.R., ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT. REGISTRAR ITAT, AHMEDABAD 1. DATE OF DICTATION 05/03/2012. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER 06/03/2012.OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT.. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSTT. RE GISTRAR FOR SIGNATURE ON THE ORDER 9. DATE OF DESPATCH OF THE ORDER..