M/s. SUN POLYTRON INDUSTRIES LTD., MUMBAI V. ITO - 2(2)(2), MUMBAI

ITA 515/MUM/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56130 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-12-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 16-01-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: REENA JHA TRIPATHI
• Assessee Lawyers: S U CHHABRIA
• Keywords: Retrospective amendment; Bad and doubtful debts; Set aside
• Section: 234B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI. B.R. MITTAL (J.M.) AND SHRI. J. SUDHAK AR REDDY (A.M.) ITA NO.515/M/2007 (AY 2001-02) M/S. SUN POLYTRON INDUSTRIES LTD. (FORMERLY KNOWN AS KESWANI SYNTHETICS INDUSTRIES LTD.), FELTHEM HOUSE, 10 J.N. HEREDIA MARG, BALLARD ESTATE, MUMBAI 400 038. PAN: AACK1985F VS. INCOME TAX OFFICER 2(2)(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.U. CHHABRIA RESPONDENT BY: MS. REENA JHA TRIPATHI (DR ) DATE OF HEARING:22/12/2011 DATE OF PRONOU NCEMENT:29.12.2011 O R D E R PER B.R. MITTAL, THE ASSESSEE HAS FILED THIS APPEAL FOR THE ASSES SMENT YEAR 2001- 02 AGAINST THE ORDER OF LD. CIT (A)-XXXIII, DATED 3 0.11.2006 ON FOLLOWING GROUNDS: 1. THE LD. CIT (A)-XXXIII, MUMBAI (HEREINAFTER REF ERRED AS THE LEARNED COMMISSIONER) ERRED IN LAW IN UPHOLDING TH E ORDER OF THE ASSESSING OFFICWER OF ADDING BACK PROVISION FOR DOU BTFUL DEBTS OF RS. 4,92,78,305.00 AS MADE FOR UNASCERTAINED LIABILITY. HE OUGHT NOT TO HAVE DONE SO. 2 ITA NO. 515/M/2007 2. THE LEARNED COMMISSIONER ERRED IN LAW IN IGNORIN G THE AUDITORS CERTIFICATE DATED 24/11/2004 CERTIFYING T HAT THE PROVISION OF RS. 4,92,78,305.00 MADE BY THE APPELLANT ARE FOR TH E GOODS SUPPLIED TO VARIOUS PARTIES AND THE COMPANY HAS ASCERTAINED THE SE DEBTORS AS DOUBTFUL OF RECOVERY AND THE COMPANY WILL SUFFER LO SSES AGAINST THE SAME. HE OUGHT TO HAVE ALLOWED TO DEDUCT THE PROVI SION OF DOUBTFUL DEBTS OF RS. 4,92,78,305.00 AS MADE FOR ASCERTAINED LIABILITIES WHILE COMPUTING BOOK PROFITS U/S 115 JB OF THE INCOME TAX ACT, 1961 (THE ACT). 3. THE LEARNED COMMISSIONER ERRED IN LAW IN UPHOLDI NG THE CHARGING OF INTEREST U/S 234B OF THE ACT BY THE ASS ESSING OFFICER. HE OUGHT NOT TO HAVE DONE SO. THE APPELLANT DENIES ITS LIABILITY TO PAY INTEREST U/S 234 B OF THE ACT. 4. THE LEARNED COMMISSIONER ERRED IN LAW IN HOLDING THAT CHARGING OF INTEREST U/S 234C OF THE ACT BEING CONS EQUENTIAL AND DIRECTING THE ASSESSING OFFICER TO CHARGE INTEREST. HE OUGHT NOT TO HAVE DONE SO. THE APPELLANT DENIES ITS LIABILITY TO PAY INTEREST U/S 234 C OF THE ACT. 2. THE TRIBUNAL BY ITS ORDER DATED 29.4.2009 DECI DED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. HCL COMNET SYSTEMS AND SERVICES LTD., 305 ITR 409 (SC) WHEREIN IT WAS HELD THAT PROVISION FOR BAD AND DOUBTFUL DEBTS CANNOT BE SAID TO BE A PROVISION FOR A LIABILITY, BECAUSE EVEN IF THE DEBT IS NOT RECOVERABLE, NO LIABILITY CAN BE FASTENED ON THE AS SESSEE. HENCE, ANY PROVISION MADE TOWARDS IRRECOVERABILITY OF A DEBT C ANNOT BE SAID TO BE A PROVISION FOR LIABILITY. THEREFORE, IT WAS HELD THA T PROVISION FOR BAD AND DOUBTFUL DEBTS ARE TOWARDS ASCERTAINED LIABILITY AS CONTEMPLATED UNDER CLAUSE (C) TO SEC. 115JA OF THE ACT. IT IS OBSERVE D THAT THE DEPARTMENT FILED 3 ITA NO. 515/M/2007 THE APPEAL BEFORE THE HONBLE MUMBAI HIGH COURT AGA INST ABOVE ORDER OF THE TRIBUNAL AND THE HONBLE MUMBAI HIGH COURT BY I TS ORDER DATED 29.11.2010 IN INCOME TAX APPEAL NO.4229 OF 2009 VID E PARA 5 HELD AS UNDER: IN VIEW OF THE AMENDMENT TO SECTION 115JB OF INC OME TAX ACT, 1961, BY FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2001 THE IMPUGNED ORDER OF ITAT DATED 29.4.2009 IN ITA NO.515/MUM/2007 CANNOT BE SUSTAINED. ACCORDINGLY, T HE IMPUGNED ORDER IS QUASHED AND SET ASIDE AND THE MATTER IS RE STORED TO FILE OF ITAT FOR THE DECISION AFRESH IN ACCORDANCE WITH LAW . THE APPEAL IS DISPOSED OF ACCORDINGLY 3. IN VIEW OF ABOVE ORDER OF THE HONBLE JURISDIC TIONAL HIGH COURT, THIS APPEAL WAS FIXED FOR HEARING BEFORE US. 4. WE HAVE CONSIDERED THE PROVISION OF SEC. 115JB OF THE INCOME TAX ACT, 1961. WE OBSERVED THAT BY THE FINANCE (2) ACT , 2009 CLAUSE (I) TO EXPLANATION 1 OF SECOND PROVISO TO SUB-SECTION (2) OF SEC.115JB HAS BEEN INSERTED WITH RETROSPECTIVE EFFECT FROM 1.4.2001 AS UNDER: THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FO R DIMINUTION IN THE VALUE OF ANY ASSET IN VIEW OF ABOVE AMENDMENT WITH RETROSPECTIVE EFFE CT, THE BOOK PROFIT IS TO BE INCREASED FOR THE AMOUNT SET ASIDE BY ASSESSEE A S PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET ON ACCOUNT OF PROVISION FOR BAD DEBTS 4 ITA NO. 515/M/2007 MADE BY THE ASSESSEE FOR ASSESSMENT YEAR 2001-02. ACCORDINGLY, THE SAID DECISION OF THE HONBLE APEX COURT ON THE BASIS OF WHICH THE TRIBUNAL DECIDED THE ISSUE EARLIER IN FAVOUR OF THE ASSESSEE IS NO LONGER A GOOD LAW W.E.F., ASSESSMENT YEAR 2001-02. HOWEVER, DURING T HE COURSE OF HEARING LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT TH E RETROSPECTIVE AMENDMENT MADE SHOULD NOT BE FOLLOWED AND AS SUCH I S NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND AS IT EXISTED ON THE R ELEVANT DATE BE FOLLOWED. THEREFORE, WE DO NOT FIND MERIT IN THE SAID CONTENT ION OF THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, BECAUSE OF RETROSPECTIVELY AMENDMENT. 5. THE ABOVE ISSUE WAS ALSO CONSIDERED BY ITAT, M UMBAI BENCH IN THE CASE OF ADIT (INT. TAX) VS. BANK INTERNATIONAL INDONESIA (2010)-T 11-85- ITAT MUMBAI WHEREIN IT WAS HELD THAT THE PROVISION FOR DOUBTFUL DEBTS IS TO BE ADDED BACK TO THE NET PROFIT AS PER THE PROFIT A ND LOSS ACCOUNT WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT, IN VIEW OF AMENDMENT MADE WITH RETROSPECTIVE EFFECT FROM 1.4.2001 BY FINANCE (2) ACT OF 2009 BY INSERTING CLAUSE (I) TO EXPLANATION 1 TO SEC.115JB (2) OF THE ACT. 6. HENCE WE UPHOLD ORDER OF LD. CIT(A) BY REJECTI NG GROUND NOS.1 & 2 OF THE APPEAL. 5 ITA NO. 515/M/2007 7. GROUND NOS.3 & 4 OF THE APPEAL FOR CHARGING O F INTEREST U/S 234B AND 234C OF THE ACT ARE CONSEQUENTIAL AND DO NOT RE QUIRE ANY SPECIFIC ADJUDICATION. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT 29 TH DECEMBER, 2011 SD/- SD/- J. SUDHAKAR REDDY) (B.R. MITT AL) (ACCOUNTANT MEMBER) JUDICIAL MEMBER MUMBAI, DATED 29 TH DECEMBER, 2011 OKK* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- CONCERNED 4. COMMISSIONER OF INCOME TAX, CONCERNED 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI