Manne Hareesh, Hyderabad V. Income Tax Officer 6(2), Hyderabad

ITA 92/Hyd/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4132 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2012-2013
• Appeal Filed On: 02-02-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: T RAMA MURTHY
• Keywords: Period of limitation; Bad and doubtful debts; Time period of passing order; Reassessment proceedings; TDS
• Section: 40a(ia); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD. BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI L . P . SAHU, ACCOUNTANT MEMBER (THROUGH VIRTUAL HEARING) ITA NO. 92 /HYD/20 2 1 ( ASSESSMENT YEAR : 2012 - 13 ) SHRI MANNE HAREESH, HYDERABAD - 500 0 016 PAN ADMPM6479L INCOME TAX OFFICER , WARD 6(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI T.RAMA MURTHY, C.A. REVENUE BY: SHRI SUNIL KUMAR PANDEY (D.R) DATE OF HEARING: 21 /0 4 /2021 DATE OF PRONOUNCEMENT: 16 /0 8 /2021 O R D E R PER L .P.S AHU , A .M. : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX - 6, HYDERABAD ORDER DT.10.10.2019 FOR THE ASSESSMENT YEAR 2012 - 13 RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. THE LEARNED COMMISSIONER OF INCOME TAX - APP EALS ERRED BOTH ON FACTS AND PROVISIONS OF LAW IN APPRECIATING THE FACT THAT ASSESSING OFFICER FAILED MAKE PROPER CONCLUSION/ ENQUIRY BEFORE MAKING THE ADDITION MADE AND PASSING THE ASSESSMENT ORDER. 2 ITA NO. 92 /HYD/20 2 1 2. THE LEARNED COMMISSIONER OF INCOME TAX - APPEALS OU GHT TO HAVE PROPERLY EVALUATED THE FACTS INDEPENDENTLY INSTEAD OF EVALUATING THE CONCLUSIONS MADE BY ASSESSING OFFICER AND CONCURRENCE THEREWITH. 3. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED BY CONCLUDING THAT RS.19,80,208/ - ACCOUNTED/PAID TOW ARDS MARKETING STAFF SALARIES AS PAYMENTS MADE TO MARKETING AGENTS AND DISALLOWANCE OF THE SAME IS CORRECT BEING NON - COMPLIANCE OF PROVISIONS OF CHAPTER XVII B OF IT ACT, 1961. 4. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED BY CONCLUDING THAT RS .32,99, 152/ - THERE EXITS LACK OF HONESTY AND BONA FIDES IN SO FAR AS CLAIMING DEDUCTION TOWARDS BAD DEBTS IGNORING THE PROOF SUBMITTED ESTABLISHING THEIR WRITE - OFF IN THE BOOKS BY WAY OF DEBITING TO PROFIT AND LOSS ACCOUNT AND FURTHER BY WAY OF DELETION F ROM SUNDRY DEBTORS. 5. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS OUGHT NOT TO HAVE RESORTED TO DISMISS THE APPEAL ON PRESUMPTION OF CONTINUATION OF DEBTORS IN THE BOOKS WHERE AS THE FACT ESTABLISHES THE AMOUNTS ARE DELETED FROM TOTAL SUNDRY DEBTORS OUTSTANDING AS ON 31.03.2012. 6. THE APPELLANT CARVES THE RIGHT TO AMEND/ALTER/MAKE ADDITIONAL GROUNDS OF ALL OR ANY OF THE GROUNDS OF APPEAL AS MENTIONED ABOVE. 2. WE NOTICE AT THE OUTSET THAT ASSESSEES INSTANT APPEAL SUFFERS FROM 303 DAYS DELAY IN 3 ITA NO. 92 /HYD/20 2 1 FILING. TO THIS EFFECT, THE LD. AR FILED A PETITION ALONG WITH AN AFFIDAVIT WHEREIN IT WAS AFFIRMED THAT DUE TO ILL HEALTH AND COVID - 19 PANDEMIC THE ASSESSEE COULD NOT MOVE FROM THE PLACE LOCATED IN THE STAT E OF AP CAUSED DELAY IN OBTAINING THE SIGNATURE OF APPEAL PAPERS, CAUSED THE IMPUGNED DELAY IN FILING OF THE INSTANT APPEAL. CASE LAW COLLECTOR LAND ACQUISITION VS MST. KATIJI & ORS, 1987 AIR 1353 (SC) AND UNIVERSITY OF DELHI VS. UNION OF INDIA, CIVIL AP PEAL NO. 9488 & 9489/2019 DATED 17 DECEMBER, 2019, HOLD THAT SUCH A DELAY; SUPPORTED BY COGENT REASONS, DESERVES TO BE CONDONED SO AS TO MAKE WAY FOR THE CAUSE OF SUBSTANTIAL JUSTICE. WE ACCORDINGLY HOLD THAT REVENUES IMPUGNED DELAY OF 303 DAYS IS NEITH ER INTENTIONAL NOR DELIBERATE BUT DUE TO THE CIRCUMSTANCES BEYOND ITS CONTROL. THE SAME STANDS CONDONED. CASE IS NOW TAKEN UP FOR ADJUDICATION ON MERITS. 3 . THE GROUND NOS.1 , 2 & 6 ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION THEREO N. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DERIVING INCOME FROM DISTRIBUTION OF LUBRICANT OILS FILED RETURN OF INCOME 4 ITA NO. 92 /HYD/20 2 1 ON 30.09.2012 ADMITTING TAXABLE INCOME OF RS.14,85,650. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2013 - 14, IT IS OBSERVED THAT THE MARKETING SUPPORT EXPENSES DEBITED INTO THE PROFIT AND LOSS ACCOUNT WAS NOT GENUINE AND PROVISION FOR BAD DEBTS WAS ALSO NOT ALLOWED AS PE R EXPLANATION 1 OF SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961 ('THE ACT'). ACCORDINGLY, THE CASE WAS REOPENED U/S.147/148 AND THEREAFTER OTHER STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, IT WAS ASKED THE ASSESSEE TO FILE DETAILS OF SERVICES RENDERED BY THE MARKETING PROFESSIONALS ALONG WITH BILLS, VOUCHERS AND RECEIPTS INDICATING DEALING OF SALES PROMOTION EXPENSES AND MARKET SUPPORT EXPENSES AND THE ASSESSEE WAS ALSO ASKED TO FILE THE DETAILS OF DEBTO RS AS ON 31.3.2011, 31.3.2012 AND 31.3.2013 ALONG WITH COPIES OF BILLS RAISED FROM THE PARTIES , WHICH ARE APPEARING IN THE LIST OF PROVISION FOR DOUBTFUL DEBTS. THE ASSESSEE COULD NOT PRODUCE THE REQUIRED DETAILS SOUGHT FOR BY THE ASSESSING OFFICER. THER EAFTER THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE ON 22.12.2016 , WHICH WAS EXTRACTED IN THE ASSESSMENT ORDER. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FILED REPLY WHICH HA D BEEN CONSIDERED BY 5 ITA NO. 92 /HYD/20 2 1 THE ASS ESSING OFFICER. FROM THE DETAILS FILED BY THE ASSESSEE IN RESPECT OF MARKET SUPPORT EXPENSES AND SALES PROMOTION EXPENSES , THE AO OBSERVED THAT THE OUTSTANDING AMOUNTS CLAIMED WERE NOT GENUINE AND THE APPELLANT COULD NOT FILE REGISTERS OF EMPLOYEES, ATTENDANCE REGISTERS AND DETAILS RELATING TO PAYMENTS OF SALARY TO MARKETING STAFF AS CLAIMED. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD NOT COMPLIED WITH THE PROVISIONS OF TDS OF THE ACT ON PAYMENTS MADE . ACCORDINGLY, THE SAME WAS DISALLOW ED AS PER SECTION 40A(IA) AND IT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IT WAS FURTHER OBSERVED THAT THE ASSESSEE HAD DEBITED INTO THE PROFIT AND LOSS ACCOUNT TOWARDS PROVISIONS FOR BAD DEBTS. IN THE CORRESPONDING PERIOD, FURTHER TRANSACTIONS WERE ALSO MADE DURING THE YEAR AND THERE WAS NO CREDIT ENTRY IN THE DEBTORS ACCOUNT AND THE ENTRY WAS PASSED T HROUGH THE JOURNAL ENTRY FOR WRITE OFF OF SUNDRY DEBTORS IN THE BOOKS OF ACCOUNT. TH E DETAILS OF THE DEBTORS ARE AS UNDER : SUNDRY DEBTORS OF S V S FROM 1.4.2011 TO 31.3.2012 6 ITA NO. 92 /HYD/20 2 1 THE AO OBSERVED THAT T HE ASSESSEE ALSO COULD NOT PRODUCE THE BILLS AND VOUCHERS EVEN THOUGH THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY. ACCORDINGLY, THE ASSE SSING OFFICER DISALLOWED THE PROVISIONS MADE AS BAD DEBTS WRITTEN OFF AS PER EXPLANATION 1 OF PROVISION OF SECTION 36(1)(VII) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER , THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND THE CIT(A) DISMISSED THE APPEAL ON BOTH THE POINTS AND OBSERVED AS UNDER : SPACE LEFT INTENTIONALLY 7 ITA NO. 92 /HYD/20 2 1 8 ITA NO. 92 /HYD/20 2 1 9 ITA NO. 92 /HYD/20 2 1 10 ITA NO. 92 /HYD/20 2 1 11 ITA NO. 92 /HYD/20 2 1 12 ITA NO. 92 /HYD/20 2 1 13 ITA NO. 92 /HYD/20 2 1 14 ITA NO. 92 /HYD/20 2 1 15 ITA NO. 92 /HYD/20 2 1 16 ITA NO. 92 /HYD/20 2 1 17 ITA NO. 92 /HYD/20 2 1 18 ITA NO. 92 /HYD/20 2 1 19 ITA NO. 92 /HYD/20 2 1 20 ITA NO. 92 /HYD/20 2 1 21 ITA NO. 92 /HYD/20 2 1 22 ITA NO. 92 /HYD/20 2 1 23 ITA NO. 92 /HYD/20 2 1 24 ITA NO. 92 /HYD/20 2 1 25 ITA NO. 92 /HYD/20 2 1 AGAINST THE ABOVE ORDER OF THE CIT(A), THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. 26 ITA NO. 92 /HYD/20 2 1 5 . THE LD. AR REITERATED THE ARGUMENTS PUT FORTH BEFORE THE AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT ALL THE DOCUMENTARY EVIDENCES WERE PROVIDED BEFORE THE AUTHORITIES BELOW AND MERELY NON - DEDUCTION OF TDS IS NOT A CRITERIA FOR DISALLOWANCE OF EXPENSES. FURTHER HE SUBMITTED THAT THE PROVISIONS FOR BAD DEBTS WERE DEBITED TO PROFIT & LOSS ACCOUNT BUT BY MISTAKE IT WAS WRITTEN AS PROVISION FOR BAD DEBTS . HE RELIED ON THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF M/S. T .R.F. LIMITED VS. CIT (2019) 323 ITR 397 (SC) AND SUBMITTED THAT THERE IS NO REQUIREMENT TO SUBMIT ANY DETAILS ONCE THOSE HAVING CONSIDERED AS BAD DEBTS BY THE ASSESSEE AND DEBITED INTO PROFIT AND LOSS ACCOUNT. 6 . ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE COULD NOT FURNISH THE REQUIRED DOCUMENT WHICH WAS SHOWN AS OUTSTANDING DURING T HE IMPUGNED ASSESSMENT YEAR AND TDS WAS ALSO NOT DEDUCTED ON THE AMOUNT PAID WHICH WAS REQUIRED TO BE DEDUCTED AS PER PROVISIONS OF THE ACT. FURTHER IN RESPECT OF PROVISION F OR BAD DEBTS, HE STATED THAT THE ASSESSEE HAS NOT CREDITED TO THE LEDGER ACCOUNT O N THE BAD DEBTS WRITTEN OFF, IT IS MERELY A PROVISION MADE BY THE ASSESSEE WHICH IS NOT 27 ITA NO. 92 /HYD/20 2 1 ALLOWABLE AS PER SECTION 36(1)(VII) OF THE ACT. HE ALSO SUBMITTED THAT THE CASE LAW RELIED ON BY THE LEARNED AUTHORIZED REPRESENTATIVE IN THE CASE OF M/S T . R . F . LIMIT ED (SUPRA) IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE ASSESSEE HAS MADE MERELY A PROVISION IN THE P & L ACCOUNT THROUGH PASSING A JOURNAL ENTRY IN THE BOOKS OF ACCOUNTS BUT NOT CREDITED TO THE CUSTOMERS ACCOUNT WHICH IS VERY MUCH CLEAR FROM THE PAR A 8.15 OF THE CIT(A)S ORDER WHICH IS A COPY OF DEBTORS LEDGER ACCOUNT. 7.1 AFTER HEARING BOTH THE SIDES, PERUSAL OF THE RECORDS AND THE ORDERS OF AUTHORITIES BELOW, WE OBSERVE THAT IN RESPECT OF MARKETING SUPPORT EXPENSES AND SALES PROMOTION EXPENSE S OF RS.19,80,210/ - , THE ASSESSEE FAILED TO DEDUCT TDS WHICH WAS VERY MUCH REQUIRED TO BE DEDUCTED BY THE ASSESSEE. THEREFORE , THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED AND CONFIRMED BY THE CIT(A). THE ASSESSEE HAS ALSO FAILED TO PRODUCE THE REQUIRED DOCUMENTS SOUGHT BY THE ASSESSING OFFICER WHEREAS HE HAD A CHANCE TO PRODUCE THE SAME BEFORE THE CIT(A) BUT HE FAILED TO DO SO . THE LD. CIT (A) HAS EXAMINED THE DETAILS FILED BY THE ASSESSEE WHICH IS AT PARA NO. 7.5 TO 7.17 OF HIS ORDER AS REPRODUCED A BOVE. THE DETAILS OF MARKET SUPPORT EXPENSES AND 28 ITA NO. 92 /HYD/20 2 1 SALES PROMOTION EXPENSES WHICH W ERE OUTSTANDING AS ON 31.03.2012 THE ASSESSEE FAILED TO PROVE WITH THE REQUIRED DOCUMENTS. EVEN BEFORE US , HE COULD NOT SUBSTANTIATE THE GENUINENESS OF EXPENDITURE S CLAIMED IN THE PROFIT AND LOSS ACCOUNT AS IT WAS SHOWN AS OUTSTANDING AT THE YEAR END. I.E 31.03.2012 AND SUBSEQUENT PAYMENTS THEREOF . IN VIEW OF THESE OBSERVATIONS, WE UPHOLD THE ORDER OF THE CIT (A) AND DISMISS THE GROUND NO. 03 RAISED BY THE ASSESSEE ON THIS ISSUE. 7 .2 . FURTHER IN RESPECT OF BAD DEBTS AS CLAIMED BY THE ASSESSEE AMOUNTING TO RS.32,99,962/ - , T HE CIT(A) HAS RIGHTLY DECIDED THE ISSUE AFTER DISCUSSING IN DETAIL IN HIS ORDER AS QUOTED SUPRA. AS FAR AS LEDGER ACCOUNT OF THE DEBTORS AS REPRODUCED BY THE CIT (A) IN PARA NO.8.15 , WE DO NOT FIND ANY WRITTEN OFF OF BAD DEBTS ENTRY BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT . IT CLEARLY SHOWS THAT THE ASSESSEE HAS NOT WRITTEN - OFF THE BAD DEBTS ENTRY FROM THE DEBTORS LEDGER ACCOUNT. THE LEAR NED AUTHORIZED REPRESENTATIVE RELIED ON THE DECISION OF H ON'BLE A PEX COURT (SUPRA) AND THE SAME IS NOT APPLICABLE TO THE PRESENT CASE , AS T HERE SHOULD BE WRITING - OFF OF BAD DEBTS IN THE P & L ACCOUNT AND ALSO TO BE DEDUCTED FROM THE DEBTORS ACCOUNT I.E. IT SHOULD BE REFLECTED IN 29 ITA NO. 92 /HYD/20 2 1 THE DEBTORS LEDGER ACCOUNT. THE DECISION OF THE HONBLE APEX COURT IN CASE OF M/S T.R.F. LTD. HAS BEEN DISCUSSED BY THE CIT (A) IN HIS O RDER AT PARA NO. 8.25. ON PERUSAL OF THE LEDGER ACCOUNT QUOTED BY THE LEARNED CIT(APPEALS) AS PER PARA NO. 8.15 OF HIS ORDER IN THE CASE OF M/S DRD TRUCKS INDIA PVT. LTD., JEEDIMETLA , WHICH RELATES TO THE IMPUGNED ASSESSMENT YEAR I.E. PERIOD FROM 1.4.20 11 TO 31.3.2012. THERE IS OPENING BALANCE, TRANSACTIONS MADE DURING THE YEAR AND THERE IS A CLOSING BALANCE OF RS.17,47,267. THERE IS NO CREDIT ENTRY FOUND AS WRITING OFF OF BAD DEBT I N THE DEBTORS LEDGER ACCOUNT. THEREFORE , THE CASE LAW RELIED ON BY T HE LEARNED AUTHORIZED REPRESENTATIVE IS NOT APPLICABLE TO THE PRESENT FACTS OF THE CASE. M ERE LY A PROVISION MAKING IN THE PROFIT AND LOSS ACCOUNT IS NOT ALLOWABLE UNLESS THE CORRESPONDING ENTRY HAS BEEN GIVEN IN THE CUSTOMERS LEDGER ACCOUNT. THE HON'BLE SUPREME COURT JUDGEMENT (SUPRA) RELIED ON BY THE CIT(A) IS CLEARLY APPLICABLE TO THE IMPUGNED ISSUE UNDER CONSIDERATION. THE LEARNED CIT(APPEALS) HAS ALSO RELIED ON THE DECISION OF CO - ORDINATE BENCH OF ITAT IN THE CASE OF EMBASSY CLASSIC (P) LTD. VS. CIT (2012) 20 TAXMANN.COM 291 (BANG) ; AT PARA 8.18 OF HIS ORDER, IN WHICH THE HONBLE BENCH HAS CONSIDERED THE JUDGEMENT OF THE HON'BLE SUPREME COURT OF M/S 30 ITA NO. 92 /HYD/20 2 1 T . R . F . L TD. CITED (SUPRA) . CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND IN OUR CONSIDERED OPINION , THE ORDER OF CIT(A) IS HEREBY CONFIRMED AND THE GROUND NOS.4 & 5 RAISED BY THE ASSESSEE ON THIS ISSUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 9 . WE LASTLY ACKNOWLEDGE THAT ALTHOUGH THE INSTANT APPEAL IS BEING DECIDED AFTER A PERIOD OF 90 DAYS FROM THE DATE OF HEARING AS PER RULE 34(5) OF THE IT(AT) RULES 1963, THE SAME HOWEVER, DOES NOT APPLY IN THE COVID LOCKDOWN SITUATION AS PER HON'BLE APEX C OURT'S RECENT DIRECTIONS DATED 27 - 04 - 2021 IN M.A.NO.665/2021 IN SM(W)C NO.3/2020 'IN RE COGNIZANCE FOR EXTENSION OF LIMITATION' MAKING IT CLEAR THAT IN SUCH CASES WHERE THE LIMITATION PERIOD (INCLUDING THAT PRESCRIBED FOR INSTITUTION AS WELL AS TERMINATION ) SHALL STAND EXCLUDED FROM 14TH OF MARCH, 2021 TILL FURTHER ORDERS. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH A UG. , 2021. SD/ - SD/ - ( S.S. GODARA ) ( L .P. SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DT. 16 .0 8 . 2021. * REDDY GP 31 ITA NO. 92 /HYD/20 2 1 COPY TO : 1. SRI MANNE HAREESH , 103, SSS APARTMENTS, BK GUDA, S R NAGAR, HYDERABAD - 500 016 2. IT O , WARD 6(2), HYDERABAD. 3. PR. C I T - 6 , HYDERABAD. 4. CIT(APPEALS) - 6 , HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE. BY ORDER SR. PVT. SECRETARY, ITAT, HYDERABAD.