GN RESOUND INDIA Private LIMITED , NAVI MUMBAI V. INCOME-TAX OFFICER 10(3)(4), MUMBAI

MA 378/MUM/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 8041 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rectification of order; Additional evidence; Bad and doubtful debts
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) M.A. NO. 378/MUM/2018 (ITA NO. 3100/MUM/2016) ASSESSMENT YEAR: 2010 - 11 GN RESOUND INDIA PVT. LTD. OFFICE NO. 1201, 1202, 1203, 12 TH FLOOR, V. TIMES SQUARE, PLOT NO. 3, SECTOR 15, PALM BEACH ROAD, CBD BELAPUR, NAVI MUMBAI - 400614 VS. INCOME TAX OFFICE - 10(3)(4) MUMBAI. PAN NO. AACCG3984C APPELLANT RESPONDENT ASSESSEE BY : MR. GANESH RAJGOPALAN, AR REVENUE BY : MR. SAURABH KUMAR RAI, DR DATE OF HEARING : 29 /06/2018 DATE OF PRONOUNCEMENT : 24/09/2018 ORDER PER N.K. PRADHAN, AM BY MEANS OF THIS MISCELLANEOUS APPLICATION (MA) FILED U/S 254(2) OF THE INCOME TAX ACT, 1961 (THE ACT) , THE APPLICANT SEEKS RECTIFICATION OF MISTAKES IN THE ORDER DATED 21.02.2018 PASSED BY THE ITAT H BENCH MUMBAI (ITA NO. 3100 /MUM/201 6 ) FOR THE ASSESSMENT YEAR (AY) 2010 - 11 . IN PART - I , HERE - IN - BELOW, WE MENTION THE CONTENTIONS OF THE LD. COUNSEL OF THE APPLICANT, IN PART - II, THE SUBMISSIONS OF THE LD. DR AND IN PART - III, THE REASONS FOR OUR DECISION. GN RESOUND INDIA PVT. LTD. MA NO. 378/MUM/2018 2 I 2. THE CONTENTIONS OF THE LD. COUNSEL FOLLOW THE WRITTEN SUBMISSION DATED 15.05.2 018 FILED BY THE APPLICANT BEFORE THE TRIBUNAL. THEREFORE, WE REFER BELOW THE SAID WRITTEN SUBMISSION. IT IS SUBMITTED THAT THE 1 ST GROUND IN THE SAID APPEAL RELATED TO THE APPELLANTS CLAIM FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF U/S 36(1)(VII ) AND THE TRIBUNAL DISPOSED OFF THIS GROUND IN PARA 6 OF ITS ORDER WHICH READS AS UNDER: WE FIND THAT THE APPELLANT HAS FAILED TO ESTABLISH BEFORE THE AO AS WELL AS THE LD. CIT(A) THAT THE DEBT WAS INCIDENTAL TO ITS BUSINESS AND THE DEBT WAS TAKEN INTO A CCOUNT IN COMPUTING THE TOTAL INCOME OF THE PREVIOUS YEAR IN WHICH IT WAS WRITTEN OFF OR AN EARLIER YEAR. IT IS STATED THAT THE LEDGER ACCOUNT OF BELTONE (I) P. LTD. DOES NOT PERTAIN TO THE 1 ST GROUND BUT TO THE 3 RD GROUND OF APPEAL AND THE TRIBUNAL MISTA KENLY REFERRED TO THE SAME TO DECIDE THE 1 ST GROUND OF APPEAL. 2.1 IT IS FURTHER STATED THAT THE TRIBUNAL IN ITS ABOVE ORDER OVERLOOKED THE FACT THAT THE ASSESSING OFFICER (AO) DID NOT COME TO ANY ADVERSE FINDING FROM THE DETAILS SUBMITTED BY THE APPELLANT ABOUT THE NATURE OF THESE DEBTS BEING BAD DEBTS PERTAINING TO THE BUSINESS OF TH E APPELLANT AND THE YEARS TO WHICH THESE TRANSACTIONS PERTAIN. FURTHER, THE AO DID NOT DISPUTE THAT THESE WERE DEBTS INCIDENTAL TO THE BUSINESS OF THE APPELLANT BUT ONLY CONCLUDES THAT THE TRANSACTIONS WERE NOT SO OLD AND AMPLE EFFORTS HAVE NOT BEEN MADE TO RECOVER THE DEBT AND THE DEBTS WERE WRITTEN OFF ON THE BASIS OF THE SETTLEMENT WITH THE CONCERNED PARTY ONLY. GN RESOUND INDIA PVT. LTD. MA NO. 378/MUM/2018 3 IT IS SUBMITTED THAT NON - AVAILABILITY OF CONFIRMATIONS FROM THE DEBTORS DOES NOT AFFECT THE GENUINENESS OF THE ORIGINAL SALE TRANSA CTIONS IN EARLIER ASSESSMENT YEARS THAT GAVE RISE TO THE DEBTS SPECIALLY WHEN NO DOUBTS HAVE BEEN RAISED IN RESPECT OF THESE SALES TRANSACTIONS IN THE YEARS THE TRANSACTIONS TOOK PLACE. THE LD. COUNSEL FURTHER SUBMITS THAT ONCE THE DEBT HAS BEEN TAKEN INT O ACCOUNT IN COMPUTING THE INCOME IN AN EARLIER ASSESSMENT YEAR, IT BECOMES ELIGIBLE FOR DEDUCTION IF WRITTEN OFF IN THE BOOKS OF ACCOUNT AS PER SECTION 36(2) OF THE ACT. THERE IS NO REQUIREMENT IN THE CBDT CIRCULAR NO. 12/2016 DATED 30.05.2016 OR SECTION 36(1)(VII) OF THE ACT THAT THE DEBTOR HAS TO CONFIRM THE DEBT AS DUE FOR A DEDUCTION TO BE AVAILABLE UNDER THAT SECTION. IT IS THUS STATED THAT THE OMISSION ON THE PART OF THE TRIBUNAL TO CONSIDER THE RELEVANT FINDINGS IN THE REMAND REPORT AND REFERENCE BY THE TRIBUNAL TO A DOCUMENT THAT IS NOT RELEVANT FOR THE 1 ST GROUND OF APPEAL CONSTITUTE MISTAKES APPARENT FROM RECORD. THEREFORE, IT IS SUBMITTED THAT THE TRIBUNAL MAY SUITABLY AMEND ITS ORDER TO RECTIFY THE AFORESAID MISTAKES I I 3. PER CONTRA , THE LD. DR SUBMITS THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAD FURNISHED BEFORE THE LD. CIT(A), ADDITIONAL EVIDENCE ALONG WITH APPLICATION UNDER RULE 46A OF THE INCOME TAX RULES, 1962. THEN THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO IN RESPECT OF THE SAID ADDITIONAL EVIDENCE. THE LD. CIT(A), GN RESOUND INDIA PVT. LTD. MA NO. 378/MUM/2018 4 AFTER RECEIVING A COPY OF THE REMAND REPORT FROM THE AO, HAD FORWARDED A COPY OF IT TO THE APPELLANT FOR FILING EXPLANATION , IF ANY. THE APPELLANT FILED A REJOINDER BEFORE THE LD. CIT(A) ON 25. 02.2016. AFTER GOING THROUGH THE REMAND REPORT SUBMITTED BY THE AO AND THE REJOINDER FILED BY THE APPELLANT, THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE OF BAD DEBTS OF RS.23,26,873/ - MADE BY THE AO U/S 36(2) OF THE ACT. THE LD. DR SUBMITS THAT THE TRI BUNAL IN THE IMPUGNED ORDER HAS MENTIONED THESE FACTS AT PARA 3. REFERENCE IS MADE BY HIM TO PARA 6 OF THE ABOVE ORDER OF THE TRIBUNAL AND IT IS SUBMITTED THAT THERE IS NO MISTAKE FROM RECORD AND SO NO RECTIFICATION IS CALLED FOR IN THE INSTANT CASE. III 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE HAVE MENTIONED AT PARA 3 OF THE IMPUGNED ORDER, THE ADDITIONAL EVIDENCE FILED BY THE APPELLANT BEFORE THE LD. CIT(A) UNDER RULE 46A, THE REMAND REPORT CALLED BY THE LD. CIT(A) FROM THE AO, THE REJOINDER FILED BY THE APPELLANT BEFORE THE LD. CIT(A) ON THE REMAND REPORT AND THE FINDING OF THE LD. CIT(A). THEREFORE, IT WOULD BE RELEVANT TO EXTRACT BELOW THE FINDINGS IN THE REMAND REPORT SUBMITTED BY THE AO, WHICH HAS BEEN PRODUCED BY THE LD. CIT(A) AT PARA 2.4.2 OF HIS ORDER DATED 29.02.2016 WHICH READS AS UNDER: 4.4. IN ORDER TO VERIFY, A LETTER DATED 22.01.2015 HAS BEEN ISSUED TO THE ASSESSES COMPANY, REQUESTING TO FILE THE DETAILS IN SUPPORT OF ITS CONTENTION ALONG WITH DOCUMENTARY EVIDENCES. I N RESPONSE, THE AR OF THE ASSESSEE COMPANY, ATTENDED ON 16.02 2015 AND FILED THE DETAILS OF BAD DEBTS . ON GN RESOUND INDIA PVT. LTD. MA NO. 378/MUM/2018 5 PERUSAL OF THE LEDGER , IT IS SEEN THAT THE TRANSACTIONS WERE NOT SO OLD AND AMPLE EFFORTS HAVE NOT BEEN MAD E TO RECOVER T HE DEBT AND THE DEBT WERE WRITTEN OFF ON THE BASIS OF SETTLEMENT WITH THE CONCERNED PARTY ONLY. A CHART, DEMONSTRATING THE YEAR OF TRANSACTION, IS SHOWN BELOW: SR.NO. NAME OF THE PARTY AMOUNT OF DEBT WRITTEN OFF ASSESSMENT YEAR IN WHICH TRANSACTION HAS BEEN MADE 1. M/S DELHI - AB OPTIQUE 9,72,314/ - 2009 - 10 2. A.P. BHIMAVARAM K.S RAO 2,76,680/ - 2008 - 09 3. BELT O NE SHREERAM H AC 4,10,209/ - 2007 - 08 4. CALCUTTA ABHA ATIDIT AIDS 5,46,069/ - 2008 - 09 5. GUJARAT - AHMD - POWER TEK 90,656/ - 2006 - 07 FURTHER, NOTICES U/S 133(6) OF THE ACT, HAS BEEN SENT TO THE ALL FIVE PARTIES. THE REPLY OF M/S AB OPTIQUE HAS BEEN RECEIVED IN THIS OFFICE ON 2 6.11.2015. VIDE ABOVE REFERRED L ETTER OPTIQUE HAS SUBMITTED LEDGER OF THE ASSESSES COMPANY FOR THE PERIOD FRO M 01.04.2009 TO 31.03.2010, WHEREIN THE ASSESSEE COMPANY HAS BEEN SHOWN AS SUNDRY CREDITOR OF RS.13,62,776/ - . THIS AMOUNT HAS ALSO BEEN SHOWN IN THE LEDGER OF M/S A B OPTIQUE, AS FILED BY THE ASSESSEE COMPANY PRIOR THE WRITTEN OFF THE DEBT. FURTHER, A FR ESH NOTICE U/S 133(6) OF THE ACT, HAS BEEN SENT TO CALL FOR THE LEDGER FOR THE PERIOD FROM 01.04.2008 TO 31.03.2010, AS THE TRANSACTION WAS MADE DURING THE FY 2008 - 09 BUT THE REPLY OF M/S A B QPTIQUE IS NOT RECEIVED YET, IN SPITE OF TELEPHONIC CONVERSATION S MADE WITH REPRESENTATIVE OF M/S A B OPTIQUE, ON 08.01.2016& 11.01.2016, REQUESTING TO SEND INFORMATION ON E - MAIL TO EXPEDITE THE PROCEEDINGS AND THE REPRESENTATIVE OF M/S A B OPTIQUE HAS ALSO ASSURED THAT INFORMATION IS BEING SENT ON MAIL BY EVENING OF 0 8.01.2016 AND BY EVENING OF 11.01.2016. GN RESOUND INDIA PVT. LTD. MA NO. 378/MUM/2018 6 THE NOTICES U/S 133(6), SENT TO M/S BELTONE SHREERAM HAC AND M/S GUJARAT - AHMD - POWER TEK, HAVE BEEN RETURN BACK BY THE POSTAL AUTHORITY WITH REMARKS 'LEFT' AND THE REPLIES FROM M/S A.P - BHIMAVARAM K.S RAO AND M/S CALCUTTA ABHA AUDIT AIDS, ARE NOT RECEIVED YET, IN SPITE OF DUE DATE FOR SUBMISSION HAS ELAPSED. FURTHER, ASSESSES COMPANY, VIDE ITS LETTER DATED 23.11.2015, HAS ALSO STATED THAT THEY HAVE UNABLE TO PROVIDE CURRENT CONTACT DETAILS OF I) M/ S POWER TEK, AHMEDABAD, AND II) M/S BELTONE SHREERAM HAC, MUMBAI. HENCE, THE APPEAL OF THE ASSESSEE COMPANY IS NOT TENABLE ON THIS ISSUE.' 4.1 THEN FOLLOWS THE FINDING OF THE LD. CIT(A) AT PARA 2.4.3 WHICH IS AS UNDER: 2.4.3 IT IS SEEN FROM THE ABOVE THA T LD. AO HARBOURED DOUBTS ABOUT THE VERACITY AND GENUINENESS OF THE TRANSACTIONS AND HENCE, HE HAD SENT NOTICE U/S 133(6) TO ALL THE PARTIES. HOWEVER, EXCEPT GETTING A REPLY FROM M/S A B OPTIQUE, NO OTHER INFORMATION WAS EITHER RECEIVED BY THE LD. AO OR SU BMITTED BY THE APPELLANT IN THE REMAND PROCEEDINGS. THEREFORE, THE CASE LAWS CITED BY LD. AR REGARDING THE CLAIM OF BAD DEBTS WOULD NOT COME TO ITS RESCUE AS EVEN THE PARTIES IN QUESTION DID NOT APPEAR TO BE GENUINE, IN VIEW OF THE FACT THAT AT LEAST FROM TWO SUCH PARTIES VIZ. BELTONE SHREERAM HAC AND M/S GUJARAI - AHMD - POWER TEK, NOTICES U/S 133(6) WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE REMARKS 'LEFT'. EVEN THE APPELLANT COMPANY SUBMITTED BEFORE THE LD. AO IN THE REMAND PROCEEDINGS THAT THEY W ERE UNABLE TO PROVIDE THE CURRENT DETAILS OF M/S POWER TEK, AHMEDABAD AND M/S BELTONE SHREERAM HAC, MUMBAI. THOUGH AS FAR AS A B OPTIQUE IS CONCERNED, THE SAID COMPANY HAS REPLIED TO THE LD. AO AND, THEREFORE, TO THAT EXTENT IT COULD BE SAID THAT THE SAID PARTY WAS GENUINE BUT HAD FAILED TO PROVIDE THE LEDGER COPY OF THE RELEVANT PERIOD AND, THEREFORE, LD. AO COULD NOT HAVE VERIFIED THE AUTHENTICITY OF THE TRANSACTIONS. EVEN AFTER THE AMENDMENT MADE IN SECTION 36(2), THE WORD USED IS BAD DEBT AND NOT 'ANY' DEBT AND, THEREFORE, WHEREAS IT IS TRUE THAT IN CASE WHERE BAD DEBTS HAVE BEEN WRITTEN OFF FOLLOWING DUE GN RESOUND INDIA PVT. LTD. MA NO. 378/MUM/2018 7 PROCEDURE OF LAW, THEY WOULD NORMALLY BE ALLOWABLE, HOWEVER, IN CASE OF NON - GENUINENESS OF TRANSACTIONS, IT IS IN DOUBT IF THE CASE LAWS COULD COME TO THE RESCUE OF THE ASSESSEE. AS OBSERVED BY ME EARLIER, IN THIS CASE, THE APPELLANT HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION AND EVEN THE NOTICES U/S 133(6) SENT BY LD. AO IN REMAND PROCEEDINGS HAVE EITHER BEEN RETURNED BACK UNSERVED OR NO REP LIES WERE FURNISHED. THEREFORE, I AM UNABLE TO AGREE TO THE ARGUMENTS ADVANCED BY THE LD. AR. ACCORDINGLY, THE GROUND RAISED IS DISMISSED. 4.2 THUS THERE IS NO MERIT IN THE CONTENTIONS OF THE LD. COUNSEL THAT THERE WAS OMISSION ON THE PART OF THE TRIBUNAL TO CONSIDER THE RELEVANT FINDINGS IN THE REMAND REPORT. THERE IS NO DISPUTE THAT THE APPELLANT HAD FILED A COPY OF THE LEDGER ACCOUNT OF BELTON (I) PVT. LTD., WHICH WE HAVE MENTIONED AT PARA 4 OF THE IMPUGNED ORDER. HOWEVER, THE 1ST GROUND OF APPEAL HAS BEEN DECIDED BY US AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE, FACTS EMERGE FROM THE REMAND REPORT SUBMITTED BY THE AO TO THE LD. CIT(A), THE REJOINDER TO IT FILED BY THE APPELLANT BEFORE THE LD. CIT(A) AND THE FINDINGS OF THE LD. CIT(A). THE IMPUGNED ORDER OF THE TRIBUNAL FOCUSED ON THESE FINDINGS AT PARA 6 OF ITS ORDER. IT HAS BEEN SPECIFICALLY STA TED AT PARA 6 OF THE IMPUGNED ORDER THAT INDISPUTABLY, THE NOTICES SENT BY THE AO TO BELTONE SHRE ERAM HC AND M/S GUJARAT - AHMD - POWER TEK WERE SENT BACK BY THE POSTAL AUTHORITIES WITH THE REMARKS LEFT. EVEN IN THE REMAND PROCEEDINGS, THE APPELLANT SUBMITTED BEFORE THE AO THAT THEY WERE UNABLE TO PROVIDE DETAILS OF THE ABOVE TWO CONCERNS. ALSO A.B. OPT IQUE FAILED TO SEND A COPY OF THE LEDGER GN RESOUND INDIA PVT. LTD. MA NO. 378/MUM/2018 8 ACCOUNT OF THE RELEVANT PERIOD TO THE AO. AGAINST THE ABOVE BACKGROUND OF FACTS, THE AO WAS NOT IN A POSITION TO VERIFY THE GENUINENESS OF TRANSACTIONS. WE HAVE MENTIONED THEREIN THAT THE APPELLANT HAS FAILED TO E STABLISH BEFORE THE AO AS WELL AS THE LD. CIT(A) THAT THE DEBT WAS INCIDENTAL TO ITS BUSINESS AND THE DEBT WAS TAKEN INTO ACCOUNT IN COMPUTING THE TOTAL INCOME OF THE PREVIOUS YEAR IN WHICH IT WAS WRITTEN OFF OR AN EARLIER YEAR. THESE ARE THE BASIC INGREDI ENTS FOR CLAIM OF BAD DEBTS. IN THE INSTANT CASE, THE APPELLANT HAS NOT FULFILLED THE CONDITIONS LAID DOWN AT PARA 4 OF THE SAID CBDT CIRCULAR. THEREFORE, THE CLAIM OF AUTOMATIC DEDUCTION OF BAD DEBT DOES NOT ARISE. 4.3 IN THE CASE OF CIT V. RAMESH ELECTR IC & TRADING CO. (1993) 203 ITR 497 (BOM) , THEIR LORDSHIPS OF THE HONBLE BOMBAY HIGH COURT HAVE HELD: UNDER S. 254(2) OF THE IT ACT, 1961, THE TRIBUNAL MAY, WITH A VIEW TO RECTIFYING ANY MISTAKE APPARENT FROM THE RECORD, AMEND ANY ORDER PASSED BY IT U NDER SUB - S (1) WITHIN THE TIME PRESCRIBED THEREIN. IT IS AN ACCEPTED POSITION THAT THE TRIBUNAL DOES NOT HAVE ANY POWER TO REVIEW ITS OWN ORDERS UNDER THE PROVISIONS OF THE IT ACT, 1961. THE ONLY POWER WHICH THE TRIBUNAL POSSESSES IS TO RECTIFY ANY MISTAKE IN ITS OWN ORDER WHICH IS APPARENT FROM THE RECORD. THIS IS MERELY A POWER OF AMENDING ITS ORDER. IN THE PRESENT CASE, IN THE FIRST ORDER, THERE IS NO MISTAKE WHICH IS APPARENT FROM THE RECORD AT ALL. THE TRIBUNAL WAS REQUIRED TO DECIDE WHETHER THE COMMIS SION PAYMENT OF RS.54,000 WAS DEDUCTIBLE UNDER S. 37. AFTER EXAMINING THE CIRCUMSTANCES, THE TRIBUNAL CAME TO A CONCLUSION THAT IT WAS NOT SO DEDUCTIBLE. THE TRIBUNAL CANNOT, IN EXERCISE OF ITS POWER OF RECTIFICATION, LOOK INTO SOME OTHER CIRCUMSTANCES WHI CH WOULD SUPPORT OR NOT SUPPORT ITS CONCLUSION SO ARRIVED AT. THE MISTAKE THE TRIBUNAL IS ENTITLED TO CORRECT IS NOT AN ERROR OF JUDGMENT BUT A MISTAKE WHICH IS APPARENT FROM THE RECORD ITSELF. THE TRIBUNAL HAS, PATENTLY, FAR EXCEEDED ITS GN RESOUND INDIA PVT. LTD. MA NO. 378/MUM/2018 9 JURISDICTION UNDE R S. 254(2) IN REDECIDING THE ENTIRE DISPUTE WHICH WAS BEFORE IT, IN THIS FASHION, AND THE TRIBUNAL HAS COMMITTED A GROSS AND INEXPLICABLE ERROR. FAILURE BY THE TRIBUNAL TO CONSIDER AN ARGUMENT ADVANCED BY EITHER PARTY FOR ARRIVING AT A CONCLUSION IS NOT A N ERROR APPARENT ON THE RECORD, ALTHOUGH IT MAY BE AN ERROR OF JUDGMENT. 5. IN VIEW OF THE FACTUAL SCENARIO AND POSITION OF LAW DELINEATED HEREINBEFORE, THE PRESENT MA, BEING DEVOID OF MERIT, IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/09/2018. SD/ - SD/ - ( SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 24/09/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI