DCIT, CHENNAI V. Shri Sanjay A. Wadhwa, L/H of (Late) Shri Arjundas Pokardas, CHENNAI

ITA 1515/CHNY/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51702 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 30-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V D GOPAL
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NOS. 1514, 1515, 1516 & 1517/MDS/2009 ASSESSMENT YEARS : 2001-02, 2004-05, 2005-06 & 2006 -07 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-II(1), CHENNAI. V. SHRI SANJAY A. WADHWA L/H OF (LATE) SHRI ARJUNDAS POKARDAS, NEW NO. 42 (OLD NO. 80), NEW AVADI ROAD, KILPAUK, CHENNAI-600 010. (PAN : AAFPP5127L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, SR. DR RESPONDENT BY : SHRI V.D. GOPAL, ADVOCATE DATE OF HEARING : 16/08/2011 DATE OF PRONOUNCEMENT : 19/08/2011 O R D E R PER BENCH : ITA NO. 1514/MDS/2009 IS AN APPEAL FILED BY THE RE VENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-II, CHENNAI IN ITA NO.8 3/08-09 DATED 16-06-2009 FOR THE ASSESSMENT YEAR 2001-02. ITA NO. 1515/MDS/ 2009 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(AP PEALS)-II, CHENNAI IN ITA I.T.A. NOS. 1514-1517/MDS/2009 2 NO.86/08-09 DATED 16-06-2009 FOR THE ASSESSMENT YEA R 2004-05. ITA NO. 1516/MDS/2009 IS AN APPEAL FILED BY THE REVENUE AGA INST THE ORDER OF THE LEARNED CIT(APPEALS)-II, CHENNAI IN ITA NO.87/08-09 DATED 1 6-06-2009 FOR THE ASSESSMENT YEAR 2005-06. ITA NO. 1517/MDS/2009 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEAL S)-II, CHENNAI IN ITA NO.88/08-09 DATED 16-06-2009 FOR THE ASSESSMENT YEA R 2006-07. AS THE ISSUES IN THESE APPEALS RELATE TO THE SAME ASSESSEE AND AR E INTERCONNECTED, THE SAME ARE DISPOSED OF BY THIS COMMON ORDER. 2. SHRI SHAJI P. JACOB, LEARNED SR. DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI V.D. GOPAL, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IN ALL THE APPEALS THE REVENUE HAS CHALLENGED TH E ACTION OF THE LEARNED CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSI NG OFFICER TOWARDS UNEXPLAINED ADVANCES ON THE BASIS OF THE LOAN AGREE MENTS FOUND IN THE COURSE OF SURVEY. IT WAS SUBMITTED BY THE LEARNED DR THAT IN THE COURSE OF SURVEY CONDUCTED ON THE PREMISES OF THE ASSESSEE ON 26-10- 2005 LOAN AGREEMENTS HAD BEEN FOUND IN REGARD TO THE BUSINESS OF THE ASSESSE E IN FINANCING FILMS. IT WAS THE SUBMISSION THAT ON THE BASIS OF THE AGREEMENTS FOUND IN THE COURSE OF SURVEY WHERE THE AMOUNTS HAD BEEN FOUND IN THE AGREEMENT W HICH WERE NOT DISCLOSED IN THE REGULAR BOOKS OF THE ASSESSEE, THE ADDITIONS HA D BEEN MADE. IT WAS THE FURTHER SUBMISSION THAT THE FINANCE AGREEMENTS WERE FOUND AS PER ANNEXURE 5/MK/IMPOUNDED. IT WAS THE SUBMISSION THAT VARIOUS AMOUNTS WERE SHOWN AS I.T.A. NOS. 1514-1517/MDS/2009 3 PER PAGE 2 OF THE ASSESSMENT ORDERS. IT WAS THE SU BMISSION THAT THE DIFFERENCE AMOUNTS WHICH WERE NOT SHOWN IN THE ASSESSEES LEDG ER WERE TREATED AS THE UNEXPLAINED ADVANCES MADE BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD DELETED THE SAME ON THE GROUND T HAT THE AGREEMENTS ONLY SHOWED THE LIMIT OF THE AMOUNT OF ADVANCE AND NOT T HE AMOUNT ADVANCED. IT WAS THE SUBMISSION THAT THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. HE VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OF FICER. 4. IN REGARD TO ITA NO. 1516/MDS/2009 RELATING THE ASSESSMENT YEAR 2005-06 IT WAS THE SUBMISSION THAT THE REVENUE HAS RAISED AN A DDITIONAL GROUND AGAINST THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSES SING OFFICER TO ALLOW ADDITIONAL BAD DEBT OF RS 5 LAKHS LENT TO SHRI AZEEZ KHALEEL I N THE ASSESSMENT YEAR 2007-08. IT WAS THE SUBMISSION THAT THE APPEAL FOR THE ASSES SMENT YEAR 2007-08 WAS NOT BEFORE THE LEARNED CIT(A) WHEN HE WAS DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2005-06. IT WAS THE SUBMISSION THAT NO DIRECT ION COULD BE GIVEN IN THE ASSESSMENT YEAR 2005-06 IN REGARD TO A CLAIM OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 WHICH WAS NOT BEFORE THE LEARNED CIT(A ), ESPECIALLY WHEN THE FACTS FOR THE ASSESSMENT YEAR 2007-08 WERE ALSO NOT BEFOR E HIM. IT WAS THE SUBMISSION THAT THE DIRECTION AS GIVEN BY THE LEARNED CIT(A) W AS LIABLE TO BE DELETED. 5. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE AMOUNTS SHOWN IN THE FINANCE AGREEMENTS WERE THE LIMITS OF THE AMOUNTS THAT COULD BE GRANTED TO THE VARIOUS PERSONS AS PER THE AGREEMENT S. IT WAS THE SUBMISSION THAT I.T.A. NOS. 1514-1517/MDS/2009 4 THE SURVEY ON THE PREMISES OF THE ASSESSEE TOOK PLA CE ON 26-10-2005 AND IN THE COURSE OF THE SURVEY NEARLY 136 PROMISSORY NOTES HA D BEEN FOUND. IT WAS THE SUBMISSION THAT AS PER THE LOAN AGREEMENTS, WHEN AN AMOUNT AS PER THE AGREEMENT WAS GIVEN, THE SAME WAS SUPPORTED BY A PR OMISSORY NOTE. IT WAS ALSO UNDISPUTED THAT THE ASSESSEE WAS FOLLOWING THE CASH SYSTEM OF ACCOUNTING. IT WAS THE FURTHER SUBMISSION THAT THE PROMISSORY N OTES WHICH WERE FOUND IN THE COURSE OF THE SURVEY WERE FULLY ACCOUNTED FOR IN TH E ASSESSEES BOOKS AND NO PROMISSORY NOTE WAS FOUND WHICH REMAINED UNACCOUNTE D. IT WAS FURTHER SUBMITTED THAT THE LEARNED CIT(A) HAD ALSO VERIFIED THE BOOKS OF ACCOUNT OF THE ASSESSEE HUF AS ALSO THE ASSESSEES WIFE AND OTHER ASSOCIATED CONCERNS AND IT WAS FOUND THAT THE AMOUNTS HAD BEEN DISCLOSED IN TH E ACCOUNTS OF THE ASSOCIATED CONCERNS ALSO AND CONSEQUENTLY NO ADDITION WAS CALL ED FOR. IT WAS THE FURTHER SUBMISSION THAT THE FACT THAT THE AMOUNTS LENT WERE SUPPORTED BY PROMISSORY NOTES ALSO CLEARLY ESTABLISHED THE FACT THAT THE AS SESSEE HAD NOT MADE ANY UNACCOUNTED ADVANCES. IT WAS THE SUBMISSION THAT T HE FINDING OF THE LEARNED CIT(A) THAT THE AMOUNTS HAD BEEN DISCLOSED IN THE H ANDS OF THE ASSOCIATED CONCERNS AS ALSO IN THE HANDS OF THE HUF AS ALSO TH E FACT THAT THE AMOUNTS LENT WERE SUPPORTED BY PROMISSORY NOTES HAD NOT BEEN DIS PUTED BY THE REVENUE. IT WAS THE SUBMISSION THAT THE ORDERS OF THE LEARNED C IT(A) WERE LIABLE TO BE UPHELD. I.T.A. NOS. 1514-1517/MDS/2009 5 6. IN REGARD TO THE ADDITIONAL GROUND RAISED BY THE REVENUE IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER MAY BE DIRECT ED TO ALLOW THE BAD DEBTS AS PER LAW. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDERS IN THE ASSESSEES CASE CLEARLY SHOWS THAT TH E ASSESSING OFFICER HAS GONE BY THE FINANCIAL AGREEMENTS ALONE WHEN COMPARED WITH T HE ASSESSEES BOOKS. A PERUSAL OF THE FINANCIAL AGREEMENTS CLEARLY SHOWS T HAT AS PER THE AGREEMENTS THE AMOUNT THAT WAS TO BE FINANCED COULD BE FINANCED BY THE ASSESSEE OR HIS ASSOCIATED CONCERNS. A PERUSAL OF THE ASSESSMENT O RDER ALSO CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT TH E ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING. A PERUSAL OF THE ORDER OF TH E LEARNED CIT(A) FOR THE ASSESSMENT YEAR 2001-02 CLEARLY SHOWS THAT THE AMOU NT PAID TO SHRI HABIBUR RAHMAN FOR THE ASSESSMENT YEAR 2001-02 IS ACCOUNTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEES HUF AS ALSO THE ASSESSEES WIFE, SMT. VRINDA S. WADHWA AND THIS FACT IS NOT CHALLENGED BY THE REVENUE. IN REGA RD TO THE ADDITION MADE FOR THE ASSESSMENT YEAR 2004-05 IT IS NOTICED THAT THE LEAR NED CIT(A) HAD CALLED FOR A REMAND REPORT AND THE ASSESSEE HAS ALSO PRODUCED TH E CONFIRMATION LETTERS FROM THE ASSOCIATED CONCERNS WHO WERE GIVEN THE LOANS. IT IS NOTICED THAT THE FACT THAT THE ASSESSING OFFICER HAD VERIFIED ALL THE PROMISSO RY NOTES AND WERE TALLIED WITH THE BOOKS OF ACCOUNTS, IS NOT DISPUTED. IN REGARD TO THE ASSESSMENT YEAR 2005-06 IT IS NOTICED THAT THE LEARNED CIT(A) HAS CATEGORIC ALLY GIVEN A FINDING THAT THE I.T.A. NOS. 1514-1517/MDS/2009 6 AMOUNTS WERE DULY ACCOUNTED FOR IN THE BOOKS OF ACC OUNTS AND THIS HAS NOT BEEN DISPROVED. THE SAME IS ALSO THE POSITION FOR THE A SSESSMENT YEAR 2006-07. IN THE CIRCUMSTANCES, AS IT IS NOTICED THAT THE AMOUNT S TREATED AS UNEXPLAINED ADVANCES WERE IN FACT THE ADVANCES AS RECORDED IN T HE BOOKS OF ACCOUNTS OF THE ASSOCIATED CONCERNS AND THE RECORDINGS HAVE BEEN SP ECIFICALLY VERIFIED AND THE REMAND REPORTS HAD BEEN CALLED FOR FROM THE ASSESSI NG OFFICER, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSU E IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. A PERUSAL OF THE LO AN AGREEMENT WHICH HAS BEEN EXTRACTED BY THE LEARNED CIT(A) ALSO CLEARLY SHOWS THAT THE AMOUNT LENT IS NOT A SINGLE POINT LENDING BUT IS A LENDING WHICH IS ON T HE BASIS OF THE COMPLIANCE OF CERTAIN CONDITIONS. THE AGREEMENTS ALSO CLEARLY SHO W THAT THE LIMIT OF THE LOAN IS A PARTICULAR AMOUNT AS MENTIONED IN THE AGREEMENTS. THUS THE AGREEMENTS ONLY SHOWED THE MAXIMUM LIMIT OF THE LOAN AND HOW AND WH EN THE LOAN IS TO BE ADVANCED TO THE BORROWER. IN THE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE AMOUNTS SHOWN IN THE LOAN AGREEMENTS WERE IN FACT T HE FULL AMOUNT WHICH WAS LENT BY THE ASSESSEE. IN THE CIRCUMSTANCES, THE OR DER OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. 8. IN REGARD TO THE FINDING OF THE LEARNED CIT(A) F OR THE ASSESSMENT YEAR 2005- 06 IN ITA NO.1516/MDS/2009 ON WHICH AN ADDITIONAL G ROUND HAS BEEN RAISED BEING THE DIRECTION GIVEN TO THE ASSESSING OFFICER TO ALLOW RS. 5 LAKHS LENT TO SHRI AZEEZ KHALEEL AS A BAD DEBT FOR THE ASSESSMENT YEAR 2007-08, IT IS NOTICED THAT IT I.T.A. NOS. 1514-1517/MDS/2009 7 IS NOT AN ISSUE WHICH COULD BE CONSIDERED FOR THE A SSESSMENT YEAR 2005-06. WHETHER THE AMOUNT HAS BECOME BAD DEBT OR WHETHER T HE CONDITIONS FOR THE WRITE OFF OF THE AMOUNT AS A BAD DEBT HAD BEEN COMPLIED W ITH, THAT CAN BE CONSIDERED ONLY IN THE ASSESSMENT OR AN APPEAL FOR THE ASSESSM ENT YEAR 2007-08. IT CANNOT BE CONSIDERED FOR THE ASSESSMENT YEAR 2005-06. THI S IS BECAUSE THE ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING WHICH HAS B EEN ACCEPTED BY THE REVENUE AS ALSO BY THE ASSESSEE. IN THE CIRCUMSTANCES, THE DIRECTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW RS. 5 L AKHS LENT TO SHRI AZEEZ KHALEEL AS A BAD DEBT IN THE ASSESSMENT YEAR 2007-08 STANDS DE LETED. 9. IN THE RESULT, THE APPEALS OF THE REVENUE IN ITA NOS. 1514, 1515 AND 1517/MDS/2009 STAND DISMISSED AND THE APPEAL OF THE REVENUE IN ITA NO.1516/MDS./2009 STANDS PARTLY ALLOWED. 10. THE ORDER WAS PRONOUNCED IN THE COURT ON 19/08/ 2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 19 TH AUGUST, 2011. H. COPY TO: ASSESSEES/AO/CIT (A)/CIT/D.R./GUARD FILE