Mega International Pvt. Ltd., V. ITO, Ward-6(3),

ITA 3603/DEL/2004

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5718 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 18-02-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 16-08-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Assessee Lawyers: RAVI GUPTA
• Keywords: Bad and doubtful debts; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO. 3603/DEL/2004 ASSESSMENT YEAR: 2001-02 M/S MEGA INTERNATIONAL P. LTD. C/O P.K. GAUR & ASSOCIATES, 1207, ROHIT HOUSE, 3, TOLSTOY MARG, CONNAUGHT PLACE, NEW DELHI. PAN NO. - VS. INCOME TAX OFFICER, WARD 6(3), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : RAVI GUPTA, ADV. RESPONDENT BY: KISHORE B. SR. DR O R D E R PER I.P. BANSAL, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER OF CIT(A) DATED 12 TH MAY, 2004 FOR AY 2001-02. 2. AT THE TIME OF HEARING, LD. AR OF THE ASSESSEE P RESSED GROUNDS NO. 2 & 5 ONLY. HENCE, OTHER GROUNDS ARE DISMISSED BEING NOT PRESSED. 3. GROUND NO. 2 & 5 READ AS UNDER: - 2. THAT THE LD. CIT(A) HAS ERRED IN FACTS AND IN L AW BY DISALLOWING OF RS. 6,35,565/- ON ACCOUNT OF DEFERRED REVENUE EXPEN SES. 5. THAT THE LD. CIT(A) HAS ALSO DISALLOWED BAD AND DOUBTFUL DEBTS ON THE BASIS THAT THESE AMOUNTS WERE NOT WRITTEN OFF F ROM THE ACCOUNT OF THE CONCERNED DEBTORS ACCOUNT. 2 ITA NO. 3603/DEL/200 4 4. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED DEDUCTION OF RS. 6,35,565/- ON ACCOUNT OF DEFERRED REVENUE EXPENSES WRITTEN OFF. THESE EXPENDITURE RELATES TO ADVERTIS EMENT, TRAINING AND SEMINAR, MARKETING ETC. INCURRED DURING FINANCIAL Y EARS 1996-97, 1997-98 & 1998-99. THE ASSESSEE AMORTIZED THOSE EXPENDITUR ES OVER PERIOD OF 10 YEARS AND CLAIMED THESE EXPENDITURES ACCORDINGLY . DURING THE YEAR UNDER CONSIDERATION THE AO DID NOT ALLOW SUCH CLAIM OF THE ASSESSEE AND MADE THE ADDITION. LD. CIT(A) HAS UPHELD THE ADDIT ION ON THE GROUND THAT PRINCIPLE OF RESJUDICATA DOES NOT APPLY TO THE INCOME TAX PROCEEDINGS AND AO WAS ENTITLED TO EXAMINE THE ADMI SSIBILITY OF THE CLAIM AND ACCORDING TO DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. C IT 225 ITR 802 ORDINARILY REVENUE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS HAS TO BE ALLOWED IN THEIR ENTI RETY IN THE YEAR IN WHICH THEY WERE INCURRED DESPITE THE FACT THAT ASSE SSEE HAD WRITTEN THEM OFF IN THE BOOKS OF ACCOUNT OVER A PERIOD OF YEARS. LD. CIT(A) OBSERVED THAT ASSESSEE HAS FAILED TO JUSTIFY ON FACTS THAT W HAT ADVANTAGE ASSESSEE GOT IN THE SUBSEQUENT YEARS WHEN SUCH CLAIM WAS MAD E. THE ASSESSEE IS AGGRIEVED, HENCE IN APPEAL. 5. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY L D. AR THAT THE AO IN A.Y. 1998-99 HAS ACCEPTED SUCH CLAIM OF THE ASSESSE E AND NOW THE CHANGE OF STAND IS NOT IN ACCORDANCE WITH LAW. HE SUBMITTED THAT THOUGH PRINCIPLE OF RESJUDICATA IS NOT STRICTLY APPLICABLE TO INCOME TAX 3 ITA NO. 3603/DEL/200 4 PROCEEDINGS BUT AT THE SAME TIME REVENUE CANNOT ADO PT INCONSISTENT APPROACH AND FOR THE PURPOSE OF CONSISTENCY THE CLA IM OF THE ASSESSEE SHOULD HAVE BEEN ALLOWED. HE IN THIS REGARD REFERR ED TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NEO POLI PACK PVT. LTD. 245 ITR 492 TO CONTEND THAT WHERE AN ISSUE HAS BEEN CONSIDERED AND DECIDED CONSISTENTLY IN A NUMBER OF EARLIER YEARS I N A PARTICULAR MANNER, FOR THE SAKE OF CONSISTENCY, SAME VIEW SHOULD CONTI NUE TO PREVAIL SUBSEQUENT YEARS UNLESS THERE IS SOME MATERIAL CHAN GE IN FACTS. THUS, IT WAS SUBMITTED BY LD. AR THAT AO AS WELL AS CIT(A) B OTH WERE WRONG IN NOT ADMITTING THE CLAIM OF THE ASSESSEE. 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF AO AND CIT(A) AND IT WAS SUBMITTED THAT PRINCIPLE OF RESJUDICATA, ACCORDING TO WELL ESTABLISHED LAW IS NOT STRICTLY APPLICABLE TO THE I NCOME TAX PROCEEDINGS. THE ASSESSEE COULD NOT SHOW THAT WHAT BENEFIT IT HA S OBTAINED OF THESE EXPENDITURES DONE IN THE EARLIER YEAR. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE FACT THAT ASSESSEE HAD AMORTIZED THE EXPENDITURE AND ACCORDINGLY THESE WERE BEING CLAIME D IN THE BOOKS OF ACCOUNT IS NOT DISPUTED. THE DEPARTMENT ITSELF HAS ADMITTED SUCH CLAIM OF THE ASSESSEE IN AY 1998-99, WHICH IS AN ASSESSME NT FRAMED U/S 143(3) OF THE ACT. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT IN ANY OF THE SUBSEQUENT YEARS SUCH CLAIM OF T HE ASSESSEE WAS DISALLOWED. THEREFORE, THE RATIO LAID DOWN BY HON BLE DELHI HIGH COURT IN 4 ITA NO. 3603/DEL/200 4 THE CASE OF CIT VS. NEO POLI PACK P. LTD. (SUPRA) W ILL BE FULLY APPLICABLE AND THE CLAIM OF THE ASSESSEE CANNOT BE REJECTED. THEREFORE, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 8. APROPOS GROUND NO. 5. THIS ISSUE IS DISCUSSED B Y AO IN PARA 4 OF THE ASSESSMENT ORDER. THE OUTSTANDING BALANCE IN R ESPECT OF 11 PARTIES AGGREGATING TO SUM OF RS. 27.43 LACS WAS WRITTEN OF F IN THE BOOKS OF ACCOUNT AND CLAIMED AS PROVISION FOR BAD AND DOUBT FUL DEBTS. THE AO MADE INDEPENDENT ENQUIRY BUT COULD NOT GET ANY RESU LT EXCEPT IN THE CASE OF ONE PARTY NAMELY S.J. ENTERPRISES WHICH PAR TY STATED THAT NO AMOUNT WAS DUE FROM IT TO THE COMPANY AS PAYMENT WA S ALREADY MADE BY THEM. THE AO OBSERVED THAT ACCORDING TO COPIES OF ACCOUNT FURNISHED BY THE ASSESSEE THE AMOUNT WAS NOT WRITTE N OFF FROM THE ACCOUNTS OF THOSE DEBTORS AND BALANCE IS CARRIED OV ER TO THE NEXT YEAR AND IN THIS MANNER THE AO HAS COME TO A CONCLUSION THAT ASSESSEE STILL NURTURE THE HOPE OF RECOVERY OF THESE DEBTS FROM TH OSE PARTIES AND THUS, THE DEBTS DID NOT BECOME BAD. 9. LD. CIT(A) HAS UPHELD THE FINDINGS OF AO THE ASS ESSEE IS AGGRIEVED, HENCE IN APPEAL. 10. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY LD. AR THAT MISTAKENLY THE ASSESSEE HAS WRITTEN THE WORD PROVI SION. HE SUBMITTED THAT IN FACT THESE DEBTS WERE WRITTEN OFF IN THE PR OFIT AND LOSS ACCOUNT AND THERE WAS NO QUESTION OF OUTSTANDING THE SAID AMOUN T IN THE BOOKS OF THE 5 ITA NO. 3603/DEL/200 4 ASSESSEE AS THEY WERE DEBIT TO PROFIT AND LOSS ACCO UNT. IT WAS SUBMITTED THAT THE CLAIM OF THE ASSESSEE WAS PERFECTLY IN ORD ER AND SHOULD HAVE BEEN ALLOWED. 11. ON THE OTHER HAND, LD. DR RELYING ON THE ORDER OF AO AND CIT(A) PLEADED THAT IT WAS MERELY A PROVISION AND ASSESSEE WAS STILL HAVING THE HOPE OF RECOVERY AND, THEREFORE, THE CLAIM HAS RIGH TLY BEEN REJECTED BY CIT(A). 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. WITH THE HELP OF ENTRIE S MADE IN THE BALANCE SHEET, THE LD. AR OF THE ASSESSEE WAS ABLE TO SHOW US THAT THE AMOUNT WAS WRITTEN OFF BY THE ASSESSEE. SUCH POSITION OF ACCOUNTS IS CONTRARY TO THE OBSERVATIONS OF AO MADE IN THE ASSESSMENT ORDER . SIMILARLY IT IS ALSO NOT COMING OUT IN THE ASSESSMENT ORDER THAT WH ETHER THE CONDITION OTHER THAN WRITING OFF WERE ALSO FULFILLED BY THE A SSESSEE TO MAKE IT ENTITLE TO CLAIM BAD DEBT. THERE IS NO CLARITY REGARDING T HESE FACTS. LD. AR ALSO ADMITTED THAT SO AS IT RELATES TO OTHER CONDITION T HE AO DID NOT EXAMINE. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH T HE PARTIES, WE ARE OF THE OPINION THAT THE MATTER SHOULD GO BACK TO THE FILE OF AO TO DECIDE THIS ISSUE AFRESH AS PER PROVISIONS OF LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. WE DIRECT ACCOR DINGLY. FOR STATISTICAL PURPOSES THIS GROUND IS ALLOWED. 6 ITA NO. 3603/DEL/200 4 13. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 12.3.2010 (G.E. VEERABHADRAPPA) VICE PRESIDENT (I.P. BANSAL) JUDICIAL MEMBER DATED: 12.3.2010 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER DEPUTY REGISTRAR