M/s. Roneo Vickers India Ltd., New Delhi V. DCIT, New Delhi

ITA 1793/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0014 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 28-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: U N MARWHA
• Keywords: Bad and doubtful debts; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI G.C. GUPTA . , HON BLE VICE PRESIDENT AND SHRI I NTURI RAMA RAO , ACCOUNTANT MEMBER ITA NO. 1793 /DEL/20 1 3 ASSESSMENT YEAR 200 4 - 200 5 M/S RONEO VICKERS INDIA LTD. VS. DCIT, CIRCLE 1(1), C/O R.N. MARWAH & CO. NEW DELHI 4/80, JANPATH, NEW DELHI - 110001 (PAN AA CCR 3625 B ) ( APPELLANT) (RESPONDENT) DATE OF HEARING : 06 .0 4 .2015 DATE OF PRONOUNCEMENT : 06 . 0 5 .2015 APPELLANT BY : SHRI U.N. MARWHA, CA RESPONDENT BY : SHRI VIKRAM SAHAY , SR.DR ORDER PER SHRI I NTURI RAMA RAO , A M : 1. THIS IS AN APPEAL FILED BY THE ASSESSEE FOR THE AY 200 4 - 0 5 AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - XV III , NEW DELHI DATED 1 4 . 01 .201 3 IN A PPEAL NO. 240 / 11 - 1 2 RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ASSUMPTION OF JURISDICTION OF THE AO. IN ISSUANCE OF A NOTICE U/S 148 OF THE ACT, DESPITE THERE BEING NO REASON TO BELIEVE NOR ANY FRESH MATERIAL TO FORM A BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. 2. WITH PREJUDICE THE AFORESAID GROUND OF APPEAL, ON MERITS, THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.21,93,187/ - IT A NO. 179 3 /DEL /20 1 3 2 BEING MISUSE CHARGES IN RESPECT OF PREMISES USED FOR THE PURPOSE OF BUSINESS ON THE GROUND THAT THE SAME IS IN THE NATURE OF PENALTY AND DOES NOT RELATE TO THE YEAR UNDER APPEAL. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER , AMEND, SUBSTITUTE, FORGO, ANY OR ALL THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 200 4 - 0 5 ON 29 . 10 .200 4 , DECLARING LOSS OF RS. 25,93,937 / - . AFTER PROCESSING THE RETURN OF INCOME U/S 143 ( 1 ) OF THE ACT, THE CASE WAS REOPENED U/S 147 OF THE ACT BY ISSUING NOTICE U/S 14 8 AND THE ASSESSMENT ORDER CAME TO BE PASSED ON 28 . 11 .20 11 U/S 143(3) R.W.S. 14 7 OF THE ACT AT THE TOTAL INCOME OF RS. 2,30,770 / - . IN THE RETURN OF INCOME, THE ASSESSEE HA D CLAIMED RS.23,63,187/ - WRITTEN OFF DEBTS , DEBITED TO P&L ACCOUNT . IN THE NOTES TO A CCOUNTS, IT IS MENTIONED THAT THE AMOUNT OF RS.21.93,187/ - DEPOSITED WITH L&DO IS WRITTEN OFF BECAUSE MONEY WILL NOT BE RECEIVED BACK. THE ASSESSING OFFICER FRAMED AN ASSESSMENT 147/143(3) DATED 28.11.2011 AFTER MA KING DISALLOWANCE OF RS.21,93,187/ - HOLDING THAT THE AMOUNT WAS PAID FOR INFRACTION OF LAW AND THE CLAIM CANNOT BE ALLOWED AS BAD DEBT BECAUSE THE CONDITIONS STIPULATED U/S 36(2) OF THE ACT ARE NOT COMPLIED WITH. AGGRIEVED, AN APPEAL WAS FILED BEFORE THE C IT(A). THE APPEAL WAS FILED BEFORE THE CIT(A) - XVIII, NEW DELHI WHO VIDE ORDER DATED 14.01.2013 DISMISSED THE APPEAL BOTH ON THE PRELIMINARY ISSUE RELATING TO CHALLENGE OF REASSESSMENT PROCEEDINGS AS WELL AS MERITS OF THE ADDITION. HENCE, THE PRESENT APPEAL BEFORE US. IT A NO. 179 3 /DEL /20 1 3 3 3. THE LD. AR STRONGLY PLEADED THAT THERE WAS NO REASON TO BELIEVE THAT INCOME GOT ESCAPED ASSESSMENT. THE REASSESSMENT NOTICE WAS ISSUED AFTER THE EXPIRY OF FOUR YEARS AND THERE WAS NO FAILURE ON ITS PART TO DISCLOSE FULLY ALL MATERIAL FACTS . HE FURTHER PLEADED THAT EVEN THE ASSESSMENT U/S 143(1) CANNOT BE REOPENED UNLESS THERE IS A FRESH MATERIAL INDICATING THE ESCAP E MENT OF INCOME AND REASON TO BELIEVE THAT INCOME GOT ESCAPE ASSESSMENT. IN THE SUPPORT OF THIS PROPOSITION, HE RELIED UPON THE FOLLOWING JUDGMENTS: I) CIT VS. ORIENT CRAFT LTD. IN ITA NO.555/2012 [29 TAXMANN.COM 392]. II) M/S A.M. UDYOG LTD. VS. ITO WD - 4(3), KOLKATA ITAT (2013) 7 TMI 767. III) BAPALAL & CO. EXPORTS VS. JCIT [2008] 170 TAXMAN 131 (MAD. H.C.) IV) AIPITA MARKETING (P.) LTD. VS. ITO [2008] 21 SOT 302 (MUM. ITAT) 4. ON MERITS, HE SUBMITTED THAT THE PAYMENT WAS MADE NOT FOR INFRACTION OF ANY LAW, BUT FOR REGULARIZATION OF THE USAGE OF RENTED BILLING FOR COMMERCIAL PURPOSES AS PER THE SCHEME ANNOUNCED BY THE DDA. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE AMOUNT CANNOT BE ALLOWED AS A DEDUCTION IN AS MUCH AS THE AMOUNT WAS PAID INFRACTION OF LAW AND PLACED RELIANCE IN THIS REGARD ON THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF RANE BRAKE LININGS LTD. REPORTED IN 115 TAXMANN 367(MAD). 5 . WE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON REC ORD. AT THE FIRST INSTANCE WE SHALL DEAL WITH THE GROUNDS RELATING TO CHALLENGE OF REASSESSMENT PROCEEDINGS. ADMITTEDLY, THERE WAS NO SCRUTINY ASSESS MENT . HENCE, IT A NO. 179 3 /DEL /20 1 3 4 BASED ON THE INFORMATION CONTAINED NOTES TO ACCOUNT, THE AUDIT PARTY POINTED OUT TO THE ASSESSING OFFICER THAT IMPUGNED AMOUNT CANNOT BE ALLOWED AS DEDUCTION AS THE AMOUNT WAS PAID FOR INFRACTION OF LAW. THE ASSESSING OFFICER AFTER CONSIDERING THE INFORMATION HAD COME TO A CONCLUSION THAT THE INCOME GOT ESCAPED ASSESSMENT AND THEREFORE, INITIATED THE REASSESSMENT PROCEEDINGS. IN OUR CONSIDERED VIEW THIS CONSTITUTES REASON TO BELIEVE THAT INCOME GOT ESCAPED ASSESSMENT. THEREFORE, THE CASE LAWS R ELIED UPON BY THE AR ARE NOT OF ANY HELP. THEREFORE, THE REASSESSMENT PROCEEDING WAS VALID. 6. NOW, WE SHALL DEAL WITH THE MERITS OF THE ADDITION. THE PREMISES WERE TAKEN ON RENT VIDE LEASE DEED DATED 31.05.1961. IN ACCORDANCE WITH CLAUSE 3 OF SAID LEASE DEED THE PREMISES WERE TO BE USED FOR RESIDENTIAL PURPOSES WITH OPTION TO USE FOR BUSINESS ON PERMISSION AND ANY CHARGES/ADDITIONAL GROUND RENT TO PAY BY THE TENANT. THE APPELLANT ON THE SAME DAY, APPLIED VIDE LETTER DATED 31.05.1961 TO LANDLORD FOR USE FO R BUSINESS. THE LANDLORD ALSO ON THE SAME DAY MADE APPLICATION TO THE L&DO/CHIEF COMMISSIONER VIDE LETTER DATED 31.05.1961 FOR USE OF PREMISES FOR BUSINESS PURPOSES AND ALL ADDITIONAL GROUND RENT/CHARGES TO BE PAID . THE L&DO VIDE LETTER DATED 29.09.1961 GR ANTED PERMISSION FOR USE OF PREMISES FOR BUSINESS PURPOSES UPON PAYMENT CHARGES AS DETERMINED IN THE SAID LETTER. THE DEMAND ON ACCOUNT OF MISUSE CHARGES OF RS.21,93,187// - WAS PAID UNDER PROTEST AND CONTESTED BY THE APPELLANT. THE PAYMENT ON 16.03.1994 OF RS.3,94,159/ - AND BY WAY OF FDR WITH THE HIGH COURT OF 18 LACS. THE LITIGATION WAS PURSUED BEFORE THE HIGH COURT. IT A NO. 179 3 /DEL /20 1 3 5 THE GOVT. INTRODUCED CONVERSION POLICY FROM LEASEHOLD TO FREEHOLD IN AUGUST 2003 AND ACCORDINGLY TO TAKE BENEFIT OF THE POLICY APPELLANT DEEM ED IT PRUDENT TO ACCEPT THE DECISION AND THE AMOUNT OF MISUSE CHARGES PAID RS.21,93,187/ - WERE WRITTEN OFF AND INCLUDED UNDER BAD DEBTS. IT WAS MANDATORY TO PAY THE MISUSE CHARGES DUE AS ON THE DATE OF EXERCISING THE OPTION OF OWNING THE PROPERTY FROM LEAS EHOLD TO FREEHOLD. IN OUR OPINION , THE CLAIM WAS NOT ON ACCOUNT OF BAD DEBTS, BUT TOWARDS THE CHARGES PAID FOR REGULARIZATION USAGE OF BUILDING. THE MERE NOMENCLATURE IN THE BOOKS OF ACCOUNT DOES NOT DETERMINE THE ALLOWABILITY OR OTHERWISE OF THE CLAIM AND , THEREFORE, CONSIDERING THE FACT THAT THE AMOUNT WAS PAID UNDER THE POLICY ANNOUNCED BY THE GOVERNMENT ITSELF, IT DOES NOT AMOUNT TO PENALTY FOR INFRACTION OF THE ANY PROVISION OF LAW. W E NOTICE FROM THE PAGE NO S . 9 TO 11 OF THE PAPER BOOK WHEREIN THE RENT CONTROLLER DELHI HAD FURNISHED THE CALCULATION FOR MISUSE AND DAMAGE CHARGES LEVIED. THERE WAS NO WHISPER ABOUT THE LEVY OF PENALTY OF ANY NATURE. THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. AHMEDABAD COTTON MFG. CO. LTD. REPORTED IN 205 ITR 163 HEL D AS FOLLOWS: - . WHAT NEEDS TO BE DONE BY AN ASSESSING AUTHORITY UNDER THE INCOME - TAX ACT, 1961, IN EXAMINING THE CLAIM OF AN ASSESSEE THAT THE PAYMENT MADE BY SUCH ASSESSEE WAS A DEDUCTIBLE EXPENDITURE UNDER S 37 OF THE INCOME - TAX ACT ALTHOUGH CALLED A P ENALTY IS TO SEE WHETHER THE LAW OR SCHEME UNDER WHICH THE AMOUNT WAS PAID REQUIRED SUCH PAYMENT TO BE MADE AS PENALTY OR AS SOMETHING AKIN TO PENALTY, THAT IS IMPOSED BY WAY OF PUNISHMENT FOR BREACH OR INFRACTION OF THE LAW OR THE STATUTORY SCHEME. IF THE AMOUNT SO PAID IS FOUND TO BE NOT A PENALTY OR SOMETHING AKIN TO PENALTY DUE TO THE FACT THAT THE AMOUNT PAID BY THE ASSESSEE WAS IN EXERCISE OF THE OPTION CONFERRED UPON HIM UNDER THE VERY LAW OR SCHEME CONCERNED, IT A NO. 179 3 /DEL /20 1 3 6 THEN ONE HAS TO REGARD SUCH PAYMENT AS B USINESS EXPENDITURE OF THE ASSESSEE, ALLOWABLE UNDER SECTION 37 . 7 . FOLLOWING THE RATIO LAID DOWN BY THE HON BLE APEX COURT IN THE ABOVE CASE, WE HOLD THAT THE AMOUNT IN QUESTION IS NOT IN THE NATURE OF PENALTY AND, THEREFORE, ALLOWABLE AS DEDUCTION. TH EREFORE, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. TH E ORDER PRONOUNCED IN THE OPEN COURT ON 0 6 TH MAY , 201 5 . SD/ - SD/ - ( G.C. GUPTA ) ( I NTU RI RAMA RAO ) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 0 6 TH MAY , 20 1 5 . AKS/ - DCOM COPY FORWARDED TO 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST . REGISTRAR, ITAT, NEW DELHI