DCIT 2(3), MUMBAI V. WALCHAND PEOPLE FIRST LTD ( FORMELRY M.S, WALCHAND CAPITAL LTD), MUMBAI

ITA 8385/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8230 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 02-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMARD EEP
• Assessee Lawyers: V G GINDE
• Keywords: Bad and doubtful debts; Tax effect
• Section: 143(3); 14A; 115JB; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI RAJENDRA SINGH (A.M.) ITA NO. 8385/MUM /2010 ASSESSMENT YEAR : 2005-06 DY. COMMISSIONER OF INCOME TAX 2(3), R. NO. 555, AAYAKAR BHAWAN, MUMBAI. VS. M/S WALCHAND PEOPLE FIRST LTD., (FORMERLY: M/S WALCHAND CAPITAL LTD., 1, CONSTRUCTION HOUSE, 5, WALCHAND HIRACHAND MARG, BALLARD ESTATE, MUMBAI- 400 001. PAN : AAACW 0364J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI AMAR DEEP ASSESSEE BY : SHRI V.G. GINDE DATE OF HEARING 30-7-2012 DATE OF PRONOUNCEMENT 03-8-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE FOR THE A.Y. 2005-06 IS DIRECTED AGAINST THE ORDER DATED 17-9-2010 PASSED B Y THE LD. CIT (A)-6, MUMBAI FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 . 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF NON-BANKING FINANCIAL CO MPANY. THE RETURN WAS FILED DECLARING LOSS OF RS. 1,13,87,061/-. DUR ING THE COURSE OF ASSESSMENT PROCEEDING, THE A.O. INTER ALIA OBSERVED THAT A SUM OF RS. 3,16,94,342/- SEEMS TO HAVE BEEN DEDUCTED WHILE COM PUTING THE BOOK ITA NO. 8385/MUM/2010 2 PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961 (THE A CT). HE FURTHER OBSERVED THAT PREVIOUSLY WHEN THE ASSESSEE HAD A DE BIT BALANCE UNDER THE HEAD PROVISION FOR DIMINUTION IN VALUE OF INVES TMENTS WRITTEN BACK, IT DID NOT ADD IT BACK. HOWEVER, THE DEPARTMENT HAD A DDED IT BACK AND MATTERS ARE SUBJUDICE BEFORE THE TRIBUNAL. THEREFO RE, TO STAND THE MATTER ALIVE, THE INCOME SO CREDITED IN THE P&L ACC OUNT SHOULD ALSO NOT BE DEDUCTED WHILE COMPUTING PROFIT U/S 115JB OF THE ACT. THEREFORE, THE A.O. ADDED AN AMOUNT OF RS. 3,16,94,342/- AS INCOME OF THE YEAR WITHOUT ALLOWING ANY DEDUCTION WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT AND ACCORDINGLY COMPUTED THE INCOM E OF THE ASSESSEE U/S 115JB AT RS. 1,17,34,572/- BEING HIGHER THAN TH E NORMAL INCOME VIDE ORDER DTD. 17-12-2007 PASSED U/S 143(3) OF THE ACT. ON APPEAL THE LD. CIT(A) WHILE OBSERVING THAT ONLY THOSE ADJUSTME NTS TO THE BOOK PROFITS ARE POSSIBLE WHICH HAVE BEEN SPECIFICALLY PROVIDED FOR IN THE PROVISIONS OF THAT SECTION, DIRECTED THE A.O. TO INCREASE THE BOO K PROFIT ONLY TO THE EXTENT OF DISALLOWANCES MADE U/S 14A OF THE ACT AND TO REMOVE OTHER ADJUSTMENTS TO THE BOOK PROFIT U/S 115JB OF THE ACT . 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING EFFECTIVE GRO UND OF APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS OF PROVISION S FOR TAX IN EARLIER YEARS, PROVISION FOR DOUBTFUL DEBTS/ADVANCES AND PROVISION FOR IT/WT IGNORING THE PROVISIONS OF SEC. 115JB AND FINDINGS OF A.O. I N ASSTT. ORDER. ITA NO. 8385/MUM/2010 3 4. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS THE ORDER OF THE A.O. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE, AT THE OUTSET, SUBMITS THAT IN THE GROUND RAISED BY THE REVENUE, T HE REVENUE IS DISPUTING THE PROVISION FOR TAX IN EARLIER YEARS, P ROVISION FOR DOUBTFUL DEBTS/ADVANCES AND PROVISION FOR IT/WT. IN FACT, T HE ASSESSEE BEFORE THE LD. CIT(A) HAS NOT DISPUTED THE ADDITION OF PROVISI ON FOR TAX IN EARLIER YEARS, PROVISION FOR DOUBTFUL DEBTS/ADVANCES AND PR OVISION FOR IT. HE FURTHER SUBMITS THAT THE ASSESSEE IN GROUND NO. 7 B EFORE THE LD. CIT(A) HAS DISPUTED PROVISION FOR WEALTH TAX RS. 3,57,613/ - OUT OF THE ITEMS OF ADDITION MENTIONED BY THE REVENUE IN GROUND NO. 2 ( SUPRA) TAKEN BEFORE THE TRIBUNAL. HE FURTHER SUBMITS THAT THE A.O. IN THE ORDER GIVING EFFECT TO THE ORDER OF THE LD. CIT(A) DTD. 14-12-2010 HAS NOT ALLOWED ANY DEDUCTION OF THE ITEMS OF ADDITION DISPUTED BY THE REVENUE IN GROUND NO. 2 TAKEN BEFORE THE TRIBUNAL. HE FURTHER SUBMITS TH AT AGAINST THE ORDER PASSED BY THE LD. CIT(A) AND THE ORDER PASSED BY TH E A.O. GIVING EFFECT TO THE ORDER OF THE LD. CIT(A) THE ASSESSEE IS NOT IN APPEAL EITHER BEFORE THE LD. CIT(A) OR BEFORE THE TRIBUNAL. HE FURTHER SUBM ITS THAT FOR THE PURPOSE OF BOOK PROFIT UNDER EXPLANATION 1 TO SECTION 115JB OF THE ACT, THERE IS NO MENTION ABOUT THE ADDITION OF PROVISION FOR WEAL TH TAX, THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN HOLDING THAT SUCH ADJUSTMENTS SHOULD BE REMOVED TO THE BOOK PROFIT U/S 115JB OF THE ACT. H E FURTHER SUBMITS THAT EVEN OTHERWISE THE TAX EFFECT ON THE ADDITION OF PROVISION FOR WEALTH TAX RS. 3,57,613/- IS LESS THAN THE LIMIT PROVIDED UNDER CBDT CIRCULAR ITA NO. 8385/MUM/2010 4 INASMUCH AS REVISED TOTAL INCOME AS PER THE ORDER G IVING EFFECT TO THE ORDER OF THE LD. CIT(A) IS A LOSS I.E. RS. 2,49,77, 399/-, THEREFORE, THE DEPARTMENT SHOULD NOT HAVE FILED THE APPEAL BEFORE THE TRIBUNAL. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS THE LD. D.R. HAS NOT DIS PUTED ANY OF THE FACTS STATED BY THE LD. COUNSEL FOR THE ASSESSEE IN PARA 5 OF THIS ORDER. THIS BEING SO AND KEEPING IN VIEW OF THE RECENT CBDT INS TRUCTION NO. 3 OF 2011 DATED 9-2-2011 REPORTED IN (2011) 332 ITR 1 (S TATUTES), THE TAX EFFECT IN THE PRESENT APPEAL FILED BY THE REVENUE I S LESS THAN THE MONETARY LIMIT OF RS. 3 LACS FIXED BY THE CBDT. 7. IN CIT VS. MADHUKAR K. INAMDAR (HUF) (2009) 318 ITR 148 (BOM) IT HAS BEEN HELD THAT THE REVISED MONETARY LIMIT IN THE CIRCULAR DATED MAY 15, 2008 WOULD BE APPLICABLE FOR ALL PENDING AP PEALS. 8. RECENTLY THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. SMT. VARSHA DILIP KOLHE IN TAX APPEAL NO. 7 OF 2010 DTD. 5-3-2012 AFTER CONSIDERING THE INSTRUCTION NO. 3/2011 AND TH E DECISION OF THE HONBLE SUPREME COURT IN SURYA HERBAL LTD. (SUPRA) HAS HELD AS UNDER:- 3..THEREFORE, THE CONTENTION OF MR. SHARMA THAT THE CIRCULAR DOES NOT APPLY TO THE PENDING CASES IS REJECTED. . . ITA NO. 8385/MUM/2010 5 5. WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE PR ESENT CASE AND IN OUR VIEW THIS APPEAL DOES NOT INVOLVE ANY CASCADING EFFECT AND IT IS NOT POINTED TO US THAT SEVERAL APPEALS ARISE THE POINT WHICH IS INVOLVED IN THIS APPEAL. 9. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WHER EIN IT HAS BEEN CONSISTENTLY HELD THAT THE CBDT INSTRUCTION NO. 03/ 2011 DTD. 9-2-2011 WOULD APPLY EVEN TO PENDING APPEALS AND THE LD. D.R . AT THIS STAGE WAS UNABLE TO POINT OUT ANY CASCADING EFFECT, WE ARE OF THE VIEW THAT THE DEPARTMENT SHOULD NOT HAVE FILED THE APPEAL AND ACC ORDINGLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 10. IN THE RESULT, THE REVENUES APPEAL STANDS DISM ISSED. ORDER PRONOUNCED ON 03-08-2012. SD/- (RAJENDRA SINGH) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 3-8-2012. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 6 MUMBAI 4. COMMISSIONER OF INCOME TAX -2, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI