The DCIT, Circle-4, Ahmedabad V. Gopala Polyplast Ltd., Ahmedabad

ITA 3017/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80341 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-09-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 03-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD . . , , BEFORE SHRI N.S. SAINI, A CCOUNTANT MEMBER AND SHRI KU L BHARAT, JUDICIAL MEMBER 1. . / I.T.A. NO.3017/AHD/2010 A.Y. 2002 - 03 2. . / I.T.A. NO.3056/AHD/2010 A.Y. 2004 - 05 1. THE DCIT CIRCLE - 4 AHMEDABAD 2. GOPALA POLYPLAST LTD. AHMEDABAD / VS. 1. GOPA LA POLYPLAST LTD. 1 - 2, AKANSHA APTS. SOLA ROAD AHMEDABAD 2. THE ASST.CIT CIRCLE - 4, AHMEDABAD ./ ./ PAN/GIR NO. : AABCG 1282 C ( / APPELLANT S ) .. ( / RESPONDENT S ) REVENUE B Y : SHRI M .K.SINGH, SR.D.R. ASSESSEE B Y : SHRI ASEEM THAKKAR, A.R. / DATE OF HEARING 02/09/2014 / DATE OF PRONOUNCEMENT 26/09/2014 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THE REVENUE AND THE ASS ESSEE HAVE CHALLENGED THE SEPARATE ORDERS OF THE L D. COMMISSIONER OF INCOME TAX (APPEALS) - XX, AHMEDABAD ( CIT (A) IN SHORT) BOTH IDENTICALLY DATED 30/08/2010 PERTAINING TO ASSESSMENT YEAR S (AY S ) 2002 - 03 & 2004 - 05 RESPECTIVELY. 2. FIRST, WE TAKE UP THE R EVENUE S APPEAL IN ITA NO. 3017/AHD/2010 FOR AY 200 2 - 0 3 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 3017/AHD/2010 - AY 2002 - 03(BY REVENUE) ITA NO. 3056/AHD/2010 - AY 2004 - 05(BY ASSESSEE) DCIT VS. GOPALA POLYPLAST LTD. - 2 - 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN QUASHING THE PROCEEDINGS INITIATED U/S.147 OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 1.2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN QUASHING THE PROCEEDINGS INITIATED U/S.147 OF THE ACT BY HOLDING THAT THE REASONS HAVE BEEN RECORDED BY ONE OFFICER AND THE NOTICE U/S.148 HAS B EEN ISSUED BY ANOTHER OFFICER, RELYING ON THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF HYNOOP FOOD & OIL INDUSTRIES LTD., WITHOUT APPRECIATING THE RATIO OF THE SUBSEQUENT DECISION OF THE HON BLE GUJARAT HIGH COURT IN SPEIAL CIVIL APPLICATI ON NOS.13060, 13061 & 13062 OF 2009 IN THE CASE OF ASHIMA ISPAT PVT.LTD. VS. DCIT. 1.3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DISREGARDING THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF ASHIMA ISPAT PVT.LTD. (SUPRA) IN WHICH IT HAS BEEN HELD THAT THERE IS NO INFIRMITY IN THE ISSUANCE OF NOTICE OF REOPENING U/S.147 BY A SUCCESSOR OFFICER ON THE BASIS OF SATISFACTION RECORDED BY HIS PREDECESSOR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE O RDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY B RESTORED TO THE ABOVE EXTENT. 3. IT IS TRANSPIRED FROM THE RECORDS THAT VIDE ORDER - SHEET ENTRY DATED 02/0 4/2014, THE REVENUE WAS DIRECTED TO FILE FORM NO.35 TO RECTIFY THE DEFECTS ALONG WITH GROUNDS OF APPEAL. IT IS ALSO TRANSPIRED FROM THE RECORDS THAT THE DEFECT NOTICE WAS ISSUED BY THE REGISTRY OF THIS TRIBUNAL ON 03/11/2010 WHICH WAS DULY RECEIVED ON 04 /1 1 /2010. THE REVENUE HAS NOT REMOVED THE DEFECT. UNDER THESE FACTS, THE APPEAL FILED BY THE REVENUE IS HEREBY REJECTED BEING DEFECTIVE. ITA NO. 3017/AHD/2010 - AY 2002 - 03(BY REVENUE) ITA NO. 3056/AHD/2010 - AY 2004 - 05(BY ASSESSEE) DCIT VS. GOPALA POLYPLAST LTD. - 3 - 4. AS A RESULT, REVENUE S APPEAL IN ITA NO.3017/AHD/2010 FOR AY 2002 - 03 IS DISMISSED BEING DEFECTIVE. 5. NOW, WE TA KE UP THE ASSESSEE S APPEAL IN ITA NO.3056/AHD/2010 FOR AY 2004 - 05, WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN REOPENING THE ASSESS MENT U/S.147 OF THE INCOME TAX ACT, 1961 EVEN THOUGH THE ASSESSMENT SO MADE IS ILLEGAL AND BAD IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.4,89,008/ - MADE BY THE A.O. BEING THE AMOUNT OF AMORT IZATION EXPENSES/DEFERRED REVENUE EXPENDITURE. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALLOWED THE CARRIED FORWARD OF THE LOSSES TO THE NEXT YEAR AS CLAIMED BY THE APPELLANT. 4. THE APPELLANT CRAVES LEAVE TO AD, ALTER, AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING OF APPEAL. 6. B RIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS REOPENED U/S.147 OF THE I NCOME TAX ACT ,1961 (HEREINAFTER REFERRED TO AS THE ACT ) AND THE ASSESSMENT U/S.143 (3) R.W.S.147 OF THE ACT WAS FRAMED VIDE ORDER DATED 19/12/2008, THEREBY THE ASSESSING OFFICER (AO IN SHORT ) MADE DISALLOWANCE OF CLAIM OF DEFERRED EXPENDITURE OF RS.4,89,008/ - AND DISALLOWANCE OF BAD DEBTS OF RS.21,25,927/ - . AGAINST THIS, THE ASSESSEE FI LED AN APPEAL BEFORE THE LD.CIT(A) , WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CONFIRMED THE ADDITION MADE IN RESPECT OF ITA NO. 3017/AHD/2010 - AY 2002 - 03(BY REVENUE) ITA NO. 3056/AHD/2010 - AY 2004 - 05(BY ASSESSEE) DCIT VS. GOPALA POLYPLAST LTD. - 4 - THE DISALLOWANCE OF DEFERRED EXPENDITURE AND DELETED THE ADDITION MADE IN RESPECT OF BAD DEBTS RELYING ON THE DECISION OF T HE HON BLE APEX COURT RENDERED IN THE CASE OF TRF LTD. VS. CIT REPORTED AT (2010) 323 ITR 397(SC). 6.1. THE LD.COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE LD.CIT(A) AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN CONF IRMING THE ADDITION IN RESPECT OF DEFERRED EXPENDITURE CLAIMED BY THE ASSESSEE. 6.2. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THERE IS NO ILLEGALITY IN THE ORDER PASSED BY THE ASSESSING OFFICER. 7 . WE HAVE H EARD 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 DECIDED THIS ISSUE IN PARA - 4.1 OF HIS ORDER, WHIC H ARE IN THE FOLLOWING TERMS: - 4.1. AS HAS ALREADY BEEN DISCUSSED EARLIER IN THE ORDER, THERE IS NO ASPECT OF DEFERRED REVENUE EXPENDITURE UNDER THE IT ACT, THE HON BLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD., SUPREME COURT HAS HELD THAT IF THE BENEFIT ACCRUED FROM A PART ICULAR EXPENDITURE FOR A SPECIFIED PERIOD OF TIME, THEN THE EXPENDITURE CAN BE SPREAD OVER FOR THE ENTIRE PERIOD. HOWEVER, IN THE INSTANT CASE, THERE IS NO SUCH SPECIFIED PERIOD FOR THE LOSS TO BE SPREAD OVER. THE AR IS NOT ABLE TO JUSTIFY WHY THE LOSS O F RS.4,89,008/ - COULD SPREAD OVER FOR ONLY 5 YEARS AND NO OTHER TIME. IN VIEW OF THE ABOVE, THE ACTION OF THE AO IN MAKING THE ADDITION OF RS.4,89,008/ - IS UPHELD . 8. THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE IS THAT ALL THE MATERIAL FACTS HAVE B EEN DISCLOSED BEFORE THE AO AND THE ASSESSMENT U/S.143(3) OF THE ACT WAS FRAMED IN EARLIER YEARS. HE SUBMITTED THAT FROM AY 2000 - 01 ON WARDS THE EXPENDITURE OF RS.4,89,008/ - IS BEING WRITTEN OFF. IN FACT, IN ALL THE EARLIER YEARS THE WRITE OFF OF THE EX PENDITURE ITA NO. 3017/AHD/2010 - AY 2002 - 03(BY REVENUE) ITA NO. 3056/AHD/2010 - AY 2004 - 05(BY ASSESSEE) DCIT VS. GOPALA POLYPLAST LTD. - 5 - HAS BEEN ACCEPTED BY THE REVENUE. HE SUBMITTED THAT THERE IS NO CLAIM OF DEDUCTION MADE U/S.35D OF THE ACT AND, THEREFORE, THE QUESTION OF DISALLOWANCE THEREOF DOES NOT ARISE. IT IS NOT DISPUTED BY THE REVENUE THAT IN THE EARLIER YEAR THE CLA IM OF THE ASSESSEE WAS ALLOWED UNDER THE SCRUTINY ASSESSMENT. IT IS SETTLED PROPOSITION OF LAW THAT ORDINARILY, REVENUE EXPENDITURE WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS MUST BE ALLOWED IN ITS ENTIRETY IN THE YEAR IN WHICH IT IS INCURRED. IT CANNOT BE SPREAD OVER A NUMBER OF YEARS EVEN IF THE ASSESSEE HAS WRITTEN IT OFF IN HIS BOOKS OVER A PERIOD OF YEARS. HOW E VER, THE FACTS MAY JUSTIFY AN ASSESSEE WHO HAS INCURRED EXPENDITURE IN A PARTICULAR YEAR TO SPREAD AND CLAIM IT OVER A PERIOD OF ENSUING YEARS. IN FACT, ALLOWING THE ENTIRE EXPENDITURE IN ONE YEAR MIGHT GIVE A VERY DISTORTED PICTURE OF THE PROFITS OF A PARTICULAR YEAR. IN THE CASE IN HAND, THE AO IN THE EARLIER YEARS HAD EXAMINED AS WELL IN THIS YEAR THIS ASPECT , THEREFORE WE ARE OF THE CONSIDERED VIEW THAT ON THIS GROUND RE - OPENING IS NOT JUSTIFIED. HENCE, WE HEREBY DIRECT THE AO TO DELETE THE ADDITION. 9. IN THE COMBINE D RESULT, REVENUE S APPEAL IS DISMISSED BEING DEFECTIVE , WHEREAS ASSESSEE S APPEAL IS ALLOW ED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HEREINABOVE AT CAPTION PAGE SD / - SD/ - ( . . ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD; DATED 26 / 09 /20 1 4 . . , . . ./ T.C. NAIR, SR. PS ITA NO. 3017/AHD/2010 - AY 2002 - 03(BY REVENUE) ITA NO. 3056/AHD/2010 - AY 2004 - 05(BY ASSESSEE) DCIT VS. GOPALA POLYPLAST LTD. - 6 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - XX, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 23.9.14 (DICTATION - PAD 9 - PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACE D BEFORE THE DICTATING MEMBER .. 23.9.14 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S .. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 26.9.14 6. DATE ON WHICH THE FILE GO ES TO THE BENCH CLERK 26.9.14 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER .. 9 . D ATE OF DESPATCH OF THE ORDER