M/s The Bazpur Coop. Sugar Factory Ltd., Nainital V. ACIT, Uttrakhand

ITA 3579/DEL/2011

• Counselvise Citation: 357920114 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 23-06-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 18-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P L BANGA
• Section: 143(3); 37(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO. 3579 / DEL/20 11 A.Y. : 2003 - 04 THE BAZPUR COOP. SUGAR FACTORY LTD., C/O BANGA & CO., CAS, NEAR BANGA BHAWAN, MALLITAL, NAINITAL (PAN: AAAAB0217D) VS. ACIT, KASHIPUR UTTRAKHAND (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. P.L. BANGA, CA DEPARTMENT BY : SH. AMIT JAIN, SR. DR ORDER PER H.S. SIDHU, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST TH E IMPUGNED ORDER OF THE LD. CIT(A)-II, DEHRADUN RELATIN G TO ASSESSMENT YEAR 2003-04. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: - 1. THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT CARRYING OUT THE DIRECTIVES GIVEN BY ITAT AFTER CONSIDERING ALL FACTS 2 AND SUBMISSIONS MADE BEFORE IT DURING THE COURSE OF HEARING. 2. THAT THE BENCH HAD CONSIDERED ALL FACTS BEFORE IT AND THEN DIRECTED ONLY TO CONSIDER THE EMBEZZLEMENT LOSS BUT LD. CIT(A) DID NOT ALLOW THE LOSS OF RS. 1,31,35,340/-. 3. THAT ALL EVIDENCES FOR THE EMBEZZLEMENT LOSS WERE FILED IN FIRST ROUND AS WELL AS SECOND ROUND BUT DID NOT CONSIDER BY THE LD. CIT(A). 4. THAT THE LOSS WAS QUANTIFIED AND ACCOUNTED THROUGH SCHEDULE OF NOTES ATTACHED TO THE BALANCE SHEET AND WAS ON RECORD IN THE YEAR OF DETECTION. 5. THAT THE LIABILITY ACCRUED TOWARDS LOSS WAS ADMISSIBLE EVEN IF NOT DEBITED TO PROFIT AND LOSS ACCOUNT AS PER SUPREME COURT DECISION. 6. THAT ANY OTHER GROUND OF APPEAL WHICH MAY BE TAKEN AT THE TIME OF HEARING OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COO PERATIVE SOCIETY FILED ITS RETURN DECLARING TOTAL LOSS AT RS. 10,65,03,595/- ON 11.11.2003 IN THE STATUS OF COOPERATIVE SOCIETY WHICH W AS PROCESSED ON 23.12.2003. FURTHER THIS ORDER WAS RECTI FIED U/S. 154 OF THE INCOME TAX ACT, 1961 ON 30.12.2003. THE CASE WAS FURTHER 3 ASSESSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (H EREINAFTER REFERRED AS THE ACT) ON 28.2.2006 ON A TOTAL LOSS OF RS. 7,82,98,587/-. THE ASSESSEE WENT TO APPEAL BEFO RE THE LD. CIT(A) AND ITAT. THE ITAT SET ASIDE THE PROCEEDING S IN CASE OF THE FIRST GROUND BEFORE AO TO CONSIDER THE CLAIM OF LOSS ON ACCOUNT OF EMBEZZLEMENT AFRESH AFTER GIVING ASSESSEE AN OPPORTUN ITY OF BEING HEARD IN ACCORDANCE WITH LAW. APROPOS SECOND GROUND , THE ITAT DIRECTED TO VERIFY THE PAYMENTS OF EMPLOYEES PROVIDEN T FUND OF ASSESSEE AND IF THE SAME IS WITHIN THE TIME ALLOWED FOR FILING OF THE RETURN, THE CLAIM OF ASSESSEE SHOULD BE ALLOWED. THE REAFTER THE ASSESSEE WAS ISSUED NOTICES U/S. 143(2) AND IN RES PONSE TO THE SAME WRITTEN SUBMISSIONS WAS FILED. ON GOING THROUGH T HE ASSESSMENT ORDER IT WAS OBSERVED THAT THERE IS NO MENTIO N OF THE CLAIM OF EMBEZZLEMENT. IT IS NOT CLEAR AS TO WHY THE ASSESSEE CHOSE TO CLAIM THIS LOSS DURING THE COURSE OF ORIGINAL ASS ESSMENT PROCEEDINGS WHEREAS THE SAME WAS NOT CLAIMED WHILE FILING THE RETURN. THE ASSESSE HAS SUBMITTED THAT THE CLAIM WAS MA DE BEFORE THE THEN AO ON 14.2.2006 WHICH IS NOT THE RIGHT PROCEDUR E. THE ASSESSEE SHOULD HAVE REVISED ITS RETURN OF INCOME IF HE HAD TO CLAIM THE LOSS. 3.1 THE ASSESSEE AGGRIEVED FROM THE ORDER OF THE AO FILED AN APPEAL BEFORE THE CIT(A) AND IN GROUND NO. 7 PLEADE D AS UNDER:- 4 THAT LOSS ON ACCOUNT OF EMBEZZLEMENT BY EMPLOYEE HAS NOT BEEN ALLOWED ALTHOUGH CLAIMED BEFORE ASSTT. COMMISSIONER OF INCOME TAX AND AUDITED ACCOUNTS ARE ON RECORD AND NO FINDING WAS RECORDED FOR DISALLOWANCE. 3.2 AS ALREADY DISCUSSED ABOVE THE AO HAD NOT MADE AN Y DISALLOWANCE OF SUCH CLAIM AS THIS CLAIM WAS NOT DEBI TED TO P&L ACCOUNT AND THEREFORE COULD NOT HAVE BEEN CONSIDERE D. IT IS NOT KNOWN AS TO HOW THIS GROUND OF APPEAL WAS TAKEN BEFORE THE CIT(A) AND ITAT AS THE SAME DOES NOT EMANATE FROM THE ORDER OF THE AO. THE ASSESSEE HAS AGAIN CITED THE SAME REASONS FOR ALL OWING THE CLAIM AS TAKEN BEFORE LD. CIT(A) AND ITAT. IN VIEW O F THE ABOVE DISCUSSIONS, THE CLAIM OF THE ASSESSEE FOR CLAIMING THIS LOSS ON ACCOUNT OF EMBEZZLEMENT CANNOT BE ENTERTAINED AT THIS S TAGE. 3.3 APROPOS THE SECOND GROUND BEFORE ITAT THE ASSESSE E HAS FILED THE DATES OF DEPOSITS OF CONTRIBUTION TO EMPLOYEES PROVI DENT FUND. THE SUBMISSION OF THE ASSESSEE WAS CONSIDERED AND A S THE PAYMENTS HAVE BEEN MADE BEFORE THE DATE OF FILING O F RETURN, THE SAME WERE ALLOWED VIDE ASSESSMENT ORDER DATED 31.12. 2010 PASSED U/S. 254/143(3) OF THE ACT. 5 4. AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER DATED 31.12.2010, THE ASSESSEE APPEALED BEFORE THE LD. CIT( A), WHO VIDE HIS IMPUGNED ORDER DATED 16.05.2011 HAS PARTLY ALLOW ED THE APPEAL OF THE ASSESSEE AND AGAINST THE IMPUGNED ORDE R DATED 16.5.2011, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 5. LD. A.R. OF THE ASSESSEE STATED THAT LD. CIT(A) HA S NOT FOLLOWED THE DIRECTIVES GIVEN BY THE ITAT AFTER CONS IDERING ALL FACTS AND SUBMISSIONS MADE BEFORE IT DURING THE COURSE OF HEARING. IT WAS FURTHER STATED THAT LD. CIT(A) DID NOT ALLOW THE LOSS OF RS. 1,31,35,340/- HOWEVER, ALL EVIDENCES FOR THE EMBEZZ LEMENT LOSS WERE FILED IN FIRST ROUND AS WELL SECOND ROUND BUT D ID NOT CONSIDER BY THE LD. CIT(A). IT WAS FURTHER POINTED OUT THAT THE LOSS WAS QUANTIFIED AND ACCOUNTED THROUGH SCHEDULE OF NOTES ATTAC HED TO THE BALANCE SHEET AND WAS ON RECORD IN THE YEAR OF DETEC TION AND THE LIABILITY ACCRUED TOWARDS LOSS WAS ADMISSIBLE EVEN IF NOT DEBITED TO PROFIT AND LOSS ACCOUNT. IN VIEW OF THE ABOVE, LD. AR OF THE ASSESSEE REQUESTED TO ALLOW THE APPEAL OF THE ASSESSE E BY CANCELLING THE ORDERS OF THE AUTHORITIES BELOW. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER OF TH E LD. CIT(A) AND STATED THAT HE HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE. 6 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REV ENUE AUTHORITIES. WE FIND THAT LD. CIT(A) HAS DISCUSSED THE ISSUES IN D ISPUTE ELABORATELY AT PAGE NO. 5 TO 6 VIDE PARA NO. 3.2 TO 5. FOR THE S AKE OF CONVENIENCE, WE ARE REPRODUCING HEREWITH THE RELEVANT FINDINGS OF T HE LD. CIT(A) AS UNDER:- 3.2 AT THIS STAGE, THE LANGUAGE OF SEC. 37(1) OF THE ACT UNDER WHICH SUCH CLAIMS ARE TO BE CONSIDERED, SPEAKS OF 'ANY EXPENDITURE', 'LAID OUT O R EXPENDED', AND 'WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THUS, THE TEST FOR ALLOWING ANY EXPENDITURE UNDER THIS SECTION WOULD NECESSARILY ENTAIL THAT SUCH EXPENDITURE HAS TO BE BOOKED IN THE P & LAIC, I.E. IT SHOULD BE CLAIMED AS EXPENDITURE TO BEGIN WITH. IT IS SEEN THAT THE PETITIONER HAS MERELY CLAIMED FOR ALLOWING SUCH EXPENDITURE BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS AND NOT. IN THE P & L A/C FOR THE YEAR UNDER CONSIDERATION. ON THIS BASIS ALONE, THE CASE OF THE PETITIONER DESERVES TO FAIL. HOWEVER, THERE IS ALSO AN ISSUE AS TO THE FINANCIAL YEAR IN WHICH SUCH AMOUNT COULD BE ACTUALLY CONSIDERED TO HAVE 7 BECOME FINALLY QUANTIFIED AND THUS POTENTIALLY ALLOWABLE AS AN DEDUCTION U/S 37(1) OF THE ACT. 3.3 IT IS SEEN FROM THE DOCUMENTS FILED BY THE PETITIONER THAT APART FROM ANY INTERNAL ENQUIRY THAT WOULD HAVE BEEN CONDUCTED TO DETERMINE THE EMBEZZLED AMOUNT, THERE IS AN ORDER DATED PASSED BY ONE SH. RC PATHAK, WHO IS DESIGNATED AS XUUK ,OA PHUH VK;QDR ,OA FUCU/KD] MRKJKAPY LGDKJH PHUH FEY L FEFR;K A THROUGH THIS ORDER, A CLEAR CASE HAS BEEN MADE OF EMBEZZLEMENT AGAINST THE ACCUSED SHRI SURENDRA SHARMA/ LEGAL HEIRS. THUS, IT IS NOT CLEAR IN WHICH YEAR EXACTLY THE EMBEZZLEMENT BECAME EVIDENT TO AN EXTENT THAT IT COULD BE TAKEN COGNIZANCE OF AS A CRIMINAL OFFENCE AND THEREBY IT BECAME LIABLE TO BE CLAIMED AS AN EXPENSE U/S 37(1) OF THE ACT. THUS, THE AMOUNT COULD BE TREATED AS QUANTIFIED IN THE YEAR OF CLAIM OR MORE LIKELY IN THE FINANCIAL YEAR PERTAINING TO THE DATE 05.07.2006 (FY 2006-07) IN WHICH THE AFOREMENTIONED AUTHORITY PASSED THE ORDER DISCUSSED IN THIS PARA ITSELF. IN ANY CASE BOOKING THE EXPENSE IN THE P&L ACCOUNT WOULD BE THE MATERIAL FACTOR, AND IT IS SEEN THAT THIS AMOUNT 8 HAS NOT BEEN BOOKED AS SUCH IN THE YEAR UNDER CONSIDERATION. 3.4 CONSIDERING THE FINDINGS GIVEN IN THE PARAS ABOVE, THIS GROUND OF THE PETITIONER FAILS AND IS DISMISSED. 4. THE SIXTH GROUND OF APPEAL INDICATES THAT THE PETITIONER IS AGGRIEVED THAT RELIEF ON ACCOUNT OF EMPLOYEES PROVIDENT FUND ALLOWED BY THE AO IN THE BODY OF THE ORDER HAS NOT BEEN GIVEN EFFECT TO. IN CASE, THIS HAS NOT BEEN DONE BY THE AO THEN THE SAME MUST BE DONE WHILE GIVING EFFECT TO THIS APPELLATE ORDER. FURTHERMORE, THE PETITIONER IS ALSO AGGRIEVED THAT LOSS HAS NOT BEEN COMPUTED FOR BEING ALLOWED TO BE CARRIED FORWARD AND SET OFF IN SUBSEQUENT YEARS. THE AO MUST DO SO AS PER LAW. THUS, GROUND NO.6 OF THE PETITIONER IS ALLOWED. 5. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 8. AFTER PERUSING THE AFORESAID FINDING OF THE LD. CI T(A) ON THE ISSUES IN DISPUTE, WE ARE OF THE CONSIDERED VIEW THA T THERE IS NO INFIRMITY IN THE FINDING OF THE LD. CIT(A) AND THERE FORE, THE SAME DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, WE UPHOLD THE SAME AND REJECT THE GROUNDS RAISED BY THE ASSESSEE. 9 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS DISMISSED. ORDER PRONOUNCED ON 12/03/2018. SD/- SD/- [B.P. JAIN] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 12/03/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES