Arman Lease & Finance Ltd., Ahmedabad V. The Dy.CIT,Circle-1, Ahmedabad

ITA 216/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1745 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-02-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 22-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Keywords: Speculation loss; Bad and doubtful debts
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.216 AND 217/AHD/2009 [ASSTT. YEAR : 2002-2003 AND 2005-2006] ARMAN LEASE & FINANCE LTD. 502/503, SAKAR-II OPP: OLD HIGH COURT OFF. ASHRAM ROAD, AHMEDABAD. PAN NO.AAACG 7987 P VS. DCIT, CIR.1 AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.N.SOPARKAR REVENUE BY : SHRI R.K. DHANESTA O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THESE ARE TWO APPEALS BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSION ER OF INCOME TAX(APPEALS)-VI, AHMEDABAD. SINCE ASSESSEE BEING SAME, FOR THE SAKE OF CONVENIENCE WE DISPOSE OF BOTH THE APPEALS BY TH IS COMMON ORDER. ITA NO.216/AHD/2009 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASS ESSEE IS AGAINST THE LEVY OF PENALTY OF RS.6,04,393/- UNDER SECTION 271( 1)(C) OF THE ACT. 3. AT THE TIME OF HEARING BEFORE US, IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT THE PENALTY WAS LEVIED BY THE AO IN RE SPECT OF TWO ADDITIONS VIZ. (I) DISALLOWANCE OF SHARE TRADING LOSS TREATIN G THE SAME AS SPECULATION LOSS BY INVOKING PROVISIONS OF SECTION 73 OF THE AC T AMOUNTING TO RS.15,69,203/- AND (II) DISALLOWANCE UNDER SECTION 14A OF RS.1,23,775/-; THAT IN THE QUANTUM APPEAL, BOTH THE ABOVE ADDITION S HAVE BEEN SET ASIDE BY THE ITAT AND RESTORED THE SAME TO THE FILE OF TH E AO VIDE ITA NO.1823/AHD/2009 ORDER DATED 24.07.2009. HE FURTHE R POINTED OUT THAT ITA NO.216 AND 217/AHD/2009 -2- ON THE IDENTICAL FACTS, THE ITAT CANCELLED THE PENA LTY LEVIED UNDER SECTION 271(1)(C) FOR A.Y.2001-02 VIDE ITA NO.590/A HD/2007 ORDER DATED 22.01.2010. THE LEARNED DR ON THE OTHER HAN D RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 4. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T IN THE QUANTUM APPEAL, THE ITAT HAS SET ASIDE BOTH THE ADDITIONS I N RESPECT OF WHICH PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVI ED. ONCE THE ADDITION ITSELF HAS BEEN SET ASIDE THE PENALTY BASED UPON SU CH ADDITION CANNOT SURVIVE. WE THEREFORE CANCEL THE PENALTY LEVIED UN DER SECTION 271(1)(C) OF THE ACT. WE MAY OBSERVE THAT THE AO WILL BE AT LIBERTY TO RE-INITIATE THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) AFT ER COMPLETING THE SET ASIDE ASSESSMENT IF THE FACTS OF THE CASE SO WARRAN T. WE FURTHER OBSERVE THAT IF HE RE-INITIATES THE PENALTY PROCEEDINGS WHI LE ADJUDICATING THE ISSUE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) HE WILL TAKE INTO ACCOUNT THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR A.Y .2001-02 VIDE ITA NO.590/AHD/2007 (SUPRA). ITA NO.217/AHD/2009 5. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASS ESSEE IS AGAINST THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.3,14,199/ -. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. THE AO DISALLOWED THE CLAIM OF BAD DEBT ON THE GROUND THAT THE ASSESSEE HAS NOT GIVEN ANY EVIDENCE REGARDING T HE EFFORTS MADE FOR RECOVERY OF BAD DEBTS. HOWEVER, WE FIND THAT NOW THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE APEX ITA NO.216 AND 217/AHD/2009 -3- COURT IN THE CASE OF T.R.F. LTD. VS. CIT, 323 ITR 3 97 (SC) WHEREIN THEIR LORDSHIP HELD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME TAX ACT, 1961 WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DED UCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH T HAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE; IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. FROM THE ABOVE, IT IS EVIDENT THAT THE HONBLE APEX COURT HAS HELD THAT AFTER 1-4-89 IN ORDER TO CLAIM DEDUCTION IN RELATIO N TO BAD DEBT IT IS NOT NECESSARY FOR THE ASSESSEE TO PROVE THAT THE DEBT H AS IN FACT BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IN THE CASE OF TH E ASSESSEE, IT IS NOT DISPUTED THAT THE DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. WE THEREFORE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE APEX COURT SET ASIDE THE ORDER OF THE AUTHO RITIES BELOW ON THIS ISSUE AND ALLOW THE CLAIM OF THE ASSESSEE ON BAD DE BTS. 7. IN RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18 TH MARCH, 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 18-03-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD