Sh. Manu Kapoor, Jalandhar V. The Incomea-tax Officer, Jalandhar

ITA 223/ASR/2014

• Counselvise Citation: 22320914 RSA 2014
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TARSEM LAL
• Assessee Lawyers: J S BHASIN
• Keywords: Wrong claim; Bad and doubtful debts
• Section: 144; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH ; AMRITSAR (SMC) . BEFORE SH. A.D. JAIN, JUDICIAL MEMEBR ITA NO.223(ASR)/2014 ASSESSMENT YEAR:2007-08 PAN:AMLPK4598A SH. MANU KAPOOR, VS. INCOME TAX OFFICER, SHOP NO.37, JAIN MARKET, WARD 3(4), JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. J.S. BHASIN, ADV. RESPONDENT BY: SH. TARSEM LAL, DR DATE OF HEARING : 15/09/2015 DATE OF PRONOUNCEMENT: 13/11/2015 ORDER THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT YE AR 2007-08 AGAINST THE ORDER DATED 10.02.2014, PASSED BY THE O F THE LD. CIT(A), JALANDHAR. THE ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS WRONGLY HELD THAT THE BOOKS OF ACCOUNTS WITH BILLS/VOUCHERS WERE NOT PRODUCED IN ASSESSMENT PROCEEDINGS. 2. THAT THE DISALLOWANCE OF CONSIGNMENT EXPENSES AM OUNTING TO RS.40,200/- HAS BEEN WRONGLY CONFIRMED BY THE LD . CIT(A). 3. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDI NG THE ADDITION OF RS.96,551/- TOWARDS COMMISSION PAID TO ONE MR. RAMU. 2 3. THAT THE LD. CIT(A) HAS ALSO ERRED IN FACTS AS A LSO ON LAW TO CONFIRM THE ADDITION OF RS.5,42,502/- CLAIMED AS BA D DEBT, BUT DISALLOWED BY THE ITO. 2. APROPOS GROUND NO.1, THE AO OBSERVED THAT DESPIT E REPEATED OPPORTUNITIES, THE ASSESSEE FAILED TO FILE ITS BOOK S OF ACCOUNT WITH BILLS/VOUCHERS, THEREBY DEPRIVING THE AO OF AN OPPO RTUNITY TO VERIFY THE CORRECTNESS OF THE ASSESSEES INCOME AND INVESTIGAT NG THE CASE PROPERLY. THE LD. CIT(A) UPHELD THE AOS OBSEVATIONS. 3. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT THE LD. CIT(A) HAS WRONGLY HELD THAT THE BOOKS OF ACCOUNT WITH BIL LS/VOUCHERS WERE NOT PRODUCED IN THE ASSESSMENT PROCEEDINGS; AND THAT IN CASE THE BOOKS WERE NOT PRODUCED, THE ASSESSMENT OUGHT TO HAVE BEE N MADE U/S 144 OF THE ACT, RATHER THAN U/S 143(3) THEREOF. 4. ON THE OTHER HAND, THE LD. DR, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 5. IN THIS REGARD, I DO NOT FIND ANY ERROR IN THE O RDER OF THE LD. CIT(A). THE LD. CIT(A) HAS UPHELD THE AOS OBSERVATIONS, BY MAKING THE FOLLOWING OBSERVATIONS: I HAVE CONSIDERED THE OBSERVATIONS OF THE AO AS MAD E BY HIM IN THE ASSESSMENT ORDER. I HAVE ALSO CONSIDERED THE WRITTE N SUBMISSIONS FILED BY THE ASSESSEE VIDE LETTER DATED 09.09.2013 ON THE ISSUE UNDER REFERENCE. ON CAREFUL CONSIDERATION OF THE AS SESSMENT ORDER, I AM ALSO OF THE OPINION THAT THE ASSESSEE FAILED TO PRODUCE COMPLETE SET OF BOOKS OF ACCOUNT ALONG WITH BILLS AND VOUCHE RS FOR VERIFICATION OF THE AO. THE SUBMISSIONS OF THE ASSESSEE THAT THE BOOKS OF ACCOUNT WERE LEFT WITH THE AO FOR HIS VERIFICATION FOR MANY DAYS ARE WITHOUT ANY DOCUMENTARY EVIDENCE. THE AO CLEARLY ST ATED IN THE ORDER WHATEVER BOOKS HAVE BEEN PRODUCED BY THE ASSE SSEE. IN HIS OPINION, THE BOOKS OF ACCOUNT PRODUCED BY THE ASSES SEE WERE NOT 3 SUFFICIENT TO VERIFY THE CORRECTNESS OF INCOME DISC LOSED BY THE ASSESSEE IN THE RETURN. IN MY OPINION, THE ACTION O F THE AO IN COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT WIL L NOT PROVE THAT THE ASSESSEE HAS PRODUCED COMPLETE SET OF BOOKS OF ACCOUNT FOR VERIFICATION OF THE AO. I AM OF THE VIEW THAT THE A SSESSEE COULD NOT REBUT THE ALLEGATION LEVELED BY THE AO WITH REGARD TO NON PRODUCTION OF BOOKS OF ACCOUNT WITH ANY DOCUMENTARY EVIDENCE. IN THE RESULT, GROUND OF APPEAL NO.2 TAKEN BY THE ASSESSEE IS REJE CTED. 6. FROM THE ABOVE, IT IS EVIDENT THAT THERE IS NO F ORCE WHATSOEVER IN THE GRIEVANCE SOUGHT TO BE RAISED BY WAY OF GROUND NO.1. THE CONTENTION OF THE ASSESSEE THAT HIS BOOKS OF ACCOUNT WERE LEF T WITH THE AO DID NOT FIND ANY SUPPORT FROM ANY DOCUMENTARY EVIDENCE. NOT HING TO THE CONTRARY HAS BEEN BROUGHT BEFORE ME. THE ASSESSEE H AS ALSO NOT BEEN ABLE TO REFUTE THE CONSIDERED FINDING RECORDED BY T HE LD. CIT(A) THAT WHATEVER BOOKS WERE PRODUCED BY THE ASSESSEE BEFORE THE AO, WERE INSUFFICIENT TO VERIFY THE CORRECTNESS OF INCOME, A S DISCLOSED BY THE ASSESSEE. SO FAR AS REGARDS THE ASSESSEES OBJECTIO N REGARDING ASSESSMENT BEING MADE U/S 143(3) AND NOT U/S 144 THEREOF, THIS ALSO STANDS ANSWERED BY THE LD. CIT(A) AND, IN MY OPINION, CORR ECTLY SO. THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT SINCE THE ASSESSMENT WAS NOT CARRIED OUT U/S 144 OF THE ACT, IT OUGHT TO BE PRESUMED THAT TH E COMPLETE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE AO FOR VERIFICAT ION. 7. IN VIEW OF THE ABOVE, FINDING NO MERIT THEREIN, GROUND NO.1 IS REJECTED. 8. AS PER GROUND NO.2, DISALLOWANCE OF CONSIGNMENT EXPENSES OF RS.40,200/- WAS WRONGLY CONFIRMED BY THE LD. CIT(A) . IN THIS REGARD, WHILE MAKING THE ADDITION, THE AO OBSERVED THAT TH E ASSESSEE CLAIMED AN EXPENDITURE OF RS.40,200/- UNDER THE HEAD CONSI GNMENT EXPENSES IN THE PROFIT & LOSS ACCOUNT; THAT ON QUERY, THE ASSES SEE EXPLAINED THAT SUCH AMOUNTS WERE PAID TO DRIVERS, AFTER BEING SAT ISFIED WITH REGARD TO THE EXTENT OF EXPENSES INCURRED BY THEM; THAT IT WAS ADMITTED BY THE 4 ASSESSEE THAT HE DID NOT HAVE ANY VOUCHERS WITH REG ARD TO THE EXPENSES CLAIMED AND THAT IN THE ABSENCE OF VOUCHERS, IT WAS NOT POSSIBLE TO VERIFY AS TO WHETHER THE ENTIRE EXPENDITURE WAS WHOLLY AN D EXCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINES S, RELATING TO THE YEAR UNDER CONSIDERATION. 9. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED VI DE WRITTEN SUBMISSIONS, THAT GOODS WERE SENT BY THE ASSESSEE F OR SALE ON CONSIGNMENT BASIS; THAT THE ASSESSEE CHARGED STORAG E EXPENSE, IF GOODS WERE NOT IMMEDIATELY SOLD; THAT DRIVERS HAD TO INCU R CERTAIN PETTY EXPENSES ON THE WAY; THAT THESE WERE ON ACCOUNT OF BORDER CROSSING AND TRUCK REPAIR, LIKE PUNCTURE OR SOME CONTINGENT EXPE NSES; THAT THERE ARE NO VOUCHERS FOR SUCH PETTY EXPENSES; THAT, HOWEVER, THE BOOKS MAINTAINED IN A NORMAL COURSE OF BUSINESS ON DAY TO DAY BASIS CONSTITUTE DOCUMENTARY EVIDENCE AND THAT ON THIS BASIS, THE EX PENSES MAY BE ALLOWED. 10. THE LD. CIT(A) REMANDED THE MATTER TO THE AO. T HE AO IN THE REMAND REPORT, COMMENTED THAT THE ASSESSEE WAS AGAI N REQUESTED IN THE REMAND PROCEEDINGS TO PRODUCE BILLS/VOUCHERS TO ENA BLE THE AO TO VERIFY THE GENUINENESS OF THE CONSIGNMENT EXPENDITURE; THA T THE ASSESSEE AGAIN FAILED TO PROVIDE INFORMATION. IN THE COUNTER COMME NTS, THE ASSESSEE REITERATED THAT THERE ARE NO VOUCHERS FOR THE PET TY EXPENSES AND THAT IT BEING UN-VOUCHED EXPENDITURE, A PART THEREOF CAN BE DISALLOWED AND NOT THE WHOLE. 11. THE LD. CIT(A), CONFIRMING THE ADDITION, OBSERV ED, INTER-ALIA, THAT IF THE BOOKS OF ACCOUNT ARE TREATED TO BE PROOF FOR EV ERY EXPENSE, THERE IS NO NEED TO MAINTAIN ANY TYPE OF BILLS/VOUCHERS. 5 12. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE DISALLOWANCE OF CONSIGNMENT EXPENSES AMOUNT TO RS.4 0,200/- HAS WRONGLY BEEN CONFIRMED BY THE LD. CIT(A). 13. THE LD. DR, ON THE OTHER HAND, PLACED STRONG R ELIANCE ON THE IMPUGNED ORDER. 14. HERE, IT CANNOT BE DISPUTED THAT WHILE ON THE WAY, THE TRUCK DRIVERS MUST BE INCURRING SOME PETTY EXPENSES, LIKE PETTY REPAIRS, ETC., FOR WHICH, NO VOUCHERS ARE POSSIBLE TO BE MAINTAINE D. THEREFORE, I AM INCLINED TO ALLOW 50% OF THE EXPENSES. THE ADDITIO N OF RS.40,200/- IS REDUCED TO RS.20,100/-. GROUND NO.2 IS PARTLY ALLOW ED. 15. SO FAR AS REGARDS GROUND NO.3, THE AO MADE AN A DDITION OF RS.96,551/- ON ACCOUNT OF DISALLOWANCE OF COMMISSIO N EXPENSES. THE AO OBSERVED AS FOLLOWS: 2.3 COMMISSION PAID: DURING THE YEAR UNDER CONSIDER ATION, THE ASSESSEE HAS PAID COMMISSION AMOUNTING TO RS.17,26, 381/-. DETAILS OF COMMISSION WERE CALLED FOR FROM THE ASSESSEE. TH E ASSESSEE, VIDE HIS LETTER DATED 09.10.2009 HAS FURNISHED NAMES OF PERSONS, DETAILS OF COMMISSION PAID AND TAX DEDUCTED AT SOURCE. ONE OF SUCH PERSONS IS SH. RAM KUMAR GUPTA TO WHOM COMMISSION O F RS.96,551/- IS SHOWN TO HAVE BEEN PAID. THE ASSESSE E HAS FURNISHED PHOTO COPIES OF RETURNS OF INCOME FILED B Y SOME OF THESE PERSONS. ONE OF THE PHOTO-COPY OF RETURN FILED IS B Y SH. RAMU, SON OF SH. MOHINDER PAL. AS PER PHOTO COPY OF HIS RETURN F ILED BY THE ASSESSEE BEFORE ME SH. RAMU, SON OF SH. MOHINDER PA L FILED HIS RETURN ON 11.03.2008 WITH RANGE III, JALANDHAR DEC LARING NET INCOME OF RS.96,570/-. AS PER COPY OF COMPUTATION C HART SUCH INCOME WAS EARNED BY WAY OF COMMISSION. COMPUTATION CHART GIVES FOLLOWING INFORMATION ABOUT THE ASSESSEE: RAMU, SON OF SH. MOHINDER PAL, H.NO. NL-143, MOHALLAS MOHINDRU, WARD NO.7, JALANDHAR. WHEN ASKED ABOUT THE WHEREABOUTS OF THIS PERSON AS THE ADDRESS GIVEN BY SH. RAMU WAS THAT OF THE ASSESSEES RESIDE NCE, THE ASSESSEE CLAIMED AS UNDER: 6 RAMU IS NOT OUR RELATIVE NOR WAS HE A TENANT IN OU R HOUSE. HE HAD COME FROM YAMUNANAGAR AND HAD NO PLACE TO LIVE. WE ALLOWED HIM TO SLEEP AT OUR SHOP. WHEN HE WANTED TO APPLY PAN WE ALLOWED HIM TO USE OUR HOME ADDRESS. HE IS NO LONGER OUR COMMIS SION AGENT. FROM THE REPLY GIVEN BY THE ASSESSEE IT IS CLEAR TH AT THE ASSESSEE IS NOT INCLINED TO GIVE THE TRUE PARTICULARS OF THE BR OKER. IN THE RETURN AS STATED ABOVE, THE VERIFICATION PART SHOWS I RAMU, SON OF SH. MOHINDER PAL GIVEN A CLEAR INDICATION THAT THE RETURN WAS NOT FILED BY SH. RAMU OR THE RETURN FILED GIVEN INCORRE CT PARTICULARS EVEN IN THE VERIFICATION FRO. EVEN OTHERWISE, AS PER PHO TOCOPY OF THE RETURN, HE FILED HIS RETURN DECLARING COMMISSION IN COME AT RS.96,549/- I.E., THE TOTAL COMMISSION CLAIMED TO BE PAID BY THE ASSESSEE. FROM THIS, IT IS CLEAR THAT HE HAS DECLA RED THE GROSS COMMISSION OF RS.96,549/- WHICH IS NOT POSSIBLE AS HE HAS NOT SHOWN ANY EXPENDITURE INCURRED TO EARN SUCH COMMISS ION INCOME. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT COMMISSION OF RS.96,551/- WAS GIVEN TO SH. RAM KUMAR GUPTA, THE C OMMISSION CLAIMED TO HAVE BEEN PAID TO HIM TO THE EXTENT OF RS.96,551/- IS DISALLOWED. 16. IN HIS WRITTEN SUBMISSIONS FILED BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED AS FOLLOWS: COMMISSIONER PAID INTO RAMU RS.96,551/- AS EXPLAINED BEFORE THE AO RAMU CAME FROM YAMUNANA GAR. HE HAD NO PLACE TO LIVE, SO WE ALLOWED HIM TO SLEEP AT OUR SHOP. WHEN HE WANTED TO GET A PAN NUMBER, WE ALLOWED HIM TO USE OUR RESIDENTIAL ADDRESS. WE ALLOWED HIM TO USE OUR RESI DENTIAL ADDRESS. WE APPOINTED HIM OUR COMMISSION AGENT AS HE WAS CON VERSANT WITH YAMUNA NAGAR AND ADJACENT AREA. WE DEDUCTED TDS FRO M COMMISSION PAID TO HIM AND HE GOT THE REFUND WHICH WENT TO HIS BANK ACCOUNT. AO HAS DISALLOWED COMMISSION PAID TO HIM ON THE FO LLOWING GROUNDS: I) HIS FATHERS NAME IS MOHINDER PAL WHICH IS THE SAME AS THE NAME OF THE ASSESSEES FATHER WHICH IS MOHINDER PAL KAPUR. IT IS NOTHING BUT A COINCIDENCE. HE IS NOT OUR RELATIV E. THERE IS DIFFERENCE IN SPELLING OF MAHINDER PAL AND MOHINDER PAL. II) HIS ADDRESS IS THE SAME AS OURS. THIS HAD ALREADY B EEN EXPLAINED BY US ABOVE. III) HE DID NOT CLAIM ANY EXPENSES AGAINST COMMISSION IN COME. IT IS SUBMITTED THAT TOTAL COMMISSION RECEIVED BY RAMU WAS 7 BELOW THE TAXABLE LIMIT. SO HE WAS NOT ADVERSELY AF FECTED IF EXPENSES WERE NOT CLAIMED. MOREOVER, HE DID NOT FIL E THE RETURN HIMSELF. HE MUST HAVE GONE TO A PERSON WHO W AS DOING THIS WORK. HE MIGHT NOT HAVE CARED TO DEDUCT EXPENS ES AS THERE WAS NO INCOME TAX INVOLVED EITHER WAY. SO TO DISALLOW COMMISSION ON THE GROUND THAT EXPENSES WERE NOT CLA IMED BY THE AGENT IS, TO SAY THE LEAST, MOST UNJUSTIFIED. AS AGAINST THIS, HIS GENUINENESS IS PROVED FROM THE FOLLOWING FACTS: I. HE GOT A PAN CARD MADE. II. HE OPENED TO BANK ACCOUNT III. HE FILED INCOME TAX RETURN IV. HE GOT REFUND OF I.TAX WHICH WENT TO HIS BANK ACCOU NT FROM WHERE HE WITHDRAWN IT. HIS EMPLOYER AT WHOSE PREMISES HE WAS RESIDING, DOE S NOT MAKE HIM A FICTITIOUS PERSONS. THE COMMISSIONS PAID TO R AMU IS ACTUAL AND GENUINE AND MAY BE ALLOWED. 17. IN HIS REMAND REPORT, THE AO STATED, AS FOLLOW S: COMMISSION PAID TO RAMU: DURING THE COURSE OF ASSE SSMENT PROCEEDINGS THE ASSESSEE VIDE HIS REPLY DATED 09.12 .2009, SUBMITTED THE LIST OF PERSONS TO WHOM THE COMMISSIO N WAS PAID DURING THE YEAR UNDER CONSIDERATION. HE MENTIONED T HE NAME OF COMMISSION AGENT AS RAM KUMAR GUPTA INSTEAD OF RAMU TO WHOM THE COMMISSION WAS PAID DURING THE YEAR. THE ASSESS EE VIDE HIS LETTER DATED 21.10.2013 STATED THAT THE FULL NAME O F SH. RAMU WAS RAM KUMAR GUPTA BUT HE WAS COMMONLY KNOWN AS RAMU. IT IS EVIDENT FROM THE REPLY OF THE ASSESSEE THAT RAM KU MAR GUPTA HAS GOT HIS PAN ON HIS COMMONLY KNOWN NAME NOT ON HIS A CTUAL NAME, THE ASSESSEE FAIL TO PRODUCE SH. RAMU FOR VERIFICA TION. 18. THE ASSESSEES REJOINDER IS AS UNDER: COMMISSION PAID TO RAMU: WHEN RAMU CAME TO US AS C OMMISSION AGENT, HE TOLD US THAT HIS NAME WAS RAM KUMAR GUPTA . HOWEVER, EVERYBODY, CALLED HIM RAMU. FOR WORK DONE BY HIM, C OMMISSION WAS PAID TO HIM. HE GOT REFUND OF TDS BY FILING HIS INCOME TAX RETURNS. HIS INCOME WAS BELOW THE TAXABLE LIMIT. HE DID EVERYTHING IN THE NAME OF RAMU. SIMPLY BECAUSE WHILE FILING LI ST OF COMMISSION AGENTS, WE MENTIONED HIS FULL NAME, DOES NOT ENTITL E THE DEPARTMENT TO DISALLOW COMMISSION PAID TO HIM. HIS PAN SHOWS T HAT HE IS A MAN FLESH AND BLOOD. HE OPENED BANK ACCOUNT TO CLAIM TD S REFUND. AS SUCH, PAYMENT OF COMMISSION TO HIM CANNOT BE TERMED AS BOGUS. 8 WE COULD NOT PRODUCE HIM AFTER A LAPSE OF ABOUT 3 Y EARS AS HE HAD LEFT US WITHOUT LEAVING ANY ADDRESS. AS A MATTER OF FACT SO MANY COMMISSION AGENTS HAD LEFT US BECAUSE WE WERE GE TTING DIRECT ORDERS FROM SEVERAL MILLS AS A RESULT OF WHICH THER E WAS SHARP DECLINE IN THE PAYMENT OF COMMISSION. THIS IS REFLE CTED FROM THE FOLLOWING FIGURES: ASSTT. YEAR SALES COMMISSION PAID 2007-08 71097223/- 1726381/- 2008-09 72128743/- 184394/- IT WILL BE APPRECIATED THAT WE CANNOT KEEP TRACK O F ALL THE PEOPLE WHO LEAVE US FOR YEARS TOGETHER. THEREFORE, NON-PR ODUCTION OF RAMU WAS DUE TO CIRCUMSTANCES BEYOND OUR CONTROL. IN VIEW OF ABUNDANT EVIDENCE PRODUCED BY US IN THE FORM OF HIS PAN, TDS DEDUCTED, RETURN FILED AND BANK ACCOUNT HE MUST HAVE OPENED TO WITHDRAW TDS REFUND, THE COMMISSION PAID TO RAMU IS GENUINE AND MAY BE ALLOWED. 19. THE LD. CIT(A) UPHELD THE ADDITION ON ACCOUNT O F DISALLOWANCE OF COMMISSION OF RS.96,551/- PAID TO SH. RAMU, OBSERVI NG AS FOLLOWS: 9.4. I HAVE CONSIDERED THE OBSERVATIONS OF THE AO A S MADE BY HIM IN THE ASSESSMENT ORDER AS WELL AS REMAND REPORT. I HAVE ALSO CONSIDERED THE WRITTEN SUBMISSIONS OF THE ASSESSEE AS WELL AS HIS COUNTER COMMENTS ON THE REPORT OF THE AO. ON CAREFU L CONSIDERATION OF THE ASSESSMENT ORDER, IT HAS BEEN NOTICED THAT T HE AO HAS MADE THE ADDITION AS THE IDENTITY OF THE COMMISSION AGEN T NAMELY SH. RAMU (BY PRODUCING HIM FOR VERIFICATION) HAS NOT ES TABLISHED EITHER DURING ASSESSMENT PROCEEDINGS OR DURING APPELLATE P ROCEEDINGS. EVEN THE CONFIRMATION OF SH. RAMU HAS NOT BEEN FILE D EITHER DURING ASSESSMENT PROCEEDINGS OR DURING APPELLATE PROCEEDI NGS. THE FATHERS NAME OF RAMU AND THAT OF ASSESSEE ARE SAME . ADDRESS OF ASSESSEE AND RAMU IS ALSO SAME. ALL THESE FACTS AR E NOT JUST COINCIDENCE. IN MY CONSIDERED OPINION, THE GENUINEN ESS OF PAYMENT HAS NOT BEEN ESTABLISHED BY THE ASSESSEE BY PRODUCI NG SH. RAMU. IN THESE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , I AM OF THE CONSIDERED OPINION THAT NEITHER THE ASSESSEE COULD ESTABLISH IDENTITY OF SH. RAMU BY PRODUCING HIM BEFORE THE AO FOR VERI FICATION NOR HE COULD PROVE GENUINENESS OF PAYMENT BY FILING DETAIL S IN RESPECT OF SERVICES RENDERED. THE ACTION OF THE AO IN MAKING A DDITION OF RS.96,551/- ON ACCOUNT OF DISALLOWANCE OF COMMISSIO N PAID TO RAMU 9 IS, THEREFORE, UPHELD. IN THE RESULT, GROUND OF APP EAL NO. 5 TAKEN BY THE ASSESSEE IS DISMISSED. 20. BEFORE ME, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDIT ION TOWARDS COMMISSION PAID TO SH. RAMU, SINCE AS MAINTAINED BE FORE THE AUTHORITIES BELOW, WHEN RAMU CAME TO THE ASSESSEE A S COMMISSION AGENT, HE INFORMED HIS NAME TO BE SH. RAM KUMAR GUP TA; THAT, HOWEVER, EVERYBODY CALLED HIM RAMU, THAT THE COMMISSION WAS PAID TO HIM FOR THE WORK DONE BY HIM; THAT HE GOT A REFUND OF TDS BY F ILING HIS INCOME TAX RETURN, AS RAMU; THAT HIS INCOME WAS BELOW THE TAXA BLE LIMIT; THAT IT WAS ONLY THAT THE ASSESSEE FILED THE LIST OF COMMISSION AGENTS; THAT HIS FULL NAME WAS MENTIONED, THAT IT REMAINS UNDISPUTED; THA T RAMUS PAN SHOWS HIM TO BE AN ACTUAL PERSON; THAT IT IS ALSO UNCHALLENGED THAT RAMU OPENED AN ACCOUNT WITH THE BANK TO CLAIM TDS; THAT THEREFORE, BOTH THE AUTHORITIES BELOW HAVE ERRED IN CONCLUDING THAT THE PAYMENT OF COMMISSION TO RAMU WAS BOGUS; AND THAT IT WAS DUE T O THE FACT THAT RAMU HAD LEFT THE ASSESSEE WITHOUT ANY PERMANENT AD DRESS, THAT HE COULD NOT BE PRODUCED BEFORE THE TAXING AUTHORITIES . 21. ON THE OTHER HAND, THE LD. DR, HAS, AGAIN, PLA CED STRONG RELIANCE ON THE IMPUGNED ORDER, CONTENDING THAT THIS IS ENTI RELY A BOGUS CLAIM OF THE ASSESSEE, AS RIGHTLY HELD BY THE TAXING AUTHORI TIES; THAT THE ASSESSEE FAILED TO PRODUCE ON RECORD EVEN THE DETAILS OF THE SERVICES RENDERED BY THE ALLEGED RAMU; THAT SO MUCH SO, NOT EVEN A CONFI RMATION COULD BE ELICITED FROM RAMU; THAT FURTHER, NOT ONLY THE ADD RESS BUT ALSO THE FATHERS NAME OF RAMU IS THAT OF THE ASSESSEE HIMSE LF; THAT DESPITE ALL THIS OVER-WHELMING EVIDENCE AGAINST THE ASSESSEE, T HE ASSESSEE FAILED TO PRODUCE EVEN AN IOTA OF EVIDENCE IN HIS FAVOUR AND THAT THEREFORE, SINCE THE ASSESSEE MISERABLY FAILED TO PROVE THE GENUINEN ESS OF THE PAYMENT, THE AUTHORITIES BELOW HAVE CORRECTLY MADE THE ADDI TION. 10 22. HERE ALSO, I AM UNABLE TO AGREE WITH THE STAND TAKEN BY THE ASSESSEE. IT IS THE ONUS OF THE ASSESSEE TO PROVE T HE CLAIM WITH EVIDENCE. IN THE PRESENT CASE, THE ASSESSEE HAS REMAINED MISE RABLY UNABLE TO PROVE ITS CLAIM. NOTHING AT ALL HAS BEEN PRODUCED I N SUPPORT OF THE CLAIM MADE, RENDERING IT TO BE MERELY A BALD CLAIM. ENTIR ELY AGREEING WITH THE ORDER OF THE LD. CIT(A), I HEREBY UPHELD THE SAME, REJECTING GROUND NO.3. 23. GROUND NO.4 STATES THAT THE LD. CIT(A) HAS ERRE D IN CONFIRMING THE ADDITION OF RS.5,42,502/-, CLAIMED AS BAD DEBT, BUT DISALLOWED. 24. THE AO MADE AN ADDITION OF RS.5,42,502/- ON ACC OUNT OF DISALLOWANCE OF REBATE & DISCOUNT EXPENSES, WHICH W AS CLAIMED TO BE BAD DEBT. WHILE DOING SO, THE AO OBSERVED THAT AS PER T HE ASSESSEE, THESE BAD DEBTS WERE OF RS.3,41,347/-, PERTAINING TO BIRAT NA GAR JUTE MILLS LTD. AND OF RS.22,790/- WITH REGARD TO HOWRAH JUTE MILLS CO. LTD.; THAT THE ASSESSEE HAS CONTENDED THAT HE HAD GIVEN THESE AMOU NTS AS ADVANCES FOR PURCHASE OF GOODS AT A PRICE; THAT THE ASSESSEE LIFTED SAME GOODS; THAT THE ASSESSEE REALIZED THAT IT CANNOT BE BENEFICIAL TO LEAVE ADVANCE WITH THE PARTIES, RATHER THAN TO LEAVE THE BALANCE GOODS , AND THAT HENCE, THE LOSS. 25. THE AO FURTHER OBSERVED THAT THE ASSESSEE WAS A SKED TO INFORM THE RATE AT WHICH THE GOODS WERE AGREED TO BE PURCHASE D, WITH DOCUMENTARY EVIDENCE AS ALSO TO INFORM THE INCREASE IN THE RATE OF GOODS AGREED TO BE PURCHASED; THAT IN REPLY DATED 16.12.2006/16.12.200 9, THE ASSESSEE CONTENDED THAT A COPY OF ACCOUNT OF RAGHUNATH JUTE MILLS WAS BEING ENCLOSED, BUT NO SUCH COPY OF ACCOUNT WAS ENCLOSED; THAT THE ASSESSEE FURTHER SUBMITTED THAT THE TRANSACTIONS WERE SETTL ED MOSTLY BY PHONE AND THERE WAS NO DOCUMENTARY EVIDENCE OF RATE; THA T SINCE THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE IN SUPPORT OF THIS C ONTENTION, THE SAME WAS NOT ACCEPTABLE; THAT THE ASSESSEE HAS FURTHER C ONTENDED THAT IT WAS A 11 BAD DEBT; THAT THIS WAS NOT ACCEPTABLE, SINCE IT WA S NOT TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE IN THE PREVIOUS YEAR AS REQUIRED UNDER THE PROVISIONS OF SECTION 36(2)(I) O F THE ACT. 26. BEFORE, THE LD. CIT(A), THE ASSESSEE FILED WR ITTEN SUBMISSIONS, THAT A PERUSAL OF THE ACCOUNTS MADE IT CLEAR THAT IT WAS NOT A CASE OF REBATE OR DISCOUNT; THAT RATHER, THE AMOUNTS INVOLVED WERE BA D DEBTS; THAT THE ASSESSEE WAS NOT SELLING ANYTHING TO THE PARTIES CO NCERNED; THAT THE ASSESSEE WAS PURCHASING GOODS FROM THEM; THAT IT WA S THE ASSESSEES ACCOUNTANT, WHO HAD IGNORANTLY TERMED THIS ACCOUNT AS REBATE AND DISCOUNT ACCOUNT; THAT THERE WAS ALSO A BAD ACCOUN T IN THE ASSESSEES BOOKS OF ACCOUNT; THAT ALL THE ENTRIES IN THAT ACCO UNT WERE ON ACCOUNT OF REBATE & DISCOUNT; THAT THE AO HAD BEEN INFORMED OF THIS POSITION, VIDE ASSESSEES LETTER DATED 01.09.2009 STATING THAT IN REALITY THE AMOUNTS CONCERNED WERE LESS REALIZED, BECAUSE BAGS HESSIAN CLOTH SUPPLIED TO THE PARTIES WAS DAMAGED DUE TO RAINS, GUNNY BAGS, HESSI AN CLOTH COME FROM CALCUTTA AND DESPITE CARE AND CAUTION, THEY SOME T IME GET DAMAGED DUE TO RAIN, RESULTING IN LESS PAYMENT TO THE ASSESSEE ; THAT THE ACCOUNTANT HAD LABELED REBATE & DISCOUNT, AS BAD DEBT ACCOUNT AND BAD DEBT ACCOUNT AS REBATE & DISCOUNT; THAT HOWEVER, AS PER THE DECISION OF THE HONBLE SUPREME COURT IN KEDARNATH JUTE MANUFACTUR ING CO. VS. CIT, 82 ITR 363 (SC), ENTRIES IN THE BOOKS OF ACCOUNT AR E NOT DETERMINATIVE OF AN ITEM OF INCOME AND EXPENDITURE AND THE AO CAN G O INTO THE MATTER AND FIND OUT THE REAL NATURE OF INCOME AND EXPEND ITURE; THAT THE AMOUNTS HAD BEEN WRITTEN OFF IN THE BOOKS OF ACCOUN T OF THE ASSESSEE; THAT THE ACCOUNTS OF THE PARTIES HAD BEEN CREDITED AND REBATE & DISCOUNT WAS WRONGLY LABELED; THAT AFTER 01.04.198 9, THE ASSESSEE IS NOT REQUIRED TO PROVE THAT DEBTS HAVE BECOME BAD AND HE HAS ONLY TO WRITE DEBTS OFF IN THE BOOKS OF ACCOUNT; THAT, THEREFORE, THE AMOUNT OF RS.5,42,502/- MAY BE ALLOWED AS BAD DEBTS; THAT BI RAT NAGAR JUTE MILLS AND RAGHUNATH JUTE MILLS WERE SINCE CLOSED AND NO R ECOVERY WAS 12 POSSIBLE FROM THEM; AND THAT THEREFORE, IT WAS A BU SINESS LOSS, WHICH MAY BE ALLOWED. 27. THE AO, IN THE REMAND REPORT DATED 08.01.2014, SUBMITTED THAT THE ASSESSEE HAD PAID TAXES TO BIRAT NAGAR JUTE MIL LS, HOWRAH JUTE MILLS CO. LTD., AND RAGHUNATH JUTE MILLS CO. LTD., WHICH ADVANCES COULD NOT BE TREATED AS BAD DEBTS, THE ASSESSEE NOT HAVING FU LFILLED THE CONDITION OF SECTION 36(1)(VII) OF THE ACT. 28. IN HIS REJOINDER, THE ASSESSEE SUBMITTED THAT H E HAD RUNNING ACCOUNTS WITH THE CONCERNED PARTY; THAT THE BALANCE AMOUNTS, FOR WHICH, NEITHER WERE GOODS RECEIVED, NOR THE AMOUNTS RETUR NED WERE WRITTEN OFF; THAT THESE WERE NOT ADVANCES; THAT IN THE CASE OF R AGHUNATH JUTE MILLS, THE AMOUNT OF RS.1,78,604.50 WAS THE BALANCE WRITTE N OFF AS ON 30.11.2005; THAT IN THE CASE OF BIRAT NAGAR JUTE M ILLS LTD., THE AMOUNT OF RS.3,47,647/- WAS WRITTEN OFF ON 31.03.2007; THA T APROPOS HOWRA MILLS CO. LTD., THE AMOUNT OF RS.22,790/- CLAIMED AS BAD DEBT WAS ON ACCOUNT OF THREE AMOUNTS OF REBATE & DISCOUNT CLAI MED BY THE ASSESSEE; THAT THIS HAD NOT BEEN GRANTED BY THE SELLING PARTY AND IT WAS AS SUCH, THAT THE AMOUNT HAS BEEN CLAIMED, AS BAD DEBT ON 31.03.2007; THAT U/S 36(1)(VII) READ WITH SECTION 36(2)(I) OF THE AC T, AS EXPLAINED TO THE AO, EVEN IF A PART OF THE BAD DEBT HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE, BAD DEBT HAS TO BE ALLO WED; THAT THE AO HAS NOT MENTIONED THESE FACTS IN HIS REMAND REPORT; AND THAT THE AMOUNT OF RS.5,42,502/- WAS CLEARLY ALLOWABLE AS BAD DEBT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT, IN TRF LTD. VS. CIT 32 3 ITR 397 (SC), AS PER WHICH, AFTER 01.04.1989, IT IS NOT NECESSARY FO R THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECO VERABLE AND THAT IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. 13 29. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.5,4 2,502/-, OBSERVING AS FOLLOWS: 10.4 I HAVE CONSIDERED THE OBSERVATIONS OF THE AO AS MADE BY HIM IN THE ASSESSMENT ORDER AS WELL AS REMAND REPORT. I HAVE ALSO CONSIDERED THE WRITTEN SUBMISSIONS OF THE ASSESSEE AS WELL AS HIS COUNTER COMMENTS ON THE REPORT OF THE AO. I HAVE FU RTHER CONSIDERED THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSE SSEE ON THE ISSUE UNDER REFERENCE. ON CAREFUL CONSIDERATION OF THE ASSESSMENT ORDER, IT HAS BEEN NOTICED THAT THE AO HAS MADE THE IMPUGNED ADDITION AS IN HIS OPINION THE AMOUNT WRITTEN OFF IS NOT A BAD DEBT AND IT IS JUST AN ADVANCE FOR PURCHASE OF GOODS WHI CH HAS BEEN STATED TO BE IRRECOVERABLE. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSEE HAS ALSO CHANGED HIS STAN D THAT THE AMOUNT CLAIMED AS EXPENSES UNDER THE HEAD REBATE & DISCOUNT IS ACTUALLY BAD DEBT AMOUNT. THE ASSESSEE HAS NOT PROD UCED ANY INDEPENDENT EVIDENCE EXCEPT COPY OF LEDGER ACCOUNT IN HIS BOOKS OF ACCOUNT TO ESTABLISH THAT THE DEBT HAS BECOME BAD. MOREOVER, THE AMOUNT REPRESENTED BY REBATE AND DISCOUNT (CLAIMED TO BE BAD DEBT) HAS NOT BEEN TAKEN INTO ACCOUNT IN COMPUTING THE IN COME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT O F SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIO US YEAR, OR MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BAN KING OR MONEY LENDING WHICH IS CARRIED ON BY THE ASSESSEE. IT MEA NS, THE AMOUNT REPRESENTED BY REBATE AND DISCOUNT DO NOT SATISFY T HE CONDITIONS AS LAID DOWN IN SECTION 36(1)(VII) READ WITH SECTION 3 6(2)(I) OF THE ACT. 30. THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED BEFORE THE AUTHORITIES BELOW THAT THE NATURE OF THE AMOUNT IN QUESTION IS NOT THAT OF BAD DEBT; THAT IT REMAINS UNDISPUTED THAT THE AMOU NTS INVOLVED ARE ADVANCE TO THE PARTIES; THAT THEREFORE, THEY MAY AL SO BE AS BAD DEBTS; THAT ALTERNATIVELY, IT IS A BUSINESS LOSS AND IT MA Y BE ALLOWED AS SUCH; THAT IN HIS SUBMISSIONS BEFORE THE LD, CIT(A), AS A LSO NOTED BY THE LD. CIT(A) IN THE IMPUGNED ORDER, THE ASSESSEE HAD CONT ENDED THAT THE AMOUNT WAS CLEARLY ALLOWABLE AS BAD DEBT, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT, IN THE CASE OF TRF LTD. VS. CIT (SUPRA), AS PER WHICH, AFTER 01.04.1989, IT IS NOT NECESSARY FOR TH E ASSESSEE TO ESTABLISH THAT BAD DEBT, IN FACT, HAS BECOME IRRECOVERABLE AN D IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACC OUNTS OF THE ASSESSEE; 14 THAT AS PER THE DECISION OF HONBLE DELHI HIGH COUR T, IN MOHAN MEAKIN LTD. VS. CIT, 348 ITR 109 (DEL.), AS PER WHICH MER ELY BECAUSE THE CLAIM WAS NOT MADE OUT UNDER ONE PARTICULAR PROVISION OF THE ACT, BUT WAS SO MADE OUT UNDER ANOTHER PROVISION OF LAW, THE ASSESS EE COULD NOT BE DEBARRED TO MAKE THE CLAIM. IT HAS BEEN CONTENDED THAT THE LD. CIT(A) HAS CORRECTLY OBSERVED THAT THE AMOUNT IN QUESTION HAD NOT BEEN TAKEN INTO ACCOUNT IN COMPUTING THE ASSESSEES INCOME OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH BAD DEBT OR PART THEREOF, WAS WRITTEN OFF, OR OF ANY EARLIER PREVIOUS YEAR, OR MONEY LENT IN THE ORD INARY COURSE OF THE ASSESSEES BUSINESS OF BANKING OR MONEY LENDING. 31. ON THE OTHER HAND, THE LD. DR, HAS PLACED STRON G RELIANCE ON THE IMPUGNED ORDER, AS CONTENDED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUCCESSFULLY REBUT THE CATEGORICAL FINDINGS RECORDE D BY THE AUTHORITIES BELOW; THAT AS PER THE OBSERVATIONS OF THE LD. CIT( A) ALSO, THE AO WAS RIGHTLY OF THE OPINION THAT THE AMOUNT WRITTEN OFF WAS NOT A BAD DEBT AND IT WAS JUST AN AMOUNT ADVANCED FOR PURCHASE OF GOOD S, WHICH HAS BEEN STATED TO BE IRRECOVERABLE; THAT THE ASSESSEE HAD N OT PRODUCED ANY INDEPENDENT EVIDENCE OTHER THAN THE COPIES OF LEDG ER ACCOUNT IN THE BOOKS OF ACCOUNT TO ESTABLISH THAT DEBT HAD BECOME BAD; THAT MOREOVER, THE ALTERNATIVE ISSUE NOW RAISED BY THE ASSESSEE WA S NOT EITHER BEFORE THE AUTHORITIES BELOW AND SO, THE MATTER MAY BE REMITTE D TO THE AO FOR ADJUDICATION, IN CASE, THE ALTERNATIVE SUBMISSION I S CONSIDERED. 32. HAVING HEARD THE PARTIES ON THIS ISSUE, WE FIND THAT AS PER TRF LIMITED VS. CIT (SUPRA) AND MOHAN MEAKIN LTD. VS. CIT (SUPRA), THE ISSUE OF ALLOWANCE OF THE AMOUNT AS A BUSINESS LOS S IS AVAILABLE TO THE ASSESSEE. HOWEVER, SINCE THIS ISSUE WAS NOT RAISED BEFORE THE TAXING AUTHORITIES, I DEEM IT PROPER TO REMIT THIS ISSUE T O THE FILE OF THE AO TO BE DECIDED AFRESH, IN ACCORDANCE WITH LAW, PARTICULARL Y IN VIEW OF THE ABOVE DECISIONS CITED BY THE ASSESSEE. THE AO SHALL AFFOR D ADEQUATE OPPORTUNITY 15 OF HEARING TO THE ASSESSEE. THE ASSESSEE, NO DOUBT, SHALL CO-OPERATE IN THE PROCEEDINGS BEFORE THE AO. ACCORDINGLY, GROUND NO.4, IS ACCEPTED FOR STATISTICAL PURPOSES. 33. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED, A S INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH NOV EMBER, 2015. SD/- (A.D. JAIN) JUDICIAL MEMBER /SKR/ DATED: 13/11/2015 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.MANU KAPOOR, JALANDHAR. 2. THE ITO WARD 3(4), JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR)