INCOME TAX OFFICER, WARD-6(3)(1), MUMBAI V. HEMA MARINE SERVICES PVT.LTD., MUMBAI

ITA 6702/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7633 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 02-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 20-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K PAHWALKESHAV PRASAD
• Keywords: Reasonable cause; Bad and doubtful debts; Tax effect; TDS
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI D. K. AGARWAL, JM AND SHRI T.R. SOOD, AM I.T.A.NO. 6702/MUM/2008 ASSESSMENT YEAR: 2005-06 THE INCOME-TAX OFFICER, WARD 6(3)(1), R.NO. 558, AAYAKAR BHAWAN, M.K. ROAD, NEW MARINE LINES, MUMBAI 400 020. VS. M/S. HEMA MARINE SERVICES PVT. LTD., 505, BHARAT CHAMBERS, CARNAC BUNDER , BARODA STREET, MUMBAI 400 009. PAN: AAACH 2029 K (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI S.K. PAHWAL/KESHAV PRASAD RESPONDENT BY : NONE O R D E R PER T.R. SOOD, AM: IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 4,41,8 27/- MADE ON ACCOUNT OF BAD DEBTS BY OBSERVING THAT THESE WER E IN THE NATURE OF DISCOUNT AND REBATES AND COULD NOT BE TRE ATED AS BAD DEBTS, WITHOUT APPRECIATING THE FACT THAT THE W RITE OFF WAS IN RESPECT OF BAD DEBTS AND NOT IN THE NATURE OF SE TTLEMENT OF THE BILLS AND THE ASSESSEE DID NOT SATISFY THE COND ITION FOR DEDUCTION AS LAID DOWN IN SECTION 3691)(VII) R.W.S. 36(2) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 82,61, 647/- MADE BY THE A.O. U/S.40(A)(IA) BY HOLDING THAT THE AMOUN T REPRESENTED FREIGHT PAYMENT ON WHICH TDS PROVISIONS ARE NOT APPLICABLE, BY ADMITTING THE ADDITIONAL DETAILS SUB MITTED BY THE ASSESSEE DURING APPELLATE PROCEEDINGS WHICH ARE IN CONTRAVENTION OF RULE 46A OF I.T.RULES, 1962. 2. IN THIS CASE NOTICE WAS ISSUED THROUGH R.P.A.D. AND DESPITE NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE. THEREFORE, WE P ROCEED TO DECIDE THE ISSUES ON EX PARTE BASIS. 3. AS FAR AS GROUND NO. 1, AFTER CONSIDERING THE SU BMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE AND THE RELEVANT MATERI AL ON RECORD, WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS WHILE EXAMINING T HE DETAILS OF CERTAIN ITA NO.6702/M/08 M/S. HEMA MARINE SERVICES P.LTD.. 2 EXPENSES, THE ASSESSING OFFICER FOUND THAT MOST OF THE ITEMS OF EXPENDITURE DEBITED UNDER THE HEAD DISCOUNT & REBATES WERE T HE AMOUNTS WRITTEN OFF IN RESPECT OF VARIOUS DEBTORS. AFTER DETAILED DISCUSS ION, HE DISALLOWED THE SAME BEING IN THE NATURE OF BAD DEBT BECAUSE THE SAME WERE NOT ACCOUNTED FOR WHILE RETURNING THE INCOME UNDER SECTION 36(2). 4. ON APPEAL BEFORE THE CIT(A), IT WAS MAINLY SUBMI TTED THAT DISCOUNTS AND REBATES WERE MORE LIKE SALES RETURN AND SUCH DISCOU NTS WERE GIVEN BECAUSE OF DISPUTES IN RESPECT OF PAYMENTS RECEIVED FROM THE C LIENTS BY ISSUE OF CREDIT NOTES ON ACCOUNT OF EXCHANGE RATE DIFFERENCE, HIGHER FREI GHT RATES, ETC. 5. LEARNED CIT(A) DELETED THE ADDITION VIDE PARA 2 .3 WHICH READS AS UNDER: I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A.R. AND I AGREE THAT THE SUBMISSIONS OF THE A.R. THAT DISCOUNT AND REBAT ES CANNOT BE TREATED AS BAD DEBTS. THE ASSESSEE HAS CLAIMED CERT AIN DISCOUNTS AND REBATES OUT OF BILLS SETTLED BY CLIENTS AND THEY AR E NOT EXACTLY BAD DEBTS. HENCE, THE CLAIM OF THE APPELLANT IS REQUIRE D TO BE ALLOWED. THE A.O. IS DIRECTED TO DELETE THIS ADDITION. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDITION BECAUSE THERE WAS NO LOGIC IN TREATING THE SAME AS CLAIM FOR BAD DEBTS. IF SOMEBODY HAS MADE A PAYMENT AND BECAUSE OF FOREIGN EXCHANGE SOME LESSOR CREDIT IS GIVEN TO THE PARTY. NATURALLY, SUCH PART Y WILL NOT MAKE PAYMENT FOR SUCH SMALL BALANCE AND OBVIOUSLY ASSESSEE WILL HAVE TO F ORGO FOR THE CLAIM. THEREFORE, THE EXPENDITURE UNDER THAT DISCOUNT AND REBATES COU LD NOT HAVE BEEN TREATED AS BAD DEBT. THUS, WE FIND NOTHING WRONG IN THE ORDER OF THE LEARNED CIT(A) AND CONFIRM THE SAME. 7. AS FAR AS GROUND NO.2 IS CONCERNED, AFTER CONSID ERING THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE AND THE REL EVANT RECORD, WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER NOTICED THAT TDS IN RESPECT OF THE FOLLOWING ITEMS OF EXPENDITURE EITHE R WAS NOT MADE OR MADE IN THE SUBSEQUENT YEAR: ITA NO.6702/M/08 M/S. HEMA MARINE SERVICES P.LTD.. 3 NATURE OF EXPENSE GROSS AMOUNT OF EXPENDITURE[RS.] DATE OF PAYMENT DATE OF CREDIT OF TDS. BROKERAGE,LUDHIANA 1,95,335 31.3.05 21.7.05 NDS LUDHIANA 48,603 31.3.05 2 5.07.05 CONTRACT, JAIPUR 2,33,349 31.3.05 20.07 .05 & 21.07.05 PROFESSIONAL FEES 2,48,560 31.3.05 22.07.05 BROKERAGE, MUMBAI 3,697 31.3.05 21.07.05 CONTRACT, MUMBAI 3,44,785 31.3.05 20.07.05, 2 1,07,05 & 26.07.05 NDS MUMBAI 11,005 14.03.05 21.0 7.05 PROFESSIONAL 88,600 31.03.05 2 0.07.05 NDS, NOIDA 4,58,612 30.11.04 25. 07.05 NDS, NOIDA 14,44,737 02.12.04 N OT PAID NDS, NOIDA 9,62,440 02.12.04 NO T PAID NDS, NOIDA 19,27,198 02.12.04 NOT PAID NDS, NOIDA 2,04,545 08.12.04 NO T PAID NDS, NOIDA 2,04,545 08.12.04 N OT PAID NDS, NOIDA 6,88,995 31.12.04 N OT PAID NDS, NOIDA 8,16,029 31.12.04 NO T PAID NDS, NOIDA 12,46,651 18.01.05 N OT PAID NDS, NOIDA 7,66,507 28.02.05 NO T PAID BROKERAGE, NOIDA 37,654 31.03.05 19.07.05, 21.07.05 99,31,847 8. ON THE BASIS OF NON-DEDUCTION OF TDS, THIS EXPEN DITURE WAS DISALLOWED UNDER SECTION 40(A)(IA). 9. BEFORE THE LEARNED CIT(A) FOLLOWING SUBMISSIONS WERE MADE VIDE PARA 3.2, WHICH READS AS UNDER: THE A.R. SUBMITTED THAT THE A.O. IS NOT JUSTIFIED IN DISALLOWING A SUM OF RS. 99,31,847/- U/S.40(A)(IA). HE CLARIFIED THAT OUT OF THIS AMOUNT, A SUM OF RS. 82,61,647/- IS FREIGHT PAYMENT S TO SHIPPING LINE FOR WHICH TDS PROVISIONS ARE NOT APPLICABLE AS THESE PAYMENTS ARE COVERED U/S.172. HE RELIED ON THE DECISION OF D ELHI TRIBUNAL IN THE CASE OF ACIT V. MODICON NETWORK (P) LTD. IN RES PECT OF THE REST OF THE EXPENDITURE HE CLAIMED THAT AN AMOUNT OF RS. 16,70,200/- WAS PAID IN JULY 2005 I.E. BEFORE FILING THE RETURN OF INCOME. UNDER THE AMENDED PROVISIONS OF SECTION 40(A)(IA) TDS IS ALLOWED IF THE SAME IS PAID BEFORE THE FILING OF RETURN OF INCOME. HENCE NO DISALLOWANCE IS CALLED FOR. 10. THE ISSUE WAS DECIDED BY THE LEARNED CIT(A) VID E PARA 3.3 AS UNDER: I HAVE DULY CONSIDERED THE SUBMISSION OF THE A.R. AND I DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 82,61,647/- AS T HE SAME IS PAYMENT TO SHIPPING LINES FOR WHICH TDS PROVISIONS ARE NOT APPLICABLE AS INCOME OF THE SHIPPING COMPANY ARE NO T ASSESSED IN INDIA. ITA NO.6702/M/08 M/S. HEMA MARINE SERVICES P.LTD.. 4 11. A COMBINED READING OF BOTH THE PARAS SHOW THA T SOME DETAILS WERE FILED BEFORE THE CIT(A) REGARDING PROOF THAT PAYMENTS WER E FOR SHIPPING LINES AND OTHER ISSUES. OTHERWISE THE FIRST APPELLATE AUTHORI TY COULD NOT HAVE GRANTED RELIEF IN ONE LINE PARA I.E. PARA NO. 3.3. IF SOME DETAILS W ERE FILED THEN THE FIRST APPELLATE AUTHORITY WAS DUTY BOUND TO CONFRONT SUCH DETAILS T O THE ASSESSING OFFICER AND ASK FOR A REMAND REPORT WHICH HAS NOT BEEN DONE, WHICH IS CLEARLY VIOLATION OF RULE 46A OF THE INCOME-TAX RULES. THEREFORE, WE SET ASID E THE ORDER OF THE LEARNED CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION OF THE ISSUE. WE FURTHER DIRECT THE ASS ESSING OFFICER TO ALLOW THE ASSESSEE TO FURNISH THE DETAILS WHICH WERE FILED BE FORE THE LEARNED CIT(A). 12. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 3 RD DAY OF MARCH 2010. SD. SD. (D.K. AGARWAL) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 3 RD MARCH, 2010. COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT, CITY 6, MUMBAI. 4. THE CIT(A)-VI, MUMBAI 5. THE DR H BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI ITA NO.6702/M/08 M/S. HEMA MARINE SERVICES P.LTD.. 5 ORDER PRONCOUNCED ON . 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE- APPELLANT AS WELL AS NO PETITION FOR ADJOURNMENT WA S FILED. WE FIND FROM THE RECORDS THAT ASSESSEE-APPELLANT WAS SERVED NOTICE B Y REGISTERED POST ACKNOWLEDGEMENT DUE TWICE AND THE ACKNOWLEDG EMENT CARDS DULY SIGNED BY THE ASSESSEE ON 25.07.2007 AND 16.11.2 007 , RECEIVED BACK. IT IS THEREFORE, PRESUMED THAT THE ASSESSEE IS NOT INT ERESTED IN PURSUING THE APPEAL FILED BY IT. IT HAS BEEN HELD BY THE HONBLE MADHYA PRADESH HIGH COURT IN ESTATE OF LATE TUKOJIRAO HOLKAR VS. CWT (2 23 ITR 480)(MP) THAT IF THE PARTY, AT WHOSE INSTANCE THE REFERENCE IS MADE, FAILS TO APPEAR AT THE HEARING OR FAILS IN TAKING STEPS FOR PREPARATION OF PAPER-BOOKS, SO AS TO ENABLE HEARING OF THE REFERENCE, THE COURT IS NOT B OUND TO ANSWER THE REFERENCE. THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN CIT VS. MULTIPLAN (INDIA) PVT. LTD., 38 ITD 320 (DEL.) IS A LSO TO THE SAME EFFECT. IN THE FACTS OF THE CASE WE HOLD THAT THE ASSESSEE IS NOT INTERESTED IN PURSUING THE PRESENT APPEAL BEFORE THE TRIBUNAL, ACCORDINGLY THE APPEAL OF THE ASSESSEE IS DISMISSED AS UNADMITTED. THE ASSESSEE, IF SO ADVISED, SHALL BE FREE TO MOVE THE TRIBUNAL PRAYING FOR RECALLING OF THIS ORDER PROVIDED THE ASSESSEE IS ABLE TO ESTABLISH THE REASONABLE CAUSE BEHIND THE NON- APPEARANCE ON THE DATE OF HEARING AND IN THAT CASE THE TRIBUNAL MAY IN ITS DISCRETION RECALL THIS ORDER AND THE APPEAL MAY BE RESTORED FOR RE-HEARING. 3. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.12.2 007. ITA NO.6702/M/08 M/S. HEMA MARINE SERVICES P.LTD.. 6 2. FROM THE GROUNDS FILED BY THE ASSESSEE BEFORE TH E LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WE FIND THAT THE LEVY PERTA INED TO CONCEALMENT OF INCOME OF RS. 1,02,744/- AND THE PENALTY LEVIED WAS RS. 22 ,248/-. THEREFORE IN VIEW OF CBDT CIRCULAR F.NO. 279/MISC.142/2007-IT DATED 15 TH MAY, 2008 THE APPEAL IS NOT MAINTAINABLE, TAX EFFECT BEING LESS THAN RS. 2 LAKH S. VIDE PARA 4 OF THIS CIRCULAR IT IS CLEARLY MENTIONED THAT THE TAX EFFECT IN ASCERTA INING MONETARY LIMITS FOR FILING OF APPEALS, IN THE CASE OF PENALTY ORDERS, WOULD MEAN QUANTUM OF PENALTY DELETED OR REDUCED. 3. THEREFORE, APPEAL OF THE REVENUE IS DISMISSED AS NOT MAINTAINABLE. ORDER PRONOUNCED ON THIS _______ DAY OF MAY, 2009 . (G.C. GUPTA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE ______MAY, 2009. KN COPY TO: 6. THE ASSESSEE 7. THE ITO-26(1)(2), MUMBAI. 8. THE CIT, CITY-XXVI, MUMBAI 9. THE CIT(A)-XXVIII, MUMBAI 10. THE DR, G BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 18.05.09 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 18.05.09 SR.PS/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.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS ITA NO.6702/M/08 M/S. HEMA MARINE SERVICES P.LTD.. 7 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER ITA NO.6702/M/08 M/S. HEMA MARINE SERVICES P.LTD.. 8