2013 (10) TMI 1118 - AT - Income Tax

Condonation of delay Held that - The facts of the delay, which are specified by affidavits and death certificates indicate the unfortunate circumstances which the litigant had to face - The Hon ble Supreme Court in the case of Mst. Katiji & others 1987 (2) TMI 61 - SUPREME Court has held that when the technical consideration and cause of substantial justice are pitted against each other the cause of substantial justice has to prevail. It has been further held that while considering the issues of condonation of delay, a rigid and pedantic approach should not be adopted and the issue should be decided conforming to natural justice Decided in favor of Assessee. Re-opening of assessment when objection raised by assessee is not considered by AO i.e. when the order is not a speaking order Held that - Reliance has been placed on the judgment of Supreme Court judgment in the case of G.K.N. Driveshafts 2002 (11) TMI 7 - SUPREME Court - In view of Hon ble Supreme Court judgment that the objections are mandatory to be decided by assessing officer. Consequently, no choice but to set aside the assessment back to the file of assessing officer to decide the objections of the assessee by speaking order and then to consider proceeding with reassessment Decided in favor of Assessee. Allowance u/s 37(1) of the Income Tax Act Held that - Expenditure pertaining to the payment made to Canara Bank on the direction of DRT, the hypothecation defalcation and its consequent effect on the immovable property placed by the assessee is purely a civil dispute and any damages allowed in this behalf even referred to as penal by DRT, do not constitute payment for infraction of law Therefore, deduction allowed Decided in favor of Assessee. 50% disallowance u/s 40A(ia) Held that - Commission payment has been made to foreign parties for procurement of foreign business and they had no presence or office in India Disallowance deleted Decided in favor of Assessee.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of reopening of assessment.
3. Service of notice under section 143(2).
4. Disallowance of expenses and bad debts.
5. Disallowance of commission under section 40(a)(ia).
6. Addition of loans.
7. Disallowance of ESI and PF contributions.
8. Charging of interest under sections 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appellant filed a petition for condonation of delay in filing the appeal, citing reasons such as the death of a director's son and the illness and subsequent death of their Chartered Accountant. The Tribunal, referencing the Supreme Court judgment in the case of Collector, Land Acquisition Vs. Mst. Katiji & others 167 ITR 471 and the Delhi High Court case of Prem Chand Bansal & Sons Vs. ITO 237 ITR 65 (Del), held that the appellant was prevented by reasonable cause from filing the appeal on time. The delay was condoned.

2. Validity of Reopening of Assessment:
The appellant challenged the validity of reopening the assessment for A.Y. 1999-2000, arguing that the original assessment was completed under section 143(3) and that the objections against reopening were not considered by the Assessing Officer (AO). The Tribunal noted that the AO failed to decide the objections as required by the Supreme Court in G.K.N. Driveshaft 259 ITR 90. The Tribunal set aside the assessment and directed the AO to decide the objections by a speaking order before proceeding with the reassessment.

3. Service of Notice Under Section 143(2):
The appellant contended that the notice under section 143(2) was not served within the prescribed period. The Tribunal observed that the department failed to produce the assessment record to establish the service of notice. The Tribunal directed the AO to ascertain the factum of valid service of notice under section 143(2) during the set-aside proceedings.

4. Disallowance of Expenses and Bad Debts:
For A.Y. 2004-05, the Tribunal addressed the disallowance of Rs. 1,56,256/- paid to Canara Bank for valuation charges, insurance charges, and DRT suit expenses, and Rs. 3,76,470/- claimed as bad debts. The Tribunal held that the payment to Canara Bank was a civil matter and not an infraction of law, thus allowable under section 37(1). The Tribunal also found that the relevant details for bad debts were filed, and the disallowance was based on a mistaken assumption. The additions were deleted.

5. Disallowance of Commission Under Section 40(a)(ia):
For A.Y. 2005-06, the appellant argued that the commission payments to non-residents were not liable to TDS as per Board's Circular No. 23 dated 23-7-1967 and the AAR ruling in Telesoft (P) Ltd. 267 ITR 725 (AAR). The Tribunal noted that the commission payments were made to foreign parties with no presence in India and deleted the 50% disallowance under section 40(a)(ia).

6. Addition of Loans:
The appellant challenged the addition of Rs. 1,89,000/- representing loans from various parties, contending that the alleged voluntary offer was not made. The Tribunal directed the AO to provide the order sheet entry to the appellant and allowed the appellant an opportunity to defend its case. The issue was set aside back to the AO.

7. Disallowance of ESI and PF Contributions:
For A.Y. 2005-06, the appellant argued that the contributions towards ESI and PF were deposited before the due date of filing the return. The Tribunal found that the payment was made within the prescribed time and deleted the disallowance.

8. Charging of Interest Under Sections 234A, 234B, and 234C:
The appellant conceded that the charging of interest under sections 234A, 234B, and 234C was consequential.

Conclusion:
The Tribunal allowed the appeal for A.Y. 1999-2000 for statistical purposes, the appeal for A.Y. 2004-05 was allowed, and the appeal for A.Y. 2005-06 was partly allowed for statistical purposes. The Tribunal directed the AO to re-examine the issues in accordance with the law and based on the provided guidelines.

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