M/s. Imperial Auto Industries Ltd., New Delhi V. DCIT, Faridabad

ITA 6633/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4463 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N MEENA
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 6633/DEL/2016 : ASSTT. YEAR : 2 011-12 M/S IMPERIAL AUTO INDUSTRIES LTD., RRA TAXINDIA, D-28, SOUTH EXTENSION, PART-I, NEW DELHI-11049 VS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, FARIDABAD (APPELLANTT (RESPONDENT) PAN NO. AAACI0645J ASSESSEE BY : SH. SOMIL AGGARWAL, CA REVENUE BY : SH. S. N. MEENA, SR. DR DATE OF HEARING: 25.02.2020 DATE OF PRONOUNCEMENT: 26.02.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDERS OF THE LD. CIT(A)-44, NEW DELHI DATED 16 .08.2016. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN UPHOLDING THE ACTION OF THE LD. A.O. IN MAKING A DISALLOWANCE OF RS.5,75,145/- ON ACCOUNT OF SHORT & EXCESS RECOVERIES THAT TOO WITHOUT ANY BASIS AND MERELY ON THE BASIS OF SURMISES AND CONJECTURES. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD . AO IN MAKING A DISALLOWANCE OF RS. 5,75,145/- IS BAD I N LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 6633/DEL/2016 IMPERIAL AUTO INDUSTRIES LTD. 2 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ACTION OF LD. A.O. IN MAKING DISALLOWANCE TO THE EXTENT OF RS.5,00,000/- ON ACCOUNT OF BUSINESS PROMOTION EXPENSES HOLDING THE SAME TO HAVE BEEN INCURRED ALLEGEDLY FOR NON BUSINE SS PURPOSE THAT TOO WITHOUT ANY BASIS AND MERELY ON TH E BASIS OF SURMISES AND CONJECTURES. 3. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE AT THE VERY OUTSET STATED THAT THE ISSUE A T GROUND NO. 1 PERTAINING TO BAD DEBTS (SHORT AND EXCESS RECOVER Y) IS SQUARELY COVERED IN ASSESSEES FAVOUR VIDE ORDER DA TED 14.09.2018 IN ITA NO.6632/DEL/2016 FOR THE ASSESSME NT YEAR 2009-10 IN ASSESSEES OWN CASE. 4. THE LD. SR. DR ALTHOUGH SUPPORTED THE ORDER OF T HE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF TH E LD. COUNSEL FOR THE ASSESSEE. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. I N THE PRESENT CASE, IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEES APPEAL IN IT A NO.6632/DEL/2016, THE RELEVANT FINDINGS HAVE BEEN G IVEN IN PARA 5 WHICH READ AS UNDER: 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. T HE BRIEF FACTS OF THE DISALLOWANCE IS THAT ASSESSEE IDENTIFI ES AT THE END OF THE YEAR THE LEDGER BALANCES OF THE TRADE CR EDITORS AND DEBTORS AND WHEN SMALL AMOUNTS ARE INVOLVED IN THOSE ACCOUNTS, THEN THEY ARE CLUBBED TOGETHER. SUCH AMOU NT MAY BE EITHER THE CREDIT OR DEBIT. ON THE NATURE OF THE FINAL BALANCES, IT IS WRITTEN OFF IF THE DEBIT ACCO UNTS ARE IN EXCESS AND IT IS WRITTEN BACK IF CREDIT AMOUNTS ARE IN EXCESS. THIS PRACTICE IS FOLLOWED BY THE ASSESSEE E VERY YEAR. THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUB MITTED A CHART FROM ASSESSMENT YEAR 2005-06 TO ASSESSMENT YEAR ITA NO. 6633/DEL/2016 IMPERIAL AUTO INDUSTRIES LTD. 3 2014-15 WHEREIN ASSESSEE IS CONSISTENTLY FOLLOWING THIS PRACTICE OF WRITE OFF. ALL THE ASSESSMENT YEARS INV OLVED ARE ASSESSED UNDER SECTION 143(3) OF THE ACT AND IN FOU R PRIOR YEARS AND THREE SUBSEQUENT YEARS TO THE IMPUGNED ASSESSMENT YEAR THE CLAIM OF THE ASSESSEE IS ALLOWE D. EVEN OTHERWISE THE ABOVE AMOUNTS WRITTEN OFF ARE MO STLY PERTAINING TO THE SUNDRY DEBTORS AND CREDITORS. BEC AUSE OF THE SMALLNESS OF THE AMOUNT SOME ARE CLUBBED TOGETH ER AND ARE TRANSFERRED TO PROFIT AND LOSS ACCOUNT. IN THE EVENT IT IS DEBITED TO THE PROFIT AND LOSS ACCOUNT IT PAR TAKES THE CHARACTER OF EITHER DISCOUNT OR BAD DEBTS . IN THE PRESENT YEAR THE AMOUNT IS DEBITED TO THE PROFI T AND LOSS ACCOUNT, THEREFORE, NATURALLY IT PAR TAKES THE CHARACTER OF DISCOUNT OR WRITE OFF OF THE BAD DEBT. BOTH THESE EXPENDITURE ARE ALLOWABLE AS DEDUCTION. IN VI EW OF ABOVE FACTS, WE DIRECT THE LEARNED ASSESSING OFFICE R TO DELETE THE DISALLOWANCE OF RS.3,09,792/- ON ACCOUNT OF SHORT AND EXCESS RECOVERIES. REVERSING THE ORDER OF THE LEARNED CIT (APPEALS) WE ALLOW GROUND NOS. 1 TO 3 O F THE APPEAL OF THE ASSESSEE. 6. HENCE, IN THE ABSENCE OF ANY MATERIAL CHANGE ON THE FACTS OF THE ISSUE THE, ADDITION IS HEREBY DELETED. 7. REGARDING THE SECOND GROUND PERTAINING TO DISALL OWANCE OF BUSINESS PROMOTION EXPENSES OF RS.5,00,000/-, THE L D. AR STATED THAT THE ISSUE IS SQUARELY COVERED IN ASSESS EES FAVOUR VIDE EARLIER ORDER DATED 15.12.2017 IN ITA NO.4604/ DEL/2016 FOR THE ASSESSMENT YEAR 2012-13 IN ASSESSEES OWN C ASE. 8. THE LD. SR. DR ALTHOUGH SUPPORTED THE ORDER OF T HE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF TH E LD. COUNSEL FOR THE ASSESSEE. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. I N THE PRESENT CASE, IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEES APPEAL IN IT A NO. ITA NO. 6633/DEL/2016 IMPERIAL AUTO INDUSTRIES LTD. 4 4604/DEL/2016, THE RELEVANT FINDINGS HAVE BEEN GIVE N IN PARA 5 WHICH READ AS UNDER: 5. WE HAVE CAREFULLY GONE THROUGH THE RECORD. IT I S AN UNDISPUTED FACT THAT NEITHER THE LD. AO NOT THE LD CIT(A) POINTED OUT ANY DISCREPANCY RELATING TO THE BUSINE SS PROMOTION EXPENSES WITH REFERENCE TO THE BOOKS OF ACCOUNTS OF THE ASSESSEE. BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT REJECTED. THOUGH, THE LD. AO AND F OR THAT MATTER LD. CIT(A) MADE THE AD HOC DISALLOWANCE , THERE DOES NOT APPEAR TO BE ANY BASIS FOR THE SAME. IT IS NOT IN DISPUTE THAT VIDE LETTER DATED 26/09/2014 TH E ASSESSEE HAS ALWAYS BEEN MAINTAINING THAT EXPENSES ARE PURELY AND COMPREHENSIVELY FURTHER BUSINESS PURPOSE . THERE IS NO DISPUTE THAT ANY OF THESE EXPENSES ARE NOT FOR BUSINESS PURPOSE. IT IS NOT THE CASE OF THE REVENUE THAT ANY OF THESE EXPENSES IS TOWARDS PERSONAL EXPENSE O F ANY PERSON RELATING TO THE ASSESSEE. IN THESE CIRCUMSTA NCES, WE FIND IT DIFFICULT TO SUSTAIN THE AD-HOC DISALLOW ANCE, IN THE ABSENCE OF AUTHORITIES POINTING OUT ANY DISCREP ANCY IN RESPECT OF THESE EXPENSES WITH REFERENCE TO THE BOO KS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. THERE IS NO BA SIS FOR QUANTIFYING THE DISALLOWANCE. WE, THEREFORE, FI ND IT DIFFICULT TO SUSTAIN THE ORDERS OF THE AUTHORITIES BELOW, AS SUCH, WHILE UPHOLDING THE CONTENTION OF THE ASSESSE E, WE FIND THAT THE DISALLOWANCE HAS TO BE DELETED. WE, ACCORDINGLY, DIRECT THE AO TO DELETE THE DISALLOWAN CE. 10. HENCE, IN THE ABSENCE OF ANY MATERIAL CHANGE ON THE FACTS OF THE ISSUE THE, ADDITION IS HEREBY DELETED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/02/2020. SD/- SD/- (H. S. SIDHU) (D R. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUN TANT MEMBER DATED: 26/02/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR