DCIT, Circle - 6(1), Kolkata, Kolkata V. M/s. Dewars Garage Limited , Kolkata

ITA 528/KOL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2339 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RADHEY SHYAM; SHANKAR HALDER
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (D), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT & SHRI S.S. VISWANETHRA RAVI, JM] I.T.A. NO. 528/KOL/2018 ASSESSMENT YEAR: 2011-12 DCIT, CIRCLE - 6(1) KOLKATA.............................................................APPELLANT P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. M/S. DEWARS GARAGE LIMITED............................................RESPONDENT 4, COUNCIL HOUSE STREET, KOLKATA 700 001. [PAN: AABCD 7605 C] APPEARANCES BY: SHRI RADHEY SHYAM, CIT, DR & SHRI SHANKAR HALDER, JCIT APPEARING ON BEHALF OF THE REVENUE. SMT. NILIMA JOSHI, FCA APPEARING ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : MARCH 07, 2019 DATE OF PRONOUNCING THE ORDER : MARCH 07, 2019 ORDER PER P.M. JAGTAP, VICE PRESIDENT THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) 17, KOLKATA DATED 27.10.2017. GROUND NO. 1 RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 45,07,049/- AND RS. 22,61,227/- CLAIMED BY THE ASSESSEE IN RESPECT OF BAD DEBT WRITTEN OFF AS SUPPLIERS RESPECTIVELY WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE FAILED TO FURNISH DOCUMENTARY EVIDENCES IN SUPPORT OF ITS CLAIM AT THE TIME OF ASSESSMENT PROCEEDINGS AS WELL AS REMAND PROCEEDINGS AND ALSO IGNORING PROVISO TO SECTION 36(II) OF THE I.T. ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS CARRYING ON THE BUSINESS AS A AUTHORISED DEALER OF MARUTI CARS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31.03.2012 DECLARING A TOTAL INCOME OF RS. 27,11,195/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS. 1,68,26,623/- 2 I.T.A. NO. 528/KOL/2018 ASSESSMENT YEAR: 2011-12 M/S. DEWARS GARAGE LIMITED WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF SUNDRY BALANCES WRITTEN OFF. IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 30.03.2014, THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF SUNDRY BALANCES WRITTEN OFF WAS DISALLOWED BY THE AO ON THE GROUND THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF HAVING DECLARED THE AMOUNT OF SUNDRY BALANCES WRITTEN OFF AS ITS INCOME EITHER IN THE YEAR UNDER CONSIDERATION OR IN THE EARLIER YEARS. 3. THE DISALLOWANCE OF RS. 1,68,26,623/- MADE BY THE AO ON ACCOUNT OF SUNDRY BALANCES WRITTEN OFF WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), ELABORATE SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE IN SUPPORT OF ITS CASE ON THIS ISSUE WHICH WERE FORWARDED BY THE LD. CIT(A) TO THE AO FOR THE LATTERS COMMENTS. IN THE REMAND REPORT SUBMITTED TO THE LD. CIT(A), THE AO OFFERED HIS COMMENTS AND AFTER TAKING INTO CONSIDERATION THE SAME AS WELL AS THE SUBMISSION OF THE ASSESSEE THEREON, THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO ON THIS ISSUE FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO 3.6 OF HIS IMPUGNED ORDER: 3.6. I HAVE GONE THROUGH THE SUBMISSION. THE AO IS SATISFIED ABOUT THE AMOUNT OF BAD DEBTS IN RESPECT OF MARUTI UDYOG LTD. FOR RS. 1,00,58,354/-. IN RESPECT OF THE CLAIM OF BAD DEBTS OF RS. 45,07,042/- I FIND THAT THESE ARE ALL VERY SMALL AMOUNTS IN RESPECT OF VARIOUS PARTIES AND SINCE THE SAME HAS BEEN WRITTEN OFF IN ACCOUNTS IS ALLOWABLE AS BAD DEBTS. STAFF ADVANCE AND ADVANCE TO SUPPLIERS AND BUSINESS EXPENSES AND LOSSES AND ARE COMMON EXPENSES OF EACH BUSINESS AND INCIDENTAL TO THE BUSINESS CARRIED ON BY THE ASSESSEE HENCE THIS AMOUNT OF RS. 22,61,227/- ALSO AN ALLOWABLE EXPENSES. THE DISALLOWANCE OF RS. 1,68,26,623/- IS ACCORDINGLY DELETED. 3 I.T.A. NO. 528/KOL/2018 ASSESSMENT YEAR: 2011-12 M/S. DEWARS GARAGE LIMITED 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS ESTABLISHED BY THE ASSESSEE ON THE BASIS OF RELEVANT FACTS AND FIGURES BEFORE THE LD. CIT(A) AS WELL AS BEFORE US, THE AMOUNT OF SUNDRY BALANCES WRITTEN OFF TO THE EXTENT OF RS. 1,45,65,396/- REPRESENTED TRADE DEBTS RECEIVABLE FROM MARUTI UDYOG LTD. AND OTHER CUSTOMERS AND SINCE THE AMOUNT TO THAT EXTENT WAS ALREADY OFFERED BY THE ASSESSEE AS ITS INCOME AND THE SAME WAS WRITTEN OFF FROM THE BOOKS OF ACCOUNT AS IRRECOVERABLE, WE FIND THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION TO THAT EXTENT WAS RIGHTLY ALLOWED BY THE LD. CIT(A) AS PER SECTION 36(1)(VI) OF THE ACT READ WITH SECTION 36(2). EVEN THE LEARNED DR HAS NOT RAISED ANY CONTENTION TO DISPUTE THIS POSITION. HE HOWEVER HAS CONTENDED THAT THE REMAINING AMOUNT OF SUNDRY BALANCES WRITTEN OFF TO THE TUNE OF RS. 22,61,227/- REPRESENTED SUNDRY ADVANCES WRITTEN OFF BY THE ASSESSEE AND THE ONUS THEREFORE WAS ON THE ASSESSEE TO ESTABLISH THAT THE SAID ADVANCES HAD BECOME IRRECOVERABLE DURING THE YEAR UNDER CONSIDERATION SO AS TO CLAIM DEDUCTION ON ACCOUNT OF LOSS INCURRED INCIDENTAL TO ITS BUSINESS. HE HAS CONTENDED THAT THIS VITAL ASPECT HOWEVER WAS OVERLOOKED BY THE LD. CIT(A) WHILE ALLOWING CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS. 22,61,227/-. A PERUSAL OF THE RELEVANT FACTS AND FIGURES FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A) ALSO SUPPORTS THIS CONTENTION RAISED BY THE LEARNED DR IN AS MUCH AS THERE WAS NOTHING IN THE SAID DETAILS TO SHOW AS TO HOW VARIOUS ADVANCES GIVEN BY THE ASSESSEE DURING THE COURSE OF ITS BUSINESS HAD BECOME IRRECOVERABLE DURING THE YEAR UNDER CONSIDERATION. THE LEARNED COUNSEL FOR THE ASSESSEE, IN THIS REGARD, HAS CONTENDED THAT THE ASSESSEE IS IN A POSITION TO SUPPORT AND SUBSTANTIATE ITS CLAIM OF 4 I.T.A. NO. 528/KOL/2018 ASSESSMENT YEAR: 2011-12 M/S. DEWARS GARAGE LIMITED HAVING BECOME THE SAID ADVANCES IRRECOVERABLE DURING THE YEAR UNDER CONSIDERATION BY PRODUCING THE RELEVANT DETAILS AND DOCUMENTS AND URGED THAT THE MATTER MAY BE SENT BACK TO THE AO FOR GIVING THE ASSESSEE AN OPPORTUNITY TO DO SO. SINCE THE LEARNED DR HAS ALSO NOT RAISED ANY OBJECTION FOR SENDING THE MATTER TO THE AO FOR THIS LIMITED PURPOSE, WE RESTORE THIS ISSUE TO THE EXTENT OF ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF SUNDRY ADVANCES WRITTEN OFF AMOUNTING TO RS. 22,61,227/- TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH AFTER GIVING THE ASSESSEE AN OPPORTUNITY TO ESTABLISH ON EVIDENCE THAT THE SAID ADVANCES HAD BECOME IRRECOVERABLE DURING THE YEAR UNDER CONSIDERATION. GROUND NO. 1 OF THE REVENUES APPEAL IS THUS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 5. AS REGARDS THE COMMON ISSUE INVOLVED IN GROUND NO. 2 AND 3 OF THE REVENUES APPEAL RELATING TO DELETION BY THE LD. CIT(A) OF THE ADDITION OF RS. 7,52,324/- MADE BY THE AO ON ACCOUNT OF BELATED PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS PF AND ESI AFTER THE DUE DATES PRESCRIBED IN THE SAID ACTS BUT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, THE LEARNED REPRESENTATIVES OF BOTH THESE SIDES HAVE AGREED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE INTER ALIA BY THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS VIJAY SHREE LTD. ITAT NO. 245 OF 2011, G.A. NO. 2607 OF 2011, JUDGEMENT DATED 6 TH SEPTEMBER, 2011 AND THE IMPUGNED ORDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE DESERVES TO BE UPHELD BY FOLLOWING THE SAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT. GROUND NO. 2 AND 3 ARE ACCORDINGL Y DISMISSED. 5 I.T.A. NO. 528/KOL/2018 ASSESSMENT YEAR: 2011-12 M/S. DEWARS GARAGE LIMITED 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE PRESIDENT DATED: 07/03/2019 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. DEWARS GARAGE LIMITED, 4, COUNCIL HOUSE STREET, KOLKATA 700 001. 2. DCIT, CIRCLE 6(1), P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA