The Addl. CIT. Range 3, Indore V. M/s BCC Finance Ltd., Indore

ITSSA 15/IND/2012

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2411 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 11-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHNEY; R A VERMA DRS
• Assessee Lawyers: ARPIT GAUR CAS
• Keywords: Business expenditure; Bad and doubtful debts; Validity of assessment; Revenue expenditure
• Section: 143(3); 142(1); 153A; 14A; 37; 139

Judgement Text

BCC FINANCE LTD. (SS)15 AND 16/IND/2012 AND COS 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER IT(SS)A NOS.15 & 16/IND/2012 A.YS. 2005-06 & 2006-07 ADDL. CIT, RANGE-3, INDORE :: ASSESSEE VS BCC FINANCE LTD., INDORE PAN AAACB 6750 D :: RESPONDENT C.O. NOS.16 & 17/IND/2012 ARISING OUT OF IT(SS)A NOS.15 & 16/IND/2012 A.YS. 2005-06 & 2006-07 BCC FINANCE LTD., INDORE PAN AAACB 6750 D :: ASSESSEE VS ADDL. CIT, RANGE-3, INDORE :: RESPONDENT DEPARTMENT BY SHRI RAJEEV VARSHNEY AND SHRI R.A. VERMA, DRS RESPONDENT BY SHRI ANIL KAMAL GARG AND SHRI ARPIT GAUR, CAS DATE OF HEARING 18.5.2016 DATE OF PRONOUNCEMENT 18.5.2016 O R D E R BCC FINANCE LTD. (SS)15 AND 16/IND/2012 AND COS 2 PER SHRI D.T. GARASIA, JM THE ABOVE APPEALS FILED BY THE REVENUE AND CROSS-OB JECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE DIFF ERENT ORDERS OF LD. CIT(A)-I, INDORE, DATED 18.11.2011. SINCE, IN THE C ROSS-OBJECTIONS, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF ASSESSMENTS U/S 153A MAKING ADDITIONS ON THOSE ISSUES IN RESPECT OF WHICH NO IN CRIMINATING MATERIAL WAS FOUND OR SEIZED DURING THE COURSE OF SEARCH, TH EREFORE, WE ARE DECIDING THIS ISSUE BEING LEGAL IN NATURE AT FIRST. SINCE IDENTICAL FACTS AND CIRCUMSTANCES ARE INVOLVED IN BOTH THE PRESENT YEAR S, THEREFORE, WE ARE TAKING FACTS FROM THE A.Y. 2005-06. 2. SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CLOSELY HELD PUBLIC LIMITED COMPANY DULY INCORPORATED AND REGIST ERED UNDER THE COMPANIES ACT, 1956, ON 08-07-1993. IT IS ONE OF TH E VARIOUS COMPANIES OF WELL KNOWN BHATIA GROUP [ALSO KNOWN AS BCC G ROUP] OF INDORE. THE ASSESSEE COMPANY IS REGULARLY ASSESSED TO INCOME-TA X SINCE ITS INCEPTION. THE ASSESSEE COMPANY FURNISHED ITS ORIGI NAL RETURN OF INCOME, PERTAINING TO THE ASSESSMENT YEAR UNDER CON SIDERATION, U/S. 139(1) OF THE INCOME-TAX ACT, 1961, ON 25-10-2005 W ITH THE THEN ACIT- 3(1), INDORE, DECLARING AN INCOME OF RS.19,40,120/- . A COPY OF THE ACKNOWLEDGEMENT OF THE ORIGINAL RETURN AND A COPY O F COMPUTATION OF TOTAL INCOME ARE PLACED AT PAGE NO. 14 TO 17 OF THE PAPER BOOK. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNISHED A LL THE NECESSARY DOCUMENTS SUCH AS COPY OF THE AUDITORS REPORT, COP Y OF THE AUDITED BALANCE-SHEET, AUDITED PROFIT & LOSS ACCOUNT AND SC HEDULES ETC. COPIES OF SUCH DOCUMENTS ARE PLACED AT PAGE NO. 21 TO 50 OF THE PAPER BOOK. IN RESPONSE TO THE RETURN OF INCOME, FURNISHE D BY THE ASSESSEE U/S. 139 OF THE INCOME-TAX ACT, 1961, NO ACTION WAS TAKEN BY THE ASSESSING OFFICER AND AS SUCH THE ASSESSMENT WAS DE EMED TO HAVE BCC FINANCE LTD. (SS)15 AND 16/IND/2012 AND COS 3 BEEN COMPLETED U/S. 143(1)(A) OF THE INCOME-TAX ACT , 1961. A SEARCH U/S. 132(1) OF THE INCOME-TAX ACT, 1961 WAS CARRIED OUT BY THE ASSISTANT DIRECTOR OF INCOME-TAX (INV.)-II, INDORE, ON 25-09- 2007, IN THE BUSINESS PREMISES OF THE ASSESSEE COMPANY AS ALSO IN THE RES IDENTIAL PREMISES OF ITS DIRECTORS. DURING THE COURSE OF THE SEARCH, THE BHATIA GROUP HAD ADMITTED ADDITIONAL INCOME AGGREGATING TO RS.26,15, 24,529/- AND AS AGAINST SUCH ADMITTED INCOME OF RS.26,15,24,529/-, THE GROUP, AS A WHOLE, HAD SHOWN AN ADDITIONAL INCOME OF RS.27,33,7 3,087/- IN THE RETURNS OF INCOME FURNISHED UNDER S.153A OF THE ACT . HOWEVER, THE ASSESSEE NEITHER ADMITTED NOR DECLARED ANY ADDITION AL INCOME IN ITS RETURN OF INCOME. SUCH FACTS ARE EVIDENT FROM THE F INDINGS GIVEN BY THE CIT(A) AT PARA 2 & 2.1 AT PAGE NO. 2 & 3 OF HIS ORD ER. DURING THE COURSE OF THE SEARCH, NO UNDISCLOSED OR UNEXPLAINED MONEY, BULLION, JEWELLERY, VALUABLE ARTICLES OR THINGS PERTAINING TO THE ASSES SEE WERE FOUND OR SEIZED FROM THE PREMISES OF ANY PERSON IN WHOSE CAS E SEARCH UNDER S.132 WAS INITIATED. SUBSEQUENTLY, A NOTICE DATED 0 3-03-2008 WAS ISSUED BY THE LEARNED ADDL. COMMISSIONER OF INCOME- TAX, RANGE-3, INDORE, U/S. 153A OF THE INCOME-TAX ACT, 1961. UNDE R SUCH NOTICE, THE ASSESSEE WAS REQUIRED TO FURNISH ITS RETURN OF TOTA L INCOME PERTAINING TO THE ASSESSMENT YEARS UNDER CONSIDERATION, WITHIN A PERIOD OF 15 DAYS FROM THE DATE OF SERVICE OF THE NOTICE. A COPY OF T HE NOTICE UNDER S. 153A IS PLACED AT PAGE NO. 1 OF PAPER BOOK. IN RESPONSE TO THE NOTICE U/S. 153A, THE ASSESSEE, FURNISHED ITS RETURN OF TOTAL I NCOME ON 10-06-2008 VIDE ACK. NO. 0030100132 DECLARING THE SAME INCOME OF RS.19,40,120/- AS WAS DECLARED BY IT IN THE ORIGINAL RETURN FURNIS HED U/S. 139(1) (PB PAGE NO. 18 TO 20). THE CASE OF THE ASSESSEE WAS SE LECTED FOR SCRUTINY AND NOTICES U/S. 143(2) & 142(1) ALONG WITH QUESTIO NNAIRES WERE ISSUED FROM TIME TO TIME. IN RESPONSE TO SUCH NOTICES, THE ASSESSEE COMPANY THROUGH ITS AUTHORIZED REPRESENTATIVE ATTENDED THE HEARINGS BEFORE THE BCC FINANCE LTD. (SS)15 AND 16/IND/2012 AND COS 4 ASSESSING OFFICER FROM TIME TO TIME AND MADE WRITTE N SUBMISSIONS ALONG WITH NECESSARY DOCUMENTARY EVIDENCES. FINALLY, THE ASSESSING OFFICER FRAMED THE ASSESSMENT ON 23-12-2009, U/S. 153A READ WITH SECTION 143(3) OF THE INCOME-TAX ACT, 1961, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.47,59,385/- AS AGAINST THE RETURNED INCOME OF RS.19,40,120/- THEREBY MAKING ADDITIONS OF RS.28,19 ,265/-, AS PER DETAILS GIVEN BELOW: S. NO. PARTICULARS AMOUNT (RS.) 1 ADDITION ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE U/S. 35D 92,560 2 ADDITION ON ACCOUNT OF DIVIDEND UNDER RULE 8D R.W.S. 14A 16,665 3 ADDITION ON ACCOUNT OF DISALLOWANCE OF TDS 1,37,545 4 ADDITION ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS 25,72,495 TOTAL ADDITIONS 28,19,265 THE AO HAS NOT GIVEN ANY SPECIFIC FINDING ON THE IS SUE OF VALIDITY OF ASSESSMENTS U/S 153A WHEN NO INCRIMINATING MATERIAL WAS FOUND OR SEIZED DURING THE COURSE OF SEARCH. IN THE INSTANT CASE, THE AO HAS MADE THE IMPUGNED ADDITIONS BY TAKING A LEAD FROM T HE AUDITED PROFIT & LOSS ACCOUNT OF THE ASSESSEE COMPANY. 3. MATTER CARRIED TO LEARNED CIT(A), WHO CONFIRMED THE ADDITION OF RS.92,560/- MADE BY THE AO IN THE ASSESSEES INCOME , ON ACCOUNT OF DISALLOWANCE OF DEFERRED REVENUE EXPENDITURE UNDER S.35D. THE CIT(A) FURTHER CONFIRMED THE ADDITION OF RS.16,665/- MADE BY THE AO ON ACCOUNT OF DIVIDEND UNDER RULE 8D R.W.S. 14A AS THE SAME WAS NOT PRESSED BY THE ASSESSEE DURING THE COURSE OF APPELL ATE PROCEEDINGS. THE CIT(A) DELETED THE ADDITIONS OF RS.1,37,545/- A ND RS.25,72,495/- BCC FINANCE LTD. (SS)15 AND 16/IND/2012 AND COS 5 RESPECTIVELY MADE ON ACCOUNT OF DISALLOWANCE OF TDS AND BAD DEBTS. HOWEVER, THE CIT(A) UPHELD THE VALIDITY OF THE ASSE SSMENT PROCEEDINGS UNDER S. 153A OF THE ACT. THE CIT(A) IN HIS FINDING S GIVEN AT PARA 5.1, P. 22 OF THE ORDER HAS HELD THAT ADDITIONS AND DISALLO WANCES IN RESPECT OF VARIOUS ITEMS DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND DULY DISCLOSED BEFORE THE DEPARTMENT CAN ALSO BE MADE EV EN WHEN NO INCRIMINATING DOCUMENT WAS FOUND OR SEIZED DURING T HE COURSE OF THE SEARCH. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN WHILE ADJUDICATING THE APPEAL IN THE CASE OF ONE OF THE G ROUP ASSESSEES NAMELY, SHRI AMANDEEP SINGH BHATIA, FOR A.Y. 2002-0 3. 4. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WEL L AS WRITTEN SUBMISSION AS UNDER: IT IS SUBMITTED THAT FOR THESE GROUNDS, A DETAILED SUBMISSION HAS BEEN MADE IN THE CASE OF APPEAL OF ONE OTHER GROUP ASSESSEE N AMELY OF SHRI AMANDEEP SINGH BHATIA IN APPEAL NO. IT(SS)A-112/IND/2011 FOR A.Y. 2002-03 PENDING FOR ADJUDICATION BEFORE THIS HONBLE BENCH. SINCE, WHILE ADJUDICATING THE GROUNDS OF APPEAL RAISED BEFORE THE CIT(A), THE CIT (A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE AFORESAID CASE OF SHRI AM ANDEEP SINGH BHATIA, OUR SUBMISSIONS MADE BEFORE THIS HONBLE BENCH IN THE C ASE OF SHRI AMANDEEP SINGH BHATIA MAY KINDLY BE TAKEN INTO CONSIDERATION . RELEVANT DOCUMENTS FILED IN THE PAPER BOOK ON WHICH THE ASSESSEE IS PLACING RELIANCE FOR THESE GROUNDS PAGE NO. NATURE OF DOCUMENT FILED FOR THE PURPOSE OF FROM TO 14 17 COPY OF ACKNOWLEDGMENT OF RETURN FILED UNDER S.139 OF THE ACT FOR A.Y. 2005-06 ESTABLISHING THAT MUCH PRIOR TO THE DATE OF SEARCH, THE ASSESSEE HAD FURNISHED ITS RETURN OF INCOME UNDER S.139 21 50 COPY OF AUDITED FINANCIAL STATEMENTS OF ESTABLISHING THAT ALL THE ADDITIONS BCC FINANCE LTD. (SS)15 AND 16/IND/2012 AND COS 6 THE ASSESSEE FOR THE FINANCIAL YEAR ENDED ON 31-03-2005 MADE BY THE AO WERE NOT BASED UPON ANY INCRIMINATING MATERIAL BUT THEY WERE MADE ONLY BY TAKING A LEAD FROM THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE. 5. LD. DRS HAVE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT OUR ARGUMENTS ADVANCED IN THE CASE O F AMANDEEP SINGH BHATIA ON IDENTICAL FACTS MAY BE TAKEN INTO CONSIDE RATION. 6. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE CASE OF SHRI AMANDEEP SINGH B HATIA. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DEALT WITH BY US IN THE CASE OF ONE OF THE GROUP ASSESSEES NAMELY, AMANDEEP SINGH BHATIA IN AP PEAL NO. IT(SS)A NO.112/IND/2011 FOR A.Y. 2002-03, WHEREIN W E HAVE HELD THAT IN ABSENCE OF ANY INCRIMINATING DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH, THE ASSESSING OFFICER IS NOT JUST IFIED IN MAKING THE ADDITIONS IN NON-ABATED ASSESSMENT ORDERS WHILE PAS SING THE ORDERS U/S 153A R.W.S. 143(3) OF THE ACT. THUS, WE QUASH THE ASSESSMENT ORDER FOR THE A.Y. 2005-06 BEING NON-ABATED. ACCORDINGLY, THI S ISSUE OF INCRIMINATING MATERIAL INVOLVED IN THE ASSESSEES C .O. NO.16/IND/2012 IS ALLOWED. HOWEVER, SINCE THE ASSESSMENT FOR THE A.Y. 2006-07 IS ABATED, THE PRESENT ISSUE IN ASSESSEES C.O. NO.17/IND/2012 FOR THE A.Y. 2006- 07 WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSES SEE DURING THE COURSE OF HEARING, THEREFORE, SAME IS DISMISSED FOR THE A.Y. 2006-07 BEING NOT PRESSED. BCC FINANCE LTD. (SS)15 AND 16/IND/2012 AND COS 7 DEPARTMENTAL APPEALS IT(SS)A NOS.15& 16/IND/2012 7. NOW, WE SHALL TAKE UP THE DEPARTMENTAL APPEALS, WHEREIN THE CIT(A)S FINDING OF DELETING THE ADDITION OF RS.25, 72,495/- & RS.3,92,191/- FOR BOTH THE AYS, RESPECTIVELY, MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS CLAIMED BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT HAS BEEN CHALLENGED. SINCE ID ENTICAL FACTS AND CIRCUMSTANCES ARE INVOLVED IN BOTH THE PRESENT YEAR S, THEREFORE, WE ARE TAKING FACTS FROM THE A.Y. 2005-06. 8. SHORT FACTS OF THE CASE ARE THAT THE AO HAS DEAL T WITH THIS ISSUE AT PARA 4, PAGE NO. 4 OF HIS ORDER. THE AO HAS GIVEN A FINDING THAT THE BAD DEBTS ARE THE ITEMS OF BALANCE SHEET AND THEY HAVE NOTHING TO DO WITH THE PROFIT & LOSS ACCOUNT MEANING THEREBY THE INCOM E HAS NEVER BEEN OFFERED RELATING TO THESE BAD DEBTS. ACCORDINGLY, T HE AO MADE THE IMPUGNED ADDITIONS OF RS.25,72,495/- & RS.3,92,191/ - TO THE TOTAL INCOME OF THE ASSESSEE. 9. MATTER CARRIED TO LEARNED CIT(A), WHO HAS DEALT WITH THIS GROUND AT PARA 5.6 ON PAGE NO. 24 OF HIS ORDER. THE CIT(A) BY CONSIDERING THE EXPLANATION OF THE ASSESSEE DELETED THE ADDITION OF RS.25,72,495/- AND RS.3,92,191/- AND DIRECTED TO AL LOW THE CLAIM OF BAD DEBTS UNDER S.36(1)(VII) AND BUSINESS EXPENDITURE U NDER S.37 OF THE ACT. 10. LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WELL A S WRITTEN SUBMISSION AS UNDER: 1.00 IN THIS REGARD, IT IS SUBMITTED THAT THE ACTI ON OF THE LEARNED CIT(A), IN RESPECT OF THE ISSUE AGITATED BY THE REVENUE, IS FU LLY JUSTIFIED AS THE CIT(A) HAS TAKEN INTO CONSIDERATION ALL THE FACTS AND CIRC UMSTANCES OF THE CASE AS EMANATING FROM THE ASSESSMENT ORDER, MATERIAL PLACE D ON RECORD AND JUDICIAL PRONOUNCEMENTS AND THEREFORE, NO INTERFERENCE IS CA LLED FOR AND CONSEQUENTLY, THIS GROUND OF APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. WE WISH TO PLACE RELIANCE ON THE FOLLOWI NG: BCC FINANCE LTD. (SS)15 AND 16/IND/2012 AND COS 8 1.01 OUR WRITTEN SUBMISSION ON THE SUBJECT ISSUE WH ICH WAS FILED BEFORE THE LEARNED CIT(A). THE RELEVANT PART OF THE SUBMISSION IS PLACED AT PAGE NO. 62 TO 73 OF OUR PAPER BOOK FILED BEFORE YOUR HONOURS. 1.02 FINDINGS GIVEN BY THE LEARNED CIT(A) AT PARA 5 .6 [PAGE NO. 24 OF THE ORDER]. 1.03 FOLLOWING DOCUMENTS PLACED IN OUR PAPER BOOK F ILED BEFORE THE BENCH : (I) DETAILS OF BAD DEBTS FILED BEFORE AO AS PLACED AT PAGE NO. 57 & 58. (II) VARIOUS DOCUMENTARY EVIDENCES FURNISHED BEFORE THE CIT(A) AS PLACED AT PAGE NO. 74 TO 204. 11. LD. DR HAS RELIED ON THE ORDERS OF THE ASSESSIN G OFFICER. 12. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. IF WE GO THROUGH THE ORDERS OF THE LD. CIT(A), WE FIND THAT LD. CIT(A) HAS GONE THROUGH TH E REPLY OF THE ASSESSEE AND FOUND THAT MOST OF THE AMOUNTS AS WRIT TEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE RELATED TO THE INCOME W HICH HAS ALREADY BEEN OFFERED FOR TAX BY THE ASSESSEE. LD. CIT(A), C ONSIDERING THE FACT THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF LEASE & FINANCE, WAS OF THE VIEW THAT THE AMOUNTS WERE ADVANCED DURING THE COUR SE OF BUSINESS, THEREFORE, IN ANY CASE, THE SAID AMOUNTS OF BAD DEB TS AS CLAIMED BY THE ASSESSEE ARE ALLOWABLE EITHER U/S 36(1)(VII) OR U/S 37 OF THE I.T. ACT. BEFORE US, LD. DRS COULD NOT CONTROVERT THE FINDING RECORDED BY THE LD. CIT(A) BY BRINGING ANY CONTRARY MATERIAL ON RECORD. THUS, ON CONSIDERATION OF ABOVE, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDERS OF THE LD. CIT(A). ACCORDINGLY, DEPARTMENTAL APPEALS FOR B OTH THE AYS ARE DISMISSED. EVEN BOTH THE DEPARTMENTAL APPEALS ARE B ELOW THE MONETARY LIMIT I.E. RS.10 LACS, THEREFORE, ON THIS COUNT ALS O, BOTH THE DEPARTMENTAL APPEALS BEING FILED IN CONTRAVENTION WITH THE CBDT CIRCULAR NO.21/2015 DATED 10.12.2015 ARE DISMISSED BEING NOT MAINTAINAB LE. BCC FINANCE LTD. (SS)15 AND 16/IND/2012 AND COS 9 13. FINALLY, DEPARTMENTAL APPEALS ARE DISMISSED, CR OSS-OBJECTION NO.16/IND/2012 IS ALLOWED WHEREAS CROSS-OBJECTION N O.17/IND/2012 IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18.5.201 6. SD/- (B.C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T. GARASIA) JUDICIAL MEMBER DATED : 17.8.2016 COPY TO: ASSESSEE/RESPONDENT/CIT(A)/CIT/DR, INDORE