SHRI BD MUNDRA & SONS M/S, Kota V. ACIT, Kota

CO 67/JPR/2011

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0558 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 9 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 18-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH JCIT DR DHK
• Keywords: Bad and doubtful debts
• Section: 12A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM C.O. NO.67/JP/2011 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 607/JP/2011) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 M/S. B.D. MUNDRA & SONS PROP. MUNDRA TRACTORS C-150, IPIA, KOTA CUKE VS. THE ACIT CIRCLE- 1 KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAAHB 7862 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : WRITTEN SUBMISSION JKTLO DH VKSJ LS@ REVENUE BY: SMT. NEENA JEPH, JCIT -DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24/03/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30/04/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THE ASSESSEE HAS FILED A C.O. WHEREIN THE LD. AR O F THE ASSESSEE CONTENDS THAT GROUND NO. 1 OF THE C.O. REMAINS TO B E ADJUDICATED BY ITAT WHILE PASSING ITS ORDER DATED 28-01-2014. THE GROUND NO. 1 OF THE C.O. IS AS UNDER:- THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A) ERRED IN DIRECTING THE AO TO CONFIRM THE DISALLOWANCE OF BAD DEBTS RS. 38,211/-IF IT RELATES TO MARGIN MONEY PAYMENT TO TRACTOR PURCHASERS. CO NO.67/JP/2011 M/S. B.D. MUNDRA & SONS VS. ACIT, CIRCLE- 1, KOTA . 2 2.1 VIDE ORDER DATED 19-09-2014 IN MISCELLANEOUS APPLICATION NO. 13/JP/2014, THE ORDER OF ITAT IN ITA NO. 607/JP/201 1 DATED 21-08-2014 WAS RECALLED WITH LIMITED EXTENT TO DECIDE GROUND N O. 1 OF THE C.O. OF THE ASSESSEE WHICH INADVERTENTLY REMAINED UN-ADJUDICATE D. 2.2 DURING THE COURSE OF HEARING, IT IS FOUND THAT ASSESSEE BY APPLICATION DATED 19-03-2015 HAS REQUESTED TO DECID E THE GROUND ON THE BASIS OF THE WRITTEN SUBMISSION ALREADY FILED. ACCO RDINGLY LD. DR IS HEARD. 2.3 IN THE WRITTEN SUBMISSION, ASSESSEE HAS RELIED ON ITAT ORDER DATED 28-01-2014 FOR THE ASSESSMENT YEAR 206-07 IN ITA NO . 608/JP/2011 CLAIMING THAT THE FACTS AND CIRCUMSTANCES OF THE CA SE IN RESPECT OF BAD DEBTS ARE SIMILAR TO PRECEDING YEAR; WHERE THIS BEN CH OF ITAT AT PARA 2.4 HAD DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING OBSERVATIONS. 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED ENTIRE RECORDS. AT THE TIME OF H EARING, THE LD. AR MENTIONED THAT IN HIS GROUND OF APPEAL, THE AMOUNT OF DISALLOWANCE CONFIRMED UNDER THE HEAD BAD DEBTS HAS BEEN WRONGLY MENTIONED AS RS. 11,47,972/- WHICH ACTUALLY IS RS. 11,74,972/-. WE HAVE CORRECTED THIS FIGURE BEING A TYPOGRAPHICAL MISTAKE IN THE GROUND ITSELF FOR WHICH LD. DR HAS N O OBJECTION. AFTER HEARING BOTH THE SIDES, WE HAVE FOUND THAT TH E REASONS GIVEN BY THE LD. CIT(A) IN DELETING THE BAD DEBTS TO THE TUNE OF RS. 56,86,172/- ARE CORRECT SINCE BOTH THE PARTIES HAVE REITERATED THEIR EARLIER ARGUMENTS WHICH WERE TAKEN BEFORE THE LD. CIT(A). CO NO.67/JP/2011 M/S. B.D. MUNDRA & SONS VS. ACIT, CIRCLE- 1, KOTA . 3 WE HAVE FOUND THAT THE AO HAS MOVED IN A WRONG DIRE CTION. IN FACT, THE BUSINESS OF THE ASSESSEE IS TO SELL VEHIC LES AFTER CAJOLING AND COAXING THE FARMERS BY MOTIVATING THEM TO MAKE PURCHASES OF TRACTORS SO THAT THEY CAN MAKE CULTIVATION IN THEIR FIELDS AND CAN GROW MORE AND MORE CROPS AND ALSO TO DO OTHER ALLIE D AGRICULTURAL WORK WITH THE HELP THEREOF. IN THIS REGARD, THE MOD US OPERANDI OF THE ASSESSEE IN ADVANCING THE MARGIN MONEY IS A REA LITY OF LIFE AND IT CANNOT BE IGNORED BECAUSE MANY A TIMES, THE FARM ERS DO NOT HAVE EVEN MARGIN MONEY TO THAT EXTENT FOR TAKING LO AN ETC. THEREFORE, THIS ADVANCE HAS TO BE TREATED AS A TRAN SACTION TRANSACTED DURING THE COURSE OF ASSESSEE'S BUSINESS . THE MANNERS IN WHICH THE ACCOUNTS ARE MAINTAINED OR BILLS ARE D RAWN MAY NOT BE HAVING THAT MUCH RELEVANCE. THE AO HAS TAKEN INT O ACCOUNT THE REQUIREMENT OF SECTION 36(2) OF THE ACT THAT THE AS SESSEE HAS TO PROVE THAT DEBT HAS BECOME REALLY BAD. IT IS WELL S ETTLED LAW ON THIS SUBJECT BY NOW THAT THE ASSESSEE IS REQUIRED TO WRITE OFF SUCH DEBTS AS BAD DEBTS WITHOUT PROVING THAT DEBT HAS RE ALLY BECOME BAD. BY THE DECISION OF HON'BLE SUPREME COURT IN T HE CASE OF TRF LTD. VS. CIT, 230 CTR 14, WHEN BAD DEBT OCCURS, THE BAD DEBT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED AND THE CUSTOMERS ACCOUNT IS CLOSED. IT IS NOT NECESSARY A FTER IST APRIL, 1989 FOR THE ASSESSEE TO ESTABLISH THAT DEBT, IN FA CT, HAS BECOME BAD OR IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF IN THE BOOKS OF THE ASSESSEE. THEREFORE, TO THAT EXTEN T, THE FINDINGS OF THE LD. CIT (A) ARE CORRECT. HOWEVER, WE ARE UNA BLE TO UNDERSTAND AS TO WHY THE AMOUNT TO THE TUNE OF RS. 11,74,972/- HAS NOT BEEN ALLOWED. THIS AMOUNT ALSO REPRESENTS T HE MARGIN MONEY AND THIS CANNOT BE DEALT WITH IN ANY MANNER S EPARATELY. BOTH PARTIES HAVE RELIED ON DECISIONS BUT WE HAVE S TATED ABOVE AFTER GOING THROUGH THE MOST RELEVANT LEGAL PRECEDE NTS SETTLED ON THE ISSUE. TO FURTHER NARRATE THE FACTS REGARDING R S. 11,74,972/-, IT WAS FOUND BY THE LD. CIT(A) THAT OUT OF TOTAL SUM O F RS. 68,61,144/- CLAIMED BY THE ASSESSEE AS BAD DEBTS, A SUM OF RS. 11,74,972/- IS IN RELATION TO MARGIN MONEY PAYMENT PERTAINING TO V ARIOUS YEARS. THIS HAS BEEN TREATED AS CASH LOANS/ ADVANCES MADE BY THE ASSESSEE TO VARIOUS PARTIES. THIS PAYMENT FACILITAT ED THE SALE OF TRACTORS BUT DID NOT FORM PART OF SALE PROCEEDS OF THE ASSESSEE FOR CO NO.67/JP/2011 M/S. B.D. MUNDRA & SONS VS. ACIT, CIRCLE- 1, KOTA . 4 ANY YEAR. ACCORDINGLY, THE LD. CIT(A) HAS NOT TAKEN IT AS BAD DEBTS. THE LD. CIT(A) HAS DISTINGUISHED THIS AMOUNT ON THE REASONING THAT THE DEBT WRITTEN OFF AS BAD DEBTS IN THE BOOKS OF T HE ASSESSEE'S ACCOUNT SHOULD HAVE BEEN TAKEN INTO ACCOUNT IN COMP UTING THE INCOME OF THE PREVIOUS YEAR OR IN OTHER EARLIER YEA RS AND FAILING WHICH THE SAME CANNOT BE ALLOWED AS SUCH. BE THAT AS IT MAY, WE ARE IN AGREEMENT WITH THE SUBMISSIONS OF THE LD. AR THAT MODUS OPERANDI ADOPTED BY THE ASSESSEE HAS NOT BEEN DISPU TED OR DOUBTED BY THE AO AND, THEREFORE, AT BEST THIS ADVA NCE, WHICH HAS BEEN TAKEN AS IRRECOVERABLE SHOULD BE AS A BUSINESS LOSS, BUT IN OUR CONSIDERED OPINION THAT MARGIN MONEY ADVANCES GIVEN ON BEHALF OF THE FARMERS IN THE NATURE OF CASH LOANS AND DEPO SITED IN THE BANK ACCOUNT OF THE CUSTOMERS IS A SORT OF BUSINESS TRANSACTION AND THIS HAS BEEN TAKEN AS SUCH WHILE COMPUTING INCOME OF ANY EARLIER YEARS. WE DO NOT HESITATE IN HOLDING THAT THIS AMOU NT HAS TO BE ALLOWED AS BAD DEBTS AND DEFINITELY IT AMOUNTS TO B USINESS LOSS AS WELL. ACCORDINGLY, WE DELETE THE ADDITION OF RS. 11 ,74,972/- AND ALLOW THE GROUND NO. 1 OF ASSESSEES APPEAL AND CON SEQUENTLY WE DISMISS GROUND NO. 1 OF REVENUES APPEA L. 2.4 THE LD. DR IS HEARD ON THIS ISSUE. 2.5 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOT DISPUTED THAT FACTS AND CIRCUMSTANCES IN THIS CASE ARE SIMILAR TO THE FACTS OF THE ASSESSMENT YEA R 2006-07 (SUPRA). IN VIEW THEREOF AND RESPECTFULLY FOLLOWING THE ORDER O F THIS BENCH OF ITAT FOR THE ASSESSMENT YEAR 2006-07, WE ALLOW THE ASSES SEE'S GROUND AS TO CLAIM OF BAD DEBTS OF RS. 38,211/-. THUS THE GROUND NO. 1 OF THE ASSESSEES CO IS ALLOWED. 2.6 CONSEQUENTLY IN ITAT ORDER DATED 21-8-14 AFTER PARA 11.2 BETWEEN PARA 11.2 AND 12.1, THE FOLLOWING PARA SHALL BE INS ERTED. CO NO.67/JP/2011 M/S. B.D. MUNDRA & SONS VS. ACIT, CIRCLE- 1, KOTA . 5 12A . IN VIEW THEREOF AND RESPECTFULLY FOLLOWING THE ORDER OF THIS BENCH OF ITAT FOR THE ASSESSMENT YEAR 2006-07, WE ALLOW THE ASSESSEE'S GROUND AS TO CLAIM OF BAD D EBTS OF RS. 38,211/-. THUS THE GROUND NO. 1 OF THE ASSESSE E IS ALLOWED. 2.7 CONSEQUENTLY, PARA 17.2 SHALL ALSO NOW BE READ AS UNDER:- THEREFORE, WE ALLOW GROUND NO. 1 OF THE C.O. OF T HE ASSESSEE AND DISMISS THE RELATED GROUNDS OF THE REV ENUES APPEAL . 3.0 IN THE RESULT, THE GROUND NO. 1 OF THE ASSESSEE 'S C.O. IS ALLOWED WITH ABOVE MODIFICATIONS ORDER PRONOUNCED IN THE OPEN COURT ON 30/04/2 015. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 TH APRIL, 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. B.D. MUNDRA & SONS PROP. MUNDRA TRACTORS, KOTA 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT CIRCLE- 1, KOTA 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 3. VK;DJ VK;QDR@ CIT, 4. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 5. XKMZ QKBZY@ GUARD FILE (C.O. NO.67/JP/2011) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR