M/s. Interzign Solutions (Pvt) Ltd., New Delhi V. DCIT, New Delhi

ITA 476/DEL/2013

• Counselvise Citation: 47620114 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: ASHWANI KUMAR
• Keywords: Bad and doubtful debts; Revenue expenditure
• Section: 143(3)

Judgement Text

I.T.A. NO.: 476/DEL/13 AND 817/DEL/13, ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENCH, NEW DELHI [CORAM: PRAMOD KUMAR AM , AND C . M . GARG JM ] I.T.A. NO .: 476/DEL/13 AND 817/DEL/13, ASSESSMENT YEAR S: 2008 - 09 AND 2009 - 10 INTERZIGN SOLUTIONS PVT LTD .. .APPELLANT 504, 5 TH FLOO R, SALCON ARUM PLOT NO 4, JASOLA DISTRICT CENTRE NEW DELHI 110 025 [PAN : AAACI6928C] VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11(1), NEW DELHI . RESPONDENT APPEARANCES BY: ASHWANI KUMAR , FOR THE APPELLANT SATPAL SINGH , FOR THE RESPONDENT O R D E R PER BENCH : 1. THESE TWO APPEALS INVOLVE A COMMON ISSUE, WERE HEARD TOGETHER, AND, AS A MATTER OF CONVENIENCE, THEREFORE, ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. WE WILL TAKE UP THE ITA NO. 476/DEL/13 I.E. APPE AL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 21 ST DECEMBER 2012, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2008 - 09. LEARNED REPRESENTATIVES AGREE THAT WHATEVER WE DECIDE FOR THE ASSESSMENT YEA R 2008 - 09 WILL FOLLOW MUTATIS MUTANDIS FOR THE ASSESSMENT YEAR 2009 - 10 AS WELL. 3. GRIEVANCE RAISED BY THE ASSESSEE , WHICH IS IDENTI CALLY WORDED FOR BOTH THE YEARS AS NOT ONLY THE FACTS OF THE CASE BUT EVEN DATE OF THE CIT(A)S ORDERS IN BOTH THE ASSESSM ENT YEARS IS THE SAME, IS AS FOLLOWS: THAT THE ORDER DATED 21 ST DECEMBER 2012 PASSED UNDER SECTION 250 OF THE INCOME TAX ACT, 1961, BY THE LEARNED CIT(A) - XV, NEW DELHI, IS AGAINST THE LAW AND FACTS ON THE FILE INASMUCH AS HE WAS NOT JUSTIFIED TO SUSTAIN THE ADDITION MADE BY THE ASSESSING OFFICER OF RS 17,28,832 I.T.A. NO.: 476/DEL/13 AND 817/DEL/13, ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 2 OF 5 IN RESPECT OF PRELIMINARY EXPENSES WRITTEN OFF AS DEFERRED REVENUE EXPENSES ON THE GROUND THAT THE EXPENSES ARE OF CAPITAL NATURE. 4. TO ADJUDICATE ON THESE APPEALS , ONLY A VERY FEW MATERIAL FACT S NEED TO BE TAKEN NOTE OF. THERE IS NO DISPUTE THAT IN RESPECT OF MATERIALLY IDENTICAL DISALLOWANCE, THE CIT(A) HAD, VIDE ORDER DATED 7 TH MARCH 2012, HELD THAT SUCH A DISALLOWANCE IS NOT SUSTAINABLE IN LAW AND IS COVERED AGAINST THE REVENUE BY THE TRIBUNA LS ORDER DATED 16 TH JULY 2010 FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR PRIOR THERETO I.E. 2006 - 07. THE ASSESSING OFFICER ACCEPTED THIS DECISION AND THE MATTER REACHED FINALITY THERE. IN THE PRESENT YEAR, HOWEVER, T HE CIT(A) DID NOT FOLLOW THE STAND S O TAKEN, AND HAS DISTINGUISHED THE TRIBUNAL ORDER ON THE GROUND THAT SINCE THESE EXPENSES WERE NOT INCURRED IN THE CURRENT YEAR, THE SAME CANNOT BE ALLOWED AS REVENUE EXPENDITURE DURING THE YEAR IN VIEW OF SPECIFIC OBSERVATIONS OF HONBLE ITAT IN THE MATT ER. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT THERE IS NO DISPUT E THAT THE EXPENDITURE ON QUESTION WAS ALLOWABLE IN NATURE AND THAT IT WAS ALLOWED TO THE EXTENT OF 1/5 TH ONLY BECAUSE THE ASSESSEE CLAIMED THE EXPENDITURE TO THAT EXTENT. THE ORDER DATED 16 TH JULY 2010, PASSED BY THE COORDINATE BENCH IN ASSESSEES OWN CAS E, IS QUITE CATEGORICAL IN THIS REGARD AND IT DOES NOTE THAT THE EXPENDITURE WAS REVENUE IN NATURE, WAS ALLOWABLE IN PRINCIPLE AND IS RESTRICTED TO 1/5 TH BECAUSE THE ASSESSEE HAS CLAIMED ONLY THAT PORTION OF THE EXPENSES. AS FOR THE OBSERVATIONS MADE BY T HE COORDINATE BENCH THAT SUCH DELETION FOR THE YEAR UNDER CONSIDERATION DOES NOT MEAN THAT THE BALANCE AMOUNT CAN BE CLAIMED BY THE ASSESSEE IN SUCCEEDING YEARS AS ALLOWABILITY OR OTHERWISE THEREOF HAS TO BE CONSIDERED INDEPENDENTLY FOR THE REASON THAT T HE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE EXPENSES OF REVENUE NATURE ARE TO BE INCURRED IN THE YEAR UNDER CONSIDERATION, THIS OBSERVATION CANNOT PRE - EMPT THE CLAIM OF THE ASSESSEE FOR THE SUBSEQUENT YEAR AS THE BENCH DID NOT HAVE A NY OCCASION TO DEAL WITH THE SAME. AS THE COORDINATE BENCH VERY RIGHTLY OBSERVED, THIS ISSUE HAS TO BE CONSIDERED INDEPEN DENTLY AND THE FINDINGS OF THE YEAR BEFORE THE COORDINATE BENCH WILL NOT PER SE DECIDE THE ISSUE ONE WAY OR THE OTHER FOR THE OTHER A SSESSMENT YEARS . HOWEVER, THAT CANNOT BE CONSTRUE D TO MEAN THAT THE BENCH HAS DECIDED THE ISSUE AGAINST THE ASSESSEE FOR THE ASSESSMENT YEARS - SOMETHING WHICH THEY HAD NO , AND COULD NOT HAVE ANY, I.T.A. NO.: 476/DEL/13 AND 817/DEL/13, ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 3 OF 5 OCCASION TO DEAL WITH OR TO ADJUDICATE UPON . IN THESE CIRCUM STANCES, THE CIT(A), IN THE IMMEDIATELY FOLLOWING YEAR, HAD A REASONABLE, AND AT LEAST A POSSIBLE VIEW, IN DELETING THE SAME DISALLOWANCE, AND THIS VIEW WAS ACCEPTED BY THE ASSESSING OFFICER BY NOT CHALLENGING THE MATTER IN FURTHER APPEAL BEFORE THE TRIBU NAL. IN THE PRESENT YEAR, HOWEVER, THE ASSESSING OFFICER, ON THE SAME ISSUE, IS IN APPEAL BEFORE US. AS TO WHETHER THE ASSESSING OFFICER CAN BE PERMITTED TO DO SO, WE FIND GUIDANCE FROM THE DECISION OF ANOTHER COORDINATE BENCH, IN THE CASE OF ACIT VS CAPT K C SINGH (107 ITD 82) WHEREIN IT, INTER ALIA, OBSERVED AS FOLLOWS: IN THE CASE OF UNION OF INDIA & ORS. VS. KAUMUDINI NARAYAN DALAL & ANR. (2001) 168 CTR (SC) 3 : (2001) 249 ITR 219 (SC), HONBLE SUPREME COURT HAD AN OCCASION TO CONSIDER WHETHER IT IS OP EN TO REVENUE TO ACCEPT A JUDGMENT IN THE CASE OF ONE ASSESSEE, AND APPEAL AGAINST THE IDENTICAL JUDGMENT IN THE CASE OF ANOTHER. THEIR LORDSHIPS HELD THAT SUCH A DIFFERENTIAL TREATMENT ON THE SAME SET OF FACTS WAS NOT PERMISSIBLE IN LAW, AND OBSERVED THAT , 'IT IS NOT OPEN TO REVENUE TO ACCEPT THE JUDGMENT IN THE CASE OF THE ASSESSEE IN THAT CASE AND CHALLENGE ITS CORRECTNESS IN THE CASE OF ANOTHER ASSESSEE, WITHOUT JUST CAUSE'. THE SAME VIEW WAS REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LTD. VS. CIT (2004) 187 CTR (SC) 193 : (2004) 266 ITR 99 (SC), AND FOLLOWED BY THE HONBLE DELHI HIGH COURTS IN THE CASES OF CWT VS. R.K.K.R. INDUSTRIES (P) LTD. (2005) 198 CTR (DEL) 567 AND CIT VS. NEO POLY PACK (P) LTD. (2000) 245 ITR 492 ( DEL). 7. WHEN IT IS NOT OPEN TO THE REVENUE AUTHORITIES TO CHALLENGE THE SAME STAND TAKEN BY AN APPELLATE AUTHORITY IN THE CASE OF AN ASSESSEE, WHEN THE REVENUE AUTHORITIES HAVE NOT CHALLENGED THAT STAND TAKEN BY THE APPELL ATE AUTHORITY IN THE CASES OF OTHER SIMILARLY SITUATED ASSESSEES , IT IS CERTAINLY NOT POSSIBLE FOR THE REVENUE AUTHORITIES TO CHALLENGE THE RELIEF GRANTED BY THE APPELLATE AUTHORITY IN THE CASE OF AN ASSESSMENT YEAR, WHEN IT IS NOT CHALLENGED IN ANOTHER ASSESSMENT YEAR. 8. AS FOR THE JUST CAUSE FOR WHICH SUCH A DEVIATION CAN BE MADE, THERE IS NOTHING MORE THAN OBSERVATION, IN THE NATURE OF AN OBITER , MADE BY THE COORDINATE BENCH BUT THEN THIS OBITER WAS AVAILABLE IN THE OTHER ASSESSMENT YEAR AS WELL. THATS NOT A NEW DEVELOPMENT IN THE INTERVENING PERIOD. 9. IN ANY CASE, THE ISSUE RAISED IN THE APPEAL IS A HYPER TECHNICAL ISSUE. IF WE ARE TO HOLD THAT THIS DEDUCTION CAN NOT BE ALLOWED AS IT IS TO BE ALLOWED IN SOME OTHER ASSESSMENT YEAR I.E. THE YEAR IN WHICH IT IS INCURRED - WHICH COULD BE THE ONLY BASIS OF THE DISALLOWANCE IN THE CURRENT ASSESSMENT YEAR , FOLLOWING THE DECISION OF THE ASHOK ANANT SABNIS VS ACIT (117 TTJ 96), IT WILL HAVE TO BE ALLOWED AS A DEDUCTION IN THE ASSESSMENT YEAR IN WHICH IT WAS INCURRED AS WOULD BE EVIDENT FROM THE FOLLOWING OBSERVATIONS: I.T.A. NO.: 476/DEL/13 AND 817/DEL/13, ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 4 OF 5 6. SEC. 153(3) PROVIDES THAT TIME LIMITS FOR ASSESSMENTS, REASSESSMENTS AND RECOMPUTATIONS DO NOT APPLY, INTER ALIA, IN THE CASES WHERE 'SUCH ASSESSMENT, REASSESSMENT OR RECOMPUTATION IS MADE ON THE ASSESSEE OR ON ANY PE RSON IN CONSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER UNDER S. 250........'. THE EFFECT OF THIS PROVISION IS THAT NOTWITHSTANDING ANY TIME LIMITS CONTAINED IN S. 153, ANY ORDERS TO GIVE EFFECT TO, OR IN CONSEQUENCE TO , FINDINGS OR DIRECTIONS CONTAINED IN AN ORDER PASSED BY THE CIT(A) CAN BE PASSED AT ANY TIME . 7. AS TO WHAT IS THE NATURE OF FINDING OR DIRECTION UNDER S. 153(3), HONBLE SUPREME COURTS FOLLOWING OBSERVATIONS IN THE CASE OF RAJINDER NATH VS. CIT (1979 ) 12 CTR (SC) 201 : (1979) 1 20 ITR 14 (SC) PROVIDE GUIDANCE : 'A FINDING GIVEN IN AN APPEAL, REVISION OR REFERENCE MUST BE A FINDING NECESSARY FOR THE DISPOSAL OF THE CASE, THAT IS IN RESPECT OF A PARTICULAR ASSESSEE AND IN RESPECT OF A PARTICULAR ASSESSM ENT YEAR. TO BE A NECESSARY FINDING, IT MUST BE DIRECTLY INVOLVED IN DISPOSAL OF A CASE. IT IS POSSIBLE THAT IN CERTAIN CASES, IN ORDER TO RENDER A FINDING ON A, A FINDING IN RESPECT OF B IS CALLED FOR.......... THE SAME PRINCIPLE SEEMS TO APPLY WHEN TH E QUESTION UNDER INQUIRY IS WHETHER AN INCOME IS TAXABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION OR FOR ANY OTHER ASSESSMENT YEAR ....' 8. IT IS THUS CLEAR THAT THE CIT(A)S FINDING THAT BAD DEBTS ARE NOT ALLOWABLE IN THE ASST. YR. 2001 - 02 BECAUSE THE SAME IS ALLOWABLE IN THE ASST. YR. 2002 - 03, WHICH IS THE ASSESSMENT YEAR OF ACTUAL WRITE OFF, IS THE KIND OF FINDING WHICH IS COVERED BY THE PROVISIONS OF S. 153(3) OF THE ACT. 9. IN VIEW OF THE FACT THAT THE CIT(A) HAS ADMITTEDLY GIVEN A FINDING TO TH E EFFECT THAT THE BAD DEBT CLAIM IS ADMISSIBLE IN THE YEAR OF ACTUAL WRITE OFF, WHICH IS PREVIOUS YEAR RELEVANT TO THE ASST. YR. 2002 - 03, COUPLED WITH THE FACT THAT THE AO HAS THE POWERS TO DO ASSESSMENT, REASSESSMENT OR RECOMPUTATION ON THE ASSESSEE IN CO NSEQUENCE OF, OR TO GIVE EFFECT TO, SUCH A FINDING CONTAINED IN AN ORDER PASSED BY THE CIT(A), THE AO SHOULD HAVE PASSED THE ORDER RECOMPUTING AND CORRECTLY ASSESSING THE TAXABLE INCOME OF THE ASSESSEE FOR THE ASST. YR. 2002 - 03. BY NOT DOING SO, THE AO HAS NOT GIVEN EFFECT TO THE FINDING CONTAINED IN THE CIT(A)S ORDER FOR THE ASST. YR. 2001 - 02, AND, TO THAT EXTENT, THE AOS INERTIA IS CLEARLY A MISTAKE APPARENT FROM RECORD. THIS INACTION IS CLEARLY CONTRARY TO THE SCHEME OF THE ACT WHICH PERMITS ANY ASSE SSMENT, REASSESSMENTS AND RECOMPUTATION ORDERS TO GIVE EFFECT TO, OR IN CONSEQUENCE OF, ANY FINDINGS OR DIRECTIONS NOT ONLY IN THE CIT(A)S ORDER BUT ALSO ORDERS OF THE TRIBUNAL, HONBLE HIGH COURTS, HONBLE SUPREME COURT AS WELL AS OF 'ANY COURT' IN A PRO CEEDING OTHERWISE THAN IN APPEAL. AN AO, AS INDEED ANY OTHER AUTHORITY IN THE IT ACT, CANNOT TURN TO THE ASSESSEE AND SAY THAT ALTHOUGH HE HAS AUTHORITY TO DO SOMETHING FOR THE GOOD OF THE ASSESSEE, IT IS NOT NECESSARY THAT HE MUST EXERCISE THAT AUTHORITY. THE INACTION OF THE AO, THEREFORE, IS A MISTAKE APPARENT FROM THE RECORD, AND THERE CANNOT BE ANY TWO REASONABLE OPINIONS ON WHETHER OR NOT THE AO SHOULD GIVE EFFECT TO THE FINDING OF THE CIT(A). IT IS ALSO IMPORTANT TO BEAR IN MIND THAT ANY OTHER VIEW OF THE MATTER I.T.A. NO.: 476/DEL/13 AND 817/DEL/13, ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 5 OF 5 WILL RESULT IN A DOUBLE JEOPARDY TO THE ASSESSEE WHICH WILL CONSTITUTE ABSURDITY BESIDES BEING GROSSLY INEQUITABLE AND PATENTLY UNFAIR. AN INTERPRETATION WHICH LEADS TO SUCH ABSURDITIES, AS IS THE SETTLED LAW, IS TO BE AVOIDED [EMPHASIS BY U NDERLINING SUPPLIED BY US] 10. AS NOTED ELSEWHERE IN THE SAID DECISION, ALL THE POWERS OF SOMEONE HOLDING A PUBLIC OFFICE ARE POWERS HELD IN TRUST FOR THE GOOD OF PUBLIC AT LARGE. THERE IS, THEREFORE, NO QUESTION OF DISCRETION TO USE OR NOT TO USE THESE POWERS. IT IS SO FOR THE REASON THAT WHEN A PUBLIC AUTHORITY HAS THE POWERS TO DO SOMETHING, HE HAS A CORRESPONDING DUTY TO EXERCISE THESE POWERS WHEN CIRCUMSTANCES SO WARRANT OR JUSTIFY A LEGAL POSITION WHICH HAS THE APPROVAL OF HO NBLE SUPREME COURT AN D IT WAS IN THIS CONTEXT THAT THE COORDINATE BENCH HAD EXPRESSED THE VIEWS SET OUT ABOVE. THE RELIEF IN THE OTHER ASSESSMENT YEAR IS, THEREFORE, SOMEWHAT CONSEQUENTIAL. IN VIEW OF THIS LEGAL POSITION , AND HAVING NOTED THAT THE ASSESSING OFFICER HAS ACCEPTE D THE CIT(A)S ORDER DELETING SIMILAR DISALLOWANCE FOR THE ASSESSMENT YEAR 2007 - 08 BY NOT CHALLENGING THE SAME IN FURTHER APPEAL, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED DISALLOWANCES OF RS 17,28,832 IN EACH OF THE ASSESSMENT YEARS BEFORE US, INDEE D DESERVES TO BE DELETED. WE , THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCES. 11. IN THE RESULT, THE APPEALS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 18 TH DAY OF NOVEMBER, 2014. SD/XX SD/XX C M GARG PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NEW DELHI, THE 18 TH DAY OF NOVEMBER, 2014 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT (A) (5) DEPARTMENTAL REPRESENTAT IVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL D ELHI BENCHES, NEW DELHI