OGILVY & MATHER P. LTD, MUMBAI v. DCIT CIR 7(1), MUMBAI

ITA 925/MUM/2009 | 2005-2006
Pronouncement Date: 30-12-2010 | Result: Allowed

Appeal Details

RSA Number 92519914 RSA 2009
Assessee PAN IRCLE7114T
Bench Mumbai
Appeal Number ITA 925/MUM/2009
Duration Of Justice 1 year(s) 10 month(s) 18 day(s)
Appellant OGILVY & MATHER P. LTD, MUMBAI
Respondent DCIT CIR 7(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 30-12-2010
Date Of Final Hearing 08-12-2010
Next Hearing Date 08-12-2010
Assessment Year 2005-2006
Appeal Filed On 11-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 925/MUM/2009 (ASSESSMENT YEAR: 2005-06) M/S. OGILVY & MATHER P. LTD. ADD. CIT CIRCLE 71 14TH FLOOR COMMERZ OBERIO GRARDEN AAYAKAR BHAVAN M.K. ROAD INTERNATINAL BUSINESS PARK VS. MUMBAI 400020 CITY GOREGAON (E) MUMBAI 400063 PAN - AAACO 0427 A APPELLANT RESPONDENT APPELLANT BY: MS. AARATI VISANJI RESPONDENT BY: MS. REENA JHA TRIPATHI O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- VII MUMBAI DATED 10.11.2008 2. ASSESSEE HAS RAISED 4 GROUNDS. GROUND NOS. 3 AND 4 ARE GENERAL IN NATURE WHICH DOES NOT REQUIRE ADJUDICATION. FOR THE SAKE OF CLARITY GROUND NO. 1 IS EXTRACTED. GROUND NO. 2 IS SIMILAR TO GROU ND NO. 1 ON THE SAME ISSUES. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN (A) DISALLOWING RS.12 72 914/- OUT OF THE PAYMENTS MADE TO RMG DAVID COMMUNICATIONS PRIVATE LIMITED U/S. 40A(2)(A) OF THE ACT; (B) DISALLOWING RS.23 05 104/- REPRESENTING SOFTWARE EX PENSES AS CAPITAL EXPENDITURE; (C) DISALLOWING RS.17 56 439/- OUT OF REPAIRS AND RENOV ATION EXPENSES IN THE NATURE OF REPAIRS AND MAINTENANCE CARRIED OU T AT LEASE PREMISES AS CAPITAL EXPENDITURE (D) NOT ALLOWING RS.2 23 56 514/- BEING THE AMOUNT OF BAD DEBTS WHICH ARE WRITTEN OFF AS IRRECOVERABLE TO THE PROFI T & LOSS ACCOUNT UNDER SECTION 36(1)(VII) READ WITH SECTION 36(2) OF THE ACT NOTWITHSTANDING SATISFYING THE CONDITIONS FOR ALLOW ANCE THEREOF UNDER SECTION 36(2) READ WITH SECTION 36(1)(VII) OF THE ACT; AND ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 2 (E) CONSIDERING THE APPELLANTS RETURNED INCOME AT RS.5 5 80 99 210/- INSTEAD OF RS.55 71 09 800/- IN ASSESSING THE TOTAL INCOME U/S. 143(3) OF THE ACT; 3. THE ISSUE IN GROUND NO. 1(A) PERTAINS TO BRINGING T O TAX AN AMOUNT OF ` 12 72 914/- STATED TO BE DISALLOWANCE OUT OF PAYMEN T MADE TO RMG DAVID COMMUNICATIONS P. LTD. UNDER SECTION 40A(2)(A). THE A.O. NOTICED THAT AN AMOUNT OF ` 3 85 31 541/- WAS PAID TO SISTER CONCERN M/S. RMG D AVID COMMUNICATIONS P. LTD. ON WHICH PROVISIONS OF SECTI ON 40A(2)(A) ARE ATTRACTED. THE ASSESSEE EXPLAINED THAT IT HAS ENTER ED INTO AN AGREEMENT WITH SBI LIFE FOR THEIR ADVERTISEMENT AND THE ENTIRE WOR K OF HOARDINGS WAS ASSIGNED TO THE SISTER CONCERN ON PROFIT SHARING BA SIS. IT WAS SUBMITTED THAT THE TOTAL BILL RAISED BY THE ASSESSEE ON SBI LIFE W AS ` 3 67 89 416/- WHEREAS THE TOTAL BILL AMOUNT OF RMG DAVID COMMUNICATIONS P . LTD. WAS TO THE TUNE OF ` 3 52 43 695/-. THE SUPPLY COST FOR THE ABOVE ACTIVI TY WAS ` 3 38 16 084. THUS THE SISTER CONCERN RMG DAVID COMMUNICATIONS P . LTD. HAD A PROFIT OF ` 14 27 611/- WHEREAS THE ASSESSEE HAD A PROFIT OF ` 15 45 721/- IN THE HOARDING BUSINESS WITH SBI LIFE. IT WAS EXPLAINED B Y THE ASSESSEE THAT ON THE TOTAL VOLUME OF RS3.67 CRORES THE PROFIT EARNED BY THE ASSESSEE COMPANY WAS 4.20% WHEREAS THE PROFIT MARGIN EARNED BY THE S ISTER CONCERN WAS 3.88%. THE A.O. WAS OF THE OPINION THAT IN THE INDU STRY OF ADVERTISING HOARDING BUSINESS WAS DONE AT A MARGIN OF 15% AND S INCE THE ASSESSEE HAS RECEIVED 8.08% IN ALL THIS CALLS FOR REALIZATION O F 6.92% IN THE BUSINESS. HOWEVER THE A.O. CONSIDERED THE SAID MARGIN UNDER SECTION 40A(2)(B) BY WORKING OUT AS UNDER: - 5.5 THE ASSESSEE HAS THEREFORE CONCEALED A MARGIN OF REMAINING 6.92% EARNED FROM THIS BUSINESS BY MAKING EXCESS PA YMENT TO ITS SISTER CONCERN THEREBY ATTRACTING THE INTERVENTION OF PROV ISIONS OF SEC.40A(2)(B) OF THE I.T. ACT. SINCE THE ASSESSEES EXPLANATION T HAT IT HAS EARNED A MARGIN OF ONLY 4.20% IS NOT ACCEPTABLE AGAINST THE INDUSTRY NORM OF 15% KEEPING THE FACT THAT THE BUSINESS WAS A JOINT VENT URE WITH THE SISTER CONCERN THE SHORT FALL OF 6.92% IS APPORTIONED ON A 50:50 BASIS AND 3.45% OF THE REMAINING 6.92% OF THE MARGIN WHICH TH E ASSESSEE HAS NOT DISCLOSED AS ITS PROFIT FROM THE HOARDING BUSINESS IS BROUGHT TO TAX BY ADDING BACK RS. 12 72 914 AS PER THE FOLLOWING CALCULATION: - TOTAL BILL RAISED BY ASSESSEE ON SBI LIFE : RS.3 67 89 416 (INCLUSIVE OF 15% TRADE DISCOUNT) 3.46% OF MARGIN IN THE FORM OF TRADE DISCOUNT THERE OF : RS.12 72 914 ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 3 [WHICH THE ASSESSEE HAS NOT DISCLOSED NOW ADDED] 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE BUSINES S WAS PITCHED JOINTLY WITH THE SISTER CONCERN AND SINCE SBI LIFE IS ALSO A PUBLIC LIMITED COMPANY THERE IS NO CONCEALMENT OF INCOME OR SHOWIN G LESS MARGIN AS THE BUSINESS WAS VERY COMPETITIVE. IT IS ALSO FURTHER S UBMITTED THAT THE PROFIT WAS SHARED MORE BY THE ASSESSEE COMPANY AND LESS BY ITS SISTER CONCERN WHO HAS EXECUTED THE CONTRACT AND THERE IS NO CONCE ALMENT OF INCOME AND FURTHER PROVISIONS OF SECTION 40A(2) ARE NOT APPLIC ABLE. THE CIT(A) HOWEVER CONFIRMED THE SAME BY STATING AS UNDER: - 1.7. THE UNDERSIGNED HAS CAREFULLY PERUSED THROUGH THE RIVAL CONTENTIONS. IT IS NOTED THAT ALTHOUGH THE AO HAD BROUGHT ON RECORD THE COMPARATIVE CASES TO PROVE THAT THE PREVAILING PROF IT RATE IN THIS HOARDING BUSINESS WAS AT 15% YET THE APPELLANT COULD NOT BR ING ANY EVIDENCE EVEN DURING THE APPEAL PROCEEDINGS TO PROVE THAT TH E INCOME (PROFIT MARGIN) IN SUCH TRADE IS NO 15% AND IS ACTUALLY LES S THAN THAT. NO SATISFACTORY EXPLANATION COULD BE OFFERED BY THE AP PELLANT BEFORE THE UNDERSIGNED TO SHOW THAT THE INCOME DISCLOSED BY IT FROM THE HOARDING BUSINESS WAS REASONABLE AND CORRECT. THE PROFIT MAR GIN PREVAILING IN ANY PARTICULAR LINE OF BUSINESS OF IDENTICAL NATURE CI TED BY THE AO CANNOT BE IGNORED. 1.8. IN VIEW OF THE ABOVE MENTIONED OBSERVATIONS AN D FINDINGS IT IS NOTED THAT THE REASONS GIVEN BY THE AO ARE CORRECT AND JUSTIFIED AND IN VIEW OF THE SAME THE ADDITION OF RS.12 72 914/- IS CONFIRMED . 5. DRAWING OUR ATTENTION TO THE BUSINESS DONE BY THE A SSESSEE DURING THE YEAR IN VARIOUS CLIENTS ACCOUNTS AND BILLING DONE AND INCOME EARNED IN VARIOUS ADVERTISING ACTIVITIES THE LEARNED COUNSEL SUBMITTED THAT THE PROFIT MARGIN VARIED FROM 5.71% TO 15% EXCEPT IN THE CASE OF ONE CLIENT (NAME WITHHELD) ON WHICH THERE WAS A MARGIN OF 44%. IT WA S THE CONTENTION THAT THE ASSESSEE HAS NOT CONCEALED ANY PERCENTAGE AND D IFFERENT PROFIT RATIOS WERE ARRIVED AT WITH DIFFERENT COMPANIES KEEPING IN VIEW THE IMPORTANCE OF THE CLIENT AND THE ADVERTISEMENT CAMPAIGN CONDUCTED BY IT AND THE MARGINS ALLOWED BY THE CLIENTS. IT WAS SUBMITTED THAT THE C ONTRACT WITH SBI LIFE WAS VERY COMPETITIVE AND THE PERCENTAGE OF MARGIN WAS 8 .08% WHICH WAS COMPARABLE WITH OTHER COMPANIES. IT WAS FURTHER SUB MITTED THAT THERE IS NO BASIS FOR ARRIVING AT 15% MARGIN UNIFORMLY ON ALL C OMPANIES AND FURTHER THE A.O. WHILE ACCEPTING THAT THE WORK WAS DONE BY THE SISTER CONCERN WRONGLY BROUGHT AN AMOUNT OF SO CALLED G.P. TO TAX RATHER T HAN DISALLOWING THE ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 4 AMOUNT PAID TO THE SISTER CONCERN UNDER SECTION 40A (2). IT WAS SUBMITTED THAT SECTION 40A(2) ARE NOT APPLICABLE AT ALL. 6. THE LEARNED D.R. HOWEVER RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A) AS FAR AS THE FACTS ARE CONCERNED. 7. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE ACTI ON OF THE A.O. AND THE ORDER OF THE CIT(A) WE ARE OF THE OPINION THAT BOTH THE REVENUE AUTHORITIES MADE THE ADDITION UNDER THE GUISE OF DI SALLOWANCE UNDER SECTION 40A(2). PROVISIONS OF SECTION 40A(2)(A) ARE APPLICA BLE IN CASE ANY PERSON CLAIMS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR TO BE MADE TO THE SISTER CONCERN OR RELATIVE OR OTHERS AS SPECIFIED IN 40A(2)(B) WHICH IN THE OPINION OF THE A.O. ARE EXCESSIVE OR U NREASONABLE FOR THE GOODS PURCHASED OR SERVICES RENDERED OR FACILITIES PROVID ED. THE A.O. IN THE GUISE OF INVOKING PROVISIONS OF SECTION 40A(2) HOWEVER BROUGHT TO TAX AN AMOUNT AS G.P. NOT DISCLOSED BY THE ASSESSEE WHICH WAS NOT COVERED BY THE PROVISIONS OF SECTION 40A(2). IF THE TRADE MARGIN O F 15% WAS SUPPOSED TO HAVE BEEN EARNED BY THE ASSESSEE BRINGING TO TAX T HE RELEVANT RATIO OF THE AMOUNT IN ASSESSEES HAND IS AN ADDITION MADE UNDER SECTION 145 BUT NOT DISALLOWANCE UNDER SECTION 40A(2). HOWEVER THE A.O . NEITHER REJECTED THE BOOKS OF ACCOUNT NOR ESTABLISHED HOW A MORE PERCENT AGE CAN BE EARNED BY THE ASSESSEE. OBVIOUSLY THE CONTRACT IS WITH SBI LI FE WHICH IS A PUBLIC LIMITED COMPANY FLOATED BY A PUBLIC SECTOR UNDERTAK ING. IT IS NOT THE CASE OF THE A.O. THAT THE ASSESSEE HAS SUPPRESSED RECEIPTS OR SHARE OF THE PROFITS WITH SISTER CONCERN. AS SEEN FROM THE WORKING OF TH E A.O. MADE IN THE ASSESSMENT ORDER THE SHORT FALL OF 6.92% IS APPORT IONED BETWEEN THE ASSESSEE COMPANY AND ITS SISTER CONCERN ON 50:50 BA SIS WHICH SUPPORTS THE CONTENTION OF THE ASSESSEE THAT ASSESSEES SISTER C ONCERN HAS RENDERED SERVICES IN THE JOINT AGREEMENT IN THE HOARDING BUS INESS WITH THE SBI LIFE. SINCE THE A.O. HAS NOT MADE OUT ANY CASE EITHER FOR SHOWING LESS MARGIN IN THE SAID BUSINESS OR CORRECTLY INVOKED PROVISIONS O F SECTION 40A(2)(B) THERE IS NO NEED FOR ANY ADDITION MADE AT 3.46% OF THE MA RGIN. WE ARE SURPRISED THAT THE LEARNED CIT(A) ALSO HAS NOT UNDERSTOOD PRO VISIONS OF SECTION 40A(2) AND CONFIRMED THE ADDITION ON PRESUMPTIONS. THE ASS ESSEE HAS FURNISHED DETAILS OF ITS CLIENT-WISE BILLING AND INCOME STATE MENT WHICH INDICATES THAT ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 5 PROFIT MARGIN VARIES FROM 5.1% TO 9% IN LARGE NUMBE R OF CLIENTS ACCOUNTS. SINCE THE A.O. HAS NOT REJECTED THE BOOKS OF ACCOUN T NOR COUNTERED THE FACTS AS SUBMITTED BY THE ASSESSEE IN THE BUSINESS WITH R EFERENCE TO OTHER AD BUSINESS CONDUCTED WE ARE OF THE VIEW THAT THE A.O . HAS WRONGLY INVOKED PROVISIONS OF SECTION 40A(2) FOR MAKING AN ADDITION ON SO CALLED PROFIT MARGIN WHICH ITSELF IS NOT SUSTAINABLE IN ANY OTHER WAY CONSIDERING THE FACTS OF THE CASE. IN VIEW OF THIS WE DELETE THE ADDITIO N SO MADE. ASSESSEES GROUND ON THIS IS ALLOWED. 8. GROUND NO. 1(B) PERTAINS TO THE ISSUE OF SOFTWARE E XPENSES. ASSESSEE HAS SPENT AN AMOUNT OF ` 23 05 104/- ON SOFTWARE. THE A.O. DISALLOWED THE ABOVE AMOUNT AS CAPITAL IN NATURE AND IT WAS THE SU BMISSION THAT SIMILAR ISSUE WAS RESTORED IN A.Y. 2004-05 TO THE A.O. BY T HE ITAT IN ITA NO. 924/MUM/2009 DATED 13 TH OCTOBER 2010. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G THE RELEVANT MATERIAL ON RECORD IT IS FOUND THAT SIMILAR ISSUE W AS RAISED IN ASSESSEES OWN CASE IN A.Y. 2000-01 AND 2004-05 AND IN THESE YEARS THE MATTER WAS REMANDED TO THE FILE OF THE A.O. FOR TAKING A FRESH DECISION IN ACCORDANCE WITH THE VIEW TAKEN BY THE SPECIAL BENCH OF THE TRI BUNAL IN AMWAY INDIA ENTERPRISES VS. DCIT 111 ITD 112 (SB( (DEL). RESPEC TFULLY FOLLOWING THE PRECEDENT WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE A.O. FOR TAKING FRESH DEC ISION IN ACCORDANCE WITH THE VIEW TAKEN BY THE SPECIAL BENCH. MATTER IS RESTORED FOR RECONSIDERATION OF THE A.O. GROUND IS CONSIDERED ALLOWED. 10. GROUND NO. 1(C) PERTAINS TO THE EXPENDITURE ON REPA IRS AND RENOVATION TREATED AS CAPITAL EXPENDITURE BY THE A.O. AND CONF IRMED BY THE CIT(A) AS SUCH. THE FACTS OF THIS GROUND ARE THAT THE A.O. TR EATED THE SAID AMOUNT CLAIMED AS REPAIRS AS CAPITAL IN NATURE WHICH WAS U PHELD BY THE CIT(A) ON THE BASIS OF THE REASONING GIVEN BY HIM IN ASSESSEE OWN CASE FOR A.Y. 2002- 03 AND A.Y. 2004-05. THE CASE OF THE ASSESSEE FOR A .Y. 2002-03 CAME UP FOR ADJUDICATION BEFORE THE TRIBUNAL VIDE ORDER DATED 2 5.03.2009 IN WHICH THE TRIBUNAL DECIDED THE ISSUE IN ASSESSEES FAVOUR FOL LOWING AN EARLIER ORDER IN ASSESSEES OWN CASE FOR A.Y. 2000-01. SIMILAR ORDER S WERE ALSO ISSUED IN ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 6 ASSESSEES OWN CASE IN A.Y. 2004-05 IN ITA NO. 924/ MUM/2009. IN THE ABSENCE OF ANY DISTINGUISHING FEATURES HAVING BEEN BROUGHT TO OUR NOTICE IN THE FACTS AND CIRCUMSTANCES OF THIS YEAR VIS--VIS THOSE ALREADY DECIDED BY THE TRIBUNAL WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION DESERVES TO BE DELETED. THE EXPENDITURE INCURRED IN RENOVATION AND REPAIRS AND MAINTENANCE ON THE LEASE PROPERTY IS TO BE TREATED AS REVENUE EXPENDITURE AND ACCORDINGLY THE GROUND IS ALLOWED. ADDITION IS DELETED. THE A.O. IS DIRECTED TO WITHDRAW THE DEPRECIATION IF ANY ALLO WED. 11. GROUND NO. 1(D) PERTAINS TO NON-ALLOWANCE OF THE AM OUNTS OF BAD DEBTS WHICH ARE WRITTEN OFF AS IRRECOVERABLE IN THE P & L ACCOUNT UNDER SECTION 37(1)(VII) R.W.S. 36(2) OF THE I.T. ACT. 12. BRIEFLY STATED THE ASSESSEE HAD WRITTEN OFF ` 3 43 35 822/- AS BAD DEBTS AND THE A.O. AFTER EXAMINING CERTAIN HIGH VOLUME D EBTORS DISALLOWED AN AMOUNT OF ` 2 23 56 514/- ON THE PRETEXT THAT ASSESSEE HAS NOT SATISFIED THE CONDITIONS UNDER SECTION 36(2). THE CONSIDERED THE SAME HOLDING THAT THE WRITE OFF IS NOT BONAFIDE AND ASSESSEE HAS NOT BEEN ABLE TO ANSWER ASSESSING OFFICERS QUERY AS TO HOW IT HAD NOT BEEN ABLE TO R ECOVER THE DUES EVEN FROM ITS OWN SISTER CONCERN NAMELY RMG DAVID COMMUNICAT IONS P. LTD. IN WHICH IT HAS CONTROLLING INTEREST. ON THIS BASIS THE CIT( A) CONSIDERED THAT THE WRITE OFF IS NOT A BONAFIDE ACT AND ACCORDINGLY CONFIRMED THE DISALLOWANCE. 13. DRAWING OUR ATTENTION TO THE DETAILS FILED IN THE P APER BOOK IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT THESE BAD DE BTS ARE NOT ACTUALLY BAD DEBTS BUT THEY ARE THE AMOUNTS SETTLED LESS THAN TH E BILLED AMOUNT AS A SORT OF SETTLEMENT AMOUNT OR REMISSION/ DISCOUNT AMOUNT IN THE DAY TO DAY BUSINESS OF THE ASSESSEE. IT WAS HER EXPLANATION TH AT SOMETIMES THE CLIENTS DO NOT PAY FULL AMOUNT DUE TO EXCESSIVE BILLING/HOA RDING NOT UP TO THE STANDARD/ VARIATIONS IN SIZE ETC. AND THESE ARE SO RT OF REMISSION TRADE DISCOUNT OR SETTLEMENT WHICH COULD NOT BE RECOVERED BUT ON WHICH INCOMES WERE OFFERED IN EARLIER YEARS. THEREFORE THE AMOUN T IS ALLOWABLE EITHER AS BAD DEBTS OR AS BUSINESS LOSS. IT WAS ALSO FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED MANY OF THE BILLS TO THE A.O . BUT THEY ARE NOT CONSIDERED IN THE RIGHT SPIRIT. WITH REFERENCE TO THE LEGAL ASPECTS OF THE ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 7 CLAIM IT WAS HER SUBMISSION THAT THE BAD DEBTS ARE ALLOWABLE ONCE THEY ARE WRITTEN OFF IN THE BOOKS OF ACCOUNT AS CONSIDERED B Y THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF OMAN INTERNATIONAL BANK 3 13 ITR 128 AND ALSO BY THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. 3 23 ITR 397. 14. THE LEARNED D.R. RELIED ON THE ORDERS OF THE A.O. A ND THE CIT(A). 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND EXAMINI NG THE ORDERS ON RECORD WE ARE OF THE OPINION THAT THE A.O. HAS CON SIDERED THE PROVISIONS OF BAD DEBTS WRONGLY ON THE AMOUNTS WRITTEN OFF. A BAD DEBT WILL ARISE ONLY IN THE CASE WHEN DEBT IS ACKNOWLEDGED AND NOT RECOVERE D. AS PER THE SUBMISSION OF THE ASSESSEE ONCE BILLED A CERTAIN AM OUNT TO A PARTY PARTY MAY SETTLE THE AMOUNT FOR LESS THAN THE AMOUNT. THE ASSESSEE EXPLAINED THAT IN THOSE CIRCUMSTANCES THE DIFFERENCE IN THE B ILLED AMOUNT AND RECEIVED AMOUNT IS WRITTEN OFF IN THE BOOKS OF ACCOUNT AND A RE ACCOUNTED AS BAD DEBTS EVENTHOUGH THEY ARE IN THE NATURE OF AMOUNT S ETTLED/REMISSION/ DISCOUNT WHICH FACTORS MAY ARISE DEPENDING OF THE NATURE OF THE BUSINESS AND THE AMOUNT SETTLED BY EACH PARTY. WITH REFERENC E TO THE AMOUNTS IN THE SISTER CONCERN ALSO IT WAS SUBMITTED THAT THIS WAS A BUSINESS UNDERTAKEN BY THE SISTER CONCERN JOINTLY WITH THE ASSESSEE. SINCE THE AMOUNT WAS WRITTEN OFF BY THE SISTER CONCERN AS NOT RECOVERED THE AMO UNT RAISED BY THE ASSESSEE ON SISTER CONCERN WAS ALSO CORRESPONDINGLY WRITTEN OFF. IT WAS SUBMITTED THAT THESE BILLS ARE PLACED BEFORE THE A.O. BUT HAVE NOT BEEN CONSIDERED. AS FAR AS LEGAL PRINCIPLES ARE CONCERNED THE PRESENT POSITION OF LAW IS THAT IF THE AMOUNTS ARE WRITTEN OFF IN THE BOOKS OF ACCOUNT IT IS SUFFICIENT TO ALLOW THE AMOUNT UNDER THE PROVISIONS OF SECTION 36(1)(VII) R .W.S. 36(2). IT IS NOT ASSESSING OFFICERS CASE THAT THE SAID INCOMES HAVE NOT BEEN TAKEN INTO ACCOUNT IN EARLIER YEARS THE A.O. IS ONLY VERIFYING THE BONADFIE OF THE CLAIMS WITHOUT UNDERSTANDING HOW THE AMOUNT ARE TO BE CONS IDERED FOR WRITE OFF. ON BOTH LEGAL PRINCIPLES AND ON FACTS THE BAD DEBT CLAIMS ARE ALLOWABLE. IN OUR VIEW THE A.O. HAS NOT EXAMINED THE NATURE OF TH E AMOUNTS THAT IS WRITTEN OFF IN ITS CORRECT PERSPECTIVE. THEREFORE WE ARE OF THE VIEW THAT THIS ISSUE CAN BE RE-EXAMINED BY THE A.O. AND ALLOW THE AMOUNTS AFTER DUE VERIFICATION. ASSESSEE SHOULD BE GIVEN AN OPPORTUNI TY TO EXPLAIN ITS CLAIM FULLY. WITH THIS THE GROUND IS ALLOWED FOR STATISTI CAL PURPOSES. ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 8 16. GROUND NO. 1(E) PERTAINS TO THE CLAIM OF THE ASSESS EE THAT ITS RETURNED INCOME WAS TAKEN AT ` 55 80 99 2120/- INSTEAD OF ` 55 71 09 880/-. THE ASSESSEE HAS FILED REVISED COMPUTATION OF INCOME AT A LESSER FIGURE IN THE COURSE OF ASSESSMENT WHICH THE A.O. HAS NOT DISCUSS ED AT ALL IN THE ASSESSMENT ORDER. THE CIT(A) DISMISSED THE CLAIM OF THE ASSESSEE STATING THAT THE ASSESSEE CANNOT REVISE ITS INCOME JUST BY FILING REVISED COMPUTATION OF INCOME WITHOUT FILING A REVISED RETURN AND RELYI NG OF THE APEX COURT JUDGEMENT IN THE CASE OF GOETZE (INDIA) LTD. VS. CI T 284 ITR 323. 17. ON CONSIDERATION OF THE ARGUMENTS WE HOLD THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 MAKES IT CLEAR THAT A RETURN CANNOT BE REVISED UNLE SS THE ASSESSEE FILES A REVISED RETURN. HOWEVER THE POWERS OF THE TRIBUNAL AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERM AL POWER CO. LTD. 229 ITR 383 ARE NOT AFFECTED BY THIS DECISION. EVEN THE CIT (A) HAS THE POWER TO ENTERTAIN THE CLAIM AS HE HAS POWER TO ENHANCE THE INCOME AS WELL. THIS ISSUE WAS DISCUSSED IN DETAIL IN THE COORDINATE BENCH ORD ER IN THE CASE OF M/S. ASIAN PAINTS LTD IN FOR A.Y. 2003-04 AND HELD AS UN DER: - 21. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. ........................... ..... IN THIS APPEAL THE PRELIMINARY QUESTION THAT FALLS FOR CONSIDERATI ON RELATES TO SCOPE OF POWERS OF CIT(A) WHETHER THE CIT(A) WAS HA VING POWER TO ADMIT ASSESSEES CLAIM WITHOUT FILING REVISED RE TURN OF INCOME. TO PROPERLY APPRECIATE THE ISSUE WE WOULD LIKE TO REPRODUCE THE FINDING GIVEN BY HONBLE SUPREME COUR T IN CASE OF GOETZ INDIA LTD. CITED SUPRA READS AS UNDER:- THE DECISION IN QUESTION IS THAT THE POWER OF THE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT 1961 IS TO ENTE RTAIN FOR THE FIRST TIME A POINT OF LAW PROVIDED THE FACT ON THE BASIS OF WHICH THE ISSUE OF LAW CAN BE RAISED BEFORE THE TRIBUNAL. THE DECIS ION DOES NOT IN ANY WAY RELATE TO THE POWER OF THE AO TO ENTERTAIN A CL AIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN. IN THE C IRCUMSTANCES OF THE CASE WE DISMISS THE CIVIL APPEAL. HOWEVER WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE A SSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE INCOME-TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT 1 961. THERE SHALL BE NO ORDER AS TO COSTS. 21.1 FROM THE ABOVE FINDING OF THE APEX COURT WE F IND THAT THE APEX COURT HAS DECIDED THE ISSUE FOR A LIMITED PURP OSE IN RESPECT OF POWER OF THE ASSESSING AUTHORITY. THE APEX COURT CLARIFIED IN ITS JUDGMENT ITSELF THAT THEIR FINDING DOES NOT IMP INGE ON THE ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 9 POWER OF THE INCOME TAX APPELLATE TRIBUNAL UNDER SE CTION 254 OF THE ACT. WE FIND THAT THE CIT(A) HAS ALSO SIMILAR P OWER U/S 251(1)(C). THE SAID SECTION READS AS UNDER:- SECTION 251(1): IN DISPOSING OF AN APPEAL THE COM MISSIONER (A) SHALL HAVE THE FOLLOWING POWERS- (A) IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT HE MAY CONFIRM REDUCE ENHANCE OR ANNUL THE ASSESSMENT (AA) IN AN APPEAL AGAINST THE ORDER OF ASSESSMENT I N RESPECT OF WHICH THE PROCEEDING BEFORE THE SETTLEMENT COMMISSION ABA TES UNDER SECTION 245HA HE MAY AFTER TAKING INTO CONSIDERAT ION ALL THE MATERIAL AND OTHER INFORMATION PRODUCED BY THE ASSE SSEE BEFORE OR THE RESULTS OF THE INQUIRY HELD OR EVIDENCE RECORDE D BY THE SETTLEMENT COMMISSION IN THE COURSE OF THE PROCEEDING BEFORE IT AND SUCH OTHER MATERIAL AS MAY BE BROUGHT ON HIS RECORD CONFIRM REDUCE ENHANCE OR ANNUL THE ASSESSMENT. B) IN ANY APPEAL AGAINST AN ORDER IMPOSING A PENALT Y HE MAY CONFIRM OR CANCEL SUCH ORDER OR VARY IT SO AS EITHER TO ENH ANCE OR TO REDUCE THE PENALTY; C) IN ANY OTHER CASE HE MAY PASS SUCH ORDERS IN TH E APPEAL AS HE THINKS FIT.: 21.2 THE ISSUE RELATED POWER OF FIRST APPELLATE AUT HORITY HAS BEEN EXAMINED BY THE HONBLE SUPREME COURT IN THE C ASE OF COMMISSIONER OF INCOME-TAX V. NIRBHERAM DELURAM 224 ITR 610(SC). THE BRIEF FACTS OF THAT CASE WERE THAT D URING REASSESSMENT PROCEEDINGS THE ITO MADE ADDITION TO T HE ASSESSEE'S INCOME TO THE EXTENT OF RS. 2 45 000 ON ACCOUNT OF OSTENSIBLE TRANSACTIONS IN HUNDI LOANS SHOWN BY THE ASSESSEE. ON APPEAL THE AAC WHILE SUSTAINING THE AFORESAID ADDITION ALSO TOOK NOTICE OF 10 OTHER ITEMS OF OSTENSIBLE HU NDI LOANS AMOUNTING TO RS. 2 30 000 AND DIRECTED THAT THE TOT AL INCOME BE ENHANCED BY THE SUM OF RS. 2 30 000. THE TRIBUNAL HOWEVER DELETED THE SAID ADDITION HOLDING THAT THE AAO HAD EXCEEDED HIS JURISDICTION. THE HIGH COURT PLACING RELIANCE ON TH E DECISION OF THE SUPREME COURT IN ADDL. CIT V. GURJARGRAVURES (P .) LTD. [1978] 111 ITR 1 HELD THAT THE AAC HAD NO JURISDICTION TO CONSIDER THE NEW ENTRIES WHICH WERE NOT CONSIDERED AT ALL BY THE ITO AND TO ADD THE AMOUNT OF RS. 2 30 000 TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDING TO THE HIGH COURT THE ITEMS RE PRESENTING THE SAID AMOUNT CONSTITUTED NEW SOURCES OF INCOME W HICH WERE NOT THE SUBJECT-MATTER OF ASSESSMENT BEFORE THE ASS ESSING OFFICER AND THEREFORE IT WAS NOT OPEN TO THE AAC IN APPEAL TO CONSIDER THE NEW SOURCES AND TO ASSESS THEM. 21.3 ON APPEAL TO THE SUPREME COURT THE SUPREME CO URT HAS HELD AS UNDER:- (PAGES 612 TO 614) IN JUTE CORPN. OF INDIA LTD.'S CASE (SUPRA) THIS COURT HAS REFERRED TO THE EARLIER DECISION OF THIS COURT IN CIT V. KANPUR COAL SYNDICATE [1964] 53 ITR 225 WHICH WAS ALSO A DECISION OF A THREE JUDGE BENCH WHEREIN THE SCOPE OF SECTION 31(3)(A) OF THE ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 10 INDIAN INCOME-TAX ACT 1922 [WHICH WAS ALMOST IDENT ICAL TO SECTION 251(1)(A) OF THE 1961 ACT] WAS CONSIDERED AND IT WA S HELD: ' 'IF AN APPEAL LIES SECTION 31 OF THE ACT DESCRIB ES THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER IN SUCH AN APPEAL. UNDER SECTION 31(3)(A) IN DISPOSING OF SUCH AN APPEAL THE APPEL LATE ASSISTANT COMMISSIONER MAY IN THE CASE OF AN ORDER OF ASSESS MENT CONFIRM REDUCE ENHANCE OR ANNUL THE ASSESSMENT; UNDER CLAU SE (B) THEREOF HE MAY SET ASIDE THE ASSESSMENT AND DIRECT THE INCOME- TAX OFFICER TO MAKE A FRESH ASSESSMENT. THE APPELLATE ASSISTANT CO MMISSIONER HAS THEREFORE PLENARY POWERS IN DISPOSING OF AN APPEAL . THE SCOPE OF HIS POWER IS COTERMINOUS WITH THAT OF THE INCOME-TAX OF FICER. HE CAN DO WHAT THE INCOME-TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO'.' (P. 693) AFTER REFERRING TO THESE OBSERVATIONS THIS COURT I N JUTE CORPN. OF INDIA LTD.'S CASE (SUPRA) HAS STATED : 'THE ABOVE OBSERVATIONS ARE SQUARELY APPLICABLE IN THE INTERPRETATION OF SECTION 251(1)(A) OF THE ACT. THE DECLARATION OF LAW IS CLEAR THAT THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IS CO -TERMINOUS WITH THAT OF THE INCOME-TAX OFFICER AND IF THAT IS SO THERE APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NO T RAISED BEFORE THE INCOME-TAX OFFICER. NO EXCEPTION COULD BE TAKEN TO THIS VIEW AS THE ACT DOES NOT PLACE ANY RESTRICTION OR LIMITATIO N ON THE EXERCISE OF APPELLATE POWER. EVEN OTHERWISE AN APPELLATE AUTHO RITY WHILE HEARING THE APPEAL AGAINST THE ORDER OF A SUBORDINA TE AUTHORITY HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAV E IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR L IMITATION IF ANY PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSE NCE OF ANY STATUTORY PROVISION THE APPELLATE AUTHORITY IS VES TED WITH ALL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE APPEARS TO BE NO GOOD REASON AND NONE WAS PLACED BEFORE US TO JUSTIFY CURTAILMENT OF THE POWER OF TH E APPELLATE ASSISTANT COMMISSIONER IN ENTERTAINING AN ADDITIONA L GROUND RAISED BY THE ASSESSEE IN SEEKING MODIFICATION OF THE ORDE R OF ASSESSMENT PASSED BY THE INCOME-TAX OFFICER.' (P. 693) TAKING NOTE OF THE DECISION IN GURJARGRAVURES (P.) LTD.S CASE (SUPRA) THE COURT HAS SAID : '... APPARENTLY THIS VIEW TAKEN BY THE TWO JUDGE B ENCH OF THIS COURT APPEARS TO BE IN CONFLICT WITH THE VIEW TAKEN BY TH E THREE JUDGE BENCH OF THIS COURT IN KANPUR COAL SYNDICATE CASE [ 1964] 53 ITR 225. IT APPEARS FROM THE REPORT OF THE DECISION IN THE G UJARAT CASE THAT THE THREE JUDGE BENCH DECISION IN KANPUR COAL SYNDICATE CASE [1964] 53 ITR 225 (SC) WAS NOT BROUGHT TO THE NOTICE OF THE B ENCH IN GURJARGRAVURES (P.) LTD. [1978] 111 ITR 1 (SC). IN THE CIRCUMSTANCES THE VIEW OF THE LARGER BENCH IN KANPUR COAL SYNDICA TE CASE [1964] 53 ITR 225 (SC) HOLDS THE FIELD....' (P. 694) HAVING REGARD TO THE DECISION IN JUTE CORPN. OF IND IA LTD.'S CASE (SUPRA) IT MUST BE HELD THAT THE HIGH COURT WAS IN ERROR IN HOLDING THAT THE APPELLATE POWER CONFERRED ON THE AAC UNDER SECTION 251 WAS CONFINED TO THE MATTER WHICH HAD BEEN CONSIDERED BY THE ITO AND THE AAC EXCEEDED HIS JURISDICTION IN MAKING AN ADDITION OF RS. 2 30 000 ITA NO. 925/MUM/2009 M/S. OGILVY & MATHER P. LTD. 11 ON THE BASIS OF THE OTHER 10 ITEMS OF HUNDIS WHICH HAD NOT BEEN EXPLAINED BY THE ASSESSEE. 21.4 IN THE LIGHT OF THE ABOVE DISCUSSION WE F IND THAT THE AO HAS NO POWER TO ADMIT FRESH CLAIM OTHERWISE THAN RE VISED RETURN BUT APPELLATE AUTHORITIES INCLUDING CIT(A) & ITAT H AVE POWER TO ADMIT SUCH CLAIM. WITHOUT PREJUDICE TO THE ABOVE F INDING WE ADMIT THE ASSESSEES CLAIM WHICH IS IN ACCORDANCE W ITH THE JUDGMENT OF THE APEX COURT IN THE CASE OF GOETZ IND IA LTD. (SUPRA).IN THE INTEREST OF NATURAL JUSTICE AND KEEP ING IN VIEW THE RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF GO ETZE (INDIA) LTD. 284 ITR 323 WE REMIT THE MATTER BACK TO THE FILE OF THE CIT(A) WITH A DIRECTION TO DECIDE THE ISSUE ON MERI T IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPO RTUNITY OF HEARING TO BOTH THE SIDES. 18. THUS KEEPING THE ABOVE PRINCIPLES AND THE FACTS OF THIS CASE AS THE ASSESSEE HAS FILED A REVISED COMPUTATION WE DIRECT THE A.O. TO CONSIDER THE REVISED COMPUTATION AND REWORK OUT THE INCOME AFTER DUE EXAMINATION. FOR THIS THE MATTER IS RESTORED BACK TO THE FILE OF THE A.O. GROUND IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 19. IN THE RESULT APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 30 TH DECEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VII MUMBAI 4. THE CIT VII MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.