THE JUTE CORPORATION OF INDIA LTD.,KOLKATA vs. DCIT, CIR-1, KOLKTA, KOLKATA

Ground No. 1 raised by the assessee in this appeal reads as under: “For that the Ld. CIT(A) was not justified in rejecting the claim of Rs. 61,65,976/- made by the appellant on account of payment of liabilities towards settlement of claims for short weight and quality for supply of raw jute to its customers. Although in his order he has referred to the remand report of ITO-1(3), A.O., wherein it was specifically stated that ledger copies, vis-a-vis payment schedules has been duly verified by him (A.O.) and statement showing year wise breakup of payments made to different customers. The extract of A.O.-ITO-1(3) in his remand report No. ITO/Ward- 1(3)/Kol/Remand/Jute/14-15/48 dated 04.08.2014 is produced ‘stated that payments of Rs. 61,65,976/- has been verified by him out of total

provision of Rs. 1,09,32,000/- for settlement of claims towards quality and quantity for supplies to different customers related to the period. That remand report was placed before CIT(Appeals)-1 during proceedings and he also taken cognizance of the same by referring the same in its stated assessment order (Page No. 11), whereas in conclusions his drawn view of that appellant was unable to produce supporting evidence of actual payments of the amount of Rs. 61,65,976/- claimed to out of total provision is totally contrary and not agreeable.”

The assessee in the present case is a public sector undertaking which is engaged in the business of trading in raw jute. The return of income for the year under consideration was filed by it on 30.09.2010 declaring a total income of Rs. 108,38,78,591/-. In the assessment originally completed under section 143(3) vide an order dated 28.12.2011, the total income of the assessee was determined by the A.O. at Rs. 130,83,04,840/- after making addition inter alia on account of disallowance of Rs. 1,09,32,000/- towards assessee’s claim for “provision for claims”. The said addition was challenged by the assessee in the appeal filed before the Ld. CIT(A) and after considering the submissions made by the assessee as well as the material available on record, the Ld. CIT(A) sustained the said addition to the extent of Rs. 47,66,024/- and directed the A.O. to allow the relief to the assessee for the balance amount after verifying its claim of having made the payments of Rs. 61,65,967/- against the provision. In the assessment completed under section 143(3)/251 vide an order dated 12.09.2013, the A.O. declined to give the relief of Rs. 61,65,976/- to the assessee on this issue on the ground that the assessee failed to produce the relevant documentary evidence to show that payments to that extent had actually been made against the provisions.

Against the order dated 12.09.2013 passed by the A.O. under section 143(3)/251, assessee again preferred an appeal before the Ld. CIT(A). During the course of appellate proceedings, the matter was remanded by the Ld. CIT(A) to the A.O. for verifying the claim of the assessee of having made the payments of Rs. 61,65,976/- against the provisions for claim. In the remand report submitted to the Ld. CIT(A), the A.O. accepted on verification that total payments of Rs. 63,78,293/- were made by the assessee against the provisions for claim in the three financial years are as under: F.Y. 2008-09 Rs. 32,55,637/- F.Y. 2009-10 Rs. 25,58,975/- F.Y. 2010-11 Rs. 5,63,681/-

We have heard the arguments of both the sides and also perused the relevant material available on record. It appears from the various documents placed on record before us including the respective orders of the authorities below that the matter has not been appreciated properly by the Ld. CIT(A) while deciding the issue relating to the disallowance of Rs. 1,09,32,000/- on account of assessee’s claim of provisions for claim. Vide his order dated 31.12.2013 passed in the first round, the said disallowance was sustained by the Ld. CIT(A) to the extent of Rs. 47,66,024/- and the relief for the balance amount of Rs. 61,65,976/- was directed to be given by him to the assessee only after verification by the A.O. of the assessee’s claim of having made actual payments to that extent against the provisions for claim. As per the said direction of the Ld. CIT(A) given by his appellate order dated 31.12.2012, an opportunity was given by the A.O. to the assessee to produce the relevant documentary evidence to show the actual payments of Rs. 61,65,976/- and since the assessee failed to comply with the said direction, he did not allow the relief of Rs. 61,65,976/- to the assessee vide his fresh assessment order dated 12.09.2013 passed under section 143(3) read with section 251. When the assessee again preferred an appeal against the said order of the A.O. challenging the disallowance of Rs. 61,65,976/- on the issue under consideration, the matter was remanded by the Ld. CIT(A) to the A.O. for verifying the claim of the assessee of having made the payments of Rs. 61,65,976/- against the provisions for claim. In the remand report submitted to the Ld. CIT(A), the A.O. accepted on verification the assessee’s claim of having made the payments of Rs. 63,78,293/- in three financial years against the provisions for claim. It appears that the Ld. CIT(A), however, overlooked these comments specifically given by the A.O. in his remand report and confirmed the disallowance of Rs. 61,65,976/- on the ground that the assessee was unable to produce supporting evidence for actual payments. Keeping in view this confusion and misunderstanding that has arisen as a result of different verifications carried out by the A.O. at different stages, we consider it just and fair to restore this issue to the file of the A.O. with the direction to allow the relief of Rs. 61,65,976/- to the assessee after verifying once again the claim of the assessee of having made payments to that extent out of the total provisions for claim of Rs. 1,09,32,000/-. Ground No. 1 of the assessee’s appeal is accordingly treated as allowed.

At the time of hearing before us, the learned counsel for the assessee has not pressed ground no 2 raised by the assessee in this appeal relating to its claim for loss of Rs. 36.29 crores relating to A.Y. 2003-04. The same is accordingly dismissed as not pressed.

In the result, the appeal of the assessee is treated as partly allowed for statistical purposes. Order Pronounced in the Open Court on 6th April, 2018.