TaxTMI 
TaxTMI 
2013 (11) TMI 181
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.... leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 3. In this case assessee company filed its return of income on 27.11.2003 declaring taxable income of Rs. 1,25,93,120/-. The scrutiny assessment in this case was completed on 30.3.2006 wherein income of the assessee was assessed at Rs. 12618280/-. Assessing Officer further noted that on perusal of assessment records reveals that assessee had debited Rs. 7810046/- on account of 'bad debts written off' which are of prior period, the same was not added back to the income of the assessee by the AO. Accordingly, the case was reopened u/s. 147. Assessee in this regard objected the reopening in this case and stated that he has disclosed fully and truly all material facts necessary for the assessment at the time of original assessment and there was no reasons to believe nor there was any material on the basis of which there was any escapement of income. The Assessing Officer was not convinced by the above submissions of the assessee. He proceeded to make the reassessment. He added the bad debt written off amounting to Rs. 7810046/- to the....
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....the absence of any fresh credible and cogent material being gathered by the Assessing Officer, no reopening of earlier assessment was permissible in law. Hence, Ld. Commissioner of Income Tax (A) held that initiation of reassessment proceedings in the case of the assessee company for the assessment year under consideration was not sustainable in law. 5. Against the above order the Revenue is in appeal before us. 6. We have heard the rival contentions in light of the material produced and precedent relied upon. We note that on the issue of bad debt was duly enquired upon by the Assessing Officer in the assessment u/s. 143(3) of the I.T. Act. In the Tax Audit Report as per Col. 22(b), it was mentioned that Rs. 7810046/- were bad debts pertaining to prior period. Taking cognizance of this observation in the course of original assessment proceedings, assessee was asked to justify (a) the claim of bad debts written off and (b) the basis on which the amount of Rs. 7810046/- pertaining to prior period had been claimed in the financial year relevant to the assessment year under consideration. In response to the aforesaid, a detailed reply was given on behalf of the assessee company v....
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....e liquidator it will be offered to tax by the assessee. Correspondence on the matter is enclosed. Diamond Agro Industries Ltd. Total contract value of this project was Rs. 205,00,000/- sales were shown in the assessment year 1995-96. Small part of retention money Rs. 300,000/- was to be received. In the assessment year 2003-04 it was found that company is unable to honour the debts due to bankruptcy. Therefore assessee ultimately decided to write off the retention money as bad debts. Correspondence on the matter is enclosed. Goetze India Ltd. This project was established for by Escorts for processing 400 tone per day mustered oil at Alwar (Rajasthan) having a total contract value of Rs. 271.00 lakhs. In comparison to the total contract value a small amount of Rs. 401,402/- against retention money was not released by the customer after waiting a reasonable time with no response from the customer, the balance was written off. Prashant India Ltd. The project was disputed with the customer on the matter of satisfactory trial run. Matter was presented before the Solvent Extraction Association of India. Various evidences of the dispute are enclosed herewith for your kind p....
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....ent material being gathered by the Assessing Officer, no reopening of earlier assessment was permissible in law. In this regard, we place reliance upon the Hon'ble Apex Court decision in the case Foramer France : 264 ITR 566 (SC) wherein it was held that the reassessment on change of opinion is not permissible. Accordingly, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (A) and hold that the re-assessment proceedings in the case of assessee company for the assessment year under consideration was not sustainable in law. 6.4 Since we have already quashed the reassessment on account of jurisdiction itself, the issue on the merit raised in the appeal is now only academic. Hence, the same is not being dealt with. 7. In the result, the appeal filed by the Revenue stands dismissed. I.T.A. NO. 1105/Del/2012 (A.Y. 2008-09) 8. The grounds raised in the appeal read as under:- 1) The Ld. Commissioner of Income Tax (A) has erred on facts and in law in deleting disallowance of Rs. 20,16,607/- on account loss in contract receipts. 2) The Ld. Commissioner of Income Tax (A) has erred on facts and in law in deleting disallowance of expenditure of Rs....
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....ion, I find that the claim of loss of RS.2016607/- has been sustained by the appellant company in the normal course of business. It is a established business practice that in cases of setting of plant and machinery/ manufacturing units, normally, performance guarantee and warranty agreements are executed between the supplier of plant and machinery and the buyer. Therefore, any defects/mistakes pointed out/detected during the currency of warranty/performance guarantee, it is the contractual obligation on the part of the supplier to remove those defects. In the present case also, the loss of RS.2016607/- has been sustained by the appellant company on account of rectifications carried out with respect to the palm oil mill established at Pothapalli (Andhra Pradesh) and supply of Hydraulic Bunch Hopper and skid steer system. The complete description of spa res/system installed during the F.Y. 2007-08 relevant to the asstt year under consideration have been furnished by the appellant company and reproduced in this order in para 3.5 above. In this fact situation, I do not find myself in agreement with the Ld. AO that the appellant company has not established the factum the loss being sust....
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....against which cost of Rs. 3,73,55,575/- was debited. Thus, the project undertaken on behalf of M/s Godrej Agrovet Ltd. had resulted into profit of Rs. 32,06,679/- in F.Y. 2006-07 and the same was offered to tax in the return of income for the A.Y. 2007-08. 12.1 Subsequently, the assessee company received certain complaints regarding setting up of palm oil mills at Pothapalli (A.P.) and as per the agreement between the assessee and M/s Godrej Agrovet Limited, the assessee company was under obligation to remove / carry out rectification with respect to the project completed in F.Y. 2006-07. We further note that the assessee's submission that as per the final performance guarantee executed by the assessee company with M/s Godrej Agrovet Limited on 24.8.2007 and as per the mechanical warranty undertaken for a period of 12 months from the date of commissioning of the plant, the assessee company was obliged to undertaken rectifications and remove defects, etc. upto 31.3.2008. Thus, we find ourselves in agreement with the Ld. Commissioner of Income Tax (A)'s observation that it has not been established by the Assessing Officer that the assessee company had incurred the loss in normal b....
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....enditure in this case has been incurred in connection with enabling engineers and other technical staff to participate in conferences and discussions organized by the Bio Diesel Association of India. The discussion held in the conferences were academic in nature and highlight the constraints faced by the industry and the new technologies and trends emerging as a result of globalization of economy. The problem faced in day to day working of bio diesel industry also come up from discussions and suggestions made during such discussions help the technical staff in solving the day to day problems. Therefore, we agree with the Ld. Commissioner of Income Tax (A) that it was with a view to update the knowledge of engineers and technical staff and therefore, has to qualify as revenue expenditure. Accordingly, we do find any infirmity in the order of the Ld. Commissioner of Income Tax (A), hence, we uphold the same. 17. In the result, the Revenue appeal stands dismissed. 18. Assessee's Cross objection No. 151/Del/2012 (A.Y. 2008-09) 19. The grounds raised in the C.O. read as under:- 1) That Ld. Commissioner of Income Tax (A) has erred in confirming disallowance of alleged interes....
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....advances to Asian Spices Extracts Ltd., terra Safe Technology (P) Ltd. and Chemical Construction CO. (P) Ltd. were made in normal course of business and thus, were commercial loans and not interest free loans as held by the Assessing Officer. It was submitted that the appellant company is in the business of setting up of big manufacturing units and for this purpose requires supply of spare parts, equipments and services of engineers and technical staff. The aforesaid three companies have been supplying these necessary services to the assessee company and against rendering of such services payment of advances becomes a business necessity. Therefore, the advances in question have been made as a business necessity and not with a view to give any undue advantage to the said concerns. Further, the advances given to the sister concerns have not resulted into any financial burden to the appellant company as the interest free funds far exceed the total amount of advances given to the sister concerns. 21. Considering the above, Ld. Commissioner of Income Tax (A) held as under:- "I have carefully considered the submissions made on behalf of the appellant company and the findings record....