Citation Codes

Equivalent Citations

citation codes

Case Number

CO 339/DEL/2011

Attorney(S)

Acts

u/s 143(3) of the Income-tax Act, 1961
sub-section (4) of section 253
Rule 47 of Income-tax Rules,
INCOME TAX ACT 1961

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Smart Summary

Structured Summary of the Tribunal's Opinion — ITA No.1884/Del./2011 & CO No.339/Del/2011

Factual and Procedural Background

The assessee (a listed public limited company engaged in manufacturing and trading of photosensitized goods, chemicals and photographic equipment) filed its return of income on 13.11.2006 declaring income of Rs.15,38,38,582/-. An assessment under section 143(3) was completed on 22.12.2008 at an income of Rs.15,62,29,979/-. The assessment was subsequently reopened by notice issued under section 148 (noted in the text as notice u/s 48) on 18.01.2010 and reassessed under sections 147/143(3) on 02.12.2010.

The assessee appealed to the CIT(A) challenging both the merits of certain additions and the validity of the reopening under section 147. The CIT(A) rejected the challenge to the validity of reopening but granted relief to the assessee on the substantive grounds (deletions of certain additions). The revenue filed an appeal before the ITAT on 18.04.2011. The assessee filed a cross-objection on 07.10.2011, about 140 days late, and sought condonation of delay. The ITAT first heard arguments on condonation and then proceeded to hear the substantive appeal by the revenue.

Legal Issues Presented

Whether the delay of approximately 140 days in filing the assessee's memorandum of cross-objections (Form No.36A) to the ITAT should be condoned.
Whether the CIT(A) erred in deleting the addition of Rs.1,24,04,816/- made by the Assessing Officer on account of alleged excess bad debts written off (i.e., whether that deletion should be restored).
Whether the CIT(A) erred in deleting the addition of Rs.9,15,25,575/- made by the Assessing Officer on account of alleged excessive deduction/expenditure due to an apparent mismatch between closing and opening stock figures (i.e., whether that deletion should be set aside).

Arguments of the Parties

Assessee's Arguments (as advanced by ld. AR)

The cross-objection was filed after a delay of approximately 140 days; an application for condonation of delay (Form No.36A) was filed explaining the delay.
The assessee claimed it was not aware of the right to file a cross-objection until counsel were engaged following a fresh hearing date fixed for 11.10.2011; the first listing on 15.06.2011 had been adjourned sine die because the Bench was not functioning.
The delay was neither wilful nor deliberate and was not attributable to laches on the part of the assessee.
The substantive ground in the cross-objection raised purely legal issues and did not require any fresh investigation; facts were already on record.
For condonation the assessee relied on several authorities (including Collector, Land Acquisition v. Mst. Katiji — 167 ITR 471 and Vaijayanatabai Baburao Patil v. Shantaram Baburao Patil — 253 ITR 798) to the effect that "sufficient cause" should receive a liberal construction to advance substantial justice; other tribunal and High Court decisions were also cited in support.

Revenue's Arguments (as advanced by ld. DR)

The assessee is a large company with in-house legal and tax experts who have a duty to review appellate orders; the claim of ignorance of the right to file a cross-objection is unjustified and unsupported by evidence.
The assessee failed to explain the delay day-by-day; its plea of ignorance is a bald assertion and not believable in the factual matrix.
Liberal approach to condonation should be limited to cases where there is no negligence, inaction or lack of bona fides; condoning the delay here would reward laches and be contrary to equality before law.
The revenue urged restoration of the Assessing Officer's orders on the substantive additions, relying on the AO's findings.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court (as reflected in the opinion)
Collector, Land Acquisition vs. Mst. Katiji — 167 ITR 471	Liberal construction of "sufficient cause" / condonation to advance substantial justice.	Relied upon by the assessee to seek liberal approach for condonation; the Tribunal considered the authority but distinguished the facts and did not grant condonation.
Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil & Others — 253 ITR 798 (SC)	Reiteration of the principle in Katiji regarding liberal construction of sufficient cause.	Relied upon by the assessee; Tribunal noted the reliance but found the facts not analogous and refused condonation.
Royal Airways Ltd. vs. Addl. Director of Income-tax — 98 ITD 259 (Delhi Bench)	Example of condonation of a long delay in special circumstances (business cessation affecting filings).	Relied upon by the assessee; Tribunal distinguished the facts (no cessation of business here) and did not accept it as supporting condonation.
Bombay Mercantile Co-op Bank Ltd. — WP No.1544 of 2010	Cited in support of condonation (specific principle not detailed in the opinion text).	Listed among authorities relied upon by the assessee; no separate or favorable application of this precedent is recorded by the Tribunal in the opinion.
Gujarat State Fertilizers & Chemicals Ltd. v. CIT — 283 ITR 149 (Guj)	Cited in support of condonation (specific principle not detailed in the opinion text).	Listed among authorities relied upon by the assessee; the Tribunal did not find the assessee's facts sufficient to invoke these authorities to condone delay.
Bharat Auto Center v. CIT — 282 ITR 366 (All.)	Cited in support of condonation (specific principle not detailed in the opinion text).	Relied upon by the assessee; Tribunal's decision shows these authorities did not persuade it to condone the delay.
Auto Centre v. State of Uttar Pradesh — 278 ITR 291 (All.)	Cited in support of condonation (specific principle not detailed in the opinion text).	Included in the list of authorities relied upon by the assessee; no distinct effect of this precedent is recorded in the Tribunal's ruling.
Dinesh Nagindas Shah v. CIT — 273 ITR 229 (Guj.)	Cited in support of condonation (specific principle not detailed in the opinion text).	Listed by the assessee; Tribunal did not apply it to grant condonation in this factual matrix.
Autoser (P) Limited v. ACIT — 101 Taxman 70 (Coch.) (Mag.)	Cited in support of condonation (specific principle not detailed in the opinion text).	Relied upon by the assessee; Tribunal did not find the facts of this case sufficiently analogous to condone delay.
Ashwin S. Mehta (HUF) v. ACIT — 75 TTJ 960 (Mum.)	Cited in support of condonation (specific principle not detailed in the opinion text).	Listed by the assessee; no specific application or favorable reliance is recorded in the Tribunal's order.
Sirius Shipping Co. Ltd v. ACIT — 257 ITR 38 (Chennai)(Trib.)	Cited in support of condonation (specific principle not detailed in the opinion text).	Relied upon by the assessee; Tribunal considered the totality of facts and declined to condone delay.
Ramlal Agrawal v. DCIT — 78 TTJ 123 (Nag.)	Cited in support of condonation (specific principle not detailed in the opinion text).	Included among the authorities relied upon by the assessee; no distinct application by the Tribunal is recorded.

Court's Reasoning and Analysis

The Tribunal addressed two distinct strands: (A) the application for condonation of delay in filing the cross-objection, and (B) the substantive appeal by revenue challenging deletions made by the CIT(A).

A. Condonation of Delay — Reasoning

The Tribunal noted statutory prescription (Rule 47 of the Income-tax Rules read with sub-section (4) of section 253) requiring the assessee to file the memorandum of cross-objections in Form No.36A within 30 days of receipt of the notice; the assessee filed on 07.10.2011, about 140 days late, and thus the cross-objection was prima facie time-barred.
The Tribunal heard the assessee's explanation: (i) lack of awareness of the right to file cross-objection until counsel engaged after the matter was re-listed for 11.10.2011, and (ii) initial hearing on 15.06.2011 had been adjourned sine die due to the Bench not functioning.
The Tribunal evaluated the factual matrix: the assessee was a large limited company with turnover exceeding Rs.400 crores, multiple associate and subsidiary companies and part of a business group (Jindal Group). The Tribunal observed that no details were provided as to how the assessee received the CIT(A)'s order and emphasized that such orders—decided for or against the assessee—would reasonably be expected to be reviewed by in-house legal/tax experts.
Given these facts, the Tribunal held the assessee had a duty to explain each day of delay and had not done so. The Tribunal reiterated the legal principle (stated as "well settled") that ignorance of law is not a ground for condonation and that the assessee's plea of not being aware of its right did not inspire confidence in the circumstances of a large corporate assessee.
Although the assessee relied on precedents (including Katiji and others) urging a liberal construction of "sufficient cause" to advance substantial justice, the Tribunal distinguished those authorities on facts (for example noting that in Katiji the delay was only four days and in Royal Airways the delay related to cessation of business activity), and concluded that the facts of the present case did not justify a liberal approach.
Conclusion on condonation: the assessee failed to establish "sufficient cause" and the cross-objection was dismissed as barred by limitation.

B. Substantive Appeal on Deletions — Reasoning

The Tribunal next examined the revenue's substantive appeal against the CIT(A)'s deletions in two principal heads: (i) alleged excess bad debts written off (Rs.1,24,04,816/-) and (ii) alleged excess deduction/expenditure due to mismatch between closing and opening stock (Rs.9,15,25,575/-). The Tribunal affirmed the CIT(A)'s factual and accounting analysis in both respects.

i. Bad Debts Written Off (Rs.1,24,04,816/-)

The Tribunal reviewed the audited accounts (Schedule "T") and the computation of income for earlier assessment years (2003-04, 2004-05, 2005-06), which showed that amounts totaling Rs.1,24,04,361/- relating to provision for doubtful debts had been added back in earlier years.
The accounts for the year under consideration showed bad debts written off of Rs.3,75,38,619/-, comprised of Rs.2,51,34,258/- claimed in the profit & loss account and Rs.1,24,04,361/- claimed through the computation of income (having been disallowed previously and hence added back earlier).
The Tribunal accepted the CIT(A)'s conclusion that there was no excess claim of bad-debt expenditure in the year under consideration and that the assessee was entitled to claim the bad debts actually written off. Accordingly, the addition made by the AO was deleted and the deletion was upheld.

ii. Excess Expenditure / Opening Stock Mismatch (Rs.9,15,25,575/-)

The Tribunal examined Schedule 'O' and Schedule 'F' of the audited accounts and an auditor's certificate dated 24.11.2010 explaining an accounting error: opening stock of raw material in transit had been added twice and reduced from current year purchases, resulting in an inflated opening stock of Rs.27,73,94,598/- instead of Rs.18,58,65,023/-, a difference of Rs.9,15,25,575/-.
The auditor's certificate explained the error as compensatory in nature (one figure having been doubled and purchases correspondingly reduced) and stated it did not affect profitability; the Tribunal accepted that the accounting treatment produced a neutral revenue effect when corrected (reducing opening stock and increasing purchases would not increase taxable income).
The Tribunal found the assessee's explanation credible and agreed with the CIT(A) that no excess deduction had been claimed and no income had escaped assessment. The deletion was therefore sustained.

Holding and Implications

Holding:

The Tribunal pronounced the following dispositive orders on 31st October 2012:

Condonation of delay: The assessee's cross-objection was dismissed as barred by limitation (the application for condonation of approximately 140 days' delay was refused).
Revenue's substantive appeal: The appeal of the revenue was dismissed — the Tribunal upheld the CIT(A)'s deletions in respect of (a) the alleged excess bad debts written off (Rs.1,24,04,816/-) and (b) the alleged excess expenditure arising from the opening stock/purchases accounting discrepancy (Rs.9,15,25,575/-).

Implications:

The direct consequence is that the Assessing Officer's additions challenged by the CIT(A) in the two substantive heads were not restored and the assessee retains the relief granted by the CIT(A). The assessee's cross-objection will not be entertained because it was filed beyond the statutory time limit and the Tribunal did not find sufficient cause to condone the delay.

The opinion does not state that a new legal precedent was laid down; rather, existing authorities on condonation were considered and distinguished on their facts, and the decision rests on the Tribunal's factual findings and application of settled principles (including that ignorance of law is not a ground for condonation in the circumstances described).

Order pronounced in open court on 31st October, 2012. Members: (U.B.S. Bedi) Judicial Member & (B.C. Meena) Accountant Member.

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M/s Jindal Photo Ltd., New Delhi v. DCIT, New Delhi

PER B.C. MEENA, ACCOUNTANT MEMBER : The appeal filed by the revenue and cross objection filed by the assessee emanate from the order of the CIT (Appeals)-VII dated 28.02.2011 for the assessment year 2006-07. ITA No.1884/Del./2011 CO No.339/Del/2011

2. The assessee company filed the return of income on 13.11.2006 declaring income of Rs.15,38,38,582/-. The assessee is a listed company in which public substantially interested and engaged in the business of manufacturing and trading of photosensitized goods, chemicals and photographic equipments. The assessment was finalized u/s 143(3) of the Income-tax Act, 1961 on 22.12.2008 at an income of Rs.15,62,29,979/-. Thereafter, the assessment was reopened by issuing a notice u/s 48 on 18.01.2010. The assessment u/s 147/143(3) of the Act was completed on 02.12.2010. Against which, the assessee filed an appeal before the CIT (A) by taking the grounds on merits of additions as well as the ground against the validity of reopening u/s 147 of the Act. It is prayed that the reopening was beyond jurisdiction, bad in law and void ab initio as its was reopened simply on the basis of change of opinion, without any new information / details that any new material / information coming to the possession of the Assessing Officer. The CIT (A) dismissed the ground and upheld the reassessment proceedings valid. However, the CIT (A) granted the relief to the assessee by deciding the grounds on merits in favour of the assessee.

3. The revenue has filed the appeal on the issue of granting the relief on 18.04.2011. As per the Income-tax Act, 1961, the assessee could have filed valid cross objection within 30 days of the receipt of the notice that an appeal against the order of CIT (A) has been preferred by the revenue. Once it is ITA No.1884/Del./2011 CO No.339/Del/2011 filed within the permitted time limit then only all the rules so far as may be, shall apply to such appeal. The assessee has filed cross objection on 07.10.2011. There is a delay of approximately 140 days. The assessee has filed an application for condonation of delay in filing the cross objection in form no.36A. The assessee has prayed for condonation of delay. Before, hearing the appeal of the revenue on merits, we heard both the sides on the condonation of the delay in filing cross objection by assessee. The ld. AR submitted that the assessee is a public limited company engaged in manufacturing and trading of photosensitized goods, chemicals and photographic equipments. The original return of income was filed on 13.11.2006. The assessment was reopened and assessee filed the appeal before the CIT (A). The CIT (A) decided the appeal on 28.02.2011. The ld. AR submitted that CIT (A) granted relief on merits of addition but sustained the validity of reopening u/s 147 of the Act. Against the deletion of addition, the revenue filed the appeal before the ITAT. As per Rule, the assessee could have filed the cross objection in Form No.36A within 30 days. However, the cross objection was filed after a delay of 140 days. Ld. AR submitted that there is a delay in filing the cross objection. The assessee was not aware about the right available to file cross objection. It was also submitted that the appeal filed by the revenue was fixed for hearing first time on 15.06.2011 and on that day, the matter was adjourned sine die as the Bench was not ITA No.1884/Del./2011 CO No.339/Del/2011 functioning. The next date of hearing was fixed for 11.10.201 through a fresh notice, pursuant to which counsels were engaged to represent the matter. Pursuant to the appointment of counsels to handle the appeal filed by the revenue, the assessee was advised to file cross objection and accordingly, cross objection was filed after a delay of 140 days. Ld. AR also submitted that this delay was neither willful nor deliberate. It cannot be attributable to latches on part of the assessee. Ld. AR further submitted that the ground raised in the cross objection is purely a legal issue not requiring any fresh investigation into the facts. Facts are already on record. Ld. AR relied on the decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. MST. Katiji & Ors. Reported in 167 ITR 471 and submitted that for advancing the substantial justice, the express sufficient cause should receive liberal construction. Ld. AR also submitted that the view taken by the Hon'ble Supreme Court in the case of Collector , Land Acquisition, cited supra, has been reiterated in the case of Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil & Other reported in 253 ITR 798 (SC). Ld. AR also relied on the decision of Delhi Bench, ITAT in the case of Royal Airways Ltd. vs. Addl. Director of Income-tax reported in 98 ITD 259. Ld. AR also submitted that in that case, delay of 9 11 years in filing appeal before the CIT (A) was condoned. Ld. AR also relied on the following decisions :- ITA No.1884/Del./2011 CO No.339/Del/2011

(i) Bombay Mercantile Co-op Bank Ltd.: WP No. 1544 OF 2010

(ii) Gujarat State Fertilizers and Chemicals Limited v CIT : 283 ITR

149 (Guj)

(iii) Bharat Auto Center v. CIT : 282 ITR 366 (All.)

(iv) Auto Centre v State of Uttar Pradesh :278 ITR 291 (All)

(v) Dinesh Nagindas Shah V. CIT : 273 ITR 229 (Guj.)

(vi) Autoser (P) Limited V. ACIT : 101 Taxman 70 (Coch.) (Mag.)

(vii) Ashwin S. Mehta (HUF) V. ACIT : 75 TTJ 960 (Mum.)

(viii) Sirius Shipping Co. Ltd V. ACIT : 257 ITR 38 (Chennai)(Trib.)

(ix) Ramlal Agrawal V. DCIT : 78 TTJ 123 (Nag.) In view of the above submissions, ld. AR prayed that the delay may be condoned.

4. On the other hand, the ld. DR submitted that the assessee is a company where the in-house legal and tax experts are available. These in-house personnel have duty to review the appellate orders decided in favour and against the assessee. The assessee has taken the ground of reopening before the CIT (A) which has been decided against it. Cross objection filed by the assessee has the delay of 140 days. The assessees claim that it was not aware of the right available to file cross objection against the appeal filed by the revenue is completely unjustified and untrue. Even after notice of appeal filed by revenue assessee remained silent for filing cross objection. The assessee has to explain every days delay. The assessees plea that it was not aware of the right to file the cross objection is completely unbelievable. Such pleadings are not based on any evidence. These are bald assertions. Liberal approach in the matter can be adopted only when the facts of the case allowed ITA No.1884/Del./2011 CO No.339/Del/2011 to adopt such approach. In assessees case, condoning the delay will not serve ends of justice, rather it will go against the substantial justice where an assessee has failed to file cross objection without any reasonable cause. It can certainly be attributable to latches on the part of the assessee. If delay is condoned then it will be a reward to the latches of the assessee. Liberal construction of the limitation provision can be made to advance substantial justice only when no negligence or inaction or want of bonafide cannot be imputed to assessee. Seekers of justice must come with clean hands. Here it is not a question of substantial justice and technical consideration against each other. There is no evidence on the record which could support the assessees bald claim that the assessee has engaged the counsel only after 11.10.2011. Why assessee could not use the in-house legal aid available to the assessee. The cause of delay in filing cross objection could have been avoided by due care and attention. In such a situation, it cannot be a sufficient cause for condoning the delay. The facts of the case relied upon by the assessee are completely at variance. In the case of Collector, Land Acquisition, cited supra by the ld. AR, the delay was only of 4 days. Here in assessees case, the delay was 140 days. Further in the case of Royal Airways Ltd., cited supra by ld. AR, the delay was related to the period when the assessees business operations came to grinding halt. There was cessation of business activities which was commercially worst calamity that could happen. Ld. DR ITA No.1884/Del./2011 CO No.339/Del/2011 submitted that the facts of assessees case are completely different. Ld. DR submitted that the doctrine of equality before law demands all litigants, including the state as a litigant, are accorded the same treatment and the law is administered in an even handed manner.

5. The CIT (A)-VII, New Delhi decided the appeal of the assessee vide its order dated 28.02.2011. Against which revenue came in appeal before the ITAT by filing appeal on 18.04.2011. As per Rule 47 of Income-tax Rules, the assessee was entitled to file memorandum of cross objections to Appellate Tribunal in form no.36A under sub-section (4) of section 253 within 30 days of the receipt of the notice. The assessee has filed the cross objection on 07.10.2011. Thus, there was a delay of 140 days. Prima facie, the cross objection filed by the assessee was time barred. The assessee submitted application for condonation of delay and the ground taken for delay is that the assessee was not aware of the right available to file cross objection. The other ground for delay is also taken that the appeal filed by the revenue was fixed for hearing for the first time on 15.06.2011 and on that date, the case was adjourned sine die. The next date of hearing was fixed for 11.10.2011 and on that date, the assessee engaged counsel to handle the appeal and then only the assessee was advised of the right available to file the cross objection. In such a situation, the assessee has tried to explain the delay stating that the delay ITA No.1884/Del./2011 CO No.339/Del/2011 was neither willful nor deliberate nor attributable latches on the part of the assessee.

6. We have heard both the sides. Assessee is a limited company. The turnover is more than Rs.400 crores for the year. From the related party disclosure in para 19 of Notes to Accounts, it is clear that assessee has many associate companies (13 companies). It is a part of Jindal Group. Assessee has also subsidiaries. No detail has been given how the order of the CIT (A) was received in the office of the assessee. Since assessee is a limited company of a big group where every such order which is decided in favour or against the assessee must have been reviewed by the legal / tax experts available in the office of the assessee. In this factual aspect, assessee has to explain every day of delay in filing cross objection. Assessee had not done so. Therefore, in our considered view, the assessee has failed to establish that there was sufficient cause beyond reasonable doubt for delay in filing the cross objection. It is a well settled principle of law that ignorance of law could not be a ground. Assessees plea that it was not aware of the right to file the cross objection has no meaning as every assessee is duty bound to know the provisions of law. Particularly in the case where company is a limited company and also belongs to a big industrial group, therefore, such pleadings do not inspire much of the confidence. In such cases, the ignorance of law could not be a ground for condoning the delay in filing the cross ITA No.1884/Del./2011 CO No.339/Del/2011 objection. Liberal approach in such cases rather goes against the basic spirit of the law. Considering these facts and in view of the legal position on the issue, we dismiss assessees cross objection as barred by limitation.

7. The revenue is in appeal before us by taking the following grounds of appeal :-

01. The order of the learned CIT (APPEALS) is erroneous & contrary to facts & law.

02. On the facts and in the circumstances of the case and in law, the Ld CIT (Appeals) has erred in deleting the addition of Rs.1,24,04,816/- on account of excess debt written off. 2.1 The Ld. CIT (A) has ignored the findings recorded by the AO and the fact that the assessee did not file required evidences to substantiate its claim.

03. On the facts and in the circumstances of the case and in law, the Ld CIT (Appeals) has erred in deleting the addition of Rs.9,15,25,575/- made on account of disallowance excessive expenditure. 3.1 The Ld. CIT (A) has ignored the findings recorded by the AO and the fact that the assessee did not file required evidences to substantiate its claim.

4. The appellant craves leave to add, to alter, or to amend any grounds of the appeal raised above at the time of the hearing.

8. Ground Nos.1 & 4 are general in nature and do not require any adjudication.

9. Ground No.2 and 2.1 are related to the deletion of addition of Rs.1,24,04,816/- on account of excess debt written off. The ld. DR relied on the order of Assessing Officer and also submitted that the order of CIT (A) may be set aside and the order of the Assessing Officer be restored. Ld. AR relied on the order of the CIT (A). ITA No.1884/Del./2011 CO No.339/Del/2011

10. We have heard both the sides on the issue. The CIT (A) has granted the relief to the assessee by holding as under :- 5.1 I have considered the written and oral submissions made on behalf of the appellant, the findings of the Assessing Officer and the facts on record. The perusal schedule "T" (relating to selling and distribution expenses) to the audited accounts for the relevant assessment year reveals that the entry corresponding to bad debts has been shown in the following manner:- Bad Debts written off Rs.3,75,38,619/- Less:- Provision for doubtful debts Rs.1,24,04,361/- in earlier years Rs.2,51,34,258/- This implies that the deduction claimed on account of bad debts written off through profit and loss account is to the extent of Rs.2,51,34,258/-. Apart from the above, the appellant has claimed deduction of Rs.1,24,04,361/- on account of provision for doubtful debts written back in the computation of income furnished with the return of income for the assessment year under consideration. The reason, as explained on behalf of the appellant for claiming the deduction of Rs.1,24,04,361/-, is that the said amount has already been added back or disallowed by the appellant itself on account of provision for doubtful debts written back in the earlier assessment years. On perusal of the copies of the computation of income for assessment years 2003- 04, 2004-05 & 2005-06, the explanation of the appellant is found to be correct as the same has been added back to the total income, the break-up of which is as under:- Assessment Year 2003-04 Rs. 13,62,267/- Assessment Year 2004-05 Rs. 90,06,195/- Assessment Year 2005-06 Rs. 20,35,539/- Rs.1,24,04,361/- Therefore, the total amount actually written off as bad debts is to the extent of Rs.3,75,38,619/- out of which the amount of (a) Rs.2,51,34,258/- has been claimed through the profit and loss account and (b) Rs.1,24,04,361/- has been claimed through computation of income furnished along with the return of ITA No.1884/Del./2011 CO No.339/Del/2011 income for the assessment year under consideration. In these circumstances, I am of the considered view that there was no excess claim of expenditure made by the appellant on account of bad debts written off. Hence, the addition of Rs.1,24,04,361/- on account of excess bad debts written off is directed to be deleted. As a result, Grounds of appeal No.2 to 2.2 are allowed. After considering the factual aspect of the case, we find that the assessee has written off bad debts of Rs.3,75,38,619/-, out of which the provision for doubtful debts was made in the earlier years of Rs.1,24,04,361/-. These provisions have been disallowed in the earlier years. The details of these provisions made in earlier years and which were added back in the income of the assessee are available at page 65 of the paper book. The assessee has debited Rs.2,51,34,258/- in the profit & loss account in the year under consideration. Thus, the assessee had actually written off the bad debits during the year to the extent of Rs.3,75,38,619/-. As per provisions of law, the assessee was entitled to claim such bad debts for the year under consideration. Keeping these facts in view, we find no fault in the order of the CIT (A) and dismiss this ground of revenues appeal.

11. Ground No.3 & 3.1 is related to deletion of addition of Rs.9,15,25,575/- on account of disallowances of excess expenditure. The CIT (A) has granted the relief in paras 6.1 & 6.2 which read as under :- 6.1 I have considered the written and oral submissions made on behalf of the appellant, the findings of the Assessing Officer and the facts on record. I have also perused the audited accounts of the appellant for the year under consideration. The perusal of ITA No.1884/Del./2011 CO No.339/Del/2011 schedule 'O' (relating to materials consumed, manufacturing and other operating expenses) to the audited accounts for the relevant assessment year reveals that the opening stock of raw- material consumed is shown to the extent of Rs.27,73,94,598/- instead of Rs.l8,58,65,023/- shown as closing stock for financial year 2004-05. The Assessing Officer was in principle correct to hold that there should not be any difference between the closing stock of Financial year 2004-05 and the opening stock of Financial year 2005-06 which is the year under consideration. As there was a difference of Rs.9,15,25,575/- between the two, the Assessing officer made the addition to that extent. However, the assessee had explained the reason for the above-mentioned accounting discrepancy. In this regard, the certificate dated 24.11.2010 issued by the auditors pointing out the mistake in accounting of Rs.9,15,25,575/- was furnished before the Assessing Officer as well as before the undersigned wherein it was clarified that "in the financial statements for the said year, opening stock of raw material in transit had been added twice and reduced from the current year purchases erroneously as a result of which opening stock of raw material had increased and purchases for the current year had been reduced by Rs.9,15,25,575/-. The error being compensatory in nature, does not effect the profitability of the company for that year. Accordingly the accounts of the company reflect the true and fair view as per our audit report dated 04.09.2006. 6.2 The perusal of Schedule 'F' (relating to Inventories) to the audited accounts for the relevant assessment year also reveals that an amount of Rs.9,15,25,575/- was shown as raw materials- in-transit as at 31-03-2005 which was also included in the closing stock ck of raw materials shown to the extent of Rs.18,58,65,023/- as at 31-03-2005. It has been explained by the appellant that the aforementioned amount of Rs.9,15,25,575/- was erroneously reduced from the total purchases of the relevant previous year by the accountant under the mistaken belief that the said amount was included in the purchases of the year under consideration instead of purchases of the preceding year. As a consequence, the accountant correspondingly increased the amount of opening stock by the amount of Rs.9,15,25,575/-. Accordingly, the amount of opening stock of raw materials as at 31-03-2006 after the aforesaid addition aggregated to Rs.27,73,94,598/- (Rs.18,58,65,023 + Rs.9,15,29,575). After ITA No.1884/Del./2011 CO No.339/Del/2011 having considered the totality of the facts and circumstances of the case, the explanation of the appellant is found to be correct. As the deduction on account of purchases for the relevant previous year was claimed short by an amount of Rs.9,15,25,575/-, the same was neutralized by a corresponding increase in the value of opening stock of raw materials. In these circumstances, it can be safely concluded that the revenue effect of the accounting treatment of the aforesaid amount of Rs.9,15,25,575/- was zero. In other words, if the value of opening stock is to be reduced, the amount of purchases is to be correspondingly increased, which would not result in addition to the net taxable income of the appellant company. Hence, I am of the considered view that no excess deduction has been claimed by the appellant resulting in any income escaping assessment. Hence, the addition of Rs.9,15,25,575/- on account of excess expenditure is directed to be deleted. As a result, Grounds of appeal No.3 to 3.3 are allowed.

12. We have considered the rival submissions made on behalf of both the sides. We have also perused the audited accounts. Schedule O of the assessees audited accounts reveals the opening stock of raw material consumed of Rs.27,73,94,598/- instead of Rs.18,58,65,023/- as shown in the closing stock of financial year 2004-05. Thus, there was a difference of Rs.9,15,25,575/-. However, this mistake has been clarified by stating that opening stock of raw material in transit had been added twice and reduced from the current year purchases erroneously as a result of which opening stock of raw material has increased and purchases for the current year has been reduced to the extent of Rs.9,15,25,575/-. We have also perused the ScheduleF of the audited accounts wherein the amount of Rs.9,15,25,575/- has been shown as raw material in transit as on 31.03.2005. This amount also ITA No.1884/Del./2011 CO No.339/Del/2011 included in the closing stock of the raw material to the extent of Rs.18,58,65,023/- as on 31.03.2005. Considering the totality of the facts and circumstances of the case, we find that the assessee has explained this mistake. The value of the opening stock is reduced and the amount of the purchases correspondingly increased. Thus, it would not result in any addition to the taxable income. In view of these facts, we agree with the finding of the CIT (A) that no excess deduction has been claimed by the assessee and no income has escaped assessment. In view of these facts, we sustain the order of the CIT (A).

13. In the result, the appeal of the revenue stands dismissed and the cross objection of the assessee is dismissed for treating the same as barred by limitation. Order pronounced in open court on this 31st day of October, 2012. Sd/- sd/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 31st day of October, 2012 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-VII, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.

M/s Jindal Photo Ltd., New Delhi v. DCIT, New Delhi

Structured Summary of the Tribunal's Opinion — ITA No.1884/Del./2011 & CO No.339/Del/2011

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Assessee's Arguments (as advanced by ld. AR)

Revenue's Arguments (as advanced by ld. DR)

Table of Precedents Cited

Court's Reasoning and Analysis

A. Condonation of Delay — Reasoning

B. Substantive Appeal on Deletions — Reasoning

i. Bad Debts Written Off (Rs.1,24,04,816/-)

ii. Excess Expenditure / Opening Stock Mismatch (Rs.9,15,25,575/-)

Holding and Implications

M/s Jindal Photo Ltd., New Delhi v. DCIT, New Delhi

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