Elemec Industries, Pune V. ACIT, Circle-8, Pune

ITA 2159/PUN/2012

• Counselvise Citation: 215924514 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 01-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: P J AP TE
• Keywords: Business income; Earning of tax free income; Bad and doubtful debts; Revised return
• Section: 14A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.2158 AND 2159/PN/2012 (ASSESSMENT YEARS 2008-09 & 2009-10) ELEMEC INDUSTRIES, PLOT NO.A-119/122, H-BLOCK, MIDC, PIMPRI, PUNE-411018 .. APPELLANT PAN NO.AAAFE7347N VS. ACIT, CIRCLE-8, PUNE .. RESPONDENT ITA NO.2248/PN/2012 (ASSESSMENT YEAR 2009-10) ACIT, CIRCLE-8, PUNE .. APPELLANT VS. ELEMEC INDUSTRIES, PLOT NO.A-119/122, H-BLOCK, MIDC, PIMPRI, PUNE-411018 PAN NO.AAAFE7347N .. RESPONDENT ASSESSEE BY : SHRI P.J. APTE REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 18-03-2014 DATE OF PRONOUNCEMENT : 21-03-2014 ORDER PER R.K. PANDA, AM : ITA NO.2158/PN/2012 FILED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER DATED 24-08-2012 OF THE CIT(A)-V, PUNE RE LATING TO ASSESSMENT YEAR 2008-09. ITA NO.2159/PN/2012 FILED BY THE ASSESSEE & ITA NO.2248/PN/2012 FILED BY THE REVENUE ARE CROSS APPEALS AND ARE DIRECTED AGAINST THE ORDER DATED 10 -08-2012 OF THE CIT(A)-V, PUNE RELATING TO ASSESSMENT YEAR 2009-10. FOR THE SAKE 2 OF CONVENIENCE ALL THE ABOVE APPEALS WERE HEARD TOG ETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.2158/PN/2012 (BY ASSESSEE) (A.Y. 2008-09) : 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER: THE LD.CIT(A)-V, PUNE ERRED ON FACTS AS WELL AS IN LA W IN CONFIRMING THE DISALLOWANCE U/S.14A OF THE INCOME TAX ACT, 1961 R.W. RULE 8D OF THE INCOME TAX RULES, 1962 OF RS.2,33,081/-. THE DISA LLOWANCE OUGHT TO BE DELETED.. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND S ELLING OF MAGNETO ASSEMBLY AND ITS COMPONENTS AND DIESEL ENGINE PARTS . IT FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,04, 45,380/- ON 26-09- 2008. SUBSEQUENTLY, HE FILED A REVISED RETURN DECL ARING TOTAL INCOME OF RS.94,72,004/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS SHOWN INTEREST FREE INCOME. ACCORDINGLY, HE CONFRONTED THE ASSESSEE ON THE ISSU E AND ASKED TO EXPLAIN AS TO WHY PROVISIONS OF SECTION 14A R.W. RU LE 8D SHOULD NOT BE APPLIED. THE ASSESSEE EXPLAINED THAT IT HAD EARNED INTEREST OF RS.1,33,33,804/- WHILE TOTAL INTEREST PAID WAS RS.1 ,17,83,508/- AND THEREFORE THERE WAS NO REASON FOR DISALLOWANCE U/S. 14A OF INCOME-TAX ACT AS INTEREST DEBITED TO P&L ACCOUNT WAS IN NEGAT IVE. THE AO HOWEVER DID NOT ACCEPT THE ABOVE CONTENTION OF THE ASSESSEE AND MADE DISALLOWANCE OF RS.2,33,081/- U/S.14A OF INCOME-TAX ACT. 3 2.2 BEFORE CIT(A) IT WAS SUBMITTED THAT THE ASSESSE E HAD MADE INVESTMENT IN THE MUTUAL FUNDS AMOUNTING TO RS.20 L AKHS DURING THE RELEVANT FINANCIAL YEAR IN ADDITION TO OPENING BALA NCE OF RS.10LAKHS ON WHICH IT HAS EARNED DIVIDEND OF RS.1,09,530/-. IT WAS SUBMITTED THAT NO EXPENDITURE WAS INCURRED TO EARN THE EXEMPT INCOME AND THAT THE INTEREST THE FIRM WAS PAYING TO BANKS AND OTHER S WERE TOWARDS LOANS THAT WERE TAKEN AND UTILISED FOR THE MANUFACT URING BUSINESS ACTIVITY AND THAT NO PART OF THE LOAN WAS UTILISED FOR MAKING INVESTMENT IN MUTUAL FUNDS. IT WAS SUBMITTED THAT THE INVESTM ENT MADE IN THE MUTUAL FUNDS WAS OUT OF THE FIRMS RESERVES AND THE REFORE NO DISALLOWANCE U/S.14A IS CALLED FOR. RELYING ON VAR IOUS DECISIONS IT WAS SUBMITTED THAT SINCE THE AO HAS FAILED TO SHOW THAT THE FIRM HAS INCURRED ANY EXPENDITURE TO EARN EXEMPT INCOME, THE REFORE, NO DISALLOWANCE U/S.14A IS CALLED FOR. ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE, IT WAS SUBMITTED THAT THE F IRM HAS EARNED INTEREST INCOME OF RS.1,67,38,374/- AND PAID INTERE ST OF RS.1,36,42,655/- AND THEREFORE THERE IS POSITIVE IN COME FROM MONEY LENDING BUSINESS. THEREFORE, ALLOCATING ANY INTERE ST EXPENDITURE OF EXEMPT INCOME WILL NOT BE IN THE TRUE SPIRIT OF LAW . 3. HOWEVER, THE LD. CIT(A) WAS NOT SATISFIED WITH T HE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE DISALLOWANCE M ADE BY THE AO BY OBSERVING AS UNDER : 5. AFTER CAREFULLY CONSIDERING THE FACTS OF THE CASE , IT IS SEEN THAT THE APPELLANT HAS MADE INVESTMENT IN MUTUAL FUNDS AMO UNTING TO RS. 20 LACS DURING THE RELEVANT FINANCIAL YEAR IN ADDITI ON TO OPENING BALANCE OF RS.10 LACS ON WHICH IT HAS EARNED DIVIDEN D OF RS.1,09,570/-. THE APPELLANT SUBMITS THAT THERE IS NO PROXIMATE CAUSE FOR DISALLOWANCE. HOWEVER, FROM THE PERUSAL OF BANK STATE MENT, IT IS SEEN 4 THAT THE INVESTMENT IN MUTUAL FUNDS HAS BEEN MADE THRO UGH CASH CREDIT A/C IN COSMOS CO-OPERATIVE BANK LTD. IT IS ALSO SEEN THAT MAJOR PART OF THE YEAR THERE IS DEBIT BALANCE IN THE CC A/ C., WHICH CLEARLY PROVES THAT INTEREST BEARING FUND HAS BEEN UTILIZED. I N ANY CASE THE SOURCE OF INVESTMENT IS THROUGH CASH CREDIT ACCOUNT AND THEREFORE APPELLANT CANNOT CLAIM THAT SURPLUS FUND HAS BEEN UTI LIZED FOR THE PURP.OSE OF INVESTMENT IN MUTUAL FUNDS. THE CLAIM OF T HE APPELLANT THAT AFTER INVESTMENT IN MUTUAL FUNDS THERE IS CREDIT BALANCE IN CC A/C IS JUST TO CAMOUFLAGE THE REAL NATURE OF TRANSACTION A S IT IS APPARENT FROM THE BANK STATEMENT THAT ALMOST MAJOR PART OF THE YEAR THERE WAS DEBIT BALANCE IN THE CC A/C ACCOUNT AND JUST BECAUSE SOMETIMES THERE WAS CREDIT BALANCE IN CC A/C ACCOUNT, IT CANNOT BE/SA ID THAT INTEREST BEARING FUND HAS NOT BEEN DIVERTED AS LONG AS THE FAC T PROVED THAT THERE WAS DEBIT BALANCE IN MAJOR PART OF THE YEAR. T HEREFORE, I DO NOT FIND ANY JUSTIFICATION FOR INTERFERING IN THE ORDER OF THE ASSESSING OFFICER. ACCORDINGLY, THE DISALLOWANCE OF RS.2,33,081 /- U/S.14A R.W. RULE 8D IS UPHELD. THE GROUND IS THUS DISMISSED. 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE ASSESSING OFFICER AND CIT(A). R EFERRING TO THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. KARNAVATI PETROCHMEM PVT. LTD. VIDE ITA NO.2228 /AHD/2012 ORDER DATED 05-07-2013 FOR A.Y. 2008-09 HE SUBMITTE D THAT THE TRIBUNAL IN THE SAID DECISION HAS DISMISSED THE APP EAL FILED BY THE REVENUE AND UPHELD THE ORDER OF THE CIT(A) ON THE G ROUND THAT INTEREST INCOME WAS MORE THAN THE INTEREST EXPENSES AND NO NEXUS HAS BEEN ESTABLISHED BY THE AO WITH THE AMOUNT INCURRED BY THE ASSESSEE FOR EARNING THE TAX FREE INCOME. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED TH AT THE CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT INTEREST BEARING F UND HAS BEEN UTILISED TOWARDS PURCHASE OF MUTUAL FUNDS. THEREFORE, THE D ECISION RELIED ON 5 BY THE LD.COUNSEL FOR THE ASSESSEE IS NOT APPLICABL E TO THE FACTS OF THE PRESENT CASE. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. WE FIND IN THE INSTANT CASE THE LD.CIT(A) HAS GIVEN A CATEGORI CAL FINDING THAT THE INVESTMENT IN MUTUAL FUND HAS BEEN MADE THROUGH CAS H CREDIT ACCOUNT IN COSMOS COOPERATIVE BANK LTD. HE HAS FURTHER GIV EN A FINDING THAT THERE IS DEBIT BALANCE IN THE CASH CREDIT ACCOUNT D URING THE MAJOR PART OF THE YEAR. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT INVESTMENT IN MUTUAL FUND HAS BEEN MADE OUT OF THE CASH CREDIT ACCOUNT. THUS, THERE IS PROXIMATE RELATIONSHIP BET WEEN THE EXPENDITURE AND THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. ONCE SUCH PROXIMITY RELATIONSHIP EXISTS TH E DISALLOWANCE HAS TO BE EFFECTED, THEREFORE, THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE EXEMPT INCOME IS WITHOUT ANY BASIS IN VIEW OF THE FACT THA T INTEREST BEARING BORROWED FUND HAS BEEN DIVERTED TOWARDS INVESTMENT IN MUTUAL FUND. UNDER THESE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN UPHOLDING THE ADDITION MADE BY THE AO. W E ACCORDINGLY UPHOLD THE SAME. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY DISMISSED. 6 ITA NO.2159/PN/2012 (BY ASSESSEE) (A.Y. 2009-10) : 7. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER: THE LD.CIT(A)-V, PUNE ERRED ON FACTS AS WELL AS IN LA W IN CONFIRMING THE DISALLOWANCE U/S.14A OF THE INCOME TAX ACT, 1961 R.W. RULE 8D OF THE INCOME TAX RULES, 1962 OF RS.3,36,215/-. THE DISA LLOWANCE OUGHT TO BE DELETED.. 7.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL IN ITA NO.2158/PN/201 2. WE HAVE ALREADY DISCUSSED THE ISSUE AND DISMISSED THE GROUN D RAISED BY THE ASSESSEE. FACTS BEING SIMILAR, THEREFORE, FOLLOWIN G THE SAME RATIO, THE ABOVE GROUND BY THE ASSESSEE IS DISMISSED. ITA NO.2248/PN/2012 (BY REVENUE) (A.Y. 2009-10) : 8. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE FI RM HAD WRITTEN OFF BAD DEBTS IN RESPECT OF THE FOLLOWING PARTIES : 8.1 THE ASSESSING OFFICER FURTHER NOTICED THAT THE ABOVE AMOUNTS REPRESENTED LOAN ADVANCED BY THE ASSESSEE IN THE EA RLIER YEARS WHICH HAD BEEN WRITTEN OFF AS BAD DEBTS DURING THE PREVIO US YEAR RELEVANT TO THE A.Y. 2009-10. THE ASSESSING OFFICER ASKED THE A SSESSEE FIRM TO EXPLAIN THE ADMISSIBILITY OF THE SAME. IN REPLY, TH E ASSESSEE FIRM SL.NO. NAME OF THE PARTY BAD DEBT WRITTEN OFF (RS.) 1 ALNESH MOTORS RS.3,00,000/- 2 SHRI MAHESH OIL DISTRIBUTORS RS.3,00,000/- 3 SUPERLEX TRADING RS.2,00,000/- 4 SHRI PANCHMUKHI ENTERPRISES RS.2,00,000/- TOTAL RS.10,00,000/- 7 SUBMITTED THAT IT HAD ADVANCED MONEY TO OTHER PARTI ES IN THE PAST FROM IT'S SURPLUS FUND AND HAS EARNED INTEREST ON THE SA ME. IT WAS FURTHER SUBMITTED THAT ALL ALONG THE PAST, THE INTEREST INC OME HAS BEEN ASSESSED AS BUSINESS INCOME. THE ASSESSEE STATED TH AT IN THE PRESENT ASSESSMENT YEAR TOO INTEREST INCOME OF RS.1,67,38,3 74/- WAS CREDITED IN PROFIT & LOSS A/C AS BUSINESS INCOME. MOREOVER, IT WAS ALSO ESTABLISHED FROM RECORDS THAT THE ASSESSEE FIRM WAS DOING MONEY LENDING BUSINESS. 8.2 HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE THAT IT WAS ENGAGED IN MONEY LENDIN G BUSINESS. HE POINTED OUT THAT NO SUCH ACTIVITY WAS MENTIONED IN THE 3CD REPORT. FURTHER, THE ASSESSEE HAS NOT CLAIMED TO BE CARRYIN G OUT MONEY LENDING BUSINESS IN PAST OR SUBSEQUENT YEARS. THE AO ACCORD INGLY CONCLUDED THAT THE CONDITIONS LAID DOWN IN SECTION 36(1)(VII) R.W.S. 36(2) OF THE I.T. ACT, 1961 WERE NOT SATISFIED AND THEREFORE MAD E DISALLOWANCE OF RS.10 LAKHS. 8.3 BEFORE CIT(A) IT WAS SUBMITTED THAT THE ASSESSE E IS A PARTNERSHIP FIRM AND AS PER CLAUSE (5) OF THE PARTN ERSHIP DEED THE FIRM IS ENTITLED TO DO ANY OTHER BUSINESS WHICH THE PART NERS MAY MUTUALLY DECIDE AMONGST THEMSELVES FROM TIME TO TIME APART F ROM THE BUSINESS OF MANUFACTURING AND SELLING OF AUTOMOBILE MAGNETOS AND ITS COMPONENTS AND PRODUCTS. IT WAS ARGUED THAT IN THE MEETING OF THE PARTNERS OF THE FIRM HELD ON 15-09-1998 THE FIRM DE CIDED THAT THE FIRM LEND SURPLUS/BORROWED MONEY OF/ BY THE FIRM TO BORR OWERS AT THE CURRENT MARKET RATE AFTER ENSURING CREDIT WORTHINES S OF THE BORROWERS. 8 THE ASSESSEE ALSO FILED THE FOLLOWING TABLE BEFORE THE CIT(A) TO SUBSTANTIATE THE REASON FOR WRITING OFF OF THE BAD LOAN : SR.NO. NAME OF THE PARTY LOAN AMOUNT (RS.) DATE ON WHICH LOAN IS GIVEN LAST DATE OF RECEIPT OF INTEREST 1 ALNESH MOTORS 3,00,000/- 26-01-2001 13-03-2001 2 SHRI MAHESH OIL DISTRIBUTORS 3,00,000/- 29-01-2001 16-03-2003 3 SUPERLEX TRADING COMPANY 2,00,000/- 01-09-2001 -- 4 SHRI PANCHMUKHI ENTERPRISES 2,00,000/- 23-11-2002 11-06-2003 9. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDE R : 8. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AS WELL AS REPLY OF THE APPELLANT. THOUGH, IN THE PARTNERSHIP DEED T HERE IS NO MENTION OF CARRYING OUT MONEY LENDING BUSINESS, BUT CLAUSE 5 OF THE PARTNERSHIP DEED ENABLES THE FIRM TO CARRY OUT ANY BU SINESS MUTUALLY DECIDED BY THE PARTNERS. IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THE PARTNERS OF THE FIRM IN A MEETING HELD ON 15-09- 1998 DECIDED TO INVERT SURPLUS FUND TO BORROWERS AT MARKET RATE. IT I S ALSO SEEN FROM THE ASSESSMENT ORDER FOR A.Y. 2006-07, THAT THE ASSESSING O FFICER HIMSELF ACKNOWLEDGED THAT THE APPELLANT FIRM IS DOING MONEY LENDING BUSINESS. IN PARA 3 OF THE ASSESSMENT ORDER FOLLOWING REM ARK HAS BEEN MADE BY THE ASSESSING OFFICER. IN ADDITION TO THESE ACTIVITIES, THE FIRM HAS ALSO DON E MONEY LENDING BUSINESS WHICH IS NEITHER AUTHORIZED BY THE PARTNERSHIP DEED NOR ANY MONEY LENDING LICENSE HAS BEE N OBTAINED BY IT FROM THE APPROPRIATE AUTHORITIES. 9. THUS, FROM THE ABOVE REMARKS OF THE ASSESSING OFFICER IT IS CLEAR THAT THE ASSESSING OFFICER HIMSELF ACKNOWLEDGED IN THE ASSESSMENT ORDER FOR A.Y. 2006-07, THAT THE APPELLANT FIRM WAS CARRYING OUT MONEY LENDING BUSINESS. AS REGARDS THE ISSUE OF AUTHORIZA TION OF MONEY LENDING BUSINESS IN THE PARTNERSHIP DEED IS CONCER NED, THE SAME HAS BEEN ALREADY DEALT WITH IN THE ABOVE PARAS. A S FAR AS NON OBTAINING OF LICENSE FOR CARRYING OUT MONEY LENDING ACTIVITY IS CONCERNED THE SAME WILL NOT HAVE ANY BEARING ON THE NATURE OF BUSINESS CARRIED OUT BY THE APPELLANT. IF LICENSE HAS NO T BEEN OBTAINED, THE APPELLANT IS LIABLE FOR ACTION UNDER THE APPROPR IATE LAW, BUT HE SAME WILL NOT ALTER THE NATURE OF BUSINESS. IT IS ALSO A FACT THAT IN THE PAST, INTEREST FROM THIS ACTIVITY HAS BEEN SHOWN UNDER THE HEAD BUSINESS INCOME. THEREFORE, ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IT IS CLEARLY SEEN THAT THE APPELLANT IS IN MONEY LEND ING BUSINESS WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER TOO IN THE ASSE SSMENT ORDER OF A.Y 2006-07 AS DESCRIBED ABOVE. ACCORDINGLY , IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE BAD DEBTS OF 9 RS.10 LACS AND HE IS DIRECTED TO DELETE THE ADDITION. THE GROUND IS THUS ALLOWED. 10. THE APPELLANT IN IT'S ALTERNATIVE SUBMISSION HAS CL AIMED THAT THE ABOVE AMOUNT OF RS. 10 LACS SHOULD BE ALLOWED U/S. 37 OF INCOME- TAX ACT. IN VIEW OF RELIEF ALLOWED IN THE MAIN GROU ND, ALTERNATIVE SUBMISSION HAS BECOME MATTER OF ACADEMIC INTEREST ONLY A ND THE SAME DOES NOT REQUIRE ANY ADJUDICATION. 10. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE OF RS.10,00,000/- AS BAD DEBTS WRITTEN OFF U/S. 36(1)(VII) R.W.S 36(2) OF THE IT. .ACT, 1961, OVERLOOKING THE FACT THAT THE A SSESSEE IS NOT ENGAGED IN MONEY LENDING BUSINESS; THE SAME ARE NOT BUSINESS DEBTS BUT ADVANCES GIVEN, ON WHICH NO INTEREST INCOME HAS ALSO BE EN OFFERED. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT (A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF BA D DEBTS WRITTEN OFF U/S. 36(1)(VII) R.W.S. 36(2) OF THE I.T.ACT, 1961, WH EN THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST UPON IT BY NOT PRODU CING THE RELIABLE DOCUMENTARY EVIDENCES IN SUPPORT OF CLAIM MADE. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE IN RESPECT OF UNACCOUNTED RECEIPTS OF RS. 4,35,187/- WHE N IN FACT THE ASSESSEE HAS NOT OFFERED THE SAME FOR TAXATION? 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THE OBSERVATION OF THE LD.CIT(A) THAT THE AO IN THE ORDER FOR A.Y. 2006-07 HAS ACKNOWLEDGED THAT THE ASSESSEE FIRM IS DOING MONEY LENDING BUSINESS COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL R EPRESENTATIVE . FROM THE AUDITED PROFIT AND LOSS ACCOUNT COPIES FIL ED BEFORE US FOR A.Y. 2006-07, 2007-08, AND 2008-09 WE FIND THE ASSE SSEE IN ITS PROFIT AND LOSS ACCOUNT WAS SHOWING THE INTEREST INCOME AS BUSINESS INCOME. 10 FROM THE COMPUTATION STATEMENT FOR THE A.Y. 2009-10 WE FIND THE ASSESSEE HAD DECLARED BUSINESS INCOME OF RS.2,15,82 ,971/- WHICH INCLUDES THE INTEREST INCOME AND THE AO HAS NOT TRE ATED THE SAME AS INCOME FROM OTHER SOURCES. IN THIS VIEW OF THE MAT TER AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) WE FI ND NO INFIRMITY IN HIS ORDER DELETING THE DISALLOWANCE OF BAD DEBT OF RS.10 LAKHS. WE ACCORDINGLY UPHOLD THE SAME AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE AND THE APPEAL FILED BY THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 21-03-2014. SD/- SD/- (R.S.PADVEKAR ) ( R.K. P ANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED 21 ST MARCH , 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-V, PUNE 4. THE CIT-V, PUNE 5. THE DR A BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE