M/s Sankeshwar Minerals Pvt Ltd , Hubli V. Deputy Commissioner of Income TAx Circle-1(1), Hubli

ITA 2079/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5634 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-01-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 27-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIMAL ANAND
• Assessee Lawyers: NARENDRA JAIN
• Keywords: Opportunity of being heard; Retrospective amendment; Additional evidence; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 2079 / BANG/2017 ASSESSMENT YEAR : 20 10 - 11 M/S. SANKESHWAR MINERALS PVT. LTD., 2 ND FLOOR, GIRIRAJ ANNEXE, T.B. ROAD, HUBLI. PAN: AAHCS 7972H VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), HUBLI. APPELLANT RESPONDENT APPELLANT BY : SHRI NARENDRA JAIN, CA RESPONDENT BY : SHRI VIMAL ANAND, ADDL. CIT (DR) DATE OF HEARING : 1 8 .01.2018 DATE OF PRONOUNCEMENT : 24 .0 1 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT (A), HUBLI DATED 03.07.2017 FOR ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. GENERAL GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HUBLI (`CIT (A)'), TO THE EXTENT PREJUDICIAL TO THE APPELLANT IS BAD IN LAW. GROUNDS RELATED TO CORPORATE TAX: 2. THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER (`A0') IN DISALLOWING A SUM OF RS . 5,60,766/- U/S 40(A)(IA) BEING INTEREST FOR NON - DEDUCTION OF TDS WITHOUT APPRECIATING THE FACT THAT PAYEES HAVE FILED THEIR RETURN OF INCOME AND REMITTED THE TAX DUE AND THEREFORE BY VIRTUE OF 2' PROVISION TO SECTION 40(A)(IA), DISALLOWANCE IS NOT TO BE MADE. 3. WITHOUT PREJUDICE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER (`A0') IN DISALLOWI NG A SUM OF RS. 5,60,766/- U/S 40(A)(IA) BEING INTEREST FOR NON D EDUCTION OF TDS WITHOUT APPRECIATING THAT AS PER THE AMENDMENT BY F INANCE (NO.2) ITA NO.2079/BANG/2017 PAGE 2 OF 5 ACT, 2014 ONLY 30% OF THE SUCH SUM SHOULD BE DISALL OWED. 4. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A CTION OF THE ASSESSING OFFICER (`A0') IN DISALLOWING A SUM OF RS 1,46,088 BEING BAD DEBTS WRITTEN OFF IN THE BOOKS OF THE COMPANY I N RESPECT OF DUES FROM OMKAR MARKETING WITHOUT APPRECIATING THAT SAME IS ALLOWABLE AS PER THE PROVISIONS OF SECTION 36(1)(VII) OF THE INC OME TAX ACT, 1961. 5. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A CTION OF THE ASSESSING OFFICER (`A0') IN DISALLOWING A SUM OF RS 8,500 BEING PRIOR PERIOD EXPENDITURE WITHOUT APPRECIATING THE FACTS A ND CIRCUMSTANCES OF THE CASE. 6. THE LEARNED AO HAS ERRED RS. 8,500 BEING PRIOR P ERIOD EXPENDITURE WHILE CALCULATING THE BOOK PROFIT AS PER THE PROVIS IONS OF SECTION 115JB. THE APPELLANT SUBMITS THAT EACH OF THE ABOVE GROUND S/ SUB-GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHE R. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFO RE OR AT, THE TIME OF HEARING, OF THE APPEAL, SO AS TO ENABLE THE INCO ME-TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL ACCORDING TO LAW. THE APPELLANT PRAYS ACCORDINGLY. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT GROU ND NO. 1 IS GENERAL AND GROUND NOS. 5 AND 6 ARE NOT PRESSED. ACCORDINGLY IT IS HE LD THAT NO ADJUDICATION IS CALLED FOR REGARDING GROUND NO. 1 AND GROUND NOS. 5 AND 6 ARE REJECTED AS NOT PRESSED. 4. REGARDING GROUND NOS. 2 AND 3, HE SUBMITTED THAT ONLY ONE ISSUE IS INVOLVED IN THESE GROUNDS I.E. REGARDING DISALLOWANCE OF RS. 5, 60,766/- U/S. 40(A)(IA) BEING INTEREST FOR NON-DEDUCTION OF TDS. HE SUBMITTED TH AT AS PER THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CI T VS. ANSAL LAND MARK TOWNSHIP (P) LTD. AS REPORTED IN 377 ITR 635 (DELHI ), SECOND PROVISO TO SECTION 40(A)(IA) INSERTED VIDE FINANCE ACT, 2012 W.E.F. 01 .04.2013 IS DECLARATORY AND CURATIVE IN NATURE AND SHOULD BE GIVEN RETROSPECTIV E EFFECT FROM 01.04.2005. HE SUBMITTED THAT AS PER THIS JUDGMENT, SECOND PROV ISO TO SECTION 40(A)(IA) IS APPLICABLE IN THE PRESENT YEAR BEING ASSESSMENT YEA R 2010-11 AND THEREFORE, NO DISALLOWANCE CAN BE MADE U/S. 40(A)(IA) IN THE P RESENT CASE IF IT IS FOUND THAT ITA NO.2079/BANG/2017 PAGE 3 OF 5 THE PAYEES HAVE FILED ITS RETURN OF INCOME DISCLOSI NG THE PAYMENT RECEIVED BY THEM AND THE INCOME EARNED BY THE PAYEE BY THE SAID TRANSACTION HAS BEEN CONSIDERED FOR MAKING PAYMENT OF TAX. HE SUBMITTED THAT FOR THIS FACTUAL VERIFICATION, THE MATTER MAY BE RESTORED BACK TO TH E FILE OF AO FOR FRESH DECISION. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHO RITIES BELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT AS PER THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CI T VS. ANSAL LAND MARK TOWNSHIP (P) LTD. (SUPRA), IT WAS HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IS DECLARATORY AND CURATIVE IN NATURE AND I T HAS RETROSPECTIVE EFFECT FROM 01.04.2005 AND THEREFORE, THE SAID PROVISO IS APPLI CABLE IN THE PRESENT CASE. AS PER THE SECOND PROVISO TO SECTION 40(A)(IA), IT IS PROVIDED THAT ANY PERSON INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, WHO F AILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIO NS OF IT ACT, BEING CHAPTER XVII ON THE SUM PAID TO A RESIDENT OR ON THE SUM CR EDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN D EFAULT IN RESPECT OF SUCH TAX IF THREE CONDITIONS ARE SATISFIED. THESE THREE CONDITIONS ARE THAT I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139; II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING I NCOME IN SUCH RETURN OF INCOME; AND III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME; 6. IN PARA NO. 7 OF HIS ORDER, IT IS NOTED BY CIT(A ) THAT THE ASSESSEE HAS NOT FURNISHED ANYTHING TO SHOW THAT, THE PAYEES HAVE PA ID TAX ON SUCH INCOME / INTEREST / ROYALTY. BEFORE THE TRIBUNAL, THE ASSES SEE HAS BROUGHT ON RECORD CERTAIN ADDITIONAL EVIDENCES ALONG WITH THE AFFIDAV IT OF SHRI RAVINDRA D SANKESHWAR, MANAGING DIRECTOR OF THE ASSESSEE COMPA NY AND THE ADDITIONAL EVIDENCES INCLUDES THE FORM NO. 26A, ALONG WITH THE CERTIFICATE FROM THE CA IN RESPECT OF PAYMENT OF INTEREST TO SUNDARAM FINANCE LTD. ANOTHER FORM NO. 26A IS ENCLOSED IN RESPECT OF PAYMENT OF ROYALTY OF RS. 55,150/- TO M/S. VRL LOGISTICS PVT. LTD. AND ANOTHER FORM NO. 26A IS ENC LOSED IN RESPECT OF PAYMENT OF RS. 43,400/- TO M/S. MOHAN PRINTING PRESS AND CA CERTIFICATE IN THIS REGARD IS ITA NO.2079/BANG/2017 PAGE 4 OF 5 ALSO ENCLOSED THAT SUCH PAYEE HAS DULY CONSIDERED A MOUNT RECEIVED BY IT FROM PRESENT ASSESSEE DURING THE FINANCIAL YEAR 2009-10. IN MY CONSIDERED OPINION, THIS ADDITIONAL EVIDENCE DESERVES TO BE AD MITTED AND THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF AO FOR FRESH DECISI ON IN THE LIGHT OF THESE EVIDENCES AND IN THE LIGHT OF THIS JUDGMENT OF HON BLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. ANSAL LAND MARK TOW NSHIP (P) LTD. (SUPRA). ACCORDINGLY, I SET ASIDE THE ORDER OF CIT(A) ON THI S ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION IN THE LI GHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO AS SESSEE. ACCORDINGLY GROUND NOS. 2 AND 3 ARE ALLOWED FOR STATISTICAL PUR POSES. 7. REGARDING GROUND NO. 4, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THIS IS NOT THE CASE OF THE AO OR CIT(A) THAT THE ASSESSEE HAS NOT WRITTEN OFF BAD DEBTS IN THE BOOKS OF ACCOUNT AND THEREFORE, AS PER THE JUDG MENT OF HONBLE APEX COURT RENDERED IN THE CASE OF T.R.F. LTD. VS. CIT AS REPO RTED IN 190 TAXMAN 391 (SC), NO DISALLOWANCE SHOULD BE MADE IN THIS CONNEC TION. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT AS PER THE ASSESSMENT ORDER, THE AO SAYS THAT IT IS OBSERVED THAT AN AMOU NT OF RS. 1,46,088/- DUE FROM ITS SISTER CONCERN M/S. OMKAR MARKETING HAS BE EN WRITTEN OFF AS BAD DEBTS. IT IS FURTHER NOTED BY THE AO THAT IT WAS A STAND B EFORE HIM THAT THE SAID SISTER CONCERN DID NOT RECEIVE THE AMOUNT DUE FROM ITS CUS TOMERS AND THEREFORE, THE SAID AMOUNT HAS BEEN WRITTEN OFF. THE DISALLOWANCE WAS MADE BY THE AO ON THIS BASIS THAT SINCE THE DEBT IS RECOVERABLE FROM THE SISTER CONCERN, IT CANNOT BE ACCEPTED THAT THE DEBT HAS BECOME BAD. THIS IS NOT THE OBJECTION OF THE AO THAT BAD DEBTS HAD NOT BEEN WRITTEN OFF IN THE BOOK S OF ACCOUNTS. AS PER THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF T.R.F. LTD. VS. CIT (SUPRA), AFTER 01.04.1989, IT IS NOT NECESSARY FOR ASSESSEE TO ESTABLISH THAT DEBT, IN FACT, HAS BECOME IRRECOVERABLE AND IT IS E NOUGH IF BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN ACCOUNTS OF ASSESSEE. HENCE IN THE FACTS OF THE PRESENT CASE, IN MY CONSIDERED OPINION, THE DISALLOWANCE MA DE BY THE AO AND ITA NO.2079/BANG/2017 PAGE 5 OF 5 CONFIRMED BY CIT(A) IS NOT JUSTIFIED. HENCE I DELET E THE SAME. GROUND NO. 4 IS ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 24 TH JANUARY, 2018. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.