ACIT, New Delhi v. M/s. IBATS, New Delhi

ITA 4186/DEL/2011 | 2006-2007
Pronouncement Date: 17-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 418620114 RSA 2011
Assessee PAN AAAFI1198K
Bench Delhi
Appeal Number ITA 4186/DEL/2011
Duration Of Justice 1 month(s) 28 day(s)
Appellant ACIT, New Delhi
Respondent M/s. IBATS, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 17-11-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 17-11-2011
Date Of Final Hearing 17-11-2011
Next Hearing Date 17-11-2011
Assessment Year 2006-2007
Appeal Filed On 19-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C: NEW DELHI BEFORE SHRI G.D. AGRAWAL VICE PRESIDENT AND SHRI C.L. SETHI JUDICIAL MEMBER I.T. A. NO.4186/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX M/S. IBATS CIRCLE 23(1) NEW DELHI. VS. S-117 PANCHSHEEL PA RK NEW DELHI. PAN: AAAFI1198K (APPELLANT) (RES PONDENT) APPELLANT BY : SHRI SALIL MISHRA SR. DR. RESPONDENT BY : SHRI PRAKASH NARAIN ADVOCATE & SHRI SURJEET SINGH CA. O R D E R PER C.L. SETHI JUDICIAL MEMBER THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 30 .06.2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) PE RTAINING TO ASSESSMENT YEAR 2006-07. 2. GROUND NO.1 IS DIRECTED AGAINST THE LEARNED CIT( A)S ORDER IN DELETING THE ADDITION OF RS.7 40 915/- MADE BY THE ASSESSING OFFICER BY REJECTING THE ASSESSEES CLAIM OF UN-RECOVERED ADVANCES WRITTEN O FF. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE ASSESSEES CLAIM OF UN-RECOVERED ADVANCES WRITT EN OF WORTH 2 RS.7 40 915/- HAS BEEN REJECTED BY THE AO BY OBSERV ING THAT THESE ARE MOSTLY AGAINST OLD ADVANCES PAID WITHOUT GIVING ANY ADDRESS OF THE PARTIES. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS NOT P RODUCED THE PARTIES SO THAT THE NATURE OF PAYMENT COULD BE VERIFIED. HOWEV ER ON AN APPEAL THE LEARNED CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER:- 7. AT GROUND OF APPEAL NO.3 THE APPELLANT HAS CON TESTED THE DISALLOWANCE OF UNRECOVERED ADVANCES. AS SEEN FROM THE SUBMISSIONS THESE ADVANCES WERE MADE BY THE APPELL ANT FOR WORK OF FABRICATION AND FINISHING AND THE AMOUNTS HAVE REMAINED OUTSTANDING FOR PERIODS RANGING FROM 4 TO 9 YEARS. THREE OF THE FIVE ACCOUNTS PERTAIN TO ONE SH. ARJUN DASS WHO EXPIRED ON 14.10.2005. BOTH HIS ADDRESS AND DEATH CERTIFICATE ARE AVAILABLE IN SUBMISSIONS MADE BEFORE THE ASSESS ING OFFICER BY THE APPELLANT. OF THE REMAINING TWO ACCOUNTS TH E PARTIES ARE STATED TO NO LONGER BE TRACEABLE. IT IS SEEN THAT THE PARTYWISE DETAILS WITH COPIES OF LEDGER ACCOUNTS FROM THE YEA R IN WHICH THE ADVANCES WERE MADE ARE PAT OF THE REPLIES FILE D BEFORE THE ASSESSING OFFICER BUT THE ASSESSING OFFICER HAS ST ATED THAT NO EVIDENCE HAS BEEN FILED BY THE ASSESSEE IN THIS REG ARD. I HAVE EXAMINED THESE LEDGER ACCOUNTS AND FIND THAT OF TH E TOTAL SUM WRITTEN OFF OF RS.7 40 914/- THE AMOUNT OF RS.3 13 502/- DUE FROM M/S. FINISHING TOUCH WAS ADVANCED BY CHEQUES O F VARIOUS DATES IN THE F.Y. 2001-02. THE AMOUNT OF RS.3 00 0 00/- WAS ADVANCED TO M/S. GEETA FINISHERS BY CHEQUE IN THE F .Y. 1997- 98. THE SUM OF RS.30 000/- IN THE CASE OF SH. ARJU N DASS WRITTEN OFF IN THE A.Y. 2006-07 PERTAINS TO ADVANC E GIVEN IN THE F.Y. 1996-97. THE ADVANCE OF RS.30 000/- IN THE NA ME OF M/S. RAMA ALSO PERTAINS TO THE F.Y. 1996-97. THE AMOUNT WRITTEN OFF IN THE CASE OF SH. RAKESH KANOJIA OF RS.50 190/- P ERTAINS TO THE F.Y.2001-02. THE MOOT POINT TO BE CONSIDERED IN DECIDING THE DEDUCTIBILITY OF THE LOSS CLAIMED IS WHETHER IT WA S INCURRED IN CARRYING OUT THE OPERATIONS OF THE BUSINESS AND IS INCIDENTAL TO THE OPERATION. IN THE FACTS OF THIS CASE THE ADVA NCES HAVE BEEN 3 MADE TO PERSONS WHO WERE CARRYING OUT THE OPERATION S OF FINISHING AND FABRICATION. LEDGER ACCOUNTS OF THE YEARS IN WHICH THE ADVANCES WERE MADE SHOW REGULAR DEALINGS OF ILLS RAISED FOR WORK DONE PAYMENT MADE THROUGH CHEQUES AND TAX DEDUCTED AT SOURCE. HENCE IT IS CONCLUDED THAT THE ADVANCES WERE MADE IN THE COURSE OF BUSINESS FOR SERVICES T O BE RENDERED FOR PURPOSES OF BUSINESS HOWEVER SUCH AMOUNTS COUL D NOT BE RECOVERED ON ACCOUNT OF DEATH OF PROPRIETOR IN SOME CASES AND CLOSURE OF BUSINESS OF OTHERS. THE APPELLANT HAS F URNISHED ADEQUATE EXPLANATION BEFORE THE ASSESSING OFFICER I N SUPPORT OF ITS CLAIM OF THE BUSINESS LOSS AND THIS ADDITION I S FOUND UNWARRANTED ON FACTS. THE APPELLANT THEREFORE SUCC EEDS AT GROUND OF APPEAL NO.3. 4. IN THIS CASE THE LEARNED CIT(A) HAS GIVEN A FIN DING THAT OUT OF RS.7 40 914/- THE AMOUNT OF RS.3 13 502/- WAS DUE FROM M/S. FINISHING TOUCH WHICH WAS ADVANCED BY THE ASSESSEE BY CHEQUE S ON VARIOUS DATES IN F.Y. 2001-02 AND THE SUM OF RS.3 00 000/- WAS ADVA NCED TO M/S. GEETA FINISHERS BY CHEQUE IN F.Y. 1997-98 AND SUM OF RS.3 0 000/- EACH IN THE NAMES OF SHRI ARJUN DASS AND M/S. RAMA GIVEN AS ADV ANCE IN F.Y. 1996-97 AND A FURTHER SUM OF RS.50 190/- WAS IN RESPECT OF SHRI RAKESH KANOJIA. THE LEARNED CIT(A) HAS GIVEN A FINDING THAT THESE ADVAN CES WERE GIVEN IN REGULAR DEALINGS FOR THE WORKS DONE BY THEM. THE LEARNED C IT(A) HAS GIVEN A FINDING THAT THESE ADVANCES WERE GIVEN IN THE COURS E OF BUSINESS BY THE ASSESSEE WHICH COULD NOT BE RECOVERED ON ACCOUNT O F DEATH OF PROPRIETOR IN SOME CASES AND CLOSURE OF BUSINESS IN OTHER CASES. IT IS WELL SETTLED THAT THE ADVANCES GIVEN IN THE COURSE OF BUSINESS IF COULD NOT BE RECOVERED 4 SUBSEQUENTLY THE SAME WOULD BE TREATED AS LOSS ON THE REVENUE SIDE. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MYSORE SUGAR CO. LTD. (1962) 46 ITR 649 (SC) HELD THAT ADVANCES GIVEN IN RESPECT OF THE GOODS TO BE SUPPLIED THERE COULD NOT BE ANY ELEMENT OF CAPITAL INVESTMENT IN MAKING THE ADVANCE AND THE LOSS INCURRED BY THE ASSESSEE WAS T HUS A LOSS ON THE REVENUE SIDE AND WAS DEDUCTIBLE. THE FACTS NARRATED BY THE LEARNED CIT(A) IN HIS ORDER ARE NOT IN DISPUTE AND NO MATERIAL CONTRARY T O THAT HAS BEEN POINTED OUT. WE THEREFORE UPHOLD THE ORDER OF THE LEARNED CIT( A) IN DELETING THE ADDITION OF RS.7 40 915/- MADE BY THE AO ON ACCOUNT OF UN-RECOVERED ADVANCES. 5. GROUND NOS. 2 & 3 ARE TAKEN TOGETHER WHICH ARE REPRODUCED AS UNDER:- (II) ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.22 29 853/- MADE BY THE AO ON ACCOUNT OF COMPENSATION GRATUITY AND EX- GRATIA. (III) ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1 1 8 907/- MADE BY THE AO ON ACCOUNT OF BUYING AGENT COMMISSION. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THIS TWO ISSUES HAVE BEEN DECIDED BY THE LEARNED CI T(A) BY OBSERVING AND HOLDING AS UNDER:- 5 9. THE NEXT ISSUE UNDER DISPUTE IS OF DISALLOWANCE OF NOTICE PAY SERVICE COMPENSATION EX-GRATIA AND GRATUITY AMOUNTING TO RS.22 29 853/-. IT IS CONTENDED THAT THE ADDITI ON WAS MADE WITHOUT RAISING ANY QUERIES ON THE DETAILS FILED BY THE APPELLANT ON 18.11.2008. IT IS SUBMITTED THAT IN THE SUBMISS ION OF 11.11.2008 FILED DURING ASSESSMENT PROCEEDINGS TH E APPELLANT HAD STATED THAT THE PAYMENTS WERE MADE ON RETRENCHM ENT OF EMPLOYEES ON ACCOUNT OF CLOSURE OF ITS FACTORY AT F ARIDABAD. THE BALANCE SHEET FILED WITH THE RETURN OF INCOME A LSO BEARS A NOTE REGARDING CLOSURE OF THE FACTORY. THE APPELLA NT HAS FURNISHED DURING APPELLATE PROCEEDINGS THE COPY O F SUBMISSION DATED 18.11.2008 ENCLOSING LIST OF EMPLOYEES TO WH OM COMPENSATION WAS PAID AND COPIES OF LEDGER ACCOUNT S OF EACH HEAD OF EXPENDITURE. IN ADDITION IT HAS FILED THE COPIES OF RECEIPTS SIGNED BY THE EMPLOYEES THE VOUCHERS SHOW ING WORKING OF QUANTUM OF NOTICE PAY GRATUITY ETC. C OPIES OF THE CHEQUES ISSUED AND COPIES OF TESTIMONIALS PROVIDED TO THE EMPLOYEES TO ENABLE THEM TO OBTAIN NEW EMPLOYMENT. THE APPELLANT HAS ALSO FILED COPIES OF FORM I AND FORM L UNDER THE PAYMENT OF GRATUITY ACT & RULES 1972 EVIDENCING THE PAYMENT OF GRATUITY. AFTER CONSIDERING THE VARIOUS EVIDENCES FILED OF PAYMENTS MADE ON RETRENCHMENT OF FACTORY E MPLOYEES AND KEEPING IN MIND THAT NO OPPORTUNITY OF PRESENTI NG ITS CASE WAS ALLOWED TO THE APPELLANT BEFORE MAKING THE DISA LLOWANCE THE APPELLANT IS GRANTED RELIEF IN RESPECT OF THE A DDITION OF RS.22 29 853/-. ACCORDINGLY GROUND OF APPEAL NO.4 IS ALLOWED. 10. THE LAST GROUND OF APPEAL PERTAINS TO THE DISAL LOWANCE OF BUYING AGENT COMMISSION OF RS.1 18 907/-. THE APPE LLANT HAS SUBMITTED THAT THE ASSESSING OFFICER NEVER REQUIRED IT TO FILE COPY OF THE AGREEMENT WITH THE AGENT OR TO STATE T HE HISTORY OF ITS BUSINESS ASSOCIATION. THE ADDITION WAS MADE WI THOUT RAISING ANY QUERIES WHATSOEVER ON THIS ITEM OF EXPE NSE. DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS FILED THE NAME AND ADDRESS OF THE BUYING AGENT WITH PAN AND SERVICE T AX NO. IT HAS FURNISHED THE DETAILS OF PAYMENT BY CHEQUE ON WHICH TAX HAS BEEN DEDUCTED AND PAID TO THE GOVERNMENT. THE COPIES OF THE INVOICES RAISED INCLUDING SERVICE TAX HAVE BEE N FILED. THE SALES BILLS RELATING TO THE COMMISSION PAYMENTS HAV E BEEN PLACED ON RECORD. IT IS ALSO SUBMITTED THAT IN THE A.YS. 2004-05 6 AND 2005-06 THE APPELLANT HAD PAID COMMISSION OF RS.11 90 370/- AND RS.5 63 172/- TO THE SAME AGENT. IN VIEW OF THE VARIOUS EVIDENCES FILED WHICH ARE SEEN TO HAVE NOT BEEN ASKED FOR IN THE ASSESSMENT PROCEEDINGS THE ADDITI ON OF RS.1 18 907/- IS FOUND TO BE WITHOUT MERIT. THE AP PELLANT THEREFORE SUCCEEDS AT GROUND OF APPEAL NO.5. 7. FROM THE PERUSAL OF THE ORDER OF THE LEARNED CIT (A) IT IS SEEN THAT THE LEARNED CIT(A) HAS DELETED THE ADDITIONS AFTER EXAM INING AND CONSIDERING VARIOUS EVIDENCES FILED BY THE ASSESSEE. HOWEVER THE LEARNED DR HAS STATED THAT SOME OF THE EVIDENCES RELIED UPON BY THE LEARN ED CIT(A) IN DELETING THE ADDITIONS WERE NOT FILED BEFORE THE AO. FROM THE O RDER OF THE LEARNED CIT(A) IT IS CLEAR THAT BEFORE CONSIDERING THE ADD ITIONAL EVIDENCES FILED BEFORE HIM BY THE ASSESSEE THE LEARNED CIT(A) HAS FAILED TO GIVE OPPORTUNITY TO THE AO TO EXAMINE THE ADDITIONAL EVIDENCES AND S UBMIT HIS REPORT AS REQUIRED UNDER RULE 46A(3) OF INCOME-TAX RULES. WE THEREFORE RESTORE THESE TWO ISSUES BACK TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION AFTER PROVIDING AN OPPORTUNITY TO THE AO UNDER RULE 46A(3 ) OF I.T. RULES. THE LEARNED CIT(A) SHALL DECIDE THE ISSUES AS PER LAW A FTER CONSIDERING ALL EVIDENCES FURNISHED BY THE ASSESSEE AND A REMAND RE PORT OF THE A.O. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S TREATED TO BE PARTLY ALLOWED FOR A STATISTICAL PURPOSE IN THE MANNER AS INDICATED ABOVE. 9. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 17.11.2011 IMMEDIATELY AFTER THE HEARING WAS OVER. SD/- SD/- (G.D. AGRAWAL) (C.L. SETHI) VICE PRESIDENT JUDICIAL MEMBER DATED: 17 TH NOVEMBER 2011 7 ITA NO.4186/DEL/2011 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.