INDOMAG STEEL TECHNOLOGY LTD.(NOW KNOWN AS SMS IRON TECHN. P.LTD.), V. DY..C.I.T.,CIRCLE-9(2),

ITA 5939/MUM/2008

• Counselvise Citation: 593920114 RSA 2008
• Duration Of Justice: 6 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 27-01-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 29-09-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 143(3); 37(1); 37

Judgement Text

ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C , NEW DELHI BEFORE SHRI H.S. SIDHU , JUDICIAL MEMBER AND SHRI J.S. REDDY, ACCOUNTANT MEMBER I.T.A. NO. 59 39 / M /2008 A.Y. : 2001 - 02 INDOMAG STEEL TECHNOLOGY LTD., (NOW KNOWN AS SMS IRON TECHNOLOGY PVT. LTD.) B - 402, SOMDUTT CHAMBER - I, 5, BHIKAJI CAMA PLACE, NEW DELHI 110 066 (PAN: AAACI1682F) VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 9(2) MUMBAI (APPELLANT) (RESPONDENT) AND I.T.A. NO. 5519/M/2008 A.Y. : 2004 - 05 SMS DEMAG PVT. LTD., (PRESENTLY KNOWN AS SMS IRON TECHNOLOGY PVT. LTD.) B - 402, SOMDUTT CHAMBER - I, 5, BHIKAJI CAMA PLACE, NEW DELHI 110 066 (PAN: AAACI1682F) VS. INCOME TAX OFFICER, WARD - 9 (3)(3), MUMBAI (APPELLANT) (RESPONDENT) AND I.T.A. NO. 2425/DEL/2011 A.Y. : 2001 - 02 SMS IRON TECHNOLOGY PVT. LTD.) B - 402, SOMDUTT CHAMBER - I, 5, BHIKAJI CAMA PLACE, NEW DELHI 110 066 (PAN: AAACI1682F) VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 9 ( 1 ) NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RAJAN BHATIA, CA DEPARTMENT BY : SH. ROBIN RAWAL, SR. DR DATE OF HEARING : 27 - 1 - 201 5 DATE OF ORDER : 30 - 1 - 201 5 ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 2 ORDER PER H.S. SIDHU : JM TH ESE APPEAL S FILED BY THE ASSESSEE EMANATE OUT OF THE SEPARATE O RDER S PASSED BY THE RESPECTIVE LD. CIT(A) , CENTRAL - I, MUMBAI AND BY THE LD. CIT(A) - XII, NEW DELHI PERTAINING TO ASSESSMENT YEAR S 2001 - 02 & 2004 - 05. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON, WE ARE THEREFORE, PRO CEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED IN THE ITA NO. 5519/M/2008 (A.Y. 2004 - 05) READ AS UNDER: - 1. THAT THE ORDER OF LD. CIT(A) IS BAD BOTH IN LAW AND ON FACTS OF THE CASE. 2. THAT TH E LD. CIT(A) WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND PROVISIONS OF THE ACT ERRED IN CONFIRMING DISALLOWANCE REPRESENTING PROVISION FOR DOUBTFUL DEBT TO THE EXTENT OF RS. 2,13,72,616/ - . 3. THAT THE LD. CIT(A) HA WITHOUT APPRECIATING THE F ACTS OF THE CASE ERRED IN CONFIRMING THE DISALLOWANCE OF PROVISION FOR CONTRACTUAL OBLIGATIONS AMOUNTING TO RS. 36,362/ - . 4. THAT THE APPEAL IS WITHIN TIME SINCE THE ORDER WAS RECEIVED ON 3.7.2008. 5. THAT THE APPELLANT MAY BE ALLOWED TO ADD, ALTER, MODIF Y OR DELETE ANY OF THE GROUNDS OF APPEAL STATED HEREINABOVE. 3. THE GROUNDS RAISED IN THE ITA NO. 5939/M/2008 (A.Y. 2001 - 02) READ AS UNDER: - 1. THAT THE ORDER OF LD. CIT(A) IS BAD BOTH IN LAW AND ON FACTS OF THE CASE. ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 3 2. THAT THE LD. CIT(A) HAS ERRE D IN HOLDING THAT GROUND NO. 5 DEALING WITH CLAIM FOR ALLOWABILITY OF PROVISION FOR DOUBTFUL DEBTS, AMOUNTING TO RS. 16,18,319/ - WAS NOT PRESSED AND THUS SUMMARILY DISMISSING THE SAME. 3. THAT THE PROVISION OF RS. 3,01,92,317/ - AS CLAIMED IS DULY DEDUCTIB LE IN TERMS OF PROVISION OF SECTION 36 AND 37 OF THE INCOME TAX ACT, 1961. 4. THAT THE APPEAL IS WITHIN TIME AS THE ORDER OF THE LD. CIT(A) WAS RECEIVED ON 6.8.2008. 5. THAT THE ASSESSEE MAY BE ALLOWED TO MODIFY, ADD, SUPPLEMENT, REVISE, AMEND GROUNDS ARE RAISED HEREINABOVE. 4. THE GROUNDS RAISED IN THE ITA NO. 2425/DEL/2011 (A.Y. 2001 - 02) READ AS UNDER: - 1.THAT THE ORDER OF THE LD. CIT(A) IS BAD BOTH IN LAW AND ON FACTS OF THE CASE AND IS VOID AB INITIO. 2. THAT THE LD. CIT(A) HAD ERRED IN UPHOLD ING A PENALTY OF RS. 6,30,046/ - U/S. 271(1)(C) OF THE I.T. ACT. 3. THAT THE LD. CIT(A) HAD ERRED IN UPHOLDING A PENALTY OF RS. 6,40,046/ - U/S. 271(1)(C) OF THE I.T. ACT, 1961. 4. THAT THE LD. CIT(A) HAD ERRED IN HOLDING THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS WITHOUT APPRECIATING THE SUBMISSION MADE BY THE APPELLANT AGAINST LEVY OF PENALTY. 5. THAT THE LD. CIT(A) HAD ERRED IN INTERPRETING DECISION OF HON BLE SUPREME COURT AS CITED BY THE APPELLANT. ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 4 6. THE LD. CIT(A) HAD ERRED IN UPHOLDING PENALTY BY APPLYING THE RATIO OF JUDICIAL PRECEDENTS NOT APPLICABLE ON THE FACTS OF THE APPELLANT. 7. THAT THE LD. CIT(A) HAD ERRED IN NOT CONSIDERING DIRECTIONS MADE IN THE APPELLATE ORDER AGAINST QUANTUM APPEAL FOR EXCLUSION OF AMOUNT OF RS. 3,01,92,317/ - AND THUS ERRONEOUSLY COMPUTED TAX SOUGHT TO BE EVADED . 8. THAT WITHOUT PREJUDICE, IN ANY CASE, LEVY OF PENALTY OF RS. 6,40,046/ - IS EXCESSIVE AND UNJUSTIFIED. 9. THAT THE APPEAL IS WITHIN TIME AS THE ORDER OF THE LD. CIT(A) WAS RECEIVED ON 18 MARCH, 2011. THE APPELLANT CRAVES LEAVE TO SUPPLEMENT, TO CANCEL, TO AMEND, TO ADD AND OR / OR OTHERWISE TO ALTER / MODIFY ANY OR ALL THE GROUNDS OF APPEAL STATED HEREINABOVE. ASSESSE S A PPEAL NO. 5939 / MUM /2008 (A.Y. 2001 - 02 ) 5. THE FACTS NARRATED FOR THE ASSTT. YEAR 2001 - 02 BY THE REVENUE AUTHORITY ARE NOT DISPUTED BY BOTH PARTIES, THEREFORE, NO NEED TO REPEAT THE SAME FOR THE SAKE OF CONVENIENCE. THE AO COMPLETED THE ASSESSMENT U/S 143(3)/147 OF THE INCOME TAX ACT, 1961 ON 23.3.2004 AND MADE THE VARIOUS ADDITIONS . 6. AGAINST THE ORDER OF THE AO DATED 23 / 3 /200 4 ASSESSEE FILED AN APPEAL BEFORE THE ID. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER DATED 11 / 7 /20 08 PARTLY ALLOWED THE APPEAL OF THE ASSESS EE. NOW THE ASSESSEE IS AGGRIEVED AGAINST THE IMPUGNED ORDER AND FILED THE APPEAL BEFORE THE TRIBUNAL. . 7 . LD. COUNSEL OF THE ASSESSEE FILED A PAPER BOOK CONTAINING THE ITE M NO. 1 TO 6 HAVING THE ORDERS OF THE HON BLE SUPREME COURT, DELHI HIGH COURT AND TRIBUNALS ORDERS COVERING THE ISSUES RAISED BY THE ASSESSEE IN THE APPEAL. COUNSEL OF THE ASSESSEE DURING THE HEARING STATED THAT HE IS ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 5 NOT PRESSING THE GROUND NO. 3, HENCE, THIS GROUND IS DISMISSED AS NOT PRESSED. 7.1 THE NEXT GROUND RELATING TO ALLOWABILITY OF PROVISION FOR DOUBTFUL DEBTS, AMOUNTING TO RS. 16,18,319/ - . W E FIND THAT AO HAS OBSERVED THAT FROM THE DETAILS SUBMITTED IN RESPECT OF DOUBTFUL DEBTS THAT THE ASSESSEE HAS CLAIMED EXPENDITURE ON ACCOUNT OF LIQUIDATED DAMAGES DEDUCTED BY T HE CUSTOMER AND CLAIMS MADE WHICH WERE NOT PAID BY THE CUSTOMER. IN THE DETAILS SUBMITTED BY THE ASSESSEE, AO OBSERVED THAT THE GENERAL PROVISION FOR LOANS AND ADVANCES OF RS. 16,18,319/ - WHICH IS IN THE NATURE OF CONTINGENT LIABILITY IS NOT ALLOWED AS PE R THE ACT. AO DISALLOWED THE SAME. WE FURTHER FIND THAT LD. CIT(A) HAS DISMISSED THIS GROUND ON ACCOUNT OF NOT BEING PRESSED BY THE ASSESEE. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE DURING THE HEARING HAS SUBMITTED THAT THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSTT. YEAR 2005 - 06 IN ITA NO. 1814/DEL/2010 VIDE ORDER DATED 23.8.2013 HAS SET ASIDE THE ISSUE IN DISPUTE TO THE AO TO EXAMINE THE DE - NOVO, IN LIGHT OF THE HON BLE SUPREME COURT DECISION DISCUSSED BY THE T RIBUNAL VIDE ITS ORDER DATED 23.8 .2013 AS UNDER: - 11. THE SECOND ISSUE VIDE GROUND NO 3.1 AND 3.2. IS REGARDING DISALLOWANCE OF BAD AND DOUBTFUL DEBTS TO THE EXTENT OF RS. 37,995,597/ - ASSESSING OFFICER NOTED THAT ASSESSEE HAD DEBITED AN AMOUNT OF RS. 39,872,234/ - AS PROVISION FOR D OUBTFUL DEBTS IN PROFIT AND LOSS ACCOUNT. HE OBSERVED THAT THIS PROVISION WAS ALSO SIMILAR PAGE NO. 7 TO THE PROVISION FOR CONTRACTUAL OBLIGATIONS AND TREATING THE SAME CONTINGENT IN NATURE, DISALLOWED THE ASSESSEE S CLAIM. LD. CIT(A) DISMISSED THE ASSESSE E S APPEAL. ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 6 12. LD COUNSEL FOR THE ASSESSEE REFERRED TO THE BALANCE SHEET CONTAINED AT PAGE NO. 1 OF THE PAPER BOOK AND POINTED OUT THAT NO SEPARATE LIABILITY HAS BEEN SHOWN IN BALANCE SHEET IN REGARD TO THE PROVISION FOR BAD DEBTS AND THE ASSESSEE HAS SHOWN NET ASSET POSITION IN THIS REGARD. HE REFERRED TO THE DECISION OF THE HON BLE SUPREME COURT IN VIJAYA BANK VS. COMMISSIONER OF INCOME - TAX (2010) 190 TAXMAN 257 (SC) WHEREIN HON BLE SUPREME COURT HAS CONSIDERED THE FOLLOWING QUESTIONS: - 2. WHETHER IT IS IMPERATIVE FOR THE ASSESSEE - BANK TO CLOSE THE INDIVIDUAL ACCOUNT OF EACH OF ITS DEBTORS IN ITS BOOKS OR A MERE REDUCTION IN THE LOANS AND ADVANCES OR DEBTORS ON THE ASSET SIDE OF ITS BALANCE SHEET TO THE EXTENT OF THE PROVISION FOR BAD DEBT WOULD BE SU FFICIENT TO CONSTITUTE A WRITE OFF IS THE QUESTION WHICH WE ARE REQUIRED TO ANSWER IN THESE CIVIL APPEALS? 13. HON BLE SUPREME COURT ANSWERED THE ABOVE QUESTION AS UNDER: - 5. AT THE OUTSET, WE MAY STATE THAT, IN THESE CIVIL APPEALS, BROADLY, TWO QUESTION S ARISE FOR DETERMINATION. THE FIRST QUESTION WHICH ARISES FOR DETERMINATION CONCERNS THE MANNER IN WHICH ACTUAL WRITE OFF TAKES PLACE ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 7 UNDER THE ACCORDING PRINCIPLES. THE SECOND QUESTION WHICH ARISES FOR DETERMINATION IN THESE CIVIL APPEALS IS, WHETHER IT IS IMPERATIVE FOR THE ASSESSEE - BANK TO CLOSE THE INDIVIDUAL ACCOUNT OF EACH DEBTOR IN ITS BOOKS OR A MERE REDUCTION IN THE LOANS AND ADVANCES ACCOUNT OR DEBTORS TO THE EXTEND OF THE PROVISION FOR BAD AND DOUBTFUL DEBT IS SUFFICIENT. 6. THE FIRST QUESTION IS NO MORE RES INTEGRA. RECENTLY, A DIVISION BENCH OF THIS COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. V. JT. CIT [2010] 320 ITR 5771 , [IN WHICH ONE OF US (S.H. KAPADIA, PAGE NO. 8 J.) WAS A PARTY] HAD AN OCCASION TO DEAL WITH TH E FIRST QUESTION AND IT HAS BEEN ANSWERED, ACCORDINGLY, IN FAVOUR OF THE ASSESSEE VIDE PARAGRAPH (25), WHICH READS AS UNDER : 'PRIOR TO APRIL 1, 1989, THE LAW, AS IT THEN STOOD, TOOK THE VIEW THAT EVEN IN CASES IN WHICH THE ASSESSEE(S) MAKES ONLY A PROVISI ON IN ITS ACCOUNTS FOR BAD DEBTS AND INTEREST THEREON AND EVEN THOUGH THE AMOUNT IS NOT ACTUALLY WRITTEN OFF BY DEBITING THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AND CREDITING THE AMOUNT TO THE ACCOUNT OF THE DEBTOR, THE ASSESSEE WAS STILL ENTITLED TO D EDUCTION UNDER SECTION 36(1) (VII). [ SEE CIT V. JWALA ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 8 PRASAD TIWARI [1953] 24 ITR 537 (BOM.) AND VITHALDAS H. DHANJIBHAI BARDANWALA V. CIT [1981] 130 ITR 95 (GUJ.)]. SUCH STATE OF LAW PREVAILED UP TO AND INCLUDING THE ASSESSMENT YEAR 1988 - 89. HOWEVER, BY INSERTION (WITH EFFECT FROM APRIL 1, 1989) OF A NEW EXPLANATION IN SECTION 36(1)(VII), IT HAS BEEN CLARIFIED THAT ANY BAD DEBT WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF THE ASSESSEE WILL NOT INCLUDE ANY PROVISION FOR BAD AND DOUBTFUL DEBT MADE IN THE ACCOUNTS OF THE ASSESSEE. THE SAID AMENDMENT INDICATES THAT BEFORE APRIL 1, 1989, EVEN A PROVISION COULD BE TREATED AS A WRITE OFF. HOWEVER, AFTER APRIL 1, 1989, A DISTINCT DICHOTOMY IS BROUGHT IN BY WAY OF THE SAID EXPLANATION TO SECTION 36(1) (VII). CONS EQUENTLY, AFTER APRIL 1, 1989, A MERE PROVISION FOR BAD DEBT WOULD NOT BE ENTITLED TO DEDUCTION UNDER SECTION 36(1)(VII). TO UNDERSTAND THE ABOVE DICHOTOMY, ONE MUST UNDERSTAND `HOW TO WRITE OFF'. IF AN ASSESSEE DEBITS AN AMOUNT OF DOUBTFUL DEBT TO THE PRO FIT AND LOSS ACCOUNT AND CREDITS THE ASSET ACCOUNT LIKE SUNDRY DEBTOR'S ACCOUNT, IT WOULD CONSTITUTE A WRITE OFF OF AN ACTUAL DEBT. HOWEVER, IF AN ASSESSEE DEBITS `PROVISION FOR DOUBTFUL DEBT' TO THE PROFIT AND LOSS ACCOUNT AND MAKES A ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 9 CORRESPONDING CREDIT TO THE `CURRENT LIABILITIES AND PROVISIONS' ON THE LIABILITIES SIDE OF THE BALANCE - SHEET, THEN IT WOULD CONSTITUTE A PROVISION FOR DOUBTFUL DEBT. IN THE LATTER CASE, THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION AFTER APRIL 1, 1989.' 14. LD COUNSEL SUB MITTED THAT THE ASSESSEE HAD WRITTEN OFF THE BAD DEBTS AS PER THE DECISION OF SUPREME COURT IN THE CASE OF VIJAYA BANK (SUPRA) AND, THEREFORE, THE REQUIREMENT OF WRITING OFF OF BAD PAGE NO. 9 DEBTS WAS FULFILLED. LD. DR RELIED ON THE ORDER OF THE LOWER REV ENUE AUTHORITIES. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. WE FIND THAT HON BLE SUPREME COURT IN THE CASE OF VIJAYA BANK (SUPRA) HAS ANSWERED THE AFOREMENTIONED QUESTION IN PARA 6 REPRODUCED E ARLIER. WE FIND THAT BOTH THE LOWER REVENUE AUTHORITIES HAVE NOT EXAMINED THE ISSUE IN THE LIGHT OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF THE VIJAYA BANK (SUPRA) AND, THEREFORE, IN THE INTEREST OF JUSTICE, THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING THE ISSUE DE - NOVO IN THE LIGHT OF THE DECISION OF THE HON BLE SUPREME COURT. 16. IN THE RESULT THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 7.2 LD. DR DID NOT HAVE RAISED ANY OBJECTION TO THIS REQUEST OF THE LD. COUNSEL OF THE ASSESSEE. ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 10 7.3 WE HAVE HEARD BOTH PARTIES AND PERUSED THE RELEVANT RECORD AVAILABLE WITH US SPECIALLY THE IMPUGNED ORDER PASSED BY THE REVENUE AUTHORITIES; PAPER BOOK FILED BY THE ASSESSEE, WE ARE OF THE VIEW THAT REQUEST MADE B Y THE LD. COUNSEL OF THE ASSESSEE SEEMS TO BE GENUINE, BECAUSE ITAT HAS ALREADY SET ASIDE THE ISSUE IN DISPUTE DENOVO TO THE AO. RESPECTFULLY, FOLLOWING THE PRECEDENT DECIDED BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSTT. YEAR 2005 - 06 IN ITA NO. 18 14/DEL/2010 VIDE ORDER DATED 23.8.2013 , WE RESTORE BACK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING THE ISSUE DE - NOVO, IN TERMS OF THE ABOVE DECISION DATED 23.8.2013 OF THE TRIBUNAL. 8. IN THE RESULT, THE ASSESSEE S ITA NO. 5939/ MUM L/20 08 (A.Y. 2001 - 02) IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ASSESSE S APPEAL NO. 2425/DEL /20 11 (A.Y. 2001 - 02) 9 . THE FACTS NARRATED FOR THE ASSTT. YEAR 2001 - 02 BY THE REVENUE AUTHORITY ARE NOT DISPUTED BY BOTH PARTIES, THEREFORE, NO NEED TO REPEAT THE SAME FOR THE SAKE OF CONVENIENCE. THE AO COMPLETED THE ASSESSMENT U/S 143(3)/147 OF THE INCOME TAX ACT, 1961 ON 23.3.2004 AND MADE THE VARIOUS ADDITIONS AND SUBSEQUENTLY MADE IMPOSED THE PENALTY OF RS. 6.40,046/ - U/S. 271(1)(C) OF THE I.T. ACT VIDE H IS ORDER DATED 16.3.2010. 10 . AGAINST THE PENALTY ORDER OF THE AO DATED 16 /3/20 10 ASSESSEE FILED AN APPEAL BEFORE THE ID. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER DATED 17 / 2 /20 11 DISMISSED THE APPEAL OF THE ASSESSEE. NOW THE ASSESSEE IS A GGRIEVED AGAINST THE IMPUGNED ORDER AND FILED THE APPEAL BEFORE THE TRIBUNAL. 11. LD. COUNSEL OF THE ASSESSEE FILED A PAPER BOOK CONTAINING THE ITE M NO. 1 TO 6 HAVING THE ORDERS OF THE HON BLE SUPREME COURT, DELHI HIGH COURT AND TRIBUNALS ORDERS COVERIN G THE ISSUES RAISED BY THE ASSESSEE IN THE APPEAL. 11 .1 W E FIND THAT THE AO HAS OBSERVED THAT IN RESPONSE TO PENALTY SHOW CAUSE, THE ASSESSEE HAS CLAIMED THAT THE AMOUNT OF RS. ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 11 16,18,319/ - DEBITED ON ACCOUNT OF PROVISION OF DOUBTFUL DEBTS REPRESENTE D GENUINE BUSINESS EXPENDITURE ALLOWABLE U/S. 37(1) OF THE ACT. AO FURTHER OBSERVED THAT THE ASSESSEE HAS CLAIMED THAT NO PENALTY CAN BE LEVIED ON THIS ADDITION. AO FURTHER OBSERVED THAT THERE IS NO FORCE IN THE CONTENTION OF THE ASSESSEE OF RS. 1 6,18,319/ - WAS NOT ALLOWABLE TO THE ASSESSEE, STILL IT WAS CLAIMED TO REDUCE THE TAX LIABILITY. THOUGH AN APPEAL WAS FILED AGAINST THE ASSESSMENT ORDER BUT THIS ADDITION WAS NOT PRESSED MEANING THEREBY THAT THE ASSESSEE HAS ACCEPTED THE STAND OF THE DEPART MENT AND ALSO THAT THE CLAIM WAS WRONGLY MADE. AO HAS HELD THAT IN VIEW OF THIS, APPARENTLY THERE IS NO FORCE IN THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT IN QUESTION IS A GENUINE BUSINESS EXPENDITURE ALLOWABLE U/S. 37(1) OF THE ACT. AFTER HAVING CONSIDERED ALL RELEVANT FACTS OF THE CASE IT IS HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF RS. 16,18,319/ - AND HENCE PROVISIONS OF SECTION 271(1)(C) ARE CLEARLY APPLICABLE IN THIS CASE. IT IS ACCORDINGLY HELD T HAT THE ASSESSEE HAS COMMITTED DEFAULT UNDER THE PROVISIONS OF SECTION 271(1)(C) FOR WHICH PENALTY OF RS. 6,40,046/ - WAS IMPOSED UPON THE ASSESSEE. WE FIND THAT LD. CIT(A) HAS OBSERVED THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND HAS ACCEPTED THE FACT THAT IT HAD MADE A CLAIM WHICH WAS NOT CORRECT IN LAW. FURTHER IN ITS SUBMISSION THE APPELLANT HAS FAILED TO JUSTIFY OR GIVE A PLAUSIBLE EXPLANATION AS TO WHY IT DID NOT MAKE A DISALLOWANCE WHICH WAS MANDATORY ON ITS PART TO MAKE AS P ER THE INCOME TAX ACT. AS SUCH THE EXPLANATION ONE TO SECTION 271(1)(C) COMES INTO PLAY AND THE ASSESSEE IS LIABLE TO PENALTY, THUS THE PENALTY OF RS. 6,40,046/ - IMPOSED ON THE ASSESEE U/S 271(1)(C) IS HEREBY UPHELD. ON THE CONTRARY, LD. COUNSEL OF THE A SSESSEE SUBMITTED THAT KEEPING IN VIEW OF THE ARGUMENTS MADE IN ITA NO. 5939/MUM/2008 AS AFORESAID, THE PENALTY IMPOSED AND CONFIRMED BY THE LD. CIT(A) MAY BE QUASHED. LD. DR DID NOT HAVE RAISED ANY OBJECTION TO THIS PROPOSITION. SINCE WE HAVE ALREADY S ET ASIDE THE ADDITION TOWARDS PROVISION FOR DOUBTFUL DEBTS AS AFORESAID VIDE PARA NO. 7 TO 7.3, THE PENALTY LEVIED ON THIS ACCOUNT IS HEREBY QUASHED ACCORDINGLY. ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 12 12. IN THE RESULT, THE ASSESSEE S ITA NO. 2425/DEL/2011 (A.Y. 2001 - 02) IS ALLOWED. ASSESSE S APPEAL NO. 5939/MUM/2008 (A.Y. 200 4 - 0 5 ) 13 . THE FACTS NARRATED FOR THE ASSTT. YEAR 200 4 - 0 5 BY THE REVENUE AUTHORITY ARE NOT DISPUTED BY BOTH PARTIES, THEREFORE, NO NEED TO REPEAT THE SAME FOR THE SAKE OF CONVENIENCE. THE AO COMPLETED THE ASSE SSMENT U/S 143(3) OF THE INCOME TAX ACT, 196 1 AND MADE THE VARIOUS ADDITIONS. 14 . AGAINST THE ORDER OF THE AO ASSESSEE FILED AN APPEAL BEFORE THE ID. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER DATED 1 6 / 6 /2008 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW THE ASSESSEE IS AGGRIEVED AGAINST THE IMPUGNED ORDER AND FILED THE APPEAL BEFORE THE TRIBUNAL.. 15 . LD. COUNSEL OF THE ASSESSEE FILED A PAPER BOOK CONTAINING THE ITEM NO. 1 TO 6 HAVING THE ORDERS OF THE HON BLE SUPREME COURT, DELHI HIGH COU RT AND TRIBUNALS ORDERS COVERING THE ISSUES RAISED BY THE ASSESSEE IN THE APPEAL. WE FIND THAT AT THE THRESHOLD LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THAT THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSTT. YEAR 2005 - 06 IN ITA NO. 1814/DEL/2010 VI DE ORDER DATED 23.8.2013 HAS SET ASIDE THE ISSUE TO THE AO TO EXAMINE THE DE - NOVO, IN LIGHT OF THE HON BLE SUPREME COURT DECISION. LD. DR DID NOT HAVE ANY OBJECTION TO THIS REQUEST. SINCE WE HAVE ALREADY DECIDED THE SIMILAR ISSUE IN FAVOR OF THE ASSESSEE T O SET ASIDE THE ISSUE TO THE AO VIDE PARA NO. 7 TO 7.3 OF THIS ORDER WHILE DEALING THE ITA NO. 5939/MUM/2008 (A.Y. 2001 - 02), HENCE, WE ALSO SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH THE SIMILAR DIRECTIONS , AS MADE ABOVE. 16. THE NEXT GROUND IS RELATED TO CONFIRMING THE DISALLOWANCE OF PROVISION FOR CONTRACTUAL OBLIGATIONS AMOUNTING TO RS. 36,362/ - . WE FIND THAT THE AO HAS DISALLOWED A SUM OF RS. 36,362/ - AS A PROVISION MADE TOWARDS CONTRACTUAL OBLIGATIONS. THE AO HAS DISALLOWED THE AMOUNT ON SIMILAR REASONING WHILE MAKING DISALLOWANCE OF WARRANTY PROVISION. AO OBSERVED THAT T HE A/R ALSO CLAIMED FOR ALLOWANCE OF EXPENSES TOWARDS CONTRACTUAL OBLIGATION FOR SIMILAR WAY AS WARRANTY PROVISION HAS BEEN ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 13 ALLOWED BY THE ITAT IN ITS OWN CASE FOR TH E ASSTT. YEAR (2002 - 03). WE FIND THAT LD. CIT(A) HAS CONSIDERED THE CONTENTION OF ASSESSEE S COUNSEL AND THE SAME WAS NOT ACCEPTABLE BECAUSE THIS YEAR THE CLAIM MADE FOR RS. 36,362/ - IS MERELY ON PROVISION ON ADHOC BASIS AND THE ASSESSEE HAS NOT BEEN ABLE TO ADVANCE ANY REASON / EXPLANATION WHICH COULD JUSTIFY THE CLAIM AS MADE. THEREFORE, THE CLAIM OF ASSESSEE IS NEGATIVE AND ADDITION OF RS. 36,362/ - AD MADE BY THE AO IS HEREBY CONFIRMED BY THE LD. CIT(A). WE FIND THAT LD. COUNSEL OF THE ASSESSEE D URING THE HEARING HAS SUBMITTED THAT THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSTT. YEAR 2005 - 06 IN ITA NO. 1814/DEL/2010 VIDE ORDER DATED 23.8.2013 SET ASIDE THE ISSUE TO THE AO TO EXAMINE THE DE - NOVO, IN LIGHT OF THE TRIBUNAL S DECISION FOR THE AS STT. YEAR 1998 - 99. THE TRIBUNAL HAS ADJUDICATED THE ISSUE AS UNDER: - 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE RECORD OF THE CASE. WE FIND SUBSTANCE IN THE SUBMISSION OF THE LD DR THAT SINCE THE TRIBUNAL S ORDER IS DATED 29.12.200 8 THE SAME SHOULD HAVE BEEN BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER. LD COUNSEL IN THE COURSE OF HEARING SUBMITTED THAT THERE IS REFERENCE TO TRIBUNAL S ORDER IN THE ASSESSMENT ORDER BUT WE DO NOT FIND ANY SUCH REFERENCE IN THE ASSESSMENT ORDER. FUR THER, LD CIT(A) HAS ALSO NOT TAKEN INTO CONSIDERATION THE EFFECT OF DECISION OF TRIBUNAL AND HAS MERELY CONFIRMED THE ASSESSING OFFICER S ACTION. UNDER SUCH CIRCUMSTANCES, IT WOULD BE IN THE INTEREST OF JUSTICE THAT THE MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ISSUE DE NOVO IN THE LIGHT OF THE TRIBUNAL S DECISION FOR THE ASSESSMENT YEAR 1998 - 99 WHEREIN TRIBUNAL OBSERVED AS UNDER: ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 14 4.3 THE THIRD GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED WITHOUT APPRECIATING THE FACT OF THE CASE IN CONFIRMING THE DISALLOWANCE OF RS. 62,36,462/ - OUT OF PROVISION FOR CONTRACTUAL OBLIGATION CLAIMED BY THE ASSESSEE. 4.5 THE ASSESSEE H AD CLAIMED AN AMOUNT OF RS. 2,63,71,552 ON ACCOUNT OF PROVISION FOR CONTRACTUAL OBLIGATION. THE AMOUNT REPRESENTED EXPENDITURE TO BE INCURRED IN RESPECT OF PROJECTS COMPLETED DURING THE YEAR UNDER CONSIDERATION. SUCH EXPENDITURE INCLUDES, LIQUIDATED DAMAGE S, PROVISIONS FOR MATERIAL, LABOUR AND OTHER EXPENSES, WHICH ARE DUE TO BE SPEND BY THE ASSESSEE - COMPANY IN VIEW OF PENDING CONTRACTUAL OBLIGATIONS. THE AMOUNT OF CLAIMS MADE BUT NOT ACCEPTED BY THE CUSTOMERS AS WELL AS LIQUIDATED PAGE NO. 6 DAMAGES DEDUCT ED BY THE CUSTOMERS ARE ALSO COVERED UNDER THE PROVISIONS OF CONTRACTUAL OBLIGATIONS. 4.6 THE ASSESSING AUTHORITY IN FACT DISALLOWED AN AMOUNT OF RS. 62,36,462 FROM THE CLAIM MADE BY THE ASSESSEE. WHAT HAS BEEN ALLOWED BY THE ASSESSING AUTHORITY IS THE AM OUNT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS THE CONTRACTUAL OBLIGATIONS. 4.7 THE FACT THAT THE ASSESSEE HAD INCURRED A SIZABLE PORTION OF THE PROVISION AS EXPENDITURE AND THE SAME HAS BEEN ALLOWED ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 15 BY THE ASSESSING AUTHORITY ITSELF IS SUPPO RTING THE CLAIM OF THE ASSESSEE THAT THE EXPENSES ARE ACCRUED AND THE LIABILITY ASCERTAINED AND THE PROVISIONS ARE MADE ON FACTUAL BASIS AND THEY WERE NOT IN THE NATURE OF ANY CONTINGENCY OF FUTURE EXPENSES. THE LEGAL CHARACTER OF THE PROVISION FOR CONTRAC TUAL OBLIGATION IS IN A WAY SIMILAR TO THE PROVISION FOR WARRANTY/ GUARANTEE. THEREFORE, THE DISCUSSION MADE IN RESPECT OF THE ISSUE REGARDING PROVISION OF WARRANTY EQUALLY APPLIES TO THE PROVISION FOR CONTRACTUAL OBLIGATIONS ALSO. THERE IS NO DOUBT THAT T HE ASSESSEE HAS TO INCUR EXPENDITURE TOWARDS THE CONTRACTUAL OBLIGATIONS PERTAINING TO THE COMPLETED PROJECTS. THIS IS EVIDENT FROM THE FACT THAT THE ASSESSING OFFICER HIMSELF HAS DISALLOWED ONLY RS. 62,36,462 AS AGAINST THE TOTAL CLAIM OF RS. 2,63,71,552 MADE BY THE ASSESSEE - COMPANY. IT SHOWS THAT THE ASSESSEE HAS ALREADY INCURRED A MAJOR PORTION OF THE PROVISION BY WAY OF ACTUAL EXPENDITURE. THEREFORE, WE DO NOT FIND ANY REASON TO DISALLOW THE BALANCE PORTION OF RS. 62,36,462. THE SAID DISALLOWANCE IS DEL ETED. THE ASSESSING AUTHORITY IS DIRECTED TO ALLOW THE AMOUNT IN FULL. 10. IN THE RESULT THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. 16.1 LD. DR DID NOT HAVE RAISED ANY OBJECTION TO THIS REQUEST OF THE LD. COUNSEL OF THE ASSESSEE. ITA NO. 5519 & 5939 / M / 2008 & 2425/DEL/2011 16 16.2 WE HAVE HEA RD BOTH PARTIES AND PERUSED THE RELEVANT RECORD AVAILABLE WITH US SPECIALLY THE IMPUGNED ORDER PASSED BY THE REVENUE AUTHORITIES; PAPER BOOK FILED BY THE ASSESSEE, WE ARE OF THE VIEW THAT REQUEST MADE BY THE LD. COUNSEL OF THE ASSESSEE SEEMS TO BE GENUINE , BECAUSE ITAT HAS ALREADY SET ASIDE THE ISSUE IN DISPUTE DENOVO TO THE AO. RESPECTFULLY, FOLLOWING THE PRECEDENT DECIDED BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSTT. YEAR 2005 - 06 IN ITA NO. 1814/DEL/2010 VIDE ORDER DATED 23.8.2013 , WE RESTORE BA CK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING THE ISSUE DE - NOVO, IN TERMS OF THE ABOVE DECISION DATED 23.8.2013 OF THE TRIBUNAL. 17 . IN THE RESULT, THE ASSESSEE S ITA NO. 5519/MUM/2008 (A.Y. 2004 - 05) IS ALLOWED FOR STATISTICAL PURPOSES. 1 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE BEING ITA NO. 5939/MUM/2008 (A.Y. 2001 - 02) IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA NO . 2425/DEL/2011 (A.Y. 2001 - 02) STANDS ALLOWED AND THE ITA NO. 5519/MUM/2008 (A.Y. 2004 - 05) IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 30 - 1 - 201 5 . SD/ - SD/ - [ J.S. REDDY] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 30 / 1 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES