The ITO, Ward-5(2), Surat V. Shri Vishal Y.Shah, Surat

ITA 2796/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4400 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: M J SHAHAR
• Keywords: Bad and doubtful debts
• Section: 37(1)

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BENCH, AHMEDABAD .., ! '# '# '# '# $ %&, ! BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER #./ I.T.A. NO.2796/AHD/2010 ( ( ')( ( ')( ( ')( ( ')( / / / / ASSESSMENT YEAR : 2007-08) INCOME TAX OFFICER WARD-5(2) SURAT / VS. SHRI VISHAL Y.SHAH 2-B, PARADISE APARTMENT ATHWA GATE SRUAT !* #./+, #./ PAN/GIR NO. : AFXPS 3608 E ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 / APPELLANT BY : SHRI K.C.MATHEWS, SR.D.R. ./*- 1 0 / RESPONDENT BY : SHRI M.J. SHAH, A.R. $'2 1 & / / / / DATE OF HEARING : 20/11/2013 34) 1 & / DATE OF PRONOUNCEMENT : 28/11/2013 5 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-IV, SURAT (CIT(A) FOR SHORT) DATED 02.07.2010 PERTAINING TO ASSESSMENT YEAR (AY) 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) SURAT HAS ERRED IN DELETING THE ADDITION OF RS.796000/- MADE ON ACCOUNT OF DISALLOWANCE OF DEFERRED REVENUE EXPENSES . [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A), SURAT HAS ERRED IN DELETING THE ADDITION OF RS.412584/- MADE ON ACCOUNT OF DISALLOWANCE OF BOGUS EXPENSES. ITA NO.2796/AHD /2010 ITO VS. SHRI VISHAL Y.SHAH ASST.YEAR 2007-08 - 2 - [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND IN LAW, THE LD.CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 29/12/2009, THEREBY THE ASSESSING OFFICER(AO) MADE ADDITION ON ACCOUNT OF DISALLOWANCE OF DEFERRED REVENUE EXPENSE S, BOGUS EXPENSES, BAD DEBTS, OUT OF CONVEYANCE & PETROL EXPENSES, DEP RECIATION ON CAR, OFFICE EXPENSES, PRINTING & STATIONERY EXPENSES, TE LEPHONE EXPENSES, ETC. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE T HE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE PARTLY A LLOWED THE APPEAL, THEREBY THE LD.CIT(A) DELETED THE ADDITION MADE ON ACCOUNT OF DEFERRED REVENUE EXPENSES AMOUNTING TO RS.7,96,000/- AND DEL ETED THE ADDITION MADE ON ACCOUNT OF BOGUS EXPENSES AMOUNTING TO RS.4 ,12,584/- AND CONFIRMED OTHER EXPENSES OF RS.19,420/- (20% OF RS. 97,102/-) AND RS.82,916/- OUT OF BOGUS EXPENSES CLAIMED. AGAINS T THIS, THE REVENUE HAS FILED THE PRESENT APPEAL. 3. FIRST GROUND IS AGAINST THE DELETION OF ADDITION OF RS.7,96,000/- MADE ON ACCOUNT OF DISALLOWANCE OF DEFERRED REVENUE EXPENSES. THE LD.SR.DR SHRI K.C.MATHEWS VEHEMENTLY SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) IS NOT JUSTIFIED I N DELETING THE ADDITION ON ACCOUNT OF DEFERRED REVENUE EXPENSES. ITA NO.2796/AHD /2010 ITO VS. SHRI VISHAL Y.SHAH ASST.YEAR 2007-08 - 3 - 3.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S HRI MANISH J.SHAH SUBMITTED THAT THERE IS NO DOUBT ABOUT THE GENUINEN ESS OF THE EXPENSES. THE AO HIMSELF HAS ALLOWED THE DEFERRED REVENUE EX PENSES. HE POINTED OUT THAT OUT OF RS.14,92,500/- THE AO HAS DISALLOWE D AN AMOUNT OF RS.7,96,000/-. HE PLACED RELIANCE ON THE DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF C IT VS. GUJARAT STATE FERTILIZERS & CHEMICALS LTD. REPORTED AT (2013) 36 TAXMANN.COM 230 (GUJ.), DATED 25/06/2013. HE SUBMITTED THAT THE PA YMENTS WERE MADE AS PER CONTRACT WITH THE CONCERNED PARTIES AND THE TAX WAS DEDUCTED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DELETED THE ADDITION ON THE BASIS THAT THE APPELLANT SUBMITTED CONTRA AND CONFIRMATION ACCOUNT S OF CITY PLUS FUNWORLD PVT.LTD. AND HE CAME TO THE CONCLUSION THA T MERELY NON- FURNISHING OF CONTRACT NOTE FOR VERIFICATION SHOULD NOT BE A GROUND FOR MAKING SUCH A DISALLOWANCE. WE FIND THAT THE AO HA S ISSUED A SHOW- CAUSE NOTICE ON 14.12.2009 CALLING UPON THE ASSESS EE TO EXPLAIN WHY THE EXPENSES OF RS.14,92,500/- SHOULD NOT BE TREATED AS DEFERRED REVENUE EXPENSES FOR THE PERIOD OF 5 YEARS AND PROPORTIONAT E EXPENSES BE TREATED AS EXPENSES FOR THE YEAR UNDER CONSIDERATION AND RE MAINING AMOUNT BE TREATED AS DEFERRED REVENUE EXPENSES AND ADDITION O F RS.11,94,000/- SHOULD NOT BE MADE ON THIS ACCOUNT. THE REPLY OF THE ASSESSEES LETTER DATED 18/12/2009 WAS REPRODUCED IN THE ASSESSMENT W HICH READS AS UNDER:- ITA NO.2796/AHD /2010 ITO VS. SHRI VISHAL Y.SHAH ASST.YEAR 2007-08 - 4 - IN THE YEAR UNDER CONSIDERATION MY PROPRIETORSHIP CONCERN VISHAL VISION I WAS HAVING SLIDE ADVERTISEMENT INCO ME. IN THE CONSIDERED YEAR I HAVE TAKEN PLACE FOR SLIDE ADVERT ISEMENT AT CITYPLUS FUNWORLD PVT.LTD. FOR RS.14,92,500/- FOR T HE PERIOD OF 1 YEAR. AGAINST THAT I HAVE RECEIVED ADVERTISEMENT F ROM VARIOUS PARTIES & I HAVE GOT THE REVENUE FOR THAT. THIS EX PENSES IS A REVENUE EXPENSES, AS I HAVE TAKEN PLACE AND PAID AM OUNT ONLY FOR 1 YEAR. SO, THERE IS NO QUESTION TO CONSIDER THIS EXPENSE AS DEFERRED REVENUE EXPENSES FORT HE PERIOD OF 5 YEARS AND PROPORTIONATE EXPENSES BE TREATED AS EXPENSES FOR T HE YEAR UNDER CONSIDERATION AND REMAINING AMOUNT CAPITALIZED. IN SUPPORT OF MY EVIDENCE I ENCLOSE HEREWITH COPY & CONTRA ACCOUNTS OF CITYPLUS FUNWORLD PVT.LTD. I HAVE ALREADY SUBMITTED THE SAME WITH MY EARLIER LETTER DATED 07.09.09. XEROX COPY OF THE P AN CARD OF CITYPLUS FUNWORLD PVT.LTD.IS ALSO ATTACHED FOR YOUR VERIFICATION. ASST.YEAR 2008-09 IS THE LAST YEAR FOR MY PROP. CO NCERN VISHAL VISION. THE EXPLANATION SUBMITTED BY THE ASSESSEE IS NOT AC CEPTABLE FOR THE REASON THAT TIME AND AGAIN THE ASSESSEE WAS REQUIRE D TO SUBMIT COPIES OF BILLS AND THE CONTRACT WITH CITYPLUS FUNW ORLD PVT.LTD. HOWEVER, THE ASSESSEE HAS NOT SUBMITTED THE SAME TI LL DATE. 4.1. FROM THE ASSESSMENT ORDER, THE UNDISPUTED FACT EMERGES THAT THE AO HAS TREATED THE EXPENSES CLAIMED BY THE ASSESSEE AS DEFERRED REVENUE EXPENSES. IN OUR CONSIDERED VIEW, THIS COULD NOT H AVE BEEN DONE BY THE AO AS SUCH NO PROVISION UNDER THE ACT IS POINTED OU T. IT IS PERTINENT TO MENTION HERE THAT THE HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT VS. GUJARAT STATE FERTILIZERS & CHEMICALS LTD. (SUPRA) HAS HELD AS UNDER:- 4.3. IN THE PRESENT CASE ALSO, THE CDR EXPENSES TO THE TUNE OF RS.2.57 CRORE HAVE BEEN RIGHTLY HELD BY BOTH THE CI T(APPEALS) AND THE TRIBUNAL AS REVENUE IN NATURE AND THE SAME HAS RIGHTLY NOT BEEN HELD TO BE CAPITAL IN NATURE. FOR THE WAIVER OF THE LOAN, THE PAYMENT HAS BEEN MADE TO THE FINANCIAL CONSULTANTS. THIS WAS FOR THE PURPOSE OF BUSINESS AND THE SAME WAS HELD TO BE ALLOWABLE ITA NO.2796/AHD /2010 ITO VS. SHRI VISHAL Y.SHAH ASST.YEAR 2007-08 - 5 - UNDER SECTION 37(1) OF THE ACT. HAVING HELD THE SA ID AMOUNT TO BE REVENUE IN NATURE APPLYING THE DECISION OF THE SUPR EME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPN.LTD. (SURPA), WHEN THE AMOUNT HAS BEEN SPREAD OVER A PERIOD OF SIX YEA RS, NO ERROR IS COMMITTED BY BOTH THE AUTHORITIES. ONCE THE EXPEND ITURE IS HELD TO BE REVENUE IN NATURE INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS, IT CAN BE ALLOWED IN ITS ENTIR ETY IN THE YEAR IN WHICH IT IS INCURRED. HOWEVER, CONSIDERING THE DEC ISION IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPN.LTD.(SUP RA), WHEN THE SPREADING IS DONE FOR OVER A PERIOD OF SIX YEARS AN D AS THE ASSESSEE-RESPONDENT HAS NO OBJECTION TO SUCH REVENU E EXPENDITURE BEING SPREAD OUT, THOUGH IT COULD HAVE INSISTED FOR THIS AMOUNT ALLOWED IN THE YEAR UNDER CONSIDERATION, WITH NO SU CH OBJECTION HAVING BEEN RAISED, THE REVENUE WOULD NOT SUCCEED I N THIS ISSUE AS THE EXPENDITURE IS HELD TO BE REVENUE IN NATURE. T HUS, THE SECOND QUESTION ALSO DOES NOT MERIT ANY CONSIDERATION. 4.2. THEREFORE, WE DO NOT FIND ANY MERIT IN THE GRO UND RAISED BY THE REVENUE, THE SAME IS HEREBY REJECTED. 5. SECOND GROUND IS AGAINST THE DELETION OF ADDITIO N OF RS.4,12,584/- MADE ON ACCOUNT OF DISALLOWANCE OF BOGUS EXPENSES. 5.1. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE POINTED OUT THAT THIS GROUND HAS WRONGLY BEEN RAISED BY THE REVENUE AS TH E LD.CIT(A) HAS CONFIRMED EXPENSES OF RS.4,14,583/- OUT OF RS.4,97, 500/-. HE HAS ALSO DRAWN OUT ATTENTION TOWARDS THE ORDER OF THE LD.CIT (A) LD.SR.DR COULD NOT CONTROVERT THIS FACT. WE FIND THAT LD.CIT(A) H AS HELD IN HIS ORDER AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS AND FIND MERITS IN THE SAME. THE BANK ACCOUNT OF THE APPELLANT SHOWS THE DEBIT ENTRI ES ON WHICH TDS HAS ALSO BEEN MADE AS ALSO THE COPIES OF ACCOUNTS OF TH E APPELLANT IN THE BOOKS OF CITY PLUS FUNWORLD PVT.LTD., SHOWS, BUT RS .4,97,500/- PAID BY ITA NO.2796/AHD /2010 ITO VS. SHRI VISHAL Y.SHAH ASST.YEAR 2007-08 - 6 - CHEQUE FOR THE PERIOD OF 16/01/2006 TO 15/04/2006 O N 22/02/2006. THE PERIOD FROM 16/01/2006 TO 31/03/2006 FALLS IN EARLI ER YEAR AND HENCE RS.4,14,583/- BE DISALLOWED AND CONFIRMED AND THE B ALANCE AMOUNT OF RS.82,916/- IS ONLY ALLOWED AS EXPENSE FOR THE CONS IDERED YEAR. 5.2. THEREFORE, WE DO NOT FIND ANY MERIT IN THE GRO UND RAISED BY THE REVENUE, THE SAME IS HEREBY REJECTED. 6. GROUND NOS.3 & 4 ARE GENERAL IN NATURE WHICH REQ UIRE NO INDEPENDENT ADJUDICATION. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) ($ %&) ! ! ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 28/11/2013 8.., '.../ T.C. NAIR, SR. PS 5 1 .&9 :9)& 5 1 .&9 :9)& 5 1 .&9 :9)& 5 1 .&9 :9)&/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. ## & $; / CONCERNED CIT 4. $;() / THE CIT(A)-IV, SURAT 5. 9'%< .& , , / DR, ITAT, AHMEDABAD 6. <( =2 / GUARD FILE. 5$ 5$ 5$ 5$ / BY ORDER, /9& .& //TRUE COPY// > >> >/ // / #+ #+ #+ #+ ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 20.11.13(DICTATION-PAD 9-PAGE S ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.11.13 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BE FORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.28.11.13 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28.11.13 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER