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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
आयकर अपीलीय अधिकरण “A” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य एविं श्री एम बालगणेश, लेखा दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, JM AND SRI M BALAGANESH, AM आयकर अपील सुं./ (यिर्ाारण वर्ा / Assessment Year 2011-12) Dy. Commissioner of ATV Projects India Limited Income Tax-Circle 9(1)(2) D-8, ATV House, MIDC Street Room No. 260A, 2 nd Floor, No. 16, Marol, Andheri (E), बनाम/ Aayakar Bhavan, M.K. Road, Mumbai-400 093 Vs. Mumbai-400 020 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. AAACA6923B अपीलार्थी की ओर े / Appellant by : Shri Anadi Varma, DR प्रत्यर्थी की ओर े / Respondent by : Shri Ronak Doshi, AR ुिवाई की तारीख / Date of hearing: 10.12.2019 घोर्णा की तारीख / Date of pronouncement : 08.01.2020 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
This appeal by Revenue is arising out of order of the Commissioner of Income Tax (Appeals)]-16, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-16/IT-83/DCIT 8(1)/2014-15 vide dated 21.10.2015. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle 8(1), Mumbai (in short DCIT/ ITO/ AO) for the A.Y. 2011-12 vide order dated
2 | P a g e ATV Projects India Ltd. 31/03/2014 under section 143(3) read with section 145(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of Revenue is against the order of CIT(A) accepting the book results and deleting the addition made by AO by applying profit rate. For this Revenue has raised the following three grounds: - “i) Whether on the facts and circumstances of the case and in law, was the Ld. CIT(A) justified in admitting additional evidences furnished by the assessee without appreciating the fact that the Assessing Officer had already given 12 opportunities to the assessee and thus there was no violation of natural justice and hence, CIT(A) should not have admitted additional evidence filed by the assessee company without any cogent explanation for such utter failure on its part. ii) Whether on the facts and circumstances of the case and in law, was the ld. CIT(A) justified in admitting additional evidences furnished by the assessee without appreciating the fact the AR of the assessee company gave a false statement under oath that the relevant 3 | P a g e ATV Projects India Ltd. document are lying with the Sales Tax Department which was completely untrue and baseless and when confronted with this fact, he was not able to give any plausible reason or justification for such a baseless and false statement given under oath during the assessment proceedings. iii) Whether on the facts and circumstances of the case and in law, was the Ld. CIT(A) justified in holding that the rejection of books of accounts by the AO is incorrect without going into the totality of facts as detailed in the assessment order and also ignoring the contents of the remand report which stated that the production of the documents by the assessee at the appellate stage is simply an after-thought and the books produced cannot be relied upon.”
Briefly stated facts are that the assessee company is engaged in the business of project engineering and manufacturing of TPE. The AO, during the course of assessment proceedings required the assessee to furnish the ledger of creditors, original purchase bills with delivery challans, lorry receipts, original sale bills with delivery challans, lorry receipts, original inward register and outward register for the year under consideration i.e. FY 2010-11. The AO also asked the assessee
4 | P a g e ATV Projects India Ltd. to produce the ledger of creditors, original purchase bills with delivery challans, lorry receipts and original sale bills with delivery challans, lorry receipts, original inward register and outward register for AY 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11. The AO also recorded the statement of Shri Ravindra Chaturvedi, Manager (Taxation), who attended the proceedings of the assessee company in regard to assessment. The AO recorded the statement of Shri Ravindra Chaturvedi under section 131 of the Act on 19.02.2014, wherein he replied that sale tax assessment for FY 2010-11 relevant to this AY 2011-12 is going on with the sale tax authorities at Mathura. He also replied while recording the statement that sale tax authorities issued notice vide No. 2143 dated 20.12.2013 to the assessee company, by virtue of which the records are required to have. The copy of sale tax notice was also submitted during recording of statement. Again, on 10.03.2014, statement of Shri Ravindra Chaturvedi was recorded under section 131 of the Act and he replied various questions which are part of the assessment recorded at para 3.1 of page 3. In response, Shri Ravindra Chaturvedi answered that the documents required to be produced before the sale tax authorities and assessment for FY 2010-11 which is going on, the AO issued notice under section 133(6) of the Act to the Deputy Commissioner of Commercial Tax, Sector III, Mathura, Uttar Pradesh and required him to produce the following details. The relevant details in the show cause notice of the AO require to be furnished as under: -
5 | P a g e ATV Projects India Ltd. “3. Hence, you are requested to furnished the following details in relation to the sales tax proceedings for FY 2010- 11 started in pursuant to notice dated 10.12.2013. i. Date of hearings as mentioned in the order sheet. ii. The list of the Original and Xerox documents as called by your office along with date of notice. iii. The list of original and Xerox documents submitted by the assessee during the proceedings along with the date of submission in your tapal or directly to you.”
The Deputy Commissioner of Commercial Tax, Sector III, Mathura, Uttar Pradesh, replied to the above notice vide reply dated 11.03.2014 and AO noted that the documents were produced before him but it seems that the AO’s finding is contradictory. On 10.03.2014, the assessee before the AO produced original purchase and sale bills finalize along with lorry receipts and delivery challans but stated that these files are required at Mathura for reconciliation purpose and for submission before the Sale Tax Authorities. Therefore, he undertook the Xerox copies of these 15 files. The AO again recorded statement of Shri Ravindra Chaturvedi, Manager
6 | P a g e ATV Projects India Ltd. (Taxation) on 18.03.2014, which is reproduced in Para 3.4 of the assessment order at Pages 5 and 6. In view of the above, the AO noted that the assessee failed to furnish complete original documents such as purchase bills, lorry receipts, delivery challans, inward register, sales bill and documents asked for vide various order sheet entries and summons issued to the assessee and according to him, the assessee has taken false stand that the books of accounts are being produced before the sale tax authorities. He recorded these finding in para 3.5 of his order as under: -
3.5 From the above mentioned facts, it is clear that the assessee has failed to furnish complete original documents such as purchase bills, lorry receipts, delivery challans, inward registers, sales bills and documents as asked for by various order sheet entries and summons issued to the assessee. Shri Ravindra Chaturvedi, Manager (Taxation) and AR of the assessee company take false stand that its books of accounts are being produced before sale tax authorities which was evident from the reply of the Dy. Commissioner of Commercial Tax, Uttar Pradesh.
In view of the above, he rejected the books of accounts by referring to the provisions of section 114(g) of the Indian
7 | P a g e ATV Projects India Ltd. Evidence Act, 1872 in Para 3.6 of the assessment order and the relevant text read as under: - “………………………………………………………………… …………………………………..Accordingly, the books of accounts of the assessee company are hereby rejected invoking the provision of section 145(3) of the Act since being not to the satisfaction of this office about the correctness or completeness of the accounts of the assessee or the genuineness of the transactions recorded in the books of accounts. In absence of the comparables which were asked by the assessee while recording statement under section 131 of the I.T. Act. However, he failed to submit the same. Hence, the gross profit ratio of the last year i.e. AY 2010-11 is taken for estimating the gross profit for the instant year. In the preceding year, i.e. AY 2010- 11, the assessee had declared GP ratio @31.63% on total turnover of ₹2574.49 lakhs as against which the assessee has declared GP ratio @ 28.13% for the year under consideration. Hence, the differential sum on account of short GP ratio works out to be ₹80,75,744/-
8 | P a g e ATV Projects India Ltd. [7,28,83,744] being 31.63% of ₹ 2304.26 lakhs –₹64,80,800/-]. Thus, the net addition on this account comes to ₹80,75,744/-. …………………………………………………………………… …………………”
He rejected the books of accounts and applied the profit rate at the rate of 31.63% as against declared GP rate at the rate of 28.73%. Thereby, the AO made addition of ₹80,75,744/- . Aggrieved, assessee preferred the appeal before CIT(A).
The CIT(A) after going through the submissions of the assessee and details noted that the assessee has filed complete details and this being a BIFR company and there was communication gap between the AO and the manger taxation of the assessee in regard to production of documents particularly inward and outward registers. Hence, he accepted the claim of assessee and deleted the addition. Aggrieved, Revenue is in appeal before Tribunal.
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee before the AO filed the details and documents called for by the AO i.e. details of party wise sales and purchases, copies of purchase and sales along with delivery challans and lorry receipts which is filed before us now at paper book 2 page 127. The assessee has filed complete summary of dates and 9 | P a g e ATV Projects India Ltd. details filed during the course of assessment proceedings and the relevant details filed are read as under: - Sr. Date Contents of Submissions No. 1. 27/08/2012 Balance sheet, Profit & Loss A/c with Schedules, Notes to Account, Audit Report, ITR Acknowledgement, Tax Audit Report and Computation of income. 2. 26/12/2012 Last 4 years Assessment Orders 3. 05/08/2013 Confirmed submission as above. 4. 17/01/2014 Details of Capital Investment subsidy, investment allowance Reserve, debenture Redemption Reserve, Reason of high claim of Refund out of TDS, Settlement with lenders and AIR Reconciliation. 5. 21/01/2014 Party wise Sales, party wise Purchase, Addresses of Purchase/ Sales Parties and List of Sundry Creditors (Major Parties) 6. 27/01/2014 Creditors Ledger, bank Statement, Purchase Bills, Details of Loan & Advances, Settlement Details and Depreciation Explanation, Submissions as regards creditors and their settlements. 7. 11/02/2014 AR Mr. Ravindra Chaturvedi has been given PA to represent the Company and Principal Officer of the Company. 8. 11/02/2014 Purchase Bills copies along with delivery challans and Lorry Receipts self-certified Sr. No.1 to 245/ Sales Bills Sr. No.1 to Sr. No. 131 9. 13/02/2014 Submission as regards Sundry Creditors and set off of b/f Depreciation and Business Losses 10. 13/02/2014 Ledger Account of Rental Income, Rental Agreement, Computation of Income of last 7 years, Balance Sheet of last 7 years and ledger copy of Sundry Creditors. 11. 18/02/2014 Tax Audit Reports from AY 2007-08 to AY 2013- 14 12. 03/03/2014 Advocate Communication regarding Sales Tax Assessment at Mathura Division 10 | P a g e ATV Projects India Ltd. Sr. Date Contents of Submissions No. 13. 03/03/2014 Aging of Unsecured Loans, Ledger Account of Unsecured Loan from 31/03/2009 to 31/03/2011, Ledger Account of Rental Income from AY 2007-08 to AY 2012-13 Aging of Creditors, Explanation for Section 40A(3) and Management Fees paid to ASREC India Limited. 14. 10/03/2014 Computation of Income along with ITR acknowledgement, Profit & Loss Account for AY 1997-98, AY 2000-01 & 1999-2000, year wise and Floor wise working of Rental Income from FY 2006-07 to FY 2010-11, Copies of Rental Agreements (15 nos.) 15. 10/03/2014 Original Purchase/ Sales Bills File 15 No. brought from Mathura for inspection/ verification. 16. 21/03/2014 A.O. Impounded the abovementioned 11 Files of Purchase/ Sales Bills (which were produced on March 18, 2014). 17. 24/03/2014 Financial Comparable from FY 2006-07 to 2010- 11, Note of Nature of Purchase and Sales.
From the above, we noted that only inward and outward register could not be produced before the AO during the course of assessment proceedings but in any case, the inward and outward register only corroborates the purchases and sales and for that purpose, the assessee has already produced bails and invoices including the delivery challans/ lorry receipts during assessment proceedings. We noted that even the AO has impounded several of such invoices/ bill files and the AO has not doubted the genuineness or veracity of purchases / sales documents. The AO has not commented adversely on any purchases/ sales documents even in his remand report. It was contended by the assessee before us now that it has made a proper application under rule 46A(1) of the Income-tax Rules, 11 | P a g e ATV Projects India Ltd. 1962 (hereinafter ‘the Rules), stating that documents are additional evidences and also provided reasons for non-filing of such documents during assessment proceedings which was considered by the CIT(A) and accepted. Even the Revenue now before Tribunal has not raised any such ground challenging the admissibility of additional evidences admitted by CIT(A) under Rule 46A(1) of the Rules. We have gone through the entire case records including order of AO and the order of CIT(A) and noted that only documents not produced by assessee was inward and outward register, which has already corroborated the purchases and sales supported by bills and invoices including challans and lorry receipts. Hence, in our view, we find that the CIT(A) has accepted the books of account because there was no defect pointed by the AO in the books of accounts and moreover, each and every details were produced by assessee before the AO during assessment proceeding, which was considered by CIT(A) in detail. Hence, we confirm the order of CIT(A) accepting the book results and this issue of Revenue’s appeal is dismissed.
The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by AO by invoking the provisions of section 41(1) of the Act by stating that the liabilities still exists. For this, Revenue has raised the following ground No. 4 and 5: - “iv) Whether on the facts and circumstances of the case and in law, was the ld. CIT(A) justified in deleting the addition of ₹30,91,95,000/- under section 12 | P a g e ATV Projects India Ltd. 42(1) without appreciating that it is onus of the assessee to prove that the liabilities still exist and the assessee company even after specific queries by the AO as detailed din the order failed to provide a single confirmation of all such o/s trade liabilities. v) Whether on the facts and circumstances of the case and in law, was the Ld. CIT(A) justified in deleting the addition of ₹30,91,95,000/- u/s 41(1) without appreciating the fact that the assessee in its draft rehabilitation scheme has sought for specific relief from section 41(1) which also points to the fact that the intention of the assessee is not to pay them at all and thus, addition under section 41(1) needs to be sustained.”
Briefly stated facts are that the AO during the course of assessment proceedings, on perusal of schedule h of the balance sheet noted that the assessee company has disclosed sundry creditors to the tune of ₹30,91,95,000/-. The AO required the assessee to explain how these are existing liabilities and also filed information liking name, address and amount in respect of each of the sundry creditors. The assessee before the AO vide letter dated 16.01.2014 stated that the assessee is a sick industrial unit declared by BIFR vide order 13 | P a g e ATV Projects India Ltd. dated 21.04.1999. Further, the assessee vide letter dated 21.01.2014 furnished the summary of sundry creditors in respect of assessee’s Mumbai unit with a total sum of ₹12,23,91,420/-. The assessee also filed information received in respect of sundry creditors containing names with respect of closing balance totaling to ₹78,23,291/-. Further, vide letter dated 27.01.2014, the assessee furnished ledger account of sundry creditors reflected in the balance sheet in the relevant year. The assessee also claimed that it has not written back any of the sundry creditors in its books of account as their payments have still to be decided by BIFR through a scheme of revival. It was stated that by acknowledging the liability existing in respect of sundry creditors, the assessee has acknowledged and going in the balance sheet and all these liabilities in respect of these sundry creditors amounting to ₹30,91,95,000/- is existing liability and very much liable to pay. It was also contended that none of the liabilities has been ceased/ remitted and that there are recovery suits filed by most of the creditors against the assessee company since, they have remained unpaid for a longer period of time due to the fact situation that the company has become sick as declared by BIFR vide order dated 21.04.1999. The AO required the assessee to file the details of sundry creditors along with their period of outstanding i.e. ageing of the sundry creditor, which was not furnished. Therefore, the AO added these sundry creditors by invoking the provisions of section 41(1) of the Act being remission or cessation of liability and for that reason the claim of the assessee that BIFR in assessee’s case No. 324/1998 order dated 14 | P a g e ATV Projects India Ltd. 21.04.1999, where assessee’s petition for declaring sick company was annulled by AAIFR and dismissed the assessee’s petition. The AO also noted that as per order of AAIFR, this is a delay of 14 years, which is far beyond of any reasonable time required for revival of the company and as per order dated 21.04.1999 issued by BIFR under section 3(1)(o) of BIFR Act, the order no more subsidies. According to AO, the assessee is unable to furnish all the ledger accounts of all the sundry creditors for all the years since beginning. Hence, he made addition of these trade/ sundry creditors amounting to ₹30,91,95,000/- by invoking the provisions of section 41(1) of the Act by observing particularly as under: - “the assessee has also not been able to furnish all the ledger accounts of all the sundry creditors for all the years since beginning. It is a matter of record that the sundry creditors worth ₹30,91,95,000/- are outstanding in the books of account since long number of years and that the assessee has not made any payment to them towards their trade liabilities and as such can be inferred here that such liabilities really no more exist/ cease to exist and thereby warranting the invoking of the provision of section 41(1) of the Act.”
Aggrieved, assessee preferred the appeal before CIT(A).
15 | P a g e ATV Projects India Ltd.
The CIT(A) noted that the assessee is a sick company registered with BIFR and also the fact that the creditors are outstanding for last number of years. Hence, it is perverse on the part of the AO to conclude that the order dated 21.04.1999 of BIFR under section 3(i)(o) provisions of SICA. The CIT(A) also gone through the letter dated 01.05.2015 of Govt. of India (Depart of Revenue), Director of Income Tax (recovery), objecting to the relief and concession asked by the assessee company in the draft rehabilitation scheme, which proves that the assessee is still a sick company and its revival plan is still pending, hence, the CIT(A) noted that even in the balance sheet, assessee has acknowledged liability to pay to its sundry creditors which is still pending. The CIT(A) by observing in Para 5.4.5 and 5.4.6 and 5.4.7 deleted the addition by observing as under: - “5.4.5 Moreover, vide its order dated 05.07.2015 Hon'ble BIFR has finalized the Draft Rehabilitation Scheme (DRS) in the case of the appellant company which have been circulated on 23.09.2015 and necessary newspaper publications have also been issued. Therefore, it is matter of fact and the law that the Appellant company is very much under the purview of the BIFR under the SICA, 1985.
5.4.6 In view of the foregoing, I am of the opinion that under section 41(1) of 16 | P a g e ATV Projects India Ltd. the Act, cessation of a liability can only be taxed when the liability has finally ceased without there being a chance of its revival. In the present case, the Appellant’s liability to its sundry creditors is still pending. Further, the same cannot be written back unilaterally by the Appellant unless and until approved by BIFR as the said outstanding liabilities are forming part of DRS pending for approval. Further, the outstanding liabilities of sundry creditors are still being shown under the “liabilities” in the Balance Sheet of the Appellant Company and the Appellant has not received any communication from such sundry creditors waiving their right to receive the amount. The observations made by the AO are a pure work guess and imagination the AO has not been able to bring on record any fact which shows that liability has ceased to exist. 5.4.7 In view of the facts and findings given in the foregoing paragraphs, I am of the considerate opinion that the addition made under section 41(1) on account of sundry creditors amounting to 17 | P a g e ATV Projects India Ltd. ₹30,91,95,000/- is not sustainable and accordingly, the AO is directed to delete the addition of ₹30,91,95,000/-.”
Aggrieved, now Revenue is in appeal before Tribunal.
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee in its balance sheet has declared sundry creditors as on 31.03.2011 aggregating to ₹30,91,95,000/-. The assessee claimed that it was a Sick Industrial Companies (Special Provisions) Act, 1985 since 1999, this amount of sundry creditors was outstanding for a long period of time and was for consideration before the Board of Industrial and Financial Reconstruction (“BIFR”). The assessee proposed to settle the outstanding debts at a 20% of the principal amount in the Draft Rehabilitation Scheme (DRS) and also requested for waiver of tax under section 41(1) of the Act. But the AO, on orders of appellate authority for Industrial and Financial Reconstruction (AAIFR) and BIFR holds that the company was no longer a sick company and moreover, a request for waiver of tax was made by the company not to pay tax under section 41(1) of the Act on the outstanding amounts to the Sundry creditors. Similar arguments were made by the learned CIT DR. We noted that even at the time of assessment proceedings the company was before BIFR for its revival and the revenue was aware of the BIFR proceedings as it had objected to the relief sought under the DRS by the company. The assessee has furnished complete party wise and age wise details of sundry creditors aggregating 18 | P a g e ATV Projects India Ltd. to ₹30,91,95,000/- and these were outstanding as on date and had not ceased to exist or were written off by the assessee. Hence, these were very much existing liability and cannot be treated as ceased under section 41(1) of the Act. Hence, we are of the view that the CIT(A) has rightly deleted the addition and we confirm the same.
The next issue in this appeal of Revenue is against the order of CIT(A) directing the AO to allow carry forward and set off of unabsorbed depreciation relating to AY 1997-98 to 2001- 02 despite the fact that the provisions of section 32(2) as they stood prior was amended by Finance Act, 2001 with effect from 01.04.2002. For this, Revenue has raised the following ground No. vi and vii - “vi) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in directing the Assessing Officer to allow carry forward and set-off of unabsorbed depreciation of AY 1997-98 to 2001-02 without appreciating that as per the provisions of Section 32(2) as they stood prior to the amendment by Finance Act, 2001 w.e.f 01.04.2002, such unabsorbed depreciation was eligible for carry forward and set –off against business profits only for a further period of eight years?
19 | P a g e ATV Projects India Ltd. vii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in directing the Assessing Officer to allow carry forward and set off unabsorbed depreciation of AY 1997-98 to 2001-02 by relying on the decision of General Motors India P. Ltd. v/s DCIT (354 ITR 244 (Guj)). Without appreciating that though the Hon’ble Supreme Court has dismissed the Department’s SLP, it has neither upheld the Hon’ble High Court’s view nor answered the Revenue’s Question?”
Brief facts are that the AO during the course of assessment proceedings on perusal of annexure to tax audit report in Form No.3CD noticed that the assessee has claimed carry forward/ brought forward losses of earlier years totaling to ₹230,27,56,831/- and unabsorbed depreciation of earlier years totaling to ₹95,26,36,689/- for the AY 1995-96 to 2011-12. The AO noted that the carry forward and set off of unabsorbed depreciation was claimed beyond 8 years and therefore, he disallowed the set off of brought forward losses of unabsorbed depreciation amounting to ₹66,79,03,134/-. Aggrieved, assessee preferred the appeal before CIT(A), who allowed the claim of the assessee by relying on the decision of Hon’ble Gujarat High Court in the case of General Motors India (P). LTD. 20 | P a g e ATV Projects India Ltd. vs. DCIT (2013) 354 ITR 244 (Guj) by observing in Para 9.3, 9.3.1 and 9.3.2 as under: - “9.3 I have carefully considered the submissions and perused the details and documents and material available on record. Hon’ble Gujarat High Court has in the case of General Motors India Pvt. Ltd. (354 ITR 244) has clearly held that the unabsorbed depreciation pertaining to AY 1997-98 to 2001-02 will be carried forward to AY 2002-03 and as a result became part thereof in terms of the provisions of section 32(2) as amended by Finance Act, 2001. Accordingly, it will be available for carry forward and set off against the profits and gains of subsequent years, without any limits.