ACIT-CIRCLE-1(1), Nagpur V. FUELCO COAL INDIA LTD., Nagpur

ITA 191/NAG/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4539 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 09-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Business income; Search and seizure; Bad and doubtful debts
• Section: 132

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,NAGPUR BENCH . . , BEFORE S/SH. D T GARASIYA,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ ITA/191/NAG/2014 , / ASSESSMENT YEAR: 2009 - 10. ASSTT. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 1(1), NAGPUR. VS. FUELCO COAL INDIA LTD., FULWANTI PALACE, DESHPANDE LAYOUT, CENTRAL AVENUE, NAGPUR. ( / APPELLANT) ( / RESPONDENT ) REVENUE BY: SHRI A.R. NINAWE. ASSESSEE BY: SHRI K.P. DEWANI. / DATE OF HEARING: 01.09.2016 / DATE OF PRONOUNCEMENT: 01.09.2016 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER,DATED 29/01/2014 OF THE CIT (A) - III,NAGPUR,THE ASSESSING OFFICER(AO)HAS FILED THE PRESENT APPEAL.ASSESSEE - COMPANY ENGAGED IN THE BUSINESS OF TRADING AND TRANSPORTATION OF COAL, FILED ITS RETURN OF INCOME ON 22/01/ 2010,DECLARING AN INCOME OF RS. 2.14 CRORES.IT REVISED ITS RETURN OF INCOME ON 28/ 09/2010, SHOWING INCOME OF RS. 2.23 CRORES.THE AO COMPLETED THE ASSESSMENT U/S.143(3)OF THE ACT ON 24/12/2010, DETERMINING THE INCOME OF THE ASSESSEE AT RS. 2.82CRORES.THE SOLITARY GROUND OF APPEAL, RAISED BY THE AO,IS ABOUT DELETING THE ADDITION OF RS. 46.50 LAKHS. BRIEF FACTS: 2. AN ACTION U/S. 132 (1) OF THE ACT WAS CARRIED OUT AT THE BUSINESS - CUM - RESIDENTIAL PREMISES OF THE ASSESSEE/DIRECTORS ON 28/01/2009.DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS C ERTAIN MATERIALS WERE SEIZED.DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THE AO OBSERVED, BASED UPON THE SEIZED ITEM NUMBER B/8 OF THE ANNEXURE B, DATED 28/01/2009, THAT THE ASSESSEE HAD GIVEN A FINANCE OF RS. 50 LAKHS TO M/S.VISHWA PAPER MILLS(VPM)), THAT IT HAD RETURN OF THE BAD DEBTS OF RS. 46.5 LAKHS AGAINST THE ABOVE STATED LOAN GIVEN. THE AO WAS NOT 2 SATISFIED ABOUT THE EXPLANATION FURNISHED BY THE ASSESSEE AND TOOK A VIEW THAT IT WAS MAINTAINING TO ACCOUNTS OF THE PARTY - VPM - TRADING ACCOUNT AND VPM LOA N ACCOUNT. HE REJECTED THE WRITING OFF OF THE BAD DEBTS AND MADE AN ADDITION OF RS. 46.5 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM THE ASSESSEE MADE ELABORATE SUBMISSIONS AND RELIED UPON CERTAIN CASE LAWS.THE FAA DIRECTED THE AO TO FILE REMAND REPORT. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE REPORT OF THE AO, THE FAA HELD THAT ASSESSEE HAD GIVEN RS. 50 LAKHS IN THE EAR LIER YEAR IS ADVANCED TO VPM WHICH BECAME IRRECOVERABLE DURING THE YEAR, THAT THE ASSESSEE HAD WRITTEN OFF THE SAME AND CLAIMED IT AS DEDUCTION IN THE PROFIT AND LOSS ACCOUNT U/S. 36 (1) OF THE ACT,THAT VPM WAS THE PARTY WHICH WAS PURCHASING COAL FROM THE ASSESSEE, THAT VPM NEEDED ADVANCES ON INTEREST FOR SHORT PERIOD, THAT IT HAD ADVANCED SOME OF RS. 50 LAKHS TO VPM, THAT THE AMOUNT WAS ADVANCED AS TRADE ADVANCE,THAT IT WAS BEARING INTEREST, THAT IT HAD EARNED INTEREST INCOME OF RS.7.02 LAKHS FOR THE IMMED IATELY PRECEDING YEAR FROM VPM, THAT IT HAD CREDITED THE ABOVE STATED INTEREST INCOME IN THE P&L ACCOUNT AND HAD OFFERED THE SAME FOR TAXATION FOR THE AY.2008 - 09,THAT THE ASSESSEE HAD CORRECTLY CLAIMED THAT BASIC CONDITION SPECIFIED U/S.36(2)(I)OF THE ACT WERE COMPLIED WITH.THE FAA ALSO REFERRED TO THE MEMORANDUM OF UNDERSTANDING AND ARTICLE OF ASSOCIATION OF THE COMPANY AND HELD THAT ADVANCING MONEY ON INTEREST WAS ONE OF THE ANCILLARY OBJECT OF THE COMPANY.HE TOOK NOTICE OF THE BOARD RESOLUTION PASSED BY THE MEETING OF THE BOARD OF DIRECTORS, DATED 28/02/2009. FINALLY HELD THAT ASSESSEE HAD RIGHTLY WRITTEN OFF RS. 46.5 LAKHS AS BAD DEBTS AND ALLOWED THE APPEAL FILED BY IT. 4. BEFORE US THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO AND A RGUED THAT ASSESSEE WAS NOT IN THE BUSINESS OF MONEY - LENDING. AUTHORISED REPRESENTATIVE(AR) STATED THAT ASSESSEE HAD WRITTEN OFF THE DEBTS IN 3 THE BOOKS OF ACCOUNTS AFTER BOARD RESOLUTION, THAT INTEREST ARE ON ADVANCE GIVEN HAD BEEN ASSESSED IN THE CASE OF THE ASSESSEE AS BUSINESS INCOME, THAT WRITING OFF OF BAD DEBT U/S.36(2) OF THE ACT WAS SUFFICIENT COMPLIANCE FOR LOSS OF BAD DEBTS, THAT IT WAS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE LOAN IN FACT HAD BECOME IRRECOVERABLE. HE REFERRED TO THE C ASE OF TURNER MORRISON & CO.(245 ITR 724). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT ASSESSEE HAD ADVANCED THE SUMMER RS. 50 LAKHS TO VPM, THAT INTEREST RECEIVED BY IT ON THE ADVANCED AMOUNT WAS SHOWN IN THE BOO KS OF ACCOUNTS AND TAXES WERE PAID ON IT, IT HAD WRITTEN OFF THE DEBT IN THE BOOKS OF ACCOUNT. WE ARE OF THE OPINION ONCE AND AMOUNT IS WRITTEN OFF THE ASSESSEE HAS NOT TO PROVE ANYTHING. WE WOULD LIKE TO REFER TO THE CASE OF TRF LTD. (323 ITR 397). IN THA T CASE THE HONORABLE APEX COURT HAS HELD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE INCOME - TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERAB LE : IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. RESPECTFULLY,FOLLOWING THE ABOVE JUDGMENT WE UPHOLD THE ORDER OF THE FAA AND DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST SEPTEMBER ,2016. 01 , 2016 SD/ - SD/ - ( . . / D T GARASIYA ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER NAGPUR ; DATED :01 . 0 9 . 2016. 4 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR NAGPUR BENCH, ITAT, / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT,NAGPUR.