M/S GOPAL DAS KHANDELWAL, Jaipur V. ADD. CIT, Jaipur

ITA 1124/JPR/2011

• Counselvise Citation: 112423114 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: G R MUNDRA

Judgement Text

1 ITA 1124/JP/2011 GOPAL DAS KHANDELWAL VS. ADDL.CIT IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 1124/JP/2011 ASSTT. YEAR- 2007-08 PAN NO. ADRPK 5823 F SHRI GOPAL DAS KHANDELWAL, THE ADDL.C.I.T., P/O- M/S SUMANGAL GEMS, 1839 VRS. RANGE-1, JAIPUR. BARA GANGORE KA RASTA, JOHRI BAZAR JAIPUR. (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI G.R. MUNDRA. DEPARTMENT BY :- SHRI D.C. SHARMA. DATE OF HEARING : 12/08/2014 DATE OF PRONOUNCEMENT : 28/08/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 02/11/2011 OF THE LEARNED C.I.T.-I, JAIPUR FOR THE A.Y. 2007-08 . THE SOLE GROUND OF APPEAL IS AGAINST NOT ALLOWING THE BAD DEBT OF RS. 5,15,000/-. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED BAD DEBT OF RS. 5,15,000/- IN THE PROFIT AND LOSS ACCOUNT IN THE NAME OF SHRI RAJEEV KHATTAR, WHICH HAS BEEN WRITTEN OFF. THE ASSESSING OFFICER GAVE REASONABLE OP PORTUNITY OF BEING HEARD ON THIS ISSUE AND ASKED TO PROVE FROM THE ASSESSEE THA T BAD DEBT HAD WRITTEN OFF AS IRRECOVERABLE AND THAT HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOU NT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEA R. HE ALSO RELIED UPON THE 2 ITA 1124/JP/2011 GOPAL DAS KHANDELWAL VS. ADDL.CIT VARIOUS DECISIONS OF THE HONBLE HIGH COURTS AND FI NALLY HELD THAT THE ASSESSEE HAD NOT ABLE TO ESTABLISH THE YEAR IN WHICH THIS DEB T HAD BEEN TAKEN INTO ACCOUNT IN COMPUTING ITS INCOME. AS PER SECTION 36(2) (I) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT), NO EFFORTS HAD B EEN MADE BY THE ASSESSEE TO RECOVER THE AMOUNT AND THIS DEBT HAD BECOME BAD. AC CORDINGLY, HE MADE THE ADDITION OF RS. 5,15,000/-. 2. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A), WHO HAD CONFIR MED THE ADDITION BY OBSERVING AS UNDER:- IT IS PERTINENT TO NOTE HERE THAT IT IS THE FIRST TIME THE APPELLANT HAS MENTIONED THAT HE IS ENGAGED IN THE BUSINESS OF MON EY LENDING. FOR CARRYING ON THE BUSINESS OF MONEY LENDING A SPECIAL LICENSE IS REQUIRED TO BE TAKEN UNDER THE RAJASTHAN MONEY LENDERS ACT, 196 3. THE APPELLANT HAS NOT FILED DETAILS OF ANY SUCH LICENSE HAVING BEEN T AKEN BY HIM. NOR HAVE THE ACCOUNTS OF THIS MONEY LENDING BUSINESS BEEN SH OWN SEPARATELY. MERELY SAYING THAT THE APPELLANT HAD GIVEN LOANS AN D ADVANCES DOES NOT ESTABLISH HIM AS A MONEY LENDER. THE NATURE OF ADVA NCES HAVE TO BE ASCERTAINED AND IT HAS ALSO TO BE ASCERTAINED WHETHE R THE DEBT WAS REFLECTED AS INCOME OF THE APPELLANT IN ANY PREVIOU S A.Y. THE APPELLANT HAS CONSISTENTLY FAILED TO DO SO. THEREFORE, THE DECISIO N OF THE A.O. TO DISALLOW THE BAD DEBT CLAIMED OF RS. 5,15,000/- U/S 36(2)(I) IS UPHELD. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED A.R. FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAD MADE ADVANCE OF RS. 5 LACS TO ONE SHRI RAJEEV KHATT AR AND CHARGED INTEREST OF RS. 15,000/- THEREON. THUS, THE ASSESSEE ADVANCED AN INTEREST BEARING LOAN TO SHRI RAJEEV KHATTAR DURING THE COURSE OF HIS MONEY LENDING BUSINESS. THE ASSESSEE MADE EFFORTS TO RECOVER THIS LOAN FROM SHR I RAJEEV KHATTAR, WHO IS LIVING 3 ITA 1124/JP/2011 GOPAL DAS KHANDELWAL VS. ADDL.CIT IN GURGAON, WHICH HAS NOT BEEN RECOVERED. THEREFORE, IT IS BAD DEBT AND ACCORDINGLY, WRITTEN OFF IN THE BOOKS OF ACCOUNT AS IRRECOVERABLE AS PER SECTION 36(1)(VII) OF THE ACT. HE FURTHER ARGUED THAT THIS BAD DEBT INCLUDING INTEREST IS ALLOWABLE U/S 37(1)(VII) READ WITH SECTION 36 (2)(I) OF THE ACT AS THE INTEREST INCOME HAS BEEN DISCLOSED AND MADE PART OF THE INCO ME OF THE ASSESSEE IN EARLIER YEAR. AS PER HON'BLE SUPREME COURT DECISION IN THE CASE OF TRF LTD. VS. CIT (2010) 323 ITR 397 HAS HELD THAT IT IS SUFFICIEN T COMPLIANCE OF THE LAW IF THE ASSESSEE WRITE OFF THE DEBT IN THE BOOKS OF ACCOUNT AS IRRECOVERABLE AND EVEN NO EVIDENCE OF RECOVERY WAS MADE AVAILABLE. THUS, HE REQ UESTED TO DELETE THE ADDITION CONFIRMED BY THE LEARNED CIT(A). 4. AT THE OUTSET, THE LEARNED D.R. RELIED UPON THE ORDER OF THE LEARNED CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS PER SECTION 36(1)(VII) OF TH E ACT, THE BAD DEBT OR PART THEREOF IS TO BE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. AS PER SECTION 36(2)(I) OF THE A CT IN MAKING ANY DEDUCTION FOR A BAD DEBT OR PART THEREOF, THE FOLLOWING PROVISIONS SHALL APPLY. [(I) NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT O R PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, OR REPRE SENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY LENDING WHICH IS CARRIED ON BY THE ASSESSEE;] 4 ITA 1124/JP/2011 GOPAL DAS KHANDELWAL VS. ADDL.CIT THE ASSESSEE HAS MADE COMPLIANCE OF SECTION 36(1)(VI I) OF THE ACT BUT HAS NOT FULFILLED THE CONDITION OF SECTION 36(2)(I) OF THE ACT. THERE WAS NO EVIDENCE ON RECORD TO SHOW THAT SUCH DEBT OR PART THEREOF HAS BE EN TAKEN INTO ACCOUNT IN COMPUTING OF INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THIS BAD DEBT IS NOT ALLOWAB LE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LEARNED CIT(A). 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/08/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 28 TH AUGUST, 2014 * RANJAN COPY FORWARDED TO :- 1. SHRI GOPAL DAS KHANDELWAL, JAIPUR 2. THE ADDL. CIT, RANGE-1, JAIPUR 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 1124/JP/2011) BY ORDER, AR ITAT JAIPUR.