ACIT, New Delhi V. M/s T.T. Ltd., New Delhi

ITA 520/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65726 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 07-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 31-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Keywords: Additional evidence
• Section: 115JB; 145

Judgement Text

ITA NO. 520/DEL/2011 ASSTT.YEAR: 2005-06 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER I.T.A.NO.520/DEL/2011 ASSESSMENT YEAR : 2005-06 ACIT, VS T.T. LTD., CIRCLE 16(1), 879, MASTER PRITHVI NATH MARG, NEW DELHI. OPP. A JMAL KHAN ROAD, KAROL BAGH, NEW DELHI-110005 (PAN: AAACT0767A) (APPELLANT) (RESPONDENT) APPELLANT BY: DR. B.R.R. KUMAR, SR.DR RESPONDENT BY : NONE PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-XIX, NEW DELHI DATED 01.11.2010 FOR AY 2007-08. 2. THE ONLY GROUND OF APPEAL RELATED TO COMMISSION OF PAYMENTS READS AS UNDER:- THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW BY SETTING ASIDE TO THE FILE OF THE AD, THE ISSUE OF V ERIFICATION OF ADDITIONAL EVIDENCE RELATING TO ACCRUAL AND GENUINE NESS OF COMMISSION PAYMENTS OF RS.24,66,237/- TREATED BY T HE AO AS PRIOR PERIOD EXPENSES IGNORING THAT: ITA NO. 520/DEL/2011 ASSTT.YEAR: 2005-06 2 (I) THE FACT THAT THE SAID EXPENDITURE WAS PRIOR P ERIOD EXPENDITURE HAD ALSO BEEN POINTED OUT IN THE TAX AU DIT REPORT IN FORM 3CD. (II) IT HAS BEEN ADMITTED BY THE ASSESSEE AS MENTIO NED AT PAGE 3 OF THE ORDER OF THE LD. CIT (A) THAT THE SAI D EXPENSES WERE RELATED TO THE SALES OF THE EARLIER YEAR. (III) THE POWERS OF THE LD. CIT (A) TO SET ASIDE IS SUES DECIDED IN SCRUTINY ASSESSMENT HAVE BEEN CURTAILED WITH EFFECT FROM 1.6.2001. (IV) BY NOT CALLING FOR A REMAND REPORT FROM THE A O ON THE ISSUES SET ASIDE FOR VERIFICATION, THE LD. CIT (A) HAS NOT DECIDED THE APPEAL IN ACCORDANCE WITH THE BOARD'S C IRCULAR NO. 14 DATED 12.12.2001 ON THE ISSUE. (V) THE CONDITIONS LAID DOWN FOR ADMITTING ADDITION AL EVIDENCE UNDER RULE 46A ARE NOT SATISFIED IN THIS C ASE.' 3. BRIEFLY STATED, THE FACTS OF THE CASE GIVING RIS E TO THIS APPEAL ARE THAT THE ASSESSEE FILED A RETURN DECLARING NIL INCOME AF TER ADJUSTING THE BROUGHT FORWARD LOSSES AND RS.2,57,28,578 UNDER THE SPECIAL PROVISIONS U/S 115JB OF THE INCOME TAX ACT, 1961 (FOR BRIEF THE ACT). THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND CONSEQUENTLY, STATUTORY N OTICES U/S 143(2) AND 143(1) OF THE ACT ALONG WITH DETAILED QUESTIONNAIRE WERE ISSUED AND DULY SERVED ON THE ASSESSEE. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPANY HAS DEBITED AMOUNT OF RS. 24,66,237/- AS PRIOR PERIOD EXPENSES AND THE SAME WAS DISALLOWED WITH TH E FOLLOWING OBSERVATIONS:- ITA NO. 520/DEL/2011 ASSTT.YEAR: 2005-06 3 ON PERUSAL OF COLUMN C OF SCHEDULE-12 OF FORM 3CD OF THE AUDIT REPORT FURNISHED U/S 44AB, IT IS O BSERVED THAT THE ASSESSEE COMPANY HAS DEBITED RS.24,66,237/ - AS PRIOR PERIOD EXPENSES. ACCORDING TO THE PROVISIONS OF INCOME TAX ACT, 1961, PRIOR PERIOD INCOME IS TAXABL E U/S 41 OF THE ACT BUT THE PRIOR PERIOD EXPENSES ARE NOT ALLOWABLE TO BE CLAIMED AS EXPENSES DURING THE CURR ENT YEAR. SINCE THESE EXPENSES DO NOT RELATE TO THE YE AR UNDER CONSIDERATION, THEREFORE, THESE EXPENSES ARE BEING DISALLOWED AS DULY DISCUSSED WITH THE AR OF THE ASS ESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) ARE HEREBY INITIA TED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. (DISALLOWANCE OF RS.24,66,237/-) 4 . THE AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE THE C OMMISSIONER OF INCOME TAX(A) WHICH WAS ALLOWED WITH THE FOLLOWING OBSERVATIONS:- 7.1 THE ASSESSEE DEBITED RS. 24,66,237/- UNDER THE HEAD PRIOR PERIOD EXPENSES. THE AO DISALLOWED THE SAME A S NOT RELATED TO THE F.Y. RELEVANT FOR THE IMPUGNED ASSES SMENT YEAR. 7.2 THE AR HAS EXPLAINED THAT THE EXPENSES ARE RE LATED TO THE SALES OF F.Y. 2003-04 RELEVANT FOR A.Y. BUT THE TRANSACTION AND THE EXPENSES GOT FINALIZED AND THE EXPENSES GOT ACCRUED IN F.Y. 2004-05 RELEVANT FOR T HE IMPUGNED A.Y. 2005-06. THE AR HAS BROUGHT ON RECORD THE VARIOUS DOCUMENTS MAINLY DEBIT NOTES ISSUED BY THE PARTIES/AGENTS TO PROVE HIS CONTENTION. 7.3 AS PER GENERAL PRINCIPLES AND S.4 & S. 145 OF I.T. ACT, THE INCOME OF A PARTICULAR YEAR IS TO BE TAXED AFTE R ALLOWING THE CORRESPONDING EXPENDITURE. IN CERTAIN CASES SOME GENUINE DIFFICULTY WOULD ARISE IN ACCOUNTING E ITHER THE INCOME OR EXPENDITURE. SOMETIMES ADJUSTMENTS WO ULD HAVE TO BE MADE IN THE BOOKS OF ACCOUNT. THE DIFFIC ULTY ITA NO. 520/DEL/2011 ASSTT.YEAR: 2005-06 4 COMES INTO PLAY WHILE ADDRESSING THESE ADJUSTMENTS IN THE INCOME TAX PROCEEDINGS. 7.4 THE OBSERVATIONS MADE BY THE HON'B1E DELHI HI GH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S VISHNU INDUSTRIAL GASES P. LTD. WITH REGARD TO PRIO R PERIOD INCOME AND EXPENDITURE WHICH ARE RELEVANT ARE AS UN DER: 'IN A DECISION RENDERED ABOUT 50 YEARS AGO, THE BOM BAY HIGH COURT, SPEAKING THROUGH CHIEF JUSTICE TENDOLKA R IN COMMISSIONER OF INCOME TAX, DELHI, AJMER, RAJASTHAN AND MADHYA PRADESH VS. NAGRI MILS CO. LTD. (1958) 33 IT R 681 OBSERVED AS FOLLOWS:- 'WE HAVE OFTEN WONDERED WHY THE INCOME TAX AUTHORIT IES, IN A MANNER SUCH AS THIS WHERE THE DEDUCTION IS OBV IOUSLY A PERMISSIBLE DEDUCTION UNDER THE INCOME TAX ACT, R AISE DISPUTES AS TO THE YEAR IN WHICH THE DEDUCTION SHOU LD BE ALLOWED. THE QUESTION AS TO THE YEAR IN WHICH A DED UCTION IS ALLOWABLE MAY BE MATERIAL WHEN THE RATE OF TAX CHARGEABLE ON THE ASSESSEE IN TWO DIFFERENT I YEARS IS DIFFERENT; BUT IN THE CASE OF INCOME OF A COMPANY, TAX IS ATTRACTED: AT A UNIFORM RATE, AND WHETHER THE DEDUC TION IN RESPECT OF BONUS WAS GRANTED IN THE ASSESSMENT YEAR 1952- 53 OR IN THE ASSESSMENT YEAR CORRESPONDING TO THE ACCOUNTING YEAR 1952, THAT IS IN THE ASSESSMENT YEA R 1953- 54, SHOULD BE A MATTER OF NO CONSEQUENCE TO THE DEPARTMENT; AND ONE SHOULD HAVE THOUGHT THAT THE DEPARTMENT WOULD NOT FRITTER AWAY ITS ENERGIES IN F IGHTING MATTERS OF THIS KIND. BUT, OBVIOUSLY, JUDGING FROM THE REFERENCES THAT COME UP TO US EVERY NOW AND THEN, T HE DEPARTMENT APPEARS TO DELIGHT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFECT THE TAXABILITY OF THE ASSESSEE OR THE TAX THAT THE DEPARTMENT IS LIKELY TO COLLECT FROM HIM WHETHER IN ONE YEAR OR THE OTHER YEAR.' THE SITUATION DOES NOT SEEM TO HAVE CHANGED OVER TH E LAST FIFTY YEARS AND THE REVENUE CONTINUES TO AGITATE TH E QUESTION WHETHER TAX IS LEVIABLE IN A PARTICULAR YE AR OR IN SOME OTHER YEAR. THIS IS HARDLY A QUESTION THAT SHO ULD ITA NO. 520/DEL/2011 ASSTT.YEAR: 2005-06 5 REQUIRE IUS TO EXERCISE OUR MINDS PARTICULARLY SINC E THERE IS NO DOUBT THAT THE TAX HAS BEEN PAID AND THE RATE OF TAX REMAINS THE SAME FOR BOTH THE ASSESSMENT YEAR.' 7.5 I HAVE GONE THROUGH THE COPIES OF THE DEBIT NOTES FURNISHED. IN THE LIGHT OF THE ABOVE DISCUSSION THE CONTENTION OF THE AR IS TO BE ACCEPTED IN PRINCIPLE . HOWEVER, THE AO IS HEREBY DIRECTED TO VERIFY THE VA RIOUS DOCUMENTS BROUGHT ON RECORD FOR THE FIRST TIME AND IF HE IS SATISFIED WITH THE GENUINENESS OF THE DOCUMENTS, TH E EXPENSES IN QUESTION MAY BE ALLOWED IN THE IMPUGNED ASSESSMENT YEAR. ACCORDINGLY, GROUND NO. 1 IS ALLOWED AS INDICATED ABOVE. NOW, THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL AGAINST THE ABOVE IMPUGNED ORDER. 5. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE MATERIAL ON RECORD BEFORE US. LD. DR SU BMITTED THAT THE ASSESSEE COMPANY DEBITED THE DISPUTED AMOUNT AS PRIOR PERIOD EXPENSES WHICH ARE NOT LIABLE TO BE CLAIMED AS EXPENSES DURING THE CURRENT YEAR. SINCE PRIOR PERIOD EXPENSES DID NOT RELATE TO THE YEAR UNDER CONSIDERA TION, THEREFORE, THESE EXPENSES WERE RIGHTLY DISALLOWED BY THE ASSESSING O FFICER. HE FURTHER SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX(A ) SET ASIDE THE FINDINGS OF THE ASSESSING OFFICER WITHOUT ANY SOUND AND JUST IFIED REASONS BECAUSE THE EXPENDITURE CLAIMED BY THE ASSESSEE WERE RELATED TO THE PRIOR PERIOD AND THIS FACT WAS POINTED OUT IN THE TAX AUDIT REPORT IN FOR M 3CD. THE DR ALSO ITA NO. 520/DEL/2011 ASSTT.YEAR: 2005-06 6 SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) AC CEPTED THE ADDITIONAL EVIDENCE WITHOUT CALLING FOR A REMAND REPORT FROM T HE ASSESSING OFFICER. THEREFORE, IMPUGNED ORDER DESERVES TO BE SET ASIDE. 6. AFTER CAREFUL CONSIDERATION OF SUBMISSIONS AND I MPUGNED ORDERS OF THE AUTHORITIES BELOW, WE OBSERVE THAT THE ASSESSING OF FICER NOTED THAT CLAIMED EXPENDITURE WERE NOT RELATED TO THE YEAR UNDER CONS IDERATION FOR ASSESSMENT AND THE SAME WERE NOT LIABLE TO BE CLAIMED AS EXPEN SES DURING THE CURRENT YEAR RELATED TO THE ASSESSMENT IN THE IMPUGNED ORDE R. THE COMMISSIONER OF INCOME TAX(A) CONSIDERED THE EXPLANATION OFFERED BY THE ASSESSEES REPRESENTATIVE AND HELD THAT THE ASSESSEES REPRESE NTATIVE HAS BROUGHT VARIOUS DOCUMENTS MAINLY DEBIT NOTES ISSUED BY THE PARTIES AND AGENTS IN SUPPORT OF HIS CONTENTION AND THESE DOCUMENTS WERE BROUGHT ON RECORD BEFORE THE FIRST APPELLATE AUTHORITIES AND IN PARA 7.5 OF THE IMPUGN ED ORDER, THE COMMISSIONER OF INCOME TAX(A) FINALLY HELD THAT THE CONTENTION OF AR DESERVES TO BE ACCEPTED IN PRINCIPLE AND HE RESTORE D THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY TH E VARIOUS DOCUMENTS BROUGHT ON RECORD FOR THE FIRST TIME. 7. IN VIEW OF ABOVE, WE HOLD THAT THE ASSESSING OFF ICER DID NOT ALLOW ANY RELIEF TO THE ASSESSEE BUT HE SIMPLY RESTORED THE I SSUE TO THE FILE OF ASSESSING ITA NO. 520/DEL/2011 ASSTT.YEAR: 2005-06 7 OFFICER FOR VERIFICATION OF THE ADDITIONAL EVIDENCE WHICH WAS PLACED BEFORE HIM. 8. AS PER RULE 46A OF THE INCOME TAX RULES, 1962, T HE ASSESSEE IS NOT ENTITLED TO PRODUCE ANY EVIDENCE WHETHER ORAL OR DO CUMENTARY OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCE EDINGS BEFORE THE ASSESSING OFFICER. RULE 46A OF THE INCOME TAX RULES IS AS UNDER:- 46A. (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE 98 [DEPUTY COMMISSIONER (APPEALS)] 99 [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)], ANY EVIDE NCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENC E PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BE FORE THE 1 [ASSESSING OFFICER], EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY : (A) WHERE THE 2 [ASSESSING OFFICER] HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED ; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAU SE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPO N TO PRODUCE BY THE 2 [ASSESSING OFFICER] ; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CA USE FROM PRODUCING BEFORE THE 2 [ASSESSING OFFICER] ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL ; OR (D) WHERE THE 2 [ASSESSING OFFICER] HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUN ITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GR OUND OF APPEAL. ITA NO. 520/DEL/2011 ASSTT.YEAR: 2005-06 8 9. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CA SE AND ON BARE READING OF THE IMPUGNED ORDER AND FINDINGS THEREON, WE ARE INCLINED TO HOLD THAT THE COMMISSIONER OF INCOME TAX(A) DID NOT CONSIDER ANY ADDITIONAL EVIDENCE VIOLATING RULE 46A OF THE RULES. LD. COMMISSIONER OF INCOME TAX(A) IMPLIEDLY FOLLOWED THE PROVISIONS OF RULE 46A OF TH E RULES BY SENDING THE ADDITIONAL EVIDENCE, WHICH WAS FIRST TIME SUBMITTED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX(A) TO THE ASSESSING OFFICER FOR VERIFICATION AND THE ISSUE WAS DE NOVO RESTORED TO THE FILE OF THE ASSESSING OFFICER. IN THIS SITUATION, WE ARE UNABLE TO HOLD THAT THE COMMISSIONER OF INCOME TAX(A) GRANTED RELIEF TO THE ASSESSEE BY ALL OWING THE CLAIMED EXPENDITURE BUT THE COMMISSIONER OF INCOME TAX(A) S IMPLY RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR A DE CISION IN ACCORDANCE WITH THE ACT. ACCORDINGLY, WE ARE INCLINED TO HOLD THAT THIS APPEAL OF REVENUE IS DEVOID OF MERITS AND DESERVES TO BE DISMISSED AND W E DISMISS THE SAME. ORDER PRONOUNCED IN THE OPEN COURT ON 19.10.2012. SD/- SD/- (SHAMIM YAHYA) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 19TH OCTOBER 2012 GS ITA NO. 520/DEL/2011 ASSTT.YEAR: 2005-06 9 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR