ACIT, CHENNAI V. Dr.S.Venkatesh, CHENNAI

ITA 1805/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8780 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 13-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 23-06-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: K RAVI
• Keywords: Unexplained cash credit; Gift; Bad and doubtful debts
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1805/MDS/2014 / ASSESSMENT YEAR : 2007-08 THE ASSTT. COMMISSIONER OF INCOME-TAX BUSINESS CIRCLE V CHENNAI VS. D R . S. VENKATESH 43B, LAKSHMINADANA NAGAR KOTTIVAKKAM CHENNAI 600 041 [PAN ABRPV 4773 H ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT /RESPONDENT BY : SHRI K. RAVI, ADVOCATE / DATE OF HEARING : 13 - 0 6 - 2016 ! / DATE OF PRONOUNCEMENT : 15 - 0 7 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, CHENNA I, DATED 8.1.2014 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. SHRI A.V. SREEKANTH, LD. DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS DISALLOWANCE OF BAD DEBT TO THE EXTENT OF ` 31,26,757/-. ACCORDING TO THE LD. DR, THE ASSESSEE HAS DEBITED A SUM OF ` 31,26,757/- AS BAD DEBT IN THE BOOKS ITA NO. 1805/14 :- 2 -: OF ACCOUNT. THE ASSESSEE HAS RETURNED A BUSINESS LOSS OF ` 28,96,216/-. THOUGH THE ASSESSEE CLAIMS BAD DEBT TO THE EXTENT OF ` 31,26,757/-, THE ASSESSEE COULD NOT FURNISH THE EN TIRE DETAILS WITH REGARD TO DEBTORS. THE ASSESSEE HAS MERELY FURNIS HED THE NAMES OF FOUR PARTIES AND THE AMOUNT OUTSTANDING FROM THEM. IN THE CASE OF SHRI CHELLA MANICKAM, THERE WAS AN OPENING BALANCE OF ` 14,902/- WHICH REMAINED AS SUCH IN THE BOOKS OF ACCOUNT. RE FERRING TO THE ACCOUNT OF M/S HARISH GRANITES, THE LD. DR SUBMITTE D THAT THE DEBIT BALANCE OF ` 10,66,540/- WAS CARRIED FORWARD. SIMILARLY, IN TH E CASE OF M/S PRETA & CO., A JOURNAL ENTRY WAS PASSED AND TH E DEBIT BALANCE WAS CARRIED FORWARD. SIMILARLY IN THE CASE OF M/S RAJAKALI EXPORTS, THE ASSESSEE CARRIED FORWARD THE DEBIT BALANCE TO THE E XTENT OF ` 11,80,961/-. THE ASSESSEE HAS NOT FURNISHED THE D ETAILS OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNT, THEREFORE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. 3. ON THE CONTRARY, SHRI K. RAVI, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS INCLUDING THE BOOKS OF ACCOUNT TO ESTABLISH THE WRITING OFF OF BA D DEBT. THE ASSESSEE ESTABLISHED BEFORE THE ASSESSING OFFICER T HAT THE DEBT HAS ALSO BECOME BAD. REFERRING TO THE ORDER OF THE CIT (A), THE LD. COUNSEL POINTED OUT THAT THE CIT(A) CALLED FOR REMAND REPOR T FROM THE ITA NO. 1805/14 :- 3 -: ASSESSING OFFICER AND FOUND THAT THE AMOUNT DISCLOS ED BY THE ASSESSEE AS BAD DEBT WAS STILL OUTSTANDING. WHEN T HE ASSESSING OFFICER FOUND THAT THE DEBTORS OF THE ASSESSEE ARE VERY MUCH AVAILABLE, THE ASSESSING OFFICER OUGHT NOT TO HAVE REJECTED THE CLAIM OF THE ASSESSEE WITHOUT EXAMINING THE SO CALLED DEBTO RS. REFERRING TO THE JUDGMENT OF THE APEX COURT IN THE CASE OF TRF L TD VS CIT, 323 ITR 397, THE LD. COUNSEL SUBMITTED THAT ONCE THE BAD D EBT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER CANN OT REJECT THE CLAIM OF THE ASSESSEE. IT IS NOT FOR THE ASSESSEE TO E STABLISH THAT THE DEBT HAS BECOME IRRECOVERABLE. IT IS THE CONSCIOUS DECI SION OF THE ASSESSEE THAT THE DEBT HAS BECOME IRRECOVERABLE, THEREFORE, THE SAME WAS CLAIMED AS BAD DEBT. ACCORDING TO THE LD. COUNSEL, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY PLACING RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE C ASE OF TRF LTD.(SUPRA). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER A SUM OF ` 31,26,757/- AS BAD DEBT. THE ASSESSEE HAS ALSO FURNISHED THE NAMES OF FOUR PARTI ES FROM WHOM THE MONEY WAS OUTSTANDING. THE ASSESSEE HAS ALSO PROD UCED THE EXTRACTS OF THE BOOKS OF ACCOUNT TO SUPPORT THE CLAIM. THE ASSESSING OFFICER ITA NO. 1805/14 :- 4 -: FOUND THAT THE ASSESSEE HAS NOT ESTABLISHED THAT T HE DEBT HAS BECOME IRRECOVERABLE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEE WRITTEN OFF THE BAD DEBT IN THE BOOKS OF ACCOUNT, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE D EBT HAS BECOME BAD. IN VIEW OF THE LANGUAGE EMPLOYED BY THE LEGISLATURE IN SEC. 36(1)(VII) OF THE ACT, THIS TRIBUNAL IS OF THE CONSIDERED OPI NION THAT IT IS FOR THE ASSESSEE TO DECIDE WHETHER THE DEBT HAS BECOME BAD OR NOT. WHEN THE ASSESSEE HAS DECIDED THAT THE DEBT HAS BECOME BAD, IT IS ALWAYS OPEN TO THE ASSESSEE TO WRITE OFF THE SAME IN THE BOOKS OF ACCOUNT. ONCE IT IS WRITTEN OFF AS BAD DEBT IN THE BOOKS OF ACCOUNT, IT IS NOT FOR THE ASSESSING OFFICER TO CHALLENGE THE CORRECTNESS OF THE FACT OF WRITING OFF THE BAD DEBT. IN VIEW OF THE JUDGMENT OF THE A PEX COURT IN TRF LTD(SUPRA) THE ASSESSING OFFICER CANNOT ASK TO ESTA BLISH THE FACT OF DEBT BECOME BAD. IT IS ALWAYS THE DECISION OF THE ASSESSEE TO TREAT A PARTICULAR DEBT AS BAD OR NOT. THEREFORE, THE CIT( A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 5. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDITIO N OF UNEXPLAINED CREDIT TOWARDS TRANSFER OF LOAN ADVANCE D FROM CUSTOMERS AND OTHERS. ITA NO. 1805/14 :- 5 -: 6. SHRI A.V. SREEKANTH, LD. DR SUBMITTED THAT THE ASS ESSEE HAS CREDITED TO ITS CAPITAL ACCOUNT AMOUNTS TOWARDS TRA NSFER OF LOANS AND ADVANCES, ADVANCES FROM CUSTOMERS, GIFT AND OTHERS. THE ASSESSEE HAS NOT EXPLAINED THE NATURE OF THE CREDIT BEFORE T HE ASSESSING OFFICER. THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT HE RECEIVED A GIFT OF ` 25,05,584/- FROM HIS FATHER SHRI T.V. SUNDARAVADAM . HOWEVER, NO CONFIRMATION LETTER WAS FILED. THE LD. DR POINTED OUT THAT THE PRIMARY ONUS IS ON THE ASSESSEE TO ESTABLISH THAT HE RECEIVED A GIFT FROM HIS FATHER. MERE FURNISHING OF NAME AND PAN OF THE DONOR MAY NOT BE SUFFICIENT. THE ASSESSEE HAS TO NECESS ARILY ESTABLISH THE CREDITWORTHINESS OF HIS FATHER TO GIVE GIFT AND THE GENUINENESS OF THE TRANSACTION. IN THE ABSENCE OF ANY SUCH DETAILS AND PARTICULARS, THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION. T HE CIT(A), WITHOUT CONSIDERING THE MATERIAL AVAILABLE ON RECORD, DELET ED THE ADDITION MADE BY THE ASSESSING OFFICER. THE LD. DR FURTHER SUBMI TTED THAT HE IS PLACING HIS RELIANCE ON THE OBSERVATION MADE BY THE ASSESSING OFFICER AND THE GROUNDS OF APPEAL RAISED BEFORE THIS TRIBUN AL. 7. ON THE CONTRARY, SHRI K. RAVI, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RECEIVED LOAN PRIO R TO ASSESSMENT YEAR 2003-04 WHICH REMAINED OUTSTANDING DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS ALSO RECEIVED ADV ANCES FOR ITA NO. 1805/14 :- 6 -: CONSTRUCTION OF HOUSE IN THE EARLIER ASSESSMENT YEA R. THE LOANS AND ADVANCES RECEIVED BY THE ASSESSEE WAS EXAMINED BY THE ADMINISTRATIVE COMMISSIONER IN THE PROCEEDINGS U/S 263 OF THE ACT AND NO FURTHER ACTION WAS TAKEN. THE ASSESSEE HAS ADMITTED THAT EVEN THOUGH THE OUTSTANDING BALANCE WAS TRANSFERRED TO CAPITAL ACCOUNT, THE LIABILITY CONTINUED TO EXIST, THEREFOR E, THE ASSESSEE EXPLAINED BEFORE THE CIT(A) THAT THE ASSESSEE IS N OT TAKING ANY SHELTER UNDER THE LIMITATION ACT. IT WAS TRANSFERR ED TO CAPITAL ACCOUNT ONLY TO SAFEGUARD THE INTEREST OF THE ASSESSEE, TH EREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SEC. 41(1) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE FURTH ER SUBMITTED THAT EVEN THOUGH THE TIME LIMIT EXPIRED FOR RECOVERY OF THE AMOUNT UNDER THE LIMITATION ACT, THE CREDITOR ALWAYS HAS A RIGH T TO RECOVER THE MONEY BY WAY OF OTHER MODES. MERELY BECAUSE AN ENT RY WAS MADE IN THE BOOKS OF ACCOUNT UNILATERALLY, THAT WILL NOT AB SOLVE THE ASSESSEE TO REPAY THE MONEY, THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS TRANSFERRED THE OUTST ANDING BALANCES TO THE CAPITAL ACCOUNT. THE ASSESSING OFFICER FOUND T HAT ON EXPIRY OF THE ITA NO. 1805/14 :- 7 -: TIME LIMIT PROVIDED UNDER THE LIMITATION ACT, THE ASSESSEE HAS NO LIABILITY TO REPAY THE ABOVESAID AMOUNT, THEREFORE, THE ACTION OF THE ASSESSEE WOULD AMOUNT TO UNILATERALLY WRITING OFF T HE AMOUNT IN THE ACCOUNTS. THEREFORE, THE AMOUNT SO CREDITED IN THE CAPITAL ACCOUNT HAS TO BE ASSESSED AS INCOME U/S 41(1) OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MERELY BECAUSE THE T IME LIMIT PROVIDED UNDER THE LIMITATION ACT EXPIRED, THAT DOES NOT MEA N THE CREDITOR COULD NOT RECOVER THE MONEY FROM THE ASSESSEE. WHAT IS PROHIBITED UNDER THE LIMITATION ACT IS INITIATION OF LEGAL PROCEEDI NGS FOR RECOVERY OF THE AMOUNT. THE LIMITATION ACT OR ANY LAW OF THE LAND DOES NOT PROHIBIT THE CREDITOR TO RECOVER THE MONEY FROM THE ASSESSE E BY ANY OTHER MODES. IN THE COURSE OF THE ACTIVITIES, THE CREDIT OR CAME TO POSSESSION OF THE ASSESSEES MONEY, HE CAN ALWAYS RETAIN THE MONEY AND ADJUST THE SAME AGAINST THE OUTSTANDING AMOUNT. WHEN SUCH IS THE POSITION IN LAW, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MERELY BECAUSE THE ASSESSEE CREDITED THE MONEY UNILATERALLY IN TH E CAPITAL ACCOUNT THAT CANNOT BE REASON TO MAKE ADDITION IN THE HANDS OF THE ASSESSEE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESS ING OFFICER. 9. NOW COMING TO THE GIFT SAID TO BE RECEIVED FROM AS SESSEES FATHER, THE ASSESSEE HAS FURNISHED ALL THE DETAILS INCLUDING THE PAN, ITA NO. 1805/14 :- 8 -: ADDRESS OF THE FATHER ETC. WHEN THE ASSESSEE FURN ISHED THE DETAILS, IT IS FOR THE ASSESSING OFFICER TO EXAMINE FURTHER AND FIND OUT WHETHER THE ASSESSEES FATHER HAS SUFFICIENT SOURCE FOR MA KING THE GIFT. UNFORTUNATELY, THE ASSESSING OFFICER HAS NOT TAKEN ANY PAIN TO EXAMINE FURTHER ON THE BASIS OF THE PARTICULARS FURNISHED B Y THE ASSESSEE. WHEN THE ASSESSING OFFICER HAS NOT EXAMINED THE M ATTER FURTHER ON THE BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE , THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER I S NOT JUSTIFIED IN DISALLOWING THE CLAIM OF GIFT SAID TO BE RECEIVED B Y THE ASSESSEE FROM HIS FATHER. THEREFORE, THE CIT(A) HAS RIGHTLY DELE TED THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF ` 25,05,584/-. 10. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL DO N OT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 15 TH JULY, 2016 RD ITA NO. 1805/14 :- 9 -: &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF