Iapl v. M/S U.p.state Agro Industrial Corporation Ltd.lucknow

Court No. - 2 (1) Case :- INCOME TAX APPEAL No. - 40 of 2017Appellant :- Pr. Commissioner Of Income Tax-Ii Ashok Marg LucknowRespondent :- M/S U.P.State Agro Industrial Corporation Ltd.LucknowCounsel for Appellant :- Manish MishraCounsel for Respondent :- Rajiv Kumar Sinha Alongwith (2) Case :- INCOME TAX APPEAL No. - 43 of 2017Appellant :- Pr. Commissioner of Income Tax-II Ashok Marg LucknowRespondent :- M/S UP State Agro Industrial Corporation Ltd. LucknowCounsel for Appellant :- Rajeev Kumar Sinha Hon'ble Devendra Kumar Upadhyaya J.Hon'ble Subhash Vidyarthi J. (Per Subhash Vidyarthi, J.) 1.Since the controversy involved in both the appeals arises from thesame dispute, these are being heard together and decided by a commonjudgement and order which is being passed treating Income Tax Appeal No.No. 40 of 2017, as the leading case. 2.Heard Shri Manish Mishra, learned counsel for the Appellant and ShriRajiv Kumar Sinha, learned counsel for the respondent. 3.By means of the Income Tax Appeal No. 40 of 2017 filed underSection 260-A of the Income Tax Act, the appellant has challenged thejudgement and order dated 09-06-2017 passed by the Income Tax AppellateTribunal at Lucknow in Income Tax Appeal Number 112/LKW/2017. 4.The following two substantial questions of law have been framed inthe memorandum of the appeal:- “Whether on the facts and circumstances of the case and in law, theHon’ble ITAT is justified in deleting the addition of Rs.5,97,61,000/–made on account of bad debt without appreciating the fact that theassessing officer made the addition as the books of accounts of theassessee corporation were not audited under section 40 4AB of theincome tax act, 1961 and it could not be ascertained whether banditswere actually written off in the books or not?Hon’ble ITAT is justified in deleting the addition of Rs.5,97,61,000/–made on account of bad debt without appreciating the fact that theassessing officer made the addition as the books of accounts of theassessee corporation were not audited under section 40 4AB of theincome tax act, 1961 and it could not be ascertained whether banditswere actually written off in the books or not? Whether on the facts and circumstances of the case and in law, theHon’ble ITAT is justified in allowing the appeal of the respondent byrecording a finding regarding the addition having been made by theassessing officer without looking into the audited balance sheet, whileadmittedly at the time of assessment the books of accounts were notaudited, thereby rendering the said order perverse, erroneous andcontrary to facts on record ?” 5.On 03.01.2018 this court had passed an order to the effect that theIncome Tax Appeal No. 41 of 2017 has already been admitted on the samesubstantial questions of law and under the aforesaid circumstances thisappeal was also admitted on the substantial questions of law as framed in thememorandum of appeal and reproduced above. 6.The respondent/assessee M/s U.P. State Agro industrial CorporationLtd. is a company owned by the U.P. government and is engaged in tradingof agricultural inputs to farmers like fertilizers, seeds, pesticides, cattle feedand implements etc. and also did purchasing of wheat and paddy under pricesupport scheme of Central Government from farmers and delivered it to theCentral Pool (FCI). 7.On 30.03.2015, the Assessing Officer passed the assessment order forthe assessment year 2012–13 in respect of the assessee respondent, in whichthe following submission made on behalf of the assessee was categoricallyrecorded: – “We are state government corporation and our accounts are audited byCAs appointed by Comptroller and Auditor General of India. We havedivisions all over U.P. and Head Office at Lucknow. For each Divisionand Head Office, separate auditors are appointed by CAG. During theyear there is a delay in appointment of auditors by C & AG forDivisional Officers and for Head Office. Audit of accounts are not finallycompleted yet.” 7.On 30.03.2015, the Assessing Officer passed the assessment order forthe assessment year 2012–13 in respect of the assessee respondent, in whichthe following submission made on behalf of the assessee was categoricallyrecorded: – “We are state government corporation and our accounts are audited byCAs appointed by Comptroller and Auditor General of India. We havedivisions all over U.P. and Head Office at Lucknow. For each Divisionand Head Office, separate auditors are appointed by CAG. During theyear there is a delay in appointment of auditors by C & AG forDivisional Officers and for Head Office. Audit of accounts are not finallycompleted yet.” 8.As the case was getting barred by limitation on 31.03.2015 in absenceof audit report and the audit was still pending, the assessee filed its return bycomputing its income at Rs. 23,19,68,000/- on the basis of the returnedincome and adjustments reflected in the provisional accounts, which waslater on revised to Rs.24,07,64,886/-. 9.In the Assessment Order dated 30-03-2015, the Assessing Officer hasstated that in the profit and loss account (subject to audit) of the Assessee Corporation for the relevant year, expenses amounting to Rs.5,97,61,000/-were claimed under the head “bad debts written off”. Since the books ofaccounts of the assessee corporation were not audited under section 44 ABof the Income Tax Act, the Assessing Authority held that it could not beascertained whether the debts were actually finally written off in the booksor not and the same was disallowed and added in the total income of theassessee. 10.The assessee filed an Appeal Number 71/09/JCID/R – VI/LKO/15-16before the Commissioner of Income Tax (Appeal) -II, Lucknow, which wasdecided by means of a judgement dated 30-11-2016, recording a finding offact “that the appellant had filed provisional accounts showing a profit ofRs.23,19,68,000/-. Later audited accounts were filed showing the profit ofRs.24,07,64, 886/-. The Assessing Officer has made an addition for thedifference of Rs.87,96,886/- which means that the income has been taken asshown in the audited accounts. In the audited profit and loss account andbalance sheet for the period under consideration amount of Rs.5,97,61,000/-has not been claimed by the appellant as bad debts. An expenditure whichhas not been claimed in the audited accounts cannot be disallowed.” TheAppellate Authority deleted the addition of Rs.5,97,61,000/- made by theAssessing Officer on account of dis-allowance of bad debts. 11.The Income Tax Department challenged the aforesaid order dated 30-11-2016 by filing ITA number 112/LKW/2017 before the Income TaxAppellate Tribunal at Lucknow, which has been dismissed by the impugnedjudgement and order dated 09-06-2017. The Income Tax Appellate Tribunalhas recorded a categorical finding “that the assessee has not raised any claimof bad debt either in the profit and loss account or balance sheet. TheAssessing Officer has made an addition having read provisional profit andloss account without looking to the audited balance sheet.” The Income TaxAppellate Tribunal accordingly dismissed the appeal filed by the department. 12.The Department has filed the present appeal under Section 260 of theIncome Tax Act on the ground that the aforesaid finding is perverse. TheIncome Tax Appellate Tribunal is the final fact-finding authority. No material has been placed on record to establish that the finding of factrecorded by the Commissioner of Income Tax and affirmed by the IncomeTax Appellate Tribunal is perverse. In absence of any material brought onrecord to establish that the aforesaid findings of fact recorded by theCommissioner Income Tax and affirmed by the Income Tax AppellateTribunal is perverse, we cannot interfere and set aside the aforesaid findingof fact treating it to be perverse. 12.The Department has filed the present appeal under Section 260 of theIncome Tax Act on the ground that the aforesaid finding is perverse. TheIncome Tax Appellate Tribunal is the final fact-finding authority. No material has been placed on record to establish that the finding of factrecorded by the Commissioner of Income Tax and affirmed by the IncomeTax Appellate Tribunal is perverse. In absence of any material brought onrecord to establish that the aforesaid findings of fact recorded by theCommissioner Income Tax and affirmed by the Income Tax AppellateTribunal is perverse, we cannot interfere and set aside the aforesaid findingof fact treating it to be perverse. 13.Shri Manish Mishra, learned counsel for the appellant has placedreliance on a judgement of the Hon’ble Supreme Court in the case of Goetze(India) Ltd. Vs. CIT reported in (2006) 204 CTR SC 182 and has contendedthat there is no provision under the Income Tax Act to make amendment in thereturn of the income by moving an application at the assessment stage withoutrevising the return. However, in the aforesaid case, the Hon’ble Supreme Courthas been pleased to place reliance on the decision of National Thermal PowerCompany Ltd., (1998) 229 ITR 383 in which it has been held that it isopen to the Authority to raise the points of law before the Appellate Tribunalunder Section 254 of the Income Tax Act, 1961. 14. In the present case, the order of the Assessing Officer was challengedin appeal before the Commissioner. While deciding an appeal, theCommissioner has all the powers of Assessing Officer and he may affirm,reduce, endorse or annul the assessment. In the present case, theCommissioner, on the basis of material on record, recorded a categoricalfinding of fact, which has been affirmed by the Income Tax AppellateTribunal in further appeal exercising the powers conferred on it by Section254 (1) of the Income Tax Act, 1961 and we find no legal error in exerciseof powers by the Income Tax Appellate Tribunal. 15.Accordingly we answer that substantial questions of law formulated inthe appeal as follows: – (i) In view of the facts and circumstances of the case it is clear that the IncomeTax Appellate Tribunal has committed no illegality in upholding the finding of factrecorded by the commissioner income tax deleting the addition of Rs.5,97,61,000/- made on account of bad debt by holding that the assessee has notraised any claim of bad debts either in the profit and loss account or balance sheet. (ii)In view of the facts and circumstances of the case the Income Tax AppellateTribunal is justified in dismissing the appeal of the Department by affirming thefinding of fact recorded by the Commissioner regarding the addition having beenmade by the Assessing Officer and the orders of the commissioner as well as theIncome Tax Appellate Tribunal or not perverse or erroneous. 16.The Income Tax Appeal No. 43 of 2017 has been filed challenging thejudgement and order dated 09.06.2017 passed in ITA No. 110/NKW/2017 bythe Income Tax Appellate Tribunal, Lucknow Bench Lucknow, whereby theIncome Tax Department’s appeal challenging the order Dated 30-11-2016passed by the Commissioner Income Tax Appeals to Lucknow has beendismissed and the order of the Commissioner setting aside the penalty ofRs.1,00,20,000/-levied by the Assessing Authority under Section 27 (1) C ofthe Income Tax Act has been set aside. 17.This appeal was admitted by means of an order dated 07–01–2020 onthe following substantial question of law:- “whether the learned Tribunal could have disallowed the three appealsfiled by the revenue which had assailed the orders of the Commissionerof Income Tax (Appeals) whereby the penalty levied under section 271(1) (c) of the Income Tax Act 1961 (as amended till date) by theAssessing Officer was deleted without taking into consideration thespecific provision of law as contained under section 292-B of the IncomeTax Act 1961 (as amended till date)?” 17.This appeal was admitted by means of an order dated 07–01–2020 onthe following substantial question of law:- “whether the learned Tribunal could have disallowed the three appealsfiled by the revenue which had assailed the orders of the Commissionerof Income Tax (Appeals) whereby the penalty levied under section 271(1) (c) of the Income Tax Act 1961 (as amended till date) by theAssessing Officer was deleted without taking into consideration thespecific provision of law as contained under section 292-B of the IncomeTax Act 1961 (as amended till date)?” 18.Since the order passed by the Assessing Officer holding that theassessee had wrongly claimed benefit of ‘bad debts written off’ was setaside by the Commissioner in appeal and the Commissioner’s order has beenaffirmed by the Income Tax Appellate Tribunal and Income Tax Appeal No.40 of 2017 filed by the department against the aforesaid order of the IncomeTax Appellate Tribunal has been dismissed, consequently this appeal is alsoliable to be dismissed. 19.In view of the aforesaid discussion, both the above noted Income TaxAppeals are hereby dismissed. Order Date :- 6.1.2022Jaswant (Justice Subhash Vidyarthi) (Justice Devendra Kumar Upadhyaya)