RAJCHANDRA CAPITAL SERVICES P.LTD, MUMBAI V. ACIT CIR 4(2), MUMBAI

ITA 1964/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75780 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 22-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K PANDA
• Assessee Lawyers: NILESH LAPASIA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 1964/MUM/2012 ( / ASSESSMENT YEAR: 2004-05) RAJCHANDRA CAPITAL SERVICES P. LTD. BIQUEES MANSION, NORTH SIDE, 261/2633, D. N. ROAD, FORT, MUMBAI-400 001 VS. ASST. CIT, CIRCLE-4(2), MUMBAI ! ' ./PAN/GIR NO. AAACR 5526 M ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#&' / APPELLANT BY : SHRI NILESH LAPASIA $%!#&' / RESPONDENT BY : SHRI B. P. K. PANDA ( )*&+, / DATE OF HEARING : 11.02.2014 -./&+, / DATE OF PRONOUNCEMENT : 26.02.2014 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE ARISING OUT OF TH E ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-8, MUMBAI (CIT(A) FOR SHORT) DATED 28.12.2011, CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT , 1961 (THE ACT HEREINAFTER) BY THE ASSESSING OFFICER ON 29.03.2010 FOR THE ASSESSMENT YEAR (A.Y.) 2004-05 IN PART. 2. IT WOULD BE RELEVANT TO STATE THE FACTS OF THE C ASE IN BRIEF. THE ASSESSEE, A COMPANY IN THE BUSINESS OF SHARE BROKING, WAS DISALLOWED IT S CLAIM FOR BAD DEBTS, MADE IN THE SUM OF RS.16,54,401/-, ON ASSESSMENT U/S.143(3) OF THE ACT. THE SAME STOOD CONFIRMED IN PART 2 ITA NO. 1964/MUM/2012 (A.Y. 2004-05) RAJCHANDRA CAPITAL SERVICES P. LTD. VS. ASST. CIT IN APPEAL, I.E., TO THE EXTENT THE CONDITION OF SEC TION 36(2)(I) STOOD MET. THIS WAS AS THE CLAIM FOR BAD DEBTS, BEING INCLUSIVE OF THE VALUE O F THE SHARES AND SECURITIES TRADED IN FOR AND BEHALF OF ITS CLIENTS, IT IS ONLY THE BROKERAGE COMPONENT OF THE DEBT RAISED ON THE CLIENTS WHICH WAS FOUND AS IN SATISFACTION OF THE C ONDITION OF SECTION 36(2), TO WHICH A CLAIM FOR BAD DEBT U/S. 36(1)(VII) IS SUBJECT. THE PENALTY PROCEEDINGS, INITIATED AT THE CONCLUSION OF THE ASSESSMENT ON 31.10.2006, WERE PR OCEEDED WITH THEREAFTER, AND PENALTY LEVIED WITH REFERENCE TO THE ENTIRE SUM DISALLOWED, I.E., RS.16.54 LACS. IN FIRST APPEAL, HOWEVER, THE FIRST APPELLATE AUTHORITY CONFIRMED TH E PENALTY ONLY WITH REFERENCE TO THE AMOUNT FOR WHICH THE DISALLOWANCE STOOD SUSTAINED, I.E., RS.2,77,090/-. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. BEFORE US, IT WAS THE ADMITTED POSITION THAT THE DISALLOWANCE U/S. 36(1)(VII) THAT SURVIVES IN THE QUANTUM PROCEEDINGS IS AT RS.2.77 L ACS, AS ONLY THE SAID AMOUNT WAS FOUND TO NOT SATISFY THE CONDITION OF SECTION 36(2). FURT HER, THE MATTER IS NO LONGER RES INTEGRA IN VIEW OF THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. SHREYAS S. MORAKHIA [2012] 342 ITR 285 (BOM), HOLDING THAT THE ENTIRE AMOUNT OF DEBT, I.E., INCLUSIVE OF THE VALUE OF SHARES AND SECURITIES TRA DED IN FOR AND BEHALF OF THE CLIENTS, WOULD CONSTITUTE A DEBT AND, THUS, QUALIFY AS A TRA DE DEBT EVEN IN TERMS OF SECTION 36(2), IRRESPECTIVE OF THE METHOD OF ACCOUNTING BEING FOLL OWED WHEREBY ONLY THE COMMISSION/BROKERAGE INCOME FOR THE SERVICES RENDER ED FORMS PART OF THE OPERATING/INCOME STATEMENT OF THE ASSESSEE, OR OF O NLY THE SAID AMOUNT HAVING BEEN RETURNED AND BROUGHT TO TAX AS INCOME ON INCURRING THE DEBT. IN VIEW OF THIS ADMITTED POSITION, NO CASE FOR LEVY OF PENALTY EVEN ON THE B ALANCE OF RS.2.77 LACS WOULD SURVIVE. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. AS APPARENT FROM THE FOREGOING, THE HONBLE JURISDICTIONAL HIGH COUR T HAVING CONFIRMED THAT THE ENTIRE AMOUNT RECEIVABLE, I.E., INCLUSIVE OF THE VALUE OF THE SECURITIES TRADED IN FOR AND ON BEHALF OF HIS CUSTOMERS, WOULD FORM PART OF THE DEBT EXIGI BLE U/S. 36(2) AS FAR AS A SHARE-BROKER IS CONCERNED, NO PENALTY EVEN ON THE BALANCE AMOUNT OF RS.2.77 LACS IS LEVIABLE; THE 3 ITA NO. 1964/MUM/2012 (A.Y. 2004-05) RAJCHANDRA CAPITAL SERVICES P. LTD. VS. ASST. CIT ASSESSEES STAND QUA THE CLAIM FOR THE ENTIRE AMOUNT HAVING BEEN VINDIC ATED BY THE AFORE- CITED DECISION BY THE HONBLE COURT. THE ASSESSEE S UCCEEDS. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 1/+23451+& ) 6 +&+7 ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 26, 2014 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER ( 8* MUMBAI; 9 DATED : 26.02.2014 )3 ROSHANI , SR. PS !' # $%&' (!'% COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( :+ ; < / THE CIT(A) 4. ( :+ / CIT CONCERNED 5. =)>?$3+3@4 ,@4/ ( 8* / DR, ITAT, MUMBAI 6. ?5A* GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , ( 8* / ITAT, MUMBAI