Deputy Commissioner Of Income Tax, Circle-3(1)(2), Bangalore V. M/s. Gemini Graphics Limited, Bangalore

ITA 325/BANG/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2575 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-04-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 09-03-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K HARITHA ADD
• Assessee Lawyers: H V GOWTHAM
• Keywords: Opportunity of being heard; Bad and doubtful debts; Corroborative evidences; Capital expenditure; Set aside
• Section: 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI. B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.325/BANG/2020 ASSESSMENT YEAR : 2014-15 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-3(1)(2), BENGALURU. VS. M/S GEMINI GRAPHICS LTD., NO.07, MATTHRU KRUPA 1 ST FLOOR, TEMPLE ROAD, MALLESHWARAM, BENGALURU-560 066. PAN AAACG 5250F APPELLANT RESPONDENT ITA NO.86/BANG/2020 ASSESSMENT YEAR : 2014-15 M/S GEMINI GRAPHICS LTD., NO.07, MATTHRU KRUPA 1 ST FLOOR, TEMPLE ROAD, MALLESHWARAM, BENGALURU-560 066. PAN AAACG 5250F VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-3(1)(2), BENGALURU. APPELLANT RESPONDENT A SSESSEE BY : SHRI H.V GOWTHAM, C.A RE VENUE BY : S MT. K HARITHA, ADD. CIT(DR) DATE OF HEARING : 06 - 0 4 - 202 DATE OF PRONOUNCEMENT : 23 - 06 - 202 1 PAGE 2 OF 9 ITA NOS.325 & 86/BANG/2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT CROSS APPEALS HAVE BEEN FILED BY ASS ESSEE AS WELL AS REVENUE AGAINST ORDER DATED 02/12/2019 PASSED BY TH E LD.CIT (A)- 13, BANGALORE FOR ASSESSMENT YEAR 2013-14 ON FOLLOW ING GROUNDS OF APPEAL: ITA NO. 86/B/2020 1. THE LEARNED COMMISSIONER OF INCOME TAX(A) ERRED IN UPHOLDING THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER, DISALLOWING THE AMOUNT OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNT. 1.1 THE LEARNED COMMISSIONER OF INCOME TAX(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE APPELLANT HAD FOLLOWED ALL CONDITIONS LAID DOWN UNDER SUBSECTION 2 OF SECTION-36. 1.2 THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRE D IN UPHOLDING THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER STATING THAT THE ACCOUNT OF THE CONCERNED DEBTORS H AS NOT BEEN CREDITED WITH THE AMOUNTS WRITTEN OFF. 1.3 THE LEARNED COMMISSIONER OF INCOME TAX (A) OUGH T TO HAVE CONSIDERED THE SUBMISSION OF APPELLANT THAT, ONCE T HE AMOUNT OF BAD DEBTS IS WRITTEN OFF IN THE BOOKS OF ACCOUNT BY DEBITING BAD DEBTS ACCOUNT, THE CREDIT AUTOMATICALLY WOULD HAVE BEEN TAKEN UNDER THE CONCERNED DEBTORS ACCOUNT. 1.4 THE APPELLANT SUBMITS THAT ALL DETAILS RELATING TO THE YEAR OF ACCOUNTING THE INCOME AND REASON FOR CONSIDERING TH E AMOUNT AS BAD DEBT HAVE BEEN FURNISHED AND THEREFORE THE APPE LLANT CLAIMS THAT THE BAD DEBTS SHALL BE ALLOWED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED IN UPHOLDING THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER FOR NOT ALLOWING THE EXPENSES INCURRED TOWARDS POOJA AM OUNTING TO RS.2,34,560/-. 2.1 THE LEARNED COMMISSIONER OF INCOME TAX (A) OUGH T TO HAVE CONSIDERED SUBMISSION OF THE APPELLANT THAT THERE A RE MORE THAN 500 EMPLOYEES IN THE COMPANY AND DISTRIBUTION OF SW EETS DURING DASARA AND WEEKLY POOJA, COULD ONLY BE CONSIDERED A S STAFF WELFARE AND THE SAME SHOULD HAVE BEEN ALLOWED. PAGE 3 OF 9 ITA NOS.325 & 86/BANG/2020 3 FOR THE ABOVE AND ANY OTHER GROUNDS, THAT MAY BE ADVANCED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT, D ISALLOWANCE BE DELETED. ITA NO. 325/B/2020 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO L AW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) WAS WRONG TO STATE THAT NEW P RODUCTS MANUFACTURES BY THE ASSESSEE IN THE R & D UNIT IS A N 'SCIENTIFIC REASEARCH' WHILE THE PRODUCTS MADE BY T HE ASSESSEE'S COMPANY IS NOT AVAILABLE IN INDIA AND BE ING IMPORTED BY VARIOUS COMPANIES. 3. THE LEARNED CIT(A) WAS WRONG IN MENTIONING THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE BY INVESTING ON NEW PLANTS OR MACHINERY TO BRING OUT NEW TYPE OF PRODUC TS IS A SCIENTIFIC RESEARCH. THIS IS NOTHING BUT AN INVESTM ENT IN R & D EQUIPMENT TO DIVERSE THE PRODUCTION TOWARDS MORE PR OFIT. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND /OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS A COMPANY CARRYING ON BUSINESS O F PRINTING LOTTERY TICKETS, SECURITY PRINTERS AND MANUFACTURE OF PAPERS. IT FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION O N 30/09/2015 DECLARING TOTAL INCOME OF RS.6,82,32,070/-. THE CAS E WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) ALONG WITH NOTICE UNDER SECTION 142(1) WAS ISSUED TO ASSESSEE. IN RES PONSE TO STATUTORY NOTICES, REPRESENTATIVE OF ASSESSEE APPEA RED BEFORE LD.AO AND FILED REQUISITE DETAILS AS CALLED FOR. 3. THE LD.AO NOTED THAT ASSESSEE CLAIMED DEDUCTION UNDER SECTION 35(1)(IV) OF THE ACT TO THE TUNE OF RS.2,62 ,53,421/-. LD.AO CALLED UPON ASSESSEE TO SHOW CAUSE AND TO SUBSTANTI ATE THE CLAIM MADE UNDER SECTION 35(1)(IV) OF THE ACT ALONG WITH DOCUMENTARY PAGE 4 OF 9 ITA NOS.325 & 86/BANG/2020 EVIDENCES. ASSESSEE HAD SUBMITTED BEFORE THE LD.AO THAT IT HAD CARRIED THE RESEARCH ACTIVITY FROM ASSESSMENT YEAR 2012-13 AND ASSESSEE HAD CLAIMED CAPITAL EXPENDITURE ON R&D SIN CE THEN. THE LD.AO REJECTED THE SUBMISSIONS OF ASSESSEE FOR THE REASON THAT ASSESSEE DID NOT FURNISH ANY DETAILS ABOUT THE RESE ARCHERS OR SKILLED MANPOWER EMPLOYED FOR R&D WORK. LD.AO ALSO REJECTED THE CLAIM FOR THE REASON THAT NO EXPENDITURE ON MANPOWER WAS QUANTIFIED FOR OR R&D WORK. 4. THE LD.AO FROM THE SCHEDULES ANNEXED FORMING PAR T OF FINANCIAL STATEMENTS OF ASSESSEE OBSERVED THAT ASSE SSEE HAS CLAIMED BAD DEBTS AMOUNTING TO RS.24,00,938/-. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS ASSESSEE WAS ASKED TO SUBSTA NTIATE THE BAD DEBTS CLAIMED. IT WAS SUBMITTED BY ASSESSEE THA T IT HAS BEEN SELLING PRINTED MATTERS TO VARIOUS UNIVERSITIES AND RECOVERY OF AMOUNT DUE FROM SOME OF THEM HAVE BECOME BAD AND TH EREFORE AS PER THE PROVISIONS OF SECTION 36(VII) OF THE ACT, T HE BAD DEBTS IS ALLOWABLE. THE LD.AO REJECTED THE SUBMISSIONS OF AS SESSEE ON THE BASIS THAT ASSESSEE HAD NOT PRODUCED ANY EVIDENCE T O SUBSTANTIATE THE SUBMISSION MADE LIKE BOOKS OF ACCOUNT SHOWING D EBTS WRITTEN OFF AND SIMULTANEOUSLY CREDIT BEING MADE IN TATTERS ACCOUNT ETC. 5. THE LD.AO ALSO NOTED FROM THE SCHEDULES THAT ASS ESSEE HAD DEBITED TO P&L ACCOUNT SUM OF RS.2,34,560/- TOWARDS POOJA EXPENSES. LD.AO IN SUPPORT OF THIS CLAIM CALLED UPO N ASSESSEE TO FURNISH DOCUMENTARY/SUPPORTING EVIDENCES/VOUCHERS T O JUSTIFY THE ALLOWABILITY OF SUCH EXPENSES. THE LD.AO DISALLOWED THE CLAIM FOR THE REASON THAT ASSESSEE FAILED TO JUSTIFY THE BUSI NESS EXPEDIENCY IN CURRENT IN INCURRING SUCH EXPENDITURE. PAGE 5 OF 9 ITA NOS.325 & 86/BANG/2020 6. AGGRIEVED BY THE ADDITIONS MADE BY THE LD.AO, AS SESSEE PREFERRED APPEAL BEFORE THE LD.CIT(A). 7. BEFORE THE LD.CIT(A), ASSESSEE PRODUCED SAMPLES OF SPECIAL PAPERS BROUGHT OUT OF THE R&D DEPARTMENT, THAT HAS BEEN REPRODUCED IN PARA 4.2 OF THE IMPUGNED ORDER. THE L D.CIT(A) OBSERVED THAT ASSESSEE FOR ASSESSMENT YEAR 2013-14 HAD CHALLENGED SIMILAR DISALLOWANCE BEFORE COORDINATE BENCH OF THI S TRIBUNAL AND THIS TRIBUNAL WIDE ORDER DATED 26/12/2017 IN ITA NO .167/B/2017, SET ASIDE THE ORDER OF THE LD.AO WITH A DIRECTION T O REVIEW THE ISSUE AGAIN AND PASS THE ORDER ON MERITS. IT HAS BEEN OBS ERVED BY THE LD.CIT(A) THAT THE LD.AO IN THE ORDER GIVING EFFECT TO THE ORDER PASSED BY THIS TRIBUNAL HAD ALLOWED THE CLAIM OF ASSESSEE UNDER SECTION 35(1)(IV) OF THE ACT. THE LD.CIT(A) ACCORDI NGLY DELETED THE DISALLOWANCE MADE BY THE LD.AO. 8. IN RESPECT OF DISALLOWANCE OF BAD DEBTS, THE LD. CIT(A) UPHELD THE OBSERVATIONS OF LD.AO AS ASSESSEE HAD NOT PRODU CED ANY EVIDENCE SUCH AS BOOKS OF ACCOUNT SHOWING DEBTS WRI TTEN OFF AND CREDIT BEING MADE SIMULTANEOUSLY DEBTORS ACCOUNT IN TERMS OF EXPLANATION TO SECTION 36(1)(VII) OF THE ACT. 9. IN RESPECT OF POOJA EXPENSES, THE LD.CIT(A) UPHE LD THE EXPENSES BY OBSERVING THAT ASSESSEE COULD NOT PRODU CE ANY DOCUMENTARY EVIDENCES. 10. AGGRIEVED BY THE ORDER OF LD.CIT(A) BOTH ASSESS EE AS WELL AS REVENUE ARE IN APPEAL BEFORE US NOW. WE SHALL 1 ST TAKE UP THE APPEAL FILED BY REVENUE: PAGE 6 OF 9 ITA NOS.325 & 86/BANG/2020 11. REVENUE HAS CHALLENGED ONLY ONE ISSUE BEFORE TH IS TRIBUNAL WHEREIN THE LD.CIT(A) DELETED THE DISALLOWANCE MADE UNDER SECTION 35 (IV) OF THE ACT. 12. THE LD. AR THUS SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF ASSESSEE BY VIRTUE OF THE ORDER GIVING EF FECT PASSED BY THE LD.AO DATED 14/12/2018 FOR ASSESSMENT YEAR 2013-14. WE NOTE THAT THIS TRIBUNAL FOR ASSESSMENT YEAR 2013-14 HAD REMANDED THIS ISSUE BACK TO LD.AO FOR THE SIMILAR REASON THAT ASS ESSEE HAD FAILED TO PRODUCE DETAILS REGARDING THE NATURE OF SCIENTIF IC RESEARCH ACTIVITY CARRIED ON BY IT DURING THE RELEVANT PERIOD. LD.CIT (A) BASED UPON THE ORDER GIVING EFFECT TO PASSED BY THE LD.AO FOR ASSESSMENT YEAR 2013-14 DELETED THE ADDITION. WE DO NOT SEE THAT TH E LD. CIT (A) HAS VERIFIED THE DOCUMENTS/EVIDENCES FILED BY ASSESSEE IN DELETING THE DISALLOWANCE MADE BY THE LD. AO. IN OUR VIEW THE IS SUE NEEDS TO BE REMANDED TO THE LD.AO TO VERIFY THE DOCUMENTARY EVI DENCES FILED BY ASSESSEE. ASSESSEE IS DIRECTED TO FILE ALL REQUISIT E DETAILS IN SUPPORT OF THE CLAIM. NEEDLESS TO SAY THAT PROPER OPPORTUNI TY OF BEING HEARD SHALL BE GRANTED TO ASSESSEE. LD. AO SHALL CONSIDER THE CLAIM OF ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY THE GROUND RAISED BY REVENUE STANDS ALL OWED FOR STATISTICAL PURPOSES. 13. IN RESPECT OF THE APPEALS FILED BY ASSESSEE, TH E ISSUES RAISED ARE IN RESPECT OF DISALLOWANCE OF BAD DEBTS AND POO JA EXPENSES. 14. THE AUTHORITIES BELOW HAVE OBSERVED THAT ASSESS EE COULD NOT FILE ANY DOCUMENTARY DOC EVIDENCES IN ORDER TO SUPP ORT THE CLAIM. PAGE 7 OF 9 ITA NOS.325 & 86/BANG/2020 THE LD.AR BEFORE US SUBMITTED THAT ALL THE DETAILS WERE GIVEN TO THE AUTHORITIES BELOW AND THE OBSERVATIONS ARE ERRONEOU S. HE RELIED ON OBSERVATIONS OF THE LD. AO PARA 13.4. 15. THE LD. CIT DR RELIED ON THE ORDERS PASSED BY A UTHORITIES BELOW. 16. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 17. WE NOTE THAT THESE DISALLOWANCES MADE BY THE LD . AO HAS NOT BEEN VERIFIED HAVING REGARD TO THE BOOKS OF ACCOUNT S,/LEDGERS ETC. WE ACCORDINGLY DIRECT LD. AO TO VERIFY THE SAME. IN RESPECT OF POOJA EXPENSES A REASONABLE AMOUNT OF EXPENSES DESERVES T O BE ALLOWED WHICH ARE ATTRIBUTABLE TO THE ANNUAL CELEBRATIONS W ITHIN THE OFFICE. 18. THE ASSESSEE IS DIRECTED TO FILE ALL RELEVANT D OCUMENTS IN SUPPORT OF ITS CLAIM IN RESPECT OF BAD DEBTS WHICH SHALL BE CONSIDERED BY THE LD. AO HAVING REGARDS TO THE VARI OUS JUDICIAL PRONOUNCEMENTS ON THIS ISSUE. NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEING HEARD SHALL BE GRANTED TO ASSE SSEE. ACCORDINGLY THESE GROUNDS RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY ASSESSEE AS WELL AS R EVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN OPEN COURT ON 23 RD JUNE, 2021. (B.R BASKARAN) (BEENA PILL AI) ACCOUNTANT MEMBER JUDICIAL MEM BER BANGALORE, DATED, THE 23 RD JUNE, 2021. /VMS/ PAGE 8 OF 9 ITA NOS.325 & 86/BANG/2020 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 9 OF 9 ITA NOS.325 & 86/BANG/2020 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -6-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -6-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -6-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -6-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -6-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -6-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -6-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS