DCIT, New Delhi V. M/s. Maryan Apparel (P) Ltd., New Delhi

ITA 3332/DEL/2016

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8018 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Additional evidence; Bad and doubtful debts; TDS
• Section: 22; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: E NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.3332/DEL/2016 ASSESSMENT YEAR: 2011-12 DCIT, CIRCLE-16(1), NEW DELHI VS. MARYAN APPAREL (P) LTD., A-201, VARDHMAN APARTMENTS, MAYUR VIHAR, PHASE-1, NEW DELHI PAN :AAECM5087C (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORD ER DATED 31/03/2016 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)-20, NEW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2011-12 RAISING FOLLOWING GROUNDS: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITIO N AMOUNTING TO RS.65,17,067/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF WITHOUT APPELLANT BY NONE RESPONDENT BY SH. VIPUL KASHYAP, SR.DR DATE OF HEARING 09.08.2021 DATE OF PRONOUNCEMENT 25.08.2021 2 ITA NO.3332/DEL/2016 APPRECIATING THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE TO PROVE THAT BAD DEBTS WERE WRITTEN OFF IN THE ACCOUN T OF THE ASSESSEE DURING ASSESSMENT PROCEEDINGS.? 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITIO N AMOUNTING TO RS. 65,17,067/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF WIT HOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO D ISCHARGE THE BURDEN CAST UPON IT TO PROVIDE EVIDENCE TO PROVE TH AT BAD DEBTS ARE WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE AS UPHELD BY THE HON'BLE APEX COURT IN CASE M/S TRF LTD VS CIT (2010 ) 323ITR 397? 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN RESTRICTING DISALLOWA NCE OF EXPENSES CLAIMED TO RS. 10,00,000/- FROM RS. 1,27,63,224/- O N THE BASIS OF DOCUMENTS PRODUCED DURING APPELLATE PROCEEDINGS WIT HOUT APPRECIATING THE FACT THAT DURING ASSESSMENT PROCEE DINGS THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNTS AND SU PPORTING VOUCHERS IN RESPECT OF THE EXPENSES CLAIMED ? 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN RESTRICTING DISALLOWA NCE OF EXPENSES CLAIMED TO RS. 10,00,000/- BY ADMITTING ADDITIONAL EVIDENCE UNDER RULE 45A WITHOUT GIVING OPPORTUNITY OF BEING HEARD TO THE AO AS STIPULATED UNDER RULE 45 A(3)? 5. THAT THE ORDER OF THE CIT(A) IS ERRONEOUS AND I S NOT TENABLE ON FACTS AND IN LAW ON THE ABOVE ISSUES. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR FORGO ANY GROUND(S) OF THE APPEAL EITHER BEFORE OR AT THE TIM E OF HEARING OF THE APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY WAS ENGAGED IN PROVIDING JOB-WORK TO APPARE L INDUSTRY. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILE D RETURN OF INCOME ON 29/03/2012, DECLARING NIL INCOME AFTER AD JUSTING BROUGHT FORWARD LOSSES. THE RETURN OF INCOME WAS RE VISED SUBSEQUENTLY TO CLAIM CREDIT OF TAX DEDUCTED AT SOU RCE (TDS). THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELE CTED FOR SCRUTINY AND STATUTORY NOTICES UNDER INCOME TAX ACT , 1961 (IN 3 ITA NO.3332/DEL/2016 SHORT THE ACT) WERE ISSUED AND COMPLIED WITH. ACC ORDING TO THE ASSESSING OFFICER, THE ASSESSEE DID NOT PRODUCE BOO KS OF ACCOUNT AND VOUCHERS OF EXPENSES FOR VERIFICATION AND, THER EFORE, THE ASSESSING OFFICER COMPLETED ASSESSMENT UNDER SECTIO N 144 OF THE ACT (BEST JUDGMENT ASSESSMENT). HE MADE CERTAIN ADD ITIONS AND ASSESSED TOTAL INCOME AT 2,46,17,800/-. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CIT(A), WHO PARTLY ALLOWED THE APPEAL. AGGRIEVED, THE REVENUE HAS PREFERRED THIS A PPEAL BEFORE THE TRIBUNAL, RAISING THE GROUNDS AS REPRODUCED ABO VE. 3. DESPITE NOTIFYING, NONE ATTENDED ON BEHALF OF THE ASSESSEE AND, THEREFORE, THE APPEAL HAS BEEN ADJUDICATED AFT ER HEARING LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSAL OF THE MATERIAL AVAILABLE ON RECORD. 4. THE GROUND NOS. 1 & 2 OF THE APPEAL RELATE TO ADDI TION OF BAD DEBT AMOUNTING TO 65,17,067/- DELETED BY THE LEARNED CIT(A). 4.1 THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEBT ORS OF 65,17,067/- WRITTEN OFF IN ABSENCE OF ANY EVIDENCE THAT THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE AMOUNT FROM T HE LEDGER ACCOUNT OF THOSE DEBTORS AND AMOUNT WAS IRRECOVERAB LE. BEFORE THE LD. CIT(A), THE ASSESSEE FILED DEBTORS ACCOUNT AND SUBMITTED THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA), THERE IS NO REQUIREMENT T O ESTABLISH THAT DEBT HAS BECOME IRRECOVERABLE AND IT WAS ENOUGH IF SAME IS WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSE E. THE RELEVANT PART OF FINDING OF THE LEARNED CIT(A) IS REPRODUCED AS UNDER: (5.3) I HAVE CONSIDERED THE SUBMISSION OF THE APPE LLANT AND THE ASSESSMENT ORDER. IN THIS REGARD, THE APEX COURT HA S ALREADY DECIDED IN THE CASE OF TRF LTD VS CIT [2010} 323 IT R 387(SC). THE OPERABLE PART OF THE JUDGMENT IS REPRODUCED AS UNDE R; 4 ITA NO.3332/DEL/2016 AFTER THE AMENDMENT OF SECTION 36(1) (VII) OF THE I NCOME TAX ACT, 1961, W.E.F. APRIL 1, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECO VERABLE: IT IS ENOUGH IF THE BAD DEBTS IS WRITTEN OFF AS IRRECOVER ABLE IN THE ACCOUNTS OF THE ASSESSEE. IN VIEW OF THE APEX COURT RULING ON THIS ISSUE AS M ENTIONED ABOVE, THE A.O IS NOT JUSTIFIED IN DENYING THE BENEFIT OF SECTION 36(1 )(VII) OF THE ACT WITH REGARD TO BAD DEBTS TO BE WRITTEN OFF. ACCORDINGLY, THE ADDITION OF RS. 65,17,067/- ON THIS ACCOUNT IS DELE TED. APPELLANTS GROUND OF APPEAL IS ALLOWED. 4.2 WE FIND THAT THE ASSESSEE HAS DEMONSTRATED BEFORE THE LEARNED CIT(A) THAT BAD DEBT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THEREFORE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADD ITION FOLLOWING THE BINDING PRECEDENTS OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD (SUPRA). THE GROUND NOS. 1 AND 2 OF THE APP EAL OF THE REVENUE ARE ACCORDINGLY DISMISSED. 5. THE GROUND NOS. 3 & 4 OF THE APPEAL OF THE REVENUE RELATE TO DISALLOWANCE OF EXPENSES OF 1,27,63,224/- MADE BY THE ASSESSING OFFICER, WHICH HAS BEEN RESTRICTED TO 10,00,000/-. 5.1 THE ASSESSING OFFICER MADE DISALLOWANCE AT THE RAT E OF 20% OF THE EXPENSES DEBITED UNDER JOB WORK, EMPLOYEE CO ST, ADMINISTRATIVE EXPENSES AND FINANCE CHARGES ON ESTI MATES BASIS, IN ABSENCE OF BOOKS OF ACCOUNTS AND VOUCHERS PRODUC ED BY THE ASSESSEE. THE ASSESSEE PRODUCED BILLS/VOUCHERS BEFO RE THE LD. CIT(A), WHICH WERE FORWARDED TO THE ASSESSING OFFIC ER FOR HIS COMMENTS, HOWEVER, DESPITE PROVIDING SUFFICIENT OPP ORTUNITY, NO COMMENT WAS MADE BY THE ASSESSING OFFICER. IN THE CIRCUMSTANCES THE LEARNED CIT(A) HIMSELF VERIFIED T HE BILLS AND 5 ITA NO.3332/DEL/2016 VOUCHERS OF THE EXPENSES AND AFTER VERIFICATION HE RESTRICTED THE DISALLOWANCE TWO 10 LAKH OBSERVING AS UNDER: (7.3) I HAVE CONSIDERED THE SUBMISSION OF THE APPE LLANT AND THE ASSESSMENT ORDER, APPELLANT HAS CLAIMED THAT IT HAS PRODUCED ALL THE BILLS AND VOUCHERS DURING THE ASSESSMENT PROCEEDING S. THE SUBMISSION OF THE APPELLANT WAS SENT TO THE A.O FOR HIS COMMENTS VIDE LETTER DATED 20O/10/2015 REQUIRING HIM TO SEND HIS COMMENTS BY 29/10/2015. ANOTHER REMINDER WAS SENT TO THE A.O VIDE LETTER DATED: 11/02/2016 TO SEND THE COMMENTS LATEST BY 22 /02/2016. HOWEVER, THE A.O CHOSE NOT TO SEND HIS COMMENTS EVE N AFTER A LAPSE OF MORE THAN 5 MONTHS. THEREFORE, I AM CONSTRAINED TO ADJUDICATE ON THE MATTER WITHOUT THE BENEFIT OF THE A.OS COMMENT S/REPORT. I HAVE GONE THROUGH THE BILLS/VOUCHERS PRODUCED DURING THE APPELLATE PROCEEDINGS. IT HAS BEEN NOTICED THAT SOME OF THE B ILLS/VOUCHERS DO NOT HAVE THE SIGNATURE/ADDRESS OF THE RECIPIENTS. T AKING A REASONABLE VIEW THAT THE EXPENSES SO CLAIMED BY THE APPELLANT IS ON THE REQUIREMENT OF THE BUSINESS UNDERTAKEN BY THE A PPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATION. THEREF ORE, TAKING A BROAD AND REASONABLE VIEW, A DISALLOWANCE OF RS.10 LAKHS TO COVER THE DISCREPANCY WITH REGARD TO UNVERIFIED BILLS/VOU CHERS FOR WANT OF PROPER ADDRESS/SIGNATURE OF THE RECIPIENTS.. ACCORD INGLY, THE ADDITION ON THIS ACCOUNT IS REDUCED TO RS. 10 LAKHS . APPELLANTS GROUND OF APPEAL IS PARTLY ALLOWED. 5.2 IN OUR OPINION, THE LD. CIT(A) HAS DULY PROVIDED T HE OPPORTUNITY TO THE ASSESSING OFFICER AND, THEREFORE , THE CLAIM OF THE REVENUE IN THE GROUNDS THAT NO OPPORTUNITY WAS PROVIDED TO THE ASSESSING OFFICER IS WRONG AND WITHOUT ANY BASI S. THE LEARNED CIT(A) HAS MENTIONED THAT A LETTER DATED 20 /10/2015 WAS SENT TO THE AO AND, THEREAFTER, REMINDER WAS S ENT ON 11/02/2016. THE LEARNED DR COULD NOT CONTROVERT THI S FACTUAL FINDING RECORDED BY THE LEARNED CIT(A). AFTER VERIF YING THE BILLS AND VOUCHERS OF THE EXPENSES, THE LD. CIT(A) HAS RE STRICTED THE DISALLOWANCE TO RS. 10.00 LAKHS TO COVER THE DISCRE PANCIES NOTICED BY HIM. IN OUR OPINION, THE FINDING OF THE LD. CIT( A) ON THE ISSUE 6 ITA NO.3332/DEL/2016 IN DISPUTE IS JUSTIFIED AND WE DO NOT FIND ANY ERRO R IN THE SAME. ACCORDINGLY, WE UPHOLD THE SAME. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH AUGUST, 2021. SD/- SD/- (K.N. CHARY) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH AUGUST, 2021. RK/- (DTDC) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI