M/s Raagini Sarees Pvt. Ltd., Kolkata V. DCIT-Circle-8, Kolkata, Kolkata

CO 116/KOL/2013

• Counselvise Citation: [2016] 119 COUNSELVISE.COM (IT) 3264 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 25-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-08-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT KR KUREEL
• Assessee Lawyers: S N NAG
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO.1967/KOL/2013 ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME TAX, VS. RAAGINI S AREES PVT. LTD. CIRCLE-8, KOLKATA. (PAN: AABCR3862P) ( APPELLANT ) ( RESPONDENT ) & C.O. NO. 116/KOL/2013 IN ITA NO. 1967/KOL/2013 ASSESSMENT YEAR: 2007-08 RAAGINI SAREES PVT. LTD. VS. DEPUTY COMMISSIONE R OF INCOME TAX, CIRCLE-8, KOLKATA. (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 25.04.2016 DATE OF PRONOUNCEMENT: 29.04.2016 FOR THE REVENUE: SHRI RAJAT KR. KUREEL, JCIT, SR. DR FOR THE ASSESSEE: SHRI S. N. NAG, FCA ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSES SEE ARE ARISING OUT OF ORDER OF CIT(A)-VIII, KOLKATA VIDE APPEAL NO. 15/CIT(A)-VIII /KOL/10-11 DATED 26.03.2013. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-8, KOLKATA U/ S. 144 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2007-08 VIDE HIS ORDER DATED NIL. FIRST WE TAKE UP ITA NO. 1967/KOL/2013 (REVENUES APPEAL). 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO ON RENTAL INCOME. 3. BRIEFLY STATED FACTS RELATING TO THIS ISSUE ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAS A FLAT SI TUATED AT BASANTA BOSE ROAD FROM WHICH NO RENTAL INCOME WAS DISCLOSED. ACCORDING TO AO, THE ASSESSEE SHOULD HAVE DISCLOSED RENTAL INCOME UNDER THE DEEMING PROVISION OF SECTION 23 OF THE ACT AND ACCORDINGLY, HE ESTIMATED THE RENT AT RS.3,60,000/- FROM THIS FLAT. SIMILARLY, T HE ASSESSEE OWNS PROPERTY AT RAICHAK. ACCORDING TO AO, IT WAS VACANT AND UNUTILIZED. ACC ORDINGLY, HE INVOKED THE PROVISION OF 2 ITA NO.1967/KOL/2013 & C.O. NO. 116/KOL/2013 RAAGINI SAREES PVT. LTD. AY 2007-08 SECTION 23 OF THE ACT FOR THIS PROPERTY ALSO AND AS SESSED DEEMED RENT AT RS. 6 LACS. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CLAIMED THAT THESE TWO PROPERTIES ARE UTILIZED BY ASSESSEE FOR THE PURPOSE OF BUSINESS. IT WAS CONTE NDED BY THE ASSESSEE THAT THESE TWO PROPERTIES ARE USED FOR STORING OF SAREES AND ALSO USED FOR CA RRYING OUT EMBROIDERY AND MODIFICATION WORK DONE BY STAFF. THIS FACT WAS REFERRED TO AO BY CIT (A) FOR REMAND REPORT. BUT THE AO IN THE REMAND REPORT STATED THAT NO REGISTER IS MAINTAINED FOR MOVEMENT OF GOODS AND ACCORDINGLY, HE REITERATED POSITION AS IN THE ASSESSMENT ORDER. BU T THE CIT(A) CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE DELETED THE NOTIONAL HOUS E RENTAL INCOME BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE SUBMISSION OF THED APPELL ANT, THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER & REMAND REPORT, THE COUNTER COMMENTS OF THE APPELLANT AND PERUSED THE FACTS OF THE CASE. IN MY OPINION THE STATUS OF THE PETITIONER IS PRIVATE LIMITED COMPANY AND IT HAS ENGAGED IN THE BUSINESS OF TRADING OF SAREES TO THE RETAIL CUSTOME RS AS WELL AS WHOLE SELLERS WHICH IS EVIDENCED AS SUCH ON THE BASIS OF ARGUMENT MADE AND DOCUMENTARY EVIDENCES PRODUCED BEFORE ME. HENCE, THE CLAIM OF THE APPELLANT THAT THE PROPERTIES IN QUEST ION USED FOR BUSINESS PURPOSE AND AS GUEST HOUSE CANNOT BE BRUSHED ASIDE UNLESS CONTRARY EVIDENCES A RE BROUGHT ON RECORD TO SHOW THAT THE PROPERTIES WERE LYING VACANT OR NOT USED FOR THE PU RPOSE OF BUSINESS. NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO IN THIS REGARD. THEREFORE, THE AD DITION OF RS.2,52,000.00 AND 4,20,000.00 MADE BY WAY OF NOTIONAL HOUSE RENT INCOME IN RESPECT OF THE FLAT/PROPERTY SITUATED AT BASANTA BOSE ROAD/RAICHAK IS THEREFORE DELETED AS THE BASIS OF S UCH INCOME WAS A PRESUMPTION AND HAS NO LOCUS STANDI. AGGRIEVED, REVENUE PREFERRED APPEAL BEFORE TRIBUNAL . 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINES S OF TRADING OF SAREES TO THE RETAIL CUSTOMERS AS WELL AS WHOLESALE. IT IS ALSO DOING EMBROIDERY WORK AND MODIFICATION WORK ON SAREES FOR WHICH IT REQUIRES PLACES. THE ASSESSEE USED THESE PREMISES FOR ITS OWN BUSINESS PURPOSES, WHICH WAS NOT CONSIDERED BY THE AO PROPERLY. EVEN DURING REMAND PROCEEDING, AO HAS NOT VERIFIED THE PREMISES AND JUST REITERATED WHAT WAS THE FINDI NG IN THE ASSESSMENT ORDER. WE FIND THAT THE FLAT WAS USED BY ASSESSEE FOR STORING OF SAREES AS A STORE HOUSE AND RAICHAK PROPERTY WAS USED BY THE COMPANY FOR CARRYING OUT EMBROIDERY AND MODI FICATION WORK BY ITS OWN STAFF AND ALSO FOR COMPANYS CUSTOMERS AND VISITORS WHO WERE COMING FR OM OUTSTATION FOR BUSINESS PURPOSES. WE FIND THAT THE CIT(A) ON THIS BASIS DELETED THE ADDI TION. NOW BEFORE US, LD. CIT, DR COULD NOT CONTROVERT THE FINDING OF CIT(A) AND HENCE, THIS IS SUE IS CONFIRMED. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF BAD DEBT WRITTEN OFF. 3 ITA NO.1967/KOL/2013 & C.O. NO. 116/KOL/2013 RAAGINI SAREES PVT. LTD. AY 2007-08 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO MADE DISALLOWANCE OF BAD DEBT O F RS.17,76,584/- FOR THE REASON THAT THE ASSESSEE COULD NOT PROVE THE AMOUNT WHICH IS SOUGHT TO BE WRITTEN OFF AS BAD DEBT WAS OFFERED FOR TAXATION IN THE PREVIOUS YEAR. AGGRIEVED, ASSE SSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE DISALLOWANCE OF BAD DEBT AFTER CONSIDER ING THE REMAND REPORT OF THE AO BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE SUBMISSION OF THE APPELLA NT, THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER & REMAND REPORT, THE COUNTER COMMENTS OF THE APPELLANT AND PERUSED THE FACTS OF THE CASE. IN MY OPINION, AS THE LEGAL STEPS HAS BEEN TAKEN FOR R ECOVERY BY THE APPELLANT AND DUE TO CHANGE OF CIRCUMSTANCES OF BUSINESS PLACES, THE DISSALLOW OF EXPENDITURE UNDER THE HEAD OF 'BAD DEBT' HAS NO PRACTICAL IMPORTANCE AS PER THE OBSERVATION OF THE AO IN THE REMAND REPORT DT. 04.0L.2013. THUS, THE 'BAD DEBT' AMOUNTING TO RS. 17,76,584/- IS HEREBY D IRECTED TO BE ALLOWED AS BUSINESS EXPENDITURE UNDER THE HEAD 'BAD DEBT, OVER AND ABOVE RS. 24,844 /- ALLOWED AS BUSINESS EXPENDITURE BY THE. A.O. OUT OF TOTAL EXPENDITURE OF RS. 4,31,579.68. THEREA FTER, THE REMAINING AMOUNT OF EXPENDITURE WILL BE CONSIDERED TO THE EXTENT OF 3/4TH OF RS. 4,06,735.6 8 AS BUSINESS EXPENDITURE SINCE THE ACTIVITY OF BUSINESS AT SHOW ROOM CLOSED ON 13.01.2007 AND BALA NCE 1/4 TH OF RS. 4,06,735.68, AT THE MOST, CAN BE DISALLOWED OUT OF THE CLAIM OF TOTAL EXPENSES UN DER THE HEAD OF ADMINISTRATIVE AND OTHER EXPENSES. THUS, THE APPELLANT GETS A FURTHER RELIEF OF RS. 20 , 81,636.00 ON ACCOUNT OF ADMINISTRATIVE AND OTHER EXPENSES. 7. WE FIND THAT NOW BEFORE US LD. SR. DR COULD NOT CONTROVERT THE FINDINGS OF CIT(A) AND EVEN THE AO IN HIS REMAND REPORT HAS NOT POINTED OU T ANY FACTUAL DISCREPANCY AS SUBMITTED IN WRITTEN SUBMISSIONS. WE FIND THAT THE CIT(A) HAS G IVEN CATEGORICAL FINDING THAT THE ASSESSEE HAS TAKEN LEGAL STEP FOR RECOVERY OF THE DUES BUT COULD NOT RECOVER DUE TO CHANGE OF CIRCUMSTANCES OF BUSINESS PLACE AND THUS DIRECTED THE BAD DEBTS TO B E ALLOWED. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS HEREBY CONFIRMED. THIS ISSU E OF REVENUES APPEAL IS DISMISSED. 8. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO ON ACCOUNT OF SHORT TERM CAPITA L GAINS. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO MADE ADDITION OF SHORT TERM CAP ITAL GAIN OF RS. 20 LACS FOR THE REASON THAT THE ASSESSEE DID NOT GIVE ANY DETAIL OF THE PROPERT Y. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO BASED ON REMAND REPORT OF THE AO OBSERV ED THAT THE PROPERTY TRANSACTION WAS ON THE BASIS OF FAMILY SETTLEMENT AND IT IS NOT A SALE . THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: I HAVE CAREFULLY GONE THROUGH THE MATERIALS BROUG HT ON RECORD AND SUBMISSION OF THE APPELLANT, PERUSED THE FACTS OF THE CASE. I HAVE ALSO CONSIDER ED THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER AND IN THE REMAND REPORT. I AM OF THE VIEW TH AT SINCE ON THE BASIS OF REGISTERED SALE DEEDS AND ON THE BASIS OF MONEY RECEIPT IN RESPECT OF SALE CO NSIDERATION MONEY OF RS. 53,57,000/- PAID BY THE 4 ITA NO.1967/KOL/2013 & C.O. NO. 116/KOL/2013 RAAGINI SAREES PVT. LTD. AY 2007-08 PURCHASERS ON TRANSFER, THE SHORT TERM CAPITAL GAIN OF RS. 40,03,439/- HAS BEEN WORKED OUT AS PER THE COMPUTATION MADE & FURNISHED BY THE AR OF THE APPEL LANT, THE SAME APPEARS TO BE IN ORDER. THE COMPUTATION OF SHORT TERM CAPITAL GAIN AS FURNI SHED IS AS FOLLOWS (U/S 50/50A) :- CONSIDERATION RECEIVED ON SALE OF SHOP AND OTHER AS SETS OF VICTORIA PLAZA RS.53,57,000.00 LESS: WRITTEN DOWN VALUE AS ON 01.04.2006 UNDER I.T . ACT, 1961 RS.13,53,561.00 SHORT TERM CAPITAL GAIN RS.40,03,439.00 I ALSO AGREE WITH THE CONTENTION OF THE A/R THAT AS PER THE PROVISIONS OF SECTION 50/50A OF INCOME TAX ACT IN THE CASE OF SALE OF DEPRECIABLE ASSETS, THE CONSIDERATION MONEY RECEIVED BY THE APPELLANT SHOULD BE REDUCED BY THE WRITTEN DOWN VALUE AS APPE ARED ON 0L.04.2006 UNDER INCOME TAX ACT,196L. SINCE, UNDISPUTEDLY IT IS THE SHORT TERM CAPITAL GA IN THAT IS TO BE WORKED OUT FROM THE SALE VALUE RECEIVED FOR TAX PURPOSE, IN MY OPINION, THE MARKET VALUATION OF SAID DEPRECIABLE ASSETS WILL NOT BE O F ANY USE TO DERIVE AT THE NET INCOME (SHORT TERM CAP ITAL GAIN) ON SUCH TRANSFER AS THE FULL VALUE OF TH E SALE CONSIDERATION RECEIVED AND SHOWN BY THE APPELL ANT ON THE BASIS OF THE VALUE MENTIONED IN THE REGISTERED DEEDS. MOREOVER, IT IS SEEN THAT IN THE ASSESSMENT ORDER THE ARBITRARY ENHANCEMENT OF RS.20,00,000/- MADE IN THE SALE VALUE CONSIDERATION BY THE AO WITHOUT BRINGING ANY MATERIAL EVIDENCES ON RECORD TO SHOW THAT THE SALE CONSIDERA TION ON SUCH TRANSFER RECEIVED BY THE APPELLANT WAS MARE THAN WHAT HAS BEEN MENTIONED IN THE REGIST ERED DEEDS AND HENCE SUCH AN ENHANCEMENT/ADDITION WITHOUT ANY BASIS CANNOT BE SU STAINED. THEREFORE, THE ADDITION OF RS.20,00,000/- IN THE ASSESSMENT ORDER PASSED U/S 1 44 DT. 30.10.2009 IS HELD TO BE MADE ON ASSUMPTION AND WITHOUT ANY BASIS AND THUS HAS NO PR ACTICAL IMPORTANCE AND MERE REITERATION OF THE SAME LOGIC BEHIND THE ENHANCEMENT OF SALE CONSIDERA TION BY THE AO IN THE REMAND REPORT DT. 04.01.2013 IS ALSO FOUND TO BE IMMATERIAL AND MEANI NGLESS AT THIS POINT AS THE APPELLANT HAS PRODUCED SUPPORTING DOCUMENTS IN THE FORM OF COPIES OF REGISTERED SALE DEEDS TO JUSTIFY/EXPLAIN THE EXACT AMOUNT OF RECEIPT OF FULL SALE VALUE CONSIDER ATION OF THE PROPERTY TRANSFERRED AND ALSO EXPLAINED THE MODE OF RECEIPT OF SUCH SUM. UNDER TH IS CIRCUMSTANCES AND CONSIDERING THE TOTALITY OF THE FACTS, THE IMPUGNED ADDITION OF RS. 20,00,000/- MADE ON ASSUMPTION AND ESTIMATION BY THE AO IN RESPECT OF SALE VALUE CONSIDERATION IS HEREBY DIREC TED TO BE DELETED AND THUS, THE APPELLANT GETS A RELIEF OF RS. 20,00,000/- UNDER THE HEAD OF COMPUTA TION OF 'SHORT TERM CAPITAL GAIN'. WE FIND THAT THE ADDITION MADE BY AO IS ON THE BASI S OF ASSUMPTION OF PROPERTY REGISTERED ON THE BASIS OF FAMILY SETTLEMENT. EVEN NOW BEFORE US, LD . SR. DR COULD NOT DEFEND THE ORDER OF CIT(A). HENCE, WE CONFIRM THE ORDER OF CIT(A) AND THIS GROUND OF REVENUES APPEAL IS DISMISSED. 10. CROSS OBJECTION OF ASSESSEE IS SUPPORTIVE IN NA TURE AND HENCE, THE SAME IS DISMISSED. 11. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED AND THE CROSS OBJECTION OF ASSESSEE IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.2016 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH APRIL, 2016 JD. (SR. P.S.) 5 ITA NO.1967/KOL/2013 & C.O. NO. 116/KOL/2013 RAAGINI SAREES PVT. LTD. AY 2007-08 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, CIRCLE-8, KOLKATA. 2. RESPONDENT M/S. RAAGINI SAREES PVT. LTD., 871, PA RK STREET, KOLKATA-700016. 3. CIT(A) , KOLKATA 4. CIT , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .