M/S. POLYCHEM LTD., MUMBAI V. ADDL CIT 16, MUMBAI

ITA 2128/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59916 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-03-2012
• Assessment Year: 1998-1999
• Appeal Filed On: 15-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTATVA
• Assessee Lawyers: D J SHUKLA
• Keywords: Additional evidence; Set aside
• Section: 43B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI V.D. RAO , J.M. ITA NO. : 2128/MUM/2011 ASSESSMENT YEAR : 1998-99 M/S. POLYCHEM LTD. 7, J. TATA ROAD, CHURCHGATE MUMBAI-400 020. PAN NO: AAACP 7184 M ASSTT. COMMISSIONER OF INCOME TAX , SPECIAL RANGE-16 MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI D.J. SHUKLA RESPONDENT BY : SHRI R.S. SRIVASTATVA DATE OF HEARING : 22.3.2012 DATE OF PRONOUNCEMENT : 27.3.2012 O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 16.12.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 1998-99. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON TWO DIFFERENT GRO UNDS. THE FIRST DISPUTE IS REGARDING DISALLOWANCE OF EXPENDITURE OF RS.1 2,74,360/- CLAIMED BY THE ASSESSEE UNDER VOLUNTARY RETIREMENT SCHEME (VRS). 2. THE AO NOTED THAT THE ASSESSEE HAD CLAIMED EXPENDITU RE OF RS.74,70,670/- ON VRS INTRODUCED DURING THE YEAR IN I TS UNITS AT NIRA UNIT, BARODA UNIT AND AT HEADQUARTERS. OUT OF THE SA ID AMOUNT, A SUM ITA NO. 2128/M/11 A.Y.98-99 2 OF RS.61,96,310/- HAD BEEN PAID BY THE ASSESSEE DURING T HE YEAR AND FOR THE BALANCE AMOUNT OF RS.12,74,360/-, PROVISION H AD BEEN MADE IN THE ACCOUNTS. THE AO DISALLOWED THE ENTIRE CLAIM ON THE GROUND THAT THE ASSESSEE HAD NOT PROVIDED DETAILS OF BREAK-UP AND DA TE AND YEAR OF PAYMENT. IN APPEAL, ASSESSEE SUBMITTED BEFORE CIT(A) THAT SUM OF RS.61,96,310/- HAD BEEN PAID DURING THE YEAR AND FOR BALANCE AMOUNT OF RS.12,74,360/-, PROVISION HAD BEEN MADE IN RESPECT O F THE SCHEME. CIT(A) ALLOWED DEDUCTION ON ACCOUNT OF PAYMENT MADE AN D CONFIRMED DISALLOWANCE OF THE BALANCE AMOUNT ON THE GROUND THAT THE PROVISION COULD NOT BE ALLOWED AS DEDUCTION. AGGRIEVED BY THE SAI D DECISION, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. AR SUBMITTED THAT ONCE VRS CLAIM HAD BEEN ACCEPTED BY THE EMPLOYEES, ASSESSEE INCURRED A LIABILITY TH OUGH PAYMENT HAD TO BE MADE ONLY AT THE TIME WHEN THE EM PLOYEES ACTUALLY LEAVE THE ORGANIZATION. IN THE PRESENT CASE, P AYMENT MADE IN RESPECT OF SAME SCHEME, HAS BEEN ALLOWED BY CIT(A) AND, THEREFORE, BALANCE AMOUNT IN RESPECT OF WHICH LIABILITY HAD BEEN I NCURRED BY THE ASSESSEE DURING THE YEAR HAS TO BE ALLOWED. LD. DR ON T HE OTHER HAND PLACED RELIANCE ON THE ORDER OF CIT(A). ITA NO. 2128/M/11 A.Y.98-99 3 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWAB ILITY OF CLAIM MADE ON ACCOUNT OF VRS SCHEME. THERE IS NO DISPUTE THAT V RS SCHEME HAD BEEN INTRODUCED DURING THE YEAR AS IN RESPECT OF TH E SAME SCHEME THE AMOUNT PAID DURING THE YEAR HAVE BEEN ALLOWED. ONLY DISPUTE IS REGARDING BALANCE AMOUNT OF RS.12,74,360/- WHICH HAD N OT BEEN PAID DURING THE YEAR. THE CASE OF THE ASSESSEE IS THAT IT HAD INCURRED THE LIABILITY AS SOON AS EMPLOYEES ACCEPTED THE CLAIM THOUGH, THE PAYMENT HAD TO BE MADE LATER. IN OUR VIEW THE CLAIM HAD TO B E ALLOWED. IN MERCANTILE SYSTEM OF ACCOUNTING CLAIM HAS TO BE ALLOWED IN THE YEAR IN WHICH LIABILITY HAS BEEN INCURRED AND NOT ON PAYMENT BASIS AS PROVISIONS OF SECTION 43B ARE NOT APPLICABLE IN SUCH CASES. THE LIABILITY WAS INCURRED AS SOON AS THE EMPLOYEES OPTED THE SAME. WE THEREFORE, SEE NO REASON TO DENY THE CLAIM OF DEDUCTION. ORDER OF CIT(A), IS ACCORDINGLY SET ASIDE AND CLAIM OF ASSESSEE IS ALLOWED. 5. THE SECOND DISPUTE IS REGARDING ADDITION OF RS.85.00 LACS IN RESPECT OF LOANS TAKEN UNDER SECTION 68 OF THE ACT AND CON SEQUENTLY DISALLOWANCE OF INTEREST OF RS.15.30 LACS. THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD TAKEN INTE R- CORPORATE LOANS OF RS.85.00 LACS FROM SIX PARTIES DETAILS O F WHICH HAVE BEEN GIVEN IN PARA-7 OF THE ASSESSMENT ORDER. THE AO A SKED THE ITA NO. 2128/M/11 A.Y.98-99 4 ASSESSEE TO EXPLAIN LOANS BY FILING NECESSARY DETAILS SUCH AS CONFIRMATIONS GIVING, P.A. NOS. OF THE CREDITORS WHICH WE RE NO COMPLIED WITH. THE AO THEREFORE, ADDED THE SUM OF RS.85.00 LA CS UNDER SECTION 68 OF THE ACT. HE ALSO DISALLOWED THE INTEREST RELATING TO THE SAID LOANS @ 18% WHICH CAME TO RS.15.30 LACS. THE ASSESSEE DURING THE APPELLATE PROCEEDINGS FILED THE NECESSARY DETAILS ALONGW ITH THE CONFIRMATIONS GIVING, P.A. NOS. ETC. BEFORE CIT(A) AND REQUESTED FOR ADMISSION OF THE SAME AS ADDITIONAL EVIDENCE. CIT(A) H OWEVER DID NOT ADMIT THE ADDITIONAL EVIDENCE, AFTER OBSERVING THAT THE CRITERIA REQUIRED FOR ADMISSION OF ADDITIONAL EVIDENCE WAS NOT SATISFIED. HE, THEREFORE, CONFIRMED THE ADDITIONS MADE BY AO AGGRIEVED BY WHICH ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. BEFORE US, LD. AR FOR THE ASSESSEE SUBMITTED THAT IT H AD DULY EXPLAINED BEFORE THE LD. CIT(A) THE REASONS FOR DELAY IN OBTAINING LOAN CONFIRMATIONS WHICH WAS BECAUSE OF THE FACT THAT THE ASSESSEE BEING A SICK COMPANY WAS NOT ABLE TO HONOUR ITS VARIOUS COMMITM ENTS FOR TIMELY PAYMENT OF INTEREST, LOAN ETC. AS A RESULT OF WH ICH CREDITORS WERE NOT CO-OPERATING. THE DETAILS OF SUBMISSIONS MADE BEFORE CIT(A) IN THIS REGARD HAS BEEN PLACED AT PAGE-7 OF THE PAPER BOOK. IT WAS ACCORDINGLY ARGUED THAT THE CIT(A) WAS NOT JUSTIFIED IN NOT ADMITTING THE ADDITIONAL EVIDENCE. THE LD. DR ON THE OTHER HAN D PLACED RELIANCE ITA NO. 2128/M/11 A.Y.98-99 5 ON THE ORDERS OF AUTHORITIES BELOW. HE HOWEVER, EXPRE SSED NO OBJECTION IF THE MATTER WAS RESTORED TO THE AO WITH A VIEW TO PROVIDE FRESH OPPORTUNITY TO THE ASSESSEE IN RESPECT OF THE ADDITI ONAL EVIDENCE. 7. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS.85.00 LACS ON ACCOUNT OF LOANS AND CONSEQUENTIAL ADDITION OF RS.1 5.30 LACS ON ACCOUNT OF DISALLOWANCE OF INTEREST. AO MADE THE ADDITI ONS ON THE GROUND THAT THE ASSESSEE HAD NOT FILED CONFIRMATIONS WI TH P.A. NOS. ETC. THE ASSESSEE FILED THE CONFIRMATIONS ETC. BEFORE CIT(A ) AS ADDITIONAL EVIDENCE AND REQUESTED ADMISSION OF THE SAM E. THE ASSESSEE EXPLAINED THE DELAY IN OBTAINING THE LOAN CONFI RMATION WHICH WAS NON-COOPERATION FROM THE CREDITORS AS ASSESSEE BEING SICK COMPANY WAS NOT IN A POSITION TO MAKE TIMELY PAYMENT O F INTEREST, ETC. THE CREDITORS. UNDER THESE CIRCUMSTANCES IN OUR VIEW C IT(A) WAS NOT JUSTIFIED IN NOT ADMITTING THE ADDITIONAL EVIDEN CE WHICH IN OUR VIEW WAS NECESSARY FOR PROPER ADJUDICATION OF THE DISPUTE. C IT(A) HAS ALSO NOT GIVEN ANY REASON AS TO HOW CRITERIA FOR ADMISSION O F ADDITIONAL EVIDENCE WERE NOT SATISFIED. WE, THEREFORE, SET ASIDE T HE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION OF ADDITIONAL EVIDE NCE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO. 2128/M/11 A.Y.98-99 6 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27.3.2012. SD/- SD/- (V.D. RAO) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 27.3.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.