DCIT, New Delhi V. M/s. Dwarikadhish Spinners Ltd., New Delhi

ITA 4783/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69586 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Assessee Lawyers: J P CHATURVEDI
• Keywords: Additional evidence

Judgement Text

ITA NOS. 4782&4783/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NOS. 4782 & 4783/DEL/2012 A.YRS. : 2004-2005 & 2007-08 DCIT, CIRCLE 10(1), NEW DELHI VS. M/S DWARIKADISH SPINNERS LTD., B-1/A-20, MOHAN COOPERATIVE INDUSTRIAL ESTATE, NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. J.P. CHATURVEDI, CA DEPARTMENT BY : MS. NIDHI SRIVASTAVA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM THESE APPEALS BY THE REVENUE EMANATE OUT OF THE OR DERS OF THE LD. CIT(A) FOR THE ASSESSMENT YEARS 2004-05 & 2007 -08 RESPECTIVELY. 2. THE ISSUE RAISED IS THAT LD. CIT(A) ERRED IN DEL ETING THE ADDITION OF RS. 3,29,54,482/- FOR ASSTT. YEAR 2004-05 AND ADDIT ION OF RS. 15,11,000/- FOR ASSTT. YEAR 2007-08 MADE BY THE ASSE SSING OFFICER ON ACCOUNT OF DISALLOWANCE OF CONTINGENT LIABILITY D EBITED IN PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. 3. SINCE THE ISSUE IS COMMON AND APPEALS WERE HEARD TOGETHER, THESE APPEALS ARE BEING CONSOLIDATED FOR THE SAKE O F CONVENIENCE. SINCE THE FACTS ARE IDENTICAL, WE ARE ADJUDICATING T HIS ISSUE WITH REFERENCE TO THE FIGURES FROM ASSTT. YEAR 2004-05. ITA NOS. 4782&4783/DEL/2012 2 4. IN THIS CASE ASSESSING OFFICER NOTED THAT AS PER AUDIT REPORT FILED ALONGWITH RETURN OF INCOME, IT WAS MENTIONED THAT I N COL. 17 (AMOUNTS DEBITED TO THE PROFIT AND LOSS ACCOUNT) OF AUDIT RE PORT, IN SUB-COLUMN (K) PARTICULARS OF ANY LIABILITY OF CONTINGENT NATU RE, THE AUDITOR HAS MENTIONED AN AMOUNT OF RS. 3,29,54,482/-. ASSESSING OFFICER OBSERVED THAT FURTHER PERUSAL OF COMPUTATION OF INCOME SHEE T, IT WAS SEEN THAT THE ASSESSEE HAS NOT DEDUCTED THE SAME FROM THE LOSS , AS COMPUTED IN THE PROFIT AND LOSS ACCOUNT, WHICH SHALL ACTUALLY B E DEDUCTED FROM THE LOSS SO WORKED OUT IN THE P&L ACCOUNT. IN THIS REG ARD, ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS UNDER:- YOU HAVE DEBITED A SUM OF RS. 329.54 LAC IN P&L A/C AS CONTINGENT LIABILITY WHICH IS NOT ALLOWABLE AND THE SAME SHOULD HAVE BEEN ADDED BACK INTO THE INCOME FOR THE RELEVANT ASSESSMENT YEAR IN WHICH YOU FAILED. PLEASE SHOW CAUSE THAT WHY THE ABOVE SAID ADDITIONS MAY NOT BE MADE INTO YOUR INCOME. 5. ASSESSEE SUBMITTED THE RESPONSE AS UNDER:- 1. THE ABOVE CONTINGENT LIABILITIES OF RS. 329.54 LAC IS NOT DEBITED TO PROFIT AND LOSS ACCOUNT. 2. IT IS ONLY APPEARING IN THE NOTES FORMING PART OF THE ACCOUNTS, WHICH IS REQUIRED FOR DISCLOSURE PURPOSE ONLY. 6. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE DID NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CONTENTION. ITA NOS. 4782&4783/DEL/2012 3 HENCE, HE REJECTED THE REPLY OF THE ASSESSEE. HE OB SERVED THAT AUDITORS HIMSELF HAS MENTIONED IN THE AUDIT REPORT AN AMOUNT OF RS. 3,29,54,482/- AS CONTINGENT LIABILITY. SINCE THE LIABILITIES WHICH ARE CONTINGENT IN NATURE ARE NOT ALLOWABLE AS PER I.T. ACT. ASSESSING OFFICER ADDED THE SAME TO THE TOTAL INCOME OF THE A SSESSEE. 7. UPON ASSESSEES APPEAL LD. CIT(A) DELETED THE AD DITION AS UNDER:- I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT, OBSERVATION OF THE ASSESSING OFFICER AND THE PAPER BOOK FILED BY THE APPELLANT IN THE FORM OF AUDIT REPORT. ONGOING THROUGH THE PROFIT AND LOSS ACCOUNT OF THE APPELLAN T FOR THE PERIOD 31ST MARCH 2004, IT IS SEEN THAT NO SUCH LIAB ILITY HAS BEEN DEBITED BY THE APPELLANT IN ITS PROFIT AND LOS S ACCOUNT. I HAVE ALSO EXAMINED THE SCHEDULE 13, 14 AND 15 OF THE BALANCE SHEET WHEREIN DETAIIS OF THE ITEM WISE EXPEN SES IS GIVEN. IT IS SEEN THAT NO SUCH LIABILITY IS APPEARI NG IN THESE EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT. THE CO NTINGENT LIABILITY HAS BEEN MENTIONED IN THE NOTES FORMING PAR T OF THE ACCOUNTS WHICH IS REQUIRED FOR DISCLOSURE PURPOSE O NLY. IT IS FURTHER MENTIONED THAT IN 3CD REPORT AT COLUMN 17(K) , THE AUDITOR SH. KAPIL AGARWAL HAS INADVERTENTLY MENTION ED RS. 329.54 LACS AS CONTINGENT LIABILITIES VIDE HIS TAX AUDIT REPORT DATED 20.10.2004. HOWEVER, IT IS MATTER OF RECORD THAT THIS LIABILITY HAS NOT BEEN DEBITED TO THE P&L ACCOUNT. T HE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADDING THE C ONTINGENT LIABILITY OF RS. 329.54 LACS WITHOUT VERIFYING THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF THE APPELLANT COMPANY F OR THE ITA NOS. 4782&4783/DEL/2012 4 PERIOD 31ST MARCH 2004. HENCE, THE CONTINGENT LIABI LITY ADDED BY THE ASSESSING OFFICER IS DELETED. 8. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT LD. CIT(A) HAS GIVEN A FINDING THAT THE I MPUGNED AMOUNT WAS NOT SHOWN AS LIABILITY IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. NO SUCH AMOUNT/LIABILITY HAS BEEN DEBITED BY THE ASSESSEE I N ITS PROFIT AND LOSS ACCOUNT. IN SUCH SITUATION, THERE IS NO QUES TION OF ANY DISALLOWANCE IN THIS REGARD. THE CONTINGENT LIABIL ITY HAS BEEN MENTIONED IN THE NOTES OF ACCOUNTS WHICH IS REQUIRED ONLY FOR DISCLOSURE PURPOSES. 9.1 FURTHERMORE, IT HAS BEEN MENTIONED BY THE LD. CI T(A) THAT AUDITORS HAS INADVERTENTLY MENTIONED AS RS. 329.54 L ACS AS CONTINGENT LIABILITIES IN THE TAX AUDIT REPORT DATED 20.10.200 4. HOWEVER, IT IS A MATTER OF RECORD THAT THIS LIABILITY HAS NOT BEEN DE BITED TO THE PROFIT AND LOSS ACCOUNT. UNDER SUCH SITUATION WE AGREE WI TH THE LD. CIT(A) THAT ASSESSING OFFICER HAS NOT JUSTIFIED IN ADDING THE CONTINGENT LIABILITY OF RS. 329.54 LACS WITHOUT VERIFYING THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE COMPANY FOR THE CONCER NED PERIOD. ASSESSING OFFICER HAS FAILED TO COMPREHEND THE ACC OUNTING TREATMENT IN THIS REGARD. UNDER THE CIRCUMSTANCES, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) THAT THE CONTINGENT LIA BILITY ADDED BY THE ASSESSING OFFICER IS LIABLE TO BE DELETED. 10. AS REGARDS THE GROUND BY THE REVENUE THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENCE I N THE FORM OF CLARIFICATION FROM THE AUDITORS WITHOUT SEEKING REMA ND REPORT FROM THE AO. WE FIND THAT THE SAME IS NOT RELEVANT. WE FIN D THAT THE ADDITION ITA NOS. 4782&4783/DEL/2012 5 MADE BY THE AO IS LIABLE TO BE DELETED SIMPLY ON THE BASIS OF THAT FACT THAT AMOUNT INVOLVED WAS NOT DEBITED IN THE PROFIT AND LOSS ACCOUNT. THE CLARIFICATION BY THE AUDITORS ONLY CLARIFIED TH E MISTAKE ON THE PART OF THE AUDITORS. HENCE, IN OUR CONSIDERED OPINIO N, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDI TION. HENCE, WE UPHOLD THE SAME. 11. IN THE RESULT, BOTH THE REVENUES APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/12/2013. SD/- SD/- [ [[ [I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 06/12/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY ASSISTANT REGISTRAR, ITAT, DELHI. ITA NOS. 4782&4783/DEL/2012 6