ACIT, Bangalore V. M/s. Sasken Communication Technologies Ltd., Bangalore

ITA 358/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9550 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-07-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 21-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARSHA PRAKASH
• Assessee Lawyers: H N KHINCHA
• Keywords: Bad and doubtful debts
• Section: 143(3); 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.358/BANG/2009 ASSESSMENT YEAR : 2003-04 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 12(3), BANGALORE. : APPELLANT VS. SASKEN COMMUNICATION TECHNOLOGIES LTD., NO.139/25, AMARJYOTHI LAYOUT, DOMLUR RING ROAD, BANGALORE 560 071. : RESPONDENT APPELLANT BY : SHRI HARSHA PRAKASH RESPONDENT BY : SHRI H.N. KHINCHA O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THE REVENUE HAS PREFERRED THIS APPEAL CONSEQUENT UP ON THE FINDING OF THE CIT(A)-V IN THE CASE OF SASKEN COMMU NICATION TECHNOLOGIES LTD. FOR THE ASSESSMENT YEAR 2003-04. 2. THE REVENUE HAS RAISED FIVE GROUNDS OF APPEAL. ON A PERUSAL, WE FIND THAT GROUND NOS: 1, 4 AND 5 ARE GENERAL AND NO T SPECIFIC WHICH, IN OUR ITA NO.358/B/09 PAGE 2 OF 5 CONSIDERED VIEW, DO NOT SURVIVE FOR ADJUDICATION. THE REMAINING TWO EFFECTIVE GROUNDS ARE REFORMULATED AS UNDER: (1) THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO CONSEQUENT TO ORDER OF THE CIT, B-III U/S 263 OF TH E ACT, ON ACCOUNT OF PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT TO THE EXTENT OF RS.3.20 CRORES TO THE BOOKS PROFITS; & (2) THE CIT(A) HAS ERRED IN DELETING THE ORDER OF THE C IT, B-III PASSED U/S 263 OF THE ACT. 3. THE HISTORY OF THE CASE, IN BRIEF, IS THAT THE O RIGINAL ASSESSMENT WAS CONCLUDED U/S 143(3) ON 29/3/06, COMPUTING THE BOOK PROFITS U/S 115JB AT RS.6383154/-. SUBSEQUENTLY, THE CIT, B-III, AFTER E XAMINING THE ASSESSMENT ORDER IN QUESTION, CAME TO THE CONCLUSIO N THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IN AS MUCH AS THE PROVISION FOR DIMINUTION IN THE VALUE OF INV ESTMENTS TO THE EXTENT OF RS.3.20 CRORES WAS NOT ADDED BACK TO THE BOOK PROFI TS AND, THUS, DIRECTED THE AO, U/S 263 OF THE ACT, TO RECOMPUTE THE BOOK P ROFITS FOR THE PURPOSE OF S.115JB BY ADDING RS.3.20 CRORES TO THE BOOK PROFIT S. ACCORDINGLY, THE AO RECOMPUTED THE BOOK PROFITS IN ACCORDANCE WITH THE CITS DIRECTIONS CONTAINED IN THE ORDER U/S 263 OF THE ACT. 4. AGITATED OVER THE AOS ACTION U/S 143(3) R.W.S.2 63 OF THE ACT, THE ASSESSEE TOOK UP THE ISSUE WITH THE CIT (A). SIMUL TANEOUSLY, THE ASSESSEE, PERHAPS, CHALLENGED THE ACTION OF THE CIT U/S 263 OF THE ACT BEFORE THE HONBLE TRIBUNAL. 4.1. THE HONBLE TRIBUNAL IN ITA NO:319(BANG) /07 DATED: 11/01/2008, AFTER DELIBERATING THE ISSUE IN A COMPREHENSIVE MAN NER, ANALYZING THE VARIOUS JUDICIAL PRONOUNCEMENTS AND EXTENSIVELY Q UOTING THE FINDING OF THE ITA NO.358/B/09 PAGE 3 OF 5 HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIA L CO. LTD. V. CIT REPORTED IN 243 ITR 83, HAD CONCLUDED THUS 5FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT THERE ARE TWO VIEWS POSSIBLE IN RESPECT OF ADDING BACK BAD AN D DOUBTFUL DEBTS WHILE COMPUTING BOOK PROFIT U/S 115JB AND THE ASSESSING OFFICER HAS ADOPTED ONE OF THE VIEW AND KEEPING IN VIEW THE APEX COURT JUDGMENT IN THE CASE OF MALABAR INDUSTRIAL CO . LTD. THE ORDER CANNOT BE HELD AS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF REVENUE. 6. THE LEARNED JURISDICTIONAL HIGH COURT IN THE C ASE OF M/S. SENAPATHY WHITLEY LTD. DCIT IN ITA NO:291/2002 VIDE ORDER DATED:15 TH NOVEMBER, 2007 RESTORED THE MATTER OF ADDING BACK THE PROVISION FOR BAD AND DOUBTFUL DEBT WHILE COMPU TING BOOK PROFIT U/S 115JA WITH THE DIRECTION THAT THE MATTER BE CONSIDERED AFRESH BY APPLYING THE PRINCIPLE LAID DOWN IN THE J UDGMENT OF THE APEX COURT IN THE CASE OF APOLLO TYRES (SUPRA). IT HAS ALREADY BEEN POINTED OUT THAT THE DELHI HIGH COURT REFERRED TO APOLLO TYRES (SUPRA) CASE AND HELD THAT PROVISION FOR BAD AND DOUBTFUL DEBTS CANNOT BE ADDED WHILE COMPUTING BOOK PROFIT. 7. KEEPING IN VIEW OF THE ABOVE DISCUSSIO N, WE HOLD THAT THE LEARNED CIT WAS NOT JUSTIFIED INVOKING THE POWER OF SECTION 263 OF THE I T ACT IN DIRECTING THE ASSESSING OFFICER TO ADD BACK THE PROVISION FOR BAD AND DOUBTFUL DEBTS. 4.2. REVERTING BACK TO THE MAIN ISSUE, DURING THE COURSE OF HEARING, THE CIT(A)S ATTENTION WAS DRAWN BY THE ASSESSEE WITH R EGARD TO THE FINDING OF THE HONBLE TRIBUNAL REFERRED SUPRA. 4.3. AFTER DUE CONSIDERATION OF THE ISSUE, TH E LD.CIT(A) HAS CONCLUDED THUS 6. .. THE HONBLE ITAT HAS HELD THAT THE LEARN ED CIT WAS NOT JUSTIFIED IN INVOKING THE POWER OF SECTION 263 OF THE IT ACT IN DIRECTING THE ASSESSING OFFICER TO ADD BACK THE PRO VISION FOR BAD AND DOUBTFUL DEBTS. IN THE RESULT, THE ORDER OF TH E CIT IS CANCELLED AND THE APPEAL OF THE ASSESSEE IS ALLOWED . ITA NO.358/B/09 PAGE 4 OF 5 6.1. IN VIEW OF THIS, THE GROUNDS OF APPEAL BE COME INFRUCTUOUS AS THE DIRECTION GIVEN BY THE CIT U/S 263 HAS BEEN CANCELL ED. AFTER TAKING INTO CONSIDERATION THE FACTS AND CIRCU MSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE HONBLE ITATS DECISION IN THE APPELLANTS OWN CASE, I AM OF THE CONSIDERED OP INION THAT THE GROUNDS OF APPEAL OF THE APPELLANT DESERVE TO SUCCE ED. THE ORDER PASSED BY THE ASSESSING OFFICER AS PER THE DIRECTIO N OF THE LEARNED CIT, BANGALORE-III U/S 263 OF THE ACT BECOMES NON-E ST AB INITIO .. 7. AGAINST THE ORDER OF THE LD. CIT(A), THE REVENUE HAS COME UP WITH THE PRESENT APPEAL . WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS. 7.1. ON A CAREFUL PERUSAL OF THE IMPUGNED ORDER OF THE CIT(A), WE ARE OF THE CONSIDERED OPINION THAT THE REVENUE HAS NO GROU ND OR LOCUS STANDI TO AGITATE OVER THE FINDING OF THE LD.CIT(A) FOR THE FOLLOWING REASONS: (A) THE ORDER OF THE LD.CIT U/S 263 OF THE ACT HAS BEEN STRUCK DOWN BY THE HONBLE TRIBUNAL IN ITS FINDING REFERRE D SUPRA; (B) ONCE THE ORDER PASSED U/S 263 HAD LOST ITS LEGAL SA NCTITY CONSEQUENT UPON THE TRIBUNALS RULING, THE IMPUGNED ORDER PASSED BY THE AO ON THE BASIS OF THE CITS ORDER U/ S 263 HAS BECOME NON EST; (C) WHEN THE ORDER PASSED BY THE AO BASED ON THE DIRECT IONS OF THE CIT U/S 263 OF THE ACT CAME UP FOR HEARING BEFO RE THE CIT(A), THE LD. CIT(A), CITING THE FINDING OF THE H ONBLE TRIBUNAL ON THE VERY ORDER OF THE CIT U/S 263, HAS CONCLUDED THAT THE GROUNDS RAISED BEFORE HIM BECOME INFRUCTUO US; (D) THE CIT(A) HAD VERY SPECIFICALLY ASSERTED THAT, 6. 1THE ORDER PASSED BY THE ASSESSING OFFICER AS PER THE DI RECTION OF THE LEARNED CIT, BANGALORE-III, U/S 263 OF THE ACT BEC OMES NON- EST AB-INITIO.. HOWEVER, HE HAD CONCLUDED, PERHAPS BY OVERSIGHT THA T, HENCE, THE ORDER PASSED U/S 143(3) RWS 263 CANNOT BE SUSTAINED AND THE SAME IS HEREBY CANCELLED. (E) SINCE THE ORDER U/S 263 PASSED BY THE CIT, B-III, B ANGALORE WAS CANCELLED BY THE HONBLE TRIBUNAL VIDE ITS ORDER CI TED SUPRA, THE REVENUES ALLEGATION THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ORDER U/S 263 PASSED BY THE CIT, B-III, DOESNT HOL D WATER. ITA NO.358/B/09 PAGE 5 OF 5 7.2. IN OVER ALL CONSIDERATION OF THE FACTS AND CIR CUMSTANCES OF THE ISSUE AS DISCUSSED IN THE FORE-GOING PARAGRAPHS, WE ARE O F THE CONSIDERED VIEW THAT THE REVENUE HAS NO VALID REASON TO AGITATE OVE R THE STAND OF THE CIT(A) AND THE ISSUE IS DECIDED ACCORDINGLY. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF AUGUST, 2009. SD/- SD/- ( K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 21 ST AUGUST, 2009. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.