Anil Bansilal Lodha, Nashik V. Assistant Commissioner of Income-tax,

ITA 2176/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1770 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Bad and doubtful debts
• Section: 14A; 37(1); 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2176/PN/2013 #& & / ASSESSMENT YEAR : 2010-11 SHRI ANIL BANSILAL LODHA, MANGAL BHAVAN, PANCHAVATI KARANJA, NASHIK 03 PAN NO.AAGPL1981M . / APPELLANT V/S ACIT, CIRCLE - 1, NASHIK . / RESPONDENT / ASSESSEE BY : SHRI PRAMOD SHINGTE / REVENUE BY : SHRI HITENDRA NINAWE / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 28-11-2013 OF THE CIT(A)-I, NASHIK RELATING TO THE ASSESSMENT YEAR 2010-11. 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NASHIK IS NOT J USTIFIED IN CONFIRMING THE ADDITION OF RS.1,00,000/ - MADE BY TH E AO BY DISALLOWING THE PART OF THE AGRICULTURAL INCOME AS DI SCLOSED IN THE RETURN OF INCOME BY THE APPELLANT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF CONSTRUCTION ACTIV ITIES. / DATE OF HEARING :02.06.2016 / DATE OF PRONOUNCEMENT:03.06.2016 2 ITA NO.2176/PN/2013 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOT ED THAT ASSESSEE HAS SHOWN AGRICULTURAL INCOME OF RS.4,52,530/-. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN THE DETAILS IN RE SPECT OF THE AGRICULTURAL INCOME EARNED AND PRODUCE THE DOCUMENTARY EVIDENCE IN RESPECT OF HIS CLAIM. THE ASSESSEE SUBMITTED THE COPIES OF 7/12 EXTRACTS OF THE LAND. IT WAS SUBMITTED THAT THE LAND IS VERY FERTILE AND ASSESSEE USED TO CULTIVATE RICH CROPS LIKE MANGO AND SOYABEAN. SINCE THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE SUCH AS DETAILS OF INCOME, EXPENSES, BILLS AND VOUCHERS ET C. THE AO TREATED AN AMOUNT OF RS.1 LAKHS OUT OF THE AGRICULTURAL IN COME DECLARED AT RS.4,52,530/- AS INCOME FROM OTHER SOURCES AND MADE ADDITION OF THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT HE OWNS 27 ACRES OF IRRIGATED LAND AT NILWANDI. SINCE THE ASSESSEE IS NOT MA INTAINING BOOKS OF ACCOUNT TO RECORD THE VARIOUS EXPENSES ETC. T HOSE DETAILS COULD NOT BE PRODUCED. HOWEVER, THE REASONABLENESS OF T HE INCOME SHOWN BY THE ASSESSEE SHOULD NOT HAVE BEEN DOUBTED. HOWEVER, THE CIT(A) ALSO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , THE ASSESSMENT ORDER AND ORAL AS WELL AS WRITTEN SUBMISSIONS ON BEHALF O F THE APPELLANT. THE AO HAS TREATED THE PART OF THE AGRIC ULTURAL INCOME AMOUNTING TO RS.1,00,000/- AS INCOME FROM OTHER SOURC ES AND ADDED THE SAME TO THE TOTAL INCOME OF THE APPELLANT FOR TH E REASONS THAT THE BILLS, VOUCHERS IN RESPECT OF AGRICULTURAL EXPENSES AND ALSO THE SALE TO VARIOUS PARTIES ARE NOT MAINTAINED BY THE APPELLANT. BEFORE ME ALSO THE APPELLANT HAS NOT PRODUCED THE SALE PATTIES AS WELL AS BILLS, VOUCHERS IN RESPECT OF AGRICULTURAL ACTIVITIES. THE APPELLANTS EXPLANATION THAT IT IS NOT PRACTICAL TO MAINTAIN DET AILS OF AGRICULTURAL EXPENSES, BILLS AND VOUCHERS IS NOT TENABLE. IN ABSENCE OF SUCH DETAILS, APPELLANT INCURRING AGRICULTURAL EXPENSES OUT OF BOOK S CANNOT BE RULED OUT. THE APPELLANT HAS ALSO ACCEPTED THAT THE SAID DE TAILS ARE NOT MAINTAINED BY HIM. MOREOVER, THE APPELLANT HAS ALSO NOT CONTESTED THE SIMILAR ADDITION MADE IN THE ASSESSMENT OF IMMEDIATELY P RECEDING YEAR. THEREFORE, THE ADDITION MADE BY THE AO OF RS. 1,00,000/- BY TREATING THE AGRICULTURAL INCOME TO THE EXTENT OF R S.1,00,000/- AS 3 ITA NO.2176/PN/2013 INCOME FROM OTHER SOURCES IS HEREBY CONFIRMED. THIS GR OUND OF APPEAL IS DISMISSED. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE STA TEMENT OF AGRICULTURAL INCOME SUBMITTED THAT DURING A.Y. 2007-08 THE AO HAD ACCEPTED THE AGRICULTURAL INCOME OF RS.5,24,332/- IN THE ORDER PASSED U/S.143(3). DURING A.Y. 2008-09 THE AO HAD ACCEPTE D THE AGRICULTURAL INCOME OF RS.5,56,528/- IN THE ORDER PASSED U/S.143(1). HE SUBMITTED THAT IN THE A.Y. 2009-10 THE AO H AD DISALLOWED AGRICULTURAL INCOME OF RS.1 LAKH OUT OF RS.4,37,598/- DISCLOSED BY THE ASSESSEE. HOWEVER, THE ASSESSEE HAD N OT FILED ANY APPEAL AGAINST THE SAID DISALLOWANCE. IN THE CURRENT YEAR , THE ASSESSEE HAD SHOWN AGRICULTURAL INCOME OF RS.4,52,530/- OUT OF WHICH THE AO HAD DISALLOWED AN AMOUNT OF RS.1 LAKH FOR NOT BEING ABLE TO PROVE THE AGRICULTURAL INCOME. HE SUBMITTED THAT SINCE THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNTS AND N OT KEEPING ANY RECORDS FOR THE INCOME AND EXPENDITURE, THEREFORE, IT WAS NOT POSSIBLE TO SUBSTANTIATE THE SAME WITH DOCUMENTARY EVI DENCE. HOWEVER, CONSIDERING THE EXTENT OF AGRICULTURAL LAND HOLDING BY THE ASSESSEE THE SAME BEING REASONABLE SHOULD BE ACCEPTED AS PROPER AND NO DISALLOWANCE SHOULD BE MADE. HE ALSO FILED 7/12 EXTR ACTS OF THE LAND CONTAINING THE NATURE OF CROP GROWN SUCH A S SOYABEAN MANGO ETC. 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED TH AT SINCE THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT FOR THE 4 ITA NO.2176/PN/2013 AGRICULTURAL INCOME AND COULD NOT SUBSTANTIATE EITHER BEFOR E THE AO OR BEFORE THE CIT(A) WITH DOCUMENTARY EVIDENCE, THEREFO RE, DISALLOWANCE OF RS.1 LAKH UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IS JUSTIFIED. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSESSEE HAS D ECLARED AGRICULTURAL INCOME OF RS.4,52,530/- IN THE RETURN OF INCOME O UT OF WHICH THE AO DISALLOWED AN AMOUNT OF RS.1 LAKH TREATING THE SAME AS INCOME FROM OTHER SOURCES ON THE GROUND THAT ASS ESSEE COULD NOT SUBSTANTIATE WITH EVIDENCE REGARDING EARNING OF SUCH AGRICULTURAL INCOME. WE FIND THE LD.CIT(A) SUSTAINED THE ADDIT ION MADE BY THE AO ON THE GROUND THAT THE ASSESSEE COULD NOT SUBSTANTIATE SUCH AGRICULTURAL INCOME AND FURTHER SIMILAR AD DITION MADE BY THE AO IN THE PRECEDING ASSESSMENT YEAR HAS N OT BEEN CONTESTED BY THE ASSESSEE IN APPEAL. WE FIND THE ASSESS EE BEFORE THE CIT(A) HAS EXPLAINED THAT IT IS OWNING 27 ACRES OF LAND . IT IS ALSO A FACT THAT DURING A.Y. 2007-08 THE AO IN THE ORDER PASSED U/S.143(3) HAS ACCEPTED THE AGRICULTURAL INCOME OF RS.5,24,33 2/-. SIMILARLY, IN A.Y. 2008-09, THE AGRICULTURAL INCOME OF RS.5,56,528/- HAS BEEN ACCEPTED IN THE ORDER PASSED U/S .143(1). HOWEVER, IT IS ALSO A FACT THAT IN A.Y. 2009-10 AS AGAINST RS.4,37,498/- DECLARED BY THE ASSESSEE AS AGRICULTURAL INCO ME, THE AO HAD DISALLOWED AN AMOUNT OF RS.1 LAKH AND THE ASSESSE E HAS NOT CHALLENGED THE SAME. WE FURTHER FIND FOR THE IMPUGNED ASSESSMENT YEAR ALTHOUGH THE ASSESSEE HAS DECLARED AG RICULTURAL INCOME OF RS.4,52,530/-, HOWEVER, THE ASSESSEE HAD EXPRESS ED ITS INABILITY TO SUBSTANTIATE THE SAME ON THE GROUND THAT HE HAS NOT 5 ITA NO.2176/PN/2013 MAINTAINED ANY BOOKS OF ACCOUNT. UNDER THESE CIRCUMSTAN CES, THE ENTIRE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE CANNO T BE ACCEPTED. AT THE SAME TIME, THE DISALLOWANCE OF RS.1 LAKH M ADE BY THE AO APPEARS TO BE ON THE HIGHER SIDE. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, DISALLOWANCE OF RS.50,000/- OUT OF THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE IN OUR OPINIO N WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY . GROUND OF APPEAL NO.1 BY THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. 9. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NASHIK IS NOT J USTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF RS.2,58 ,751/ - ON ACCOUNT OF EXPENDITURE IN RELATION TO THE EXEMPT IN COME BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D . 10. FACTS OF THE CASE IN BRIEF, ARE THAT THE AO DURING TH E COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT ASSESSEE HAS SHO WN INVESTMENT IN SHARES/MUTUAL FUNDS AND HAS PAID TOTAL INTER EST OF RS.10,02,879/- DURING THE YEAR. SINCE NO EXPENSES HAVE B EEN APPORTIONED TOWARDS EXPENSES INCURRED FOR EARNING EXEMP TED INCOME ATTRIBUTABLE TO HOLDING OF SUCH INVESTMENTS, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE U/S.14A SHOULD NOT BE MADE. IT WAS SUBMITTED BY THE ASSESSEE THAT THE IN VESTMENTS IN SHARES/MUTUAL FUNDS ARE OLD AND THE ASSESSEE IS HAVING S UFFICIENT OWN CAPITAL AND THEREFORE NO DISALLOWANCE IS CALLED FOR. 11. HOWEVER, THE AO DID NOT ACCEPT THE PLEA OF THE AS SESSEE. ACCORDING TO HIM, THE ASSESSEE HAS NOT MAINTAINED ANY SE PARATE ACCOUNTS BY WAY OF WHICH THE MANAGEMENT AND ADMINISTRAT IVE EXPENDITURE COULD BE SEGREGATED. FURTHER, THE ASSESSEE HAD BORROWED CERTAIN FUNDS ON WHICH LIABILITY TO PAY INTEREST IS BEING 6 ITA NO.2176/PN/2013 INCURRED WHEREAS CERTAIN AMOUNTS HAD BEEN INVESTED IN E ARNING TAX FREE DIVIDEND INCOME. THEREFORE, A PART OF THE INTEREST LIAB ILITY WOULD BE ON ACCOUNT OF INVESTMENTS MADE FOR EARNING TAX FREE DIVIDEND INCOME. REJECTING THE VARIOUS EXPLANATIONS GIVEN B Y THE ASSESSEE THE AO DISALLOWED INTEREST AMOUNT OF RS.2,28,276/- AND ADMINISTRATION EXPENSES OF RS.30,475/- TOTALING TO RS.2,58,751/-. 12. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 8.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E, THE ASSESSMENT ORDER, RELEVANT LEGAL PROVISIONS, JUDICIAL PRONOUNCEM ENTS CITED AND ORAL AS WELL AS WRITTEN SUBMISSIONS ON BEHALF OF THE APPE LLANT. THE AO HAS INVOKED THE PROVISIONS OF SECTION 14A READ WITH RUL E 8D AND MADE THE DISALLOWANCE OF RS.2,58,751/-. THE CONTENTION OF THE AR THAT THE AO SHOULD RECORD HIS DISSATISFACTION AS REGARDS THE CORREC TNESS OF THE CLAIM OF THE APPELLANT THAT HE HAS NOT INCURRED ANY EXPENDITURE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF T OTAL INCOME UNDER THE PROVISIONS OF ACT IS NOT FOUND CORRECT AND MOREOV ER, THE AO IS NOT BOUND TO RECORD HIS DISSATISFACTION IN THE MANNER AS STA TED BY THE APPELLANT. THE FACT THAT THE APPELLANT IS HAVING IN COME WHICH IS NOT CHARGEABLE TO TAX IS NOT DISPUTED. FURTHER, THE FACT THAT THE APPELLANT HAS INCURRED EXPENSES ON ACCOUNT OF INTEREST IS ALSO NOT DISPUTED. THEREFORE, THE AO HAS CORRECTLY INVOKED THE PROVISION S OF SECTION 14A. THE APPELLANT HAS ALSO NOT BEEN ABLE TO PROVIDE DETAI LS OF EXPENDITURE DIRECTLY RELATING TO DIVIDEND INCOME. THE DISALLOWA NCE WOULD BE AS PER RULE 8D(2) OF THE I.T. RULES, 1962. THE APPELLANTS CONTENTION WITH REGARD TO INTEREST AMOUNT ADOPTED BY THE AO FOR CALC ULATION OF DISALLOWANCE U/S.14A R.W. RULE 8D IS ALSO NOT ACCEPTAB LE IN VIEW OF THE CLEAR PROVISIONS GIVEN IN RULE 8D(2)(I) AND (II). HE NCE AOS DISALLOWANCE OF RS.2,58,751/- IS CONFIRMED. THIS GROUN D OF APPEAL IS DISMISSED. 13. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 14. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE B ALANCE SHEET OF THE ASSESSEE COMPANY SUBMITTED THAT AS AGAINS T THE INVESTMENT OF RS.68,64,737/- IN SHARES AND MUTUAL FUNDS THE OWN CAPITAL AND FREE RESERVES OF THE ASSESSEE IS RS.4,72,08,723/ -. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE 7 ITA NO.2176/PN/2013 OF CIT VS. HDFC LTD. HE SUBMITTED THAT WHERE ASSESSEES CAPITAL, PROFIT, RESERVES AND SURPLUS AND CURRENT ACCOUNT DEPOSIT S ARE HIGHER THAN THE INVESTMENT IN TAX FREE SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT THE INVESTMENTS MADE BY THE ASSESSE E WOULD BE OUT OF THE INTEREST FREE FUNDS AVAILABLE WITH ASSESSEE AND NO DISALLOWANCE IS WARRANTED U/S.14A. REFERRING TO THE DECIS ION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. REPORTED IN 313 ITR 340 HE SUBMITTED THAT T HE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT IF THERE BE INTEREST FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD RAIS ED A LOAN, IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM INTEREST FREE FUND S AVAILABLE. THEREFORE, IF THERE WERE FUNDS AVAILABLE, BOTH INTEREST FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS WER E SUFFICIENT TO MEET THE INVESTMENTS. HE ACCORDINGLY SUBMITT ED THAT NO DISALLOWANCE OF INTEREST CAN BE MADE U/S.14A OF THE I.T. ACT. 15. SO FAR AS ADMINISTRATIVE EXPENSES ARE CONCERNED, HE SUBMITTED THAT NO PART OF SUCH ADMINISTRATIVE EXPENSES IS REQUIRED TO BE INCURRED FOR EARNING THE TAX FREE INCOME. 16. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 17. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE 8 ITA NO.2176/PN/2013 INVESTMENT IN SHARES AND MUTUAL FUNDS AS ON 31-03-2010 IS RS.68,64,737/- WHEREAS THE CAPITAL OF THE ASSESSEE AS SH OWN IN THE BALANCE SHEET IS RS.4,72,08,723/-. THUS, THE CAPITAL OF THE ASSESSEE IS MUCH MORE THAN THE INVESTMENT IN SHARES AN D MUTUAL FUNDS, THE DIVIDEND INCOME OF WHICH IS CLAIMED AS EXEMPT. 18. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) HAS HELD THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST FREE AND OVERDRAFT AND/OR LOANS TA KEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPAN Y, IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS . FOLLOWING THE ABOVE DECISION THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA) HAS HELD THAT WHERE ASSES SEES CAPITAL AND FREE RESERVES ARE HIGHER THAN THE INVESTMENT IN TAX FREE SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF THE INTEREST FREE FUNDS AVA ILABLE WITH ASSESSEE AND NO DISALLOWANCE IS WARRANTED U/S.14A. 19. SINCE THE CAPITAL OF THE ASSESSEE IN THE INSTANT CASE IS ADMITTEDLY MUCH MORE THAN THE INVESTMENT IN SHARES, THE DIVIDEND INCOME OF WHICH IS TAX FREE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE JURISDICTIONAL HIGH COURT CITED (SUPRA) WE HO LD THAT NO DISALLOWANCE OF INTEREST U/S.14A IS REQUIRED. SO FAR AS T HE ADMINISTRATIVE EXPENSES IS CONCERNED, WE FIND THE AO HAS DISALLOWED RS.30,475/- WHICH HAS BEEN UPHELD BY THE CIT(A). ALTHOUGH IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASS ESSEE THAT NO EXPENDITURE HAS BEEN INCURRED, HOWEVER, THE SA ME CANNOT BE ACCEPTED IN TOTO. IT CANNOT BE SAID THAT NO EXPEND ITURE HAS BEEN 9 ITA NO.2176/PN/2013 INCURRED FOR SUPERVISING AND MONITORING THE INVESTMENTS MA DE BY THE ASSESSEE. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, DISALLOWANCE OF RS.15,000/- IN OUR OPINION WILL MEET THE ENDS OF JUSTICE. WE ACCORDINGLY MODIFY THE ORDER OF THE CIT(A) A ND DIRECT THE AO TO DISALLOW AN AMOUNT OF RS.15,000/- U/S.14A R.W. R ULE 8D. GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. 20. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS UNDER : 3. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NASHIK IS NOT J USTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF RS.4,13 ,218/- BY REJECTING THE APPELLANT'S CLAIM OF DEDUCTION U/S. 28 OR SECTION 37(1) OF THE ACT . 21. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS SHOWN AN AMOUNT OF RS.4,13,218/- TOWARDS BAD DEBTS. ON BEING CONF RONTED THE ASSESSEE FURNISHED DETAILS OF SUCH BAD DEBTS. THE AO NOTICED FROM THE DETAILS THAT THE DEBTS CLAIMED ARE ON ACCOUNT O F ADVANCES GIVEN TO THE CONTRACTORS AND EXCESS AMOUNT PAID AGAINS T THE BILLS OF THE CONTRACTORS. THUS, ACCORDING TO THE AO BAD DEBTS ARE NOT PART OF SALE AND NOT INCLUDED IN THE TOTAL INCOME OF ANY PREV IOUS YEAR. THE ASSESSEE ALSO COULD NOT SUBSTANTIATE ANYTHING FOR RE COVERY OF THE SAID DEBT. IN ABSENCE OF ANY PROOF THE AO HELD THA T THE DEBT CANNOT BE SAID AS BAD. HE ACCORDINGLY DISALLOWED THE CLAIM OF BAD DEBT OF RS.4,13,218/-. 22. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 10.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, THE ASSESSMENT ORDER AND ORAL AS WELL AS WRITTEN SUBMISSIONS ON BEHALF O F THE APPELLANT. THE APPELLANTS CLAIM OF BAD DEBT IS NOT IN ACCORDANCE TO THE PROVISION OF SEC.37(1)(VII) R.W.S.36(2) OF THE ACT. SIMILARLY, APPELLANTS CLAIM OF DEDUCTION OF BAD DEBT U/S.28 OR SEC.37(1) IS ALSO NOT TENABLE AS 10 ITA NO.2176/PN/2013 AMOUNTS CLAIMED AS BAD DEBT WERE ADVANCES TO THE CONTR ACTORS AND SUB-CONTRACTORS AND NOT TO THE SUPPLIERS AS EVIDENT FROM THE BALANCE SHEET OF THE APPELLANT. THESE AMOUNTS ARE NOT IN THE NATURE OF EXPENDITURE AND THEREFORE CANNOT BE ALLOWED U/S.37(1 ) OF THE ACT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE APPELLANTS CL AIM IS NOT ACCEPTABLE. THEREFORE, THE IMPUGNED DISALLOWANCE MA DE BY THE AO OF RS.4,13,218/- ON ACCOUNT OF BAD DEBTS IS HEREBY CONFIR MED. THIS GROUND OF APPEAL IS DISMISSED. 23. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 24. THE LD. COUNSEL FOR THE ASSESSEE FILED THE DETAILS OF TH E NATURE OF BAD DEBTS CLAIMED WHICH IS MAINLY ADVANCES GIVEN TO THE CONTRACTORS IN THE PREVIOUS YEAR AND CERTAIN EXCESS AM OUNTS PAID TO SUPPLIERS WHICH THE ASSESSEE HAS CLAIMED AS BAD DEBT. HE SUBMITTED THAT IN CASE THE SAME IS NOT ALLOWED AS BAD DE BT, THE SAME CAN BE ALLOWED AS BUSINESS LOSS. FOR THE ABOVE PRO POSITION, HE RELIED ON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN T HE CASE OF C.B. RICHARD ELLIS MAURITIUS LTD. VS. DCIT REPORTED IN 38 SOT 236 AND THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN T HE CASE OF JALPRADEEP SECURITIES LTD. VS. DCIT REPORTED IN 4 ITR (T RIBUNAL) 491. 25. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 26. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED T HE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO DISALLOWED THE CLAIM OF BAD DEBT ON THE GROUND THAT THE DEBTS CLAIMED ARE NOT PART OF SALE AND NOT INCLUDED IN THE TOTAL INCOME IN ANY PREVIOU S YEAR. FURTHER, THE DEBTS CLAIMED ARE ON ACCOUNT OF ADVANCES G IVEN TO 11 ITA NO.2176/PN/2013 CONTRACTORS AND EXCESS AMOUNT PAID AGAINST THE BILLS OF T HE CONTRACTORS. WE FIND THE LD.CIT(A) UPHELD THE ACTION OF THE AO ON THE GROUND THAT THE CLAIM OF BAD DEBT BY THE ASSESSEE IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 36(1)(VII) R.W.S. 36(2 ). SIMILARLY, HE ALSO REJECTED THE CLAIM OF BUSINESS LOSS U/S.28 OR 37(1) ON THE GROUND THAT THESE AMOUNTS ARE NOT IN THE NATURE OF EXPENDITURE AND THEREFORE CANNOT BE ALLOWED U/S.37(1) OF TH E ACT. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADVANCES GIVEN TO CONTRACTORS IN THE PRECEDING YEAR WH ICH IS NOT RECOVERABLE AND THE EXCESS AMOUNT PAID TO THE SUPPLIER S CAN BE CONSIDERED AS BUSINESS LOSS. 27. IT IS THE SETTLED PROPOSITION OF LAW THAT FOR CLAIMING BA D DEBT THE ASSESSEE IS ONLY TO WRITE OFF THE BAD DEBT IN THE PR OFIT AND LOSS ACCOUNT AND HE IS NOT REQUIRED TO PROVE THAT THE SAME HAS INFACT BECOME BAD. HOWEVER, FOR CLAIMING THE BUSINESS LOSS, THE ON US IS ALWAYS ON THE ASSESSEE TO PROVE THAT THE AMOUNTS WR ITTEN OFF IN THE BOOKS IS INFACT BUSINESS LOSS. THE ASSESSEE HAS TO PROV E THAT HE HAS TAKEN REASONABLE STEPS FOR RECOVERY OF THE SAME AN D WAS UNSUCCESSFUL AND NOTHING CAN BE RECOVERED FROM THE PART Y FOR WHICH HE HAS WRITTEN OFF THE SAME AS BUSINESS LOSS. HOWEV ER, FROM THE SUBMISSION MADE BY THE ASSESSEE, IT DOES NOT APPEAR THAT THE ASSESSEE HAS CONCLUSIVELY PROVED THAT THE AMOUNT HAS BEEN WRITTEN OFF AFTER TAKING REASONABLE STEPS FOR RECOVERY OF THE SAME . BEFORE THE AO THE ASSESSEE HAS NOT MADE ANY SUCH CLAIM AND A LTHOUGH IT WAS ARGUED BEFORE THE CIT(A) HE HAS REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THESE AMOUNTS WRITTEN OFF ARE NOT IN THE NATURE OF EXPENDITURE AND THEREFORE CANNOT BE ALLOWE D U/S.37(1) OF THE ACT. CONSIDERING THE TOTALITY OF THE FACTS O F THE 12 ITA NO.2176/PN/2013 CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO GIVE ONE MOR E OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDEN CE TO HIS SATISFACTION THAT THESE AMOUNTS ARE IN THE NATURE OF BUS INESS LOSS. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE ASSE SSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 28. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03-06-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 03 RD JUNE, 2016. ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ) - I, NASHIK 4. 5. 6. THE CIT-I, NASHIK $ ''(, (, / DR, ITAT, B PUNE; - / GUARD FILE. / BY ORDER , // TRUE COPY // // $ ' //TRUE /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE