Shri Manukant C.Shah,HUF, Surat V. The Dy.CIT.,Circle-2, Surat

ITA 1000/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6361 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 17-03-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S SURYAVANSHI
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained cash credit; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER) ITA NO.1000/AHD/2008 [ASSTT. YEAR : 2004-2005] MANUKANT C. SHAH HUF 38, SAHIL MADEV NAGAR SOCIETY SAGRAMPURA SURAT 395 002. VS. ACIT, CIR.2 SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL REVENUE BY : SHRI G.S. SURYAVANSHI O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)- II, SURAT ARISING OUT OF THE ORDERS OF THE ASSESSIN G OFFICER UNDER SECTION 143(3) OF THE I.T. ACT, 1961. 2. THE GROUND NO.1 OF THE ASSESSEES APPEAL READS A S UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.28,15,845/- ON THE GROUND OF ALL EGED UNEXPLAINED CASH CREDITS U/S.68 OF THE ACT. 3. THE FACTS OF THE CASE ARE THAT IN THE ASSESSEES BOOKS OF ACCOUNTS, THERE WAS CREDIT OF RS.28,15,845/- IN THE NAMES OF 156 PERSONS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE EXPRESSED HIS INABILITY TO PRODUCE CONFIRMATIONS FROM ANY OF THE CREDITORS ON THE GROUND THAT THEY ARE SMALL CREDITORS BELOW RS.20,000/- FROM EAC H PERSON. THE ASSESSEE ALSO EXPRESSED ITS INABILITY TO PRODUCE TH EIR COPY OF THE ACCOUNT ON THE GROUND THAT ITS ACCOUNTS ARE LOST IN THE FLO OD. SINCE THE ASSESSEE ITA NO.1000/AHD/2008 -2- WAS UNABLE TO PROVE THE CREDIT SHOWN IN ITS BALANCE SHEET, THE AO MADE THE ADDITION OF RS.28,125,845/-. THE CIT(A) ALSO S USTAINED THE SAME. 4. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT BEFORE THE CIT(A) THE ASSESSEE HAS PRODUCED CO NFIRMATION FROM TEN PARTIES IN RESPECT OF ITS CLAIM OF DEPOSITS, BUT TH E CIT(A) DID NOT ACCEPT THE SAME. HOWEVER, HE EXPRESSED HIS INABILITY TO P RODUCE THE CONFIRMATIONS BEFORE US. IN VIEW OF THE ABOVE, FAC T REMAINS THAT THE ASSESSEE HAS NOT PRODUCED THE CONFIRMATION OF ANY O F THE CREDITORS EITHER BEFORE THE AO OR BEFORE US. IT IS SETTLED LAW THAT ONUS IS UPON THE ASSESSEE TO PROVE CREDIT LYING IN ITS BOOKS OF ACCO UNTS. BUT TO DISCHARGE SUCH ONUS, THE ASSESSEE IS REQUIRED TO ESTABLISH (I) IDENTITY OF THE CREDITOR, (II) CREDIT-WORTHINESS OF THE CREDITOR AN D (III) GENUINENESS OF THE TRANSACTION. HOWEVER, THE ASSESSEE HAS NOT ESTABLI SHED ANY OF THE ABOVE INGREDIENTS TO PROVE THE CASH CREDIT IN HIS ACCOUNT . IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(A) ON THIS ISSUE, THE SAME IS SUSTAINED AND THE GROUND NO.1 OF THE ASSESS EES APPEAL IS REJECTED. 5. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UN DER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS WRITTEN OFF TO THE TU NE OF RS.9,94,512/-. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. WE FIND THAT THE AO DISALLOWED THE ASSE SSEES CLAIM OF BAD DEBTS ON THE GROUND THAT THE ASSESSEE HAS NOT ESTAB LISHED THAT THE DEBT HAS BECOME BAD. HOWEVER, THIS ISSUE IS NOW SETTLED IN FAVOUR OF THE ASSESSEE ITA NO.1000/AHD/2008 -3- BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT, 323 ITR 397 (SC) WHEREIN THEIR LORDSHIP HE LD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME TAX ACT, 1961 WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DED UCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH T HAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE; IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. FROM THE ABOVE, IT IS EVIDENT THAT THE HONBLE APEX COURT HAS HELD THAT AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE T O ESTABLISH THAT THE DEBT HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS WRITTEN OFF THE DEBT IN ITS BOOKS OF A CCOUNTS. THEREFORE, IN OUR OPINION, THE DISALLOWANCE OF CLAIM OF BAD DEBTS, ON THE GROUND THAT THE ASSESSEE COULD NOT ESTABLISH WHETHER THE DEBT HAS BECOME BAD OR NOT IS NOT TENABLE. IN VIEW OF THE ABOVE, WE RESPECTFULLY FOLLOWING THE AB OVE DECISION OF THE HONBLE APEX COURT IN THE CASE OF T.R.F. LIMITED DIRECT THE AO TO ALLOW THE ASSESSEES CLAIM OF BAD DEBT. 7. IN RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 29 TH JUNE, 2011 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 29-06-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD