Assam Tea Corporation Ltd Vs CIT(A) (ITAT Kolkata)
ITAT Kolkata held that disallowance of loss claimed by the assessee under section 41 of the Income Tax Act in a hypothetical way is unjustified and accordingly matter set aside for afresh examination.
Facts- The assessee company is an instrumentality of Assam State. It was engaged in tea plantation and manufacturing of tea. It had filed its return of income electronically on 30.09.2012 declaring total loss. The case of the assessee was selected for scrutiny and a notice u/s. 143(2) of the Act was issued and served upon the assessee. During the course of assessment proceedings, the Assessing Officer found that assessee had shown sundry creditors amounting to Rs. 141.38 Cr as on 31.03.2012. He perused the details of these and thereafter made the addition of the sundry creditors to the extent assessee has disclosed the losses.
Conclusion- Held that Section 41(1) of the Act had been incorporated in the Act to cover a particular fact situation. This Section applies where a trading liability was allowed as a deduction in earlier years in computing the business income of the assessee and the assessee had opted a benefit in respect of such trading liability in later year by way of remission or cessation of the liability.
The principle behind the Section was that a provision intended to ensure that the assessee would not get away with a double benefit namely once by way of a deduction in an earlier assessment year and again by not being taxed on the benefit received by him in a later year with the reference to the liability earlier allowed as a deduction.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present two appeals are directed at the instance of the assessee against separate orders of Commissioner of Income Tax (Appeals)-2, Guwahati [in short ld. ‘CIT(A)’] dated 26.02.2019 for AY 2012-13. ITA No. 216/GTY/2019 arises out of a quantum appeal i.e. an assessment order was passed u/s 143(3) of the Income Tax Act, 1961 (in short the ‘Act’) on 17.03.2015 and in this order ld. CIT(A) has decided the appeal of the assessee u/s 250 of the Act on 26.02.2019. ITA No. 85/GTY/2020 is a penalty appeal which arose from a penalty proceeding initiated u/s 271(1)(c) of the Act.
2. First, we take ITA No. 216/GTY/2019. The assessee has raised the following grounds of appeal:
“1) On the facts and in the circumstances of appellant’s case the learned Commissioner of Income Tax (Appeals) [here in after referred to as ld. CIT(Appeals)] was not justified in confirming the additions/disallowances of Rs. 1,96,07,621/- and Rs.41,50,903/-made by the Assessing Officer (AO) in his Assessment Order and further enhancing the assessed income of the appellant by Rs142,83,99,477/-. The action of the Id. CIT(Appeals) being contrary to the provisions of law, it is prayed that the same should be quashed and the original additions/disallowances of Rs. 1,96,07,621/- and Rs. 41,50,903/- made by the A.O. and the enhancement of Rs. 142,83,99,477/- made by the Id. CIT (Appeals) all should be deleted in full.
2) On the facts and in the circumstances of the appellant’s case the Id. CIT (Appeals) was totally wrong in holding that the liabilities of Rs. 141,38,93,166/- claimed by way of Sundry Creditors as at 31/03/2012 has ceased to exist. His action is based merely on surmises, conjectures and suspicion ignoring the proofs and details of Sundry Creditors submitted in course of assessment and appeal proceedings.
3) On the facts and in the circumstances of the appellant’s case the Id. CIT (Appeals) was totally wrong in assuming that the purported shortage of processed Tea was bogs as because there was actually no such shortage and therefore his action of making an addition of Rs. 3,41,13,932/- for such alleged shortage was void ab-intio.
4) On the facts and in the circumstance of the appellant’s case the Id. CIT(Appeals) was not justified in giving direction to the A.O. to invoke his powers u/s 150(1) and u/s 150(2) of the Income Tax Act, 1961 for examination of Tea Shortage and Non compliances to TDS provisions regarding assessment years 2013-14 to 2018-19 His action being based merely on suspicion is bad under law and should be quashed.
5) The Appellant prays for leave to take any other ground/s of appeal or, amend, alter, vary the above grounds of appeal before or at the time of hearing of the appeal.”
3. All these grounds are interconnected with each other. Therefore, we take them together. The brief facts of the case are that the assessee company is an instrumentality of Assam State. It is engaged in tea plantation and manufacturing of tea. It has filed its return of income electronically on 30.09.2012 declaring total loss at Rs. 2,37,58,524/-. The case of the assessee was selected for scrutiny and a notice u/s 143(2) of the Act was issued and served upon the assessee. During the course of assessment proceedings, the Assessing Officer (in short ld. ‘AO’) found that assessee has shown sundry creditors amounting to Rs. 141.38 Cr as on 31.03.2012. He perused the details of these and thereafter made the addition of the sundry creditors to the extent assessee has disclosed the losses. The discussion made by ld. AO read as under:
“4. As per Note 9 of the audited accounts, assessee has shown sundry creditors as on 31.03.2012 at Rs. 141,38,93,166/- as against Rs. 136,01,89,749/- as on 31.03.2011, an increase of Rs. 5,37,03,417/-. The assessee was asked to furnish details vide questionnaire issued on 10.09.2014. The assessee has not furnished the required details of sundry creditors or supporting evidences to confirm the account balances. From perusal of assessment records, the amount of sundry creditors shown by assessee over the years is tabulates as follows:
