Carlson Hospitality Marketing (India) Pvt. Ltd., Gurgaon V. DCIT, circle-3(1), New Delhi

ITA 4192/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6154 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 31-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Depreciation; Additional evidence; Bad and doubtful debts; TDS
• Section: 234B; 37(1); 143(1); 143(2); 68; 37

Judgement Text

1 ITA NO. 4192/DEL/2018 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 4192/DEL/20 18 (A.Y 2011-12) (THROUGH VIDEO CON FERENCING) CARLSON HOSPITALITY MARKETING (INDIA) PVT. LTD. 1 ST FLOOR, BLOCK A, CHIMES BUILDING, PLOT NO. 61, SECTOR-44, GURGAON, HARYANA AABCC5374K (APPELLANT) VS DCIT CIRCLE-3(1) NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST ORDER DATED 19.02.2018 PASSED BY CIT(A)-2 NEW DELHI FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 2 (CIT(A)) HAVE ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE AS SESSEES CASE IN CONFIRMING THE ADDITION OF '22,71,911/- MADE BY LD. AO U/S 68 OF THE ACT IN RESPECT OF CREDIT BALANCES OUTSTANDING AS ON 31.03.2011 IN RESPECT TW O CREDITORS. 2. THAT THE LD. CIT (A) HAVE GROSSLY ERRED ON FACTS A ND CIRCUMSTANCES OF THE ASSESSEES CASE AND IN CONFIRMING THE DISALLOWANCE MADE BY THE LD. AO ON APPELLANT BY SH. R. K. KAPOOR, CA RESPONDENT BY DR. MANINDER KAUR, SR. DR DATE OF HEARING 09.09.2021 DATE OF PRONOUNCEMENT 14.09.2021 2 ITA NO. 4192/DEL/2018 ACCOUNT OF EXCHANGE RATE FLUCTUATION LOSS AMOUNTING TO '53,181/- WITHOUT AFFORDING ANY OPPORTUNITY TO THE ASSESSEE FOR EXPLA INING THEIR NATURE AND JUSTIFICATION FOR THEIR ALLOWABILITY. 3. THAT THE LD. AO AND CONSEQUENTLY THE LD. CIT(A) HA VE GROSSLY ERRED ON FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE IN C HARGING INTEREST U/S. 234A AND 234B OF THE ACT . 3. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 ENGAGED IN THE BUSINESS OF SALES AND MARKETING FOR CARLSON GROUP OF HOTELS. THE ASSESSEE E-FILED ITS RETURN OF INCOME ON 24/11/ 2011 FOR ASSESSMENT YEAR 2011-12 DECLARING AN INCOME OF RS.198,35,504/-. TH E RETURN WAS PROCESSED U/S 143(1) OF THE ACT AND WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICES U/S 143(2) OF THE ACT WERE ISSUED TO THE AS SESSEE. ALL THE DATA, INFORMATION, CLARIFICATIONS, DETAILS SOUGHT BY THE ASSESSING OFFICER WAS DULY FILED BY THE ASSESSEE. THE ASSESSMENT ORDER U/S 14 3 (3) OF THE ACT WAS PASSED ON 14/3/2014 ASSESSING THE TOTAL INCOME OF THE ASSE SSEE AT RS. 1,67,15,540/- AFTER MAKING CERTAIN DISALLOWANCES AND ADDITIONS, D ETAILS OF WHICH ARE AS UNDER:- S R . NATURE OF DISALLOWANCE/ADDITION AMOUNT (RS.) 1. DISALLOWANCE OF 25% OF ADVERTISEMENT & SALES PROMOTION EXP, TREATING IT AS CAPITAL IN NATURE 43,20,942/ - 2. ADDITION U/S 68 OF IT ACT- CASH CREDIT ON ACCOUNT OF CREDIT BALANCE OUTSTANDING IN RESPECT OF TWO CREDIT ORS 22,71,911/ - 3. DISALLOWANCE OF BAD DEBTS WRITTEN OFF 2,34,000/ - 4. DISALLOWANCE OF LOSS ARISING ON EXCHANGE RATE FLUCTUATION 53,181/ - TOTAL 68,80,034/ - 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL O F THE ASSESSEE. 3 ITA NO. 4192/DEL/2018 5. AS REGARDS GROUND NO. 1 RELATING TO ADDITION OF RS.22,71,911/- U/S 68 OF THE ACT IN RESPECT OF CREDIT BALANCE OUTSTANDING AS ON 31/3/2011 IN RESPECT OF TWO CREDITORS. THE LD. AR SUBMITTED THAT DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE CO NFIRMATION FROM ALL THE CREDITORS EXCEEDING OUTSTANDING BALANCE OF RS. 5 LA CS EACH AS ON 31 ST MARCH, 2011. THERE WERE ONLY SIX SUCH CREDITORS HAVING BA LANCE OF RS. 2,21,51,259/- IN THIS CATEGORY. OUT OF THIS, ASSESSEE OBTAIN CON FIRMATION AND FILED THE SAID CONFIRMATIONS OBTAIN FROM FOUR SUCH CREDITORS HAVIN G BALANCE OF RS. 1,98,79,348/-, WHICH CONSTITUTED ALMOST 90% OF THE TOTAL OUTSTANDING CREDITORS. HOWEVER, THE ASSESSEE COULD NOT ARRANGE CONFIRMATIONS FROM TWO CREDITORS, THAT ARE DURGA DAS PUBLICATIONS PVT. LTD . (RS.13,12,602/-) AND TRAVEL CLICK INCORPORATION (RS. 9,59,309/-) AS ONE OF THE CREDITORS NAMELY TRAVEL CLICK INTENTIONAL WAS AN OVERSEAS CREDITORS. THE LD. AR SUBMITTED THAT THESE TWO CREDITORS ARE ALSO DEALING IN THE IDENTIC AL BUSINESS I.E. ADVERTISEMENT AND MARKETING IN WHICH THE ASSESSEE IS DOING BUSINE SS. THE ASSESSING OFFICER MADE THE ADDITION IN RESPECT OF THESE TWO CREDITORS U/S 68. AT THE APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE FILED C ERTAIN ADDITIONAL EVIDENCES IN RESPECT OF BONAFIDE BUSINESS RELATION WITH THESE CR EDITORS CONSISTING OF COPY OF LEDGERS OF THESE PARTIES IN THE BOOKS OF ASSESSEE, COPY OF TDS CERTIFICATES ISSUED TO THESE PARTIES IN RESPECT OF EXPENSES ACC OUNTED FOR, COPIES OF INVOICES REST BY THESE PARTIES ON THE ASSESSEE TO ESTABLISH THAT THESE PARTIES WERE REGULAR TRADING PARTIES WITH THE ASSESSEE. THE LD. AR SUBMITTED THAT THE ASSESSEE ALSO EXPLAIN THAT PAYMENTS TO THESE PARTIE S HAVE BEEN MADE IN THE SUBSEQUENT YEARS AS WELL. SOME FURTHER TRANSACTION S HAD TAKEN PLACED WITH THESE PARTIES IN THE SUBSEQUENT YEARS FOR WHICH THE ASSESSEE FILED COPY OF LEDGERS ACCOUNTS FOR FINANCIAL YEAR 2010-11, 2011-1 2 AND 2012-13 ALL THESE TWO PARTIES. THUS, THE LD. AR SUBMITTED THAT PROVI SIONS OF SECTION 68 ARE NOT APPLICABLE TO THESE PARTIES BECAUSE MOST OF THE BAL ANCES IN THE ACCOUNT OF THESE PARTIES WERE OUTSTANDING AND CAME FORWARD TO THIS YEAR FROM THE EARLIER YEARS AND PROVISIONS OF SECTION 68 COULD NOT HAVE B EEN INVOKED FOR MAKING ADDITIONS IN THE HANDS OF THE ASSESSEE. THE CIT(A) CALLED FOR REMAND REPORT ON 4 ITA NO. 4192/DEL/2018 THESE DOCUMENTS FROM THE ASSESSING OFFICER. THE AS SESSING OFFICER CLAIMED THAT THESE DOCUMENTS WERE NOT ADDITIONAL EVIDENCES AND INTERESTED UPON THAT ONLY CONFIRMATIONS FROM THESE PARTIES PERHAPS WOULD SATISFY ADDITIONS U/S 68 WAS CORRECTLY MADE BY THE ASSESSING OFFICER. THE L D. AR SUBMITTED THAT THE PARTIES ARE GENUINE AND REGULAR AND THE IDENTITY AN D CREDITWORTHINESS OF THESE PARTIES WERE PLACED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A) AND INSTEAD OF LOOKING TO THE ADDITIONAL EVIDENCES OF T HE TWO CREDITORS, THE ASSESSING OFFICER HAS NOT TAKEN COGNIZANCE FILED BY THE ASSESSEE IN SUPPORT OF HIS SUBMISSION. THE LD. AR RELIED UPON THE DECISIO N OF THE OF THE HONBLE SUPREME COURT IN CASE OF ANEES AHMED AND SONS VS. C IT 297 ITR 441 (SC). THE LD. AR FURTHER SUBMITTED THAT ALL THESE SIX PAR TIES FOR WHICH THE ASSESSING OFFICER ASKED BALANCE CONFIRMATION HAVE PROVIDED SE RVICES IN THE NATURE OF ADVERTISEMENT & MARKETING TO THE ASSESSEE. HOWEVER , THE ASSESSING OFFICER ACCEPTED THE GENUINENESS OF THE FOUR PARTIES FOR WH ICH CONFIRMATION WAS FURNISHED BY THE ASSESSEE AND TREATED REMAINING TWO PARTIES AS IN GENUINE AND MADE ADDITION OF THE CLOSING BALANCE OF THE SAID TW O PARTIES U/S 68 OF THE ACT, MERELY ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO FURNISH THE BALANCE CONFIRMATIONS. THE LD. AR POINTED OUT THAT FROM TH E LEDGER OF THESE PARTIES IT CAN BE SEEN THAT ASSESSEE HAS BOOKED THE INVOICES F OR SERVICES RENDERED BY THESE PARTIES IN THE NATURE OF ADVERTISEMENT & MARK ETING AND PAID THESE PARTIES FROM THE BANKING CHANNELS. THE LD. AR FUR THER RELIED UPON THE DECISION OF THE HONBLE HIGH COURT IN CASE OF CIT V S. RICE INDIA EXPORTS PVT. LTD (I2010-TIOL-583-HC-DEL-IT) AS WELL AS THE DECIS ION OF THE TRIBUNAL IN CASE OF MANOJ AGGARWAL (113 ITD 377 DELHI (SB).THE LD. A R RELIED UPON THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN CASE OF ZAZS ONS EXPORT LTD. VS. CIT (2017) 88 TAXMAN.COM 617 AND ALSO RELIED ON HONBLE DELHI HIGH COURTS DECISION IN CASE OF CIT VS. KISHORI LAL CONSTRUCTIO N LTD. WITHOUT PREJUDICE TO THESE SUBMISSIONS, THE LD. AR FURTHER SUBMITTED THA T IN FINANCIAL YEAR 2013- 14, THE OUTSTANDING BALANCES OF BOTH THESE PARTIES WERE 9,06,882/- IN CASE OF DURGA DAS PUBLICATION PVT. LTD. AND RS.5,24,934/- I N CASE OF TRAVEL CLICK INTERNATIONAL HAVE BEEN RETURNED BACK BY THE ASSESS EE, BEING THE AMOUNTS NOT 5 ITA NO. 4192/DEL/2018 CLAIMED BY THE SAID PARTIES. THE LD. AR PRODUCED HE LEDGERS AND BALANCES WHEREIN RETURN OF ACCOUNT FOR FINANCIAL YEAR 2013-1 4 WAS MENTIONED. THE LD. AR POINTED OUT THAT THE SAID WRITE BACK HAS BEE N OFFERED TO TAX BY THE ASSESSEE IN FINANCIAL ASSESSMENT YEAR 2013-14. THE LD. AR SUBMITTED THAT THE SAID WRITE BACKS HAVE BEEN CREDITED UNDER THE H EAD OTHER INCOME IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. FURTHERMORE, THE INCOME TAX RETURNS OF THE ASSESSEE HAVE BEEN SHOWS THAT SUCH CREDIT HAS BEEN IN-FACT OFFERED FOR TAX DURING THE YEAR UNDER CONSIDERATION. THE ABOVE POSITION TRANSLATES TO TH E FACTS THAT OUTSTANDING BALANCES ADDED U/S 68 IN ASSESSMENT YEAR 2011-12 HA VE BEEN ALREADY SUBJECTED TO TAX IN ASSESSMENT YEAR 2014-15 AND IF THE AMOUNT ADDITION IS UPHELD IN ASSESSMENT YEAR 2011-2, THE SAME WOULD AM OUNTS TO DOUBLE TAX OF THE SAID AMOUNT IN THE ABOVE TWO YEARS. 6. THE LD. DR RELIED UPON THE ORDER OF THE CIT(A) A ND ASSESSMENT ORDER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIALS AVAILABLE ON RECORD. FROM THE PERUSAL OF THE RECOR DS AND THE SUBMISSIONS OF THE LD. AR THE CONFIRMATIONS AND THE LEDGER ACCOUNT S ALONG WITH OTHER DOCUMENTARY EVIDENCE WERE PRODUCED BEFORE THE CIT(A ) FOR WHICH THE ASSESSING OFFICER IN HIS REMAND REPORT NEVER DOUBTED THE GEN UINENESS. IN-FACT, THE TWO PARTIES REGARDING WHICH THE OUTSTANDING BALANCES WE RE PENDING HAS BEEN WRITTEN BACK BY THE ASSESSEE AND WAS OFFERED TO TAX IN ASSESSMENT YEAR 2014- 15. THE PURCHASES AS WELL AS THE CORRESPONDING SAL E WERE ALSO ACCEPTED BY THE ASSESSING OFFICER. THEREFORE, THIS ADDITION WAS BA SED ONLY ON THE ASSUMPTION AND SURMISES WHICH CANNOT SUSTAIN UNDER THE LAW. TH US, THE CIT(A) WAS NOT RIGHT IN CONFIRMING THE SAID ADDITION, HENCE, GROUN D NO. 1 OF THE ASSESSEES APPEAL IS ALLOWED. 8. AS REGARDS GROUND NO.2 RELATING TO ADDITION OF R S.53,181/- ON ACCOUNT OF EXCHANGE RATE FLUCTUATION LOSS WITHOUT AFFORDING AN Y OPPORTUNITY TO THE 6 ITA NO. 4192/DEL/2018 ASSESSEE FOR EXPLAINING THE NATURE AND JUSTIFICATIO N FOR THE ALLOWABILITY. THE LD. AR SUBMITTED THAT THE SAID EXPENDITURE WAS NOT A CA PITAL TRANSACTION AND, THEREFORE, WAS NOT RETURNED UNDER TAX AUDIT REPORT & FINANCIALS. IN THE RETURN OF INCOME, THERE WAS NO ADJUSTMENT INDICATED ON ACCOUN T OF PROVISIONS OF SECTION 43A OF THE ACT WHICH IS RIGHTLY REPORTED BY THE TAX AUDITOR IN SCHEDULE DESCRIBING DEPRECIATION IN FORM 3CACD. THE SAID EX CHANGE LOSS HAS BEEN RECOGNIZED ON THE TRANSACTION PERTAINING TO RESERVA TION FEES, TOUR AND TRAVEL/MARKETING EXPENSES, PARTICIPATION FEES AND A DVERSE FEES WHICH ARE CLEARLY REVENUE IN NATURE AND THE STATUTORY AUDITOR HAS ALSO REPORTED THE ABOVE EXPENDITURE IN FOREIGN CURRENCY IN NOTES TO FINANCI AL DURING THE YEAR UNDER CONSIDERATION IN PURSUANT TO PARA 4D OF PART 2 OF S CHEDULE 6 OF COMPANIES ACT, 1956 AND NONE OF THE EXPENDITURE IS IN THE NATURE O F CAPITAL TRANSACTION. FOREIGN EXCHANGE FLUCTUATION LOSS ON ACCOUNT OF REV ENUE TRANSACTION, AS IS THE CASE OF THE ASSESSEE, IS ALLOWABLE U/S 37 OF THE AC T. THE LD. AR RELIED UPON THE DECISION OF CIT VS. WOODWARD GOVERNOR INDIA PVT. LT D. 312 ITR 254 (S.C) AS WELL AS OIL AND NATURAL GAS CORPORATION LTD. VS. CI T 332 ITR 180 (S.C). THE LD. AR ALSO RELIED UPON THE DECISION OF THE HONBLE MADHYA PRADESH HIGH COURT IN CASE OF MP FINANCIAL CORPORATION VS. CIT 165 ITR 765. 9. THE LD. DR RELIED UPON THE ORDER OF THE CIT(A) A ND ASSESSMENT ORDER. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE LOSS SUFFERED BY THE ASSE SSEE ON ACCOUNT OF THE EXCHANGE DIFFERENCE ON THE PARTICULAR DATE IS INDIC ATED IN THE BALANCE SHEET AND THE SAME IS AN ITEM OF EXPENDITURE U/S 37(1) OF TH E INCOME TAX ACT, 1961. IT IS AN ALLOWABLE EXPENDITURE. IN-FACT, NO ADJUSTMENT O N ACCOUNT OF PROVISIONS U/S 43A OF THE ACT WAS REPORTED BY THE TAX AUDITOR IN S CHEDULE RELATING TO DEPRECIATION IN FORM 3CA-CD. THESE FACTS WERE NOT DISPUTED BY THE REVENUE AUTHORITIES AND ARE CLEARLY REVENUE IN NATURE. THE REFORE, GROUND NO. 2 IS ALLOWED. 7 ITA NO. 4192/DEL/2018 11. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER, 2021 SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 14/09/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI