Shri Priyakant Ramanlal Parikh (Ind.), Ahmedabad V. The ACIT, Cir. 5(2), Ahmedabad

ITA 2596/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6364 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 24-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: S N DIVATIA
• Keywords: Bad and doubtful debts

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 2596/AHD/2017 / ASSESSMENT YEAR: 2014-15 SHRI PRIYAKANT RAMANLAL PARIKH (IND.) 5 TH FLOOR, H.K. HOUSE ASHRAM ROAD AHMEDABAD 380 009. PAN : ABRPP 6335 P VS ACIT, CIR.5(2) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N. DIVATIA, AR REVENUE BY : SHRI S.K. DEV, SR.DR / DATE OF HEARING : 01/05/2019 /DATE OF PRONOUNCEMENT : 06/05/2019 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A)- 5, AHMEDABAD DATED 20.10.2017 PASSED FOR THE ASSTT.YEAR 2014-15. 2. ASSESSEE HAS TAKEN SIX GROUNDS OF APPEAL, OUT OF WHICH GROUND NOS.1, 5 AND 6 ARE GENERAL GROUNDS OF APPEAL, WHICH DO NOT CALL FOR RECORDING OF ANY SPECIFIC FINDING. 3. IN GROUND NO.2 AND 3, THE ASSESSEE HAS PLEADED T HAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM O F BAD DEBT AMOUNTING TO RS.1,82,625/-. ALTERNATIVELY, THE LD. CIT(A) OUGHT TO HAVE ITA NO.2596 /AHD/2017 - 2 - ALLOWED IT AS A BUSINESS LOSS IF THE BAD DEBT IS NO T ADMISSIBLE TO THE ASSESSEE. 4. BRIEF FACTS OF THE CASE HAVE LUCIDLY BEEN PLEADE D BY THE ASSESSEE IN HIS SUBMISSIONS BEFORE THE LD.FIRST APPELLATE AUTHO RITY. THE RELEVANT PART READS AS UNDER: YOUR APPELLANT HAD APPROACHED M/S. K.P. & COMPANY, THE CONCERNED PERSON IS SHRI JAGATBHAI SHAH WHO WERE ENGAGED IN TH E BUSINESS OF SHARES, STOCK AND FINANCE AS SUB BROKER FOR PURCHASE SHARES OF RELIANCE INDUSTRIES AS WELL AS SHARES OF STATE BANK OF INDIA IN THE YEA R 1998 FOR THE PURPOSE OF MY TRADING BUSINESS OF SHARES. I HAD INSTRUCTED THE ABOVE BROKER TO PURCHASE SHARES OF RELIANCE INDUSTRIES LTD. AT THE RATE OF RS. 140.50 P. ON 28-8-1998. ACCORDING TO THE SETTLED NORMS AND PRACT ICE, THE SETTLEMENT IS TO TAKE PLACE EVERY WEEK AND ACCORDINGLY, AS THE PR ICE OF THE SHARES OF RELIANCE INDUSTRIES LTD. HAD GONE DOWN AND I HAD PA ID THE DIFFERENCE BADLA AMOUNT TO RS. 33475/-. THEREAFTER, AGAIN THE PRICE HAD GONE DOWN TO RS. 121.75P. PER SHARE OF RELIANCE INDUSTRIES LT D. AND I HAD DECIDED TO TAKE DELIVERY OF THE ABOVE 1500 SHARES OF RELIANCE INDUSTRIES LTD. AND M/S. K.P. & COMPANY HAD RAISED BILL NO. AC/9826/000 14 IN SEPT. 1998 OF RS. 182625/-AND REQUESTED ME TO MAKE FULL PAYMEN T OF RS. 182625/-FOR PURCHASE OF 1500 SHARES ON BEHALF OF ME. ZEROX COPY OF WHICH IS ALREADY SUBMITTED ALONG WITH PREVIOUS SUBMISSION DATED 9/12 /2016. I HAD MADE FULL PAYMENT OF RS. 182625/- BY CHQ. NO. 242527 DAT ED 22-9-1998 DRAWN ON TEXTILE TRADERS CO.OP.BANK WHICH HAS ALSO BEEN E NCASHED BY M/S. K.P. & COMPANY. THE SAID BROKER K.P. & CO. AFTER RE CEIVING THE PAYMENT HAD NOT EFFECTED DELIVERY OF 1500 SHARES OF RELIANC E INDUSTRIES LTD AND THE SAID BROKER HAD CONFIRMED AND ACKNOWLEDGED IN W RITING TO ME ON 1-3- 1999 THAT THE DELIVERY OF THE SAID SHARES ARE PENDI NG. M/S. K.P. &COMPANY HAD FAILED AND NEGLECTED TO EFFECT DELIVER Y OF 1500 SHARES OF RELIANCE INDUSTRIES LTD. I HAD ISSUED DEBIT NOTE OF RS. 40750/-BEING INTEREST ON THE AMOUNT PAID BY ME FOR PURCHASE OF T HE SHARES OF RELIANCE INDUSTRIES LTD. M/S. K.P. & COMPANY HAD CONTINUOUSL Y NOT ONLY FAILED AND NEGLECTED BUT HAVE INTENTIONALLY HELD DELIVERY OF 1500 SHARES OF RELIANCE INDUSTRIES. THEREFORE, I HAD APPROACHED AD VOCATE SHRI HARIN P. RAVAL WHO HAD ISSUED NOTICE DATED 25-4-2000 FOR INI TIATING CIVIL PROCEEDINGS FOR NON DELIVERY OF SHARES AND/OR RECOV ERY/REFUND OF THE AMOUNT PAID TO THEM ALONGWITH INTEREST ACCRUED THER EON AND CLAIMED FURTHER DAMAGES AS PER THE LAW. THE COMPLAINT WAS A LSO FILED BEFORE THE POLICE STATION OFFICER, NAVRANGPURA, AHMEDABAD AND THE HON. ITA NO.2596 /AHD/2017 - 3 - MAGISTRATE, COURT NO. 13, AHMEDABAD HAD DIRECTED TO INVESTIGATE THE NAVRANGPURA POLICE STATION OFFICER TO THE COMPLAINT U/S. 156(3) OF THE C.P.C.ACT. ZEROX COPY OF ADVOCATE NOTICE AND COURT' S ORDER IS ALREADY FURNISHED TO YOU ALONGWITH SUBMISSION DATED 9-12-20 16. TILL THE END OF THE ACCOUNTING YEAR 1-4-13 TO 31-3- 14, NEITHER THE DELIVERY OF 1500 SHARES OF RELIANCE INDUSTRIES WERE MADE TO ME BY M/S. K.P. & COMPANY NOR PAYMENT OF RS.182625/-YOU WILL FIND THA T SINCE THE TRADE ADVANCE WAS MADE DURING THE COURSE OF ITS ASSESSEE, ANY LOSS ON ACCOUNT OF RECOVERABILITY WOULD AUTOMATICALLY FALL UNDER TH E CATEGORY OF TRADE DEBT / RECEIVABLE AND HENCE IS AL LOWABLE AS BUSINESS LOSS. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF CLT VS MYSORE SUGAR CO. LTD RE PORTED IN (1962) 46 ITR 649 (SC) . 5. AS FAR AS CLAIM OF BAD DEBT IS CONCERNED, THE SA ME HAS BEEN DISALLOWED TO THE ASSESSEE ON THE GROUND THAT CONDI TIONS ENUMERATED IN SECTION 36(2) OF THE ACT WERE NOT FULFILLED BY THE ASSESSEE, AND THEREFORE, IT IS NOT ADMISSIBLE. FINDING RECORDED BY THE LD.C IT(A) IN THIS CONNECTION IS WORTH TO NOTE. IT READS AS UNDER: DECISION: 3.3. THE AO HAS NOTICED THAT THE ASSESSEE HAD CLAIM ED BAD DEBTS DURING THE YEAR. THE AO HAS CONSIDERED THE SUBMISSIONS FUR NISHED BY THE ASSESSEE. HOWEVER, HE HAS NOT ACCEPTED THE SAME. TH E AO HAS HELD THAT THE AMOUNT WHICH IS BEING CLAIMED AS BAD DEBT BY TH E ASSESSEE DOES NOT FULFILL THE CONDITION SPECIFIED IN SECTION 36(2) OF THE ACT. ACCORDINGLY THE AO HAS DISALLOWED AN AMOUNT OF RS. 1,82,625/-. 3.4. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT HAS CONTENDED THAT THE APPELLANT IS DOING BUSINESS OF M ONEY LENDING AND ALSO DOING BUSINESS OF SHARE TRADING AND SPECULATION BUS INESS OF SHARES AND COMMODITY SINCE LAST MANY YEARS. IT IS FURTHER CONT ENDED THAT THE APPELLANT HAD PURCHASED CERTAIN SHARES THROUGH M/S. K.P. & CO. AND MADE FULL PAYMENT OF RS.1,52,625/- ,HOWEVER, THE SA ID BROKER AFTER RECEIVING THE PAYMENT HAD NOT EFFECTED DELIVERY OF SHARES. IT IS FURTHER CONTENDED THAT AS THE BROKER HAD FAILED TO MAKE PAY MENTS THE ASSESSEE HAD APPROACHED ADVOCATE AND ISSUED NOTICES TO THE BROKE R FOR INITIATING CIVIL ITA NO.2596 /AHD/2017 - 4 - PROCEEDINGS FOR NON-DELIVERY OF SHARES. IN THESE CI RCUMSTANCES IT IS FURTHER CONTENDED BY THE APPELLANT THAT AMOUNT OF R S. 1,82,625/- IS CLAIMED AS BAD DEBT. IN THIS REGARD THE APPELLANT H AS RELIED UPON CERTAIN DECISIONS AS CITED ABOVE. 3.5. THE FACTS OF THE CASE AND THE SUBMISSIONS ARE CONSIDERED. THE PROVISIONS OF SECTION 36(2) OF THE ACT ARE REPRODUCE D ASUNDER:- 'IN MAKING ANY DEDUCTION FOR A BAD DEBT OR PART THE REOF, THE FOLLOWING PROVISIONS SHALL APPLY. (I) NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH D EBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTI NG THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHIC H THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, OR REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY LENDING WHICH IS CARRIED ON BY THE ASSESSEE. ' FROM THE PLAIN READING OF THIS SECTION IT IS VERY M UCH CLEAR THAT THE CLAIM OF BAD DEBT BY THE ASSESSEE DOESN'T COME UNDER THE PURVIEW OF THE PROVISIONS OF SECTION 36(2)OF THE ACT. IN THE CASE O F NETCO PHARMA LTD. THE HON'BLE ITAT, HYDERABAD BENCH'A' IN APPEAL NO.3 77/HYD/2009 AND 487AND 686/HYD/2007 DTD. 31.10.2012 CLEARLY HELD TH AT TRADE DEBTS OR TRADE ADVANCES ARE NOT ALLOWABLE AS BAD' DEBT. CONS IDERING THE ABOVE, THE DISALLOWANCE OF BAD DEBT MADE BY THE AO IS JUSTIFIE D AND THE DISALLOWANCE MADE BY THE AO IS CONFIRMED. THUS THE GROUND OF APP EAL IS DISMISSED. 4. GROUND NO.2 RELATES TO INITIATION OF PENALTY PR OCEEDINGS U/S.271(L)(C) OF THE ACT. NO APPEAL LIES AGAINST THE INITIATION O F PENALTY UNDER SECTION 271(L)(C). HENCE, THIS GROUND IS DISMISSED. 6. THE LD.COUNSEL FOR THE ASSESSEE WAS UNABLE TO FI ND OUT ANY ILLEGALITY ON THIS FINDING OF THE LD.CIT(A), BUT PR OCEED TO EMPHASIS ON ALTERNATIVE CONTENTION. HE TOOK US THROUGH A LEGAL NOTICE SERVED THROUGH ADVOCATE, SHRI HARIN P. RAVAL TO M/S.K.P. & COMPANY AND SHRI JAGATBHAI SHAH. COPY OF THIS LEGAL NOTICE HAS BEEN PLACED ON PAGE NO.41 OF THE PAPER BOOK. THEREAFTER, HE POINTED OUT THAT THE ASSESSEE FILED A ITA NO.2596 /AHD/2017 - 5 - POLICE COMPLAINT WHICH WAS NOT ENTERTAINED HENCE, H E FILED A COMPLAINT BEFORE METROPOLITAN MAGISTRATE HAVING JURISDICTION OVER THE AREA OF THE ASSESSEE. THE LD.MAGISTRATE VIDE ORDER DATED 16.10 .2001 PASSED UNDER SECTION 156(3) OF THE CR.PC DIRECTED THE POLICE TO CARRY OUT AN INVESTIGATION. COPY OF THIS ORDER IS AVAILABLE AT PAGE NO.49 AND 50 OF THE PAPER BOOK. ON THE STRENGTH OF THESE DOCUMENTS, HE SUBMITTED THAT THE ASSESSEE WAS UNABLE TO RECOVER PAYMENTS MADE BY HIM FOR PURCHASES OF SHARES. SHARES WERE NOT HANDED OVER TO THE ASSESS EE, HENCE, IT BE ALLOWED AS BUSINESS LOSS. THE LD.COUNSEL FOR THE A SSESSEE ALSO TOOK US THROUGH WRITTEN SUBMISSIONS FILED BEFORE THE AO AND SUBMITTED THAT THESE SHARES WERE SOUGHT TO BE PURCHASED IN THE BUS INESS OF TRADING IN SHARES. FOR THIS PURPOSE, HE SPECIFICALLY TOOK US THROUGH PAGE NO.3 OF THE ASSESSMENT ORDER. 7. ON THE OTHER HAND, THE LD.DR RELIED ON THE ORDER S OF THE REVENUE AUTHORITIES. 8. WE HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND GO NE THROUGH THE RECORD CAREFULLY. WE FIND THAT SHARES WERE SOUGHT TO BE PURCHASED IN THE YEAR 1998. THE ORDER OF LD.MAGISTRATE FOR CARRYING OUT AN INVESTIGATION UNDER SECTION 156(3) OF THE CR.PC IS DATED 16.10.20 01. THE ASSESSEE HAS SOUGHT LOSS IN THE ATT.YEAR 2014-15. THERE IS NO M ATERIAL ON RECORD DEMONSTRATING HOW THIS LOSS HAS BEEN CRYSTALLIZED I N THIS ASSESSMENT YEAR 2014-15. THE DOCUMENTS WHICH HAVE BEEN PLACED ON RECORD ARE OF THE YEAR 2000. THE LEGAL NOTICE WAS ISSUED ON 25 TH APRIL, 2000. THE ORDER OF THE MAGISTRATE IS 16.10.2001. APART FROM THESE T WO THIRTEEN YEARS OLD DOCUMENTS NO OTHER EVIDENCE HAS BEEN PLACED ON RECO RD DEMONSTRATING WHETHER THE LOSS HAS BEEN CRYTLISED IN THIS YEAR I. E. ASSTT.YEAR 2014-15. ITA NO.2596 /AHD/2017 - 6 - THEREFORE, WE DO NOT FIND ANY MERIT IN BOTH THE CON TENTIONS OF THE LD.COUNSEL FOR THE ASSESSEE. LD.CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE. 9. SO FAR AS GROUND NO.4 IN RESPECT OF ADDITION OF RS.23,525/- MADE BY THE AO WITH THE AID OF SECTION 41 IS CONCERNED, WE FIND FROM THE ASSESSMENT ORDER THAT THE LD.AO HAS MADE THIS ADDIT ION ON THE GROUND OF ACCEPTANCE OF THE SAME BY THE ASSESSEE. AS THE FACT EMERGES FROM THE RECORD, THIS ISSUE HAS NOT BEEN AGITATED BY THE ASS ESSEE BEFORE THE LD.FIRST APPELLATE AUTHORITY. THEREFORE, THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE ISSUE IN QUESTION HAS BEEN RA ISED BEFORE THE LOWER AUTHORITIES. WE FIND NO FORCE IN GROUND NO.4 OF AP PEAL. IT IS REJECTED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS REJECT ED. PRONOUNCED IN THE OPEN COURT ON 6 TH MAY, 2019. SD/- SD/- (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED, 06/05/2019