THE DCIT 5(1), MUMBAI V. M/S. HICKSON & DADAJEE P. LTD, MUMBAI

ITA 5388/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0904 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 27-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 27-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Assessee Lawyers: NAZAYAN ATAL
• Keywords: Bad and doubtful debts; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI D.K. AGARWAL, J.M. AND SHRI A.L. GEHLOT , A.M. ITA NO. 5388/M/2008 ASSESSMENT YEAR: 2005-06 DY. COMMISSIONER OF INCOME TAX 5(1) APPELLANT ROOM NO. 568/525, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. VS. M/S HICKSON & DADAJEE PVT. LTD., RESPONDENT SHREE PANT BHUWAN, MAMASAHEB WAREKAR BRIDGE, MUMBAI 400 007. (PAN AAACH0986M) APPELLANT BY : MR. R.S. SRIVASTAVA RESPONDENT BY : MR. NAZAYAN ATAL ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- V, MUMBAI, PASSED ON 02.07.2008 FOR THE ASSESSMENT YEAR 2005-06 WHEREIN THE REVENUE HAS RAISED THE FOL LOWING GROUND OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT IT WAS BEYOND THE JURISDICTION OF THE ASSESSING OFFICER TO EXAMINE THE IMPLEMENTATION OF THE SCHEME AS GRANTED BY BIFR EVE N IF IT AFFECT THE TAXABILITY OF THE COMPANY BEYOND THE IMM UNITY FROM INCOME TAX GRANTED TO THE ASSESSEE UNDER THE SCHEME . 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ASSESSEE COMPANY HAS NOT INDULGED ITSELF IN THE COLORABLE DEVICES BY NOT FOLLOWING THE SCHEME AS GRANTED UNDE R BIFR AND AVOIDED ITS INCOME TAX LIABILITY BY CLAIMING TH E BENEFITS OF IMMUNITIES GRANTED UNDER THE SCHEME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF LIABILITY TO M/S ROMEL ESTATE PVT. LTD. AMOUNTING TO RS. 1,64,99,829/- EVEN THOUGH THE ASSESSEE COULD NO T CONFIRM THE SAID TRANSACTION. ITA NO. 5388/M/08 M/S HICKSON & DADAJEE PVT. LTD. 2 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 20,95,842/- UNDER THE HEAD OTHER EXPENDITURE WRITTE N OFF AND DIRECTING THE ASSESSING OFFICER TO CONSIDER THE SAM E AS BACK DATE WITHOUT APPRECIATING THE FACT THE ASSESSEE COU LD NOT SUBMIT THE SUPPORTING EVIDENCES. 2. BRIEFLY THE FACTS OF THE GROUND NO. 1 & 2 ARE TH AT THE ASSESSEE IS IN THE BUSINESS OF CHEMICALS AND BUILDING CONSTR UCTION. THE AO EXAMINED THE BIFR SCHEME OF THE ASSESSEE. THE AO NO TICED THAT THE ASSESSEE DID NOT COMPLY WITH THE SCHEME, THEREFORE, HE WAS OF THE VIEW THAT BIFR SCHEME OF THE ASSESSEE IS NOTHING EL SE BUT A GIMMICK TO AVOID TAX. THE AO APPLIED THE RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF MCDOWELL AND CO. LTD. VS. COMMERCIAL TAX OFFICER, 154 ITR 148 (SC). THE CIT(A) ALLOWED T HE RELEVANT GROUNDS OF APPEAL OBSERVING AS UNDER:- 2.2 I HAVE GONE THROUGH THE SUBMISSIONS AND ARGUMEN TS OF THE LD. AR AS WELL AS THE IMPUGNED ASSESSMENT ORDER . I FIND THAT THE LD. AO HAD NOT GRASPED ALL THE NUANCES OF SICA AND THE PURPOSE OF HAVING CREATED BIFR BY THE PARLIAMEN T OF INDIA SICA IS OVERRIDING ACT OVER ALL OTHER ACTS, INCLUDI NG I.T. ACT, 1961. THE IT DEPARTMENT IS REPRESENTED BY DIRECTORA TE OF RECOVERY ON BEHALF OF CBDT BEFORE BIFR. THUS, ONCE THE SCHEME IS PASSED BY BIFR, NO OBJECTION OF CBDT CAN BE SUSTAINED EXCEPT THROUGH AAIFR AND HONBLE SUPREME COURT. IN ANY CASE IT IS NOT OPEN TO THE LD. AO TO EXAMINE AND SCRUTINIZE THE VALIDITY AND IMPLEMENTATION OF THE S CHEME GRANTED BY BIFR UNDER SICA. IN THE INSTANT CASE, TH E HONBLE BIFR HAS ALSO PASSED THE ORDER DT. 29.9.2005 ON SUC CESSFUL REHABILITATION OF THE APPELLANT COMPANY AND DECLARE D IT AS NON- SICK COMPANY WITHIN THE PROVISIONS OF SEC.3(1)(C) OF SICA. THUS, IN VIEW OF THE ABOVE DISCUSSION AND IN THE FA CTS AND CIRCUMSTANCES OF THE INSTANT CASE, THE ACTION OF LD . AO IS FOUND TOTALLY UNJUSTIFIED. ACCORDINGLY, THE APPEAL IS ALL OWED ON THESE GROUNDS. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. THE BENCH WAS ASKED A SPECIFIC QUERY TO THE LEARNED DR WHETHER THIS BIFR SCHEME HAS BEEN REVERS ED BY THE CONCERNED AUTHORITY. THE CONTENTION OF THE LEARNED REPRESENTATIVES OF THE PARTIES WERE THAT THE CONCERNED AUTHORITY DI D NOT REVERSE THE SAID BIFR SCHEME OF THE ASSESSEE. IN THE LIGHT OF T HE FACT THAT THE AO CAN EXERCISE POWERS ONLY UNDER THE INCOME TAX TO ASSESS THE TAXABLE INCOME. WHETHER THE ASSESSEE HAS COMPLIED W ITH THE BIFR SCHEME OR NOT IS NOT THE SUBJECT MATTER OF AO, THOU GH, HE HAS ITA NO. 5388/M/08 M/S HICKSON & DADAJEE PVT. LTD. 3 EMPOWERED TO EXAMINE THE SCHEME OF BIFR, WHICH ARE RELATED TO INCOME TAX ACT. IN THE LIGHT OF THE FACT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS CONFIRMED ON THIS ISSUE. 4. GROUND NO. 3 IS IN RESPECT OF ADDITION OF RS. 1, 64,99,829/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN THE SAID AMOUNT OF RS. 1,64, 99,829/- AS SUNDRY CREDITOR, WHICH IS IN THE NAME OF M/S ROMELL REAL ESTATE PVT. LTD. THE AO NOTICED THAT OUTSTANDING BALANCE A S ON 31.03.2004 WAS ALSO RS. 1,64,99,829/-. THE AO ASKED THE ASSESSEE TO EXPLAIN THE NATURE OF THE SAID CREDITOR. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT THE SAID AMOUNT IS DUE TO M/S ROMELL REAL ESTATE PVT. LTD. ON ACCOUNT OF PURCHASE OF TDR VIDE AGREEMENT DTD. 4 TH FEBRUARY, 2004 FROM NIRLON LTD. ON BEHALF OF THE A SSESSEE. THE AO FURTHER NOTED THAT M/S ROMELL REAL ESTATE PV T. LTD. VIDE AGREEMENT DATED 2 ND MARCH, 2004 MADE PAYMENT TO M/S NIRLON LTD. ON BEHALF OF THE ASSESSEE. THE AO ISSUED CONFIRMATI ON LETTER TO M/S ROMELL REAL ESTATE PVT. LTD. BUT NO REPLY WAS RECEI VED. IT HAS ALSO NOTED BY THE AO THAT THE ASSESSEE COMPANY HAS SURRE NDERED PART OF THE LOAN AT GOREGAON UNIT FOR ROAD, NULLAHS, PLAYGR OUNDS, ETC. TO BMC FOR WHICH BMC ISSUED TDR TO THE ASSESSEE COMPAN Y FOR 1870 SQ. METERS, WHICH HAS BEEN UTILIZED FOR CONSTRUCTIO N ON FSI 65000 SQ.FT. ON THE BASIS OF MATERIAL AVAILABLE WITH THE AO, THE AO HELD THAT THIS IS SIMPLY AN INTERNAL ARRANGEMENT WITH TH E PARTIES. THE TDR RECEIVED BY THE ASSESSEE COMPANY FROM BMC HAS BEEN GIVEN TO M/S ROMELL REAL ESTATE PVT. LTD. FOR CONSTRUCTIO N OF FSI OF 65000 SQ.FT. HENCE, THERE IS NO OUTSTANDING AMOUNT PAYABLE TO M/S ROMELL REAL ESTATE PVT. LTD. THE AO, ACCORDINGLY, M ADE ADDITION OF RS. 1,64,99,829/-. THE CIT(A) ACCEPTED THE ASSESSEE S CONTENTION AND OBSERVED AS UNDER:- 5.2 I HAVE GONE THROUGH THE SUBMISSIONS AND ARGUMEN TS OF THE LD. AR AS WELL AS THE IMPUGNED ASSESSMENT ORDER . I FIND THAT THE LD. AO IN PARA 3 OF THE IMPUGNED ASSESSMEN T ORDER HAS WRONGLY MENTIONED THAT THE APPELLANT BY AN AGRE EMENT DATED 04.02.2004 HAD PURCHASED THE TDR FROM NIRLON LTD. FOR 3010 SQ. METERS EQUIVALENT TO 33,3999.64 SQ. FT. @ RS. 571/- PER SQ. FT. AMOUNTING TO RS. 1,84,99,829/- FOR CONS TRUCTION ON THE FSI 65,000 SQ. FT. DURING THE AY 2004-05. IN FA CT, M/S ROMELL REAL ESTATE PVT. LTD. VIDE AGREEMENT DATED 3 RD AUGUST, ITA NO. 5388/M/08 M/S HICKSON & DADAJEE PVT. LTD. 4 2002 HAD PURCHASED THE TDR/FSI TO THE EXTENT OF APPROXIMATELY 14443 SQ. METERS FOR A LUMPSUM CONSID ERATION OF RS. 6 CRORES FROM M/S NIRLON LTD. WHATEVER TDR H AS BEEN PURCHASED BY THE APPELLANT FROM M/S ROMELL REAL EST ATE PVT. LTD. ONLY AND PART PAYMENT TOWARDS THE SAME HAS BEE N MADE TO THE TUNE OF RS. 20,00,000/- ON 17.3.2004 TO M/S ROMELL REAL ESTATE PVT. LTD. ONLY OUT OF THE TOTAL CONSIDE RATION PAYABLE TO THEM TO THE TUNE OF RS. 1,84,99,829/- LE AVING THE BALANCE TO THE TUNE OF RS. 1,64,99,829/- DUE TO M/S ROMELL REAL ESTATE PVT. LTD. THAT HAD BEEN SHOWN AS CREDIT OR OF THE APPELLANT. THUS, M/S ROMELL REAL ESTATE PVT. LTD. I S A TRADE CREDITOR OF THE APPELLANT FOR THE TRANSACTION OF T DR PURCHASE IN QUESTION. THE AGREEMENT DATED 02.03.2004 REFERRE D TO BY THE LD. AO OF THE APPELLANT WITH M/S NIRLON LTD. IS ONLY FOR THE PURPOSE OF TRANSFER/UTILIZATION OF FSI SLUM (TDR) A S THE APPELLANT ONLY COULD HAVE UTILIZED THE SAME TDR BEI NG LAND HOLDER. THUS AGREEMENT REFERRED TO BY THE LD. AO H AS NOTHING TO DO WITH THE SALE TRANSACTION OF THE TDR HAVING A NY PURCHASE CONSIDERATION TO BE GIVEN TO M/S NIRLON LT D. BY THE APPELLANT. IN FACT, THERE ARE TWO AGREEMENTS OF SAM E DATE I.E. 4.2.2004 FOR UTILIZATION OF FSI SLUM (TDR) FOR 1300 SQ. METERS AND 590 SQ. METERES RESPECTIVELY THAT ARE PART OF T HE SAME TDR PURCHASED FROM M/S ROMELL REAL ESTATE PVT. LTD. THUS, I FIND THAT THE IMPUGNED ADDITION HAS BEEN MADE BECAU SE OF NON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE ON THIS ISSUE AT THE LEVEL OF THE LD. AO WHEREAS M/ S ROMELL REAL ESTATE PVT. LTD. IS REALLY A TRADE CREDITOR OF THE APPELLANT AND THE AMOUNT PAID/PAYABLE TO M/S ROMELL REAL ESTA TE PVT. LTD. IS IN RELATION OF THE IMPUGNED TDR PURCHASE ON LY. HENCE, IN VIEW OF THE ABOVE DISCUSSION AND IN THE FACTS AN D CIRCUMSTANCES OF THE INSTANT CASE, THE IMPUGNED ADD ITION IS DELETED. THE APPEAL SUCCEEDS ON THIS GROUND. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE CASE OF THE AO WAS THAT IN FACT THERE WAS NO OUTSTANDING LIABILITY WHEREAS THE CIT(A) SIMPLY ACCEPTED THE ASSESSEES CONTENTION AND HELD THAT THE AMOUNT SHO WN OUTSTANDING IN THE NAME M/S ROMELL REAL ESTATE PVT. LTD IN RESPECT OF OUTSTANDING PAYMENT AGAINST THE PURCHASE OF TDR BUT IN FACT THE FACTS ARE NOT SO CLEAR. THE LEARNED AR COULD NOT SA TISFACTORILY EXPLAIN BEFORE US THAT HOW THIS SIMPLE OUTSTANDING PAYMENT ON ACCOUNT OF PURCHASE OF TDR SHOWN IN THE BALANCE SHE ET AS SUNDRY CREDITOR WAS NOT APPRECIATED BY THE AO WHEREAS THE FINDING OF THE AO THAT THERE WAS NO OUTSTANDING LIABILITY AT ALL. WE ARE OF THE VIEW THAT THE CONTENTION OF THE ASSESSEE IS REQUIRE D A DETAILED EXAMINATION FROM THE ORIGINAL RECORDS, WHICH ARE NO T READILY AVAILABLE AT THIS STAGE. IN RESPECT OF THIS GROUND THE DECISION OF THE ITA NO. 5388/M/08 M/S HICKSON & DADAJEE PVT. LTD. 5 CIT(A) IS NOT IN ACCORDANCE WITH SECTION 250(6) WHICH REQUIRES THAT THE CIT(A) SHALL STATE THE POINTS FOR DETERMINATION , THE DECISION THEREON AND THE REASONS FOR THE DECISION. SINCE COMPLETE FACTS ARE NOT ON RECORD AFTER VERIFICATION FROM ORIGINAL RECO RD, WE, THEREFORE, THINK IT PROPER TO REMIT THIS ISSUE TO THE FILE OF THE CIT(A) WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER RECORDING COMPLETE AND DETAILED FACTS OF THE ISSUE AND AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE SIDES. 6. GROUND NO. 4 IS IN RESPECT OF ADDITION OF RS. 20 ,95,892/-. 7. THE AO MADE THE ADDITION AS THE ASSESSEE DID NOT PRODUCE THE REQUIRED DETAILS. THE AO NOTICED THAT THERE WAS NO SUCH OUTSTANDING AMOUNT OF PREVIOUS YEARS. THE CIT(A) DE LETED THE SAID ADDITION BY OBSERVING AS UNDER:- 6.2 I HAVE GONE THROUGH THE SUBMISSIONS AND ARGUMEN TS OF THE LD. AR AS WELL AS THE IMPUGNED ASSESSMENT ORDER . I FIND THAT THERE IS NO DISPUTE THAT THE IMPUGNED BALANCES ARE OLD ONLY AND ALSO THE FACT THAT APPELLANT COMPANY HAD B EE SICK FOR YEARS. HENCE, LOOKING TO TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, THE LD. AO IS DIRECTED TO ALLO W THE IMPUGNED BAD DEBTS AS PER LAW. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT CIT(A) SIMPLY REPR ODUCED THE AOS ORDER AND ACCEPTED THE ASSESSEES CONTENTION WITHOU T VERIFYING AND RECORDING COMPLETE FACTS. IN RESPECT OF THIS GROUND ALSO THE DECISION OF THE CIT(A) IS NOT IN ACCORDANCE WITH SECTION 250(6). IN THE LIGHT OF DETAILED DISCUSSION MADE IN GROUND NO. 3, WE REMIT THIS ISSUE ALSO TO THE FILE OF THE CIT(A) WITH IDENTICAL DIRECTIONS AS MADE IN GROUND NO. 3. ITA NO. 5388/M/08 M/S HICKSON & DADAJEE PVT. LTD. 6 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JULY, 2010. SD/- SD/- (D. K. AGARWAL) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 30 TH JULY, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, H BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 27.7.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 28.7.10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER