Mohan Jute Mills Ltd., Kolkata V. ITO, Wd- 1(2), Kolkata, Kolkata

ITA 261/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1522 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 14-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: K K GOSWAMI
• Keywords: Additional evidence
• Section: 43B; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA [BEFORE SHRI N.V. VASUDEVAN, JM & SHRI WASEEM AHMED, AM] I.T.A. NO. 261/KOL/2014 ASSESSMENT YEAR: 2005-06 M/S. MOHAN JUTE MILLS LTD..............................APPELLANT 16A, PALACE COURT, 1, KYD STREET KOLKATA 70016 [PAN: AACCM4482B] I.T.O. WARD 1(2) RESPONDENT KOLKATA APPEARANCES BY: SHRI K.K. GOSWAMI, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE. SHRI SAURABH KUMAR, ADDL. CIT (DR) APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : AUGUST 21, 2017 DATE OF PRONOUNCING THE ORDER SEPTEMBER 01, 2017 ORDER PER WASEEM AHMED, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT (APPEALS) XX, KOLKATA DATED 25.11.2013. THE ASSESSMENT WAS FRAMED BY ITO WARD 1(2), KOLKATA, U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HERE-IN-AFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 22.03.2013 FOR THE ASSESSMENT YEAR 2005-06. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS WELL AS IN LAW, THE LD. CIT(A) WAS WRONG AND UNJUSTIFIED IN CONFIRMING THE ADDITION OF RS. 67,37,002/- ON ACCOUNT OF GRATUITY MADE BY THE LD. I.T.O. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS WELL AS IN LAW, THE LD. CIT (A) WAS WRONG AND UNJUSTIFIED IN CONFIRMING THE INTEREST U/S 234B & 234C AS A RESULT OF ABOVE MENTIONED DISALLOWANCE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR ALTER, AMEND AND MODIFY SUBSTITUTE, DELETE AND/OR REVISE ALL OR ANY OF THE GROUNDS OF APPEAL AND OR BEFORE THE FINAL HEARING. 2 I.T.A. NO. 261/KOL/2014 ASSESSMENT YEAR: 2005-06 M/S. MOHAN JUTE MILLS LTD. 2. SUBSEQUENTLY, THE ASSESSEE HAS REVISED ITS GROUND NO 1 VIDE APPLICATION DATED 12.07.2017. THE REVISED GROUND NO 1 READS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT (A) ERRED AND WAS UNJUSTIFIED IN RESTRICTING THE DISALLOWANCE OF GRATUITY CLAIMED DURING THE YEAR, TO THE TUNE AT RS. 62,15,970/- TREATING IT AS PRIOR PERIOD EXPENSE EVEN THOUGH THE SAME IS ALLOWABLE. RELIEF CLAIMED: THE ADDITION TO THE TUNE OF RS. 62,15,970/- SHOULD BE DELETED. 3. T HE FIRST ISSUE RAISED BY ASSESSEE IN REVISED GROUND OF APPEAL IS THAT LD. CIT (A) ERRED IN RESTRICTING THE ADDITION MADE BY THE AO FOR RS. 62,15,970/- ON ACCOUNT OF GRATUITY AMOUNT BY HOLDING THE SAME AS PRIOR PERIOD EXPENSES. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING AND PRODUCTION OF SACKING AND EXPORT OF CLOTH. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED GRATUITY EXPENSES FOR RS. 67,37,002/- IN ITS PROFIT AND LOSS ACCOUNT. ON QUESTION BY THE AO ON CLAIM OF GRATUITY AMOUNT, THE ASSESSEE FAILED TO FURNISH THE NECESSARY DETAILS. THEREFORE, THE AO DISALLOWED THE GRATUITY EXPENSES OF RS. 67,37,002/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT (A). THE ASSESSEE BEFORE THE LD. CIT (A) FILED THE NECESSARY DETAILS FOR THE GRATUITY EXPENSES SUCH AS LEDGER AND EVIDENCE OF PAYMENT OF THE GRATUITY. 6. THE ASSESSEE ALSO SUBMITTED THAT AT THE TIME OF ASSESSMENT, THE DETAILS OF GRATUITY PAYMENT WERE DULY SUBMITTED TO THE AO. HOWEVER, THE EVIDENCE OF PAYMENT SUCH AS VOUCHERS WAS NOT SUBMITTED TO THE AO AS IT WAS NEVER REQUISITIONED BY THE AO. THE LD. CIT (A) AFTER ACCEPTING THE SUBMISSION OF THE ASSESSEE CALLED FOR THE REMAND REPORT FROM THE AO WHO OBJECTED ON THE ADMISSION OF ADDITIONAL EVIDENCE. AS PER THE AO, THE ADDITIONAL EVIDENCE CAN BE ACCEPTED IN 3 I.T.A. NO. 261/KOL/2014 ASSESSMENT YEAR: 2005-06 M/S. MOHAN JUTE MILLS LTD. TERMS OF THE PROVISION OF RULE 46A OF INCOME TAX RULES AND FURTHER SUBMITTED THAT NONE OF THE CONDITION AS STATED IN THE RULES HAS BEEN FULFILLED BY THE ASSESSEE. 7. THE AO IN ITS REMAND REPORT FURTHER SUBMITTED THAT THE PAYMENT OF GRATUITY WAS MADE TO DIFFERENT EMPLOYEES BEGINNING FROM THE YEARS 2002 TO 2005. HOWEVER, THE ENTIRE AMOUNT OF GRATUITY PAYMENT FOR RS. 67,37,002/- WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT IN THE YEAR UNDER CONSIDERATION. IN FACT, THE ASSESSEE HAS SHOWN ADVANCE PAYMENT OF GRATUITY IN EARLIER YEARS WITHOUT MAKING ANY PROVISION FOR ACCRUED LIABILITY IN THE BOOKS OF ACCOUNTS. AS SUCH, THE AO IN ITS REMAND REPORT SUBMITTED THAT THE AMOUNT OF GRATUITY EXPENSE PERTAIN TO THE EARLIER YEARS. 8. HOWEVER THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS DELETED THE ADDITION MADE BY THE AO IN PART BY OBSERVING AS UNDER: THE FACT OF THE CASE IS THAT THE APPELLANT CLAIMED RS. 67,37,002/- TO THE P/L ACCOUNT BEING PAYMENT OF GRATUITY TO THE EMPLOYEES. THE A.O. DISALLOWED THE APPELLANTS CLAIM ON THE GROUND THAT THE PAYMENT WAS MADE ON DIFFERENT DATES STARTING FROM THE YEAR 2002 ONWARDS. NO PROVISION WAS MADE IN RESPECT OF LIABILITY OF GRATUITY ACCRUED TO THE EMPLOYEES IN THE EARLIER YEARS. HOWEVER, IN THE REMAND REPORT, IT WAS REPORTED THAT THE GRATUITY FOR THE YEAR 2004-05 WAS OF RS. 2,33,888/- ONLY. THE A.Y. 2002-03, 2003-04 AND 2004-05 WHICH WAS NOT CLAIMED IN THE EARLIER YEARS. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS FOUND THAT THE PAYMENT OF GRATUITY FOR THE YEAR UNDER CONSIDERATION WAS MADE ONLY OF RS. 5,21,032/- AND THE BALANCE AMOUNT PERTAINS TO THE EARLIER YEARS. SINCE, THE GRATUITY AMOUNT WAS PAID BY THE APPELLANT TO THE EMPLOYEES DURING THE YEAR ONLY OF RS. 5,21,032/-, THE SAME IS DIRECTED TO BE ALLOWED, HOWEVER, THE BALANCE AMOUNT BEING PRIOR PERIOD EXPENSES WHICH IS NOT RELATED TO THE EXPENDITURE FOR THE A.Y. 2005-06, IS NOT FOUND TO BE ALLOWABLE. BEING AGGRIEVED BY THE ORDER OF LD. CIT (A), THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 9. THE LD AR BEFORE US SUBMITTED THAT THE ASSESSEE HAS PAID THE AMOUNT OF GRATUITY TO DIFFERENT EMPLOYEES IN THE F.YS. BEGINNING FROM 2001-02 TO 2004-05. TILL THE F.Y. 2003-04, THE PAYMENT OF GRATUITY AMOUNT WAS SHOWN AS AN ADVANCE IN 4 I.T.A. NO. 261/KOL/2014 ASSESSMENT YEAR: 2005-06 M/S. MOHAN JUTE MILLS LTD. THE BALANCE SHEET AND NO CLAIM IN SPITE OF ADVANCE PAYMENT OF GRATUITY WAS MADE IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. THE ENTIRE AMOUNT OF GRATUITY WAS DEBITED TO ITS PROFIT AND LOSS ACCOUNT DURING THE YEAR AND DEDUCTION WAS CLAIMED IN PURSUANCE TO THE PROVISION OF SECTION 43B OF THE ACT. ON THE OTHER HAND, THE LD DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN CASE RELATES TO THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES FOR CLAIM MADE BY THE ASSESSEE ON ACCOUNT GRATUITY EXPENSES. THE DISALLOWANCE WAS MADE BY THE LOWER AUTHORITIES ON THE GROUND THE GRATUITY EXPENSE PERTAINS TO THE EARLIER YEARS AND THEREFORE IT IS REPRESENTS THE PRIOR PERIOD ITEMS WHICH CANNOT BE ALLOWED AS DEDUCTION. 10.1 INDEED THE ASSESSEE HAS MADE THE PAYMENT OF GRATUITY TO DIFFERENT EMPLOYEES IN THE EARLIER YEARS BEGINNING FROM AYS 2001-02 TO 2004-05. THE PAYMENT MADE TO THE EMPLOYEES IN EARLIER YEARS WAS CLASSIFIED AS ADVANCE TO THE EMPLOYEES WHICH IMPLIES THAT THE GRATUITY AMOUNT WAS NOT SETTLED BY THE ASSESSEE IN THE EARLIER YEARS. AS PER THE LD AR, THE ENTIRE AMOUNT OF GRATUITY WAS SETTLED AND PAID DURING THE YEAR UNDER CONSIDERATION. THEREFORE THE DEDUCTION WAS CLAIMED DURING THE YEAR. 11. THE PAYMENT OF GRATUITY IS GOVERNED UNDER THE PROVISION OF SECTION 43B WHICH READS AS UNDER: CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT 51 . 52 43B. 53 NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE 51 UNDER THIS ACT IN RESPECT OF 54 [(A) ----- (B) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF 55 CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES, 56 [OR] 5 I.T.A. NO. 261/KOL/2014 ASSESSMENT YEAR: 2005-06 M/S. MOHAN JUTE MILLS LTD. 12. FROM THE ABOVE PROVISION, WE FIND THAT THE EXPENSES OF GRATUITY ARE ALLOWED ON THE BASIS OF ACTUAL PAYMENT WHICH IMPLIES THAT EVEN THE ASSESSEE CLAIMS THE GRATUITY EXPENSES AS DEDUCTION IN ITS PROFIT AND LOSS ACCOUNT THEN ALSO THE DEDUCTION WOULD BE DENIED TO IT IN VIEW OF THE PROVISIONS OF SECTION 43B OF THE ACT. THEREFORE IN OUR CONSIDERED VIEW GRATUITY EXPENSE IS ALLOWABLE ON THE BASIS OF ACTUAL PAYMENT. 13. AS IN THE CASE BEFORE US, THE ASSESSEE HAS MADE THE PAYMENT WHICH WAS SHOWN AS ADVANCE IN THE BOOKS IN THE EARLIER YEARS, THEREFORE, IT NEEDS TO BE VERIFIED WHETHER THE DEDUCTION WAS CLAIMED BY THE ASSESSEE IN THE EARLIER YEARS. THUS EVEN THE GRATUITY EXPENSE REPRESENTS THE PRIOR PERIOD EXPENSE WOULD BE ALLOWED ON ACTUAL PAYMENT BASIS. IN THE LIGHT OF ABOVE DISCUSSION WE ARE INCLINED TO RESTORE BACK THE ISSUE TO THE FILE AO WITH THE DIRECTION TO ALLOW THE DEDUCTION OF THE GRATUITY EXPENSES AFTER VERIFYING THE FOLLOWING DETAILS: I. WHETHER ANY DEDUCTION OF GRATUITY EXPENSE HAS BEEN CLAIMED BY THE ASSESSEE IN THE EARLIER YEARS, II. THE ASSESSEE WILL PRODUCE ALL THE EVIDENCES SHOWING THE PAYMENT OF GRATUITY FOR RS. 62,15,970/- ONLY. IN VIEW OF THE ABOVE, THE ISSUE RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO 2 IS CONSEQUENTIAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. SIMILARLY GROUND NO 3 GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 01, 2017. SD/- SD/- (N.V. VASUDEVAN) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 01/09/2017 6 I.T.A. NO. 261/KOL/2014 ASSESSMENT YEAR: 2005-06 M/S. MOHAN JUTE MILLS LTD. BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. MOHAN JUTE MILLS LTD. 16A PALACE COURT, 1 KYD STREET, KOLKATA -700016 2. ITO WARD 1(2), KOLKATA 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA