Vastupal Bearing Races Ltd., Ahmedabad V. ITO, Ward-4(1)(4), Ahmedabad

ITA 1785/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6767 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 28-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P PATHAK
• Keywords: Bad and doubtful debts; Revenue expenditure; Set aside
• Section: 37(1); 37

Judgement Text

PAGE 1 OF 6 , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC BENCH, AHMEDABAD BEFORE , SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ ITA NO.1785/AHD/2017 / ASSTT. YEAR : 2012 - 2013 VASTUPAL BEARING RACES LTD. , 504, SARAP BUILDING, OPP. NAVJIVAN PRESS , ASHRAM ROAD , AHMEDABAD . PAN: AAACV9341R VS . I.T.O , WARD - 4 (1 ) (4 ) , AHMEDABAD . (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI HEM CHHAJED , A.R REVENUE BY : SHRI O.P. PATHAK , SR . DR / DATE OF HEARING : 28 / 03 / 201 9 / DATE OF PRONOUNCEMENT: 18 /04 /2 01 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE AS SESSEE AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 8 , AHMEDABAD, [ LD. CIT (A) IN SHORT] , DATED 06 / 0 6 / 2017 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143 (3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DATED 09 / 03 / 201 5 RELEVANT TO ASSESSMENT YEAR (AY) 2012 - 13 . ITA NO .1785/AHD/2017 ASSTT. YEAR 2012 - 13 2 PAGE 2 OF 6 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER PASSED BY THE LD.CIT(A) IS AGAINT THE LAW, EQUITY AND JUSTICE. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPHELD THE ADDITION MADE BY THE LD.AO FOR INTEREST INCOME ON IT REFUND OF RS.28,560/ - 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPHELD THE DISALLOWANCE MADE BY THE LD.AO OF P.F & ESI OF RS.39,430/ - 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPHELD THE DISALLOWANCE MADE BY THE LD.AO OF BUSINESS LOSS CLAIMED U/S.37(1) OF THE ACT OF RS.8,48,558/ - 5. THE APPELLATE CRAVES LIBERTY TO ADD, AMEND, ALTER OT MODIFY ALL OR ANY GROUNDS OF APPEAL BEFORE FINAL APPEAL. 3. THE 1 ST ISSUE RAISED BY THE ASSESSEE IS THAT THE LD. CIT - A ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE ADDITION OF RS. 28,560.00 ON ACCOUNT OF INTEREST ON THE INCOME TAX REFUND. 4. THE AO BASED ON ITS EXTRACTED FROM THE ITD DURING THE ASSESSMENT P ROCEEDINGS OBSERVED THAT THE ASSESSEE HA D RECEIVED INTEREST ON THE INCOME TAX REFUND AMOUNTING TO RS. 2 8 , 560 .00 WHICH IS CHARGEABLE TO TAX , BUT THE SAME WAS NOT OFFERED TO TAX. THEREF ORE THE AO MADE AN ADDITION OF RS. 2 8 , 560 .00 TO THE TOTAL INCOME OF THE A SSESSEE. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LEARNED CIT (A) W HO CONFIRMED THE ORDER OF THE AO BY OBSERVING AS UNDER: DURING THE APPELLATE PROCEEDINGS ALSO, THE AR OF THE APPELLANT COULD NOT EXPLAIN THE SAME. AS THE INTEREST ON REFUND RECEIV ED BY THE APPELLANT IS NOT TAKEN INTO ACCOUNT OF ITS INCOME BY THE APPELLANT, THE ADDITION MADE BY THE AO IS CONFIRMED AND APPEAL ON THIS GROUND IS DISMISSED ITA NO .1785/AHD/2017 ASSTT. YEAR 2012 - 13 3 PAGE 3 OF 6 6. B EING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 61 AND SUBMITTED THAT IT HA D NOT RECEIVED ANY INTEREST ON THE INCOME TAX REFUND AMOUNTING TO 2 8 , 560. 00. THEREFORE THE SAME CANNOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 7. ON THE OTHER HAND , THE LEARNER DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE CONTENTIOUS AND PERUSED THE MATERIALS AVAILABLE. THE ISSUE IN THE INSTANT CASE RELATES WHETHER THE ASSESSEE HAS RECEIVED INTEREST ON THE INCOME TAX REFUND AMOUNTING TO RS. 2 8 , 560 .00 WHICH WAS NOT DISCLOSED BY IT IN ITS INCOME TAX RETURN. AS PER THE ASSESSEE IT HAS NOT RECEIVED THE INTEREST ON THE INCOME TAX REFUND FOR RS. 2 8 , 560 .00, THEREFORE THE SAME WAS NOT OFFERED TO TAX. 8.1 HOWEVER, THE AO TREATED THE INTEREST INCOME OF THE ASSESSEE BASED ON ITS REPORT GENERATED FROM THE ITD. IT IS AN UNDISPUTED FACT THAT THE INTEREST ON THE INCOME TAX REFUND WILL BE CREDITED TO THE ACCOUNT OF THE ASSESSEE THROUGH BANKING CHANNEL. THUS THE ITS REPORT CANNOT BE CONCLUSIVE EVIDENCE TO HOLD THAT THE ASSESSEE HAS RECEIVED INTEREST ON THE INCOME TAX REFUN D OF RS. 2 8 , 560 .00 ONLY. IN OUR CONSIDERED VIEW THE AO SHOULD HAVE REFERRED THE BOOKS OF ACCOUNTS/BANK STATEMENT OF THE ASSESSEE TO AS CERTAIN THE FACT THAT THE ASSESSEE HAS RECEIVED INTEREST O N THE INCOME TAX REFUND. THEREFORE IN THE INTEREST OF JUSTICE AN D FAIR PLAY, WE ARE INCLINED TO SET ASIDE THE ISSUE TO THE FILE OF THE AO TO VERIFY WHETHER THE AMOUNT OF INTEREST HAS BEEN CREDITED TO THE ACCOUNT OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. IF YES THAT THE SAME ITA NO .1785/AHD/2017 ASSTT. YEAR 2012 - 13 4 PAGE 4 OF 6 WILL BE TREATED AS INCOME OF THE ASSES SEE. ACCORDINGLY , WE ALLOW THE GROUND OF THE APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSES. 9. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT LEARNED CIT (A) ERRED IN UPHOLDING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE OF 39 , 430 ON ACCOUNT OF CONTRIBUTION TO PF AND ESI. 10. AT THE OUTSET , THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CON CEDED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE . HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 11. THE 3 RD ISSUE RAISED BY THE ASSESSEE IS THAT LEARNED CIT (A) ERRED IN CONFIRMING THE ORDER OF THE AO BY DISA LLOWING THE BUSINESS LOSS OF 8, 48 , 558 .00 UNDER SECTION 37(1) OF THE ACT. 12. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED A DEDUCTION OF 8 , 48 ,5 58 .00 BY WAY OF WRITING OFF THE ADVANCES GIVEN TO VARIOUS PARTIES. THE ASSESSEE CLAIMED TO HAVE GIVEN THE ADVANCES IN THE COURSE OF THE BUSINESS , AND SUCH ADVANCES BECAME IR RECOVERABLE. THEREFORE THE SAME W AS WRITTEN O F F AS BUSINESS LOSS. 13. HOWEVER , THE AO DURING T HE ASSESSMENT PROCEEDINGS OBSERVED CERTAIN FACTS AS DETAILED UNDER : I. THE A SSESSEE GAVE THE ADVANCES TO THE PARTIES KNOWN TO IT AS IT WAS HAVING BUSINESS DEALING S WITH SUCH PARTIES. II. NO PRUDENT BUSINESS PERSO N WILL ADVANCE THE MONEY TO THE PARTIES WHICH WIL L BECOME IRRECOVERABLE. ITA NO .1785/AHD/2017 ASSTT. YEAR 2012 - 13 5 PAGE 5 OF 6 III. THE ADVANCE MONEY WRITTEN O F F WAS NOT OFFERED TO TAX IN THE EARLIER YEARS. 14. IN VIEW OF THE ABOVE , THE CLAIM OF THE ASSESSEE WAS DISALLO WED AND ACCORDINGLY A SUM OF 8, 48 , 5 5 8 .00 WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 15. THE A GGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A). THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED THAT THE ADVANCES WERE GIVEN TO THE PARTIES IN THE COURSE OF THE BUSINESS . THEREFORE, THE SAME IS ALLOWABLE AS A DEDUCTION. 16. HOWEV ER , THE LEARNED CIT (A) DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE AMOUNT WRITTEN O F F WAS NOT OFFERED TO TAX IN THE EARLIER YEAR. THEREFORE THE CONDITION AS SPECIFIED UNDER SECTION 36 ( 2 ) OF THE ACT WAS NOT FULFILLED. ACCORDINGLY , THE LEARNED CIT (A) CONFIRMED THE ORDER OF THE AO. 17. BEING AGGRIEVED BY THE ORDER OF THE LEARNERS ITA ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED AR BEFORE US REITERATED THE SUBMISSIONS AS MADE BEFORE THE LEARNED CIT (A). ON THE OTHER HAND , THE LEARNE D DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE CONTROVERSY IN THE INSTANT CASE RELATES WHETHER THE ADVANCES GIVEN IN THE COURSE OF THE BUSINESS CAN BE ALLOW ED AS BAD DEBTS THOUGH THE SAME WAS NOT OFFERED TO TAX AS MANDATED UNDER SECTION 36( 2 ) OF THE ACT. THE PROVISIONS OF SECTION 37 ( 1 ) OF THE ACT S TATES THAT ANY REVENUE EXPENDITURE ITA NO .1785/AHD/2017 ASSTT. YEAR 2012 - 13 6 PAGE 6 OF 6 INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS IS ELIGIBLE FOR DEDUCTION WHI LE COMPUTING THE INCOME UNDER THE HEAD BUSINESS AND PROFESSION. IN THE INSTANT CASE , THE ADVANCES WERE GIVEN IN THE COURSE OF THE BUSINESS TO CERTAIN PARTIES BY THE ASSESSEE , AND THIS FACT HAS NOT BEEN DOUBTED BY THE AUTHORITIES BELOW. THEREFORE IN OUR CON SIDERED VIEW , THE SAME CAN BE ALLOWED AS THE EXPENSES INCURRED UNDER SECTION 37 ( 1 ) OF THE ACT. 18.1 THE ASSESSEE INDEED HAS INCURRED THE LOSS BY WAY OF GIVING THE ADVANCES IN THE COURSE OF THE BUSINESS TO CERTAIN PARTIES WHICH BECAME IRRECOVERABLE. THUS THE ASSESSEE IS ENTITLED TO THE DEDUCTION ON ACCOUNT OF SUCH BUSINESS LOSS. REGARDING THIS , WE FIND SUPPORT AND GUIDANCE FROM THE ORDER OF DELHI TRIBUNAL IN THE CASE OF ITO VS. SINGH RADIO CO. (INDIA) PVT.LTD. REPORTED IN 59 TAXMAN 367 WHEREIN IT WAS HELD AS UNDER: IN VIEW OF THE FINDINGS OF THE COMMISSIONER (APPEALS) THAT THE MONEY RECEIVED ON CHITS BY THE ASSESSEE WAS UTILISED FOR THE PURPOSE OF BUSINESS AND THAT THE LOSS ON CHITS WAS SUSTAINED DURING THE COURSE OF BUSINESS , THE COMMISSIONER (APPEALS) WAS JUSTIFIED IN ALLOWING THE ASSESSEE S CLAIM FOR LOSS . 18.2 I N VIEW OF THE ABOVE , WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF BUSIN ESS LOSS AS DISCUSSED ABOVE. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 19. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE COURT ON 18 /04 / 2019 AT AHMEDABAD. - SD - - SD - (RAJPAL YADAV ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 18 / 04 /2019 M ANISH