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Income Tax Appellate Tribunal, DELHI BENCHES “A”: DELHI
Before: SHRI BHAVNESH SAINI & SHRI N.K. BILLAIYA
This appeal by assessee has been directed against the Order of the Ld. Pr. CIT, Delhi-4, New Delhi, Dated 31.03.2016, for the A.Y. 2011-2012 under section 263 of the I.T. Act, 1961.
2 ITA.No.3122/Del./2016 M/s. ITKTS Interactive Technologies Pvt. Ltd., New Delhi.
Briefly, the facts of the case are that the assessee company filed its return of income on 29.09.2011 showing total loss of Rs. 62,07,218/-. The assessee company is engaged in the business of selling tickets of entertainment and sports activities through its multiple channels enabled by technology. The A.O. after giving opportunity of being heard to the assessee, made additions on account of interest income on refund and foreign travel expenses in a sum of Rs.7,92,054/-. The total income was assessed at loss of Rs.(-)54,15,164/- vide assessment order under section 143(3) Dated 29.11.2013. The Ld. Pr. CIT found certain discrepancies in the assessment order on various items and after giving opportunity of being heard to the assessee, set aside the assessment order with a direction to the A.O. to pass the Order afresh, after giving opportunity of being heard to the assessee.
The assessee is in appeal on 04 grounds of appeals.
3 ITA.No.3122/Del./2016 M/s. ITKTS Interactive Technologies Pvt. Ltd., New Delhi. 4. The Learned Counsel for the Assessee did not press Ground Nos. 3 and 4 of the appeal because the Ld. CIT(A) has already granted relief to the assessee. The same grounds are, therefore, dismissed as not pressed.
On Ground Nos. 1 and 2, the assessee challenged the impugned order with regard to amount of debit balances written-off amounting to Rs.1,03,591/- claimed as business loss under section 37 or under section 28 of the I.T. Act, 1961.
The Ld. Pr. CIT noted that assessee had debited Rs.1,03,591/- on account of debit balances written-off. The details of this claim is not available on record. The A.O. did not examine as to whether the impugned written-off was shown as income in earlier years. Thus, the assessment order passed under section 143(3) of the I.T. Act, is erroneous and prejudicial to the interests of the Revenue. The Ld. Pr. CIT gave an opportunity of being heard to the assessee. The assessee submitted before the Ld. Pr. CIT that during the previous year assessee had written-off
4 ITA.No.3122/Del./2016 M/s. ITKTS Interactive Technologies Pvt. Ltd., New Delhi. certain debit balances amounting to Rs.1,03,591/- and claimed the same as deduction while computing its total income. The said amount was disclosed in the Schedule-12 (-) Operating, Administration, Selling and Financial expenses of the audited financial statements for the relevant previous year under the head “Administrative Expenses”. The said amount represented the amount of advances given which were written-off as the same had become irrecoverable, therefore, the same were written-off and claimed as deduction under section 37(1)/28 of the I.T. Act, 1961. The A.O. has called for the details on the same, therefore, claim of assessee is allowable.
The Ld. Pr. CIT considering the explanation of assessee, set-aside the Order of the A.O. on this issue and directed the A.O. to frame the assessment afresh. His findings in para 2.5.1 is reproduced as under :
“2.5.1. I have carefully considered the submission made by the assessee, the facts of the case and the paper book and find no merit in the 5 ITA.No.3122/Del./2016 M/s. ITKTS Interactive Technologies Pvt. Ltd., New Delhi. same. The assessee has accepted the fact that the AO had not examined whether the said amount was reflected as income as is the requirement for claiming bad debts. However, the assessee has questioned the need of examining the same. The assessee has at the same time implicitly accepted that the above amount has not been reflected in the income of the assessee in the earlier years. The assessee has written off the advance stated to be irrecoverable. However, the amount so advanced is against a service or commodity as the case may be and should have formed the part of the receipt of the assessee. There is nothing like claiming non- recoverable advances as expenditure/business loss. The assessee’s argument is rejected. The assessment so framed is set aside on this issue. The A.O. is directed to reframe the assessment on the above issue after adding back the above mention amount of Rs.1,03,591/-.”
6 ITA.No.3122/Del./2016 M/s. ITKTS Interactive Technologies Pvt. Ltd., New Delhi.
The Learned Counsel for the Assessee reiterated the submissions made before the Ld. Pr. CIT and referred to PB-12 which is Schedule-12 in which assessee claimed deduction of the impugned amount under the head “Debit Balances Written-off”. He has submitted that assessee filed replies before A.O. on this issue, copies of which are filed at pages-54 and 38 of the PB. PB-26 is show cause notice issued by the Ld. Pr. CIT. He has submitted that A.O. examined the issue and allowed the claim of assessee. He has, however, admitted that A.O. in the set-aside proceedings made similar addition, which is confirmed by the Ld. CIT(A) vide Order dated 02.01.2018, against which, appeal of assessee is pending before the Tribunal. The findings of the Ld. CIT(A) in its Order dated 02.01.2018 on this issue in para-7.5 of the Order is reproduced as under :
“7.5. I have examined the submission of the appellant and finding of the AO. The appellant has written off the advances however, with regard to establishing that advances written off has been taken into account as 7 ITA.No.3122/Del./2016 M/s. ITKTS Interactive Technologies Pvt. Ltd., New Delhi. income of the previous year, has not been established. In view of the same, the finding of the AO is in order and I do not have any reason to interfere in this. Addition on this account of Rs.1,03,591/- is sustained.”
8.1. Learned Counsel for the Assessee further submitted that before proceeding under section 263 of the I.T. Act, both the conditions of Section 263 shall have to be satisfied. He has submitted that advance written-off is an allowable deduction and in support of the same relied upon several decisions in the list of propositions. He has, therefore, submitted that impugned order may be set-aside and quashed.
On the other hand, Ld. CIT-D.R. relied upon the impugned Order of the Ld. Pr. CIT and submitted that A.O. did not examine the issue at assessment stage, therefore, it was correctly set-aside by the Ld. Pr. CIT under section 263 of the I.T. Act, 1961. The Ld. CIT-D.R. on merit also submitted that claim of assessee is not allowable because
8 ITA.No.3122/Del./2016 M/s. ITKTS Interactive Technologies Pvt. Ltd., New Delhi. the assessee has not established that advance written-off has been taken into account as income of the assessee in previous year. Therefore, even on merit, assessee has no case of interference. The Ld. CIT-D.R. also submitted that A.O. did not examine the issue of bad debt or loss in correct perspective as per law.
We have considered the rival submissions and perused the material on record. In this case, A.O. passed the assessment order under section 143(3) of the I.T. Act, 1961, in which the A.O. did not mention any fact, explanation of assessee or his findings with regard to issue of Rs.1,03,591/- debiting balance written-off by the assessee in the books of account. Learned Counsel for the Assessee failed to produce any evidence or material on record including the order sheet of the A.O. to establish if A.O. examined the said issue at assessment stage. He has merely referred to certain replies filed by the assessee without reference to any query raised by the A.O. It is, thus, established on record that the A.O. did not examine this issue at assessment stage. Since no investigation or enquiry
9 ITA.No.3122/Del./2016 M/s. ITKTS Interactive Technologies Pvt. Ltd., New Delhi. have been made on the present issue and the Ld. Pr. CIT passed the Order on 31.03.2016, therefore, Explanation-2 to Section 263 is clearly attracted in the present case. We may note that Explanation-2 to Section of the I.T. Act, 1961 have been inserted in the Income Tax Act w.e.f. 01.06.2015 whereby it is directed that “For the purpose of this section, it is hereby declared that an order passed by the Assessing officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, the Order is passed without making inquiries or verification which should have been made.” Thus, the conditions of Explanation-2 to Section 263 of the I.T. Act which clearly satisfied in the present case. Therefore, the assessment order is clearly erroneous in so far as it is prejudicial to the interests of the Revenue on this issue. The Ld. Pr. CIT, therefore, rightly exercised the jurisdiction under section 263 of the I.T. Act, 1961. The decisions relied upon by the Learned Counsel for the Assessee in the list are thus not applicable to the facts of the case. It may also be noted here that after passing of 10 ITA.No.3122/Del./2016 M/s. ITKTS Interactive Technologies Pvt. Ltd., New Delhi. the revision order, the A.O. made addition against the assessee which is confirmed by the Ld.CIT(A) holding that “the appellant written-off the advances however, with regard to establishing that advances written-off has been taken into account as income of the previous year, has not been established”. Thus, assessee failed to satisfy the authorities below that claim of assessee is allowable as per Law. The Ld. Pr. CIT, therefore, rightly exercised jurisdiction under section 263 of the I.T. Act, 1961. No interference is required in the matter. We, confirm the Order of the Ld. Pr. CIT and dismiss the appeal of assessee.
In the result, appeal of Assessee dismissed.
Order pronounced in the open Court.