ASSISTANT COMMISSIONER OF INCOME TAX, Ajmer V. AJMER VIDHYUT VITRAN NIGAM LTD., Ajmer

ITA 936/JPR/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7777 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Assessee Lawyers: SUNIL PORWAL CA DHK
• Keywords: Depreciation; Rule of consistency; Bad and doubtful debts
• Section: 271(1)(c); 201; 48; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B , JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 936/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 THE ACIT CIRCLE 2 AJMER CUKE VS. M/S. AJMER VIDYUT VITRAN NIGAM LTD VIDYUT BHAWAN, PANCHSHEEL NAGAR, AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AACCA 8526 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 943/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 M/S. AJMER VIDYUT VITRAN NIGAM LTD VIDYUT BHAWAN, PANCHSHEEL NAGAR, AJMER CUKE VS. THE ACIT CIRCLE 2 AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AACCA 8526 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI B.K. GUPTA, CIT-DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SUNIL PORWAL, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08 /01/2020 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09 /01/2020 VKNS'K@ ORDER PER VIJAY PAL RAO, JM THESE CROSS APPEALS ARE DIRECTED AGAINST THE O RDER DATED 21-09-2017 OF LD. CIT(A), AJMER ARISING FROM PEN ALTY ORDER PASSED U/S 271 (1) ( C) OF THE ACT FOR THE ASSESSMENT YEAR 201 0-11. ITA NO.936/JP/2017 THE ACIT, CIRCLE 2, AJMER VS AJMER VIDYUT VITRAN NIGAM LTD., AJMER 2 2.1 IN THE SCRUTINY ASSESSMENT COMPLETED ON 28-03-2 013, THE AO INTER ALIA MADE THE ADDITIONS ON ACCOUNT OF DEPRECIATION ON NON-EXISTING ASSETS, PROVISIONS FOR DOUBTFUL DEBTS AND PRIOR PERIOD EXPE NSES. THE AO INITIATED THE PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT I N RESPECT OF THESE THREE ADDITIONS AND LEVIED THE PENALTY VIDE ORDER DATED 3 0-03-2017 PASSED U/S 271(1)( C) OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO REGARDING LEVY OF PENALTY U/S 271(1) OF THE ACT BE FORE THE LD. CIT(A). THE LD. CIT(A) DELETED THE PENALTY LEVIED BY THE AO IN RESPECT OF THE ADDITIONS MADE ON ACCOUNT OF DEPRECIATION ON NON-EX ISTING ASSETS AND PRIOR PERIOD EXPENSES ON THE GROUND THAT THESE TWO ADDITIONS WERE DELETED BY THE TRIBUNAL IN THE QUANTUM APPEAL. THE PENALTY LEVIED IN RESPECT OF DOUBTFUL DEBTS WAS CONFIRMED BY THE LD. CIT(A) AS THE SAID ADDITION WAS CONFIRMED BY THE TRIBUNAL IN QUANTUM APPEAL. THUS B OTH THE REVENUE AS WELL AS ASSESSEE ARE AGGRIEVED BY THE IMPUGNED ORDE R OF THE LD. CIT(A) AND FILED THE CROSS APPEALS. 3.1 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A),AJMER HAS ERRED IN:- 1. CANCELLING THE PENALTY LEVIED FOR DISALLOWANCE OF DEPRECIATION ON NON-EXISTING ASSETS OF RS. 2,14, 00,000/- WITHOUT APPRECIATING THE FACT THAT THE QUANTUM ADDI TION MADE ITA NO.936/JP/2017 THE ACIT, CIRCLE 2, AJMER VS AJMER VIDYUT VITRAN NIGAM LTD., AJMER 3 BY THE AO WAS CONFIRMED BY THE LD. CIT(A) AS THE AS SETS WERE NOT PHYSICALLY AVAILABLE WITH THE ASSESSEE. 2. CANCELLING THE PENALTY LEVIED FOR DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 26,64,72,749/- WITH OUT APPRECIATING THE FACT THAT THE QUANTUM ADDITION MAD E BY THE AO WAS CONFIRMED BY THE LD. CIT(A) AS THE ASSESSEE FAILED TO PROVE THAT PRIOR PERIOD EXPENSES WERE ACTUALLY PAID IN THE RELEVANT FINANCIAL YEAR. 3.2 WE HAVE HEARD THE LD. DR AS WELL AS THE LD.AR A ND CONSIDERED THE RELEVANT MATERIALS AVAILABLE ON RECORD. AT THE OUTS ET, WE NOTE THE DISALLOWANCES/ ADDITIONS MADE BY THE AO IN RESPECT OF DEPRECIATION ON NON-EXISTING ASSETS AND PRIOR PERIOD EXPENSES WERE DELETED BY THIS TRIBUNAL VIDE ORDER DATED 28-08-2017 IN ITA NO. 371 /JP/2016. THUS THE ADDITIONS ITSELF ARE NOT IN EXISTENCE THEN THE PEN ALTY LEVIED BY THE AO WOULD NOT SURVIVE. THE LD. DR HAS SUBMITTED THAT T HE DEPARTMENT HAS FILED AN APPEAL AGAINST THE ORDER OF THIS TRIBUNAL BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT, HOWEVER THE FINDINGS OF THIS TRIBUNAL ON THESE ISSUES HAVE NOT BEEN DISTURBED BY THE HON'BLE JURIS DICTIONAL HIGH COURT TILL DATE. THEREFORE, IN THE FACTS AND CIRCUMSTANCE S OF THE CASE WHEN ADDITIONS/ DISALLOWANCES WERE DELETED BY THIS TRIBU NAL THEN THE PENALTY DELETED BY THE LD. CIT(A) DOES NOT REQUIRE ANY INTE RFERENCE. THUS BOTH THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. ITA NO.936/JP/2017 THE ACIT, CIRCLE 2, AJMER VS AJMER VIDYUT VITRAN NIGAM LTD., AJMER 4 4.1 THE ASSESSEE IN ITS APPEAL HAS RAISED THE FOLLO WING GROUND:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF I.T. ACT, 1961 OF RS. 10,41,34,400/- O N ACCOUNT OF DISALLOWANCE OF PROVISIONS FOR DOUBTFUL DEBTS WH ICH IS BAD IN LAW. 4.2 THE LD.AR OF THE ASSESSEE HAS SUBMITTED THAT TH E ASSESSEE HAS MADE THE PROVISIONS OF BAD & DOUBTFUL DEBTS FROM CONSUME RS. THOUGH THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE OUTSTANDING D UES FROM THE CONSUMERS WHOSE ELECTRICITY CONNECTION WAS PERMANENTLY DISCON NECTED, HOWEVER, AS PER ACCOUNTING NORMS OF THE ELECTRICITY DISTRIBUTIO N COMPANIES IT IS NOT DIRECTLY DEBITED TO THE CUSTOMER ACCOUNT FOR FUTUR E RECOVERY AND THUS THE TERM PROVISION IS BEING USED. THE LD.AR OF THE ASSE SSEE FURTHER SUBMITTED THAT THE ASSESSEE HAS ACTUALLY WRITTEN OFF THESE DE BTS CONSIDERING THE AMOUNT OF REALIZATION AS INCOME IN THE SUBSEQUENT Y EARS AS AND WHEN DEBTS ARE RECOVERED FROM THE CONSUMERS. THOUGH THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE/ ADDITION MADE BY THE AO , HOWEVER, IT WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME WHEN THE ASSES SEE HAS DISCLOSED ALL THE RELEVANT FACTS DURING THE COURSE OF ASSESSMENT PROCEEDING. THE LD.AR OF THE ASSESSEE THUS CONTENDED THAT MERE DISALLOWA NCE OF CLAIM BY THE ITA NO.936/JP/2017 THE ACIT, CIRCLE 2, AJMER VS AJMER VIDYUT VITRAN NIGAM LTD., AJMER 5 AO ON THE GROUND THAT IT IS NOT ALLOWABLE AS PER TH E PROVISIONS OF THE ACT WOULD NOT BE HELD AS CONCEALMENT OF INCOME ON ITS P ART OR FURNISHING THE INACCURATE PARTICULARS OF INCOME. IN SUPPORT OF HIS CONTENTIONS, THE LD.AR OF THE ASSESSEE RELIED ON THE JUDGMENT OF HON'BLE S UPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (20 10), 322 ITR 158 (SC). 4.3 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T IT IS NOT A CASE OF BONA FIDE BELIEF OF THE ASSESSEE ABOUT THE ALLOWABI LITY OF THE CLAIM OF PROVISIONS FOR BAD AND DOUBTFUL DEBTS BUT THE CLAIM OF THE ASSESSEE IS PATENTLY WRONG AND UNACCEPTABLE. THE LD. DR FURTHER SUBMITTED THAT DESPITE THE FACT SUCH CLAIM OF THE ASSESSEE IS NOT PERMISSIBLE UNDER THE ACT WHICH AMOUNTS TO FURNISHING THE INACCURATE PART ICULARS OF INCOME. THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE 4.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIALS AVAILABLE ON RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE AO MADE THE DISALLOWANCE OF PROVISI ON FOR BAD AND DOUBTFUL DEBTS IN PARA 7 OF ASSESSMENT ORDER AS UND ER:- 7. PROVISIONS FOR DOUBTFUL DEBTS ON VERIFICATION OF PROFIT & LOSS ACCOUNT, IT IS SEE N THAT THE ASSESSEE HAS CLAIMED BAD AND DOUBTFUL DE BTS PROVISIONS FOR DUES OF RS. 30,63,23,038/-. THEREFOR E, VIDE ITA NO.936/JP/2017 THE ACIT, CIRCLE 2, AJMER VS AJMER VIDYUT VITRAN NIGAM LTD., AJMER 6 QUESTIONNAIRE DATED 23-01-2013 IT WAS SHOW CAUSED A S TO WHY PROVISION FOR BAD & DOUBTFUL DEBTS SHOULD NOT B E DISALLOWED AND ALSO ADDED TO THE BOOK PROFIT U/S 11 5JB. VIDE SUBMISSION DATED 26-03-2013 THE ASSESSEE HAS STATED THAT A SUM HAS BEEN DEBITED AS BAD & DOUBTFU L PROVISION FOR DUES FROM CONSUMER ACTUALLY IT IS WRI TE OFF OF OUTSTANDING OF PERMANENT DISCONNECTED CONSUMER HOWE VER, AS PER ACCOUNTS NORMS OF ELECTRICITY COMPANIES IT I S NOT DIRECTLY DEBITED TO CUSTOMERS ACCOUNT FOR FUTURE RE COVERY AND THUS THE TERM PROVISION IS BEING USED WHEREAS IT IS ACTUALY8 WRITE OFF AND THE YEAR OF REALIZATION OF THE SAME I S CONSIDERED AS INCOME AND THUS IT IS ACTUALLY WRITE OFF OF BAD DEBTS. THE SUBMISSION OF THE ASSESSEE IS PERUSED AND THE SAME IS NOT ACCEPTABLE FOR THE REASONS THAT ANY PRO VISION FOR UNCERTAIN LIABILITY IS TO BE ADDED BACK TO THE BOOK PROFIT. THE PROVISIONS OF BAD AND DOUBTFUL DEBTS DUES IS MADE N OT FOR CERTAIN LIABILITY. THE BAD & DOUBTFUL DEBTS OF RS. 30,63,23,038/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME & BOOK PROFIT U/S 115JB. THE AO STATED IN THE ASSESSMENT ORDER THAT ON VERIF ICATION OF PROFIT AND LOSS ACCOUNT, IT WAS FOUND THAT THE ASSESSEE HAD CL AIMED BAD AND DOUBTFUL DEBTS PROVISION. ACCORDINGLY, THE AO ISSUED SHOW CA USE TO THE ASSESSEE AS TO WHY SAID CLAIM SHOULD NOT BE DISALLOWED. THE ASSESSEE IN ITS REPLY STATED THAT THE SUM HAS BEEN DEBITED AS BAD AND DOU BTFUL PROVISION FOR DUES FROM CONSUMER BUT ACTUALLY IT IS WRITE OFF OF OUTSTANDING OF PERMANENT DISCONNECTED CONSUMER. THUS IT TRANSPIRES FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAS DISCLOSED THIS FACT BEF ORE THE AO AND THE AO ITA NO.936/JP/2017 THE ACIT, CIRCLE 2, AJMER VS AJMER VIDYUT VITRAN NIGAM LTD., AJMER 7 HIMSELF HAS NOTED THE FACT FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. THOUGH THE PROVISION FOR BAD AND DOUBTFUL DEBTS ARE NOT ALLOWABLE CLAIM UNTIL AND UNLESS IT IS ACTUALLY WRITTEN OFF AND THE SAID ADDITION WAS CONFIRMED BY THE TRIBUNAL IN QUANTUM APPEAL IN ITA NO. 371/JP/2016 FOR THE ASSESSMENT YEAR 2010-11 VIDE ORDER DATED 28-08- 2017 (M/S. AJMER VIDYUT VITRAN NIGAM LTD VS ACIT, CIRCLE 2, AJMER) BY OBSERVING AT PARA 48 AS UNDER:- 48. WE HAVE HEARD THE RIVAL SUBMISSIONS AND P URUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE COMP ANY HAS CONTENDED THAT IT IS NOT A PROVISION BUT AN ACT UAL WRITE OFF. IT WAS SUBMITTED THAT AS PER ACCOUNTING PROCEDURE/GUIDELINES PRESCRIBED FOR THE ELECTRICITY COMPANIES, IT IS NOT DIRECTLY DEBITED TO THE CUSTOM ER ACCOUNT FOR THE PURPOSES OF DETERMINING THE AMOUNT TO BE RECOVERED IN FUTURE. IT WAS FURTHER SUBMITTED THAT AS AND WHEN THE AMOUNT IS REALISED IN FUTURE, THE SAME WILL BE OFFERED TO TAX. THERE IS HOWEVER NOTHING ON RECORD TO DEMONSTRATE WHAT ACCOUNTING TREATMENT, THE ASSESSEE COMPANY HAS DONE IN ITS BOOKS OF ACCOUNTS UNDER THE DOUBLE ENTRY ACCOUNTING SYSTEM, IF THE AMOUNTS IN INDIVIDUAL ACCOUNTS OF THE CUSTOMERS ARE NOT WRITTEN OFF. UNLESS AND UNTIL, THE ACCOUNTING TREATMENT IN THE B OOKS OF ACCOUNTS IS CLEAR AND THROUGH WHICH IT CAN BE DEMON STRATED THAT THE ASSESSEE COMPANY HAS ACTUALLY WRITE OFF THE BAD DEBTS IN ITS BOOKS OF ACCOUNTS, MERELY CONTENDING T HAT THE INTENTION IS TO WRITE OFF THE BAD DEBTS WOULD NOT BE SUFFICIENT ENOUGH TO CLAIM A DEDUCTION UNDER THE PR OVISIONS OF THE ACT. THE PROVISIONS OF SECTION 36(1)(VII) RE AD WITH EXPLANATION 1 ARE CLEARLY ATTRACTED AND THE ASSESSE E HAS NOT ABLE TO DEMONSTRATE HOW THE SAID PROVISIONS ARE NOT APPLICABLE IN THE INSTANT CASE. FURTHER, LD CIT(A) HAS GIVEN A FINDING THAT IN AY 2011-12, THE ASSESSEE COMPANY ITSELF HAS ADDED BACK THE PROVISION FOR DOUBTFUL DEBTS FOR THE ITA NO.936/JP/2017 THE ACIT, CIRCLE 2, AJMER VS AJMER VIDYUT VITRAN NIGAM LTD., AJMER 8 PURPOSES OF COMPUTING THE INCOME UNDER THE NORMAL PROVISIONS OF THE ACT. THE RULE OF CONSISTENCY THER EFORE EQUALLY APPLIES TO THE ASSESSEE COMPANY. IN THE EN TIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE AO HAS RIGHTLY DISALLOWED THE PROVISION FOR DOUBTFUL DEBTS AND WHICH HAS RIGHTLY BEEN CONFIRMED BY THE LD CIT(A). IN THE RESULT, THE GROUND OF THE ASSESSEE I S DISMISSED. THUS FROM THE FINDINGS OF THE AO AS WELL AS TRIBUN AL IN THE QUANTUM PROCEEDINGS, IT IS CLEAR THAT IT IS NOT A CASE OF F URNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME BUT THE CLAIM OF THE ASSESSEE IS REGARDING PROVISION FOR BA D AND DOUBTFUL DEBTS BEING OUTSTANDING DUES FROM THE ELECTRICITY DISCONN ECTION CONSUMERS. ONCE THE ASSESSEE HAS PRODUCED AND DISCLOSED ALL TH E RELEVANT FACTS THEN MERE DISALLOWANCE OF CLAIM BY THE AO ON THE GROUND THAT THE SAME IS NOT ALLOWABLE AS PER PROVISIONS OF THE INCOME TAX WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED THE INAC CURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME. ACCO RDINGLY, FOLLOWING THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (SUPRA), THE PENALTY LEVIED BY THE AO AGAINST DISALLOWANCE OF CLAIM OF PROVISION FOR BAD AND DOUB TFUL DEBTS IS DELETED. THUS THE SOLITARY GROUND OF THE ASSESSEE IS ALLOWED . ITA NO.936/JP/2017 THE ACIT, CIRCLE 2, AJMER VS AJMER VIDYUT VITRAN NIGAM LTD., AJMER 9 5.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THAT OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 /01 /2020. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09/01/ 2020 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE 2, AJMER 2. IZR;FKHZ@ THE RESPONDENT- M/S. AJMER VIDYUT VITRAN NIGAM LTD . AJMER 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.936/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR