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TaxTMI 
TaxTMI 
TaxTMI 
2012 (2) TMI 81
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....oceedings under Section 143(3) of the Act, the Assessing Officer made several additions and disallowances to the returned income. Included in them was an amount of Rs. 17,39,263/-. This amount represented the aggregate of several items written back by the assessee in the books of accounts for the relevant previous year and as per para 15.2 of the assessment order they are as follows:- "15.2. As discussed above the amounts written back include the following amounts: (i) Miscellaneous Income a. Salary & wages 59,088 b. Relating to parties 10,72,329 c. Security forfeited - d. Unencashed cheques 1,97,758 e. Excess dividend paid In earlier year written back 14,916 (i) Excess provision for doubtful debts And advances written back 17,133 (ii) Unclaimed bonus written back Disallowed in the earlier assessment year 14,133 (iii) Tax on immovable property for the Year 1990-90 3,730 (iv) Excess provision for excise ....
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....see. The assessee has written back the amount only after the expiry of the period of limitation available under the limitation Act. When the so called creditors have no legal remedy or enforceable right on the assessee to make any recovery then it is legitimate cessation of liability and writing back of these amounts in the profit & Loss Account makes it taxable." Thus the aggregate amount of Rs. 17,39,263/- was brought to assessment. In support of the addition, the Assessing Officer referred to and relied upon the judgment of the Supreme Court in CIT v. T.V.Sundaram Iyengar & Sons Ltd. [1996] 222 ITR 344. 5. The assessee appealed to the CIT(A) against the aforesaid addition. It would appear that before the CIT(A) the following breakup of the addition was given:- 1. Salaries, wages and bonus 59088/- 2. Supplier's credit balances 639005/- 3. Customer's credit balances 433324/- 4. Uncashed cheques 197758/- 5. Cash advance 1219/- 1330394/- 6. Excess dividend paid in earlier years written back 14916/- Total 1345310/- It may be noticed from the aforesaid breakup that there is no difference in the figure of salaries, wages and bonus and the....
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....57/- TOTAL Rs. 3,76,820/- 10. It was submitted before the CIT(A) that none of the aforesaid items of expenditure had been claimed as a deduction in the earlier years in which the provision for the payments had been created because of Section 43B of the Act and, therefore, the writing back of the provisions in the books of account for the year under appeal on the ground that those provisions were no longer required, does not attract Section 41(1). This contention of the assessee was accepted by the CIT(A) with regard to the first, third and fourth items aggregating to Rs. 3,62,687/- and the addition to this extent was deleted. However, in respect of the unclaimed bonus of Rs. 14,133/-, the CIT(A) held that it must have been claimed and allowed as a deduction in the earlier year, presumably because Section 43B did not apply to provision created for bonus. He accordingly upheld the addition under Section 41(1). 11. Thus the CIT(A) decided the correctness of the various additions in the following manner:- Addition Amount Deleted Confirmed Salaries, wages and bonus written back Rs. 59,088/- - yes Suppliers credit balances Rs. 6,39,005/- - yes Customers cre....
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....earlier years, the Assessing Officer has himself deleted the additions/disallowances and in the light of this development, the unilateral write back of the unclaimed credit balances etc. cannot be brought to tax under Section 41(1) of the Act. It has also been observed that in respect of the addition relating to uncashed cheques and securities forfeited, there had been no claim for deduction for the provisions of Section 41(1) to be invoked. The Tribunal having been constituted by the Income Tax Act as the ultimate fact-finding authority, we would have expected it to pass reasoned orders, setting out the relevant facts, figures and contentions in a manner in which parties to the dispute can readily appreciate the reasoning and the conclusions. There should be clarity and the factual matrix lucidly stated. It has not been made explicit in the order of the Tribunal as to what were the directions in the order stated to have been passed by the Tribunal in respect of the earlier years and what was the basis or facts upon which the Assessing Officer for those years deleted the disallowance/additions made. Despite this handicap, we have proceeded to dispose of the present appeals since th....
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.... are also not in accordance with law. 16. In the case of the uncashed cheques amount to Rs.1,97,758/-, the finding of the Tribunal is that that there was no claim for deduction in any of the earlier years and, therefore, the amount cannot be added under Section 41(1) of the Act. It is not in dispute, as it cannot be, that the amount of uncashed cheques was not allowed as deduction in any of the earlier assessment years. As per the assessee this represents the cheques received and remaining on hand on the last day of the accounting period. Tribunal has accepted this stand. The Assessing Officer and the CIT(A) have not stated why the stand of the assessee was not acceptable. Revenue has also not stated and averred that the assessment order now passed, this aspect was not considered and examined. In these circumstances, Section 41(1) can hardly have any application. We accordingly, uphold the decision of the Tribunal deleting the addition. 17. As regard the excess dividend of Rs. 14,916/-, the same reasoning holds good because dividend paid by a company to its share holders is not an allowable deduction under the Income Tax Act as it represents an appropriation of the profits after ....