M/s. Hindusthan Engineering & Industries Ltd., Kolkata V. A.C.I.T., Cir -5, Kolkata,

ITA 2032/KOL/2009

• Counselvise Citation: 203223514 RSA 2009
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 14-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-12-2009
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: R SALARPURIA
• Keywords: Opportunity of being heard
• Section: 43B

Judgement Text

1 , B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B, KOL KATA [ , . .. . ! ! ! !. .. . , , , , '# ] BEFORE SRI N.VIJAYAKUMARAN, JUDICIAL MEMBER & SRI C.D. RAO, AC COUNTANT MEMBER $ $ $ $ / ITA NO. 2032 (KOL) OF 2009 %& '( / ASSESSMENT YEAR 2006-07 HINDUSTAN ENGINEERING & INDS. LTD. (PAN-AAACH8505Q) ASSTT.COMMISSIONER OF I.T., CIRCLE-5, KOLKATA. (+, / APPELLANT ) - - - VERSUS - (/0+,/ RESPONDENT ) +, 1 2 '/ FOR THE APPELLANT: / SRI R.SALARPURIA /0+, 1 2 ' / FOR THE RESPONDENT: / SRI NIRAJ KUMAR 3 1 !# / DATE OF HEARING : 07/12/2011 4' 1 !# / DATE OF PRONOUNCEMENT : 09/12/2011 '5 / ORDER ( ), (N. VIJAYAKUMARAN), JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. C.I.T.(A)-V, KOLKATA DATED 28/02/2009 FOR THE ASSESSMENT YEAR 20 06-07. THE GROUNDS OF APPEAL READ AS UNDER :- 1. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER WAS WHOLLY WRONG AND UNJUSTIFIED IN DISALLO WING THE DEDUCTION OF TRADE ADVANCES AND DEPOSITS OF RS. 37,36,973/-, WRITTEN O FF IN THE BOOKS OF ACCOUNT AS BAD AND IRRECOVERABLE DEBTS AND/OR BUSINESS LOSSES, BY WRONGLY HOLDING IT AS CAPITAL LOSS WITHOUT ANY BASIS AND THE LD. CIT(A) W AS ALSO EQUALLY WRONG AND UNJUSTIFIED IN CONFIRMING THE DISALLOWANCE FOR THE ALLEGED LACK OF DETAILS. BOTH THE ACTIONS OF THE A.O AND THE LD. CIT(A), WITHOUT CONSIDERING AND APPRECIATING THE FACTS THAT THOSE WERE ENTIRELY THE TRADE ADVANC ES AND DEPOSITS, WERE WHOLLY UNREASONABLE, UNCALLED FOR AND BAD IN LAW. 2. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCE S OF THE CASE THE A.O WAS WHOLLY WRONG AND UNJUSTIFIED IN DISALLOWING THE DEDUCTION OF RS. 1,34,21,829/- U/S 2(24)(X) READ WITH SECTION 36(1)(VA) OF THE ACT ON THE ALLEGED GROUND THAT THE EMPLOYEES CONTRIBUTION TO P.F AND E.S.I WERE NOT D EPOSITED WITHIN THE STATUTORY PERIOD AND THE LD. CIT(A) WAS ALSO EQUALLY WRONG AN D UNJUSTIFIED IN CONFIRMING THE DISALLOWANCE OF THE CLAIM. BOTH THE ACTIONS OF THE A.O AND THE LD. CIT(A), WERE WHOLLY UNREASONABLE, UNCALLED FOR AND BAD IN L AW. 2 3. FOR THAT THE APPELLANT CRAVES LEAVE TO ADD, ALT ER, AMEND OR MODIFY ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING OF THE APPEAL. 2. THE EFFECTIVE GROUND AS IN GROUND NO.1 ABOVE IS ON THE DISALLOWANCE OF RS. 37,36,973/-. THE AUTHORITIES BELOW WERE OF THE VIE W THAT IT IS ON THE CAPITAL FIELD. HENCE THEY REJECTED THE CLAIM OF THE ASSESSEE. ON APPEAL TO US, IT WAS EXPLAINED THAT THE SECURITY DEPOSIT AS WELL AS ADVANCES WERE EITHE R FOR SELLING OF GOODS MANUFACTURED BY THE ASSESSEE-COMPANY AND/OR PURCHASES OF RAW MATERI ALS REQUIRED BY THE ASSESSEE- COMPANY IN MANUFACTURING OF THE PRODUCTS. THE ASSE SSEE IS THE MANUFACTURER AND SELLER OF CHEMICALS, CASTINGS, STEEL WIRES, WAGONS, POINTS & CROSSINGS, JUTE AND PETROCHEMICALS ETC. THE LEARNED COUNSEL, THEREFORE, CONTENDED BEF ORE US THAT IT WAS A MISTAKE AND INADVERTENCE THAT THE ASSESSEE HAD SHOWN THIS EXPEN DITURE RELATING TO PRIOR PERIOD. HOWEVER, IN FACT, THE ENTIRE CLAIM REPRESENTED NON- RECOVERY OF ADVANCES MADE OR PURCHASE OF RAW MATERIALS ETC. WHICH WERE TO BE ALL OWED AS BUSINESS LOSS/BAD DEBT DURING THE YEAR ON THE BASIS OF ACTUAL WRITE OFF IN THE BO OKS OF ACCOUNT. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER S OF THE AUTHORITIES BELOW. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. AS EXPLAINED BY THE LEARNED COUNSEL, IF TH IS EXPENDITURE IS INCURRED FOR ADVANCES MADE OR PURCHASE OF RAW MATERIALS OR SECURITY DEPOS IT FOR SELLING GOODS AND/OR PURCHASE OF RAW MATERIALS WHICH IS REQUIRED EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE, WHO IS MANUFACTURING AND SELLING OF THE ABOVE PRODUCTS, TH E SAME HAS TO BE VERIFIED AFRESH AS THERE IS A TOTAL NON-APPRECIATION OF FACTS. WE OBS ERVE THAT THE LD. A.O. HAS TREATED THIS LOSS AS CAPITAL LOSS BY RELYING ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DISTILLERS TRADING CORPN. LTD. VS. C.I.T. [252 ITR 795 (DEL)]. AS RIGHTLY ARGUED BY THE LEARNED COUNSEL, THE DECISION RELIED ON BY THE LD. A.O. IS QUITE DISTINGUISHABLE AS IT RELATES TO EARNEST MONEY PAID WHICH WAS ADJUSTABLE AGAINST THE COST OF PLANT & MACHINERY. IN THE CASE BEFORE US, IT IS THE SECURI TY DEPOSIT OR ADVANCE EITHER FOR SELLING OF GOODS MANUFACTURED BY THE ASSESSEE-COMPANY UNDER APPEAL BEFORE US AND/OR PURCHASE OF RAW MATERIALS REQUIRED FOR THE BUSINESS OF THE A SSESSEE-COMPANY IN MANUFACTURING THE PRODUCTS. THE LD. A.O. HAS TO VERIFY WHETHER THE S ECURITY DEPOSITS OR ADVANCES WERE FOR 3 THE PURCHASE OF RAW MATERIALS AND FOR SELLING OF GO ODS MANUFACTURED BY THE ASSESSEE- COMPANY. THAT BEING THE CASE, THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT [(2010) 323 ITR 397 (SC)] WILL SQUARELY APPLY. HENCE, WE SET ASIDE THE ORDER OF THE LD. C.I.T.(A) AND REMIT THE ISSUE BACK TO THE FILE OF THE LD. A.O. FOR DECISION IN ACCORDANCE WITH LAW. IT IS NEEDLESS TO MENTION THAT THE LD. A.O. SHOULD OFFER SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 4. COMING TO THE SECOND ISSUE WHICH IS AGAINST DIS ALLOWANCE OF RS.1,34,21,829/- MADE U/S. 2(24)(X) READ WITH SEC. 36(1)(VA) OF THE ACT U NDER THE HEAD EMPLOYEES CONTRIBUTION TO PF AND ESI, THE AUTHORITIES BELOW DISALLOWED TH E SAME ADDED TO THE INCOME OF THE ASSESSEE AS ACCORDING TO THE DEPARTMENT, THIS AMOUN T WAS NOT DEPOSITED WITHIN THE STATUTORY PERIOD. 5. AFTER HAVING CONSIDERED THE RIVAL SUBMISSIONS, THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALLOM EXTRUSIONS LTD. [(2009) 319 ITR 306 (SC)] AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. VINAY CEMENT LTD. [(2007) 213 CTR 268 (SC)], WHEREIN THE HONBLE SUPREME COURT HE LD THAT AMENDMENT TO SEC. 43B(B) OF THE ACT BY THE FINANCE ACT, 2003 IS RETROSPECTIV E, WE ARE OF THE VIEW THAT THE DATE OF DEPOSIT OF THE AMOUNT HAS TO BE VERIFIED WHETHER IT WAS DEPOSITED WITHIN THE DUE DATE FOR FILING OF THE RETURN U/S. 139(1) OF THE ACT AND IN THAT CASE AS PER THE DECISIONS OF HONBLE SUPREME COURT, THE CLAIM OF THE ASSESSEE HA S TO BE ALLOWED. FURTHER, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AR AMBAGH HATCHERIES LTD. VS. CIT IN ITA NOS. 267 OF 2004 TO 269 OF 2004 VIDE THEIR ORDER DA TED 11/03/2011 HAS LAID DOWN THE RATIO ON THIS ISSUE OF 43B DISALLOWANCE. THE HONB LE JURISDICTIONAL HIGH COURT BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. ALLOM EXTRUSIONS LTD., CITED SUPRA, HELD THAT THE ASSESSEE SHOULD GET THE BENEFI T OF THE AMENDED PROVISION AS THE DEPOSIT MADE WAS WITHIN THE TIME PRESCRIBED IN SEC. 139(1) READ WITH SEC. 43B OF THE ACT AND THE ASSESSEE IS ENTITLED TO THE BENEFIT OF THE AMENDMENT. AS THE DATES OF DEPOSITS ARE NOT AVAILABLE, AS AGGRIEVED BY BOTH THE PARTIES , WE REMIT THE ISSUE BACK TO THE FILE OF THE LD. A.O. BY SETTING ASIDE THE ORDER OF LD. C.I. T.(A) AND DIRECT THE A.O. TO VERIFY THE DATES OF DEPOSITS WITH RELEVANT DATE OF FILING OF T HE RETURN FOR THE RELEVANT PREVIOUS YEAR AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AS PER THE RATIO LAID DOWN ABOVE. 4 NEEDLESS TO MENTION THAT THE LD. A.O. SHOULD AFFORD SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, THE ASSESEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6 '5 #' 7 8 69 THIS ORDER IS PRONOUNCED IN THE COURT ON 9.12.2011 SD/- SD/- ( . .. . ! ! ! !. .. . ) '# ( ) (C.D. RAO), ACCOUNTANT MEMBER (N.VIJAYAKUMARAN) JUDICIAL MEMBER ( (( (!# !# !# !#) )) ) DATE: 9-12-2011 '5 1 /%% :'';- COPY OF THE ORDER FORWARDED TO: 1. +, / THE APPELLANT : HINDUSTHAN ENGINEERING & INDUSTRIES LTD., C/O. M /S. SALARPURIA J AJODIA & CO., 7, C.R.AVENUE, KOL-700072 2 . /0+, / THE RESPONDENT : A.C.I.T., CIRCLE- 5, KOLKATA. 3. %5 () : THE CIT(A)-V, KOLKATA. 4 . %5 / THE C.I.T., KOL , KOLKATA. 5. >%8 /% / DR, ITAT, KOLKATA BENCHES, KOLKATA 6. GUARD FILE . 0 /%/ TRUE COPY, '5/ BY ORDER, (DKP) ? / DY/ASSTT. REGISTRAR .