ITO,Ward - 6(1), Kolkata V. Shri Raj Kumar Patni, Kolkata

ITA 1714/KOL/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70424 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 14-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 07-10-2009
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Bad and doubtful debts
• Section: 143(3); 131; 11

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ''# ''# ''# ''#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 1714/KOL/2009 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2004-05 INCOME-TAX OFFICER, WD-36(1), KOLKATA VS. SHRI RA J KUMAR PATNI (PAN: AEKPP3656B) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING : 08.11.2013 DATE OF PRONOUNCEMENT: 21.11.2013 FOR THE APPELLANT: SHRI RAVI JAIN, CIT (DR) FOR THE RESPONDENT: SHRI SOUMITRA CHOUDHURY, ADV OCATE $0 / ORDER PER BENCH: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XX, KOLKATA IN APPEAL NO. 191/CIT(A)-XX/WD.36(1)/07-08/KOL DATED 14.05.2009. ASSESSMENT WAS FRAMED BY ITO, WARD-36(1), KOLKATA U/S. 143(3) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2004-05 VIDE HIS ORDER DA TED 28.12.2006. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AS R EGARDS TO THE ALLOWANCE OF BAD DEBT BY CIT(A). FOR THIS, REVENUE HAS RAISED FOLLOWING THR EE GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE DISALLOWANCE OF RS .1,52,75,595/- BEING THE BAD DEBT WRITTEN OFF BY THE ASSESSEE. 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN MAKING WRONG INTERPRETATION OF THE AMENDED PROVISION OF SEC. 36(1)(VII) OF THE I. T. ACT, 1961. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN NOT CONSIDERING THAT AS PER AME NDED PROVISION OF SEC. 36(1)(VII), THE ASSESSEE IS REQUIRED TO ESTABLISH THAT THE DEBT IN QUESTION HAD BECOME BAD IN A PARTICULAR PREVIOUS YEAR. 3. BRIEFLY STATED FACTS ARE THAT DURING THE RELEVAN T ASSESSMENT YEAR THE ASSESSEE CLAIMED A BAD DEBT OF RS.1,52,75,595/-. THE AO REQUIRED THE ASSESSEE TO EXPLAIN BAD DEBTS THAT HOW THE DEBT HAS BECOME BAD. THE ASSESSEE STATED THAT THIS BAD DEBT IS AGAINST THE SALE OF SHARES MADE TO ONE SHARE BROKER ARIHANT EXIM SCRIP PVT. LTD. (A ESPL). THE ASSESSEE FILED COPY OF LEDGER ACCOUNT OF AESPL FOR FY 2000-01, 2002-03 AND 2003-0 4. SUBSEQUENTLY, NOTICE U/S. 131 OF THE 2 ITA NO. 1714/K/2009 SHRI RAJ KUMAR PATNI., AY:2004-05 ACT WAS ALSO ISSUED AND IN COMPLIANCE TO THIS NOTIC E AESPL FILED COPY OF LEDGER ACCOUNT OF RAJ INVESTMENT & CO. FOR FY 2003-04, BALANCE SHEET AND ACKNOWLEDGMENT OF INCOME TAX RETURN. SIMILARLY, IN RESPECT OF AESPL THE BALANCE SHEET AND FINANCIAL STATEMENT FOR FY 2003- 04 AND 2004-05 WERE ALSO FILED. IN RESPONSE TO SUM MONS U/S. 131 OF THE ACT SHRI MANOJ KHETAIN THE AUTHORISED REPRESENTATIVE OF AESPL APPE ARED AND FILED COPY OF LEDGER ACCOUNT OF RAJ INVESTMENT & CO. FOR FYS 2000-01, 2001-02, 2002 -03, 2003-04 AND 2004-05. ON THE SAME DATE THE STATEMENT OF SHRI MANOJ KHETAIN WAS RECORD ED U/S. 131 OF THE ACT. DURING THE COURSE OF EXAMINATION SHRI MANOJ KHETAIN ADMITTED THAT AS PER LEDGER ACCOUNT OF FY 2000-01 THERE HAVE BEEN TWO PURCHASES MADE DURING THIS FY I.E. FO R A SUM OF RS.2,41,24,000/- DONE ON 20.9.2000 AND FURTHER TRANSACTION OF RS.1,46,42,100 /- DONE ON 22.11.2000. ACCORDINGLY, THE TOTAL TRANSACTIONS WORKED OUT AT RS.3,87,66,100/- O UT OF WHICH BALANCE OF RS.1,52,75,595/- IS OUTSTANDING. THE LD. COUNSEL FOR THE ASSESSEE BEFO RE THE AO STATED THAT NO DOUBT AESPL IN THEIR LEDGER ACCOUNT FURNISHED FOR THE FY 2003-04 A ND 2004-05 DECLARED A SUM OF RS.29,31,11,986/- AS PAYABLE TO ASSESSEE ON THE BA SIS OF ADVANCE GIVEN TO THAT PARTY IN EARLIER YEARS. BUT THIS AMOUNT I.E. ON ACCOUNT OF SALE OF SHARES IS RS.3,87,66,00/- OUT OF WHICH THE REMAINING PAYABLE IS RS.1,52,75,595/- WHICH HAS BEC OME BAD AS THE CALCUTTA STOCK EXCHANGE HAS INITIATED ACTION AGAINST AESPL AS DEFAULTER AND THIS AMOUNT IS NOT POSSIBLE TO RECOVER FROM AESPL AND RAJ INVESTMENT CO.. BUT THE AO WAS OF TH E VIEW THAT ONCE IT IS A FACT THAT THERE IS A BALANCE OUTSTANDING IN THE CASE OF AESL FOR A SUM O F RS.29,31,11,986/- AS PAYABLE TO THE ASSESSEE BY THE SAID PARTY AND IT IS CONTINUED SAY ING AS AN AMOUNT PAYABLE TO THE ASSESSEE THERE IS NO QUESTION OF CESSATION OF LIABILITY ON ACCOUNT OF BAD DEBT AS CLAIMED BY THE ASSESSEE FOR THE BALANCE AMOUNT OF RS.1,52,75,595/- AND HE DISALLOWE D THIS BAD DEBT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO AFTER CONSIDERI NG THE SUBMISSION OF THE ASSESSEE ALLOWED THE CLAIM OF ASSESSEE. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS MADE T WO SALES AGGREGATING TO RS.3,87,66,100/- I.E. RS.2,41,24,000/- ON 20.09.2000 AND SECOND TRANSACTI ON FOR AN AMOUNT OF RS.1,46,42,100/- ON 22.11.2000 AND OUT OF THE SALE OF THESE SHARES THE OUTSTANDING AMOUNT IS RS.1,52,75,595/- IN THE BOOKS OF RAJ INVESTMENT & CO. AS ON 31.03.2001. TH IS AMOUNT OF RS.1,52,75,595/- REPRESENTS OUTSTANDING BALANCE WHICH REMAINED DUE TO THE ASSES SEE ON ACCOUNT OF SALE OF SHARES. NOBODY IS DENYING THIS FACT THAT NEITHER REVENUE NOR THE T HIRD PARTIES I.E. AESPL OR RAJ INVESTMENT & CO. THAT THERE IS NO OUTSTANDING BALANCE. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US FILED COPY OF SIXTH PROGRESS REPORT ON THE ACTION TAKEN PURSU ANT TO THE RECOMMENDATIONS OF THE JOINT PARLIAMENTARY COMMITTEE ON STOCK MARKET SCAM AND MA TTERS RELATING THERETO ISSUED BY 3 ITA NO. 1714/K/2009 SHRI RAJ KUMAR PATNI., AY:2004-05 MINISTRY OF FINANCE IN MAY 2006, WHEREIN SEBI VIDE ORDER DATED 18.10.2002 ISSUED U/S. 11 AND 11B OF SEBI ACT, 1992 DEBARRED SOME OF THE PERSONS FROM ASSOCIATING WITH SECURITIES MARKET ACTIVITIES AND DEALING IN SECURITIES TILL THE COMPL ETION OF INVESTIGATION PROCEEDINGS AND AGAINST SHRI KETAN PAREKH AND SOME ENTITIES ASSOCIATED WITH HIM. DURING THE PERIOD THEY HAVE BEEN DIRECTED NOT TO BUY, SALE OR DEAL IN THE SECURITIES MARKET DIRECTLY OR INDIRECTLY. IN THIS REPORT, AESPL HAS BEEN SHOWN AT SL. NO. 9 WHICH IS PART OF ASSESSEES PAPER BOOK. IT WAS EXPLAINED BY THE LD. COUNSEL FOR THE ASSESSEE THAT NEITHER THE A SSESSEE IS UNABLE TO RECOVER THIS AMOUNT NOR THE PARTY IS IN A POSITION TO PAY BACK. IT IS A FA CT THAT THIS AMOUNT OF RS.1,52,75,595/- IS DUE TO THE ASSESSEE FROM EARLIER YEARS ON ACCOUNT OF SALE OF SHARES TO AESPL AND THIS IS OUTSTANDING BALANCE. EVEN IN SUBSEQUENT YEARS THE ASSESSEE DID NOT RECEIVE ANY PAYMENT AGAINST SUCH OUTSTANDING BALANCE AND MOREOVER, THE DEBTOR HAS BE EN DECLARED DEFAULTER BY KOLKATA STOCK EXCHANGE. THE ASSESSEE HAS WRITTEN OFF THIS AMOUNT IN VIEW OF THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT AND CLAIMED THE DEDUCTION OF THE SAME, WHICH WAS DENIED BY THE AO. THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT (2010) 323 ITR 397 (SC), WHEREIN IT HAS BEEN HE LD AS UNDER: THIS POSITION IN LAW IS WELL-SETTLED. AFTER APRIL 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS B ECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACC OUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINE D WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CR EDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISI ON IS DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAM INED WHETHER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF T HE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MAT TER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVEMENTI ONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. AS THE ISSUE IS SETTLED BY HONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA) AND GOING THROUGH THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS NARRATED ABOVE, WE ARE OF THE VIEW THAT THERE IS NO REASON FOR US TO INTERFERE IN THE ORDER OF CIT(A). WE DISMISS THE APPEAL OF REVENUE. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2013. SD/- SD/- . . . . ''# ''# ''# ''# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21ST NOVEMBER, 2013 4 ITA NO. 1714/K/2009 SHRI RAJ KUMAR PATNI., AY:2004-05 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT ITO, WARD-36(1), KOLKATA. 2 ./,- / RESPONDENT SHRI RAJ KUMAR PATNI, 36, STRAND ROA D, 2 ND FLOOR, ROOM NO. 7, KOLKATA-70 001 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA. <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .