COCHIN INTERNATIONAL AIRPORT LTD,ERNAKULAM vs. THE DCIT, KOCHI

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ITA 390/COCH/2020Status: HeardITAT Cochin14 March 2022AY 2015-164 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO had made sufficient inquiry regarding the bad debts claim, which was a write-off of earlier provisions disallowed. Regarding the PF contractor payable, it was determined not to be a statutory due falling under Section 43B. Therefore, the revision order was not justified.

What were the facts?

The assessee claimed Rs. 10 Crores as bad debts and had a PF contractor payable of Rs. 92,97,024. The Principal CIT initiated revision proceedings under Section 263, alleging lack of inquiry by the AO on these two issues.

What were the issues?

Whether the AO's assessment order was erroneous and prejudicial to the revenue due to lack of inquiry on bad debts and applicability of Section 43B to PF contractor payables.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 43B

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Hearing: 14.03.2022Pronounced: 14.03.2022

O R D E R PER BENCH: This assessee’s appeal is directed against the order passed by the Ld.Pr.CIT, Kochi u/s.263 of the Income Tax Act, 1961 [in short, ‘the Act’], dated 17-06-2020, for the AY.2015- 16.

2.

Considered rival submissions and perused materials available on record.

3.

We find that the assessment for the AY.2015-16 was framed u/s.143(3) of the Act on 27-12-2017 in response to the return filed by the assessee-company on 30-09-2015. This assessment was sought to be revised by the Ld.Pr.CIT u/s.263 of the Act, on the ground that the Ld.AO had not made any enquiry with regard to the following two issues:

i. Claim of Rs.10 Crores made by the assessee on account of bad debts; ii. PF contractor payable amounting to Rs.92,97,024/- would fall within the ambit of provisions of Section 43B of the Act and since the details of payment of said statutory dues were not filed by the assessee, the same would be liable for disallowance u/s.43B of the Act;

4.

The Ld.Pr.CIT passed revision order on 17-06-2020 setting aside the order of AO, treating the order passed as erroneous in as much as it is prejudicial to the interest of Revenue to examine the aforesaid two issues afresh.

5.

We find with regard to the first issue on claim of bad debts of Rs.10 Crores, the assessee has been consistently making provision for bad and doubtful debts every year by debiting to P&L A/c. In the year of making provision, the assessee has duly disallowed the said provision in the return of income which is evidenced from tabulation enclosed in page 18 of the paper book. It is pertinent to note that this tabulation was indeed filed before the Ld.Pr.CIT in response to show cause notice issued by him. From the said tabulation, it could be seen that out of the provision for bad debts made in earlier years, the assessee had indeed written-off a sum of Rs.10 Crores during the year under consideration and claimed the same as ‘deduction’ in the return of income. Admittedly, this adjustment would get reflected only in balance sheet and will not get reflected in the P&L A/c of the assessee. In these circumstances, we are unable to comprehend ourselves as to how the Ld.Pr.CIT could have noticed this item on verification of P&L A/c, when the subject mentioned issue is not an item to be reflected in P&L A/c. In any event, sum of Rs.10 Crores has been claimed as deduction during the year under consideration in respect of provision made in earlier years which has duly been disallowed in the return. One more excruciating fact is that these details were indeed furnished before the Ld.AO by the assessee during the course of assessment proceedings vide letter dt.05-12-2017, Para No.6 thereon. The Ld.AO had duly applied his mind on the same and on being satisfied with the claim of the assessee’s, granted relief to the assessee. Hence, it cannot be stated that this is a case of lack of enquiry by the Ld.AO. The law is very well settled that revision jurisdiction under Section 263 of the Act could be invoked only in the event of lack of enquiry by the Ld.AO and not on account of inadequate enquiry. Reliance in this regard is placed on the Hon’ble Delhi High Court’s decision in the case of CIT Vs. Sunbeam Auto Ltd., reported in 332 ITR 167 (Del). Hence, we have no hesitation in quashing Section 263 order passed on account of the first issue in respect of claim of bad debts of Rs.10 Crores.

5.1. With regard to the Second issue i.e., applicability of Section 43B for PF contractors payable amounting to Rs.92,97,024/-, we find that the said sum, represents amount payable to the contractor by the assessee towards PF dues. The same does not fall within the ambit of statutory dues in the case of assessee warranting application on Section 43B of the Act. We hold that the Ld.Pr.CIT had proceeded on incorrect assumption of the fact in this regard and hence no error could be attributed in the order of the Ld.AO. In any case, this aspect also has been examined by the Ld.AO during the course of assessment and hence the Ld.Pr.CIT could not validly invoke the revision jurisdiction u/s.263 of the Act. Accordingly, the order passed by the Ld.Pr.CIT u/s.263 of the Act is quashed on this issue also.

6.

In the result, the appeal of assessee is allowed.

Dictated and pronounced in the open court on 14th March, 2022

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