Lily Enterprise Pvt.Ltd., Ahmedabad V. The ACIT.,(OSD)Range-1, Ahmedabad

ITA 197/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0158 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 25-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 23-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR VAKIL
• Keywords: Business income; Principle of natural justice; Bad and doubtful debts
• Section: 143(3); 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 197/AHD/2012 / ASSESSMENT YEAR : 2007-08 LILY ENTERPRISE PVT LTD, C/O. MEHTA LODHA & CO., CAS, 105, SAKAR-I, ASHRAM ROAD, AHMEDABAD-380009 PAN : AAACL 3749 E VS ACIT (OSD)-I, RANGE-4, AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI PRAKASH D. SHAH, AR REVENUE BY : SHRI SAMIR VAKIL, SR DR / DATE OF HEARING : 25/10/2016 / DATE OF PRONOUNCEMENT: 27/10/2016 / O R D E R PER R.P. TOLANI, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, AHMEDABAD DATED 14.10.2011 FOR ASSESSMENT YEAR 2007-08. 2. FOLLOWING GROUNDS ARE RAISED:- 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN NOT QUASHING THE ORDER PASSED U/S 143(3) OF THE ACT, AS THE SAME IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND THEREFORE THE ORDER PASSED BY T HE LEARNED AO SHOULD BE QUASHED AND/OR DISALLOWANCE OF RS.22,18,603/- IS TO BE ALLOWED WHILE COMPUTING THE TOTAL INCOME. 2. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY NOT ALLOWING THE CLAIM OF RS.22,18,603/- AND THEREFORE THE LEARNED A O SHOULD BE DIRECTED TO ALLOW THE SAME WHILE COMPUTING THE TOTAL INCOME. ITA NO. 197/AHD/2012 LILY ENTERPRISE PVT LTD VS. ACIT AY : 2007-08 2 3. BRIEF FACTS ARE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FINANCE AND TRADING IN SHARES AND SECURITIES. THE ASSESSEE FILE D RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 27.10.2007 DECLARING A LOSS OF RS.1,90,855/-. TAKING INTO CONSIDERATION THE EARLIER CARRIED FORWA RD LOSSES, THE TOTAL LOSSES CLAIMED BY THE ASSESSEE WERE TO THE TUNE OF RS.2,38 ,96,979/-. THE ASSESSEE IN THIS YEAR HAD CLAIMED ACTUAL WRITE OFF OF BAD DEBTS AMOUNTING TO RS.22,18,603/-. ACCORDING TO ASSESSEE, NO NOTICE P ROPOSING ANY DISALLOWANCE OUT OF BAD DEBT WAS EVER SERVED ON THE ASSESSEE AND THE ASSESSING OFFICER MADE THIS DISALLOWANCE WITHOUT HE ARING THE ASSESSEE. THIS DISALLOWANCE DOES NOT RESULT INTO ANY REVENUE IMPLICATION INASMUCH AS IT RESULTED IN REDUCTION OF ASSESSEES LOSS TO RS.2 ,16,78,376/-. 4. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL W HERE THIS GRIEVANCE WAS AGITATED BY WAY OF DETAILED WRITTEN SUBMISSIONS . THE LD. CIT(A) FORWARDED THE WRITTEN SUBMISSIONS TO THE ASSESSING OFFICER FOR REMAND PROCEEDINGS WHICH WERE DULY ATTENDED AND CO-OPERATE D BY THE ASSESSEE BY SUBMITTING THE COPIES OF REQUIRED DOCUMENTS. LD. C IT(A), HOWEVER, CONFIRMED THE DISALLOWANCE BY FOLLOWING OBSERVATION S:- 4.3 IN THE REPLY THE ASSESSEE ONLY SUBMITTED THE CO PY OF THE REPLY FILED BEFORE THE COMMISSIONER OF INCOME TAX (A) AND FAILED TO PR ODUCE THE DETAILS REGARDING THE GENUINENESS OF THE TRANSACTION AND AL SO FAILED TO PROVE THAT AMOUNT WRITTEN OFF WRITING THE CURRENT YEAR AS BUSI NESS LOSS HAS ALREADY BEEN SHOWN AS BUSINESS INCOME IN THE EARLIER YEAR. THE ASSESSEE WAS ALSO ASKED TO JUSTIFY THE CLAIM OF THESE WRITTEN OFF AMOUNT AS BU SINESS LOSS IN VIEW OF THE HONBLE SUPREME COURT DECISION IN THE CASE OF TRF L TD, 323 ITR 39. BUT THE ASSESSEE FAILED TO PROVIDE SUCH DETAILS. 5. AGGRIEVED, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT:- (I) THE ASSESSEES CLAIM OF WRITE OFF OF BAD DEBT W AS MADE WITH AN ALTERNATIVE PLEA THAT OTHERWISE IT MAY BE TREATED A S BUSINESS LOSS ITA NO. 197/AHD/2012 LILY ENTERPRISE PVT LTD VS. ACIT AY : 2007-08 3 U/S. 28 OF THE ACT. THESE WERE BUSINESS ADVANCES MA DE FROM THE YEAR 2004-05 AND ONWARDS AND WERE COMING FROM EARLI ER YEARS. DUE TO SLUMP IN THE SHARE MARKET, ASSESSEE WAS NOT ABLE TO RECOVER THESE AMOUNTS. THE FACT THAT THEY WERE BUS INESS ADVANCES COMING FROM EARLIER YEARS HAS NOWHERE BEEN DISPUTED BY THE AUTHORITIES BELOW. (II) THE LD. CIT(A) IN THE ABOVE OBSERVATIONS HAS G IVEN A SOLITARY FINDING THAT THE ASSESSEE COULD NOT PRODUCE THE DET AILS REGARDING THE GENUINENESS OF THE TRANSACTION. THE OBSERVATION OF THE REVENUE AUTHORITIES ABOUT THE GENUINENESS OF THE TR ANSACTIONS WAS NOT CORRECT INASMUCH AS IN EARLIER YEARS THEY H AVE BEEN ACCEPTED AS BUSINESS ADVANCES. (III) SIMILARLY, THE OBSERVATIONS THAT THE ASSESSEE FAILED TO PROVE THE BUSINESS INCOME IN EARLIER YEARS IS ALSO NOT CORREC T AS IN EARLIER ASSESSMENTS, THEY HAVE BEEN ACCEPTED AS BUSINESS AD VANCES. THE OBSERVATIONS THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF WRITE OFF IS ALSO NOT CORRECT AS HONBLE SUPREME CO URT IN THE JUDGMENT OF TRF LTD (SUPRA) ITSELF HAS HELD THAT AC TUAL WRITE OFF OF BAD DEBT IS TO BE ALLOWED. 7. LD. SR. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. IN OUR CONSIDERED VIEW, THE ENDS OF JUSTICE WILL BE MET IF THE MATTER IS SET ASIDE AND RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE SAME AFRESH INASMUCH AS THE ASSESSEES COMPLETE WRITTEN SUBMISSIONS AND EVI DENCE HAS NOT BEEN ITA NO. 197/AHD/2012 LILY ENTERPRISE PVT LTD VS. ACIT AY : 2007-08 4 CONSIDERED AND ADVERSE INFERENCES HAVE BEEN DRAWN W ITHOUT POINTING OUT THE MATERIAL AVAILABLE ON RECORD. IT WILL BE DESIR ABLE THAT THE LD. ASSESSING OFFICER VERIFY THE EVIDENCES FILED BY THE ASSESSEE AND THE FURTHER SUBMISSIONS WHICH MAY BE MADE BY HIM. IN VIEW THER EOF, THE ISSUE IN QUESTION IS SET ASIDE AND RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAME DE NOVO. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 27 TH OCTOBER, 2016 AT AHMEDABAD. SD/- SD/- (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER (R.P. TOLANI) JUDICIAL MEMBER AHMEDABAD; DATED 27/10/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD