ITO, UDAIPUR V. M/s. Smart Advisors (India) Private Limited, UDAIPUR

ITA 222/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82887 (ITAT-JODHPUR)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Business expenditure; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 222 /JODH/201 4 (A.Y. 200 9 - 1 0 ) IT O , WARD - 1 (1) , VS. M/S. SMART ADVISORS (INDIA) UDAIPUR. PVT. LTD., 1 - 3 , PALIKA BAZAR , TOWN HALL LINK ROAD , UDAIPUR . PAN NO. AAJCS 8206 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI . DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 07 / 0 8 /201 4 . DATE OF PRONOUNCEMENT : 08 /0 8 /201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 13 /01 /201 1 OF L D . CIT(A), UDAIPUR . THE ONLY GROUND RAISED IN THIS APPEAL READS AS UNDER : ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 14,54,953/ - MADE ON ACCOUNT OF BAD DEBTS WRITTEN OFF IGNORING THE FACT THAT THERE WERE NO SALES AND 2 PURCHASES OF SHARES IN THE BOOKS OF THE ASSESSEE, HENCE NO DEBTS OR PAR T THEREOF CAN BE TAKEN INTO ACCOUNT AS WRITTEN OFF. 2 FACTS RELATING TO THIS CASE , IN BRIEF, ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 22/09/ 200 9 DECLARING AN INCOME OF RS. 4,79,783/ - . THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SUB - BROKER SHIP OF M/S. INDIA INFOLINE LTD. AND M/S. INFOLINE COMMODITIES LTD. THE ASSESSEE CLAIMED AN AMOUNT OF RS. 14,54,953/ - UNDER THE HEAD BAD DEBTS . THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN ABOUT THE ALLOWABILITY OF THE SAID BAD DEBTS. THE ASSESSEE EXPLAINED THAT THE SAID AMOUNT HAD BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE BROKER AGE INCOME HAD BEEN SUBJECT TO TAX IN THE HANDS OF THE ASSESSEE. IT WAS SUBMITTED THAT THE AMOUNT OUTSTANDING ON ACCOUNT OF PURCHASE OF SECURITIES ON BEHALF OF THE CLIENT OF THE ASSESSEE WAS BOOK DEBT WHICH HAD BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS . THEREFORE, ALL THE CONDITIONS OF SECTION 36(1)(VII) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) HAD BEEN FULFIL LED. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND MADE THE DISALLOWANCE. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT BAD DEBTS HAD 3 BEEN TRANSFERRED BY THE MAIN STOCK BROKER BY DEBITING THE ACCOUNT OF THE ASSESSEE TO THE EXTENT OF RS. 14,54,953/ - AND SINCE THE CLIENTS DID NOT PAY THE AMOUNTS, THE ASSESSEE HAD NO OTHER ALTERNATIVE BUT TO WRITE OFF THE SAME AS BAD DEBTS AND CLAIM ED THE S AME AS BUSINESS EXPENDITURE , WHICH WAS ALLOWABLE AS PER THE ACT . RELIANCE WAS PLACED ON THE DECISION OF THE ITAT SPECIAL BENCH MUMBAI IN THE CASE OF DCIT VS. SHREYAS S. MORKHIA (2010) 131 TTJ 641 (MUMBAI - T)(SB) . NOW THE DEPARTMENT IS IN APPEAL. 4. LEARNED D.R. , ALTHOUGH , SUPPORTED THE ORDER OF THE ASSESSING OFFICER, BUT COULD NOT CONTROVERT THE FINDINGS GIVEN BY THE LD. CIT(A) . 5. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER DATED 23/07/2014 OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ITO, WARD - 2(2), UDAIPUR VS. M/S. SOLARIS , UDAIPUR IN I.T.A.NO. 279/JODH/2013 FOR THE A.Y. 2007 - 08 , COPY OF THE SAID ORDER WAS FURNISHED . 6 . WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED D.R. AND PERUSED THE MATERIAL AVAILABLE ON RECORD. I T IS NOTICED THAT A SIMILAR ISSUE HAS BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL IN THE AFORESAID REFERRED 4 TO CASE OF ITO, WARD - 2(2), UDAIPUR VS. M/S. SOLARIS, UDAIPUR IN I.T.A.NO. 279/JODH/2013 FOR THE A .Y. 2007 - 08, WHERE RELEVANT FINDINGS HAVE BEEN GIVEN AT PARA 16 OF THE ORDER DATED 23/07/2014 WHICH READ AS UNDER: - 16 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE WAS THE AUTHORIZED PERSON OF M/S. M/S. S.S. KANTILAL ISHWARLAL SECURITIES LTD. BEING A FRANCHISE OF THE SAID CONCERN, IT WAS ENGAGED IN TRADING OF SHARES AND RECEIVED BROKERAGE FROM THEM. THE AGREEMENT WAS ENTERED IN BETWEEN THE ASSESSEE AND M/S. S.S. KANTILAL ISHWARLAL SECURITIES LTD. ON THE BASIS OF MODEL AGREEMENT PRESCRIBED BY THE SECURITY TRANSACTION ACT AND NATIONAL STOCK EXCHANGE. THE SAID AGREEMENT WAS STRICTLY IN LINES FRAMED BY THE SEBI AND PROVIDED FOR ALL RIGHTS AND DUTIES OF MEMBER BROKER. THE SAID AGREEMENT CANNOT BE TERMED AS MUTUAL BENEFIT AGREEMENT BETWEEN ASSESSE E AND M/S. S.S. KANTILAL ISHWARLAL SECURITIES LTD. SINCE BOTH OF THEM DID NOT HAVE ANY COMMON OBJECT OR BENEFIT WHICH SHALL BE SHARED BY THEM. THE AMOUNT IN QUESTION WAS RECOVERED BY M/S. S.S. KANTILAL ISHWARLAL SECURITIES LTD. FROM THE ASSESSEE, SO IT WA S DIRECTLY RELATED TO THE BUSINESS CONDUCTED BY THE ASSESSEE BECAUSE THE AMOUNT WAS RECOVERED ON ACCOUNT OF DEFAULT MADE BY ONE OF THE CLIENT INTRODUCED BY THE ASSESSEE WHO WAS ACTING AS AUTHORIZED REPRESENTATIVE OF THE MEMBER BROKER I.E. M/S. S.S. KANTILA L ISHWARLAL SECURITIES LTD. THEREFORE, THE AMOUNT IN QUESTION WAS TO BE ALLOWED AS A BUSINESS LOSS AND THE LD. CIT(A) RIGHTLY DIRECTED THE ASSESSING OFFICER TO DO SO. WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 7 . SO, BY RESPECT FULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 23/07/2014 IN THE CASE OF ITO, WARD - 2(2), UDAIPUR VS. M/S. SOLARIS, UDAIPUR IN I.T.A.NO. 279/JODH/2013 FOR THE A.Y. 2007 - 08 , WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 5 8 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED . ( ORDER PRONOUNCED IN THE COURT ON 08 TH AUGUST , 201 4) . SD/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08 TH AUGUST , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .