Sh. Avtar Singh Darshan Singh, Aligarh V. A.C.I.T., Circle-1, Aligarh

ITA 119/AGR/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89210 (ITAT-AGRA)
• Duration Of Justice: 4 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-08-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 04-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH KUM
• Keywords: Opportunity of being heard; Bad and doubtful debts; Reason to believe; Reassessment proceedings
• Section: 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.119/AGRA/ 2011 ASSESSMENT YEAR: 1999-2000 SHRI AVTAR SINGH DARSHAN SINGH, VS. ASST. COMMISSIO NER OF INCOME TAX, C/O. SHRI SANJEEV GUPTA, C.A. CIRCLE-1, ALIGARH. 2/327A, NIRANJAN PURI, RAMGHAT ROAD, ALIGARH. (PAN NOT AVAILABLE). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH, ADVOCATE RESPONDENT BY : SHRI ANIRUDH KUM AR, CIT (D.R.) DATE OF HEARING : 20.07.2015 DATE OF PRONOUNCEMENT : 24.07.2015 ORDER PER INTURI RAMA RAO, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), GHAZIABAD DATED 03.02.2011 FOR THE A.Y. 1999-2000, RAISING THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. A.O. IN OPENING OF THE PROCEEDINGS UN DER SECTION 147 AND IN ISSUING NOTICE U/S 148 WHILE THERE WAS NO MA TERIAL ON RECORD TO INFER REASON TO BELIEVE THAT ANY INCOME H AS ESCAPED ASSESSMENT OR DEDUCTION HAS BEEN WRONGLY CLAIMED. ITA NO.119/AGRA/2011 A.Y. 1999-2000 2 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. A.O. IN FRAMING THE IMPUGNED ASSESSME NT U/S 144 THEREBY INVOKING THE PROVISION OF SECTION 184(5) TO ASSESS THE APPELLANT AS AOP INSTEAD OF REGISTERED FIRM. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. A.O. OF DISALLOWING THE CLAIM OF BAD DEBTS AMOUNTING TO RS.2,78,89,641/- DURING THE YEAR. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE DECISION OF LD. A.O. THAT APPELLANT FIRM IS NOT ENG AGED IN THE MONEY LENDING BUSINESS. 5. THAT IN ANY VIEW OF THE MATTER AND IN ANY CASE, ASSESSMENT ORDER PASSED MAKING ADDITIONS/DISALLOWANCES IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SAME HAS BEEN PASSED WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE APPEL LANT IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRANSPORT COMMISSION AND RETAILE R. RETURN OF INCOME FOR THE A.Y. 1999-2000 WAS FILED ON 30.08.1999 DECLARING A LOSS OF RS.2,85,86,170/-. THE SAID RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) (A) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) AND THERE WAS NO SCRUTINY A SSESSMENT AGAINST THE ASSESSED INCOME. SUBSEQUENTLY, A NOTICE DATED 08.12.2004 WA S ISSUED UNDER SECTION 148 OF THE ACT PROPOSING TO REASSESS THE TOTAL INCOME. THE RE ASONS RECORDED FOR ISSUANCE OF NOTICE UNDER SECTION 148 ARE AS UNDER :- ITA NO.119/AGRA/2011 A.Y. 1999-2000 3 IN THIS CASE ORIGINAL ASSESSMENT WAS FRAMED UNDER SECTION 143(1) BY THE THEN ADDL. COMMISSIONER OF INCOME TAX (ASSES SMENT) SPECIAL RANGE, AGRA ON LOSS OF RS.2,85,86,174/- ON 30.03.20 01. THE PARTNER OF THIS FIRM SHRI DALJEET SINGH & BALWANT SINGH ETC. A RE ALSO DIRECTORS IN THE COMPANY M/S. BHARAT FOOD INDIA LIMITED, ALIGARH . DURING THE YEAR, ASSESSEE HAS CLAIMED BAD DEBT AMOUNTING TO RS.2,78, 89,641/- BEING THE AMOUNT OF LOAN GIVEN TO M/S. BHARAT FOOD INDIA LIMI TED, ALIGARH. RETURN OF BOTH THE CONCERNS I.E. M/S. AVTAR SINGH D ARSHAN SINGH & BHARAT FOOD INDIA LIMITED HAS BEEN SIGNED BY SHRI D ALJIT SINGH IN THE CAPACITY OF PARTNER AND MANAGING DIRECTOR RESPECTIV ELY IN ABOVE TWO CONCERNS. IN AN IDENTICAL CASE REPORTED IN TITOL N EWS SERVICE MUMBAI, NOV., 24/2004 IN THE CASE OF GRINDWELL NOROTON LIMI TED VS. DEPARTMENT, HONBLE TRIBUNAL HAS HELD THAT SUCH TYP E OF LOANS ADVANCED TO THE COMPANY WHICH HAS LATER ON WENT INTO LIQUIDA TION AND CLAIMED AS BAD DEBTS IS NOT ALLOWABLE. IN VIEW OF THE ABOVE F ACT AN AMOUNT OF RS.2,78,89,641/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 OF THE I.T. ACT, 1961 (PHOTOCOPY OF THE ITAT ORDER IN THE CASE OF GRINDWELL NORTON LIMITED, IS ENCLOSED). 3. IN RESPONSE TO THE SAID NOTICE UNDER SECTION 148 , THE ASSESSEE FIRM VIDE HIS LETTER DATED 02.02.2005 SUBMITTED THAT THE RETURN ALREADY FILED MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED UNDER SECTION 144 READ WITH SECTION 147 O F THE ACT VIDE ORDER DATED 31.12.2005 AT A TOTAL INCOME OF NIL BY MAKING ADDIT ION OF BAD DEBTS CLAIMED OF RS.2,78,89,641/- AND INTEREST PAID TO THE PARTNERS AT RS.6,70,062/- AND REMUNERATION PAID TO PARTNERS AT RS.50,000/-. BEING AGGRIEVED, APPEAL WAS FILED BEFORE THE LD. CIT(A), GHAZIABAD WHO VIDE HIS ORDER DATED 03.02.20 11 HAD CONFIRMED THE ABOVE DISALLOWANCES AND ALSO UPHELD VALIDITY OF REASSESSM ENT PROCEEDINGS. ITA NO.119/AGRA/2011 A.Y. 1999-2000 4 4. BEING AGGRIEVED, THE APPELLANT HAD COME UP WITH THE PRESENT APPEAL BEFORE US. IT WAS ARGUED BY THE LD. COUNSEL FOR THE APPELLANT THAT THE ASSESSMENT PROCEEDINGS WERE INVALID IN LAW IN AS MUCH AS THERE WAS NO REAS ONS TO BELIEVE THAT INCOME HAD ESCAPED THE ASSESSMENT AND HE FURTHER SUBMITTED THA T THE CLAIM FOR ALLOWANCE OF BAD DEBT AT RS.2,78,89,641/- IS IN ACCORDANCE WITH THE DIRECTIONS OF SECTION 36(2) OF THE ACT. THEREFORE, HE PRAYED THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACTS OF THE CASE. 5. ON THE OTHER HAND, LD. CIT (DEPARTMENTAL REPRESE NTATIVE) HAS RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE SHALL NOW FIRST DEAL WITH THE GROUND CHALLENGING VA LIDITY TO THE REASSESSMENT PROCEEDINGS. THE CONTENTION OF THE APPELLANT CANNO T BE ACCEPTED FOR SIMPLE REASON THAT THERE WAS NO OPINION FORMED AT THE TIME OF ORI GINAL ASSESSMENT SINCE THERE WAS NO SCRUTINY ASSESSMENT AND THE VERY FACT THAT THE AMOU NTS WERE ADVANCED TO SISTER CONCERN OF THE APPELLANT WHICH ARE WRITTEN OFF AND CLAIMED AS BAD DEBT RAISED THE SUSPICION AND LED TO BELIEVE THAT INCOME GOT ESCAPE D ASSESSMENT OF TAX. THEREFORE, WE UPHOLD THE VALIDITY OF REASSESSMENT PROCEEDINGS. W E NOTICE FROM THE ASSESSMENT ORDER THAT THE APPELLANT HAD NOT PRODUCED THE BOOKS OF ACCOUNTS FOR VERIFICATION BEFORE THE A.O. IN ORDER TO EXAMINE THE BAD DEBTS, IT IS THE REQUIREMENT OF LAW THAT CERTAIN CONDITIONS PRESCRIBED IN THE STATUTE SHOULD BE SATI SFIED. THE CONDITIONS PRESCRIBED UNDER THE PROVISIONS OF SUB-SECTION (2) OF SECTION 36 READ AS UNDER :- ITA NO.119/AGRA/2011 A.Y. 1999-2000 5 SECTION 36 (2) 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 DEB T 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 OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, OR REPR ESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY - LENDING WHICH IS CARRIED ON BY THE ASSESSEE;] 7. FROM THE ABOVE PROVISIONS, IT IS CLEAR THAT THE ASSESSEE HAS TO SATISFY THAT THE DEBT HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE I NCOME OF THE ASSESSEE OR REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY LENDING AND THE AMOUNTS HAVE BEEN WRITTEN OFF IN TH E BOOKS OF ACCOUNT. SINCE THE APPELLANT FIRM HAD NOT PRODUCED BOOKS OF ACCOUNT AN D FILED DETAILS AS DESIRED BY THE A.O., THE A.O. IS JUSTIFIED TO DISALLOW THE SAME. HOWEVER, IN ORDER TO MEET THE ENDS OF JUSTICE, WE REMIT THE MATTER BACK TO THE FILE OF A. O. FOR DENOVO ASSESSMENT AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE FIRM. 8. IN THE RESULT, APPEAL FILED BY THE APPELLANT IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 24.07.201 5) SD/- SD/- (G.C. GUPTA) (INTURI RAMA RAO) VICE PRESIDENT ACCOUN TANT MEMBER DATE: 24 TH JULY, 2015 PBN/* ITA NO.119/AGRA/2011 A.Y. 1999-2000 6 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA