ACIT, New Delhi V. M/s Designed Products Ltd., New Delhi

ITA 601/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4292 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: M K GIRI
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.601/DEL/2011 ASSESSMENT YEAR : 2006-07 ACIT, DESIGNED PRODUCTS LTD., CIRCLE-10 (1), T-24, OKHLA INDL. AREA, NEW DELHI. V. PHASE-II, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACD AAACD AAACD AAACD- -- -167 167 167 167- -- -G GG G APPELLANT BY : MS. MONA MOHANTY, SR. DR. RESPONDENT BY : SHRI M.K. GIRI, ADVOCATE. ORDER PER A.K. GARODIA, AM: THIS IS REVENUE'S APPEAL FILED AGAINST THE ORDER OF LD CIT(A)-XIII, NEW DELHI DATED 13.12.2010 FOR ASSESSMENT YEAR 2006-07. 2. GROUND NO.1 IS GENERAL. GROUND NO.2 OF THE APPEAL IS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER U/S 2(24)(X) READ WITH SECTION 36 OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF `.4269/- IN RESPECT OF EMPLOYEES CONT RIBUTION TO PROVIDENT FUND WHICH WAS DEPOSITED LATE BY THE ASSESSEE. BEING PAGE 2 OF 7 ITA NO.601/DEL/11 AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE LD CIT (A). HE HAS DELETED THIS DISALLOWANCE BY FOLLOWING THE JUDG MENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF AIMIL LTD. AS REPORTED IN 321 ITR 508. NOW, THE REVENUE IS IN APPEAL BEFORE US. 4. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER W HEREAS LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. SINCE LD CIT(A) HAS DE CIDED THIS ISSUE BY FOLLOWING THE JUDGMENT OF HON'BLE JURISDICTIONAL HI GH COURT RENDERED IN THE CASE OF AIMIL LTD. (SUPRA) AND HENCE, WE HOLD THA T THERE IS NO INFIRMITY IN THE ORDER OF LD CIT(A) ON THIS ISSUE. THI S GROUND OF THE REVENUE IS REJECTED. 6. GROUND NO.3 OF THE APPEAL IS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF PENAL PAYMENT. 7. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT AS PER THE AUDIT REPORT GI VEN BY THE AUDITOR OF THE ASSESSEE COMPANY, IT IS MENTIONED THAT U NDER THE HEAD QUOTA PROCUREMENT CHARGES, THE ASSESSEE HAS DEBITED PENA LTY OF `.8,96,975/-THE ASSESSING OFFICER HELD THAT THIS AMOUNT BEING PENAL IN NATURE IS NOT ALLOWABLE AS PER THE IT ACT. ACCORDING LY, HE DISALLOWED THE SAME. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE LD CIT (A). BEFORE LD CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT THIS AMOUNT IS ACTUALLY BAD DEBTS WRITTEN OFF DUR ING THIS YEAR AND IT PAGE 3 OF 7 ITA NO.601/DEL/11 DOES NOT PERTAIN TO ANY PAYMENT MADE TOWARDS INFRACT ION OF LAW. IT WAS SUBMITTED THAT DUE TO CLERICAL ERROR, THE SAME HAS BEE N SHOWN AS QUOTA PROCUREMENT CHARGES INSTEAD OF BAD DEBTS WRITTEN OFF. THE ASSESSEE HAS ALSO FURNISHED LEDGER ACCOUNT OF THE PARTIES WHOSE ACCOUNTS HAD BEEN WRITTEN OFF DURING THE YEAR. LD C IT(A) OBTAINED REMAND REPORT FROM THE ASSESSING OFFICER. IT IS NOTED BY THE LD CIT(A) ON PAGE NO.6 OF HIS ORDER THAT THE ASSESSING OFFICER IN ITS REMAND REPORT DATED 29.3.2010 HAS SUBMITTED THAT THE ASSESSEE H AS NOT DISCLOSED THIS FACT AT THE TIME OF HEARING. LD CIT(A) HAS DELETED THIS ADDITION ON THIS BASIS THAT THE AMOUNT IN QUESTION WAS A CTUALLY BAD DEBTS WRITTEN OFF AND IS NOT A PENALTY. NOW, THE REV ENUE IS IN APPEAL BEFORE US. 8. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER W HEREAS LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THIS CLEAR FINDING OF LD CIT(A) THAT THE AMOUNT IN QUESTION IS RELATED TO BAD DEBTS WR ITTEN OFF, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) ON THIS ISSUE BECAUSE LD CIT(A) HAS OBTAINED REMAND REPORT ALSO BEFORE DECIDIN G THIS ISSUE. HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD C IT(A) ON THIS ISSUE. THIS GROUND IS ALSO REJECTED. 10. GROUND NO.4 OF THE APPEAL IS AS UNDER:- 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF INTEREST EXPENSES. PAGE 4 OF 7 ITA NO.601/DEL/11 11. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY TH E ASSESSING OFFICER ON PAGE NO.3 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS T AKEN UNSECURED LOAN FROM FINANCIAL INSTITUTIONS ETC. ON WH ICH INTEREST OF `.886081/- HAS BEEN PAID. THE ASSESSING OFFICER HAS NOTE D THAT THE LOAN IN QUESTION TAKEN BY THE ASSESSEE WAS `.48,23,598/- WHICH IS ALMOST SAME BEING THE LOAN GIVEN BY THE ASSESSEE TO ITS TWO SISTER CONCERNS OF `.47,58,131/-. THE ASSESSING OFFICER DISALLO WED INTEREST EXPENSES BY HOLDING THAT INTEREST EXPENSES WERE NOT INCU RRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. BEING AGGRIEVED, T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT (A) . LD CIT(A) HAS DELETED THIS DISALLOWANCE BY HOLDING THAT THERE IS NO DIRECT RELATION BETWEEN THE LOAN TAKEN BY THE ASSESSEE FROM THE BANK FO R ITS BUSINESS OPERATION DURING THE PRESENT YEAR AND THE INTEREST FR EE LOAN/ADVANCE TO ITS SISTER CONCERN IN EARLIER YEARS. NOW, THE REVEN UE IS IN APPEAL BEFORE US. 12. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT WAS A SUBMISSION OF THE ASSESSEE BEFORE LD CIT(A) THAT THE OUTSTANDING LOAN PAY ABLE TO CANARA BANK AS ON 31.34.2006 OF `.38,54,929/- HAS BEEN TAKE N BY THE ASSESSEE DURING THE CURRENT YEAR STARTING FROM 6.10.200 5 AND THE OTHER LOAN OUTSTANDING OF `.96860.79 AS ON 31.3.2006 IS STAND ING IN THE BOOKS IN THE FORM OF CAR LOAN FROM ICICI BANK LTD. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE LD CIT(A) THAT THE FUN DS ADVANCED TO M/S COGITO TECHNOLOGIES LTD OF `.16,18,131/- WERE ADV ANCED BEFORE THE FINANCIAL YEAR 2002-03 AND THE AMOUNT ADVANCED TO O THER COMPANY I.E. M/S SHAHOTWALE INDUSTRIES LTD. OF `.31.40 LAKHS HAVE BE EN ADVANCED PAGE 5 OF 7 ITA NO.601/DEL/11 PARTLY IN 2003-04. `.4.40 LAKHS PARTLY IN FINANCIAL YEAR 2004-05 `.16.30 LAKHS AND PARTLY IN THE PRESENT YEAR OF `.10.70 LAKHS BUT BEFORE 25.8.2005. REGARDING THIS FACT, LD CIT(A) HAS OBTAIN ED REMAND REPORT FROM THE ASSESSING OFFICER ALSO. THE ASSESSING OFFICER HAS N OT CONTROVERTED THESE SUBMISSIONS OF THE ASSESSEE AND HE HAS MER ELY STATED IN THE REMAND REPORT THAT NO SUCH DATE AND DET AILS WERE MADE AVAILABLE BY THE ASSESSEE AT THE TIME OF HEARING AND T HE ASSESSEE HAS MADE ANOTHER TWIST IN THE CASE AND THEREFORE, THESE CO NTENTIONS OF THE ASSESSEE SHOULD BE REJECTED. IT SHOWS THAT THESE FACTS COULD NOT BE CONTROVERTED BY THE ASSESSING OFFICER AND HENCE, THE SAM E CANNOT BE IGNORED. PART OF OUTSTANDING LOAN PAYABLE BY THE ASSESS EE TO ICICI BANK LTD. IS IN RESPECT OF CAR LOAN AND HENCE IT CANNOT B E ACCEPTED THAT THE SAME WAS DIVERTED BY THE ASSESSEE AS INTEREST FREE ADVANCE TO ITS SISTER CONCERN. THE OTHER OUTSTANDING AMOUNT OF `.38.5 4 LAKHS HAS BEEN OBTAINED BY THE ASSESSEE COMPANY DURING THE CURREN T YEAR STARTING FROM 6.10.2005 WHEREAS THE INTEREST FREE ADVA NCES WERE GIVEN BY THE ASSESSEE EITHER IN EARLIER YEARS OR PRIOR TO THIS DATE IN THE PRESENT YEAR AND HENCE, THERE IS NO DIRECT NEXUS OF TH IS INTEREST BEARING BORROWED FUNDS WITH THE INTEREST FREE ADVANC ES GIVEN BY THE ASSESSEE. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A) ON THIS ISSUE ALSO. THIS GROUND OF THE REVENUE IS ALSO REJECTED. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 15. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY O F 13 TH APRIL, 2011. SD/- SD/- (I.P. BANSAL) (A.K. GAR ODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 13.4.2011. HMS PAGE 6 OF 7 ITA NO.601/DEL/11 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING DATE OF DICTATION DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. DATE OF ORDER SENT TO THE CONCERNED BENCH PAGE 7 OF 7 ITA NO.601/DEL/11