Smt. Rajkumari Ramshakti Sheth, Ahmedabad V. The Income Tax Officer,Ward-11(4), Ahmedabad

ITA 2481/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89673 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Depreciation; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA KR. YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.) I.T. A. NO. 2481/AHD/2011 (ASSESSM ENT YEAR: 2008-09) SMT. RAJKUMARI RAMSHAKTI SHETH PROP. RAMRAJ ASSOCIATES 126, NEW CLOTH MARKET, O/S. RAIPUR GATE, AHMEDABAD-380001 V/S ITO WARD-11(4), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: ADIPR 4260N APPELLANT BY : SMT. URVASHI SODHAN, A.R. RESPONDENT BY : B.L. YADAV, SR. D.R. ( )/ ORDER DATE OF HEARING : 08-06-2015 DATE OF PRONOUNCEMENT : 25-06-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER. 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-XVI, AHMEDABAD DATED 03.08.20111 FOR A.Y. 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF RAMRAJ ASSOCIATES AND STATED TO BE ENGAGED IN THE BUSINESS OF TRADING OF CLOTH. ASSESSEE FILED HER RETURN OF ITA NO 2481/ AHD/2011 . A.Y. 2008-0 9 2 INCOME FOR A.Y. 2008-09 ON 22.08.2008 DECLARING TOT AL INCOME OF RS. 3,85,081/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 15 .12.2010 AND THE TOTAL INCOME WAS DETERMINED AT RS. 8,11,960/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO V IDE ORDER DATED 03.08.2011 DISMISSED THE APPEAL OF THE ASSESSEE. AG GRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFO RE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ID. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIR MING ACTION OF AO IN DISALLOWING CLAIM OF BAD DEBTS OF RS. 4,07,853/- MADE BY THE AP PELLANT UNDER THE PROVISIONS OF SECTION 36 (1) (VII) OF THE ACT. LD. CIT (A) FURTHE R ERRED IN HOLDING THE SAME AS CAPITAL LOSS FAILING TO APPRECIATE THE FACT THAT THE INTERE ST INCOME EARNED ON ADVANCES MADE IN THE COURSE OF MONEY LENDING BUSINESS WAS OFFERED TO TAX IN EARLIER YEARS. LD. CIT (A) OUGHT TO HAVE GRANTED CLAIM OF BAD DEBT MADE BY THE APPELLANT. 2. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG DISALLOWANCE MADE BY AO OF RS. 19, 027/- OUT OF MOTOR CAR EXPENSES, TELEPHONE EXPE NSES & DEPRECIATION CLAIMED ON CAR WITHOUT APPRECIATING THE FACT THAT THE SAID EXP ENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS. 1 ST GROUND IS WITH RESPECT TO DISALLOWANCE OF THE CLAI M OF BAD DEBTS. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PER USING THE RETURN OF INCOME, A.O NOTICED THAT ASSESSEE HAS CLAIMED BAD D EBTS AMOUNTING TO RS. 4,07,853/- WHICH COMPRISED OF DEBTS STATED TO BE OU T OF MONEY LENDING BUSINESS AND PERTAINING TO TWO PARTIES NAMELY SHRI KANTILAL HASTIMAL (RS. 3,55,000/-) AND MADHAVPURA MERCANTILE CO-OP. BANK L TD. (RS. 1,05,705/-). A.O WAS OF THE VIEW THAT SINCE THE PRESENT BUSINESS OF THE ASSESSEE WAS TRADING IN CLOTH AND HAD NO RELEVANCE TO THE MONEY LENDING BUSINESS AND IN THE ABSENCE OF ANY EVIDENCE REGARDING MONEY LENDING ACTIVITY, THE DEBT PERTAINING TO MONEY LENT HAD NO RELEVANCE WITH THE INCOME OF THE ASSESSEE AND THEREFORE THE SAME CANNOT BE ALLOWED U/S. 36(1) (VII) R.W.S. 36(2) OF THE ITA NO 2481/ AHD/2011 . A.Y. 2008-0 9 3 ACT AND ACCORDINGLY DISALLOWED THE CLAIM OF BAD DEB TS. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE L D. CIT(A) WHO UPHELD THE ORDER OF A.O BY HOLDING AS UNDER:- 3.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE LD. COUNSEL AND THE FACTS OF THE CASE. I HAVE GONE THROUGH THE BALANCE SHEETS AND IN TEREST ACCOUNT OF THE A.Y. 1999-2000 ONWARDS AND NOTICED THAT THOUGH THE NAME OF KANTILA L HASTIMAL WAS APPEARING IN THE BALANCE SHEETS IN THE ASSET SIDE BUT NO INTEREST WA S CREDITED IN HIS NAME IN THE INTEREST ACCOUNT. IT SEEMS THAT NO INTEREST WAS EVER CHARGED FROM THIS PARTY. THOUGH, THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE REGARDING MONEY LEND ING BUSINESS CARRIED ON BY HER BUT EVEN IF THE ASSESSEE WAS IN THE BUSINESS OF MONEY L ENDING, NO INTEREST FROM KANTILAL HASTIMAL WAS DECLARED. IN THE BALANCE SHEETS FOR TH E A.Y. 2005-06 TO A.Y. 2007-08, THE NAME OF KANTILAL HASTIMAL WAS APPEARING IN THE LIST OF LOANS AND ADVANCES WHEREAS THE NAME OF MADHAVPURA MERCANTILE CO-OPERATIVE BANK LTD . WAS APPEARING IN THE LIST OF INVESTMENTS. THEREFORE, EVEN IF THE LOANS GIVEN TO KANTILAL HASTIMAL WAS NOT RECOVERABLE, IT WAS A CAPITAL LOSS TO THE ASSESSEE. LIKEWISE, TH E ASSESSEE HAD MADE INVESTMENT WITH MADHAVPURA MERCANTILE CO-OPERATIVE BANK LTD. AND TH E NON- RECOVERY OF RS. 52,853/- (WRONGLY TAKEN AS RS. 1,05,705/- BY THE ASSESSING O FFICER) WAS A LOSS OF INVESTMENT AND THAT WAS ALSO ON CAPITAL ACCOUNT. THEREFORE, THE AS SESSEE WAS NOT ENTITLED TO THE CLAIM U/S 36(1)(VII) FOR THE LOSS ON CAPITAL ACCOUNT THE ASSE SSING OFFICER HAD DISALLOWED THE CLAIM AS THE APPELLANT FAILED BEFORE HIM TO SATISFY THE C ONDITIONS LAID DOWN U/S 36(1)(VII) R.W.S. 36(2) OF THE ACT AND HAD NOT FURNISHED ANY EVIDENCE OF MONEY LENDING BUSINESS CARRIED ON BY THE APPELLANT. NO ANY SUCH EVIDENCE WAS FURNISHE D DURING THE APPELLATE PROCEEDINGS. WHEN NO INTEREST WAS EVER DECLARED ON THE LOANS TO KANTILAL HASTIMAL (RS. 3,55,000/-) AND THE LOSS WAS INCURRED FOR THE INVESTMENT WITH M ADHAVPURA MERCANTILE CO-OPERATIVE BANK LTD., THE CONDITIONS OF SEC. 36(2) WAS NOT FUL FILLED AND THEREFORE, THE APPELLANT WAS NOT ENTITLED TO THE DEDUCTION U/S 36(1)(VII) OF THE ACT. THE APPELLANT CANNOT DERIVE SUPPORT FROM THE DECISION OF TRF LTD. VS. CIT 323 ITR 397 ( SC) BECAUSE THIS DECISION IS APPLICABLE ONLY IF THE BAD DEBT IS WRITTEN OFF AND NOT WHERE THE LOANS AND ADVANCES AND INVESTMENTS ARE WRITTEN OFF. IN VIEW OF THE AFORESA ID DISCUSSION, I AM OF THE OPINION THAT THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE CLAIM OF THE APPELLANT MADE U/S 36(1)(VII) OF THE ACT. HIS FINDING IS SUSTAINED AND THE DISALLOWANCE OF RS. 4,07,853/- IS CONFIRMED. THE SECOND GROUND OF APPEAL IS ACCORDING LY DISMISSED. 5. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. A.R REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A). SHE FURTHER SUBMITTED THAT THE ASSESSEE IS INDEED ENGAGED IN THE BUSINESS OF MONEY LENDING AND THE AMOUNT OF INTERES T INCOME IS REFLECTED IN ITA NO 2481/ AHD/2011 . A.Y. 2008-0 9 4 THE PROFIT AND LOSS ACCOUNT. SHE POINTED TO THE TRA NSLATED COPY OF THE PROFIT AND LOSS ACCOUNT PLACED AT PAGE 75 TO 88 OF THE PAP ER BOOK. SHE FURTHER SUBMITTED THAT THE AMOUNT WAS LENT TO KANTILAL HAST IMAL IN THE PAST IN NORMAL COURSE OF HER BUSINESS AND ON FAILURE OF KANTILAL H ASTIMAL TO REPAY THE AMOUNT, THE AMOUNT WAS WRITTEN OFF AS BAD DEBTS. SH E FURTHER SUBMITTED THAT THE AMOUNT WAS WRITTEN OFF IN THE PROFIT AND LOSS A CCOUNT AND THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTION 36(1)(V II) R.W.S. 36(2) OF THE ACT. LD. A.R. ALSO PLACED ON RECORD THE COPY OF TH E BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THE ASSESSEE OF EARLIER YEARS, THE LEDGER ACCOUNT OF KANTILAL HASTIMAL. AS FAR AS THE WRITE OFF WITH RES PECT TO MADHAVPURA MERCANTILE CO-OP. BANK LTD. IS CONCERNED, SHE SUBMI TTED THAT THE INTEREST INCOME EARNED HAS BEEN OFFERED TO TAX BY THE ASSESS EE IN THE PAST. SHE THEREFORE SUBMITTED THAT ASSESSEE BE ALLOWED THE DE DUCTION OF BAD DEBTS. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE CL AIM OF BAD DEBTS. WITH RESPECT TO THE AMOUNT LENT TO KANTILAL HASTIMAL (RS . 3,55,000/- WHICH WAS WRITTEN OFF DURING THE YEAR) IT IS ASSESSEES CONTE NTION THAT THE AMOUNT WAS LENT IN EARLIER YEARS IN THE COURSE OF MONEY LENDIN G ACTIVITY OF THE ASSESSEE AND DESPITE THE EFFORTS MADE BY THE ASSESSEE FOR TH E RECOVERY OF AMOUNT AND ON FAILURE OF THE ASSESSEE TO RECOVER THE AMOUNT, T HE AMOUNT HAS BEEN WRITTEN OFF AS BAD DEBTS. ON THE OTHER HAND WHILE U PHOLDING THE ACTION OF A.O, IT IS CIT(A)S FINDING THAT THOUGH THE NAME OF KANTILAL HASTIMAL WAS APPEARING IN THE BALANCE SHEET BUT NO INTEREST FROM THE AMOUNT LENT WAS CREDITED TO THE INCOME ACCOUNT. BEFORE US, THE LD. A.R. HAS PLACED ON RECORD, THE TRANSLATED COPY OF THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF ITA NO 2481/ AHD/2011 . A.Y. 2008-0 9 5 EARLIER YEARS TO SUPPORT THE CONTENTION THAT THE AS SESSEE WAS INDEED ENGAGED IN MONEY LENDING ACTIVITY IN PAST AND HAD SHOWN TH E INTEREST INCOME IN THE RETURN OF INCOME. FROM THE TRANSLATED COPY OF BALAN CE SHEET PLACED ON RECORD (WHICH ARE DULY CERTIFIED BY LD. A.R.), IT I S SEEN THAT ASSESSEE ON THE ASSET SIDE OF THE BALANCE SHEET HAS SHOWN AMOUNT DU E FROM KANTILAL HASTIMAL OF RS. 3,55,000 (AS ON 31.03.2002 PAPER BO OK PAGE 75), RS. 65,00,000 (AS ON 31.03.2001 PAPER BOOK PAGE 79) AND RS. 2,50,000/- (AS ON 31.03.2000 PAPER BOOK PAGE 84). ASSESSEE HAS ALSO P LACED ON RECORD THE TRANSLATED COPY OF INTEREST ACCOUNT OF EARLIER YEAR S I.E. FOR F.Y. 98-99, 99- 2000, 2000-01 & 2001-02. THE PERUSAL OF THE INTERES T ACCOUNT OF THE EARLIER YEAR REVEALS THAT THOUGH ASSESSEE HAS SHOWN INTERES T INCOME FROM VARIOUS OTHER PARTIES BUT HAS NOT SHOWN ANY RECEIPT OF INTE REST FROM KANTILAL HASTIMAL THOUGH AS PER BALANCE SHEETS THE AMOUNTS W HICH WERE ADVANCED BY ASSESSEE AND WHICH HAVE BEEN STATED TO BE DURING TH E COURSE OF BUSINESS HAD INCREASED VIS-A-VIS 31.03.2000 AND 31.03.2002. IN S UCH A SITUATION THE SUBMISSION OF THE ASSESSEE THAT THE AMOUNT WAS ADVA NCED TO KANTILAL HASTIMAL IN THE NORMAL COURSE OF MONEY LENDING BUSI NESS CANNOT BE ACCEPTED MORE SO IN THE ABSENCE OF INCOME FROM THE AMOUNT LE NT. BEFORE US, LD. A.R. HAS ALSO NOT PLACED ANY MATERIAL ON RECORD TO DEMON STRATE THE TERMS AND CONDITIONS OF WHICH THE MONEY WAS LENT BY ASSESSEE TO KANTILAL HASTIMAL AND ALSO HAS NOT PLACED ANY MATERIAL TO CONTROVERT THE FINDING OF LD. CIT(A). WITH RESPECT TO AMOUNT WRITTEN OFF WITH RESPECT TO MADHAVPURA MERCANTILE CO-OP. BANK LTD., WE FIND THAT LD. CIT(A) HAS NOTED THAT THE INVESTMENT WITH THE BANK WERE IN THE NATURE OF INVESTMENT AND ON CAPITAL ACCOUNT AND THE LOSS WAS A CAPITAL LOSS. BEFORE US, ASSESSEE HA S NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD. CIT(A). WE THEREFORE FIND NO ITA NO 2481/ AHD/2011 . A.Y. 2008-0 9 6 REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). I N THE RESULT, THE GROUND OF ASSESSEE IS DISMISSED. 2 ND GROUND IS WITH RESPECT TO DISALLOWANCE OF EXPENSES . 8. A.O NOTICED THAT ASSESSEE HAS INCURRED MOTOR CAR EX PENSES, TELEPHONE EXPENSES AND CLAIMED DEPRECIATION ON CAR THE AGGREG ATE OF WHICH WAS RS. 95,122/- A.O WAS OF THE VIEW THAT THE PERSONAL ELEM ENT IN THE AFORESAID EXPENSES CANNOT BE RULED OUT. HE ACCORDINGLY DISALL OWED 1/5 TH OF THE EXPENDITURE AMOUNTING TO RS.19,024/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO U PHELD THE ORDER OF A.O BY HOLDING AS UNDER:- 4.0 THE THIRD GROUND OF APPEAL IS REGARDING THE DIS ALLOWANCE OF 20% OUT OF THE MOTOR CAR EXPENSES, TELEPHONE EXPENSES AND DEPRECIATION ON CA R. THE ASSESSING OFFICER VIDE PARA-5 OF THE ASSESSMENT ORDER HAD HELD THAT PERSONAL ELEM ENT IN THE AFORESAID EXPENSES CANNOT BE RULED OUT. HE WAS OF THE VIEW THAT IT IS NOT VER IFIABLE WHETHER ALL THE EXPENSES WERE EXCLUSIVELY MADE FOR THE PURPOSE OF BUSINESS. THE L D. COUNSEL HAD NOT DISPUTED THIS FINDING DURING THE COURSE OF APPELLATE PROCEEDINGS NOR ANY WRITTEN OBJECTION WAS FILED. IN ABSENCE THEREOF, I HAVE NO REASON TO INTERFERE WITH THE FINDING OF THE ASSESSING OFFICER. THE FINDING OF THE ASSESSING OFFICER IS THUS SUSTAI NED AND THE DISALLOWANCES ARE CONFIRMED. THE THIRD GROUND OF APPEAL IS ACCORDINGL Y DISMISSED. 9. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US. 10. BEFORE US, LD. A.R REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND SUBMITTED THAT THE ADDITION MADE ON AD H OC BASIS BE DELETED. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A .O AND LD. CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE UPHOLDING THE DISALLOWAN CE HAS NOTED THAT THE ITA NO 2481/ AHD/2011 . A.Y. 2008-0 9 7 COUNSEL HAD NOT DISPUTED THE FINDING WITH RESPECT T O THE PERSONAL ELEMENT IN THE EXPENSES AND HAD ALSO NOT FILED ANY WRITTEN OBJ ECTION. BEFORE US, ASSESSEE HAS NOT PLACED ANY MATERIAL ON RECORD TO C ONTROVERT THE FINDINGS OF LD. CIT(A). WE THEREFORE FIND NO REASON TO INTERFER E WITH THE ORDER OF LD. CIT(A).IN THE RESULT, THIS GROUND OF ASSESSEE IS DI SMISSED. 12. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25- 06 - 2015. SD/- SD/- (SHAILENDRA KR. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD