M/s Jupiter Aqua Lines Ltd., Mohali V. DCIT, Mohali

ITA 1362/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68430 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Bad and doubtful debts
• Section: 234B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS. 1361 & 1362/CHD/2012 ASSESSMENT YEARS: 2008-2009 & 2009-10 M/S JUPITER AQUA LINES LTD. VS THE DCIT D-192, INDUSTRIAL AREA CIRCLE-6(1), PHASE-VII-B, MOHALI MOHALI PAN NO. AAACJ3530F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 12/08/2013 DATE OF PRONOUNCEMENT : 23/08/2013 PER T.R. SOOD, AM BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST THE SEPARATE ORDERS PASSED BY THE LD. CIT(A), CHANDIGARH DATED 8 .11.2012. 2. IN ITA NO. 1361/CHD/2012 FOR ASSESSMENT YEAR 200 8-09, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AS WELL AS ON FACTS IN DISMISSING THE APPEAL EX- PARTE HOLDING THAT NO APPLICATION FOR ADJOURNMENT W AS RECEIVED WHICH IS FACTUALLY INCORRECT IN AS MUCH AS APPLICATION FOR ADJOURNMENT WAS MOVED IN PERSON WHI CH WAS NOT PLACED ON RECORD BY THE LD. COMMISSIONER OF INC OME TAX(APPEALS) AND AS SUCH DISMISSING THE APPEAL IS U TTER DISREGARD OF THE SETTLED PRINCIPALS OF NATURAL JUST ICE IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE DISALLOWANCE OF 50% OF THE EXPENSES AMOUNTING TO RS . 2 11,72,181/- (TOTAL 23,44,363/-) CLAIMED AND WRITTEN OFF AS BAD DEBTS WHICH IS ARBITRARY AND UNJUSTIFIED. 3. THAT THE DEBTS HAVING BECOME BAD AND WRITTEN OFF WH ICH IS THE ONLY CONDITION AS PER LAW, THE ADHOC DISALLOWAN CE WITHOUT PIN POINTING AS TO WHICH DEBT HAS NOT BECOM E BAD IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 4. THAT THE ALLOWANCE OF THE SAME IN THE NEXT YEAR LEA DS TO THE INFERENCE THAT THE EXPENSES CLAIMED ARE PERMISSIBLE AND AS SUCH THE CLAIM OF THE ASSESSEE IS BONA-FIDE. 3. OUT OF THE ABOVE GROUNDS, GROUND NO.1 WAS NOT PR ESSED BY THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, THE SAME I S DISMISSED AS NOT PRESSED. 4. GROUND NOS. 2, 3 & 4 : AFTER HEARING BOTH THE PARTIES WE FIND THAT ASSESSING OFFICER DURING ASSESSMENT PROCEEDIN GS NOTICED THAT THE ASSESSEE HAS CLAIMED BAD DEBTS ON ACCOUNT OF BALANC E WRITTEN OFF (SHORT AND EXCESS) AMOUNTING TO RS. 23,44,363/-. ON AN EN QUIRY, IT WAS STATED THAT THE SAME PERTAINS TO THE BAD DEBTS AND SINCE T HE SAME HAVE BECOME IRRECOVERABLE AND HAVE BEEN WRITTEN OFF ACCORDINGLY . AT THE SAME TIME, SOME OF THE AMOUNTS WHICH WERE PAYABLE BY THE ASSES SEE AND HAD NOT BEEN PAID HAVE BEEN CREDITED TO THIS ACCOUNT. FURT HER, ENQUIRY WAS MADE REGARDING EFFORTS WHICH HAVE BEEN MADE FOR REC OVERY OF SUCH AMOUNTS. IN RESPONSE TO THIS QUERY, IT WAS STATED THAT MARKETING EXECUTIVE OF THE ASSESSEE HAD MADE PERSONAL VISITS TO THESE PARTIES. IN THIS BACKGROUND THE ASSESSING OFFICER OBSERVED THAT SINCE NO DOCUMENTARY EVIDENCE WAS AVAILABLE IN RESPECT OF EF FORTS MADE TO RECOVER THE AMOUNT IN THE FORM OF CORRESPONDENCE OR ANY LITIGATION, THEREFORE, THE SAME COULD NOT BE ALLOWED WHOLLY. F URTHER, THE ASSESSING OFFICER ULTIMATELY ALLOWED 50% OF THE AM OUNT IN THE CURRENT YEAR AND THE BALANCE 50% IN THE NEXT YEAR. 3 5. ON APPEAL, THE ACTION OF THE ASSESSING OFFICER H AS BEEN CONFIRMED BY THE LD. CIT(A). 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THESE AMOUNT REPRESENTS TRADE DEBTS WHICH WERE NOT ULTIMA TELY FOUND TO BE RECOVERABLE AND HAVE BEEN WRITTEN OFF DURING THE Y EAR. THE ASSESSEE HAS ALSO WRITTEN OFF THE AMOUNTS WHICH WERE NOT PAY ABLE DURING THE YEAR, THEREFORE, THE SAME SHOULD HAVE BEEN ALLOWED ACCORDINGLY. IN THIS REGARD, HE REFERRED TO THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF TRF LTD V CIT 323 ITR 397 (SC). 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT NO EVIDENCE WAS FILED BEFORE ASSESSING OFFICER OR CIT(A) TO SHOW TH AT DEBTS HAVE REALLY BECOME BAD AND THEREFORE, ACTION OF THE ASSESSING O FFICER WAS JUSTIFIED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASS ESSEE. AFTER THE AMENDMENT TO SECTION 36(1)(VII) W.E.F. 1.4.1989, TH E CONDITION TO PROVE THAT DEBT HAVE REALLY BECOME BAD IS NO MORE THERE. THIS POSITION STANDS CONFIRMED BY THE HON'BLE SUPREME COURT IN TH E CASE OF TRF LTD V CIT (SUPRA). THE HEAD NOT OF THIS DECISION READS AS UNDER:- AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE INCOME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 198 9 IN ORDER TO OBTAIN A DEDUCTION IN RELATION BAD DEBT S, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH T HAT THE DEBT, IN FACT, HAVE BECOME IRRECOVERABLE: IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 9. DURING THE COURSE OF HEARING, WE HAVE VERIFIED T HE ACCOUNTS OF VARIOUS PARTIES AND FOUND THAT ACCOUNTS HAVE BEEN G ENERALLY WRITTEN OFF BY THE ASSESSEE. IN ANY CASE THE FACT REGARDING WR ITING OFF OF THE DEBT HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. TH EREFORE, WE SET 4 ASIDE THE ORDER OF LD. CIT(A) AND DIRECT HE ASSESSI NG OFFICER TO ALLOW WHOLE OF THE AMOUNT OF BAD DEBT CLAIMED BEFORE HIM. SINCE 50% DEDUCTION HAS BEEN ALLOWED IN THE NEXT YEAR, HE IS FURTHER DIRECTED TO WITHDRAW THE DEDUCTION IN THE NEXT YEAR. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ITA NO. 1362/CHD/2012 ASSESSMENT YEAR 2009-10 11. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS :- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AS WELL AS ON FACTS IN DISMISSING THE APPEAL EX- PARTE HOLDING THAT NO APPLICATION FOR ADJOURNMENT W AS RECEIVED WHICH IS FACTUALLY INCORRECT IN AS MUCH AS APPLICATION FOR ADJOURNMENT WAS MOVED IN PERSON WHI CH WAS NOT PLACED ON RECORD BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND AS SUCH DISMISSING THE APP EAL IS UTTER DISREGARD OF THE SETTLED PRINCIPALS OF NATURA L JUSTICE IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. COMMISSIONE R OF INCOME TAX (APPEALS) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE PARTLY DISALLOWED EXPENSES AMOUNTI NG TO RS. 5,03,150/- CLAIMED AND WRITTEN OFF AS BAD DEBTS WHICH IS ARBITRARY AND UNJUSTIFIED. 3. THAT THE DEBTS HAVING BECOME BAD AND WRITTEN OFF WH ICH IS THE ONLY CONDITION AS PER LAW, THE ADHOC DISALLOWAN CE WITHOUT PIN POINTING AS TO WHICH DEBT HAS NOT BECOM E BAD IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 4. THAT THE ALLOWANCE OF THE SAME IN THE NEXT YEAR LEA DS TO THE INFERENCE THAT THE EXPENSES CLAIMED ARE PERMISSIBLE AND AS SUCH THE CLAIM OF THE ASSESSEE IS BONA-FIDE. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS. 9,37 ,435/- ON ACCOUNT OF ALLEGED PROFIT ON SHORT STOCK OF RS. 32, 85,787/- IN UTTER DISREGARD OF THE EXPLANATIONS RENDERED DUR ING THE 5 COURSE OF ASSESSMENT PROCEEDINGS WHICH IS ARBITRARY AND UNJUSTIFIED. 6. THAT THERE WAS NO DIFFERENCE IN STOCK AS EXPLAINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND AS SUCH TH E ADDITION MADE OF RS. 9,37,435/- IS ARBITRARY AND UNJUSTIFIED. 7. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN UPHOLDING THE CHARGING OF INTEREST UNDER SECTIONS 234B & 234C OF THE ACT WHICH IS NOT CHARGE ABLE IN THE FACTS OF THE CASE. 12. OUT OF THE ABOVE GROUNDS, GROUND NO.1 WAS NOT P RESSED AND THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 13. GROUND NOS. 2, 3 & 4 : THE ISSUE RAISED IN THESE GROUNDS IS IDENTICAL TO THE ISSUE RAISED IN THE ASSESSMENT YEA R 2008-09 IN RESPECT OF BAD DEBTS WHICH WE HAVE ADJUDICATED IN THE ABOVE PARA NOS. 4 TO 9. FOLLOWING THE SAME, WE ALLOW THIS GROUND WITH IDENT ICAL DIRECTIONS. 14. GROUND NOS. 5 & 6 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT A SURVEY WAS CONDUCTED ON THE PREMISES OF THE ASSESSE E ON 15.7.2008. DURING THE COURSE OF SURVEY AND BASED ON POST-SURVE Y ENQUIRY SOME DIFFERENCE WAS FOUND IN THE STOCK AS PER BOOKS AND PHYSICAL INVENTORY. ACCORDINGLY, ADDITION WAS MADE ON ACCOUNT OF GP ON SUCH DIFFERENCE WHICH HAS BEEN WORKED OUT IN PARA 4 OF THE ASSESSME NT ORDER WHICH IS AS UNDER:- VALUE OF CLOSING STOCK AS PER TRADING A/C AS ON 15 .09.2008: 19524203.80 COST PRICE OF STOCK FOUND IN 15.09.2008 : RS. 13053 224.00 VALUE OF STOCK LYING AT CONSIGNEE AGENTS : RS. 21 85191.83 VALUE OF SPARES : RS. 10,00,000.00 VALUE OF PHYSICAL STOCK : 16238415.83 DIFFERENCE (SHORT STOCK) 3285787.97 6 THEREFORE, AT THE TIME OF SURVEY, THERE IS SHORTAGE OF STOCK TO THE TUNE OF RS. 3285787/- WHEN CONFRONTED WITH THE ASSESSES COUNSEL, HE CANNO T SUBMIT ANY PLAUSIBLE EXPLANATION. THEREFORE, AN ADDITION OF RS. 937435/- (RS. 3285787/- X G.P. SHOWN BY ASSESSEE I.E. 28.53%) IS MADE IN THE RETURNED INCOM E. 15. ON APPEAL, THE ACTION OF THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE LD. CIT(A). 16. BEFORE US, LD. COUNSEL FOR THE ASSESSEE REFERR ED TO PAGE NO.1 OF THE PAPER BOOK WHICH WAS TENTATIVE TRADING ACCOUNT DRAWN ON THE DATE OF SURVEY. HE SUBMITTED LATER ON THAT REVISED ACC OUNT WAS FILED THROUGH LETTER DATED 10.10.2008, COPY OF WHICH IS P LACED AT PAGE 147 WHICH SHOWS THE CLOSING STOCK AT RS. 1,73,27,276/- INSTEAD OF RS. 1,95,24,203/- WHICH WAS SHOWN TO BE TENTATIVE TRADI NG ACCOUNT ON THE DATE OF SURVEY. HE FILED A COPY OF RECONCILIATION OF SALES WHICH ISALSO DEVIATED FROM THE ORIGINAL FIGURES. HE EXPLAINED THAT VARIATION WAS MAINLY ON ACCOUNT OF SALES WHICH WERE NOT POSTED. HE POINTED OUT THAT LEDGER POSTING FOR SALES WAS BEING MADE ONLY AFTER RECEIPT OF TRANSPORT RECEIPTS BECAUSE FREIGHT WAS BEING REDUCED FROM TH E TOTAL SALES VALUE AS ASSESSEE WAS SUPPLYING GOODS ON F.O.R BASIS. TH IS CLEARLY SHOWS THAT THERE WAS HARDLY ANY DEFICIENCY IN THE STOCK. 17. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT NO RECONCILIATION WAS FILED BEFORE THE ASSESSING OFFICER. HE STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND CIT(A). WE HAVE CONSIDERE D THE RIVAL SUBMISSIONS CAREFULLY. WE FIND THAT SOME DETAILS HA VE BEEN FILED VIDE LETTER DATED 10.10.2008, COPY OF WHICH IS AVAILABLE AT PAGES 76 TO 147. WE HAVE DIRECTED THE LD. COUNSEL FOR THE ASSESSEE O N THE LAST DAY OF HEARING TO PRODUCE THE BILLS AND FRESH RECONCILIATI ON WHICH WAS PRODUCED ON THE DATE OF HEARING I.E. 12.8.2013. TH EREFORE, THESE DOCUMENTS WERE SHOWN AT THE INSTANCE OF THE TRIBUNA L AND THE OBJECTION FOR ADMISSION OF THESE DOCUMENTS IS REJECTED. 7 18. WE HAVE GONE THROUGH THE FRESH RECONCILIATION F ILED BEFORE US AND FIND SOME FORCE IN THE CONTENTION THAT SOME OF THE SALES BILLS MAY HAVE NOT BEEN POSTED TO THE SALES ACCOUNT FOR LAST ONE W EEK FROM THE DATE OF SURVEY BECAUSE ASSESSEE WAS AWAITING RECEIPT OF TRA NSPORT CHALLAN. HOWEVER, AT THE SAME TIME IT WAS NOTICED THAT SERIA L NUMBERS OF THE BILLS WHICH WERE SHOWN TO HAVE NOT BEEN POSTED IS N OT RUNNING CONSECUTIVELY. ON THE POINTED QUERY REGARDING THIS , THE LD. COUNSEL SUBMITTED THAT SOME OF THE BILLS HAVE ALREADY BEEN ENTERED, THEREFORE, WHOLE OF THE STORY OF SALES OF NOT HAVING BEEN POST ED DOES NOT SEEMS TO BE PLAUSIBLE. THEREFORE, CONSIDERING THE OVER ALL FACTS OF THE CASE, WE ARE OF THE OPINION THAT IF AN ADDITION OF RS. 4 LAC S IS MADE TOWARDS GROSS PROFIT ON ACCOUNT OF GOODS SOLD OUTSIDE THE B OOKS IS MADE, THE SAME WOULD MEET THE ENDS OF JUSTICE. THIS PROPOSAL WAS ACCEPTED BY THE LD. COUNSEL FOR THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THEE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO MAK E ADDITION OF RS. 4 LAKHS TOWARDS GROSS PROFIT ON ACCOUNT OF DEFICIENCY IN THE STOCK. 19. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.08.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 23 RD AUGUST, 2013 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR