M/s. Shree Krishna Jewellers, Ahmedabad V. The Income tax Officer,Ward-7(2), Ahmedabad

ITA 2229/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6352 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 17-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained cash credit; Revision of order; Opportunity of being heard; Bad and doubtful debts
• Section: 143(3); 68; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.2229/AHD/2009 A. Y.: 2004-05 M/S. SHREE KRISHNA JEWELLERS, 2/3, KADAMBARI SOCIETY, JIVRAJ PARK, VEJALPUR ROAD, AHMEDABAD 380 051 VS THE INCOME TAX OFFICER, WARD 7(2), ROOM NO. 206, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD PA NO. AAOFS 5093 B (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. N. SOPARKAR, AR RESPONDENT BY SHRI ALBINUS TIRKEY, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XI , AHMEDABAD DATED 19-05-2009, FOR ASSESSMENT YEAR 2004-05. 2. ON GROUND NO.1 OF THE APPEAL, THE ASSESSEE CHALL ENGED THE DISALLOWANCE OF RS.41,69,320/- AS BAD DEBTS. THE AS SESSEE SUBMITTED WRITTEN SUBMISSIONS BEFORE THE LEARNED CI T(A) ON THIS ISSUE WHICH IS REPRODUCED IN THE APPELLATE ORDER. THE LEA RNED CIT(A) ON GOING THROUGH THE SAME NOTED THAT THERE CANNOT BE A NY DEBT IF SALES TRANSACTION IS NOT TAKEN PLACE. FURTHER, IT WAS MEN TIONED THAT MERE DEBTS CANNOT BE SAID TO BE A BAD DEBTS. APPLYING TH E DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DHAL ENTE RPRISES & ITA NO.2229/AHD/2009 M/S. SHREE KRISHNA JEWELLERS VS ITO, WARD-7(2), AHM EDABAD 2 ENGINEERING PVT. LTD., 295 ITR 481 THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE LEARNED CIT(A). 3. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND R EFERRED TO PB-2 WHICH IS THE HISTORY ON THE ABOVE ISSUE AND EXPLAIN ED THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF MANUFACTURING AND TRADING OF GOLD AND SILVER ORNAME NTS. THE ASSESSEE DELIVERED GOLD ORNAMENTS WEIGHING 8256.079 GRAMS AMOUNTING TO RS.41,69,320/- ON JANGAD NOTE IN THE M ONTH OF SEPTEMBER, 2003 TO SHRI VIPULBHAI J. SONI. THE SAID PARTY ISSUED 4 BLANK UN-DATED CHEQUES OF BANK OF BARODA, AHMEDABAD . ALL THE PAYMENTS BECAME DUE IN FEBRUARY, 2004 AND THE ASSES SEE ISSUED 4 BILLS ON VARIOUS DATES IN THE MONTH OF FEBRUARY, 20 04. WHEN THE CHEQUES WERE DEPOSITED FOR CLEARANCE TO THE BANK TH E SAME WERE RETURNED UNPAID. DETAILS OF THE SAME ARE ALSO GIVEN AT PAGE 2 OF THE PAPER BOOK. IT WAS EXPLAINED THAT THE ASSESSEE CONT ACTED THE PARTY FOR PAYMENT BUT WHO HE HAS THREATENED TO COMMIT SUI CIDE. THEREAFTER, THE ASSESSEE HAD INITIATED LEGAL ACTION BY FILING C RIMINAL COMPLAINT IN THE CRIMINAL COURT. THE LEARNED COUNSEL FOR THE ASS ESSEE REFERRED TO THE COPY OF THE LEDGER ACCOUNT OF THE PARTY IN SUPP ORT OF THE CONTENTION THAT BILLS WERE ISSUED AND CHEQUES WERE GIVEN BY THE SAID PARTY AND ULTIMATELY THE AMOUNT WAS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE PARTY FOR CLAIMING BAD DEBTS. THE L EARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT SINCE DESPI TE BEST EFFORTS THE AMOUNTS COULD NOT BE RECOVERED AND THE ASSESSEE WRI TTEN OFF THE DEBTS IN THE ACCOUNTS AS PER REQUIREMENT OF SECTION 36(1) (VII) OF THE ITA NO.2229/AHD/2009 M/S. SHREE KRISHNA JEWELLERS VS ITO, WARD-7(2), AHM EDABAD 3 IT ACT, THEREFORE, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF T. R. F. LTD. 323 ITR 397 IN WHICH IT WAS HELD A S UNDER: THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE ABOVE DECISION, THE DECISION IN THE CASE OF DHALL E NTERPRISES & ENGINEERS PVT. LTD. (SUPRA) WOULD NOT LONGER REMAIN GOOD LAW. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW. 4. ON CONSIDERATION OF THE ABOVE FACTS AND SUBMISSI ONS OF THE PARTIES, WE ARE OF THE VIEW THE ISSUE IS SQUARELY C OVERED IN FAVOUR OF ITA NO.2229/AHD/2009 M/S. SHREE KRISHNA JEWELLERS VS ITO, WARD-7(2), AHM EDABAD 4 THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. (SUPRA). SINCE THE ASSESSEE C OULD NOT RECOVER THE AMOUNT FROM THE PARTY, THEREFORE, BAD DEBT WAS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE PARTY AS PER T HE PROVISIONS OF SECTION 36(1) (VII) OF THE IT ACT. THEREFORE, THE A SSESSEE WOULD BE ENTITLED FOR DEDUCTION. WE ACCORDINGLY, SET ASIDE T HE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION. GROUND N O.1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 5. ON GROUNDS NO.2 OF THE APPEAL, THE ASSESSEE CHAL LENGED THE ADDITION OF RS.3,71,523/- AS CASH CREDIT DESPITE TH E FACT THAT THE ASSESSEE ACCEPTED UNSECURED LOAN OF RS.2,20,000/- O NLY DURING THE ASSESSMENT YEAR UNDER APPEAL. THE AO NOTED THAT THE ASSESSEE WAS REQUESTED TO PROVE CREDITWORTHINESS AND GENUINENESS OF THE DEPOSIT AMOUNTING TO RS.3,71,523/-. THE ASSESSEES REPRESEN TATIVES STATED THAT THEY ARE UNABLE TO PROVE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION AND REQUESTED THAT CONFIRMATIONS FI LED EARLIER MAY BE CONSIDERED AND NO ADVERSE ACTION MAY BE TAKEN AGAIN ST THE ASSESSEE. THE AO, THEREFORE, NOTED THAT SINCE THE A SSESSEE COULD NOT PROVE CREDITWORTHINESS AND GENUINENESS OF THE F RESH DEPOSITORS AND THE CONFIRMATION FILED EARLIER CANNOT BE CONSID ERED, THEREFORE, HE MADE ADDITION OF RS.3,71,523/-. THE LEARNED CIT(A) CONFIRMED THE ABOVE ADDITION. 6. THE LEARNED COUNSEL FOR THE ASSESSEE ADMITTED TH AT THE PRESENT ASSESSMENT PROCEEDINGS WERE INITIATED AGAINST THE O RDER PASSED BY CIT U/S 263 OF THE IT ACT, THEREFORE, THE AO PASSED THE ORDER U/S ITA NO.2229/AHD/2009 M/S. SHREE KRISHNA JEWELLERS VS ITO, WARD-7(2), AHM EDABAD 5 143(3) READ WITH SECTION 263 OF THE IT ACT. HE HAS SUBMITTED THAT DURING THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSE E HAS RECEIVED FRESH DEPOSIT OF RS.2,20,000/-, THEREFORE, ADDITION MADE BY THE AO IS INCORRECT. HE HAS SUBMITTED THAT CONFIRMATIONS, COP IES OF THE ACCOUNTS AND PROOF OF INCOME OF THE DEPOSITORS WERE SUBMITTE D IN ORIGINAL ASSESSMENT STAGE WHICH HAS NOT BEEN CONSIDERED BY T HE AO WITHOUT ANY JUST REASONS. HE HAS SUBMITTED THAT SINCE ALL E VIDENCES ARE AVAILABLE ON RECORD, THEREFORE, THE AO SHOULD NOT H AVE REJECTED THE EXPLANATION OF THE ASSESSEE. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. ON OF THE RIVAL SUBMISSIONS WE ARE OF THE VIEW T HE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. TH E AO MADE ADDITION IN A SUM OF RS.3,71,523/- ON ACCOUNT OF UN EXPLAINED CASH CREDIT. HOWEVER, THE DETAILS FILED ON PAGE 8 OF THE PAPER BOOK SHOWS THAT IN THE ASSESSMENT YEAR UNDER APPEAL THE ASSESS EE HAS RECEIVED FRESH CREDITS OF RS.2,25,847/- ONLY. THUS, THERE IS A DIFFERENCE IN THE FIGURE OF UNEXPLAINED CREDIT ITSELF. FURTHER, THE A SSESSEE CLAIMED THAT ALL THE CONFIRMATIONS, PROOF OF INCOME OF THE CREDI TORS AND THEIR CONFIRMATIONS HAVE BEEN FILED BEFORE THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THEREFORE, THE AO SHOULD HA VE CONSIDERED THE SAME. COPIES OF THE SAME ARE ALSO FILED IN THE PAPER BOOK IN SUPPORT OF THE CONTENTION OF THE ASSESSEE. THE AO H OWEVER, DID NOT TAKE INTO CONSIDERATION SUCH EVIDENCES ON RECORD. T HE AO HAS NOT GIVEN ANY REASON WHY THE CONFIRMATIONS FILED EARLIE R CANNOT BE TAKEN INTO CONSIDERATION IN THE PROCEEDINGS INITIATED ON THE BASIS OF THE ORDER PASSED U/S 263 OF THE IT ACT. SINCE ALL THE E VIDENCES AND ITA NO.2229/AHD/2009 M/S. SHREE KRISHNA JEWELLERS VS ITO, WARD-7(2), AHM EDABAD 6 MATERIAL ON RECORD WERE AVAILABLE ON RECORD OF THE AO, THEREFORE, THE AO WAS BOUND TO CONSIDER THE EVIDENCES ON RECORD AN D SHALL HAVE TO PASS REASONED ORDER THEREON. MERELY BECAUSE PROCEED INGS WERE INITIATED ON THE BASIS OF THE ORDER PASSED U/S 263 OF THE IT ACT IS NO GROUND TO REJECT THE CONTENTION OF THE ASSESSEE AND IT IS ALSO NO GROUND FOR NOT TAKING INTO CONSIDERATION THE EVIDEN CES ON RECORD. SINCE, NO SPECIFIC FINDINGS HAVE BEEN GIVEN ON THE EVIDENCES ALREADY AVAILABLE ON RECORD FOR EXPLAINING THE CASH CREDITS U/S 68 OF THE IT ACT, THEREFORE, MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW AND RESTORE THIS ISSUE TO AO WITH DIRECTION TO CONSIDER ALL EVIDENCES FILED AT THE ORIGINAL ASSESSMENT STAGE BY THE ASSESSEE BY GIVING REASONAB LE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED PARTLY AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 01-07-2011 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 01-07-2011 LAKSHMIKANT/- ITA NO.2229/AHD/2009 M/S. SHREE KRISHNA JEWELLERS VS ITO, WARD-7(2), AHM EDABAD 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD