ZEUS NUMERIX P.LTD, PUNE V. DCIT CIR 10(3), MUMBAI

ITA 5045/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3843 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 04-08-2014
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Assessee Lawyers: DR JAYANT M RANADE
• Keywords: Business expenditure; Bad and doubtful debts; Revised return
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO. 5045/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) ZEUS NUMERIX PRIVATE LIMITED, P - 14, 12 IT CAMPUS RAJIV GANDHI INFOTECH PARK, PHASE - 1 HINJEWADI, PUNE 411057. / VS. DCIT - 10(3), MUMBAI. ./ PAN : AAACZ2163J ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : DR. JAYANT M. RANADE / RESPONDENT BY : SHRI ASGHAR ZAIN, VP, DR / DATE OF HEARING : 17 .02.2016 / DATE OF PRONOUNCEMENT : 17 .02.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 4.8.2014 IS AGAINST THE ORDER OF THE CIT (A) - 22, MUMBAI DATED 7.4.2014 FOR THE ASSESSMENT YEAR 2010 - 2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. THE LD CIT (A) ERRED IN OBSERVING THAT THE ASSESSEE FILED REVISED RETURN INCOME AFTER THE ISSUE OF NOTICE U/S 143(2) AND AFTER DISCUSSION WITH ASSESSING OFFICER. 2. THE LD CIT (A) ERRED IN CONFIRMING DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 1,90,000/ - IN RESPECT OF BAD DEBTS ON ACCOUNT OF NON - SUBMI SSION OF LEDGER EXTRACT, PROFIT AND LOSS ACCOUNT FOR FINANCIAL YEAR 2007 - 2008, COPY OF THE INVOICE RAISED, COPY OF EXTRACT FOR SUPPLY OF SOFTWARE EVEN AFTER THE SAID DOCUMENTS WERE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LD CIT (A) ERRED IN NOT ALLOWING THE EXPENSES WRITTEN OFF IN THE BOOKS OF ACCOUNT AS BUSINESS EXPENDITURE IF NOT AS BAD DEBTS. 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUND AND MENTIONED THAT GROUND NO.1 IS NOT PRESSED. ACCORDINGLY, THE SAID GROUND IS DISMISSED AS NOT PRESSED. 2 3. REFERRING TO GROUND NO.2, LD COUNSEL FOR THE ASSESSEE NARRATED THAT THIS THE CASE WHERE THE ASSESSEE SOLD A PRODUCT AND RECEIVED SUM OF RS. 1.9 LAKHS AS ADVANCE. CONSIDERIN G THE LIKELY PROBLEMS WITH THE QUALITY OF THE SAID PRODUCT, ASSESSEE HAD TO GIVE A BANK GUARANTEE AGAINST THE SAID AMOUNT OF RS. 1.9 LAKHS FOR REFUNDING, IN CASE OF QUALITY DEFECTS . ON THE FACTS OF THE CASE, IN VIEW OF THE PROBLEMS RELATING TO THE QUALITY OF THE PRODUCT, THE BUYER INVOKED THE BANK GUARANTEE AND APPROPRIATED THE PAYMENT OF RS. 1.9 LAKHS. ASSESSEE CLAIMED THE SAME AS A BAD DEBT. AO AND THE CIT (A) DID NOT ALLOW THE SAME. THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE AB OVE MENTIONED GROUND NO.2 OF THE APPEAL. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE COPY OF THE INVOICE EVIDENCING THE FACT OF SALE OF THE PRODUCTS AND ALSO TO THE FACT OF RECEIPT OF RS. 1.9 LAKHS . HE ALS O DEMONSTRATED THE INTENTION OF THE BUYER TO INVOKE THE BANK GUARANTEE AND HE RELIED ON T HE CORRESPONDENCE WITH REFERENCE TO THE QUESTION S RAISED BY THE PURCHASER RELATING TO THE QUALITY OF THE PRODUCT. EVENTUALLY, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE SALE OF THE PRODUCT AND RECEIPT OF SUM OF RS. 1.9 LAKHS ARE UNDOUBTED. HE A LSO DEMONSTRATED THE BUYER INVOKED THE BANK GUARANTEE SINCE THE PRODUCT IS NOT UP TO THE STA NDARDS. IN RESPONSE TO A QUERY FROM THE BENCH ABOUT THE INVOKING OF THE BANK GUARANTEE AND HOW IT CONSTITUTES A BAD DEBT , LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS ACTUALLY NOT A DEBT IN THE REAL SENSE, BUT, IT HAS A SHADE OF IT. WITHOUT PRESSING ON THIS GROUND, LD COUNSEL FOR THE ASSESSEE READ OUT THE GROUND NO.3, WHICH IS RAISED WITHOUT PREJUDICE TO THE GROUND NO. 2 AND SUBMITTED THAT THE INVOKING OF THE BANK GUARANTEE TO THE EXTENT OF RS. 1.9 LAKHS CONSTITUTES BUSINESS LOSS AND THE SAME MAY BE ALLOWED AS BUSINESS EXPENDITURE U/S 28 OF THE ACT. 5. ON EXAMINING / VERIFYING THE ORDERS OF THE REVENUE AUTHORITIES, WE FIND, THIS ASPECT OF ASSESSEES CLAIM IE TO ALLOW IT AS A BUSINESS EXPENDITURE WAS NOT EXAMINED OR ADJUDICATED BY THE LOWER AUTHORITIES. AFTER HEARING BOTH THE PARTIES, WE FIND GROUND 2 SHOULD BE DISMISSED AGAINST THE ASSESSEE AND GROUND NO.3 SHOULD BE RE FERRED TO THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION IF THE SAME SHOULD BE ALLOWED AS ALLOWABLE EXPENDITURE U/S 28 OF THE INCOME TAX ACT, 1961. CIT (A) IS DIRECTED TO DECIDE THE ISSUE AT GROUND NO.3 OF THE APPEAL AFRESH AFTER HEARING THE ASSESSEE AND 3 AFTER GOING THROUGH THE WRITTEN SUBMISSIONS AND THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PUDUMJEE PULP & PAPER MILLS LTD [2015] 93 CCH 176 (MUM), DATED 5.8.2015 RELATING TO THE ALLOWABILITY OF SUCH CLAIMS AS BUSINESS LOSS. ACCORDINGLY , GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN COURT ON 1 7 T H FEBRUARY, 2016. S D / - S D / - ( PAWAN SINGH ) ( D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 17 .2.2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI