DCIT, CHENNAI V. Binny Ltd., CHENNAI

ITA 1675/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4535 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 08-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 06-06-2016
• Court: TRIBUNAL
• Department Lawyers: M M BHUSARI
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Bad and doubtful debts

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , '.. % , * BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.1675/MDS/2016 + + /ASSESSMENT YEAR: 2010-11 THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), INVESTIGATION WING, 46, NUNGAMBAKKAM HIGH ROAD, CHENNAI-600 035. VS. M/S.BINNY LTD., NO.1, COOKS ROAD, PERMBUR, CH-12. [PAN: AAACB 2529 G ] ( . /APPELLANT) ( /0. /RESPONDENT) . 1 / APPELLANT BY : MR.M.M.BHUSARI, CIT /0. 1 /RESPONDENT BY : MR.B.RAMAKRISHNAN, CA 1 /DATE OF HEARING : 14.03.2017 1 /DATE OF PRONOUNCEMENT : 26.05.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 14.03.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 18, CHENNAI, IN ITA NO.505/15-16 FOR THE AY 2010-11. ITA NO.1675/MDS/2016 :- 2 -: 2.0 THE REVENUE HAS FILED AN APPEAL RAISING FIVE GR OUNDS ORIGINALLY ALONG WITH THE APPEAL MEMO. SUBSEQUENTLY REVISED GROUNDS OF APPEAL WERE FILED. AFTER HEARING BOTH THE PARTIES THE REVISED GROUNDS OF THE APPEAL FILED BY THE REVENUE IS ACCEPTED AND DECIDED AS UNDER. 3.0 GROUND NOS.1 & 5 ARE GENERAL IN NATURE WHICH DO NOT REQUIRE SPECIFIC ADJUDICATION. 4.0 GROUND NOS.2 TO 2.4 ARE RELATED TO THE ADDITION OF RS.14,64,58,265/- RELATING TO THE DEBIT BALANCES WRITTEN OFF IN RESPE CT OF INTEREST AND OTHER EXPENSES MADE BY THE PROMOTER GROUP WHICH WAS WRITT EN OFF. DURING THE ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER (IN SHORT AO) FOUND FROM THE NOTES ON ACCOUNTS THAT THE ASS ESSEE HAS WRITTEN OFF MISCELLANEOUS AND PROFIT & LOSS A/C DEBIT BALANCES AMOUNTING TO RS.247.86 CR. AND ADJUSTED AGAINST THE REVALUATION RESERVE. THE AO CALLED FOR EXPLANATION OF THE ASSESSEE AND ON RECEI PT OF ASSESSEES REPLY REDUCED THE AMOUNT OF RS.3.17 CR. RELATED TO THE TD S AND THE BALANCE AMOUNT OF RS.244,68,79,341/- WAS ADDED TO THE RETUN ED INCOME. THE AMOUNT OF RS.14,64,58,265/- RELATING TO THE DEBIT B ALANCES WRITTEN OFF RELATING TO INTEREST AND OTHER EXPENSES MADE BY THE PROMOTER GROUP WHICH WAS WRITTEN OFF, WAS ALSO INCLUDED IN TOTAL S UM OF RS.244.68 CRORES. 5.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT(A) AND ARGUED THAT THE AMOUNT OF RS.244.68 CR. WAS NEVER DEBITED TO THE PROFIT & LOSS A/C AND NEVER CL AIMED AS EXPENDITURE IN ITA NO.1675/MDS/2016 :- 3 -: THE HANDS OF THE ASSESSEE AND HENCE THE SAME CANNOT BE TREATED AS INCOME U/S.41(1) OF INCOME TAX ACT. THE LD.CIT(A) CALLED FOR THE REMAND REPORT AND THE AO SUBMITTED REMAND REPORT ACCEPTING THE CONTENTION OF THE ASSESSEE FOR ` 230.04 CRORES BUT IN RESPECT OF DEBIT BALANCES AMOUNTING TO RS.14.64 CRORES REPRESENTING INTEREST EXPENSES MET BY PROMOTER GROUP, THE AO HAS NOT ACCEPTED STATING THA T THE ASSESSEE DID NOT FURNISH THE DETAILS. 5.1 THE LD.CIT(A) PLACING RELIANCE ON THE REMAND RE PORT DELETED THE ENTIRE ADDITION STATING THAT THE AO HAS ACCEPTED TH E CLAIM OF THE ASSESSEE IN TOTO. HENCE, THE DEPARTMENT IS ON APPEAL BEFORE US CHALLENGING THE DELETION OF ADDITION OF RS.14,64,58,265/- RELATING TO INTEREST AND EXPENSES MET BY PROMOTER GROUP, WHICH WAS NOT ACCEPTED BY TH E AO IN REMAND REPORT. 5.2 APPEARING FOR THE REVENUE, THE LD.DR ARGUED THA T THE LD.CIT(A) CALLED FOR THE REMAND REPORT AND AO HAS SUBMITTED T HE REMAND REPORT ACCEPTING THE CLAIM OF THE ASSESSEE, EXCEPT FOR RS. 14.64 CR. RELATING TO DEBIT BALANCES OF INTEREST AND EXPENSES RELATING TO PROMOTER GROUP. THE AO IN HIS REMAND REPORT CLEARLY STATED THAT THE ASS ESSEE HAS NOT FURNISHED THE DETAILS. THEREFORE, THE LD.CIT(A) WO ULD HAVE CONFIRMED THE ADDITION INSTEAD OF DELETING THE SAME. ON THE OTHE R HAND, THE LD.AR ARGUED THAT THE LD.CIT(A) HAS DELETED THE ADDITION PLACING RELIANCE ON THE REMAND REPORT. HOWEVER, HE DID NOT OBJECT FOR REM ITTING THE MATTER ITA NO.1675/MDS/2016 :- 4 -: BACK TO THE FILE OF THE AO FOR VERIFICATION OF THE DETAILS IN RESPECT OF INTEREST AND EXPENSES WRITTEN OFF AMOUNTING TO RS.1 4.64 CR. 6.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. THE AO IN THE REMAND REPORT HAS CLEARLY STATED THA T THE ASSESSEE HAS NOT FURNISHED THE RELEVANT DETAILS IN RESPECT O F INTEREST AND EXPENSES MADE BY THE PROMOTER GROUP. THE LD.CIT(A) HAS NEITH ER CALLED FOR THE DETAILS NOR EXAMINED THE GENUINENESS AND CORRECTNES S OF THE EXPENSES AND APPLICABILITY OF THE PROVISIONS RELATING TO SEC .41(I) OF INCOME TAX ACT. THIS ISSUE REQUIRES FURTHER VERIFICATION TO DECIDE THE ALLOWABILITY. BOTH THE LD.DR AND THE LD.AR FAILED TO FURNISH THE INFORMATI ON WITH REGARD TO PARTYWISE BREAKUP OF LIABILITIES, WHETHER THE EXPEN SES DEBITED TO PROFIT & LOSS ACCOUNT OR NOT? WHETHER THE EXPENSES WERE PAI D SUBSEQUENTLY AND THE NATURE OF LIABILITY, ETC. BOTH THE PARTIES AGRE ED TO REMIT THE MATTER BACK TO THE FILE OF THE AO. THEREFORE, WE REMIT TH E MATTER BACK TO THE FILE OF THE AO, WITH DIRECTIONS CALL FOR THE NECESSARY D ETAILS AND EXAMINE WHETHER THE PROVISIONS OF SEC.41(1) ARE APPLICABLE OR NOT AND DECIDE THE DISALLOWANCE AFRESH ON MERITS. NEEDLESS TO SAY THA T PROPER OPPORTUNITY SHOULD BE GIVEN TO THE ASSESSEE. 7.0 GROUND NO.3 & 3.1 ARE RELATED TO THE DISALLOWAN CE OF COOPERATIVE EXPENSES TO THE TUNE OF RS.1,13,47,899/- AND TRAVEL EXPENSES WRITTEN OFF AMOUNTING TO RS.35,63,867/-. ITA NO.1675/MDS/2016 :- 5 -: DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND TH AT THE FOLLOWING AMOUNTS WERE WRITTEN OFF IN THE PROFIT & LOSS A/C. THE COOPERATIVE SOCIETY WRITE OFF FROM CORPORATE OFFICE OF RS.1,13,47,899/- , TRAVEL WRITE OFF OF RS.35,63,867/-. THE AO DISALLOWED THE AMOUNT OF RS .1,49,11,766/- HOLDING THAT THE EXPENSES ARE CAPITAL IN NATURE AND HAS NOT BEEN ADMITTED AS INCOME IN ANY OF THE PREVIOUS YEAR. THE ASSESSE E WENT ON APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) ALLOWED THE DEDUCTION ACCEPTING THE EXPLANATION OF THE ASSESSEE STATING THAT THE AM OUNT PAID TO COOPERATIVE CREDIT SOCIETY AS PER THE COURTS ORDER AND EXPENDITURE IN RELATION TO THE TRAVEL EXPENSES WAS OFFERED AS INCO ME IN THE EARLIER YEARS. 8.0 AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE RE VENUE IS ON APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, THE LD.DR ARGUED THAT T HE LD.CIT(A) HAS NOT CALLED FOR THE DETAILS AND EXAMINED WHETHER THE AMOUNT WRITTEN OFF WAS ACTUALLY ALLOWABLE EXPENDITURE OR NOT. THE ASS ESSEE HAS NEITHER FURNISHED THE DETAILS REGARDING THE NATURE OF PAYME NT MADE TO THE COOPERATIVE EMPLOYEES CREDIT SOCIETY NOR THE NATURE OF TRAVEL EXPENSES WHICH WERE SAID TO BE OFFERED EARLIER AS INCOME. T HEREFORE, THE LD.DR ARGUED THAT THE ISSUE SHOULD BE REMITTED BACK TO TH E FILE OF THE AO FOR VERIFICATION OF THE NATURE OF EXPENSES AND ALLOWABI LITY AS BAD DEBTS OR OTHERWISE. ON THE OTHER HAND, THE LD.AR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. ITA NO.1675/MDS/2016 :- 6 -: 9.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. NEITHER LD.CIT(A) NOT THE AO HAS GIVEN A FINDING W HETHER THE EXPENDITURE DEBITED AS BAD DEBTS WAS EXAMINED. FROM THE ORDER OF THE LD.CIT(A) AS WELL AS THE AO, THE FACTS COULD NOT BE ASCERTAINED. THOUGH, THE LD.CIT(A) STATED THAT THE AMOUNT WAS PAID TO CO OPERATIVE EMPLOYEES CREDIT SOCIETY AS PER THE COURT ORDER, THE REASON F OR PAYMENT, THE NATURE OF THE EXPENDITURE, WAS NOT FURNISHED. GENUINENESS AND NATURE O OF THE PAYMENT REQUIRED TO BE VERIFIED FROM THE COURTS OR DER. THE CONTENTS OF THE COURT ORDER HAS NOT BEEN DISCUSSED IN THE ASSES SMENT ORDER OR IN THE LD.CIT(A)S ORDER. SIMILARLY, IN THE CASE OF TRAVE L EXPENSES THOUGH ASSESSEE STATED THAT THE AMOUNT WAS OFFERED AS INCO ME IN THE EARLIER YEARS, HE HAS NOT FURNISHED THE DETAILS OF EARLIER YEARS IN WHICH IT WAS OFFERED AS INCOME, THE NAMES AND PERSONS FROM WHOM THE TRAVEL EXPENSES RECOVERED AND REASONS FOR WRITE OFF ETC., WERE NOT FURNISHED. ALL THE FACTS ARE REQUIRES VERIFICATION AT THE END OF THE AO. THE REFORE, WE REMIT THE MATTER BACK TO THE FILE OF THE AO TO CALL FOR THE D ETAILS AND DECIDE THE ISSUE A FRESH ON MERITS. ACCORDINGLY, WE SET-ASIDE THE O RDERS OF THE LOWER AUTHORITIES AND REMIT THE MATTER BACK TO THE FILE O F THE AO FOR DE NOVO CONSIDERATION. GROUND NO.3 IS ALLOWED FOR STATISTI CAL PURPOSES. 10.0 GROUND NO.4 IS RELATED TO THE DISALLOWANCE U/S .40(A)(I) OF THE INCOME TAX ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND TH AT THE ASSESSEE HAS DEBITED EXPENSES RELATING TO THE CAR, TRACTOR, TRANSPORT CHARGES LEGAL ITA NO.1675/MDS/2016 :- 7 -: EXPENSES CONSULTANT FEE, MISCELLANEOUS, ETC., AGGRE GATING TO RS.1,22,77,439/- U/S.40(A)(I) OF INCOME TAX ACT FOR NON DEDUCTION OF TAX AT SOURCE. 11.0 THE ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT( A) AND THE LD.CIT(A) ALLOWED THE ASSESSEES APPEAL PLACING REL IANCE ON THE DECISION OF THE HONBLE ITAT SPECIAL BENCH, VISAKHAPATNAM IN TH E CASE OF MERILYN SHIPPING AND TRANSPORT [16 ITR (TRIB) 1] AND THE DE CISION OF THIS THIS TRIBUNAL IN THE CASE OF ITAT NO.985/MDS/2012 ITO V . M/S.THEEKATHIR PRESS. 12.0 WE HEARD BOTH THE PARTIES FROM THE ORDERS OF T HE LOWER AUTHORITIES, THE FACTS ARE NOT ASCERTAINABLE, NO DETAILS ARE PLA CED REGARDING THE NAME OF PAYEES, THE AMOUNT PAID DATE OF PAYMENT WHETHER TDS IS APPLICABLE OR NOT ON THE PAYMENT ETC., ARE NOT FURNISHED BY THE A O AS WELL AS THE LD.CIT(A). THEREFORE, THE FACTS REGARDING THE PAYM ENT AND THE APPLICABILITY OF THE PROVISIONS OF SEC.40(A)(I) REQ UIRED FURTHER VERIFICATION. NOW THE ISSUE OF PAID/PAYABLE IN RELATION TO THE AD DITION U/S 40(A)(IA) IS SETTLED IN FAVOUR OF THE DEPARTMENT BY HONBLE APEX COURT IN PALAM GAS V. CIT. BOTH THE PARTIES HAVE AGREED FOR REMITTING TH E MATTER BACK TO THE FILE OF THE AO FOR VERIFICATION OF THE FACTS. ACCORDING LY, THE ISSUE IS REMITTED THE MATTER BACK TO THE FILE OF THE AO TO VERIFY THE FACTS AND RECONSIDER THE ISSUE AFRESH ON MERITS. ITA NO.1675/MDS/2016 :- 8 -: 13. THE APPEAL OF THE REVENUE IS ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ' . . % ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 6 /DATED: 26 TH MAY, 2017. TLN 1 /%7 87 /COPY TO: 1. . /APPELLANT 4. 9 /CIT 2. /0. /RESPONDENT 5. 7 / /DR 3. 9 ( ) /CIT(A) 6. + /GF