Eastern General Industries Limited., Kolkata V. D.C.I.T Cir - 10,kolkata., Kolkata

ITA 116/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100130 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 17-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK NAG JCITSRDR
• Assessee Lawyers: MRS NILIMA JOSHI
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 116 / KOL / 2013 ASSESSMENT YEAR :2006-07 EASTERN GENERAL INDUSTRIES LTD., 90/31, DIAMIND HARBOUR ROAD, KOLKATA -700038 [ PAN NO.AAACE 7750 J ] V/S . DCIT, CIRCLE-10, AAYKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT MRS. NILIMA JOSHI, FCA /BY RESPONDENT SHRI ALOK NAG, JCIT-SR-DR /DATE OF HEARING 05-10-2015 /DATE OF PRONOUNCEMENT 24-11-2015 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA IN APPEAL NO.582/ CIT(A)-XII/CIR-10/08-09 DATED 29.11.2011. ASSESSMENT WAS FRAMED BY DCIT, CI RCLE-10, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS ORDER DATED 28.11.2008 FOR ASSESSMENT YEAR 2006 -07. 2. ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY NOT AL LOWING THE CLAIM OF BAD DEBT/BUSINESS ASSETS/INVENTORY ETC., 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A LIMI TED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF LEATHER GOODS, MARBLE BLOCK AND ITA NO.116/KOL/2013 A.Y. 2006-07 EASTERN GENERAL INDS. LTD. V. DCIT CIR-10 KOL. PAGE 2 LUFFER AND TRADING OF TEA. DURING THE YEAR UNDER CO NSIDERATION, ASSESSEE HAS WRITTEN OFF CERTAIN ITEMS AS BAD DEBTS IN THE AUDIT ED FINANCIAL STATEMENTS AS DETAILED UNDER : 1) TRADING DEBTS RS. 4,69,381.00 2) LOSS OF BUSINESS ASSETS RS. 1,22,354.00 3) OBSOLETE INVENTORIES RS. 3,91,111.00 TOTAL RS. 9,82,846.00 THE AO CALLED UPON THE ASSESSEE TO SUBMIT THE DETAI L BREAKUP OF THE BUSINESS ASSETS, OBSOLETE INVENTORIES AND THE NAME AND ADDRE SSES OF THE TRADING DEBTORS. THE ASSESSEE SUBMITTED THAT THE LOSS OF TH E BUSINESS ASSETS INCLUDES ADVANCES FOR EXPENSES, SALES TAX DEPOSIT, EQUIPMENT S, STORES, CASH, BALANCE IN UCO BANK, UNITED BANK ETC. AS REGARDS THE OBSOLE TE INVENTORIES, IT WAS SUBMITTED THAT IT REPRESENTS THE OLD TRADING STOCKS OF DRY FLOWERS WHICH HAS BEEN CARRIED OVER IN THE FINANCIAL STATEMENTS SINCE MANY YEARS. THE AO ALSO SOUGHT THE CLARIFICATION FROM THE ASSESSEE REGARDIN G THE LOSS OF BUSINESS ASSETS, OBSOLETE INVENTORIES STATING THAT HOW AND W HY THE ABOVE ITEMS WILL BE BAD AS THESE AMOUNTS HAVE NEVER BEEN SHOWN AS INCOM E IN EARLIER YEARS. ACCORDING TO THE AO, THE ASSESSEE FAILED TO SUBSTAN TIATE WITH NECESSARY DETAILS REGARDING THE FACT THAT IT WAS TAKEN AS INC OME IN THE EARLIER YEARS. THEREFORE, THE AO HAS DISREGARDED THE CLAIM OF THE ASSESSEE AND ADDED THE AFORESAID BAD DEBTS TO THE TOTAL INCOME OF THE ASSE SSEE. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) WHO CONFIRMED THE ORDER OF THE AO BY OBSERVING IN PARA-5 AS UNDER :- 5...THE A.O IN HIS ASSESSMENT ORDER HAS GIVEN THE FINDING THAT THE ASSESSEE HAS WRITTEN OFF TOTAL RS.11,80,212/- UNDER THE HEAD BAD DEBT. BUT W HEN THE AO HAS ASKED FOR THE DETAILS OF BAD DEBT THE ASSESSEE SUBMITTED THE DETAILS WHICH INCLUDES CASH IN ACCOUNTS IN UCO BANK, UNITED BANK OF INDIA, CHEQUES AND DRAFTS IN TRANSIT OF VARIOUS PARTIES. IT ALSO INCLUDES PACKING MATERIALS OF RS.391111/- EQUIPMENT OF RS.8021/-, ST ORES OF RS.10870/- AND CASH IN DIFFERENT BANKS. DURING THE APPELLATE PROCEEDING THE AR COULD NOT JUSTIFY THE INCLUSION OF CASH IN DIFFERENT BANK ACCOUNTS IN BAD DEBT. FURTHER, FOR D ECLARING BAD DEBT THE ITEM SO CLAIMED MUST HAVE IN INCLUDED AS INCOME IN PREVIOUS YEARS. BUT E H AR COULD NOT BRING ANYTHING ON RECORD SHOWING IN WHICH PREVIOUS YEARS SUCH ITEMS AS DISCU SSED ABOVE WERE SHOWN INCLUDED AS INCOME. THEREFORE, ASSESSEES APPEAL ON GROUND NO. 2 IS DISMISSED. ITA NO.116/KOL/2013 A.Y. 2006-07 EASTERN GENERAL INDS. LTD. V. DCIT CIR-10 KOL. PAGE 3 5. NOW AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESS EE IS IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. THAT THE LD CIT(A) WAS UNJUSTIFIED IN NOR ALLOW ING THE CLAIM OF BAD DEBT OF RS.4,69,381 WHEN THE EVIDENCE IN SUPPORT OF THE CLAIM WAS FURNI SHED BEFORE HIM. 2. THAT THE LD CIT(A) WAS UNJUSTIFIED IN NOR ALLOWI NG THE LOSS OF BUSINESS ASSETS CLAIMED AS BUSINESS LOSS AT RS.1,22,354/- BY WRONGLY CONSIDERI NG THE CLAIM AS CLAIM OF BAD-DEBT. 3. THAT THE LD CIT(A) WAS UNJUSTIFIED IN NOR ALLOWI NG THE CLAIM OF OBSOLETE INVENTORIES WRITTEN OFF AT RS.3,91,111/ BY WRONGLY CONSIDERING THE CLAI M AS CLAIM OF BAD DEBT. 4. THAT THE LD CIT(A) WAS UNJUSTIFIED IN DISMISSING THE GROUND NO. 3 OF THE GROUNDS OF APPEAL FILED BEFORE HIM BY WRONGLY HOLDING IT AS A CONSEQU ENTIAL GROUND THOUGH IN THIS GROUND THE APPELLANT HAD OBJECTED TO THE ILLEGAL ADJUSTMENT BY THE A.O OF THE FUND OF RS.63,273/- OF THIS YEAR AGAINST THE ALLEGED DEMAND OF THE SAME AMOUNT FOR THE ASSTT. YEAR 2001-02 WITHOUT GIVING THE INTIMATION IN WRITING TO THE APPELLANT A S PROVIDED IN SECTION 245 OF THE I.T. ACT AND WHICH DEMAND DOES NOT EXIST ACCORDING TO THE RECORD S OF THE APPELLANT. MRS NILAM JOSHI, LD. AUTHORIZED REPRESENTATIVE APPE ARING ON BEHALF OF ASSESSEE AND SHRI ALOK NAG, LD. DEPARTMENTAL REPRES ENTATIVE APPEARING ON BEHALF OF REVENUE. 6. WE HAVE HEARD RIVAL PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. BEFORE US LD. AR SUBMITTED PAPER BOOK CONTA INING PAGES 1 TO 49. WE OBSERVE FROM THE ORDER OF ASSESSING OFFICER THAT IT EMS WHICH WERE WRITTEN OFF AS BAD DEBT WERE DISALLOWED ON THE GROUND THAT ASSE SSEE FAILED TO FURNISH THE RELEVANT DETAILS FOR THE YEAR IN WHICH SUCH BAD DEB TS WERE SHOWN AS INCOME OF ASSESSEE AND SAME WAS CONFIRMED BY LD. CIT(A). HOWE VER AT THE TIME OF HEARING LD. AR DREW OUR ATTENTION AT PAGES 43 TO 46 OF THE PAPER BOOK, WHEREIN SALE LEDGER OF THE PARTIES TO WHOM THE SALE S WERE MADE IN THE FINANCIAL YEAR 2004-05 & 2005-06 RESPECTIVELY FOR A N AMOUNT OF 4,69,381/-. THE LD. AR SUBMITTED THAT THESE DETAILS WERE FILED BEFORE THE AUTHORITIES BELOW. IT IS ALSO EVIDENT FROM PAGE 18 OF THE PAPER BOOK WHERE A DETAILED CHART OF PARTY-WISE SALE ALONG WITH THE RELEVANT PREVIOUS YEARS IN WHICH THEY WERE ACCOUNTED WAS PLACED. AS REGARDS THE LOSS OF BUSINE SS ASSET, THE ASSESSEE SUBMITTED THE DETAILS OF THOSE ASSETS AT PAGE 18 OF THE PAPER BOOK AND CLAIMED THAT NONE OF THE ASSETS WAS RECOVERABLE. WE FIND THAT ALL THE BUSINESS ASSETS ARE ON REVENUE ACCOUNT. AS REGARDS THE OBSOL ETE INVENTORY FOR AN ITA NO.116/KOL/2013 A.Y. 2006-07 EASTERN GENERAL INDS. LTD. V. DCIT CIR-10 KOL. PAGE 4 AMOUNT OF RS.3,91,111/-, IT WAS SUBMITTED THAT ASSE SSEE HAS PURCHASED DRY FLOWERS FOR MORE THAN FIVE YEARS BACK AND PURPOSE O F THESE DRY FLOWER WAS TO SALE TO THE PARTIES. HOWEVER, NO PARTY CAME TO BUY THAT PRODUCT AND CONDITION OF THE DRY FLOWER HAS BEEN DETERIORATED OVER A PERI OD OF TIME. THEREFORE, THESE ARE WRITTEN OFF AS OBSOLETE MATERIAL. THE QUANTITAT IVE OF DETAILS OF THE DRY FLOWER IS PLACED ON PAGES 19 OF THE PAPER BOOK. FROM THE A FORESAID DISCUSSION, WE INFER THAT THE BAD DEBT WRITTEN OFF HAS BEEN TREATE D AS INCOME OF THE EARLIER YEAR AND WERE WRITTEN OFF AS PER THE PROVISION OF S EC. 36(1)(VII) OF THE ACT. NOW AS FAR AS WRITING OFF THE BUSINESS ASSETS AND OBSOL ETE INVENTORIES ARE CONCERNED WE FIND THAT THESE ITEMS ARE ON REVENUE A CCOUNT AS SHOWN BY THE ASSESSEE AND NOTHING WAS RECOVERABLE OUT OF THOSE A SSETS. ALL THE ABOVE ITEMS WERE DULY WRITTEN OFF IN THE BOOKS OF ACCOUNT S AND CERTIFIED BY A QUALIFIED AUDITOR OF THE COMPANY. THERE WAS NO ADVERSE COMMEN T IN THE AUDIT REPORT OF THE AUDITOR. IN VIEW OF ABOVE AND CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE CASE, WE ALLOW THIS GROUND OF ASSESSEES APPEAL . 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 24/ 11/2015 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 24 /1 1 /2015 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-EASTERN GENERAL INDS. LTD. 90/31, DIAMOND HARBOUR RD. KOL-38 2. /RESPONDENT-DCIT, CIR-10, AAYKAR BHAWAN, P-7, CHOWRIN GHEE SQR. KOL-69 3. * +, - - . / CONCERNED CIT KOLKATA 4. - - .- / CIT (A) KOLKATA 5. 012 33+,, - +, , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ - , /TRUE COPY/ / - +, ,