M/s. Creative Home Fashion Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 846/DEL/2013

• Counselvise Citation: 84620114 RSA 2013
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SRINIWAS KUMAR
• Keywords: Depreciation; Principle of natural justice; Wrong claim; Bad and doubtful debts; Difference of opinion; Provision of bad debts; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA NO. 561/DEL/2013 ASSESSMENT YEAR: 2006-07 DCIT, CIRCLE 3(1), NEW DELHI. VS. CREATIVE HOME FASHIONS PVT. LTD., A-201, VARDHMAN APARTMENTS, MAYUR VIHAR, NEW DELHI. PAN NO. AABCC4828Q (APPELLANT) (RESPONDENT) ITA NO. 846/DEL/2013 ASSESSMENT YEAR: 2007-08 CREATIVE HOME FASHIONS PVT. LTD., A-201, VARDHMAN APARTMENTS, MAYUR VIHAR, NEW DELHI. PAN NO. AABCC4828Q VS. ITO, WARD 3(3), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SRINIWAS KUMAR, SR. DR RESPONDENT BY: SH. V. RAJA KUMAR, ADV. O R D E R PER S.V. MEHROTRA, A.M. THESE CROSS APPEALS FILED BY THE REVENUE & ASSESSE E ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A)-VI, NEW DELHI DATED 29/11/2012 FOR A.Y. 2006-07. ITA NOS. 561 & 846/DEL/2013 2 2. THE ASSESSEE, A PRIVATE LIMITED COMPANY, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING AND EXPORT OF HOME FURNISHING GOODS, READYMADE GARMENTS, ETC. BR IEF FACTS OF THE CASE ARE THAT RETURN DECLARING INCOME OF RS. 2,08,23,770 /- WAS FILED BY THE ASSESSEE. THE ASSESSMENT WAS COMPLETED U/S 143(3) AT AN INCOME OF RS. 2,09,33,186/-. SUBSEQUENTLY, DCIT, CIRCLE 3(1), NE W DELHI OBSERVED ON 21/04/2011 THAT ASSESSEE HAD MADE A PROVISION OF RS . 10,91,72,176/- ON ACCOUNT OF PROVISION FOR BAD DEBTS IN THE BALANCE S HEET AND DEBITED THE SAME TO DIFFERENT HEADS OF PROFIT AND LOSS ACCOUNT. THE MISTAKE RESULTED IN UNDER ASSESSMENT OF INCOME OF RS. 10,91,72,176/-. FURTHER IT WAS NOTICED THAT THE ASSESSEE HAD ADDED BACK AN AMOUNT OF RS. 1 06.63 LAKHS INSTEAD OF RS. 124 LAKHS ON ACCOUNT OF DEPRECIATION WHICH RESU LTED IN UNDER ASSESSMENT OF RS. 17.36 LAKHS. ACCORDINGLY, NOTICE U/S 148 WAS ISSUED. THE AO HAS OBSERVED THAT THIS NOTICE REMAINED UN-CO MPLIED. THEREAFTER ON 07/07/2011 AND 30/09/2011, NOTICE U/S 142(1) WAS IS SUED BY THE ACIT, CIRCLE 3(1), NEW DELHI. HOWEVER, BOTH THE NOTICES REMAINED UN-COMPLIED. IN THE ASSESSMENT ORDER IT IS FURTHER OBSERVED THAT ON 01/11/2011 NOTICE U/S 142(1) WAS ISSUED ALONG WITH REASONS RECORDED FOR I NITIATION OF PROCEEDINGS U/S 148 FIXING THE CASE FOR 09/11/2011. ON 08/11/2 011 THE AUTHORIZED REPRESENTATIVE SUBMITTED A LETTER DATED 07/11/2011 RAISING OBJECTION ON ISSUING OF NOTICE U/S 148 AFTER EXPIRY OF LIMITATIO N. THE AO AFTER CONSIDERING THE OBJECTION REJECTED THE SAME VIDE HIS ORDER DATE D 18/11/2011 WHICH HAS ITA NOS. 561 & 846/DEL/2013 3 BEEN REPRODUCED AT PAGE 2 OF THE ASSESSMENT ORDER. FURTHER, AO ISSUED 142(1) NOTICE DATED 18/11/2011 FIXING THE DATE OF 2 8/11/2011 BUT THE SAME REMAINED UN-COMPLIED. ON 08/12/2011 A FINAL NOTICE WAS ISSUED TO THE ASSESSEE REQUESTING HIM TO FURNISH THE DETAILS. BU T THE SAID NOTICE ALSO REMAINED UN-COMPLIED. THEREFORE, THE AO PASSED THE ORDER U/S 144 DETERMINING THE TOTAL INCOME AT RS. 13,18,42,357/-. 3. LD. CIT(A), WHILE PARTLY ALLOWING THE ASSESSEES APPEAL, CONFIRMED THE ADDITION IN RESPECT OF PROVISION FOR BAD DEBTS OF R S. 10,91,72,176/- AND DELETED THE ADDITION OF RS. 17,36,995.85 ON ACCOUNT OF DEPRECIATION. 4. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), BO TH, THE ASSESSEE AND DEPARTMENT, ARE IN APPEAL BEFORE US AND HAVE TAKEN FOLLOWING GROUNDS OF APPEAL: GROUNDS OF DEPARTMENTS APPEAL : WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF WRONG CLAIM OF DEPRECIATION AMOUNTING TO RS. 17,36,995/- IGNORING THE FACTS THAT THE ASSESSE E COMPANY DID NOT COOPERATE AT ALL DURING THE ASSESSMENT PROCEEDINGS. NOBODY ATTENDED THE REASSESSMENT PROCEEDINGS DESPITE THE FACT THAT OPPORTUNITY WAS GRANTED TO TH E ASSESSEE SEVERAL TIMES. NEITHER ANY REPLY W.R.T. ANY NOTICE WAS RECEIVED FROM THE A SSESSEE NOR ANY OTHER SUBMISSION WAS MADE BY THE ASSESSEE AT THE TIME OF REASSESSMEN T PROCEEDINGS. GROUNDS OF ASSESSEES APPEAL : 1. THAT THE EX PARTY ASSESSMENT ORDER PASSED BY THE A O IS ILLEGAL, ARBITRARY AND UNCALLED FOR. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE AO HAS ERRED IN PASSING THE ORDER U/S 147 AND THE SAID ORDER ILLEGAL AND BA D IN LAW. ITA NOS. 561 & 846/DEL/2013 4 3. THAT THE NOTICE U/S 148 AND THE REASSESSMENT ORDER PASSED ARE ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. THE NOTICE HAS BEEN ISSUED WITHOUT AND APPLICATION OF MIND AND IN A MECHANICAL MANNER. TH ERE IS NO INCOME WHICH HAS ESCAPED ASSESSMENT. 4. THAT NO NOTICE U/S 143(2) WAS SERVED WHILE PASSING REASSESSMENT ORDER U/S 148/147 OF I.T. ACT. 5. THAT THE APPELLATE COMMISSIONER UPHOLD THE ADDITION MADE ON ACCOUNT OF PROVISION OF BAD DEBTS OF RS. 109172176/-, WHICH PE RTAIN TO ALL UNITS OF APPELLATE COMPANY, IT IS A CONTINGENT LIABILITIES, WHICH HAS NOT BEEN ACCOUNTED IN BOOKS OF ACCOUNT. 6. THE AO HAS WRONGLY MADE ADDITION ACCOUNT OF PROVISI ON OF BAD DEBTS OF RS. 10,91,72,176/- WHERE AS THESE FACTS WERE ALREADY TH ERE AT THE TIME OF PROCEEDING U/S 143(3). THERE IS NO NEW FACTS, IT I S ONLY A CHANGE OF OPINION. 7. THAT IN THE FACTS OF THE CASE THE AO HAS ERRED IN M AKING THE REASSESSMENT EX PARTE U/S 144 OF I.T. ACT AND THE CIT(APPEALS) HAS ALSO ERRED IN SUSTAINING THE SAID ASSESSMENT ORDER. THE APPELLANT HAS NOT BEEN ALLOWED PROPER OPPORTUNITY AND THE ACTION OF THE AO BEING IN VIOLA TION OF THE PRINCIPLES OF NATURAL JUSTICE, IS WRONG AND ILLEGAL. 4.1 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES. ADMITTEDLY, THE ASSESSMENT ORDER WAS PASSED EX-PARTE. HOWEVER, THE ASSESSEES OBJECTIONS AS REGARDS TO ISSUANCE OF NOTICE U/S 148 WERE DISPOSED OFF BY AO. BEFORE US THE ASSESSEE HAS ALSO, INTER-ALIA, RAISED A GROUND THAT NO NOTICE U/S 143(2) WAS SERVED WHILE PASSING RE-ASSESSMENT O RDER U/S 148/147 OF THE ACT. ON THIS ISSUE THE FACTUAL ASPECTS NEEDS TO BE FIRST ASCERTAINED. AS FAR AS MERITS OF THE CASE ARE CONCERNED, SINCE AO HAD P ASSED EX-PARTE ORDER, IN ORDER TO IMPART SUBSTANTIAL JUSTICE TO THE ASSESSEE , IT WOULD BE IN THE INTEREST OF JUSTICE THAT THE MATTER BE RESTORED BACK TO THE FILE OF AO FOR FRESH ITA NOS. 561 & 846/DEL/2013 5 ADJUDICATION OF CASE DENOVO. THE ASSESSEE WOULD BE FREE TO RAISE ANY LEGAL GROUND BEFORE THE AO WHICH WILL BE CONSIDERED BY AO IN ACCORDANCE WITH LAW. 4.2 WE DIRECT ACCORDINGLY. 5. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31/01/2014 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 31/01/2014 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR