Waves Foods Pvt.Ltd., Ahmedabad V. The Dy.CIT.,S.K.Circle, Himatnagar

ITA 2851/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94686 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 12-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K
• Assessee Lawyers: PF JAIN
• Keywords: Bad and doubtful debts; Difference of opinion; Change of opinion
• Section: 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO.2851/AHD/2010 (ASSESSMENT YEAR:2005-06) WAVES FOOD PRIVATE LTD., 905, ATLANTA TOWER, NR. SEARS TOWER, GULABI TEKRA, AHMEDABAD 380015 APPELLANT VS. DY. COMMISSIONER OF INCOME-TAX, HIMMATNAGAR, AHMEDABAD RESPONDENT PAN: AAACW4408M / BY ASSESSEE : SHRI P. F. JAIN, A.R. / BY REVENUE : SHRI A. K. PANDEY, SR.D.R. /DATE OF HEARING : 28.08.2015 /DATE OF PRONOUNCEMENT :18.11.2015 ORDER ITA NO.2851/AHD/2010 (WAVES FOOD P. LTD. VS. ACIT) A.Y. 2005-06 - 2 - PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005-06, ARISES FROM ORDER OF THE CIT - VI, AHMEDABAD, DATED 10.08. 2010 PASSED IN PROCEEDINGS U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, HEREAFTER THE ACT. 2. THE INSTANT APPEAL FILED AT ASSESSEES BEHEST RA ISES TWO SUBSTANTIVE GROUNDS IN CHALLENGING THE LOWER APPELL ATE ORDER UPHOLDING VALIDITY OF RE-OPENING AND DISALLOWANCE O F PROVISION MADE FOR DAMAGED GOODS RESPONSIBILITY IN QUESTION A MOUNTING TO RS.77,03,560/- AS MADE IN THE COURSE OF RE-ASSESSME NT FRAMED ON 04.12.2009. 3. THE ASSESSEE COMPANY FILED ITS RETURN ON 31.10.2 005 DECLARING NIL INCOME. THE ASSESSING OFFICER FRAMED A REGULAR ASSESSMENT ON 31.10.2007 MAKING SECTION 40(A)(IA) D ISALLOWANCE OF RS.3,34,86,361/- FOR NON DEDUCTION OF TDS ON VAR IOUS PAYMENTS. THE SAME IS NOT AN ISSUE BEFORE US. THE REAFTER, THE ASSESSING OFFICER FORMED REASONS TO BELIEVE THAT AS SESSEES INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT . HE ISSUED SECTION 148 NOTICE DATED 23.12.2008. THE ASSESSEE SOUGHT FOR REASONS THEREOF. PAGE 12 OF THE PAPER BOOK COMPRIS ES OF THE SAME AS UNDER: ASSESSEE HAD DEBITED LIABILITY OF DAMAGED GOODS OF RS.1,00,59,941/- IN PROFIT AND LOSS ACCOUNT, ASSESSEE HAD ALSO DEBIT ED BAD DEBTS OF RS.2,02,902/-. THESE EXPENSES WERE CLAIMED IN PROF IT AND LOSS ACCOUNTS WHICH ARE NOT ALLOWABLE. ASSESSEE HAD DEB ITED BAD DEBTS OF RS. 2,02,902/-. AS PER HONBLE GUJARAT HIGH COURT S DECISION IN THE CASE OF DHAL ENTERPRISE & ENGINEERING PVT. LTD. V/S . CTR 207 ITR 729(2007) ONLY DEBITING THE AMOUNT OF BAD DEBTS CAN NOT BE ALLOWED AS EXPENSES. ASSESSEE HAD NOT PROVED THAT DEBTS BECOM E BAD. ITA NO.2851/AHD/2010 (WAVES FOOD P. LTD. VS. ACIT) A.Y. 2005-06 - 3 - ASSESSEE HAD MADE PROVISION ON CLAIMING D.G.R. IN PROFIT AND LOSS ACCOUNT OF RS.1,00,59,941/- AS CONTINGENT LIAB ILITY. DURING THE ASSESSMENT PROCEEDING FOR A.Y.2006-07 ASSESSEE HAD GIVEN ITATS ORDER IN WHICH ITAT HAD PASSED ORDER IN CASE OF RAS NA LTD. WHICH IS SISTER CONCERN OF THE ASSESSEE GROUP IN WHICH ITAT HAD GIVEN CLEAR DIRECTION THAT CURRENT PROVISION ARE TO BE ADDED. IN THE ASSESSEES CASE AS PER WORKING GIVEN FOR THE CURRENT YEAR ASSESSEE HAD MADE D.G.R. PROVISION OF RS.77,03,560/- ARE TO BE ADDED IN THE INCOME. THE ASSESSING OFFICER ACCORDINGLY TOOK UP RE-ASSESS MENT PROCEEDINGS. THE ASSESSEE WOULD SUBMIT THAT AN IDE NTICAL PROVISION IN CASE OF RASNA LIMITED STOOD DECIDED IN ITS FAVOUR. IT CLAIMED THAT THE IMPUGNED DAMAGED GOODS LIABILITY W AS AN ASCERTAINED ONE INSTEAD OF BEING CONTINGENT. THE A SSESSING OFFICER IN HIS ORDER DATED 04.12.2009 HELD THAT THI S DAMAGED GOODS LIABILITY MUST HAVE ACTUALLY ARISEN AND INCUR RED AND NOT THAT MERELY ANTICIPATED AS CERTAIN TO OCCUR. HE DI SALLOWED CURRENT PROVISION OF RS.77,03,560/- BY ADOPTING THE VERY REASONING. 4. THE ASSESSEE PREFERRED APPEAL INTER ALIA CHALLEN GING VALIDITY OF RE-OPENING AS WELL AS ASSAILED CORRECTNESS OF TH E IMPUGNED DAMAGED GOODS LIABILITY DISALLOWANCE ON MERITS. TH E CIT(A) REJECTS BOTH THESE PLEAS. THIS LEAVES ASSESSEE AGG RIEVED. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE C ASE FILE. IT TRANSPIRES FROM THE PAPER BOOK THAT THE ASSESSING O FFICER IN THE COURSE OF REGULAR ASSESSMENT FRAMED HEREINABOVE HAD ISSUED STATUTORY NOTICE U/S.142 (1) DATED 02.07.2007 FORMI NG PAGE 19 OF THE PAPER BOOK. HE RAISED A SPECIFIC QUERY 16 SEEK ING DETAILS OF LIABILITY FOR DAMAGED GOODS OF RS.1,00,59,941/-. T HE ASSESSEE ITA NO.2851/AHD/2010 (WAVES FOOD P. LTD. VS. ACIT) A.Y. 2005-06 - 4 - FILED ITS REPLY ALONG WITH P&L ACCOUNT AND DETAILS OF ALL OF ITS EXPENSES. PAGE 25 OF THE PAPER BOOK COMPRISES OF T HE RELEVANT PARTICULARS OF THE ABOVE STATE LIABILITY REDUCED FR OM RS.1,62,77,457/- IN PRECEDING ASSESSMENT YEAR TO TH AT OF RS.1,00,59,941/- IN THE IMPUGNED ASSESSMENT YEAR. RELEVANT NOTES ON POLICY FOR DAMAGE GOODS AT PAGE 27 STATED THAT THE SAME RECEIVABLE IN DAMAGED CONDITION IN SUBSEQUENT YEARS OUT OF THOSE SOLD DURING THE YEAR IS MADE IN ACCOUNTS OF THE YEA R CORRESPONDING TO ITS SALES ON ESTIMATION BASIS AS D ETERMINED BY THE MANAGEMENT. IT HIGHLIGHTED THAT ANY SHORTFALL / EXCESS LIABILITY IS CHARGED OF /CREDITED TO ACCOUNTS IN TH E YEAR OF OCCURRENCE. THERE IS NO DISPUTE ABOUT THIS FACTUAL POSITION. A CO-ORDINATE BENCH IN CASE OF RASNA ENTERPRISE LTD. (SUPRA), IN REVENUES APPEAL ITA NO.1728/AHD/2000 DECIDED ON 24 .02.2006 HAD OBSERVED THAT THE ASSESSEE THEREIN HAD FOLLOWED PAST PRACTICE AND THERE WAS A HISTORY OF THE SAME PROVING TO BE I NACCURATE AS THE FACTS HIGHLIGHTED RIGHT BACK OF VARIOUS AMOUNTS . THE LD. CO- ORDINATE BENCH HELD THAT THE ASSESSEES CLAIM THERE IN TO THE EXTENT OF THE WRITE BACKS WAS NOT JUSTIFIABLE. IT WAS NOWHERE HELD THAT SUCH A PROVISION COULD NOT BE MADE AT ALL. WE ARE OF THE OPINION IN THESE FACTS AND CIRCUMSTANCES THAT ASSES SING OFFICERS TWIN REASONING QUA THIS ISSUE OF DAMAGED GOODS LIAB ILITY IS MERE CHANGE OF OPINION FORMED IN COURSE OF THE ORIGINAL REGULAR ASSESSMENT (SUPRA) NOT RESULTING IN ANY DISALLOWANC E. WE ACCEPT ASSESSEES ARGUMENT RELYING ON CASE LAW CIT VS. KEL VINATOR OF INDIA PVT. LTD. 320 ITR 561 (SC) AND REJECT THOSE O F THE REVENUE SUPPORTING THE IMPUGNED RE-OPENING. THE LATTER ASP ECT IN VIEW OF CASE LAW IN RASNA LTD. (SUPRA) ALREADY STANDS DISTI NGUISHED ON ITA NO.2851/AHD/2010 (WAVES FOOD P. LTD. VS. ACIT) A.Y. 2005-06 - 5 - FACTS HEREINABOVE. WE CONCLUDE IN THESE FACTS THAT THE IMPUGNED RE-OPENING IS NOT SUSTAINABLE. THE SAME IS ACCORDI NGLY QUASHED. OUR FINDINGS ON THE FORMER SUBSTANTIVE GROUND RENDE R THE LATTER ONE ON MERITS INFRUCTUOUS. 6. THIS ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 18 TH DAY OF NOVEMBER, 2015. SD/- SD/- (PRAMOD KUMAR) (S. S. GODA RA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 18/11/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0