DCIT Corporate Circle 2(1), CHENNAI V. ESAB India Ltd., CHENNAI

ITA 2618/CHNY/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0161 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-04-2018
• Assessment Year: 2004-2005
• Appeal Filed On: 31-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: JHARNA B HARILAL
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Bad and doubtful debts; TDS
• Section: 43B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , . , ! BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NO.2618/CHNY/2017 /ASSESSMENT YEAR : 2004-05 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(1), CHENNAI-600 034 VS M/S. ESAB INDIA LTD., BLOCK NO.13, 3 RD MAIN ROAD, INDUSTRIAL ESTATE, AMBATTUR, CHENNAI-600 058. PAN: AAACE0861G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. AR V SREENIVASAN, JCIT /RESPONDENT BY : MS.JHARNA B.HARILAL, FCA /DATE OF HEARING : 27.03.2019 /DATE OF PRONOUNCEMENT : 29.03.2019 / O R D E R PER S.JAYARAMAN, AM: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI, IN ITA NO. 6/CI T(A)-6/2007-08 DATED 22.08.2017 FOR ASSESSMENT YEAR 2004-05. 2. M/S. ESAB INDIA LTD., THE ASSESSEE, IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF WELDING ELECTRODES AND EQUIPMENTS. WHILE MAKING THE ASSESSMENT FOR THE ASSESSMENT Y EAR 2004-05, THE AO INTER-ALIA, DISALLOWED ; BELATED PAYMENT OF EMP LOYEES AND EMPLOYERS CONTRIBUTION OF PF AND ESI, BAD DEBT W RITTEN OFF U/S.36(1) (VII) READ WITH SECTION 36(2), SUNDRY BALANCE WRIT TEN OFF AND IN THE LONG TERM CAPITAL GAIN , INCREASED THE SALE CONSIDERATIO N BY 20% OVER THE 2 ITA NO.2618/CHNY/2017 AMOUNT ADMITTED BY THE ASSESSEE AND REFUSED TO AL LOW COST OF ACQUISITION ETC. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) PARTLY ALLOWED THE APPEAL. AGGRIEVED AGAINST THAT ORDER , THE REVENUE FILED THIS APPEAL. 3. THE APPEAL WAS FILED BY THE REVENUE BELATEDLY BY A DAY. THE REVENUE FILED AN AFFIDAVIT EXPLAINING THE DELAY AND PLEADED FOR CONDONATION OF DELAY. AFTER HEARING BOTH SIDES, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 4. ON THE ISSUE OF DISALLOWANCE OF EMPLOYEES CONTRI BUTION TO PF AND ESI, THE LD. DR ARGUED ON THE LINES OF GROUNDS OF A PPEAL, WHICH IS EXTRACTED AS UNDER:- 2.1. THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF EMPLOYEES CONTRIBUTION ESI & PF RELYING ON THE DEC ISION OF THE HONBLE HIGH COURT IN THE CASE OF M/S. INDUSTRIAL S ECURITY & INTELLIGENCE INDIA PVT. LTD. HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND A REVIEW PETITION HAS BEEN PREFERRED BY THE REV ENUE. 2.2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE EMPLOYEES CONTRIBUTION OF ESI & PF ARE GOVERNED BY THE SECTIO N 36(1)(VA) OF THE ACT AND NOT UNDER SECTION 43B OF THE ACT. 2.3. THE RECENT BOARDS CIRCULAR NO.22/2015, DT.17. 12.2015 HAS ACCEPTED THE DECISION OF THE SUPREME COURT IN THE C ASE OF ALOM EXTRUSIONS ONLY IN RESPECT OF DISALLOWANCE U/S 43B OF THE ACT AND HAS STATED THAT THIS CIRCULAR DOES NOT APPLY TO THE CLA IM OF DEDUCTION RELATING TO EMPLOYEES CONTRIBUTION TO WELFARE FUND S WHICH ARE GOVERNED BY SECTION 36(1)(VA) OF THE ACT. 4.1 PER CONTRA, THE LD. AR SUBMITTED THAT THE IMPU GNED PAYMENTS WERE MADE WITHIN THE DUE DATE FOR FILING OF RETU RN OF INCOME AND HENCE, 3 ITA NO.2618/CHNY/2017 THE LD. CIT(A) RELYING ON THE HONBLE JURISDICTION AL HIGH COURT DECISION IN THE CASE OF M/S. INDUSTRIAL SECURITY & INTELLIGE NCE INDIA PVT. LTD. IN MDS/585 & 586 OF 2015 & MP NO.1 OF 2015 DATED 24.07 .215; THE HONBLE ALLAHABAD HIGH COURT DECISION IN THE CASE OF CIT VS.SAGUN FOUNDRY LTD. REPORTED IN (2017) 78 TAXMANN.COM 47 ( ALL); HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS.AIMIL LTD. IN ITA NO.1063/2008 AND CHENNAI BENCH OF THIS TRIBUNAL IN THE CASE OF NEXUM ELECTRO STEELS LTD. VS.DCIT IN ITA NO.803/MDS/2013, ALLOWED THE APPEAL. THEREFORE, THE LD. AR PLEADED THAT THE ORDER OF THE LD. CIT(A) MA Y BE UPHELD. 4.2 WE HEARD THE RIVAL SUBMISSIONS. SINCE THE LD. C IT(A) HAS FOLLOWED THE PLETHORA OF DECISIONS IN ALLOWING THE APPEAL IN CLUDING THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE O F M/S. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD, WE DO NOT F IND ANY REASON TO INTERFERE WITH HIS ORDER. THEREFORE, THE GROUNDS R AISED BY THE REVENUE ON THIS ISSUE FAIL AND ARE DISMISSED. 5. ON THE ISSUE OF BAD DEBTS WRITTEN OFF , THE LD. DR SUBMITTED THAT THE ASSESSEE DEBITED 1,04,94,999/- AS BAD DEBTS IN ITS PROFIT & LOSS ACCOUNT, THE ASSESSING OFFICER DISALLOWED THE BAD D EBTS WRITTEN OFF STATING THAT THE ASSESSEE HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE SHOWING THE NATURE OF BAD DEBTS AND EFFORT S MADE TO RECOVER 4 ITA NO.2618/CHNY/2017 THE SAME. THEREFORE, LD. DR SUBMITTED THAT THE DECI SION OF THE LD. CIT(A) IS CONTRARY TO LAW AND ON FACTS ON THE FOLL OWING GROUNDS:- 3.1 THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF BAD DEBTS WRITTEN OFF WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE ABOUT THE GENUINENESS OF THE SAME EITHER AT THE TIME OF ASSESSMENT PROCEEDINGS OR AT THE APPELLATE PROCEEDINGS . 3.2 THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF BAD DEBTS WRITTEN OFF WITHOUT CONSIDERING THE PRINCIPLE S FOR APPLYING THE ALLOWABILITY OF BAD DEBTS WHICH ARE ENUNCIATED IN T HE CASE OF SARANGPUR COTTON CO LTD (143 ITR 166) OF HONBLE GUJARAT HIGH COURT. 3.3 THE CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT THE CIT(A)-VL, MUMBAI, VIDE ORDER NO. CIT(A)VL/LTO-6(2)/7/05-06 DA TED 28.09.2005 HAS CONFIRMED THE DISALLOWANCE OF BAD DEBTS IN THE ASSE SSEES OWN CASE FOR THE AY 2002-03, WHICH WAS NOT CONTESTED BY THE ASSE SSEE TILL DATE. 5.1 PER CONTRA, THE LD. AR SUBMITTED THAT THE LD. C IT(A) BY APPLYING THE RATIO OF THE JUDGEMENT OF HONBLE SUPREME COUR T IN THE CASE OF TRF LTD.VS. CIT (CIVIL APPEAL NO.5293/2003) WHEREIN H ONBLE SUPREME COURT HELD THAT AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE APPELLANT TO ESTABLISH THAT THE DEBT IN FACT HAS BE COME IRRECOVERABLE. IT IS ENOUGH, IF THE BAD DEBT IS WRITTEN OFF AS IRRECOV ERABLE IN THE ACCOUNTS OF THE APPELLANT. ALLOWED THE ISSUE IN ASSESSEES FAOVUR. SINC E THE ASSESSEE HAS WRITTEN OFF THE BAD DEBTS, THE LD. CI T(A) RELYING ON THE CBDT CIRCULAR NO.12/2016 DATED 30.05.2016 ALLOWED T HE APPEAL. THEREFORE, THE LD A R PLEADED THAT ORDER OF THE LD . CIT(A) MAY BE UPHELD. 5 ITA NO.2618/CHNY/2017 5.2 WE HEARD THE RIVAL SUBMISSIONS. SINCE THE ASSE SSEE HAS WRITTEN OFF THE BAD DEBTS AS IRRECOVERABLE IN ITS BOOKS OF ACCOUNTS AND THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF THE HO NBLE SUPREME COURT , THE CORRESPONDING GROUNDS OF THE REVENUE ARE DISMIS SED. 6. ON THE ISSUE OF SUNDRY BALANCE WRITTEN OFF, TH E LD. DR SUBMITTED THAT THE A.O. HAS DISALLOWED THIS AMOUNT FOR THE REASON THAT ASSESSEE COULD NOT FURNISH RELEVANT DETAILS. THE ASSESSEE H AS WRITTEN OFF THE SUNDRY BALANCE AT 7,08,000/- COMPRISING OF TDS CREDIT, SECURITY DEPOSIT AND OTHERS. WHEN THE A O REQUIRED THE ASSE SSEE TO FURNISH PARTICULARS IN SUPPORT OF ITS CLAIM, THE ASSESSEE F AILED TO DO SO. THEREFORE, HE DISALLOWED THIS CLAIM. HOWEVER, THE LD.CIT (A) WITHOUT EXAMINING THE NATURE OF CLAIM AND THE RELEVANT PA RTICULARS BUT CONSIDERING THE VOLUME OF BUSINESS OF THE ASSESSEE ALONE HAS ALLOWED THE APPEAL. THEREFORE, HE SUBMITTED THAT THE LD. CI T(A) HAS ERRED IN HIS DECISION ON THE FOLLOWING GROUNDS:- 4.1 THE CIT(A) ERRED IN DELETING THE ADDITION ON A CCOUNT OF SUNDRY BALANCE WRITTEN OFF CONSIDERING THE DIFFICULTIES FACED BY T HE ASSESSEE TO FURNISH THE EVIDENCE FOR THE SAME. 4.2 THE CIT(A) OMITTED TO CONSIDER THE FACT THAT TH E BREAK UP GIVEN AT THE TIME OF SCRUTINY PROCEEDINGS WITH REGARD TO SUNDRY BALAN CE WRITTEN OFF DIFFERS FROM THE BREAK UP WHICH WAS MENTIONED IN THE APPELLATE O RDER. 4.3 THE CIT(A) OMITTED TO CONSIDER THE FACT THAT TH E SECURITY DEPOSIT WITH TAMILNADU ELECTRICITY ETC. WOULD BE TREATED AS CAPI TAL EXPENDITURE AND NOT ALLOWABLE U/S.37 OF THE ACT. PER CONTRA, THE LD. AR SUPPORTED THE ORDER THE LD. CIT(A). 6 ITA NO.2618/CHNY/2017 6.1 WE HEARD THE RIVAL CONTENTIONS AND GONE THROUG H THE RELEVANT MATERIALS. IT IS CLEAR FROM THE ORDER OF THE AO THA T ASSESSEE HAD NOT FURNISHED THE REQUIRED DETAILS/PARTICULARS BEFORE THE AO AND EVEN BEFORE THE LD. CIT(A) ALSO, THE ASSESSEE HAS NOT FURNISHED THE REQUIRED PARTICULARS. IN THE CIRCUMSTANCES, WE DEEM IT FIT T O REMIT THIS ISSUE BACK TO THE FILE OF THE AO FOR FRESH EXAMINATION. THE AS SESSEE SHALL LAY RELEVANT MATERIALS IN SUPPORT OF ITS CONTENTION BE FORE THE AO AND COMPLY WITH THE REQUIREMENTS OF THE AO IN ACCORDAN CE WITH LAW. THE AO IS FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FI T, BUT HE SHALL FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSSEE ON THE MATER IAL ETC TO BE USED AGAINST IT AND DECIDE THE MATTER IN ACCORDANCE WI TH LAW. 7. ON THE ISSUE OF COMPUTATION OF LONG TERM CAPITAL GAINS, LD. DR SUBMITTED THAT ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN OF 32,20,464/- ON ACCOUNT OF SALE OF LAND AT KHARDAH, THE SALE CONSIDERATION WAS SHOWN AT 1,65,69,240/- AND COST OF ACQUISITION AT 57,37,379/-. THE AO REQUIRED THE ASSESSEE TO PRODUC E COPY OF SALE AND PURCHASE AGREEMENTS AND ALSO STAMP DUTY VALUE A CCEPTED BY THE AUTHORITIES UNDER THE SALE OF PROPERTY U/S.50C. SIN CE THE ASSESSEE HAS NOT FURNISHED THE DETAILS, THE AO DISALLOWED THE CL AIM. ON APPEAL, THE ASSESSEE FURNISHED CERTAIN PARTICULARS BEFORE THE CIT(A) AND THE LD. 7 ITA NO.2618/CHNY/2017 CIT(A) WITHOUT AFFORDING ANY OPPORTUNITY TO THE A O ALLOWED THE APPEAL AND HENCE, AGGRIEVED, THE REVENUE RAISED THE FOLLO WING GROUNDS:- 5.1 THE CIT(A) ERRED IN CONFIRMING THE SALE VALUE OF RS.1,65,69,240/- AS ADMITTED BY THE ASSESSEE AS THE VALUE TO BE ADOP TED AS PER PROVISION OF SEC.50C OF THE ACT WITHOUT THE EVIDENC IARY SUPPORT SUCH AS REGISTERED SALE DEED. 5.2 THE CIT(A) ERRED IN CONFIRMING THE SALE VALUE A S ADOPTED BY THE ASSESSEE WITHOUT RELYING ON THE REGISTERED SALE DEE D AND THE ENDORSEMENT OF THE STAMP VALUATION AUTHORITY ON IT AS PER THE PROVISIONS OF SEC.50C OF THE IT ACT. 5.3 THE CIT(A) FAILED TO CONSIDER THE FACT THAT NO PROOF WAS FILED BY THE ASSESSEE, SUCH AS REGISTERED SALE DEED WHEREIN IT W OULD BE ENDORSED BY THE STAMP VALUING AUTHORITY WITH REGARD TO THE V ALUE OF THE PROPERTY AND PAYMENT OF STAMP DUTY THEREON WHICH IN TURN PRO VES THE CORRECTNESS OF THE ASSESSEES CLAIM. 5.4 THE CIT(A) OMITTED TO CONSIDER THE FACT THAT GE NUINENESS OF THE CLAIM WAS NOT PROVED BY THE ASSESSEE EITHER BY FURN ISHING THE REGISTERED SALE DEED COPY OR THE CONFIRMATION GIVEN BY THE STAMP REGISTERING AUTHORITY AS THE VALUE ADOPTED BY THE A SSESSEE WAS THE GUIDELINE VALUE OF THE PROPERTY. 5.5. THE CIT(A) ERRED IN RELYING ON THE DETAILS SUC H AS SALE AGREEMENT SUBMITTED BY THE ASSESSEE WHILE CONFIRMING THE SALE VALUE, DOES NOT HAVE ANY EVIDENTIARY VALUE. 5.6 THE CIT(A) OUGHT TO HAVE INVOKED THE PROVISIONS OF RULE 46A AND AFFORDED AN OPPORTUNITY TO THE AO, WHILE CONSIDERIN G THE ASSESSEES CLAIM ON COST OF ACQUISITION OF THE PROPERTY. PER CONTRA, LD. AR SUPPORTED THE ORDER OF THE LD. C IT(A). 7.1 WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. SINCE THE LD. CIT(A) HAS NOT AFFORDED OP PORTUNITY TO THE AO ON THE FRESH MATERIALS SUBMITTED BEFORE HIM AND SINCE THE REVENUE IS PLEADING THE CASE AS PER THE PROVISIONS OF RULE 46A , WE DEEM IT FIT TO REMIT THIS ISSUE BACK TO THE FILE OF THE AO FOR FR ESH EXAMINATION. THE 8 ITA NO.2618/CHNY/2017 ASSESSEE SHALL LAY RELEVANT MATERIALS IN SUPPORT OF ITS CONTENTION BEFORE THE AO AND COMPLY WITH THE REQUIREMENTS OF THE AO IN ACCORDANCE WITH LAW. THE AO IS FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT HE SHALL FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSSE E ON THE MATERIAL ETC TO BE USED AGAINST IT AND DECIDE THE MATTER IN ACC ORDANCE WITH LAW. 8. IN THE RESULT, THE REVENUES APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 29 TH MARCH, 2019 SD/- SD/- ( . . . ) (. ) ( N.R.S.GANESAN) (S.JAYARAMAN) ( / JUDICIAL MEMBER) ( /ACCOUNTANT MEMBER) /CHENNAI, /DATED 29 TH MARCH, 2019 SOMU #$% &% /COPY TO: APPELLANT 2. RESPONDENT 3. ( () /CIT(A) 4. ( /CIT 5. % ##- /DR 6. 0 /GF