Roopchand Kodandss(Aluwala), Jaipur V. Income tax Officer, Ward-7(2), Jaipur, Jaipur

ITA 145/JPR/2023

AI Insights

The case revolves around the dispute concerning the classification of Shri Roopchand Kodan Das as either a 'Kachcha Arhatia' (commission agent) or a 'Pacca Arhatia' (trader) for the assessment year 2010-11, which affects the treatment of bad debts claimed. Initially, the Assessing Officer (AO) classified him as a 'Pacca Arhatia' and made certain additions to his income, including the treatment of bad debts as non-business expenses. The CIT(A) upheld this classification, but the ITAT later reversed it, recognizing him as a 'Kachcha Arhatia'. Despite this, the AO issued a rectification order under Section 154, disallowing the bad debts, which led to the current appeal. The Tribunal's decision to allow the appeal was based on the absence of a valid cause for rectification at the time the order was passed, as the ITAT's decision was not yet in existence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132257 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-05-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 16-03-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K.L. MOOLCHANDANI
• Keywords: Business expenditure; Rectification of order; Bad and doubtful debts; Procedural lapse
• Section: 154; 143(3)

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC’’ JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: Hon’bleSHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 145/JP/2023 fu/kZkj.k o"kZ@Assessment Year : 2010-11 Shri Roopchand Kodan Das (Aluwala) A-2, Muhana Mandi Terminal Market Sanganer, Jaipur 302 029 (Raj) cuke Vs. The ITO Ward -7(2) Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFR 2436 C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri K.L. Moolchandani, ITP jktLo dh vksj ls@ Revenue by: Mrs. Monisha Choudhary, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 16/05/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 28/06/2023 vkns'k@ ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 16-02-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2010-11 wherein the assessee has raised the following grounds of appeal. ‘’1. On the facts and in the circumstances of the case the ld. CIT(A), NFAC, Delhi has legally and factually8 erred in dismissing the appeal summarily without addressing the following grounds of appeal and contentions: (a) no opportunity whatsoever was allowed to the assesee to pass such rectification order u/s 154 of the Act (b) There existed no apparent mistake 2 ITA NO. 145/JP/2023 ROOPCHAND KODAN DAS VS ITO, WARD 7(2), JAIPUR within the meaning of Section 154 of the Act. As evident from the AO, no addition on account of the claim of the bad debts of Rs.87,758/- was made consciously with specific and categorical findings. Thus in the rectification order, it was incorrectly observed by the AO that the addition on this account was not made inadvertently. (c) On the date of passing of the impugned rectification order u/s 154 of the Act i.e. on 28-05-2015, the appeal filed against the regular assessment order was pending , warranting no rectification as per finding of the AO as recorded in the order. 2. Thus the appeal order so passed in summary manner without addressing the above ground is not a well reasoned and logical order the same deserves to be quashed solely on this ground alone. 3. Without prejudice to the above, legal procedural lapses, on merits also, the claim of bad debts as made by the assessee was within the four corners of law and was very much maintainable. The Revenue did not negate such claim, no valid addition can be made. 2.1 Apropos Ground No 1 to 3 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- 4. Decision 4.1. The submissions of the appellant have been carefully considered and following facts are seen from the appellant submissions and records available with this office. Briefly the facts of the case are that the appellant filed its return and claimed himself to be a Kachcha Arhatia (Commission Agent) but the AO held him to be a Pacca Arhatia (Trader) and assessed him at the turn over by estimating his income to be Rs. 1,00,000/- in addition to the income shown as commission income [ Which he held to trading income]. While passing the order the AO 3 ITA NO. 145/JP/2023 ROOPCHAND KODAN DAS VS ITO, WARD 7(2), JAIPUR did not make any separate addition by disallowing the bad debts claimed. He used these bad debts transaction as one of the evidence is determining the assesse to be a Trader i.e. Pacca Arhatia. However, he mentioned in the order "in case the assesse succeeds in appeals on the issue of Kachcha Arhatia/Pacca Arhatia, the bad debt claimed by it will be liable to be disallowed being non business expenses The assesse has also raised this matter before the earlier CIT(A) vide appeal dated 16.04.2013 as follows:- "On the facts and in the circumstances of the case, the Ld. AO has legally and factually erred in giving the finding the assessee's claim of bad debts of Rs. 87,758/- will be liable to be disallowed being non- business expenses in case the issue of Kachcha Arthatia is succeeded in appeal. Such conditional finding is obviously bad in law and is also contrary to the business norms of Kachcha Arthatia. Thus, such finding also deserves to be quashed". 4.2 The CIT(A) vide order dated 14.05.2018 held the appellant to be Pacca Arhatia and did not allow the issue of Bad debts. The appellant however won in ITAT, Jaipur which as per submission of the appellant held him to be Kachcha Arhatia 4.3 Thus, once ITAT held him to be a Kachcha Arhatia, the caution written by AO in his order got activated. He had already mentioned that those expenses were for non- business purposes. Even CIT(A) has not allowed this ground. The rectification filed before CIT(A) by the appellant has not been decided. But apparently these it's no cause for rectification when CIT(A) has specifically not allowed that ground. 4.4 Since AO found these bad debts claim for non- business purposes in the context of Kachcha Arhatia, the same were being disallowed as per the information 4 ITA NO. 145/JP/2023 ROOPCHAND KODAN DAS VS ITO, WARD 7(2), JAIPUR available on record. The AO has recorded categorically that such bad debts are not allowable for a Kachcha Arhatia after his examination of the affairs of the appellant during assessment proceeding. There is no need to revisit the issue. The same is apparent from record and therefore necessary rectification has been done by the present AO. There is no infirmity in the framing of such order. The action of the AO is upheld. The appeal of assesse is dismissed. 5. In nutshell, the appeal of the appellant is dismissed.’’ 2.2 During the course of hearing, the ld. AR filed a detailed written submission and mainly prayed that the claim of bad debts is very much admissible as per law and the addition of Rs.87,785/- had been incorrectly made in the impugned rectification order and the same deserves to be deleted summarily. He further submitted that the claim of such bad debts had been allowed by the Department in this case in the past and also in the subsequent years. The assesse had continued to operate its business operation in the same manner and style as in the past and in the subsequent years. There was no deviation in the working of the assessee during this year. Hence, in such circumstances, there is no reason to disallow such claim during this year. 2.3 On the other hand, the ld. DR supported the order of the ld. CIT(A). 2.4 The Bench has heard both the parties and perused the materials available on record. As per facts of the present case, the original order of assessment was 5 ITA NO. 145/JP/2023 ROOPCHAND KODAN DAS VS ITO, WARD 7(2), JAIPUR passed u/s 143(3) of the Act on 18-03-20213 wherein no addition was made on account of claim of bad debts of Rs.87,758/-as the assessee was held to be a Pucca Arhatia. It is important to mention that while passing the order of assessment the AO had categorically mentioned that if at any stage the assessee succeeds on the issue of Kachcha Arhatia/ Pucca Arhatia then the bad debts claimed by the assessee will be liable to be disallowed being non-business. However, the Revenue by invoking Section 154 of the Act passed rectification order dated 28-05-2015 wherein it was mentioned that bad debts of Rs.87,758/- was omitted through oversight while computing the income of the assessee u/s 143(3) on 18-03-2013. It is important to mention that when the AO had casually passed the order of assessment thereby pointing out / incorporating the rider in the said order. Thus, there remains no question of apparent mistake in the said order. 2.5 Now the ld. CIT(A) while passing the order held that since ITAT has held the assessee to be a Kachcha Arhatia. Therefore, the caution written by the AO in his order got activated but the question remains that on the date of passing rectification order dated 28-05-201t, the order of ITAT was not in existence as the same to be passed on 4-12-2019 only. Therefore, the Revenue has no reason or cause to invoke Section 154 of the Act for warranting rectification as on that date i.e. 28-05-2015. There was no apparent error / mistake in the assessment order passed u/s 143(3) on 18-03-2013 because the AO casually and deliberately after 6 ITA NO. 145/JP/2023 ROOPCHAND KODAN DAS VS ITO, WARD 7(2), JAIPUR due consideration put rider in para 5 of the order of assessment. Therefore, in this way, at the time of passing rectification order dated 28-05-2015, there was no appeal order in existence which could give right to the Revenue to invoke Section 154 of the Act. Therefore, as per Bench view, the order passed on 28-05-2015 is premature and factually based on incorrect facts and thus deserves to be quashed and is held accordingly. In view of the above deliberation, the appeal of the assessee is allowed. 3.0 In the result, the appeal filed by the assessee is allowed Order pronounced in the open court on 28 /06/2023 Sd/- ¼lanhi xkslkbZ½ (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 28 /06/2023 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shri Roopchand Kodan Das (Aluwala), Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward- 7(2), Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZ QkbZy@ Guard File (ITA No.145/JP/2023) vkns'kkuqlkj@ By order, Asstt. Registrar