DAHYABHAI SHARE & STOCK BROKERS LTD., MUMBAI V. C.I.T., APPEAL-IV, MUMBAI

ITA 1141/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56114 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-11-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 18-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: B M PHATAK
• Keywords: Business expenditure; Bad and doubtful debts

Judgement Text

1 ITA NO. 1141/MUM/2009 M/S DAH YABHAI SHARE & STOCK BROKERS LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R.K. PANDA, A.M. AND SHRI VIJAY PAL RA O, J.M. ITA NO. 1141/MUM/2009 (ASST YEAR 2001-02) M/S DAHYABHAI SHARE & STOCK BROKERS LTD., 22/23, PURAB APTS., 42 B.G. KHER MARG, MALABAR HILL, MUMBAI 400 006. VS I.T.O. 4(1)(1), MUMBAI. (APPELLANT) (RESPONDENT) PAN NO. AAACDI880G APPELLANT BY S HRI B.M. PHATAK RESPONDENT BY SHRI C.G.K. NAIR DATE OF HEARING 30.11.2011 DATE OF PRONOUNCEMENT 09.12.2011 ORDER PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 27.11.2008 OF THE COMMISSIONER OF INCOME TAX (A)- I V, MUMBAI RELATING TO ASSESSMENT YEAR 2001-02. 2. GROUNDS OF APPEAL NO. 1 & 2 RELATE TO DISALLOWAN CE OF BAD DEBTS OF RS. 683,616/-. 3. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSE E IS A MEMBER OF THE BOMBAY STOCK EXCHANGE CARRYING ON THE BUSINESS OF S HARE AND STOCK BROKING. THE A.O. DISALLOWED AN AMOUNT OF RS. 683, 616/- CLAIMED BY THE ASSESSEE AS BAD DEBTS WHICH WAS UPHELD BY THE LD. C IT(A) ON THE GROUND 2 ITA NO. 1141/MUM/2009 M/S DAH YABHAI SHARE & STOCK BROKERS LTD. THAT PROVISIONS OF SECTION 36(1)(VII) R.W.S. 36(2) WERE NOT COMPLIED WITH. WE FIND THE ISSUE INVOLVED IN THE INSTANT CASE IS WRIT ING OFF OF BAD DEBTS IN THE CASE OF A SHARE BROKER. THE ISSUE NOW STANDS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH O F THE TRIBUNAL IN THE CASE OF SHREYAS S. MORAKHIA WHEREIN IT HAS BEEN HELD THA T AMOUNT RECEIVABLE BY THE ASSESSEE, WHO IS A SHARE BROKER, FROM HIS CLIEN TS AGAINST THE TRANSACTIONS OF PURCHASE OF SHARES ON THEIR BEHALF CONSTITUTES DEBT WHICH IS A TRADING DEBT. IT WAS HELD THAT THE BROKERAGE/COMM ISSION INCOME ARISING FROM SUCH TRANSACTIONS VERY MUCH FORMS PART OF THE SAID DEBT AND WHEN THE AMOUNT OF SUCH BROKERAGE/COMMISSION HAS BEEN TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME OF THE ASSESSEE OF THE RELEVA NT PREVIOUS YEAR OR ANY EARLIER YEAR, IT SATISFIES THE CONDITION STIPULATED IN SECTION 36(2)(I) AND THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 36(1)(VII) BY WAY OF BAD DEBTS AFTER HAVING WRITTEN OF THE SAID DEBTS FROM HIS BOOKS OF ACCOUNT AS IRRECOVERABLE. IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 4. IN GROUND OF APPEAL NO. 3 THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 23 1,166/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF MOTOR CAR EXPENSES. SIMILAR LY, IN GROUND OF APPEAL NO. 4, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE BUSINESS EXPENSES OF RS. 215,839/-. IN GROUND OF APPEAL NO. 5 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 412,743/- ON ACCOUNT OF TRAVELL ING AND CONVEYANCE EXPENSES. FOR THE SAKE OF CONVENIENCE, ALL THE THR EE GROUNDS ARE TAKEN UP TOGETHER FOR ADJUDICATION. 5. AFTER HEARING BOTH THE SIDES WE FIND THE A.O. DI SALLOWED THE ABOVE EXPENSES ON ACCOUNT OF NON-FURNISHING OF DETAILS BE FORE HIM. THE ASSESSEE COULD NOT SUBSTANTIATE WITH EVIDENCE TO THE SATISFA CTION OF THE A.O. THAT THE ENTIRE MOTOR CAR EXPENSES ARE WHOLLY AND EXCLUSIVEL Y INCURRED FOR THE 3 ITA NO. 1141/MUM/2009 M/S DAH YABHAI SHARE & STOCK BROKERS LTD. PURPOSE OF BUSINESS. SIMILARLY, ON ACCOUNT OF NON- PRODUCTION OF FULL DETAILS, HE DISALLOWED THE OTHER EXPENSES I.E BUSINESS EXPEN SES OF RS. 215,839/- AND RS. 412,743/- ON ACCOUNT OF TRAVELLING AND CONV EYANCE EXPENSES. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DUE TO COLLAPSE OF THE BUILDING, ALL THE BILLS AND VOUCHERS INCLUDING THE BOOKS OF ACCOUNT WERE DESTROYED FOR WHICH IT COULD NOT PRODUCE THE DETAIL S BEFORE THE A.O. HOWEVER, SINCE THE BOOKS OF ACCOUNT WERE MAINTAINED IN THE COMPUTER AND ON THE BASIS OF THE BANK STATEMENT, THE ASSESSEE HA S PREPARED THE ACCOUNTS WHICH WERE AUDITED BY THE AUDITORS AND WHO HAVE NOT POINTED OUT ANY MISTAKE. HOWEVER, WE ARE UNABLE TO ACCEPT THE ABOV E CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. FROM THE DETAILS FURNISH ED BY THE LD. COUNSEL FOR THE ASSESSEE WE FIND THE BUILDING COLLAPSED ON 19.4 .2001. SINCE THE BILLS AND VOUCHERS AND OTHER RECORDS WERE DESTROYED, WE F AIL TO UNDERSTAND HOW THE COMPUTER USED BY THE ASSESSEE REMAINED INTACT O N THE BASIS OF WHICH THE ACCOUNTS WERE PREPARED. FURTHER IT IS THE SETT LED PROPOSITION OF LAW THAT FOR CLAIMING ANY EXPENDITURE, THE ONUS IS ON THE AS SESSEE TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF THE A.O. THAT THE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS. IN THE INSTANT CASE, THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST UPON IT. HOWEVER, WE FIND FROM THE ASSESSMENT ORDER THAT THE A.O. DISALLOWED THE ENTIRE AMOUNT OF THE EXPENSES. HE HAS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS INCURRED AN AMOUNT OF RS. 1,11,996/- ON ACCOUNT OF REPAIRS AND MAINTENANCE AND AN AMOUNT OF RS. 2,75,725/- ON ACCO UNT OF TRAVELLING AND CONVEYANCE EXPENSES IN THE PRECEDING ASSESSMENT YEA R. SIMILARLY, FROM THE DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK WE FIND AN AMOUNT OF RS. 2,61,733 WAS DEBITED BY THE ASSESSEE UNDER THE HEAD MOTOR CAR EXPENSES IN THE PRECEDING YEAR. THEREFORE, IN OUR OPINION, THE DISALLOWANCE OF THE ENTIRE EXPENSES DEBITED BY THE ASSESSEE ON A CCOUNT OF MOTOR CAR EXPENSES, REPAIRS & MAINTENANCE EXPENSES AND TRAVEL LING & CONVEYANCE EXPENSES IS UNJUSTIFIED. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERING THE FACT THAT THE ASSESSEE FAILED TO PR ODUCE BILLS AND VOUCHERS AND OTHER SUPPORTING DOCUMENTS TO SUBSTANTIATE THE GENUINENESS OF THE 4 ITA NO. 1141/MUM/2009 M/S DAH YABHAI SHARE & STOCK BROKERS LTD. EXPENSES, 50% OF THE EXPENSES CLAIMED ON MOTOR CAR EXPENSES, REPAIRS & MAINTENANCE EXPENSES AND TRAVELLING & CONVEYANCE EX PENSES MAY BE ALLOWED AS REASONABLE EXPENSES FOR THE IMPUGNED ASS ESSMENT YEAR. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AN D DIRECT THE A.O. TO ALLOW 50% OF THE ABOVE THREE ITEMS. WE HOLD AND DIRECT AC CORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 4 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 09.12.2011. SD/- ( VIJAY PAL RAO ) JUDICIAL MEMBER SD/- ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 09.12.2011. RK COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT, 4, MUMBAI 4 CIT(A) - IV, MUMBAI 5 DR BENCH D 6 MASTER FILE /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI