DCIT, Bangalore V. M/s Shriram Chita (Karnataka)(P) Ltd., Bangalore

ITA 499/BANG/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0649 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-02-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIIIDR
• Keywords: Bad and doubtful debts; Assessment record; Reassessment proceedings
• Section: 143(3); 147; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NOS.354 TO 356/BANG/2011 ASSESSMENT YEARS : 2004-05, 2006-07 & 2007-08 SHRIRAM CHITS (KARNATAKA) PVT. LTD., 259/31, 1 ST FLOOR, 10 TH CROSS STREET, WILSON GARDEN, BANGALORE. PAN : AACCS 2078R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 12(3), BANGALORE. APPELLANT RESPONDENT ITA NOS.499 TO 500/BANG/2011 ASSESSMENT YEARS : 2004-05 & 2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(3), BANGALORE. VS. SHRIRAM CHITS (KARNATAKA) PVT. LTD., 259/31, 1 ST FLOOR, 10 TH CROSS STREET, WILSON GARDEN, BANGALORE. PAN : AACCS 2078R APPELLANT RESPONDENT ASSESSEE BY : SHRI S. ANANTHAN, C.A. REVENUE BY : SHRI ETWA MUNDA, CIT-III(DR) DATE OF HEARING : 13.02.2013 DATE OF PRONOUNCEMENT : 22.02.2013 ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 2 OF 14 O R D E R PER BENCH: ITA 354 & 499/BANG/2011 ITA 354/B/11 IS AN APPEAL BY THE ASSESSEE, WHILE ITA 499/B/11 IS AN APPEAL BY THE REVENUE. BOTH THESE APPEALS ARE DIRE CTED AGAINST THE ORDER DATED 29.12.2010 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSMENT YEAR 2004-05. WE WILL FIRST TAKE UP FOR CONSIDERAT ION THE APPEAL BY THE ASSESSEE. ITA 354/B/2011 2. IN THE CONCISE GROUNDS 2 & 3, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(APPEALS) WHEREBY THE CIT(APPEALS) UPHELD THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT. THESE GROUNDS READ AS FOLLOWS:- 2. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) FAILED TO APPRECIATE THE FACT THAT THE RE-OPENING O F THE ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961 IS BAD IN LAW. (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) FAILED TO APPRECIATE THE FACT THAT THERE CANNOT BE ANY VAL ID RE-OPENING OF THE ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961 WHEN NO ASSESSMENT ORDER WAS PASSED U/S 143(3) AFTER SERVIC E OF NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 AND AFTER HEARIN G. (C) THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) FAILED TO APPRECIATE THE FACT THAT THERE CANNOT BE DROPPIN G OF PROCEEDINGS AFTER SERVICE OF NOTICE U/S 143(2) OF T HE INCOME TAX ACT, 1961 AND AFTER HEARING. ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 3 OF 14 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) FAILED TO APPRECIATE THE FACT THAT THE ASSESSMENT MADE U/S 14 3(3) R.W.S.147 IS BAD IN LAW SINCE NO NOTICE U/S 143(2) WAS SERVED AFTER THE NOTICE U/S.148 AND RETURN PURSUANT TO THAT NOTICE B UT BEFORE COMPLETION OF THE ASSESSMENT U/S. 143 (3) R.W.S. 14 7. 3. THE FACTS MATERIAL FOR ADJUDICATION OF THE AFORE SAID GROUNDS ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF ORGANIZING CHITS. FOR THE A.Y. 2004-05, THE ASSESS EE FILED RETURN OF INCOME ON 30.10.2004 DECLARING A LOSS OF RS.4,29,30,878. RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ON 28.02.2005. THE CASE WAS TAKEN UP FOR SCRUTINY ASSESSMENT AND NOTICE U/S. 143(2) OF THE ACT WAS IS SUED ON 14.06.2005. THE SCRUTINY ASSESSMENT PROCEEDINGS WERE, HOWEVER, NOT FURTHER PROSECUTED AND IT WAS DROPPED. ON 25.03.2008, NOTI CE U/S. 148 WAS ISSUED BY THE AO FOR MAKING AN ASSESSMENT U/S. 147 OF THE ACT. THE REASONS RECORDED BY THE AO BEFORE ISSUE OF NOTICE U/S. 148 WAS ON THE GROUND THAT FOREMANS DIVIDEND WHICH WAS CLAIMED AS EXEMPT ON T HE BASIS OF JUDICIAL DECISIONS WAS NOT APPLICABLE TO THE FACTS OF THE AS SESSEES CASE. ANOTHER REASON GIVEN WAS LOSS ON OWN BIDDING CLAIMED BY THE ASSESSEE WAS NOT A LOSS PERTAINING TO THE PREVIOUS YEAR RELEVANT TO AS SESSMENT YEAR 2004-05. THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDI NGS WAS UPHELD BY THE CIT(A) FOR THE A.Y. 2003-04. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE LAID EMPHASIS ON GROUND NO.3 IN WHICH THE ASSESSEE HAS ALLEGED THAT AFTER T HE ISSUE OF NOTICE DATED 25.03.2008 U/S. 148 OF THE ACT, THE ASSESSEE FILED A LETTER DATED 30.11.2009 REQUESTING THE AO TO TREAT THE ORIGINAL RETURN AS R ETURNED FILED IN RESPONSE ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 4 OF 14 TO NOTICE U/S. 148 OF THE ACT. IT WAS FURTHER SUB MITTED THAT THE AO DID NOT ISSUE ANY NOTICE U/S. 143(2) OF THE ACT THEREAFTER AND COMPLETED THE ASSESSMENT ON 17.12.2009. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUMOON, 321 ITR 362 (SC) , WHEREIN IT WAS HELD THAT COMPLETION OF ASSESSMENT WITHOUT ISSUE OF NOTICE U/S. 143(2) IS A DEFECT WHICH IS NOT CURABLE . IT WAS FURTHER HELD THAT AN ORDER OF ASSESSMENT WITHOUT ISSUE OF NOTICE U/S. 143(2) OF THE ACT IS INVALID. IT WAS POINTED OUT THAT THE PROVISIONS OF SECTION 143(2) ARE EQUALLY APPLICABLE TO A RETURN IN RESPONSE TO NOTICE U/S. 1 48 OF THE ACT. IT WAS THEREFORE SUBMITTED BY THE LD. COUNSEL FOR THE ASSE SSEE THAT THE PRESENT ASSESSMENT PROCEEDINGS COMPLETED WITHOUT ISSUE OF N OTICE U/S. 143(2) OF THE ACT IS INVALID AND THEREFORE SHOULD BE ANNULLED . 5. SINCE THIS ISSUE WAS RAISED FOR THE FIRST TIME B EFORE THE TRIBUNAL, ASSESSMENT RECORDS WERE CALLED FOR AND PERUSED. ON PERUSAL OF THE ASSESSMENT RECORDS, IT IS NOTICED THAT AFTER THE IS SUE OF NOTICE U/S. 148 OF THE ACT AND AFTER THE ASSESSEES LETTER DATED 30.11 .09 REQUESTING THE AO TO TREAT THE ORIGINAL RETURN AS RETURN FILED IN RESPON SE TO NOTICE U/S. 148 OF THE ACT, THE AO HAS NOT ISSUED ANY NOTICE U/S. 143(2) O F THE ACT. IN FACT, THERE IS A NOTICE DATED 11.07.2008 U/S. 143(2) OF THE ACT BOTH THE ORIGINAL AND A COPY ON THE AOS RECORD, WHICH IS UNSIGNED. APART FROM THIS, THERE IS NO EVIDENCE TO SHOW THAT ANY NOTICE U/S. 143(2) WAS EV ER ISSUED OR SERVED ON THE ASSESSEE. 6. THE LD. DR COULD NOT CONTROVERT THE FACTUAL POSI TION AS IT EMANATES FROM THE RECORDS OF ASSESSMENT. IN LIGHT OF THE AB OVE, WE ARE OF THE VIEW ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 5 OF 14 THAT THE PRESENT ASSESSMENT PROCEEDINGS COMPLETED W ITHOUT ISSUE OF NOTICE U/S. 143(2) OF THE ACT ARE INVALID AND THEREFORE TH E ORDER OF ASSESSMENT DESERVES TO BE ANNULLED, AS LAID DOWN BY THE HONBL E SUPREME COURT IN THE CASE OF HOTEL BLUMOON (SUPRA) . WE ARE ALSO OF THE VIEW THAT THE DEFECT IN THE PROCEEDINGS CANNOT BE SAVED BY THE PROVISION S OF SECTION 292BB OF THE ACT FOR THE REASON THAT THE AFORESAID PROVISION WHICH WAS INSERTED BY THE FINANCE ACT, 2008 W.E.F. 1.4.2008 WILL APPLY ON LY FROM THE ASSESSMENT YEAR 2008-09. IN FACT, IT HAS BEEN HELD BY THE HON BLE SPECIAL BENCH OF THE ITAT IN THE CASE OF KUBER TOBACCO PRODUCTS PVT. LTD. V. DCIT, [2009] 28 SOT 292 (DEL) (SB) AS WELL AS THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. BUHARI LAL AGRAWAL, 346 ITR 67 (ALL) AND THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. CEBON INDIA LTD. [2009] 184 TAXMANN 290 (P&H) THAT THE PROVISIONS OF SECTION 292BB ARE PROSPECTIVE AND CANNOT APPLY FOR ASSESSMENT YEARS PRIOR TO A.Y. 2008-09. MOREOVER, THE PROVISIONS OF SEC.292BB CAN BE PRESSED INTO SERVICE ONLY WHEN THERE IS EVIDENCE OF NOTICE HAVING BEEN ISSUED. THERE IS NO EVIDENCE ON RECORD TO SHOW THA T NOTICE U/S.143(2) OF THE ACT WAS EVER ISSUED BY THE AO. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ORDER OF ASSESSMENT PASSED BY THE AO IN THE PRESENT CASE IS INVALID AND IS LIABLE TO BE ANNULLED AND IS HEREBY ANNULLED. GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. 7. IN VIEW OF THE DECISION ON GROUND NO.3, THE OTHE R GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL AND THE GROUNDS RAISED B Y THE REVENUE IN ITS APPEAL DO NOT REQUIRE ANY CONSIDERATION. ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 6 OF 14 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IN ITA NO.354/BANG/2011 IS ALLOWED, WHILE THE APPEAL IN ITA NO.499 BY THE R EVENUE IS DISMISSED. ITA 355 & 500/BANG/2011 9. ITA 355/B/11 IS AN APPEAL BY THE ASSESSEE, WHILE ITA 500/B/11 IS AN APPEAL BY THE REVENUE. BOTH THESE APPEALS ARE DIREC TED AGAINST THE ORDER DATED 30.12.2010 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO A.Y. 2006- 07. WE SHALL FIRST TAKE UP FOR CONSIDERATION THE A SSESSEES APPEAL. ITA NO.355/B/11 10. CONCISE GROUND NO.1 RAISED BY THE ASSESSEE IS G ENERAL IN NATURE AND CALLS FOR NO ADJUDICATION. CONCISE GROUND NO.2 RAISED BY THE ASSESSEE READS AS FOLLOWS:- 2. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN SUSTAINING THE ADDITION ON ACCOUNT OF FOREMANS DIVIDEND AMOUNTING TO RS. 82,49,301/- (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THE FACT THAT THE FOREMANS DIVIDEND IS NOT TAXABLE ON ACCOUNT OF MUTUALITY. 11. AT THE TIME OF HEARING, IT WAS FAIRLY CONCEDED BY HE LD. COUNSEL FOR THE ASSESSEE THAT THIS ISSUE HAS ALREADY BEEN DECID ED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.750, 751, 749 & 748/B ANG/1998 DATED 08.04.2003. THE TRIBUNAL IN THE AFORESAID DECISION HELD THAT PRINCIPLE OF MUTUALITY WILL NOT APPLY IN RESPECT OF FOREMANS DI VIDEND RECEIVED BY THE ASSESSEE AND THEREFORE THE SAME WOULD BE TAXABLE. RESPECTFULLY FOLLOWING ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 7 OF 14 THE AFORESAID DECISION OF THE TRIBUNAL, WE UPHOLD T HE ORDER OF THE CIT(A) AND DISMISS GROUND NO.2 RAISED BY THE ASSESSEE. 12. CONCISE GROUND NO.3 RAISED BY THE ASSESSEE READ S AS FOLLOWS:- 3. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) ERRED IN SUSTAINING THE DISALLOWANCE U/S 40(A)(IA) OF INC OME TAX ACT, 1961 OF RS. 89,92,562/- DEBITED UNDER THE HEAD LEGA L CHARGES. (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THE FACT THAT THE AMOUNT OF RS.89,92,562 /- DID NOT REPRESENT FEES PAID TO LAWYERS BUT EXPENSES INCURRE D TOWARDS COURT FEES, CONVEYANCE AND OTHER ITEMS AND THERE IS NO REQUIREMENT TO EFFECT TDS ON SUCH EXPENSES. 13. THE ASSESSEE IN THE COURSE OF ITS CHIT BUSINESS WOULD COME ACROSS CASES WHERE SUBSCRIBERS DO NOT PAY THE CHIT AMOUNT. LEGAL PROCEEDINGS USED TO BE INITIATED AGAINST THE DEFAULTING SUBSCRI BERS IN A COURT OF LAW. IN RESPECT OF THOSE LEGAL PROCEEDINGS, THE ASSESSEE US ED TO INCUR EXPENSES IN THE FORM OF COUNSEL FEE AS WELL AS EXPENSES LIKE CO URT FEE AND OTHER FEES IN CONNECTION WITH THE LEGAL PROCEEDINGS. THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEEN DEDUCTING TAX AT SOURCE IN RESPEC T OF THE LEGAL FEES THAT IS PAID TO THE ADVOCATES. AS FAR AS THE EXPENSES L IKE COURT FEE, PROCESS FEE, NOTICE FEE, ETC. ARE CONCERNED, THE ASSESSEE T OOK THE STAND THAT THERE WAS NO PAYMENT WITHIN THE MEANING OF SECTION 194J I .E., FEES FOR PROFESSIONAL SERVICES AND THAT SUCH PAYMENT WAS MER ELY REIMBURSEMENT OF EXPENSES INCURRED BY THE ADVOCATE ON BEHALF OF THE ASSESSEE AND THEREFORE NO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT COULD BE MADE. THE ABOVE SUBMISSION OF THE ASSESSEE DID NOT FIND FAVOU R WITH THE AO AND THE AO MADE AN ADDITION OF RS.89,92,562 U/S. 40(A)(IA) OF THE ACT. ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 8 OF 14 14. THE CIT(A) ON THE ABOVE ISSUE HELD AS FOLLOWS:- 9.0. THE LAST ISSUE THAT REMAINS TO BE ADJUDICATE D IS THE CORRECTNESS OF THE DISALLOWANCE OF LEGAL CHARGES AT RS.89,92,552/- THE LEARNED COUNSEL SUBMITTED BEFORE ME THAT ADDITI ON OF RS.89,92,552/- IS THE SUM TOTAL OF TWO SUMS REPRESE NTING RS.47,42,730/- AND RS.41,92,832/-. THE POINT MADE B Y THE LEARNED COUNSEL IS THAT OUT OF THE AMOUNT OF RS.47, 42,730/- EXCEPT A SUM OF RS.5,52,630/- THE REST REPRESENT DIRECT EX PENDITURE INCURRED AT THE ADMINISTRATIVE OFFICE, BANGALORE AN D VARIOUS BRANCHES LOCATED IN KARNATAKA AND NOT EVEN A RUPEE REPRESENT PROFESSIONAL FEES PAID TO ADVOCATES. THE DETAILS AR E INCLUDED IN THE PAPER BOOK VIDE PAGE NO.60 TO 65. EVEN IN RESPE CT OF RS.5,52,630/- IT REPRESENT SUM TOTAL OF PROFESSIONA L FEES AND DIRECT EXPENDITURE. 9.1. SIMILARLY THE SUM OF RS.41 ,92,832/- REPRESEN T PARTLY DIRECT AND PETTY EXPENSES INCURRED AT THE ADMINISTRATIVE O FFICE, BANGALORE. IT IS THE SUBMISSION OF THE LEARNED COUN SEL THAT THESE EXPENSES REPRESENT THE REIMBURSEMENT OF EXPENDITURE LIKE BATA AND COURT FEES. THE DETAILS WERE MADE AVAILABLE IN THE BILL ITSELF AND NO DISALLOWANCE UNDER LAW CAN BE MADE ON THE REIMBURSEMENT OF EXPENDITURE AS IT FALLS OUT SIDE T HE TDS PROVISIONS. REGARDING THE FEES PORTION THE LEARNED COUNSEL SUBMITTED THAT IN EACH OF THE CASE WHEREIN THE AMOU NT EXCEEDED THE THRESHOLD LIMIT TDS WAS DEDUCTED AND REMITTED T O GOVERNMENT IN TIME. THE DETAILS ARE INCLUDED AT PAG ES 66 TO 75 AND 76 TO 78 OF PAPER BOOK. 9.2. I HAVE MADE A RANDOM SELECTION AND DIRECTED TH E APPELLANT COMPANY TO PRODUCE THE ORIGINAL AND CONTEMPORANEOUS RECORDS EVIDENCING REIMBURSEMENT OF EXPENDITURE, PAYMENT OF PROFESSIONAL FEES AND DEDUCTION OF TDS WHEREVER WAR RANTED. THE APPELLANT PRODUCED RELEVANT DOCUMENTS. I HAVE GONE THROUGH THEM. I AM OF THE OPINION THAT THE CONSOLIDATED BIL L CAN NOT BE BIFURCATED AS SUGGESTED BY THE ARS AND TDS PROVISIO NS ARE APPLICABLE ON THE COMPOSITE BILL PAID UNDER THE HEA D LEGAL AND PROFESSIONAL CHARGES. IN THE CIRCUMSTANCES, THE AD DITION TO THE EXTENT OF RS.89,92,562/- MADE BY THE AO IS SUSTAINE D. 15. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS RAISED GROUND NO.3 BEFORE THE TRIBUNAL. ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 9 OF 14 16. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE CONCL USION OF THE CIT(A) IS THAT THE BIFURCATION OF THE PAYMENTS AS ATTRIBUT ABLE TO THE LEGAL FEES AND REIMBURSEMENT OF EXPENSES, HAS BEEN DONE BY THE ASS ESSEE HIMSELF AND THEREFORE THE SAME CANNOT BE ACCEPTED AS A VALID BA SIS. ON THE ABOVE FINDING OF THE CIT(A), THE ASSESSEE HAS FILED COPY OF THE VOUCHERS AND BILLS RAISED BY THE ADVOCATE WHICH ARE AT PAGES 1 TO 122 OF THE PAPERBOOK FILED BY THE ASSESSEE. AS A TEST CASE, WE WILL EXAMINE T HE PAYMENTS MADE BY THE ASSESSEE TO ONE, M. KUCHELA, ADVOCATE. THE BIF URCATION OF THE PROFESSIONAL CHARGES AND REIMBURSEMENT OF EXPENSES IS RS.5,707 AND RS.3,981 RESPECTIVELY. A COPY OF THE BILL RAISED B Y MR. KUCHELA IS AT PAGE 12 OF THE PAPERBOOK AND PERUSAL OF THE SAID LETTER ALONG WITH ANNEXURE AT PAGE 13 OF THE PAPERBOOK GIVING DETAILS OF EXPENSES OF RS.3,981 MAKES IT CLEAR THAT IT IS NOTHING BUT EXPENSES RELATING TO F ILING EXECUTION PETITIONS AGAINST 11 DIFFERENT PARTIES. THE BREAK UP OF THE EXPENSES IS TYPING CHARGES, PROCESS FEE AND RPAD CHARGES. THE VERY SA ME ADVOCATE HAS RAISED BILL FOR PROFESSIONAL FEES FOR RS.5,708 AND THE DETAILS OF THE SAID PROFESSIONAL FEES IS AT PAGE 15 OF THE PAPERBOOK. THE BREAK UP SHOWS THAT THE PROFESSIONAL FEE WAS CHARGED BY THE ADVOCATE FO R FILING EXECUTION PETITION AGAINST 11 PERSONS. IT IS THUS CLEAR THAT THE BREAK UP OF THE PAYMENT OF PROFESSIONAL FEES AND THE PAYMENT OF REI MBURSEMENT OF EXPENSES HAS BEEN DONE BY THE ADVOCATE CONCERNED AN D THE FINDINGS OF THE CIT(A) TO THE CONTRARY ARE NOT CORRECT. WE ARE THEREFORE OF THE VIEW THAT SUM OF RS.89,92,562 WAS PURELY REIMBURSEMENT OF EXP ENSES AND THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DE DUCT TAX AT SOURCE IN RESPECT OF REIMBURSEMENT OF EXPENSES. IN THIS REG ARD, THE LD. COUNSEL HAS ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 10 OF 14 PLACED RELIANCE ON THE DECISION OF THE HONBLE DELH I HIGH COURT IN THE CASE OF CIT V. EXPEDITORS INTERNATIONAL (INDIA) (P.) LTD. ( 2012) 24 TAXMAN.COM 76 (DEL) , WHEREIN THE HONBLE DELHI HIGH COURT HAS HELD THAT THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURC E WHEN PAYMENTS WERE MADE TOWARDS REIMBURSEMENT OF EXPENSES. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE AO U/S. 40(A )(IA) OF THE ACT DESERVES TO BE DELETED. GROUND NO.3 BY THE ASSESSEE IS ACCO RDINGLY ALLOWED. 17. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. ITA 500/B/11 18. IN THIS APPEAL BY THE REVENUE FOR THE A.Y. 2006 -07, GROUNDS NO.1 & 4 ARE GENERAL IN NATURE AND DO NOT CALL FOR ADJUDIC ATION. GROUNDS OF APPEAL NO.2 & 3 RAISED BY THE REVENUE READ AS FOLLOWS:- 2. THE LEARNED CIT (A) ERRED IN ALLOWING BAD DEBT S WRITTEN OFF OF RS.2,23,56,022/- WITHOUT APPRECIATING THE FA CT THAT THE ASSESSEE FAILED TO PROVIDE ANY DETAILS OF CASE WISE DEBTS WRITTEN OFF DESPITE BEING GIVEN SUFFICIENT OPPORTUNITIES DU RING ASSESSMENT PROCEEDINGS. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND TH AT OF THE ASSESSING OFFICER MAY BE RESTORED. 19. THE ASSESSEE CLAIMED A SUM OF RS.8,25,37,212 AS BAD DEBTS WRITTEN OFF. THE AO CALLED FOR THE DETAILS OF THE DEBTS WR ITTEN OFF AS BAD DEBTS; ALSO THE REASON AS TO WHY THE ASSESSEE CONSIDERED THOSE DEBTS AS BAD DEBTS AND THE EFFORTS MADE BY THE ASSESSEE TO RECOVER SUC H AMOUNTS. IT IS NOT IN ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 11 OF 14 DISPUTE THAT THE ASSESSEE FILED THOSE DETAILS VIDE LETTER DATED 12.12.2008 GIVING THE BREAK UP OF BAD DEBTS. ON SCRUTINY OF T HE DETAILS, THE AO FOUND THAT IN RESPECT OF DEBTS TOTALING TO RS.5,08,19,083 , THE ASSESSEE HAD FILED SUITS FOR RECOVERY OF AMOUNTS AND IN RESPECT OF ANO THER SUM OF RS.93,61,907, THE ASSESSEE HAD INITIATED ARBITRATIO N PROCEEDINGS. THE AO ACCEPTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS IN RESPECT OF THE AFORESAID AMOUNTS. IN THE RESPEC T OF THE BALANCE AMOUNT OF RS.2,23,56,022, THE AO FOUND THAT THE ASSESSEE H AD NOT FILED ANY LEGAL CASES BECAUSE THE SUBSCRIBERS AND SURETIES ADDRESSE S WERE INCOMPLETE OR HAD CHANGED. IN VIEW OF THE ABOVE SCENARIO, THE AO WAS OF THE VIEW THAT THE ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF BA D DEBTS COULD NOT BE ENTERTAINED AND HE ACCORDINGLY MADE AN ADDITION OF RS.2,23,56,022 TO THE TOTAL INCOME OF THE ASSESSEE. 20. ON APPEAL BY THE ASSESSEE, THE CIT(A) DELETED T HE ADDITION MADE BY THE AO FOR THE FOLLOWING REASONS:- 7.2. I HAVE CONSIDERED THE ISSUE IN THE LIGHT OF THE REMARKS MADE BY THE ASSESSING OFFICER AND THE REJOINDER OF THE APPELLANT AS BROUGHT OUT BY THE LEARNED COUNSEL. I HAVE ALSO PER USED ITATS ORDER AND THE ORDERS OF THE HIGH COURT. I HAVE ALSO GONE THROUGH THE DECISION OF THE HONBLE SUPREME COURT IN TRF LI MITED VS CIT REPORTED IN 323 ITR 397(SC). I AM IN AGREEMENT WITH LEARNED COUNSELS SUBMISSION IN THIS BEHALF. IN VIE W OF SUPREME COURTS DECISION, IT IS ENOUGH THAT BAD DEBTS WRITT EN OFF IN THE BOOKS OF ACCOUNTS. THERE IS NO DISPUTE IN THIS CASE AND THE ENTIRE AMOUNT OF RS.8,25,37,212/- WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS. IN THESE CIRCUMSTANCES, I HEREBY DELETE T HE ADDITION UNDER THE HEAD BAD DEBTS AMOUNTING TO RS.2,23,56,02 2/-. THE APPELLANT SUCCEEDS ON THIS POINT. ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 12 OF 14 21. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 22. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR WHO LAID EMPHASIS ON GROUND NO.2 RAISED BY THE REVENUE IN ITS APPEAL. W E HAVE PERUSED THE SAID GROUND WHICH ALLEGES THAT THE ASSESSEE FAILED TO GIVE THE DETAILS OF BAD DEBTS WHICH ARE IN DISPUTE IN THE REVENUES APPEAL. WE ARE OF THE VIEW THAT THE GROUND RAISED IS PURELY MISCONCEIVED. PERUSAL OF THE ORDER OF THE AO SHOWS THAT THE ASSESSEE HAD GIVEN ALL THE DETAILS A ND THE REASONS FOR NOT FILING LEGAL PROCEEDINGS AGAINST THE DEFAULTING SUB SCRIBERS AND SURETIES WERE ALSO EXPLAINED BEFORE THE AO. IN ANY EVENT, I N THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TRF LTD. (SUPRA), WE ARE OF THE VIEW THAT THE WRITE OFF HAS TO BE ALLOWE D AND IT WAS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBTS WHICH IS WRITTEN OFF AS BAD IS IRRECOVERABLE. WE THEREFORE FIND NO MERIT IN THE A PPEAL BY THE REVENUE AND THE SAME IS DISMISSED. ITA 356/BANG/2011 ASSESSEES APPEAL A.Y. 2007-08 23. GROUND 1 OF THE CONCISE GROUNDS OF APPEAL IS GE NERAL IN NATURE AND CALLS FOR NO ADJUDICATION. CONCISE GROUND NO.2 IS IDENTICAL TO GROUND NO.2 RAISED BY THE ASSESSEE IN ITA NO.355/BANG/2011 AND FOR THE REASONS STATED WHILE DECIDING IDENTICAL GROUND OF APPEAL IN ITA NO.355/BANG/2011, THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISM ISSED. ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 13 OF 14 24. GROUND NO.3 RAISED BY THE ASSESSEE READS AS FOL LOWS:- 3. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN SUSTAINING THE DISALLOWANCE U/S 40(A)(IA) OF INC OME TAX ACT, 1961 OF RS. 9,55,237/- DEBITED UNDER THE HEAD LEGAL CHARGES. (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) FAILED TO APPRECIATE THE FACT THAT THE AMOUNT OF RS .9,55,237/- DID NOT REPRESENT FEES PAID TO LAWYERS BUT EXPENSES INC URRED TOWARDS COURT FEES, CONVEYANCE AND OTHER ITEMS AND THERE IS NO REQUIREMENT TO EFFECT TDS ON SUCH EXPENSES. (C) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) FAILED TO APPRECIATE THE FACT THAT THE DISALLOWANCE HAS BEEN MADE BASED ON SURMISES & CONJECTURES. (D) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) FAILED TO APPRECIATE THE FACT THAT THE DISALLOWANCE WAS NOT MADE BASED ON ANY SPECIFIC INSTANCE OF PAYMENT BUT ON AD HOC BASIS WHICH IS NOT TENABLE IN LAW. 25. THIS GROUND OF APPEAL IS IDENTICAL TO GROUND NO .3 RAISED IN ASSESSEES APPEAL IN ITA NO.355/BANG/2011 FOR THE A .Y. 2006-07. FOR THE REASONS GIVEN THEREIN WHILE DECIDING THE SAID GROUN D, WE ARE OF THE VIEW THAT THE ADDITION SUSTAINED BY THE CIT(A) DESERVES TO BE DELETED. GROUND NO.3 IS ACCORDINGLY ALLOWED. THE APPEAL BY THE ASS ESSEE IS PARTLY ALLOWED. 26. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NO.354/BANG/2011 IS ALLOWED ; ITA NOS.355 & 356/BANG/2011 IS PARTLY ALLOWED ; AND THE APPEALS OF THE REVENUE IN ITA NO.499/BANG/2011 AND 500/BANG/2011 ARE DISMISSED . ITA NOS.354 TO 356 & 499 TO 500/BANG/2011 PAGE 14 OF 14 PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF FEBRUARY, 2013. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 22 ND FEBRUARY, 2013. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.