DUKE OFFSHORE LTD, MUMBAI V. ITO WD 10(1)(2), MUMBAI

ITA 5300/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55867 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 30-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Opportunity of being heard; Bad and doubtful debts; Revised return
• Section: 27; 6

Judgement Text

ITA NO 5300 OF 2010 DUKE OFFSHORE LIMITED MUMBAI PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 5300/MUM/2010 (ASSESSMENT YEAR: 2007-08) M/S DUKE OFFSHORE LTD. INCOME TAX OFFICER 403 URVASHI SAYANI ROAD WD 10(1)(2) PRABHADEVI MUMBAI MUMBAI 400025 VS PAN AABCD 3165 B APPELLANT RESPONDENT APPELLANT BY: SHRI VIJAY KOTHARI RESPONDENT BY: SHRI D.S.SUNDER SINGH, DR DATE OF HEARING: 30/11/2011 DATE OF PRONOUNCEMENT: 30/11/2011 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEE APPEAL AGAINST THE ORDERS OF CI T(A)-21 MUMBAI DATED 20 TH MAY,2005. THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO THE CLAIM OF SUNDRY BALANCES WRITTEN O FF AMOUNTING TO ` 1,04,32,341/- WHICH THE ASSESSING OFFICER DID NOT A LLOW ON THE REASON THAT THE ASSESSEE HAS NOT CLAIMED THE SAME I N THE ORIGINAL RETURN OF INCOME AND HAS NOT FILED A REVISED RETURN OF INCOME, APPLYING THE PRINCIPLES ESTABLISHED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD., 2 84 ITR 323, IN WHICH IT WAS HELD THAT NO FRESH CLAIM/DEDUCTION WAS ALLOWABLE OR OTHERWISE THAN BY FILING A REVISED RETURN. THE CIT (A) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE REASON THAT THE ASSESSEE HAS CONSCIOUSLY NOT CLAIMED THE AMOUNT AND, THEREFORE, THE BAD DEBT CLAIM CANNOT BE ENTERTAINED. ITA NO 5300 OF 2010 DUKE OFFSHORE LIMITED MUMBAI PAGE 2 OF 7 2. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF FRANCO-INDIAN PHARMACEUTICAL S (P) LTD. REPORTED IN 195 TAXMAN 30 (MUM.) (MAG.) WHEREIN IT WAS HELD THAT TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (IN DIA) LTD. (SUPRA) DOES NOT IN ANY WAY AFFECT THE POWERS OF THE TRIBUN AL TO ADMIT AN ADDITIONAL GROUND OR ADDITIONAL CLAIM WHEN ALL THE FACTS OF THE CASE ARE ON RECORD. THE LEARNED COUNSEL FURTHER RELIED O N THE ORDER OF THE COORDINATED BENCH IN THE CASE OF HDFC BANK LTD IN I TA NO.3843/MUM/2010 DATED 19.08.2011 WHEREIN THIS ISSU E WAS CONSIDERED FOLLOWING THE DECISION ON THE CASE OF FR ANCO-INDIAN PHARMACEUTICAL (P) LTD., VS. INCOME TAX OFFICER 195 TAXMANN 30 (MUM) (MAGAZINE SECTION). 3. THE LEARNED DR, ON THE OTHER HAND, SUBMITT ED THAT AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GO ETZE (INDIA) LTD. (SUPRA), THE AO CANNOT ENTERTAIN ANY CLAIM WHICH WA S NOT MADE BY THE ASSESSEE IN THE ORIGINAL RETURN UNLESS THE SAME IS MADE BY WAY OF FILING A REVISED RETURN. 4. WE HAVE CONSIDERED THE ISSUE AND CAREFULLY PERUS ED THE ARGUMENTS. THERE IS NO DISPUTE WITH REFERENCE TO TH E FACT THAT THE ASSESSEES P&L ACCOUNT HAD A DEBIT ENTRY OF SUNDRY BALANCES WRITTEN OFF AND THIS WAS STATED BY THE CIT (A) IN P ARA 3.2 OF THE ORDER. THE ASSESSEE HAS SUBMITTED THAT IT HAD FILED RETURN OF INCOME TAKING THE LOSS BEFORE TAXATION WITHOUT CONSIDERING THE SUNDRY BALANCES WRITTEN OFF. HOWEVER, IT MADE THE CLAIM BY WAY OF A LETTER BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 19.0 9.2008. THEREFORE, ITA NO 5300 OF 2010 DUKE OFFSHORE LIMITED MUMBAI PAGE 3 OF 7 TO THAT EXTENT FACTS ARE CONCERNED, THE ASSESSEE WR OTE OFF AMOUNT IN THE P&L ACCOUNT. THEREFORE, THE CLAIM IS AN ELIGIBL E CLAIM, SUBJECT TO VERIFICATION OF OTHER CONDITIONS. THE CLAIM WAS REJ ECTED ONLY BECAUSE THE ASSESSEE DID NOT CLAIM IN THE ORIGINAL RETURN A ND DID NOT FILE ANY REVISED RETURN. THIS ISSUE WAS CONSIDERED BY THE CO ORDINATED BENCH IN THE CASE OF HDFC BANK LTD IN ITA NO.3843/MUM/201 0 DATED 19.8.2011 AS UNDER: 6. WE HAVE CAREFULLY PERUSED THE JUDGMENT OF HONB LE SUPREME COURT IN THE CASE OF MURLIDHAR BHAGWAN DAS (SUPRA) CITED BY THE LEARNED DR. IN THE SAID CASE, THE ASSESSEE WAS A FIRM CARRYING ON BUSINESS IN DIFFERE NT LINES. IT WAS ASSESSED TO INCOME-TAX U/S 23(4) OF THE ACT FOR THE ASSESSMENT YEAR 1949-50 ON THE GROUND THAT THE NOTICE ISSUED UNDER SUB-SECTION (2) AND (4) OF SECT ION 22 OF THE ACT HAD NOT BEEN COMPLIED WITH. ON SEPTEMBER 27, 1955, THE SAID ASSESSMENT WAS CANCELLED UNDER SECTI ON 27 OF THE ACT. BUT BEFORE THE SAID CANCELLATION IT WAS FOUND THAT AN INTEREST INCOME OF RS.88,737/- IN THE SHAPE OF U.P. ENCUMBERED ESTATES ACT BONDS RECEIVED BY HI M IN DISCHARGE OF THE DEBTS DUE FROM THIRD PARTIES HAD ESCAPED ASSESSMENT AS THE ASSESSEE FAILED TO DISCLO SE THE SAME. THE INCOME-TAX OFFICER ISSUED A NOTICE U/ S 34(1)(A) OF THE ACT FOR THE ASSESSMENT YEAR 1949-50 ON THE GROUND THAT THE SAID SUM OF RS.88,737/- HAD ESC APED ASSESSMENT IN THE SAID ASSESSMENT YEAR. AFTER THE ASSESSMENT OF THAT YEAR WAS SET ASIDE U/S 27 OF THE ACT, THE INCOME-TAX OFFICER IGNORING THE NOTICE ISSUED B Y HIM U/S 34(1)(A) OF THE ACT, INCLUDED THAT AMOUNT IN TH E FRESH ASSESSMENT MADE BY HIM. THE ASSESSEE PREFERRED AN APPEAL AGAINST THAT ORDER AND THAT WAS DISPOSED BY THE APPELLATE ASSISTANT COMMISSIONER ON DECEMBER 4, 195 7. THE APPELLATE ASSISTANT COMMISSIONER IN HIS ORDER H ELD THAT THE BONDS WERE RECEIVED BY THE ASSESSEE IN THE PREVIOUS ACCOUNTING YEAR AND, THEREFORE, DIRECTED T HAT THE SUM REPRESENTING INTEREST ON THE BONDS SHOULD BE DE LETED FROM THE ASSESSMENT FOR THE YEAR ENDING 1948-49. PURSUANT TO THE DIRECTION GIVEN BY THE APPELLATE AS SISTANT COMMISSIONER THE INCOME-TAX OFFICER INITIATED PROCEEDINGS U/S 34(1) OF THE ACT IN RESPECT OF THE ASSESSMENT YEAR 1948-49. THE NOTICE ISSUED UNDER TH AT SECTION WAS SERVED ON THE RESPONDENT ON DECEMBER 5, 1957. THE ASSESSEE FILED A PETITION UNDER ARTICLE 2 26 OF THE CONSTITUTION IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD FOR QUASHING THE SAID PROCEEDINGS, MAINLY ON ITA NO 5300 OF 2010 DUKE OFFSHORE LIMITED MUMBAI PAGE 4 OF 7 THE GROUND THAT THE PROCEEDINGS WERE INITIATED BEYO ND THE TIME PRESCRIBED BY SECTION 34 OF THE ACT. THE H IGH COURT ACCEPTED THE CONTENTION AND QUASHED THE PROCEEDINGS INITIATED BY THE INCOME-TAX OFFICER. TH E DEPARTMENT WENT IN APPEAL BY SPECIAL LEAVE TO THE HONBLE SUPREME COURT AND THE QUESTION RAISED THERE IN WAS WHETHER THE SECOND PROVISO TO SECTION 34(3) OF THE ACT COULD BE INVOKED IN THE FACTS OF THE CASE. THE SAID PROVISO READ AS UNDER : PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS S ECTION LIMITING THE TIME WITHIN WHICH ANY ACTION MAY BE TA KEN, OR ANY ORDER, ASSESSMENT OR REASSESSMENT MAY BE MAD E, SHALL APPLY TO A REASSESSMENT MADE UNDER SECTION 27 OR TO AN ASSESSMENT OR REASSESSMENT MADE ON THE ASSESS EE OR ANY PERSON IN CONSEQUENCE OF OR TO GIVE EFFECT T O ANY FINDING OR DIRECTION CONTAINED IN AN ORDER UNDER SE CTION 31, SECTION 33, SECTION 33A, SECTION 33B, SECTION 6 6 OR SECTION 66A. THE HONBLE SUPREME COURT ANSWERED THE QUESTION BY HOLDING AS UNDER : (I) THAT UNDER THE INCOME-TAX ACT, THE YEAR WAS THE UNIT OF ASSESSMENT. THE DECISION OF AN INCOME-TAX OFFICER GIVEN IN A PARTICULAR YEAR DID NOT OPERATE AS RES JUDICATA IN THE MATTER OF ASSESSMENT OF THE SUBSEQUENT YEARS. THE JURISDICTION OF THE TRIBUNALS IN THE HIERARCHY CREATED BY THE ACT WAS NO HIGHER THAN THAT OF THE INCOME-TAX OFFICER: IT WAS ALSO CONFINED TO THE YEAR OF ASSESSMENT. (II) THAT THE JURISDICTION OF THE APPELLATE ASSISTANT COMMISSIONER UNDER SECTION 31 WAS STRICTLY CONFINED TO THE ASSESSMENT ORDER OF THE PARTICULAR YEAR UNDER APPEAL. (III) THAT THE ASSESSMENT OR REASSESSMENT MADE IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN AN ORDER UNDER SECTION 31, SECTION 33, SECTION 33A, SECTION 33B, SECTION 66 OR SECTION 66A MUST NECESSARILY RELATE TO THE ASSESSMENT OF THE YEAR UNDER APPEAL, REVISION OR REFERENCE, AS THE CASE MIGHT BE. (IV) THAT THE SECOND PROVISO TO SECTION 34(3) ONLY LIFTE D THE BAN OF LIMITATION AND DID NOT ENLARGE THE JURISDICTION OF THE TRIBUNALS UNDER THE RELEVANT SECTIONS. (V) THAT THE EXPRESSIONS FINDING AND DIRECTION, IN THE SECOND PROVISO TO SECTION 34(3), MEANT RESPECTIVELY, A FINDING NECESSARY FOR GIVING RELIEF IN RESPECT OF THE ASSESSMENT FOR THE YEAR IN QUESTION, AND THE DIRECTION WHICH THE APPELLATE OR REVISIONAL ITA NO 5300 OF 2010 DUKE OFFSHORE LIMITED MUMBAI PAGE 5 OF 7 AUTHORITY, AS THE CASE MAY BE, WAS EMPOWERED TO GIVE UNDER THE SECTIONS MENTIONED IN THAT PROVISO. A FINDING, THEREFORE, COULD ONLY BE THAT WHICH WAS NECESSARY FOR THE DISPOSAL OF AN APPEAL IN RESPECT OF AN ASSESSMENT OF A PARTICULAR YEAR. THE APPELLATE ASSISTANT COMMISSIONER MIGHT HOLD, ON THE EVIDENCE, THAT THE INCOME SHOWN BY THE ASSESSEE WAS NOT THE INCOME FOR THE RELEVANT YEAR AND THEREBY EXCLUDE THAT INCOME FROM THE ASSESSMENT OF THE YEAR UNDER APPEAL. THE FINDING IN THAT CONTEXT WAS THAT THE INCOME DID NOT BELONG TO THE RELEVANT YEAR. HE MIGHT INCIDENTALLY FIND TH AT THE INCOME BELONGED TO ANOTHER YEAR, BUT THAT WAS NOT A FINDING NECESSARY FOR THE DISPOSAL OF AN APPEAL IN RESPECT OF THE YEAR OF ASSESSMENT IN QUESTION. (VI) THAT THE EXPRESSION ANY PERSON IN THE SECOND PROVISO TO SECTION 34(3) REFERRED TO ONE WHO WOULD BE LIABLE TO BE ASSESSED FOR THE WHOLE OR A PART O F THE INCOME THAT WENT INTO THE ASSESSMENT OF THE YEAR UNDER APPEAL OR REVISION. (VII) THAT, THEREFORE, THE SECOND PROVISO TO SECTION 34(3 ) DID NOT SAVE THE TIME-LIMIT PRESCRIBED UNDER SECTIO N 34(1) IN RESPECT OF AN ESCAPED ASSESSMENT OF A YEAR OTHER THAN THAT WHICH WAS THE SUBJECT MATTER OF THE APPEAL OR REVISION, AS THE CASE MIGHT BE, AN D ACCORDINGLY THE NOTICE ISSUED UNDER SECTION 34(1)(A ) IN THIS CASE WAS BARRED BY LIMITATION AND WAS NOT SAVED BY THE SECOND PROVISO TO SECTION 34(3). 7. IT IS THUS CLEAR THAT THE ISSUE INVOLVED IN THE CASE OF MURLIDHAR BHAGWAN DAS (SUPRA) WAS ENTIRELY DIFFEREN T FROM THE ISSUE INVOLVED IN THE PRESENT CASE AND THE OBSERVATION MADE BY THE HONBLE SUPREME COURT TO TH E EFFECT THAT THE JURISDICTION OF THE TRIBUNAL IN THE HIERARCHY CREATED BY THE ACT WAS NO HIGHER THAN THAT OF THE I NCOME- TAX OFFICER WAS RECORDED IN THE DIFFERENT CONTEXT I .E. THE DECISION OF THE TRIBUNAL AS THAT OF THE AO WAS ALSO CONFINED TO THE ASSESSMENT YEAR UNDER APPEAL. THE R ATIO OF THE SAID DECISION WHICH WAS RENDERED IN A DIFFE RENT CONTEXT THUS CANNOT BE EXTENDED AND APPLIED TO THE ISSUE INVOLVED IN THE PRESENT CASE WHICH IS ENTIRELY DIFF ERENT FROM THE ISSUE INVOLVED IN THE CASE OF MURLIDHAR BH AGWAN DAS (SUPRA) DECIDED BY THE HONBLE SUPREME COURT. 8. IT IS OBSERVED THAT THE DECISION RENDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF FR ANCO- INDIAN PHARMACEUTICALS (P) LTD. (SUPRA) ON THE OTHE R HAND, ITA NO 5300 OF 2010 DUKE OFFSHORE LIMITED MUMBAI PAGE 6 OF 7 IS DIRECTLY APPLICABLE TO THE ISSUE INVOLVED IN THE PRESENT APPEAL. IN THE SAID CASE THE ASSESSEE FILED ITS RET URN OF INCOME FOR THE RELEVANT YEAR DECLARING CERTAIN INCO ME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A LETTER MAKING AN ADDITIONAL CLAIM FOR DEDUCTION ON ACCOUNT OF BAD DEBTS ON THE GROUND THA T THE SAME WAS NOT MADE IN THE RETURN ORIGINALLY FILED DU E TO CLERICAL/ARITHMETICAL ERROR. THE AO REJECTED THE SA ID CLAIM. ON APPEAL, THE LEARNED CIT(APPEALS) UPHELD THE ACTI ON OF THE AO RELYING ON THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) BY OBSER VING THAT THE ASSESSEE HAD TO FILE A SEPARATE REVISED RETURN OF INCOME TO MAKE SUCH CLAIM. ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) MA KES IT CLEAR THAT THE POWERS OF THE TRIBUNAL AS LAID DOWN IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT 229 ITR 383 ARE NOT AFFECTED BY THE SAID DECISION. IT WAS H ELD THAT THE TRIBUNAL HAS THE POWER TO ADMIT AN ADDITIO NAL GROUND OR CLAIM MADE BY THE ASSESSEE, WHEN ALL THE FACTS ARE ON RECORD. IT WAS HELD BY THE TRIBUNAL THAT THE FACTS IN THE CASE BEFORE IT HAD BEEN BROUGHT ON RECORD BE FORE THE AO BY THE ASSESSEE IN THE LETTER ITSELF AND THE CLAIM OF THE ASSESSEE, THEREFORE, WAS TO BE ADMITTED KEEPING IN VIEW THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF NATIONAL THERMAL POWER CO. LTD. (SUPRA) AS WELL AS IN THE CASE OF JUTE CORPORATION OF INDIA LTD. VS. CIT 187 ITR 688. SINCE THE ISSUE RELATING TO THE SAID CLAIM OF THE ASSESSEE HAD NOT BEEN CONSIDERED ON MERIT EITHER BY THE AO OR BY THE LEARNED CIT(APPEALS), THE TRIBUNAL RES TORED THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME ON MERIT AFTER GIVING REASONABLE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF FRANCO INDIAN PHARMACEUTICAL (SUPRA), WE AD MIT THE CLAIM OF THE ASSESSEE FOR DEDUCTION IN RESPECT OF LOAN WRITTEN OFF AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME ON MERIT IN ACCORDAN CE WITH LAW AFTER GIVING PROPER AND SUFFICIENT OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. 5. RESPECTFULLY FOLLOWING THE COORDINATED BENCH DEC ISION IN THE CASE OF FRANCO-INDIAN PHARMACEUTICALS (SUPRA) AND T HE DECISION OF THE HDFC BANK LTD., (SUPRA), WE ADMIT THE CLAIM OF THE ASSESSEE FOR DEDUCTION IN RESPECT OF SUNDRY BALANCES WRITTEN OFF AND RESTORE THE ITA NO 5300 OF 2010 DUKE OFFSHORE LIMITED MUMBAI PAGE 7 OF 7 SAME TO THE FILE OF THE ASSESSING OFFICER WITH A DI RECTION TO DECIDE THE ISSUE ON MERITS IN ACCORDANCE WITH LAW, AFTER G IVING PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 6. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2011. SD/- SD/- (D.K.AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER VNODAN/SPS MUMBAI, DATED 30 TH NOVEMBER, 2011. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI