The DCIT, Circle-1(2), Baroda V. LMP Tractors Pvt.Ltd., Baroda

ITA 1827/AHD/2010

• Counselvise Citation: 182720514 RSA 2010
• Duration Of Justice: 3 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-06-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 28-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: M K PATEL
• Keywords: Bad and doubtful debts; Corroborative evidences; Competent authority; Assessment record
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI A. MOHAN ALANKAMONY, AM AND KUL BHARAT , JM) ITA NO.1827/AHD/2010(A.Y.: 2003-04 ) THE D. C. I. T., CIRCLE -1 (2), AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA VS M/S. L. M. P. TRACTORS P. LTD., SURAJ PLAZA, SAYAJIGUNJ, BARODA P. A. NO. AAACL 3212 C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI D. K. SINGH, SR. DR RESPONDENT BY SHRI M. K. PATEL, AR DATE OF HEARING : 27-06-2013 DATE OF PRONOUNCEMENT : 14/08/2013 O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL IS PREFERRED BY THE REVENUE AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A)-IV, BARODA IN APPEAL NO. CAB/IV-284/172/09- 10 DATED 23-03- 2010, FOR ASSESSMENT YEAR 2005-06 PASSED U/S 250 RE AD WITH SECTION 143 (3) AND 147 OF THE IT ACT. 2. THE LONE SURVIVING GROUND NO.1 RAISED BY THE RE VENUE IS REPRODUCED HEREIN BELOW FOR CONSIDERATION: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CI&T(APPEALS) ERRED IN DELETING THE ADDITION OF RS. 1.09 CRORES MADE U/S 41 (1) OF THE ACT ON ACCOUNT OF REMISSION OR CESSION OF TRADING LIABILITY IN THE CASE OF TAFE. THE LD. C IT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT TAFE HAD CL AMED BAD DEBT ON ACCOUNT OF THE SAID AMOUNT OF RS.1.09 CRORE S; AND WITHOUT WRITING OFF IN THEIR BOOKS, TAFE WOULD NOT HAVE ITA NO.1827/AHD/2010 (AY 2003-04) THE DCIT, CIR. 1(2), BARODA VS M/S. L. M. P. TRACTO RS P. LTD. 2 CLAIMED BAD DEBT IN THEIR INCOME-TAX PROCEEDINGS FO R THE A. Y. 2003-04. 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D AS DEALER OF TRACTORS FILED ITS RETURN OF INCOME ON 23-11-200 3,FOR THE ASSESSMENT YEAR 2003-04 DECLARING AN TOTAL LOSS AT (-) RS.19,7 0,649/-. THE CASE WAS PROCESSED U/S 142(1) OF THE ACT AND ASSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE ACT WAS CONCLUDED AND ORDER WAS PASSED ON 16-12-2008 DETERMINING THE TOTAL TAXABLE INCOME OF THE ASSESSEE AT RS.89,29,350/- WHEREIN AN ADDITION OF RS.1,09,00,00 0/- WAS MADE BY THE LEARNED AO U/S 41 (1) OF THE ACT ON ACCOUNT OF DISALLOWANCE MADE FOR REMISSION/CESSATION OF TRADING LIABILITY BY REJ ECTING THE SUBMISSION OF THE ASSESSEE. THE RELEVANT PORTION OF THE ASSESS MENT ORDER IS REPRODUCED HEREUNDER UNDER: 3.3 I HAVE GONE THROUGH THE SUBMISSION OF THE ASSES SEE WHICH IS NOT CONVINCING. AS STATED, THE ASSESSEE WAS THE DEA LER OF TRACTORS AND FARM EQUIPMENT LIMITED (TAFE) AND TILL F. Y. 20 01-02 IT HAD PURCHASED TRADING MATERIAL FROM TAEF. THEREAFTER AG REEMENT WAS CANCELLED AND ACCORDING TO ASSESSEE TAEF HAS FILED RECOVERY SUIT (CIVIL) BEFORE HONORABLE COURT OF MADRAS IN CIVIL S UIT NO.121 OF O2003. THE ABOVE SUBMISSION OF THE ASSESSEE IS NOT ACCEPTA BLE AS IT HAS NOT FILED ANY SUPPORTING EVIDENCES TO SHOW THE NATURE O F DISPUTE BETWEEN THE ASSESSEE AND TAFE. IT MAY BE STATED HER E THAT DURING THE COURSE OF ASSESSMENT PROCEEDING FOR A. Y. 2003- 04, TAFE HAS FILED SUPPORTING EVIDENCES BEFORE THE ASSESSING OFF ICER WHICH SHOWS THAT TAEF HAS WRITTEN OFF RS.1.09 CRORE AS BAD DEBT WHICH WAS TO BE RECEIVED BY TAFE FROM THE ASSESSEE. ONCE THE TAE F HAS WRITTEN OFF ITS DEBT, IT IS IMMATERIAL THAT TAEF HAS FILED SUIT IN THE COURT OF LAW. FROM THE DETAILS FILED BY THE ASSESSEE, THE NA TURE OF SUIT & ALSO NATURE OF DISPUTE WITH TAFE IS NOT ASCERTAINABLE. A SSESSEES CONTENTION THAT THE COMPANY HAS YET NOT OBTAINED AN Y BENEFIT AS AS THE SUIT IS PENDING IS NOT ACCEPTABLE AS PER THE IN FORMATION AVAILABLE ON RECORDS, THE TAFE HAS ALREADY WRITTEN OFF THE LI ABILITY FOR THE ASSESSEE. FROM THE DETAILS AVAILABLE ON RECORDS, IT IS CLEAR THAT TAFE HAS WRITTEN OFF THE LIABILITY OF THE ASSESSEE COMPA NY AND THEREFORE AS PER PROVISION OF THE SECTION 41(1) THE ASSESSEE WAS REQUIRED TO OFFER RS.1.09 CRORES FOR TAXATION AS PER SECTION 41 (1). THE CASE LAWS ITA NO.1827/AHD/2010 (AY 2003-04) THE DCIT, CIR. 1(2), BARODA VS M/S. L. M. P. TRACTO RS P. LTD. 3 CITED BY THE ASSESSEE ARE DIFFERED THAN THE FACTS O F THE CASE OF THE ASSESSEE. CONSIDERING THE ABOVE STATED FACTS, IT IS CLEAR THAT ASSESSEE HAS KNOWINGLY NOT OFFERED AN AMOUNT OF RS. 1.09 CRORES FOR TAXATION FOR THE YEAR UNDER CONSIDERATION. THEREFOR E, AN AMOUNT OF RS.1.09 CRORES IS ADDED TO THE RETURNED INCOME OF T HE ASSESSEE. FROM THE ABOVE FACTS, I AM SATISFIED THAT THE ASSES SEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME & CONCEALED PA RTICULARS OF ITS INCOME, PENALTY PROCEEDINGS U/S 271 (1) (C ) ARE IN ITIATED BY ISSUE OF NOTICE U/S 274 R. W. S. 271 OF THE ACT. 4. THE ASSESSEE CARRIED THE MATER BEFORE THE LEARNE D CIT(A). THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE OBSERVATIONS OF THE LEARNED AO CONFIRMED TH E ADDITION MADE BY THE LEARNED AO. THE RELEVANT PORTION OF HIS FIND INGS IN PARA 3.2 IS REPRODUCED HEREIN UNDER:- 3.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND APPELLANTS SUBMISSIONS. ASSESSING OFFICERS INFERE NCE REGARDING CESSATION OF LIABILITY IS BASED SOLELY ON INFORMATI ON RECEIVED FROM ASSESSING OFFICER OF TRACTORS & FARM EQUIPMENTS LTD . (TAFE), THE CREDITOR THAT TAFE HAD CLAIMED BAD DEBTS OF RS.1,09 ,00,000/- PERTAINING TO APPELLANT IN ITS INCOME TAX CASE. AS PER ASSESSING OFFICER, FOR APPLYING SECTION 41(1) IN APPELLANTS CASE, IT WAS IMMATERIAL THAT TAFE HAD FILED SUIT FOR RECOVERY IN THE COURT OF LAW, WHICH WAS STILL PENDING. THE ASSESSING OFFICER FURT HER OBSERVED THAT NATURE OF SUIT WITH TAFE WAS NOT ASCERTAINABLE. AS PER TAFES PLAINT AND AFFIDAVIT IN CONNECTION WITH CIVIL SUIT OF RECOVERY FILED BY IT IN THE HIGH COURT OF MADRAS IN JULY, 2002, AN AM OUNT OF RS.1,30,28,190/- WAS DUE AND PAYABLE BY THE APPELLA NT. COPY OF THIS PLAINT AND AFFIDAVIT WAS FILED BY THE APPELLAN T BEFORE THE ASSESSING OFFICER ALSO. IN PARA 10 OF PLAINT, IT WA S STATED BY TAFE THAT THIS AMOUNT WAS DUE AND PAYABLE BY THE APPELLA NT TO TAFE FOR GOODS SOLD AND SUPPLIED. THE ASSESSING OFFICER ALSO COLLECTED FROM TAFE, LEDGER ACCOUNT STATEMENTS OF APPELLANT IN THE BOOKS OF TAFE FROM A. Y. 2001-02 ONWARDS, WHICH ARE AVAILABLE ON ASSESSMENT RECORD. AS PER THESE LEDGER ACCOUNTS, APPELLANT OWE D AROUND RS.1,39,00,000/- TO TAFE AS ON 31.3.2003. APPELLANT S DEBT WAS NOT WRITTEN OFF IN THESE LEDGER ACCOUNTS BY TAFE, E VEN THOUGH A CLAIM OF BAD DEBTS WAS MADE IN ITS INCOME TAX CASE. IT IS THEREFORE CLEAR THAT TAFE HAD NOT GIVEN UP ITS CLAIM AND HAD IN FACT FILED A SUIT FOR RECOVERING THE DEBTS. THE MADRAS HIGH COUR T IN THE CASE OF INDIA METERS LTD. 262 ITR 849, HELD THAT THERE CANN OT BE ANY ITA NO.1827/AHD/2010 (AY 2003-04) THE DCIT, CIR. 1(2), BARODA VS M/S. L. M. P. TRACTO RS P. LTD. 4 REMISSION OF LIABILITY WHEN THE MATTER IS IN DISPUT E BEFORE A COURT. THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SKG SUGAR LTD. (1994) 76 TAXMAN 252 (CALCUTTA) HELD THAT CESSATION OF A L IABILITY CAN ARISE ONLY WHEN THE LIABILITY CEASES TO EXIST IN THE EYE OF LAW TO ALL INTENT AND PURPOSE. IT CANNOT BE THEREFORE SAID THAT CESSA TION OR REMISSION OF LIABILITY HAD OCCURRED IN APPELLANTS CASE. CLAI M OF BAD DEBTS BY TAFE IN ITS INCOME TAX PROCEEDINGS IS NOT ENOUGH TO APPLY SECTION 41(1), WHEN TAFE WAS SIMULTANEOUSLY PURSUING THE RE COVERY BY FILING A SUIT. ON FACTS OF THE CASE, IT IS HELD THA T THE LIABILITY OF RS.1,09,00,000/- OF APPELLANT TOWARDS TAFE CANNOT B E SAID TO HAVE CEASED OR REMITTED DURING F. Y. 2002-03. ADDITION O F RS.1,09,00,000/- U/S IS DELETED. 5. THE LEARNED AR REITERATED THE SUBMISSIONS MADE B EFORE THE AUTHORITIES BELOW AND SUPPORTED THE ORDER OF THE LE ARNED CIT(A). THE LEARNED AR FURTHER RELIED ON THE DECISION OF THE HO NBLE JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF CIT-II VS NITIN S . GARG, REPORTED IN [2012] 22 TAXMANN.COM 59(GUJ.) AND PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SUSTAINED. THE LEARNED DR REL IED UPON THE ORDER OF THE ORDER OF THE LEARNED AO AND THE SAME M AY BE SUSTAINED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE REVENUE AUTHORITIES ALONG WITH THE PA PER BOOK FURNISHED BY THE ASSESSEE. ON OUR PERUSAL, WE FIND THAT THE A O DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESS EE HAS NOT FILED ANY SUPPORTING EVIDENCE TO SHOW THE NATURE OF DISPU TE BETWEEN THE ASSESSEE AND TAFE. HOWEVER, THE LD.CIT(A) HAS GIVE N A FINDING ON FACT THAT AS PER TAFES PLAINT AND AFFIDAVIT IN CON NECTION WITH CIVIL SUIT OF RECOVERY FILED BY IT IN THE HONBLE HIGH CO URT OF MADRAS IN JULY- 2002, AMOUNT OF RS.1,30,28,190/- WAS DUE AND PAYABL E BY THE ASSESSEE. COPY OF THIS PLAINT AND AFFIDAVIT WAS FI LED BY THE APPELLANT BEFORE THE AO ALSO. IT IS ALSO RECORDED BY THE LD. CIT(A) THAT IN ITA NO.1827/AHD/2010 (AY 2003-04) THE DCIT, CIR. 1(2), BARODA VS M/S. L. M. P. TRACTO RS P. LTD. 5 PARAGRAPH NO.10 OF PLAINT, IT WAS STATED BY TAFE TH AT THIS AMOUNT WAS DUE AND PAYABLE BY THE ASSESSEE TO TAFE FOR G OODS SOLD AND SUPPLIED. THE AO ALSO COLLECTED FROM TAFE, LEDGER ACCOUNT, STATEMENTS OF APPELLANT IN THE BOOKS OF TAFE FROM F .Y. 2001-02 ONWARDS, WHICH ARE AVAILABLE ON ASSESSMENT RECORD. IT IS FURTHER OBSERVED BY THE LD.CIT(A) THAT AS PER THESE LEDGER ACCOUNTS, THE ASSESSEE OWED AROUND RS.1,39,00,000/- TO TAFE AS ON 31.3.2003. IT IS OBSERVED BY THE LD.CIT(A) THAT HOWEVER THE TAFE HAS MADE A CLAIM OF BAD DEBT IN ITS INCOME-TAX CASE, BUT IT I S CLEAR THAT DUES HAS NOT BEEN GIVEN UP WHICH IS EVIDENT FROM THE FACT TH AT A SUIT FOR RECOVERY THE TAX WAS FILED AND PENDING ADJUDICATION BEFORE THE COMPETENT AUTHORITY. THIS FINDING ON FACT IS NOT CONTROVERTED BY THE LD.SR.DR, THEREFORE, IN OUR CONSIDERED OPINION, THE RE IS NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) BY HOLDING THAT NO CESSA TION OR REMISSION OF LIABILITY HAD OCCURRED IN APPELLANTS CASE. HE HAS RIGHTLY FOLLOWED THE RATIO LAID DOWN IN THE IN THE CASE OF CIT VS. NITN S.GARG REPORTED AT [2012] 22 TAXMANN.COM 59 (GUJ.) DATED APRIL-11, 201 2. THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 14-08 -2013 SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER ( KUL BHARAT ) JUDICIAL MEMBER LAKSHMIKANT DEKA/ TC NAIR LAKSHMIKANT DEKA/ TC NAIR LAKSHMIKANT DEKA/ TC NAIR LAKSHMIKANT DEKA/ TC NAIR ITA NO.1827/AHD/2010 (AY 2003-04) THE DCIT, CIR. 1(2), BARODA VS M/S. L. M. P. TRACTO RS P. LTD. 6 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED-IV, BARODA 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER //TRUE COPY// DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: DIRECT ON COMPUTER 08-07-201 3/5-8-13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 08-07-2013/5/8/13 OTHER MEMBER: 3. DATE ON WHICH 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.:14.8.13 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 14.8.13 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: