Amar Enterprise, Baroda V. The Income tax Officer, Ward-5(2), Baroda

ITA 2520/AHD/2011

• Counselvise Citation: 252020514 RSA 2011
• Duration Of Justice: 3 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , ( .) , ! BEFORE SHRI BEFORE SHRI G.D. AGARWAL,VICE PRESIDEN T (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO. 2520/AHD/2011 ( / ASSESSMENT YEAR : 2007-08) AMAR ENTERPRISE 5, SHILPI SOCIETY OPP.SWAMI NARAYAN MANDIR KARELIBAUG BARODA 390 018 / VS. THE INCOME TAX OFFICER WARD-5(2) BARODA % & ./ ./ PAN/GIR NO. : AALFA 1895 N ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %(+ / APPELLANT BY : SHRI SURENDRA MODIANI, A.R. )*%(,+ / RESPONDENT BY : SHRI DINESH SINGH, SR.DR - ., /& / DATE OF HEARING 03/06/2015 0123 , /& / DATE OF PRONOUNCEMENT 05/06/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-V, BARODA (CIT(A) IN SHORT) DATED 09/08/2011 PERTAINING TO ASSESSMENT Y EAR (AY) 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS AGAINST LAW AND FACTS. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN DISALLO WING THE EXPENDITURE OF RS.1,14,336/- IN RESPECT OF BAD DEBT S WRITTEN OFF DURING THE YEAR. ITA NO.2520/AHD /2011 AMAR ENTERPRISE VS. ITO ASST.YEAR 2007-08 - 2 - IT IS SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE EXPENDITURE ON THE BAD DEBTS ACTUALLY WRITTEN O FF DURING THE YEAR. YOUR APPELLANT PRAYS THAT THE ADDITION OF RS.1,14,3 36/- BE DELETED. YOURS APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEN D OR DELETE ANY OF THE GROUND OF APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 04/12/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE DISALLOWANCE OF BAD DEBT OF RS.1,14,366/- AND ALSO MADE ADDITION OF RS.91,282/- ON ACCOUNT OF DIFFERENCE IN ACCOUNT OF ARIHANT ENTERPRISES. FURTHER, THE AO MADE ADDITION OF RS.5,000/- U/S.40A (3) OF THE ACT. AGAINST THE SAID ASSESSMENT ORDER, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DISMISSED THE APPEAL. AGGRIEVED BY THE ORDER OF TH E LD.CIT(A), NOW THE ASSESSEE IS FURTHER IN APPEAL BEFORE US. 3. THE ONLY EFFECTIVE GROUND IN THIS APPEAL IS AGA INST DISALLOWING THE BAD DEBTS OF RS.1,14,336/-. THE LD.COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DI SALLOWING THE BAD DEBTS AND ADDITION THEREON. HE SUBMITTED THAT THE LD.CIT (A) OUGHT TO HAVE DELETED THE DISALLOWANCE. THE LD.COUNSEL FOR THE A SSESSEE RELIED ON THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CAS E OF TRF LIMITED VS. CIT REPORTED AT (2010) 323 ITR 397 (SC). ITA NO.2520/AHD /2011 AMAR ENTERPRISE VS. ITO ASST.YEAR 2007-08 - 3 - 3.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE AO HAS GIVEN A CLEAR FINDING THA T THE ASSESSEE IN WRITTEN SUBMISSION STATED THAT THE FIRM HAS CLAIMED BAD DEBT AS BIL METAL INDUSTRIES LTD. HAS NOT PAID DUE AMOUNT DURING PREC EDING YEARS AS A RESULT OF WHICH THE ASSESSEE HAS WRITTEN OFF THE DUE AMOUN T. HE SUBMITTED THAT THE AO OBSERVED THAT ON VERIFICATION OF LEDGER ACCO UNT OF BIL METAL INDUSTRIES FOR THE FINANCIAL YEAR 2006-07 RELEVANT TO AY 2007-08 FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE IT WAS FOUND T HAT THERE WAS OPENING BALANCE OF RS.1,63,819/-, DURING THE YEAR AS AGAINS T THE DUE BALANCE OF RS.1,63,819/-, RS.63,788/- WAS PAID BY BIL METAL ON 22/04/2006. DURING THE YEAR GOODS WORTH RS.1,02,592/- WAS SOLD BY THE ASSESSEE AND FURTHER PAYMENT OF RS.40,000/- WAS RECEIVED BY THE ASSESSEE ON 24/03/2007. HE SUBMITTED THAT THE AO OBSERVED THAT THE ASSESSEE CONTINUED ITS BUSINESS TRANSACTIONS WITH BIL METAL INDUSTRIES LTD. HE FURTHER SUBMITTED THAT THE AR ON BEHALF OF THE ASSE SSEE AGREED TO THE PROPOSED ADDITION OF BAD DEBT OF RS.1,14,336/-. THE LD.SR.DR SUBMITTED THAT UNDER THE FACTS OF THE PRESENT CASE, THE JUDGE MENT OF HONBLE APEX COURT RENDERED IN THE CASE OF TRF LIMITED VS. CIT REPORTED AT (2010) 323 ITR 397 (SC) IS NOT APPLICABLE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO IN PARAS-4 & 4.1 OF THE ASSESSM ENT ORDER HAS OBSERVED AS UNDER:- ITA NO.2520/AHD /2011 AMAR ENTERPRISE VS. ITO ASST.YEAR 2007-08 - 4 - 4. DISALLOWANCE OF CLAIM OF BAD DEBT - RS.1 ,14,366/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON VERI FICATION OF CLAIM OF VARIOUS EXPENSES, IT WAS FOUND THAT THERE WAS CLAIM OF BAD DEBT OF RS.1,32,797/- WHICH INCLUDES AMOUNT WRITTEN OFF OF RS.1,14,366/- IN THE CASE OF BIL METAL INDUSTRIES LTD. VIDE NOTICE U/S 1 42(1) DATED 20.11.2009, ASSESSEE WAS REQUESTED TO JUSTIFY HOW T HE CLAIM OF BAD DEBT IS ALLOWABLE IN THE CASE OF BIL METAL INDUSTRIES SP ECIALLY WHEN THE BUSINESS OF BIL METAL IS RUNNING & DURING THE YEAR THE BUSINESS OF THE ASSESSEE WAS CONTINUED WITH THE SAID COMPANY. IN RE PLY, THE ASSESSEE FILED WRITTEN SUBMISSION STATING THAT THE FIRM HAS CLAIMED BAD DEBT AS BIL METAL INDUSTRIES LTD HAS NOT PAID DUE AMOUNT DU RING PRECEDING YEARS AS A RESULT OF WHICH THE ASSESSEE HAS WRITTEN OFF THE DUE AMOUNT. ON VERIFICATION OF LEDGER ACCOUNT OF BIL METAL INDU STRIES FOR THE F.Y.2006-07 RELEVANT TO A.Y.2007-08 FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE IT WAS FOUND THAT THERE WAS OPENING BALANC E OF RS.1,63,819/-, DURING THE YEAR AS AGAINST THE DUE BALANCE OF RS.1, 63,819/-, RS.63,788/- WAS PAID BY BIL METAL ON 22.04.2006. DURING THE YEA R GOODS WORTH RS.1,02,592/- WAS SOLD BY THE ASSESSEE AND FURTHER PAYMENT OF RS.40,000/- WAS RECEIVED BY THE ASSESSEE ON 24.03.2 007. 4.1. FROM THE ABOVE STATED FACTS, IT IS VERY CLEAR THAT THE BUSINESS TRANSACTIONS OF THE ASSESSEE WERE CONTINUED DURING THE F.Y.2006-07 WITH BIL METAL INDUSTRIES LTD. BIL METAL IND. LTD. WAS FOUND PURCHASER FROM THE ASSESSEE AND TOWARDS PURCHASES PAYMENTS WE RE ALSO MADE. THUS LIT WAS RUNNING ACCOUNT. CONSIDERING THESE FAC TS, ASSESSEE'S CLAIM FOR BAD DEBT OF RS,1,14,366/- IS FOUND PREMATURE. V IDE ORDER SHEET ENTRY DATED 16.11.2009, THESE FACTS ALSO BROUGHT TO THE N OTICE OF THE A.R. OF THE ASSESSEE & DISALLOWANCES ON ACCOUNT OF CLAIM OF BAD DEBTS OF RS.1,14,366/- WAS PROPOSED FOR WHICH A.R. OF THE AS SESSEE WAS AGREED. THEREFORE, THE CLAIM OF THE ASSESSEE FOR BAD DEBT O F RS.1,14,366/- IS REJECTED AND THE AMOUNT IS ADDED TO THE INCOME OF T HE ASSESSEE. THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME AND CONCEALED THE PARTICULARS OF INCOME AND THEREFORE PENALTY PRO CEEDINGS U/S.271(1)(C) OF THE I T ACT IS INITIATED. ITA NO.2520/AHD /2011 AMAR ENTERPRISE VS. ITO ASST.YEAR 2007-08 - 5 - 4.1. THE LD.CIT(A) HAS CONFIRMED THE FINDING OF THE AO BY OBSERVING AS UNDER:- 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE AS WEL L AS THE OBSERVATION OF THE AO AID THE ARGUMENTS ADVANCED BY THE AR. FROM T HE FACTS MENTIONED BY THE AO AND DOCUMENTS SUBMITTED BY THE APPELLANT DURING THE COURSE OF PROCEEDINGS BEFORE THE UNDERSIGNED IT IS VERY CLEAR THAT THE APPELLANT WAS CONTINUING BUSINESS WITH BIL META L IND. LTD DURING THE PREVIOUS YEAR UNDER CONSIDERATION AND IT WAS REGULA RLY MAKING SALES TO THAT PARTY. IT HAS ALSO RECEIVED PAYMENT OF RS.4000 0/- ON 24.03.2007. PROBLEM, IF ANY, WAS IN RELATION TO BILLS AMOUNTING TO RS.114366/-, IN RESPECT OF WHICH THE APPELLANT HAS NOT SUBMITTED AN Y DOCUMENTARY EVIDENCE OF DISPUTE. IT IS ALSO VERY CLEAR FROM THE SUBMISSION OF THE APPELLANT THAT AMOUNT OF RS.1,14,366/- IS NOT RECOV ERABLE BECAUSE OF SOME KIND OF DISPUTE BETWEEN THE APPELLANT AND BIL METAL IND. LTD AND NOT BECAUSE THE FINANCIAL POSITION OF BIL METAL IND . LTD HAS BECOME SO BAD THAT THE RECOVERY OF THE AMOUNT IS DOUBTFUL. IT HAS BEEN HELD IN THE CASE OF DEVI FILM PVT LTD V CIT (MAD) 75 ITR 301 TH AT ACTION OF THE ASSESSEE WAVING A PORTION OF AMOUNT DUE FROM THE DE BTOR DOES NOT AMOUNT TO BAD DEBT RATHER IT IS A TRADING LOSS. A S IMILAR INFERENCE CAN BE DRAWN FROM THE FINDING OF HONORABLE CALCUTTA HIGH C OURT IN CASE OF CIT V COATES OF INDIA LTD (1998) 232 ITR 324 (CAL). THEREFORE, CLAIM OF THE APPELLANT FOR ALLOWING DEDUCTION OF AMOUNT O F RS.114366/- AS A BAD DEBT IS NOT SUSTAINABLE. NOW IT HAS TO BE SEEN WHETHER THE SAME CAN BE ALLOWED AS A TRADING LOSS. IT IS SEEN FROM THE A SSESSMENT ORDER THAT THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE TO SHO W THAT WHICH ARE THE BILLS IN RESPECT OF WHOM PAYMENT IS BEING RECEIVED FROM BIL METAL IND LTD AND WHICH ARE THE BILLS UNDER DISPUTE. APPELLAN T HAS ALSO NOT FURNISHED ANY EVIDENCE/ DETAIL SHOWING THE NATURE O F DISPUTE AND EXTENT OF AMOUNT UNDER DISPUTE. IT IS ALSO NOT PROVED THAT THE BUSINESS LOSS PERTAINS TO THE PREVIOUS YEAR UNDER CONSIDERATION. IN ABSENCE OF ANY DETAILS THE APPELLANT CANNOT BE GIVEN BENEFIT OF AL LOWING DEDUCTION OF AMOUNT OF RS.114366/- AS TRADING LOSS INCURRED DURI NG THE YEAR. IN VIEW OF THE ABOVE CLAIM OF BAD DEBT BY THE APPELLANT IN RESPECT OF AMOUNT OF RS.114366/- IS REJECTED AND DISALLOWANCE MADE BY TH E AO IN THIS REGARD IS UPHELD. ITA NO.2520/AHD /2011 AMAR ENTERPRISE VS. ITO ASST.YEAR 2007-08 - 6 - 4.2. THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED REL IANCE ON THE JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF TRF LIMITED VS. CIT REPORTED AT (2010) 323 ITR 397 (SC) IN SUPPORT OF HIS CONTENTION THAT THE CLAIM OF THE ASSESSEE WITH REGARD TO BAD D EBT IS ALLOWABLE. WE DO NOT SEE ANY FORCE IN THE CONTENTION OF THE LD.CO UNSEL FOR THE ASSESSEE AS IN THE PRESENT CASE THE AO HAS DEMONSTRATED THAT TH E ASSESSEE HAS CONTINUED BUSINESS TRANSACTIONS WITH THE CONCERNED PARTY. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HAS RECEIVED PAYMENTS FR OM THE CONCERNED PARTY. MOREOVER, ASSESSEE THROUGH ITS AUTHORIZED R EPRESENTATIVE AGREED TO THE DISALLOWANCE OF BAD DEBT AND ADDITION OF THE SAME. THE JUDGEMENT OF HONBLE APEX COURT IN THE CASE OF TRF LIMITED VS. CIT(SUPRA) RELIED UPON BY THE LD.COUNSEL FOR THE AS SESSEE WILL NOT HELP TO THE ASSESSEE. THEREFORE, GROUND RAISED IN THE ASSE SSEES APPEAL IS REJECTED. 5. IN THE RESULT, ASSESSEES APPEAL STANDS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 5 TH DAY OF JUNE, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( .) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 5/ 06 /2015 6/..- , .-../ T.C. NAIR, SR. PS ITA NO.2520/AHD /2011 AMAR ENTERPRISE VS. ITO ASST.YEAR 2007-08 - 7 - !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-V, BARODA 5. ; <)-89 , /893 , 7 / DR, ITAT, AHMEDABAD 6. < => . / GUARD FILE. / BY ORDER, * ;) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 3.6.15 (DICTATION-PAD 6+ PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..4.6.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.5.6.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 5.6.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER