M/s.IVY Product Intermediaries Limited, Bangalore V. Deputy Commissioner of Income Tax, Bangalore

ITA 2031/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7600 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R N PARBAT
• Assessee Lawyers: C ANANTHAN
• Keywords: Opportunity of being heard; Bad and doubtful debts; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH 'C' BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO.2031/BANG/2016 (ASST. YEAR 2010-11) IVY PRODUCT INTERMEDIARIES LTD., (EARLIER KNOW AS ING VYSYA FINANCIAL SERVICES LTD.,/THE VYSYS BANK LEASING LTD.,) BANGALORE PAN AAACT8127G. . APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-11(4), BANGALORE. . RESPONDENT APPELLANT BY : SHRI C ANANTHAN, CA RESPONDENT BY : SHRI RN PARB AT, CIT DATE OF HEARING : 4-9-2017 DATE OF PRONOUNCEMENT : 8-9-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) -3, BEN GALURU DATED 5/10/2016 FOR ASST. YEAR 2010-11 ITA NO. 2031/B/16 2 2. BRIEFLY STATED, THE FACTS OF THE CASE RELEVANT F OR THIS APPEAL ARE AS UNDER:- 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINE SS OF MARKETING AND DISTRIBUTION OF FINANCIAL PRODUCTS AND SERVICES , FILED ITS RETURN OF INCOME FOR ASST. YEAR 2010-11 ON 22/9/2010 DECLARIN G INCOME OF RS.1,32,37,676/-. THE RETURN WAS PROCESSED U/S 143 (1) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) AND THE C ASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE PUT FORTH AN ADDITIONAL C LAIM FOR WRITE OFF OF BAD DEBTS AMOUNTING TO RS.4,70,619/-. THE ASSE SSING OFFICER (AO), HOWEVER, COMPLETED THE ASSESSMENT U/S 143(3 ) OF THE ACT VIDE ORDER DATED 25/2/2013 ACCEPTING THE ASSESSEES RETURNED INCOME OF RS.1,32,37,676/-, WITHOUT CONSIDERING THE ASSESS EES ADDITIONAL CLAIM FOR WRITE OFF BAD DEBTS AMOUNTING TO RS.4,70, 619/-. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 25/2 /2013 FOR ASST. YEAR 2010-11, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD CIT(A) RAISING, INTER ALIA, THE ISSUE OF NON CONSIDERATION BY THE AO OF THE ASSESSEES ADDITIONAL CLAIM FOR BAD DEBTS WRITTEN O FF AMOUNTING TO RS.4,70,619/-. THE LD CIT(A) REJECTED CONSIDERING THIS CLAIM OF THE ITA NO. 2031/B/16 3 ASSESSEE, FOLLOWING THE DECISION OF THE HONBLE APE X COURT IN THE CASE OF GOETZE (INDIA) LTD, VS. CIT (284 ITR 323) ( SC). 3.0 THE ASSESSEE, BEING AGGRIEVED BY THE ORDER OF T HE CIT(A)-3, BANGALORE DATED 5/10/2016 FOR ASST. YEAR 2010-11, HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL, WHEREIN IT HAS RAISED T HE FOLLOWING GROUNDS:- GROUND NO. I - NON-CONSIDERATION OF ADDITIONAL CLA IM OF DEDUCTION OF REVERSAL OF PROVISION FOR BAD DEBT S OF RS. 4,70,619. 1. THE COMMISSIONER OF INCOME TAX (APPEAL) - 3, BE NGALURU ['HEREINAFTER REFERRED TO AS 'THE CIT(A)'] ERRED IN DISMISSING THE ADDITIONAL CLAIM FOR DEDUCTION OF WRITE OFF BAD DEBTS OF RS.4,70,619 U/S. 36(1)(VII) OF THE INCOME TAX ACT,1 961 MADE BY THE APPELLANT BEFORE THE LEARNED ASSESSING OFFIC ER ('AO') DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS ON THE GROUND THAT THE CLAIM WAS FIRST TIME MADE BEFORE AO DURING ASSESSMENT PROCEEDING WITHOUT FILING REVISED RETURN FOR THAT MATTER. 2. HE FURTHER ERRED IN WRONGLY APPLYING THE RATIO IN THE CASE OF GOETZE INDIA LIMITED 284 ITR 323 TO THE PRE SENT CASE. 3. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT A. ONCE THE EXPENDITURE/CLAIM IS FOUND TO BE ALLOWA BLE AS DEDUCTION AS PER PROVISIONS OF THE INCOME-TAX ACT, 1961, THE ITA NO. 2031/B/16 4 SAME ARE TO BE ALLOWED AS DEDUCTION UNDER THE ACT W HILE COMPUTING INCOME CHARGEABLE TO TAX. B. APPELLATE AUTHORITIES INCLUDING CIT(A) CAN ADMIT FRESH CLAIMS MADE BY THE APPELLANT. C. GOETZE JUDGMENT (284 FIR 323) OF THE APEX COURT HAS LIMITED APPLICATION AND APPELLATE AUTHORITIES INCLU DING CIT(A) HAVE THE POWER TO ALLOW DEDUCTION/CLAIM FOR EXPENDITURE/ALLOWANCE TO THE APPELLANT WHICH OTHERW ISE ENTITLED TO, EVEN THOUGH NO CLAIM WAS MADE BY THE A PPELLANT IN THE RETURN OF INCOME. 4. THE APPELLANT PRAYS THAT THE CLAIM-OF THE APPEL LANT BE ADMITTED AND CIT (A) BE DIRECTED TO CONSIDER THE CL AIM OF THE APPELLANT AND THE SAID APPEAL TO BE HEARD ON MERITS . GROUND NO. II - DEDUCTION IN RESPECT OF REVERSAL OF PROVISION FOR BAD DEBTS OF RS. 4,70,619 U/S. 36(1)( VII) OF THE INCOME TAX ACT,1961 1. C1T(A) FURTHER ERRED IN NOT CONSIDERING REVERSA L OF PROVISION FOR BAD DEBTS OF RS 4,70,619 AS A DEDUCTI BLE ITEM FROM THE COMPUTATION. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT A. THE APPELLANT HAS ALREADY DISALLOWED PROVISION O F RS 4,70,619/- IN AY 2008-09 WHERE IT HAD ORIGINALLY MA DE THE PROVISION. B. CONSEQUENTLY THE REVERSAL OF PROVISION WHICH WAS DISALLOWED BY THE APPELLANT IN EARLIER YEAR SHOULD ALSO NOT BE TAXED. ITA NO. 2031/B/16 5 C. TAX CAN BE LEVIED ONLY ON THE LEGITIMATE AND COR RECT TAXABLE INCOME TO BE DETERMINED IN ACCORDANCE WITH THE PROVISION OF THE ACT. D. ONCE THE EXPENDITURE/CLAIM IS FOUND TO BE ALLOWA BLE AS DEDUCTION AS PER PROVISIONS OF THE INCOME-TAX ACT, 1961, THE SAME ARE TO BE ALLOWED AS DEDUCTION UNDER THE ACT W HILE COMPUTING INCOME CHARGEABLE TO TAX. 3. THE APPELLANT PRAY THAT THE AO BE DIRECTED TO RE DUCED TAXABLE INCOME BY RS 4,70,619/- BEING REVERSAL OF P ROVISION FOR BAD DEBTS CREDITED TO PROFIT & LOSS ACCOUNT. 4. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT SU BMITS THAT THE AMOUNT OF RS 4,70,619/- BE ALLOWED AS BAD DEBTS U/S 36(1)(VII) READ WITH SECTION36(2). 4. GROUND NO.I (1 TO 4) NON CONSIDERATION OF ADDI TIONAL CLAIM OF DEDUCTION OF REVERSAL OF PROVISION FOR BA D DEBTS OF RS.4,70,619/-. 4.1.1 ACCORDING TO THE LD AR FOR THE ASSESSEE, THE LD CIT(A), IN THE IMPUGNED ORDER, HAS DISMISSED THE ASSESSEES AP PEAL BY MERELY HOLDING THAT THE ASSESSEES ADDITIONAL CLAIM FOR WR ITE OFF OF BAD DEBTS WAS RIGHTLY IGNORED BY THE AO IN VIEW OF THE DECISI ON OF THE HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD., (SUP RA) SINCE THE SAID CLAIM WAS NEITHER MADE IN THE ORIGINAL RETURN OF IN COME FILED OR BY ITA NO. 2031/B/16 6 WAY OF A REVISED RETURN OF INCOME. IT IS SUBMITTED THAT THE ASSESSEE HAD MADE A PROVISION FOR BAD DEBTS AMOUNTING TO RS. 4,70,619/- IN ITS BOOKS OF ACCOUNT IN THE PERIOD RELEVANT TO ASST. YE AR 2008-09 AND THE SAME WAS WRITTEN OFF IN THE YEAR UNDER CONSIDERATIO N BUT WAS INADVERTENTLY NOT CLAIMED IN THE RETURN OF INCOME F OR ASST. YEAR 2010- 11. ON REALIZATION OF THIS INADVERTENT MISTAKE, TH E ASSESSEE PUT FORTH THE SAID CLAIM FOR WRITE OFF OF BAD DEBTS TO THE EX TENT OF RS.4,70,619/- BEFORE THE AO IN THE COURSE OF ASSESSMENT PROCEEDIN GS; WHICH CLAIM WAS NOT CONSIDERED BY THE AO. 4.1.2 IT IS CONTENDED THAT THE LD CIT(A) INSTEAD O F CONSIDERING THE ASSESSEES CLAIM FOR WRITE OFF OF BAD DEBTS AMOUNTI NG TO RS.4,70,619/- ON MERITS, SUMMARILY DISMISSED THE AS SESSEES CLAIM HOLDING THE ACTION OF THE AO IN IGNORING THE ASSESS EES CLAIM TO BE IN ORDER, IN VIEW OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD., (284 ITR 323). THE LD AR C ONTENDED THAT THE HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LT D., (SUPRA) DOES NOT PLACE FETTERS ON THE APPELLATE AUTHORITIES TO E NTERTAIN FRESH CLAIMS PUT FORTH BY THE ASSESSEE WHICH ARE A PART OF RECOR D AND/ OR ARE MATERIAL FOR THE PURPOSE OF ASSESSING THE CORRECT T AX LIABILITY OF AN ITA NO. 2031/B/16 7 ASSESSEE IN ACCORDANCE WITH LAW. IT WAS FURTHER SUB MITTED THAT THE HONBLE APEX COURT IN THE CASE OF NTPC LTD., (229 I TR 383) HAD HELD THAT A TAXPAYER MAY MAKE A FRESH CLAIM OR MODI FY A CLAIM AT ANY STAGE OF PROCEEDINGS SO THAT THE ASSESSING AUTHORIT Y CAN CORRECTLY ASSESS THE TAX LIABILITY IN ACCORDANCE WITH LAW. I N THIS REGARD RELIANCE WAS ALSO PLACED ON THE FOLLOWING JUDICIAL PRONOUNCE MENTS:- (I) CIT VS. MOTOR INDUSTRIES CO. LTD., (229 ITR 1 37) (KAR) (II) CPG CONSULTANT INDIA PVT. LTD. (ITA NO.1596/B ANG/2016 DA. 31/5/2017); (III) PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD., (2 011) 349 ITR 336 (BOM) 4.2 PER CONTRA, THE LD DR FOR REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. 4.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. THE FACTS OF THE CASE, AS EM ERGE FROM THE RECORD, ARE THAT IN THE COURSE OF ASSESSMENT PROCEE DINGS THE ASSESSEE RAISED AN ADDITIONAL CLAIM FOR WRITE OFF OF BAD DEB TS IN ITS BOOKS OF ITA NO. 2031/B/16 8 ACCOUNT AMOUNTING TO RS.4,70,619/- IN THE YEAR UNDE R CONSIDERATION. THE AO IGNORED THE AFORESAID CLAIM PUT FORTH BY THE ASSESSEE. 4.3.2 ON A PERUSAL OF THE IMPUGNED ORDER, WE FIND T HAT THE LD CIT(A) REJECTED CONSIDERING THE ASSESSEES CLAIM ON THIS ISSUE OF THE WRITE OFF OF BAD DEBTS AMOUNTING TO RS.4,70,619/-, WITHOU T DEALING WITH THE GROUNDS RAISED ON THE MERITS OF THE ISSUE. THE LD CIT(A) DISMISSED THE ASSESSEES CLAIM AND UPHELD THE ACTION OF THE A O BY RELYING ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD., (SUPRA). IN OUR CONSIDERED VIEW THIS DECISIO N OF THE HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD., (SUP RA) DOES NOT PLACE FETTERS ON THE APPELLATE AUTHORITIES TO ENTERTAIN F RESH CLAIMS PUT FORTH BY THE ASSESSEE ON ISSUES WHICH ARE A PART OF RECOR D, AND/OR ARE MATERIAL FOR THE PURPOSE OF ASSESSING THE CORRECT T AX LIABILITY OF THE ASSESSEE IN ACCORDANCE WITH LAW. WE ARE THEREFORE, OF THE CONSIDER OPINION THAT IT WAS INCUMBENT FOR THE LD CIT(A) TO HAVE EXAMINED THE ASSESSEES ADDITIONAL CLAIM OF THE WRITE OFF OF BAD DEBTS OF RS.4,70,619/- IN VIEW OF THE GROUNDS RAISED BEFORE HIM AND PARTICULARLY WHEN THE RELEVANT MATERIAL IS PART OF THE RECORDS OF ASSESSMENT AS THIS CLAIM ADMITTEDLY WAS PUT FORTH B EFORE THE AO IN ITA NO. 2031/B/16 9 ASSESSMENT PROCEEDINGS. IN COMING TO THIS VIEW, WE DRAW SUPPORT FROM THE RATIO LAID DOWN IN THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF NTPC LTD., (229 ITR 383); OF THE HONBL E KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MOTOR INDUSTRIES CO. LTD., (229 ITR 137) AND OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN THE CASE OF CPG CONSULTANTS INDIA PVT. LTD., VS. DCIT (ITA NO.1596/BANG/2016 DT. 31/5/2017). IN THIS FACTUAL AND LEGAL MATRIX OF THE CASE, AS DISCUSSED ABOVE, WE SET ASIDE THE I MPUGNED ORDER OF THE LD CIT(A) ON THIS ISSUE AND AFTER ADMITTING THE GROUNDS RAISED BY THE ASSESSEE ON ITS CLAIM FOR BEING ALLOWED WRITE O FF OF BAD DEBTS AMOUNTING TO RS.4,70,619/- (SUPRA), RESTORE THE MAT TER TO THE FILE OF THE LD CIT(A) FOR EXAMINATION, VERIFICATION AND ADJ UDICATION ON MERITS, AFTER AFFORDING BOTH THE ASSESSEE AND THE A O ADEQUATE OPPORTUNITY OF BEING HEARD IN THE MATTER AND TO FIL E DETAILS/SUBMISSIONS REQUIRED IN THIS REGARD. CONSE QUENTLY, GROUND NO.1 (1 TO 4) RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND NO.II ( 1 TO 4) 5.1 THIS GROUND BY THE ASSESSEE IS RAISED ON MERTIS WITH REGARD TO ITS CLAIM FOR WRITE OFF OF BAD DEBTS AMOUNTING TO R S.4,70,619/-. IN ITA NO. 2031/B/16 10 VIEW OF THE FACT THAT WE HAVE RESTORED THIS ISSUE F OR CONSIDERATION AND ADJUDICATION ON MERITS TO THE FILE OF THE LD CIT(A) AS PER OUR FINDINGS IN PARAS 4.3.1 AND 4.3.2 OF THIS ORDER (SUPRA), WE DO NOT DEEM IT APPROPRIATE TO ADJUDICATE THIS GROUND RAISED BY THE ASSESSEE IN THIS APPEAL BEFORE US. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR ASST. Y EAR 2010-11 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH SEPTEMBER, 2017 . SD/- SD/- (LALIET KUMAR) (JA SON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE DATED : 8/9/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETAR Y, ITAT, BANGALORE.