ACIT, Cuttack V. M/s. Utkal Highways, Cuttack

ITA 246/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3695 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 19-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: K K BAL
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO . 246 /CTK/201 5 ASSESSMENT YEAR : 2010 - 11 ACIT, CIRCLE 2(1), CUTTACK VS. M/S. UTKAL HIGHWAYS, SHREE VIHAR COLONY, TULSIPUR, CUTTA C K PAN/GIR NO . AAAFU 8445 M (APPELLANT ) .. ( RESPONDENT ) ITA NO. 241 /CTK/2015 ASSESSMENT YEAR: 2010 - 11 M/S. UTKAL HIGHWAYS, SHREE VIHAR COLONY, TULSIPUR, CUTTA C K VS. ACIT, CIRCLE 2(1), CUTTACK PAN/GIR NO. AAAFU 8445 M (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI K.K.BAL, AR RE V ENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 11 /07 / 2017 DATE OF PRONOUNCEMENT : 12 /07 / 2017 O R D E R PER N.S.SAINI, AM THESE ARE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE AGA INST THE ORDER OF THE LD CIT (A) - CUTTACK , DATED 27.2.2015 FO R THE ASSESSMENT YEAR 2010 - 11. 2 ITA NO.246 /CTK/2015 ITA NO.241/CTK/2015 ASSESSMENT YEAR:2010 - 11 2. IN THE ASSESSEES APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE ADDITION SUSTAINED BY THE CIT (A) OF RS.11,18,426/ - UNDER THE HEAD OPERATION AND MAINTENANCE EXPENSES AND RS.4,55,999/ - UNDER THE HEAD SALARY AND WAGES ON ESTIMATION ARE WITHOUT ANY BASIS AND LIABLE TO BE DELETED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE DETAILS OF DOCUMENTS REGARDING EXPENSES UNDER THE HEAD OPERATION AND MAINTENANCE. SINCE NO PART OF THE EXPENDITURE COULD BE VERIFIED BY THE ASSESSING OFFICER DESPITE OPPORTUNITIES GIVEN TO THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED 2% OF THE CLAIM OF THE EXPENDITURE AMOUNTING TO RS.11,18,426/ - FROM THE TOTAL EXPENDITURE CLAIMED UNDER THIS HEAD. THE ASSESSING OFFICER FURTHER FOUND THAT CLAIM OF SALARY, WAGES AND BOGUS AMOUNTING TO RS.98,05,660/ - ARE NOT FULLY VOUC HED. THEREFORE, HE DISALLOWED RS.4,55,999/ - OUT OF SUCH EXPENSES. 4. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE ONLY ARGUMENT OF LD A.R. O F THE ASSESSEE THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) IS VERY HIGH AND, THEREFORE, THE DISALLOWANCE MAY BE RESTRICTED TO 1% OF THE EXPENSES UNDER THE HEAD OPERATION AND MAINTENANCE AND 50% UNDER THE HEAD SALARY, WAGES AND BONUS. 3 ITA NO.246 /CTK/2015 ITA NO.241/CTK/2015 ASSESSMENT YEAR:2010 - 11 7. ON THE OTHER HAND, LD D.R. RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIALS ON RECORD, WE FIND IN THE STATEMENT OF FACTS FILED, THE ASSESSEE HAS STATED THAT TH E ASSESSEE IS A PARTNERSHIP FIRM AND CARRIES ON THE BUSINESS OF EXTRACTION, MECHANICAL LOADING & UNLOADING AND TRANSPORTATION COAL FORM OPEN CAST MINES UNDER MCL BY DEPLOYING HEAVY MACHINERIES AND TRANSPORT VEHICLES. THE A SSESSEE IS CARRYING ON THE SAME L INE OF BUSINESS FOR THE LAST 30 YEARS. ITS ACCOUNTS COMES UNDER REGULAR SCRUTINY BY THE INCOME TAX DEPARTMENT FOR THE LAST TEN YEARS. T HE ASSESEE MAINTAINS ALL BOOKS OF ACCOUNTS INCLUDING THE BILLS AND VOUCHERS AGAINST THE EACH AND EVERY EXPENSES CLAIMED I N THE AUDITED PROFIT AND LOSS ACCOUNT. THE MAJOR HEAD OF EXPENSES ARE THE OPERATION AND MAINTENANCE EXPENSES AND SALARY AND WAGES EXPENSES. THE OPERATION AND MAINTENANCE EXPENSES INCLUDES OIL AND LUBRICANT, SPARES AND ACCESSORIES AND REPAIR AND MAINTENANCE OF HEAVY MACHINERIES AND TRANSPORT VEHICLES. THE SALARY AND WAGES INCLUDES SALARY PAID TO THE MACHINES OPERATORS, TRANSPORT VEHICLE DRIVES, SUPERVISORS AND OFFICE STAFFS. THE ASSESSEE MAINTAINS ALL BILLS AND VOUCHERS AGAINST SUCH EXPENSES , SALARY REGISTE R AND SALARY ACKNOWLEDGMENT STATEMENT IN SUPPORT OF THE SALARY PAYMENT. DURING THE COURSE OF ASSESSMENT , THE ASSESSEE FURNISHED ALL THE BOOKS OF ACCOUNTS, REGISTERS AND THE BILLS AND VOUCHES FOR VERIFICATION. THE AS SESSING OFFICER VERIFIED THE BOO KS O F ACCOUNT, REGISTERS AND VOUCHERS IN DETAIL AND FOUND EVERYTHING IN ORDER. BUT UNFORTUNATELY , WHILE PASSING THE ASSESSMENT ORDER , HE DISALLOWED 2% OF THE OPERATIO N 4 ITA NO.246 /CTK/2015 ITA NO.241/CTK/2015 ASSESSMENT YEAR:2010 - 11 MAINTENANCE EXPENSES AT RS.11 ,18,426/ - . THE REASONS ASSIGNED FOR SUCH DISALLOWANCE IS THAT ' NO PART OF THE EXPENDITURE COULD BE VERIFIED IN SPITE OF REPEATED NOTICES ISSUED'. IT IS STATED THAT THIS IS BASE LESS ALLEGATION. THE ASSESSING OFFICER SHOULD HAVE SPECIFIED THAT PART OF THE EXPENSES WHICH THE ASSESSEE COULD NOT FURNISH FOR VERIFICATI ON. INSTEAD OF DOING THAT , THE ASSESSING OFFICE HAS DISALLOWED RANDOMLY @2% OF T HE EXPENDITURE. THE ACTION OF THE ASSESSING OFFICER IS CONFUSING. ON ONE HAND , HE IS SAYING NO PART OF THE EXPENSES COULD BE VERIFIED ON THE OTHER HE IS DISALLOWING RANDOMLY 2% OF THE ENTIRE EXPENSES CLAIMED. THEREFORE , THE DISALLOWANCE IS ARBITRARY AND LIABLE TO BE DELETED. IT IS ALSO STATED THAT DURING THE COURSE OF ASSESSMENT , THE ASSESSEE FURNISHED THE SALARY REGISTER INCLUDING THE ACKNOWLE DGEMENT OF THE EMPLOYEES. THE AS SESSING OFFICER DISALLOWED THE SALARY AND WAGES PAID TO THE EXTENT OF RS.4,55,999/ - ON THE GROUND THAT THE SALARY AND WAGES EXPENSES ARE NOT FULLY VOUCHED. IF THE SALARY AND WAGES ARE NOT FULLY VOUCHED , IT SHOULD HAVE BEEN QUANTIFIED TO WHAT EXTENT IT HAS NOT BEEN VOUCHED. THE DISALLOWANCE IS WITHOUT ANY BASIS. 9. LD D.R. COULD NOT CONTROVERT THE ABOVE STATEMENT OF FACTS FILED ALONGWITH THE APPEAL BEFORE US DURING THE COURSE OF HEARING. BE THAT AS IT MAY, AS LD A.R. OF THE ASSESSEE BEFORE US HAS STATED THA T THE DISALLOWANCE MADE IS ON HIGHER SIDE AND DISALLOWANCE SHOULD BE SUSTAINED AT 1% OF THE TOTAL EXPENSES OF RS.11,18,426/ - UNDER THE HEAD OPERATION AND MAINTENANCE EXPENSES AND 50% OF THE DISALLOWANCE OUT OF EXPENSES UNDER THE HEAD SALARY, WAGES AND BONUS , THEREFORE, KEEPING IN VIEW THE ABOVE 5 ITA NO.246 /CTK/2015 ITA NO.241/CTK/2015 ASSESSMENT YEAR:2010 - 11 STATED STATEMENT OF FACTS, WHICH REMAINED UNCONTROVERTED BY LD D.R., ACCEPT THE PLEA OF LD A.R. OF THE ASSESSEE AND MODIFY THE ORDER OF THE CIT(A) ACCORDINGLY. THE ASSESSING OFFICER IS DIRECTED TO DISALLOW 1 % OF THE EXPENSES CLAIMED UNDER THE HEAD OPERATION AND MAINTENANCE AND RETAIN 50% OF THE DISALLOWANCE MADE UNDER THE HEAD SALARY, WAGES AND BONUS. THUS, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 10. IN REVENUES APPEAL, THE SOLE ISSUE IS THAT THE CIT(A) ERRED IN DELETING THE BAD DEBTS WRITTEN OFF OF RS.42,78,386/ - . 11. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS DEBITED RS.42,78,386/ - AS BAD DEBTS. HE OBSERVED THAT BAD DEBT IS ALLOWABLE AS DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT ONLY IF IT IS WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE PREVIOUS YEAR IN WHICH CLAIM FOR DEDUCTION IS MADE. HE OBSERVED THAT THE ASSESSEE FAILED TO PR ODUCE RELEVANT DOCUMENTS RELATING TO THE BAD DEBTS AND, THEREFORE, HE DISALLOWED FOR THE SAME. 12. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS WRITTEN OF THE AMOUNTS AS IRRECOVERABLE IN ITS BOOKS OF ACCOUNT AND, THEREFORE, SAME IS ALLOWABLE AS B AD DEBTS TO THE ASSESSEE AND DELETED THE ADDITION. 13. LD D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS LD A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) AND RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED VS CIT(2010) , 323 6 ITA NO.246 /CTK/2015 ITA NO.241/CTK/2015 ASSESSMENT YEAR:2010 - 11 ITR 397 (SC), WHEREIN, IT HAS BEEN HELD THAT IT IS NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT ACTUALLY IT HAS WRITTEN OFF THE AMOUNT IN THE BOOKS OF ACCOUNTS, AND IT IS NOT NECESSARY FOR HIM TO PROVE THAT THE AMOUNT HAS ACTUALLY BECOME BAD. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIALS ON RECORD, WE FIND THAT NO MATERIAL HAS BEEN BROUGHT ON R ECORD BY THE REVENUE TO SHOW THAT THE ASSESSEE HAS NOT WRITTEN OFF THE DEBTS AS BAD IN ITS BOOKS OF ACCOUNT. FURTHER, LD D.R. COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE CIT(A). HENCE, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GRO UND OF APPEAL OF THE REVENUE. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCE D ON 12 /07 /2017 . SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 12 /07 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY , ITAT, CUTTACK 1. THE ASSESSEE : M/S. UTKAL HIGHWAYS, SHREE VIHAR COLONY, TULSIPUR, CUTTACK 2. THE REVENUE: JCIT, RANGE - 2, CUTTACK 3. THE CIT(A) - CUTTACK 4. THE PR. CIT - CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//