Case Law Details
M/s Delite Properties Pvt. Ltd. Vs I.T.O. (ITAT Kolkata)
We have perused the relevant papers available on records. It appears from the fact that non acceptance of the assessee’s prayer for lawful exclusion of the amount have resulted to a wrong determination of income for the relevant year. Moreover, taxation of the same amount in two different years is a definite violation or principle that no piece of income can be taxed twice.
In this respect the assessee has relied upon the judgment passed by the Hon’ble Chennai Tribunal in TS 386-ITAT-2012-Chny in the case of R.Nagarjun vs ACIT where it was held that the income tax department is duty bound to demand and collect only legitimate tax dues and should not take advantage of ignorance of assessee. It was further held that same income cannot be taxed twice even though it is erroneously offered in two different years. Even under law if the assessee was not liable to be assessed for any reason, whatsoever, then the assessee’s claim for its non assessability cannot be denied merely because in the return filed by the assessee it mistakenly offered to pay tax on such income.
It was further held in the case of Kedarnath Jute Mfg Co.Ltd vs Commissioner of Income Tax 1971 AIR 2145 that “whether assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter”. The case of the assessee is just similar to what has been cited above and the ratio laid down by the above judgements is fully applicable to the instant case. The action of non acceptance of the genuine claim of the assessee by the lower authorities is unjustified and liable to be deleted.
We consider it fair and proper in the interest of justice to set aside the orders of the authorities below on the issue in dispute and restore the matter to the file of the AO to decide the same afresh after giving the assessee proper opportunity of hearing and upon taking into consideration of the entire evidence already available on record as well as other documentary evidence which the assessee may choose to file in support of the claim on the issue.
FULL TEXT OF THE ITAT JUDGMENT
The instant appeal has been filed before us by the assessee against the order dated 16.12.2015 passed by the Commissioner of Income Tax(Appeals)-16, Kolkata under section 143(3) of the Income Tax Act, 1961 arising out of the order dated 30.12.2008 passed by the Income Tax Officer, Ward-7(3), Kolkata for the assessment year 2006-07 with the following grounds :
“1.For that on the facts and in the circumstances of the case the addition of the sum of Rs 80,000/- on the ground of non deduction of tax at source u/s 194J is erroneous and bad in law and the confirmation of the same by CIT(A) without appreciating the submission of the appellant is unjust and unlawful.
2. For that on the facts and in the circumstances of the case the addition by disallowance of a sum of Rs.1,58,061/-being 30% of Rs 5,28,870/-claimed or account of service and supervision charges is unwarranted, wrong and incorrect and confirmation of the same by the CIT(A) is incorrect, erroneous and unsustainable.
3. For that on the facts and in the circumstances of the case the addition by disallowance of a sum of Rs 64,020/- being 30% of total claim of Rs 2,99,396/- on account of professional and legal charges is arbitrary, wrong and incorrect and confirmation of the same by the CIT(A) is unjust, wrong and unlawful.
4. For that on the facts and in the circumstances of the case the Assessing officer was not justified in law and facts in not accepting the claim of the appellant for deduction of the sum of Rs 7,00,000/- from total income on account of provision for bad and doubtful debts and confirmation of the same by CIT(A) in utter disregard of the principle of taxation is unjust and bad in law.
5. For that appellant craves leave to take further additional grounds and/or to alter and/or to modify and/or to amend any grounds taken herein at any time before or during the hearing of the appeal.
2. The ld. AR at the very outset of the proceedings submitted before us that he does not want to press ground No.1. Therefore ground no.1 is dismissed as not pressed.
3. Ground No.2 relates to the case of addition by disallowance to the tune of 1,58,061/- being 30% of Rs.5,26,870/- claimed on account of service and supervision charges made by the assessee.
4. The said expenses was made by the assessee on account of service and supervision charges but 30% of the total expenses of Rs.5,26,870/- i.e. Rs. 1,58,061/- has been disallowed by the assessee on the ground that the assessee has not produced any bill in respect of such payments rather the assessee produced self made vouchers towards payment made to different persons.
4.1. The ld. CIT(A) on appeal upheld the order passed by the Ld.AO on the ground that such expenses were not supported by cogent material and neither any attempt has been made by the assessee to substantiate the genuineness of the expenses.
5. At the time of hearing of the instant appeal before us, the ld. AR submitted that it has not been disputed by the ld. AO that the expenses were actually incurred by the assessee and the same is recorded in the regular books of accounts. Further that the AO has not brought on record any cogent material so as to justify that, part of the major expenses should be disallowed on estimate basis and thus neither the said expenditure was considered to be bogus by the AO. The ld. AR further added that this is just a mechanical addition for the sake of disallowance. On the contrary, the ld. DR relied upon the order passed by the Ld. AO.
6. We have heard the ld. Representatives of the respective parties. We find that when the AO allowed 70% of the total expenses made on account of service and supervision charges as thought fit there was no reason to reject the balance 30% of it. The expenses so incurred in this particular head was also properly recorded in the books of account of the assessee which was neither rejected by the AO. In this respect the ld. AR relied upon the judgments passed by the Hon’ble Madras High Court in the matter of CIT vs Lakshmi Vikas Bank Ltd. 2014(4)/TMI 827the relevant portion whereof is reproduced hereinbelow :
“when revenue had thought fit to allow 90% of the claim there was no reason to reject the balance 10%. The court confirmed the order of Tribunal that held that both AO and CIT(A) had no material on record to reject the claim. Once AO held that 90% of expenditure of this nature is liable to be accepted there was no reason to restrict the claim to 90% alone and disallow 10%. It was also held in the case of Asian Techs Limited vs CIT 103CTR 101 that when substantial part of expenses incurred has been admitted as incurred, AO was not justified to disallow a small portion thereof by resorting to estimate. Assessee also draws your honour’s attention to the judgement in the cases of Tripat Kaur vs- ACIT 22(1) in ITA no 3244/Del/2012 and ITO vs Lake palace hotels and motel p Itd 13 TT J(JP) 216 wherein it was held that addition made on estimated basis can not be justified and sustained in law.”
Taking into consideration the entire aspect of the matter and the judgement cited above we are of the view that the order passed by the ld. CIT(A) confirming the order of addition made by the AO on estimated basis without assigning any reason thereof is incorrect, erroneous and not sustainable in the eyes of law. We, therefore, delete the addition by disallowance of Rs. 1,58,061/-.
7. Ground No.3 relates to the addition by way of disallowance of the sum of 64,020/- being 30% of the total claim of Rs.2,99,396/- as incurred on professional and legal charges.
8. The ld. AO disallowed Rs.64,020/- being 30% of the total charges of 2,99,396/- with the following observations :-
“5. On perusal of accounts it was found that assessee claimed a sum of rs.299,396/- on account of professional and legal charges. Assessee submitted the details of such expenses. On perusal of these expenses it was found that the amalgamating companies paid lawyers and recovery agents and debited these .These expenses included a sum of Rs.141 100/• on account of Delite Spinning Mills Pvt Ltd, Rs.40300/- on account of Sagursan Pvt Ltd , RS.16000/• on account of Sagursan Exports Pvt Ltd and Rs. 16000/- on account Anna Grehoy Nirman P.Ltd as expenses towards amalgamation with Delites Properties Pvt Ltd. These companies were amalgamated by the court order with effect from 1.4.2004 and assessee claimed these expenses in its books. Assessee produce self made vouchers with respect to payment to lawyers and recovery agents of RS.126100/• on account of Delite Spinning Mills Pvt Ltd and RS.23800/• However assessee could not produce any bill with respect to these payments. Mr. Jalan was requested to explain why these expenses should not be disallowed Mr. Jalan could not say anything. In view of the above 30% of the total expenses( 141100+40300+16000+16000) =Rs 64020/· is disallowed and added back to the total income.’
8.1. The ld. CIT(A) relied upon the order passed by the AO dismissing the ground of appeal preferred by the assessee on the ground that the AR failed to prove the genuineness of this transaction in the appellate proceedings. The ld. AR at the time of hearing could not deliver strong argument in support of his claim. The ld. DR also relied upon the order passed by the ld. AO.
9. We have heard the rival contentions made by the parties. We have gone through the materials available on records. We, however, could not justify the attempt and conduct of the assesee to substantiate the genuineness of such expenses in its entirety in the absence of valid documents. We therefore think it fit to disallow 15% of it and delete 15% of the addition made by the AO in this regard. The said ground of appeal is thus partly allowed.
10. Ground No.4 relates to addition of Rs.7,00,000/- for bad and doubtful debts, written back during the relevant A.Y.2006-07 and reduced from the other expenses. By and under the additional ground the assessee has prayed for a direction upon the AO to reduce Rs.7 lacs from the total income of the assessee on account of provisions for bad and doubtful debts written back in accounts. The AO made the addition on the ground that it was incorrect representation in terms of Schedule-6 of the Companies Act, the prior period adjustment ought to have been shown in the appropriation section. The assessee has neither filed revised return to correct this anamoly relying upon the judgement of Goetze India Ltd. Vs CIT 204 CTR 182. The ld. CIT(A) upheld the action made by the AO.
11. The ld. AR at the time of hearing of the matter submitted that in the preceding year i.e. A.Y.2005-06 an amount of Rs.7,00,000/- was debited in the profit and loss account under the head “other expenses’ as provision for bad and doubtful debts. The provision was thus directly debited to the profit and loss account. Accordingly, the said provision for bad and doubtful debts of 7,00,000/-was written back in the accounts of the relevant year. Inadvertently and due to ignorance of the accountant the said amount was shown by reducing the same from gross amount appearing in the profit and loss account under the head ‘other source’ instead of showing it below the line of profit and loss a/c as should have been. This resulted to a wrong disclosure of loss in the accounts as this reduction had the effect of reducing the actual loss incurred for the year and on the other hand said Rs 7,00,000/- was again wrongly taxed as income of the relevant year. During audit this fact of wrong presentation of account leading to wrong disclosure of loss appears to have also skipped notice and attention of the auditor.
11.1. During the assessment proceedings the assessee by its letter dated 03.11.2008 and 24.11.2008 drew attention to the ld. AO and requested to exclude the same from the income of the assessee as this is not lawfully to be taxed. The AO, however, declined to entertain the said claim of the assessee on the ground that since no revised return was filed the claim for exclusion of the same could not be entertained. The ld. AR further submitted that such mistake was done due to ignorance of the accountant and the assessee cannot be made to suffer the loss and damage for such ignorance of the accountant for lack of attention on the part of qualified auditor. On the contrary the ld. DR argued in support of the order passed by the AO and the CIT(A).
12. We have heard the representatives of both the parties. We have perused the relevant papers available on records. It appears from the fact that non acceptance of the assessee’s prayer for lawful exclusion of the amount have resulted to a wrong determination of income for the relevant year. Moreover, taxation of the same amount in two different years is a definite violation or principle that no piece of income can be taxed twice. In this respect the assessee has relied upon the judgment passed by the Hon’ble Chennai Tribunal in TS 386-ITAT-2012-Chny in the case of R.Nagarjun vs ACIT where it was held that the income tax department is duty bound to demand and collect only legitimate tax dues and should not take advantage of ignorance of assessee. It was further held that same income cannot be taxed twice even though it is erroneously offered in two different years. Even under law if the assessee was not liable to be assessed for any reason, whatsoever, then the assessee’s claim for its non assessability cannot be denied merely because in the return filed by the assessee it mistakenly offered to pay tax on such income. It was further held in the case of Kedarnath Jute Mfg Co.Ltd vs Commissioner of Income Tax 1971 AIR 2145 that “whether assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter”. The case of the assessee is just similar to what has been cited above and the ratio laid down by the above judgements is fully applicable to the instant case. The action of non acceptance of the genuine claim of the assessee by the lower authorities is unjustified and liable to be deleted. We consider it fair and proper in the interest of justice to set aside the orders of the authorities below on the issue in dispute and restore the matter to the file of the AO to decide the same afresh after giving the assessee proper opportunity of hearing and upon taking into consideration of the entire evidence already available on record as well as other documentary evidence which the assessee may choose to file in support of the claim on the issue.
13. In the result the appeal by the assesee is partly allowed.
Order pronounced in the Court on 06.06.2018.
