Mr. Arunesh Kumar Madan, Bangalore V. Income Tax Officer, Ward- 3(2)(4), Bangalore

ITA 1625/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9003 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 12-07-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - B BENCH : BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER ITA NO. 1625 /BANG/201 9 ASSESSMENT YEAR : 20 1 6 - 1 7 SHRI. ARUNESH KUMAR MADAN, B1201, MANTRI TRANQUIL, OFF KANAKPURA ROAD, GUBBALALA, BENGALURU 560 061. PAN : AAKPM 0544 P VS. THE INCOME TAX OFFICER, WARD 3(2)(4), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI. GANESH R. GHALE, ADVOCATE STANDING COUNSEL TO DEPARTMENT DATE OF HEARING : 25 . 11 .201 9 DATE OF PRONOUNCEMENT : 14 . 01 .20 20 O R D E R THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-3, BANGALORE DATED 16.05.2019 FOR ASSESSMENT YEAR 2016-17. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE 5 GROUNDS BUT THE GRIEVANCES ARE 2 I.E., REGARDING DISALLOWANCE OF THE CLAIM OF BAD DEBT AMOUNTING TO RS.6,61,216/- AND DISALLOWANCE OF EXPENDITURE OF RS.1,59,969/- OUT OF THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE. 3. THIS APPEAL WAS FIXED FOR HEARING FOR THE FIRST TIME ON 16.09.2019 ON WHICH DATE, THE BENCH DID NOT FUNCTION AND HENCE, THE HEARING WAS ADJOURNED TO 23.10.2019. ON THIS DATE ON 23.10.2019, THE ASSESSEE MADE A REQUEST FOR ADJOURNMENT AND ON THE REQUEST OF THE ASSESSEE, THE HEARING WAS ADJOURNED TO 24.10.2019. ON THIS DATE ALSO, THE LEARNED AR OF THE ASSESSEE MADE A REQUEST FOR ADJOURNMENT AND ON HIS REQUEST, ITA NO. 1625/BANG/2019 PAGE 2 OF 5 THE HEARING WAS ADJOURNED TO 25.11.2019. THIS DATE WAS PRONOUNCED IN THE OPEN COURT. ON 25.11.2019, NONE APPEARED ON BEHALF OF THE ASSESSEE AND THERE IS NO REQUEST FOR ADJOURNMENT AND HENCE, THIS APPEAL OF THE ASSESSEE WAS HEARD EX-PARTE QUA THE ASSESSEE. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF THE CIT(A). 4. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED DR OF THE REVENUE AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I FIND THAT THE FACTS REGARDING THESE TWO ISSUES ARE DISCUSSED BY THE CIT(A) IN PARAS 4.0 AND 4.1. THESE ISSUES ARE DECIDED IN PARA NOS.4.2 AND 4.3 OF HIS ORDER AND HENCE, I REPRODUCE THESE 4 PARAS FROM THE ORDER OF THE CIT(A) FOR READY REFERENCE: 4.0 THE GROUNDS OF APPEAL 1.1 TO 1.4 RELATE TO THE ISSUE OF DISALLOWANCES OF RS.6,61,216/- AND RS. 1,59,969/-, AS MADE BY THE AO. IN BRIEF DURING ASSESSMENT PROCEEDINGS THIS WAS OBSERVED BY THE AO THAT THE APPELLANT HAD CLAIMED AN EXPENDITURE OF RS.6,61,216/- AS NSEL LOSS AGAINST HIS INCOME FROM OTHER SOURCES. THE APPELLANT WAS ASKED TO EXPLAIN AS TO HOW THE SAME WAS AN ALLOWABLE EXPENDITURE AS PER PROVISIONS OF SECTION 57(III) OF THE ACT. IN RESPONSE TO THE SAME THE APPELLANT INFORMED THAT THE AMOUNT PERTAINED TO THE BAD DEBTS THAT AROSE ON ACCOUNT OF TRADING ON COMMODITIES IN THE NATIONAL SPOT EXCHANGE LIMITED (NSEL). THE APPELLANT SUBMITTED THAT THE LOSS WAS BEING WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT PROPORTIONATELY FROM AY 2014- 15 ONWARDS. THE APPELLANT SUBMITTED THAT THERE WERE TOTAL BAD DEBTS OF RS.29.34 LAKHS AND AN AMOUNT OF RS. 22.72 LAKHS HAD ALREADY BEEN CLAIMED BY HIM IN AY 2014-15 AND AY 2015-16 AND ONLY THE BALANCE AMOUNT OF RS. 6.61 LAKHS WAS BEING CLAIMED DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT SUBMITTED THAT THE AMOUNT WAS ADJUSTED AGAINST THE INTEREST INCOME FROM THE OTHER SOURCES IN VIEW OF THE FACT THAT INVESTMENT MADE WITH THE NSEL IS TREATED AS DEPOSITS UNDER THE MAHARASHTRA PROTECTION OF INTEREST OF DEPOSITORS (IN FINANCIAL ESTABLISHMENTS) ACT, 1999 AND NOT WITH ANY MALA FIDE INTENTION. AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLANT, THE AO CONCLUDED THAT THE AMOUNT OF RS. 6,61,216/- WAS NOT AN ALLOWABLE EXPENDITURE UNDER SECTION 57(III) OF THE ACT AS THE SAME WAS NOT AN EXPENDITURE TO EARN THE INTEREST INCOME DISCLOSED UNDER HEAD 'INCOME FROM OTHER SOURCES'. ITA NO. 1625/BANG/2019 PAGE 3 OF 5 4.1 AS REGARDS AMOUNT OF RS.1,59,969/- RELATING TO INTEREST PAID ON LOAN TAKEN AGAINST FIXED DEPOSITS FOR REPAYMENT OF INTEREST ON OVERDRAFT FACILITY AVAILED BY APPELLANT FROM SBI, THE APPELLANT SUBMITTED THAT THE SAME RELATED TO HIS BUSINESS/TRADING ACTIVITY. SINCE THE APPELLANT HAD CLAIMED THE SAME AS DEDUCTION UNDER SECTION 57(III) OF THE ACT, THE AO DISALLOWED THE SAME. 4.2 DURING APPELLATE PROCEEDINGS THE APPELLANT HAS MADE DETAILED SUBMISSIONS. AS REGARDS THE AMOUNT OF RS. 6,61,216/-, THE APPELLANT SUBMITTED THAT THE AO SHOULD HAVE ALLOWED THE AMOUNT AS BUSINESS EXPENDITURE AS THE SAME RELATED TO BAD DEBTS WRITTEN OFF BY HIM. AS REGARDS ALLOWING THIS EXPENDITURE UNDER SECTION 57(III) OF THE ACT, VIDE LETTER DT 15.05.2019 THE APPELLANT FAIRLY CONCEDED THAT THE SAID CLAIM WAS ERRONEOUS. HOWEVER, THE APPELLANT SUBMITTED THAT THE AO SHOULD HAVE ALLOWED THE SAME AS BUSINESS EXPENDITURE. IN ORDER TO VERIFY THIS CLAIM OF THE APPELLANT, THE APPELLANT WAS ASKED TO PRODUCE FINANCIALS FOR FY 2013-14 AND TO SHOW THAT HE SATISFIED THE CONDITIONS LAID DOWN UNDER SECTION 36(1)(VII) AND UNDER SECTION 36(2) OF THE ACT. THE REQUISITE DETAILS WERE PRODUCED BY THE APPELLANT. A PERUSAL OF THE SAME SHOWS THAT THE DEBTS OF RS.29,33,528/- HAD ALREADY BEEN WRITTEN OFF BY THE APPELLANT IN HIS BOOKS OF ACCOUNTS IN FY 2013-14 ITSELF AND AS SUCH NO SUCH DEBTS EXISTED AS ON 31.03.2015 OR 31.03.2016. NOW AS PER PROVISIONS OF SECTION 36(1)(VII) OF THE ACT ONLY SUCH AMOUNT CAN BE ALLOWED AS DEDUCTION WHICH HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. SINCE THE AMOUNT OF THESE DEBTS HAD ALREADY BEEN WRITTEN OFF BY THE. APPELLANT IN FY 2013-14, THE SAME COULD HAVE BEEN CLAIMED AS BAD DEBTS IN RELATION TO AY 2014-15 IF OTHER CONDITIONS WERE ALSO SATISFIED BUT NOT IN ANY SUBSEQUENT ASSESSMENT YEAR. SINCE THE BAD DEBTS OF RS. 6, 61,216/- DID NOT EXIST IN THE BOOKS OF APPELLANT DURING FY 2015-16, SO THE QUESTION OF ITS WRITING OFF AS BAD DEBTS AND CLAIMING IT AS DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT DURING THE YEAR UNDER CONSIDERATION WOULD NOT ARISE. CONSIDERING ABOVE, THE ACTION OF THE AO IN DISALLOWING THE AMOUNT OF RS.6,61,216/- IS UPHELD AS NEITHER THE AMOUNT IS ALLOWABLE DEDUCTION UNDER SECTION 57) OF THE ACT NOR THE SAME CAN BE ALLOWED AS BAD DEBTS UNDER SECTION 36(1)(VII) OF THE ACT. 4.3 AS REGARDS THE AMOUNT OF RS.1,59,969/-, BEING THE INTEREST PAID ON OVERDRAFT, THE APPELLANT HAS CLAIMED THAT THE EXPENDITURE WAS INCURRED BY HIM DURING THE COURSE OF BUSINESS/TRADING ACTIVITY. HOWEVER, NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURING THE APPELLATE PROCEEDING THE APPELLANT HAS PRODUCED ANY DETAILS TO SHOW THAT THE EXPENDITURE WAS ITA NO. 1625/BANG/2019 PAGE 4 OF 5 RELATED TO HIS BUSINESS/TRADING ACTIVITIES AND THAT THE OVERDRAFT WAS USED FOR THE PURPOSE OF BUSINESS. THE CLAIM OF THE APPELLANT IS A MERE ASSERTION WITHOUT ANY SUPPORTING DOCUMENTS. CONSIDERING ABOVE, THE ACTION OF THE AO IN DISALLOWING THE AMOUNT OF RS. 1,59,969/- IS UPHELD AS NEITHER THE AMOUNT IS ALLOWABLE DEDUCTION UNDER SECTION 57(III) OF THE ACT NOR THE SAME CAN BE ALLOWED AS BUSINESS EXPENDITURE. 5. IN VIEW OF THE FACTS OF THE PRESENT CASE AS NOTED ABOVE, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) REGARDING THE DECISION IN RESPECT OF BOTH THESE ISSUES. REGARDING BAD DEBTS, HE HAS GIVEN A CATEGORICAL FINDING THAT THIS CLAIM IS NOT ALLOWABLE NEITHER UNDER SECTION 57(III) NOR UNDER 36(1)(VII) OF THE IT ACT, 1961 AND REGARDING DISALLOWANCE OF INTEREST EXPENDITURE ALSO, HE HAS GIVEN A CATEGORICAL FINDING THAT THIS AMOUNT IS NOT ALLOWABLE UNDER SECTION 57(III) OF THE IT ACT, 1961 AND IT IS NOT ALLOWABLE AS A BUSINESS EXPENDITURE BECAUSE THE ASSESSEE HAS NOT PRODUCED ANY DETAILS TO SHOW THAT THE EXPENDITURE WAS RELATED TO HIS BUSINESS / TRADING ACTIVITY AND THAT OVERDRAFT WAS USED FOR THE PURPOSE OF BUSINESS. HENCE, I DECLINE TO INTERFERE IN THE ORDER OF THE CIT(A). 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- BANGALORE. DATED: 14 TH JANUARY, 2020. /NS/* ( N. V. VASUDEVAN ) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO. 1625/BANG/2019 PAGE 5 OF 5 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.