M/S. ORIENT SHARE & STOCKBROKERS LTD., Mumbai V. THE ITO WD-4(2)(4), Mumbai

ITA 2017/MUM/2005

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6330 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 07-10-2010
• Assessment Year: 1998-1999
• Appeal Filed On: 15-03-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Unexplained cash credit; Opportunity of being heard; Bad and doubtful debts
• Section: 40A(3); 234B; 133(6)

Judgement Text

1 ITA NO 2017/MUM/2005 I II IN THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH G GG G MUMBAI MUMBAI MUMBAI MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI R R R R K PANDA, AM K PANDA, AM K PANDA, AM K PANDA, AM & SHRI VIJAY PAL RAO, JM & SHRI VIJAY PAL RAO, JM & SHRI VIJAY PAL RAO, JM & SHRI VIJAY PAL RAO, JM IT ITIT ITA NO A NO A NO A NO. . . . 2017/MUM/2005 2017/MUM/2005 2017/MUM/2005 2017/MUM/2005 (ASSESSMENT YEAR 1998-99) M/S ORIENT SHARE & STOCK BROKERS LTD B-404 NIRMAL NAGAR MIRA BHYANDER ROAD MIRA ROAD (EAST) MUMBAI 107 VS THE INCOME TAX OFFICER WARD 4(2)(4), MUMBAI (APPELLANT) (RESPONDENT) PAN PAN PAN PAN AAACO1947P AAACO1947P AAACO1947P AAACO1947P ASSESSEE BY: SHRI SANJIV M SHAH REVENUE BY: SHRI A K NAYAK O OO O R RR R D DD D E EE E R RR R PER PER PER PER R RR R K PANDA K PANDA K PANDA K PANDA: :: : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 10.6.2004 OF THE CIT(A)-IV, MUMBAI RELATING TO ASS ESSMENT YEAR 1998-99. 2 GROUNDS OF APPEAL NO.1 BY THE ASSESSEE READS AS U NDER: THE LD CIT(A) ERRED IN FRAMING HIS APPELLATE ORDER DATED 10.6.2004 IN INFRINGEMENT OF THE WHOLESOME PRINCIPLE OF SUBSTANT IAL AND FUNDAMENTAL JUSTICE, IN THAT, HE HAS NOT AFFORDED ADEQUATE AND SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADVANCE AND BUTTRESS ITS VIEW POIN T IN RELATION TO THE DISPUTED ISSUES. 3 AFTER HEARING BOTH THE PARTIES, WE FIND AS AGAINS T THE RETURNED INCOME OF ` 4,30,380/-, THE ASSESSING OFFICER COMPLETED THE A SSESSMENT ON A TOTAL INCOME OF ` 21,86,050/-. THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN SUFFICIENT TIME IN FURNISHING THE CONFIRMATIONS. AFTER CONSIDERING THE SUBMISSIO NS MADE BY THE ASSESSEE, THE 2 ITA NO 2017/MUM/2005 CIT(A) REMANDED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO GRANT SUFFICIENT OPPORTUNITY TO THE ASSESSEE FOR SUBMISSI ON OF THE CONFIRMATIONS AND DIRECTED THE ASSESSING OFFICER TO SEND THE REMAND R EPORT AFTER EXAMINATION OF THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSING OF FICER FURNISHED THE REMAND REPORT. SUBSEQUENTLY, THE CASE WAS POSTED FOR HEAR ING BY THE CIT(A) ON SEVERAL OCCASIONS BUT THERE WAS NO RESPONSE FROM THE ASSES SEE NOR THERE HAS BEEN ANY PETITION FOR ADJOURNMENT OF THE CASE. FINALLY, NOTI CE WAS SERVED ON THE ASSESSEE BY AFFIXTURE ON THE LAST KNOWN ADDRESS I.E. GIVEN I N FORM NO.35. SINCE THERE HAS NOT BEEN ANY RESPONSE FROM THE ASSESSEE, THE CIT(A) DISPOSED OF THE APPEAL ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. UND ER THESE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). SINCE ADMITTEDLY, IN SPITE OF REPEATED OPPORTUNITIES GIVE N BY THE CIT(A), THE ASSESSEE PREFERRED NOT TO APPEAR BEFORE HIM; THEREFORE, WE D ONT FIND ANY MERIT IN THE GROUND RAISED BY THE ASSESSEE. ACCORDINGLY, THE GR OUND RAISED BY THE ASSESSEE IS DISMISSED. 4 GROUNDS OF APPEAL NO.2 BY THE ASSESSEE READS AS U NDER: THE LD CIT(A) ERRED IN APPROVING THE ADDITION OF ` . 50,000/- IN RELATION TO ALLEGED UNEXPLAINED CASH CREDIT ON THE PREMISE THAT NO EVIDENCE WAS ADDUCED BEFORE THE ASSESSING OFFICER WITH REGARD TO THE SAME. 4.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER NOTICED THAT SEVERAL PARTIES HAVE BEEN SHOWN AS HAVING GIVEN LOA NS TO THE ASSESSEE COMPANY. THE ASSESSEE WAS ASKED TO FILE CONFIRMATIO NS. THE ASSESSEE FILED SOME CONFIRMATIONS AND SUBMITTED THAT TEN PARTIES H AVE TURNED HOSTILE AND ACCORDINGLY REQUESTED THE ASSESSING OFFICER TO ISSU E SUMMONS TO THOSE PARTIES. 3 ITA NO 2017/MUM/2005 THE ASSESSING OFFICER, THEREAFTER, ISSUED SUMMONS T O THOSE PARTIES. OUT OF THEM SOME OF THE SUMMONS WERE RETURNED UN-SERVED. IN SOM E CASES REPLIES GIVEN BY CREDITORS WERE NOT ACCEPTED BY THE ASSESSING OFFICE R. ACCORDINGLY, THE ASSESSING OFFICER MADE ADDITION OF ` 9,25,000/- U/S 68 OF THE I T ACT. 4.2 IN APPEAL, THE CIT(A) CALLED FOR A REMAND REPOR T FROM THE ASSESSING OFFICER AND ON THE BASIS OF THE REMAND REPORT, HE DELETED AN AMOUNT OF ` 8,75,000/- AND SUSTAINED AN AMOUNT OF ` 50,000/-. 5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL HERE BEFORE US. 6 THE LD COUNSEL FOR THE ASSESSEE, REFERRING TO PA GE 19 OF THE PAPER BOOK, DREW THE ATTENTION OF THE BENCH TO THE NOTICE U/S 1 33(6) ISSUED BY THE ASSESSING OFFICER WHERE HE HAS LISTED DOWN 7 PARTIES. REFERR ING TO PAGE 20 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO THE COP Y OF THE NOTICE ISSUED U/S 133(6) BY THE ASSESSING OFFICER TO THE SEVEN PARTIE S. REFERRING TO PAGE 21 OF THE PAPER BOOK, HE SUBMITTED THAT THE ASSESSEE HAS FILE D ALL THE CONFIRMATION LETTERS EXCEPT THE CONFIRMATION LETTER IN THE CASE SHRI N R INVESTMENTS. AGAIN REFERRING TO PAGE 19, HE SUBMITTED THAT THE AMOUNT REFLECTED IN THE NAME OF N R INVESTMENTS IS STATED TO BE ` 25,000/-. THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF ` 50,000/-. 4 ITA NO 2017/MUM/2005 6.1 THE LD DR, ON THE OTHER HAND, REFERRING TO PA GE 2 OF THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE HAS NOT DISCHARGED THE ONUS CAST UPON IT IN CASE OF SHRI SHYAM SUNDER BANG FROM WHOM THE ASSESSEE HAS T AKEN LOAN OF ` 50,000/-; THEREFORE, THE ORDER OF THE CIT(A) SHOUL D BE UPHELD. 7 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. ADMITTEDLY, THE ASSESSING OFFICER HA S MADE ADDITION OF ` 9,25,000/- ON ACCOUNT OF LOAN TAKEN BY THE ASSESSE E COMPANY FROM VARIOUS PARTIES AND IN RESPECT OF WHOM FULL DETAILS WERE NO T FURNISHED ON THE GROUND THAT THOSE CREDITORS TURNED HOSTILE. WE FIND DURING T HE APPEAL PROCEEDINGS, THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSIN G OFFICER AND ON THE BASIS OF THE REMAND REPORT, HE DELETED THE ADDITION OF ` 8,75,000/- AND SUSTAINED AN ADDITION OF ` . 50,000/-. FROM THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE, ALTHOUGH ALL THE PAPERS WERE FILED, COPY OF THE REM AND REPORT FROM THE ASSESSING OFFICER IS NOT ENCLOSED. EVEN IN THE ORDER OF THE C IT(A) ALSO IT IS NOT CLEAR FROM WHOM THE ASSESSEE HAS NOT RECEIVED THE CONFIRMATI ON LETTER, FOR WHICH HE HAS SUSTAINED THE ADDITION. FROM PAGE 2 OF THE ASSESS MENT ORDER, IT SEEMS THAT THE ASSESSEE HAS ALREADY FILED CONFIRMATIONS FROM N R I NVESTMENT WHEREAS NO REPLY WAS RECEIVED BY THE ASSESSING OFFICER. HOWEVER, IN CASE OF SHYAM SUNDER BANG, ADDITION OF ` 50,000/- WAS MADE BY THE ASSESSING OFFICER FOR NO N-RECEIPT OF ANY REPLY. 7.1 IT IS THE SUBMISSION OF THE LD DR THAT THE ASSE SSEE HAS NOT DISCHARGED ITS ONUS IN THE CASE OF SHYAM SUNDER BANG FOR WHICH THE ADDITION OF ` 50,000/- HAS 5 ITA NO 2017/MUM/2005 BEEN SUSTAINED BY THE CIT(A). HOWEVER, IT IS THE S UBMISSION OF THE LD COUNSEL OF THE ASSESSEE THAT SINCE THE ASSESSEE HAS NOT SUBMIT TED REPLY OF N R INVESTMENTS, THE ADDITION OF ` . 25000/- AT BEST CAN BE SUSTAINED. SINCE NOTHING IS CLEARLY COMING OUT OF THE ORDER OF THE CIT(A) AN D SINCE COPY OF THE REMAND REPORT IS NOT AVAILABLE IN THE PAPER BOOK ON THE BA SIS OF WHICH THE CIT(A) HAS SUSTAINED ADDITION OF AN AMOUNT OF ` 50,000/-; THEREFORE, WE IN THE INTEREST OF JUSTICE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE CIT(A) WITH THE DIRECTION TO PASS A SPEAKING ORDER ON THIS ISSUE. NEEDLESS TO SAY, THE CIT(A) SHALL GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. WE HOLD AND DIRECT A CCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTI CAL PURPOSE. 8 GROUNDS OF APPEAL NO.3 BY THE ASSESSEE READS AS U NDER: THE LD CIT(A) ERRED IN MAINTAINING THE DISALLOWANC E OF EXPENDITURE OF ` 1,29,240/- ON THE GROUND THAT NO EVIDENCE WAS PROVI DED BY THE APPELLANT THERETO. 8.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IN ITS P&L ACCOUNT CLAIMED EXPENDITURE OF ` 1,53,240/- WHICH HAS BEEN INCURRED BY ITS SISTER C ONCERN M/S NAVIN & ASSOCIATES WHICH HAS BEEN REIMBURSED BY TH E ASSESSEE TO THEM. THE TOTAL EXPENDITURE STATED BY THE ASSESSEE IS AS UNDE R: I) TELEPHONE EXPENSES ` 10,588/- II) PRINTING & STATIONARY ` 13,020/- III) COURIER EXPENSES ` 92,464/- IV_ STAFF WELFARE ` 10,268/- V) REPAIRS & MAINTENANCE ` 6,900/- VI) POSTAGE & TELEGRAM ` 20,000/- ` 1,53,240/- ====== 6 ITA NO 2017/MUM/2005 8.2 SINCE AN AMOUNT OF ` 1,20,000/- HAS BEEN PAID IN CASH, THE ASSESSEE HA S DISALLOWED AN AMOUNT OF ` 24,000/- U/S 40A(3) OF THE I T ACT. THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY AND SHOW THE EVIDENCES FIRSTLY THAT THE EXPENDITURE CLAIMED HAS BEEN INCURRED AND SECONDLY THAT IT IS FOR THE BUSINESS OF THE ASSESSEE. IN ABSENCE OF ANY EVIDENCE FURNISHED BY THE ASSESSEE AND OBSERVING THAT SIMILAR HEADS OF EXPENDITURE APPEAR IN THE P&L ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE BALA NCE AMOUNT OF ` 1,29,240/- SINCE THE ASSESSEE HAS ALREADY DISALLOWE D ` 24,000/- ITSELF. 9.2 IN APPEAL BEFORE THE CIT(A), IT WAS SUBMITTED T HAT THE ASSESSEE AND ITS SISTER CONCERN WERE CARRYING ON BUSINESS FROM THE C OMMON PREMISES. THE SISTER CONCERN HAS INCURRED CERTAIN EXPENSES ON BEHALF OF THE ASSESSEE AND THEREAFTER RAISED DEBIT NOTES ON THE ASSESSEE DULY SUPPORTED B Y THE RELEVANT BILLS AND VOUCHERS OF THE EXPENDITURE. IT WAS SUBMITTED THA T SINCE THE EXPENDITURE HAS BEEN REIMBURSED, THE SAME SHOULD HAVE BEEN ALLOWED. HOWEVER, THE CIT(A) WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASS ESSEE. HE NOTED THAT NO EVIDENCE HAS BEEN PRODUCED BY THE ASSESSEE IN RESPE CT OF EXPENDITURE INCURRED ALONG WITH NECESSARY EVIDENCES SUCH AS DEBIT NOTES RAISED BY SISTER CONCERN AND ACCORDINGLY UPHELD THE ADDITION MADE BY THE ASSESSI NG OFFICER. 10 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL HERE BEFORE US. 7 ITA NO 2017/MUM/2005 11 THE LD COUNSEL FOR THE ASSESSEE, REFERRING TO TH E PAGE 40 OF THE PAPER BOOK, DREW THE ATTENTION OF THE BENCH TO THE REPLY GIVEN TO THE ASSESSING OFFICER VIDE LETTER DATED 17.2.2001. REFERRING TO THE CLAU SE 2 OF THE SAID LETTER, THE LD COUNSEL FOR THE ASSESSEE, DREW THE ATTENTION OF THE BENCH AND SUBMITTED THAT M/S NAVIN & ASSOCIATES HAVE INCURRED VARIOUS EXPENSES O N BEHALF OF THE ASSESSEE SUCH AS COURIER EXPENSES, TELEPHONES EXPENSES ETC., AND THEY HAVE RAISED MONTHLY DEBIT NOTES AGAINST THE ASSESSEE AND THE AS SESSEE HAS MADE THE PAYMENTS. IN THE SAID LETTER, THE ASSESSEE HAS ALSO PRODUCED THE ORIGINAL DEBIT NOTES FOR THE PERUSAL OF THE ASSESSING OFFICER. RE FERRING TO PAGES 47 TO 57 OF THE PAPER BOOK, THE LD COUNSEL FOR THE ASSESSEE DREW TH E ATTENTION OF THE BENCH TO THE DEBIT NOTES RAISED BY M/S NAVIN & ASSOCIATES ON THE ASSESSEE COMPANY ON ACCOUNT OF VARIOUS EXPENSES INCURRED BY THEM ON BEH ALF OF THE ASSESSEE COMPANY. REFERRING TO THE PAGE 24 OF THE PAPER BOO K, HE SUBMITTED THAT VIDE LETTER DATED 10.2.2001 COPY OF THE ACCOUNT OF M/S N AVIN & ASSOCIATES WAS FILED BEFORE THE ASSESSING OFFICER. HE SUBMITTED THAT THE EXPLANATION GIVEN BY THE ASSESSEE HAS COMPLETELY IGNORED BY THE ASSESSING OF FICER AS WELL AS THE CIT(A). 11.1 ON THE OTHER HAND, THE LD DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 12 AFTER HEARING THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, WE FIND THE ASSESSEE ADMITTEDLY HAS FILED EXPLANATION DULY SUPP ORTED WITH DEBIT NOTES RAISED BY M/S NAVIN & ASSOCIATES, THE SISTER CONCERN OF TH E ASSESSEE COMPANY. WE FIND THE EXPLANATION AND THE EVIDENCES FURNISHED BY THE ASSESSEE WERE COMPLETELY IGNORED BY THE ASSESSING OFFICER. THE CIT(A) WAS A LSO FACTUALLY INCORRECT IN 8 ITA NO 2017/MUM/2005 MENTIONING THAT NO EVIDENCE HAS BEEN PRODUCED BY THE ASSESSEE IN RESPECT OF THE EXPENDITURE INCURRED ALONG WITH NECESSARY EVIDE NCES SUCH AS DEBIT NOTES RAISED BY THE SISTER CONCERN. SINCE THE PAPER BOO K CONTAINS THE EXPLANATION GIVEN BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND SUPPORTED WITH DEBIT NOTES ISSUED BY THE SISTER CONCERN AND SINCE THE LD DR COULD NOT CONTROVERT THE ABOVE DOCUMENTARY EVIDENCES, THEREFORE, WE SET A SIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO D ELETE THE ADDITION OF ` . 1,29,240/-. THE GROUND RAISED BY THE ASSESSEE IS AC CORDINGLY ALLOWED. 13 GROUNDS OF APPEAL NO.4 BY THE ASSESSEE READS AS UNDER: THE LD CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF ` . 7,01,429/- PERTAINING TO BAD DEBTS EMANATING FROM BAD DELIVERI ES ON THE COUNT THAT THE APPELLANT HAD NEVER PRODUCED ANY EVIDENCE TO TH AT EFFECT. 13.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSEE CLAIMED BAD DEBTS AMOUNTING TO ` 7,01,429/- ON ACCOUNT OF THE FOLLOWING PARTIES: I) BAHADUR PAISATA ` 4,46,774/- II PUNET INVESTMENT ` 95,810/- III) ESSAR SECURITES ` 91,348/- IV) INVESTOR CENTRE ` 67,505/- TOTAL TOTAL TOTAL TOTAL ` `` ` 7,01,429/ 7,01,429/ 7,01,429/ 7,01,429/- -- - 13.2 ON BEING QUESTIONED BY THE ASSESSING OFFICER I T WAS SUBMITTED THAT DESPITE REMINDERS AND TELEPHONIC CALLS FOR RECOVERY OF THE AMOUNTS, THE ASSESSEE COULD SUCCEED. SINCE THERE WAS NO RECOVERY IN LAST THREE YEARS, THE ASSESSEE CONSIDERED THE SAME AS BAD DEBTS AND ACCORDINGLY WR ITTEN OFF THE SAME. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE C ONTENTION OF THE ASSESSEE. RELYING ON THE DECISION OF THE D BENCH OF THE DEL HI ITAT, IN THE CASE OF INDIA 9 ITA NO 2017/MUM/2005 TERMIC CORPORATION LTD REPORTED IN 56 ITD 308 (DEL) HE NOTED THAT THE ASSESSEE HAS TO SHOW THAT THE DEBTS HAVE BECOME BAD. SINCE NO EVIDENCES WERE FILED, HE DISALLOWED THE CLAIM OF THE ASSESSEE. 13.3 BEFORE THE CIT(A), IT WAS SUBMITTED THAT DEBT S AROSE ON ACCOUNT OF BAD DELIVERIES MADE BY CLIENTS AND ASSESSEE COULD NOT COLLECT ANY PART OF THE MONEY; THEREFORE, THE SAME WAS WRITTEN OFF. HOWEVER, THE CIT(A) WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THA T THE ASSESSEE HAS NEVER PRODUCED EVIDENCE TO THE EFFECT THAT DEBTS AROSE ON ACCOUNT OF BAD DELIVERIES MADE BY THE CLIENTS AND THE ASSESSEE HAS TAKEN MINI MUM EFFORTS TO COLLECT THE DEBTS. HE ACCORDINGLY CONFIRMED THE ADDITION MADE T HE ASSESSING OFFICER. 14 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL HERE BEFORE US. 15 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ISSUE RELATES TO BAD DEBTS IN THE CASE OF SHARE BROKERS AND THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH O F THE TRIBUNAL IN THE CASE OF DCIT VS SHRI SHREYAS S MORAKHIA REPORTED IN 5 ITR 1 (TRIBUNAL). HE ALSO RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS PARSHVA SECURITIES P LTD VIDE ITA NO. 1247 OF 2007 VIDE ORD ER DATED 1.8.2008 AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TRF LTD VS CIT REPORTED IN 230 CTR 14 (SC) 10 ITA NO 2017/MUM/2005 15.1 THE LD DR, ON THE OTHER HAND, SUBMITTED THAT I N THE CASE OF SHRI SHREYAS S MORAKHIA (SUPRA) LITIGATION WAS GOING ON WHEREAS IN THE INSTANT CASE, NO SUCH LITIGATION IS GOING ON AND THE ASSESSEE HAS PASSED FANCIFUL ENTRY BY CLAIMING BAD DEBTS WRITTEN OFF. HE SUBMITTED THAT THE DECISION I N THE CASE OF TRF LTD (SUPRA) IS NOT APPLICABLE ON THE FACTS OF THE PRESE NT CASE. REFERRING TO THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS KOHLI BROS. COLOUR LAB (P) LTD REPORTED IN 186 TAXMAN 62(ALL) H E SUBMITTED THAT THE ASSESSING OFFICER BEFORE ALLOWING/ REFUSING DEDUCTI ON OF BAD DEBTS IS FULLY EMPOWERED TO MAKE AN ENQUIRY AS TO WHETHER ENTRY OF WRITING OFF BAD DEBTS OR PART THEREOF IS GENUINE ENTRY AND NOT IMAGINARY AND FANCIFUL ENTRY. HE ACCORDINGLY SUPPORTED THE ORDERS OF THE ASSESSING O FFICER AND THE CIT(A). 15.2 THE LD COUNSEL FOR THE ASSESSEE IN HIS REJOIND ER, REFERRING TO THE PAGE 22 OF THE PAPER BOOK, DREW THE ATTENTION OF THE BENCH TO THE REPLY GIVEN BY THE ASSESSEE TO THE ASSESSING OFFICER ON ACCOUNT OF CLA IM OF BAD DEBTS IN RESPECT OF FOUR PARTIES. HE SUBMITTED THAT ENTRIES ARE NOT FA NCIFUL ENTRY AND THE LD DR CANNOT GO BEYOND THE ASSESSMENT ORDER. IT IS NOT TH E CASE OF THE ASSESSING OFFICER THAT THESE ARE FANCIFUL ENTRIES. 16 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. FROM THE COPY OF THE ASSESSMENT ORDER, IT IS CRYSTA L CLEAR THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BAD DEBTS OF ` . 7,,01,429/- IN CASES OF THE FOUR PARTIES ON THE GROUND THAT THE ASSESSEE HAS TO SHOW THAT THE DEBTS HAVE BECOME 11 ITA NO 2017/MUM/2005 BAD. WE FIND THE CIT(A) UPHELD THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAS NEVER PRODUCED ANY EVIDENCE TO THE EFFECT THAT DEBTS AROSE ON ACCOUNT OF BAD DELIVERIES MADE BY THE CLIENTS AND THE ASSESSEE HAS TAKEN MINIMUM EFFORTS TO COLLECT THE DEBTS. 16.1 WE FIND, THIS ISSUE NOW STANDS DECIDED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD (SUPRA) WHEREIN IT HAS BEEN HELD THAT AFTER 1.4.1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT DEBT, IN FACT, H AS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. SINCE THE ASSESSEE IN THE INSTANT CASE ADMITTEDLY H AS WRITTEN OFF THE AMOUNT IN THE BOOKS OF ACCOUNT; THEREFORE, IT IS NOT NECESSAR Y ON THE PART OF THE ASSESSEE TO DEMONSTRATE THAT THE AMOUNT HAS BECOME BAD OR SOME EFFORTS HAS BEEN MADE FOR REALIZATION OF THE DEBT. WE, THEREFORE, SET AS IDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION . THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 17 GROUNDS OF APPEAL NO.5 BY THE ASSESSEE READS AS UNDER: THE LD CIT(A) ERRED IN IMPOSING INTEREST ON THE AP PELLANT U/S 234B AND 234C. 18 AFTER CONSIDERING THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, WE ARE OF THE CONSIDERED OPINION THAT CHARGING OF INTERES T U/S 234B & 234C IS MANDATORY AND CONSEQUENTIAL IN NATURE. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 12 ITA NO 2017/MUM/2005 19 GROUNDS OF APPEAL NO. 6 & 7 BEING GENERAL IN NAT URE ARE DISMISSED. 20 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 26 TH , DAY OF NOV 2010. SD/- SD/- ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 26 TH , NOV 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI