The DCIT, Central Circle-2(4), Ahmedabad V. M/s. Zaveri & Co. Exports, Ahmedabad

ITA 2640/AHD/2007

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9718 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-07-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 13-06-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Assessee Lawyers: MK PATELAR
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , ( .) , BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.2640/AHD/2007 ( / ASSESSMENT YEAR : 1998-99) THE DCIT CENTRAL CIRCLE-2(4) AHMEDABAD / VS. M/S.ZAVERI & CO. EXPORTS SWAGAT BUILDING RATNAM C.G.ROAD AHMEDABAD % & ./ ./ PAN/GIR NO. : AAAFZ 0697 G ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %( + / APPELLANT BY : SHRI R.I. PATEL, CIT-DR )*%( , + / RESPONDENT BY : SHRI M.K. PATEL, AR -. , /& / DATE OF HEARING 01/07/2015 0123 , /& / DATE OF PRONOUNCEMENT 17/07/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-III, AHMEDAB AD [CIT(A) IN SHORT] DATED 29/03/2006 PERTAINING TO ASSESSMENT Y EAR (AY) 1998-99. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- ITA NO.2640/AHD /2007 DCIT VS. M/S.ZAVRI & CO.EXPORTS ASST.YEAR 1998-99 - 2 - 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.15,66,500/- MADE BY A.O. ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS IN RESPECT OF M/S.SHREE CORPORTION. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WH ILE NOT TAKING INTO CONSIDERATION THE FACTS THAT SHRI UDYAN B.CHOK SHI, WHO IS PARTNER IN M/S.SHREE CORPORATION IN THE CAPACITY OF KARTA OF HUF, IS PROPRIETOR OF M/S.SHREEJI MEDICAL AGENCY AND DIR ECTOR IN M/S SILVER PHARMA CHEM PVT.LTD. HIMSELF HAS CLAIMED THA T PAYMENTS MADE BY M/S.SHREEJI MEDICAL AGENCY AND M/S.SILVER P HARMA CHEM PVT.LTD. WAS FOR AND ON BEHALF OF SHREE CORPORATION . FURTHER, THE ASSESSEE FIRM DID NOT ASK ANY QUESTION TO SHRI UDYA N B.CHOKSHI REGARDING THE ABOVE CLAIM OF SHRI CHOKSHI DESPITE O F OPPORTUNITY OF CROSS-EXAMINATION BEING GIVEN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER ON THE ABOVE POINTS. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C IT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT A SEARCH ACTION WA S CONDUCTED AT THE OFFICE PREMISES OF THE ASSESSEE-FIRM AND SUBSEQUEN TLY THE ASSESSMENT U/S.153A(B) R.W.S. 143(3) OF THE INCOME TAX ACT,196 1 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DAT ED 27/03/2006, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE DI SALLOWANCE OF BAD DEBTS OF RS.15,66,500/-. AGAINST THE SAID ASSESSME NT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS DELETED THE ADDITION MADE BY THE AO. A GGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE REVENUE IS FURTHER IN APPEAL BEFORE US. ITA NO.2640/AHD /2007 DCIT VS. M/S.ZAVRI & CO.EXPORTS ASST.YEAR 1998-99 - 3 - 3. GROUND NOS.1 & 2 ARE INTER-CONNECTED AND THEREFO RE THE SAME ARE DECIDED TOGETHER. THE LD.CIT-DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE-FIRM HAS ALREADY RECOVE RED THE AMOUNT OF RS.15,66,500/- WHICH IT CANNOT ARBITRARILY AND IRRA TIONALLY TREAT A GOOD DEBT AS BAD AND WRITE IT OFF IN HIS ACCOUNT. THE L D.CIT-DR SUBMITTED THAT THE ASSESSEE HAS SHOWN AN AMOUNT OF RS.15,66,500/- IN THE BALANCE-SHEET AS ON 31 ST MARCH-2004 AS ADVANCES EVEN AFTER A LAPSE OF PERIO D OF ABOUT 7 OR 8 YEARS. HE SUBMITTED UNDE THE FACTS OF THE PRE SENT CASE, THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 3.1. ON THE CONTRARY, THE LD.COUNSEL FOR THE ASSESS EE SUBMITTED THAT IT IS ADMITTED POSITION THAT SO-CALLED MOU WAS NEVER ACTE D UPON AND, THEREFORE, DISPUTES ARE PENDING WITH THE COMPETENT COURT OF LAW. HE SUBMITTED THAT EVEN THIRD PARTIES HAVE DECLARED IN THEIR BOOKS OF ACCOUNTS AS LOANS AND ADVANCES. 4. WE HAVE HEARD THE PARTIES AT LENGTH, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE BY OBSERV ING AS UNDER:- 9. THE CONTENTIONS/DETAILS ON RECORD WERE CAREFULL Y CONSIDERED. IT IS SEEN THAT THE APPELLANT AND THE OTHER AFFECTED P ARTIES HAD INITIATED EFFORTS TO RECOVER THEIR DUES FROM M/S.SHREE CORPOR ATION IN TERMS, SPECIFIED IN THE MOU OF JULY, 1996, COPY OF WHICH WAS FOUND AT THE TIME OF SEARCH, AS PER THE ANNEXURE REFERRED BY THE A.O. IT IS ALSO EVIDENT THAT THE MOU WAS ACTED UPON ONLY PARTIALLY. AS A RESULT, THE CHEQUES FURNISHED BY M/S.SHREE CORPORATION WERE DIS HONOURED REPEATEDLY AND CONSEQUENTLY THERE WERE A NUMBER OF CIVIL/CRIMINAL PETITIONS. SHRI UDAYBHAI ALSO DID NOT MAKE AVAILAB LE HIS HOUSE FOR ENABLING RECOVERY, AS WAS APPARENTLY AGREED IN THE MOU. IN THE LETTERS ITA NO.2640/AHD /2007 DCIT VS. M/S.ZAVRI & CO.EXPORTS ASST.YEAR 1998-99 - 4 - DTD. 11/2/2000, THE TWO PARTIES M/S.SHREEJI MEDICAL AGENCY AND M/S.SILVER PHARMACHEM PVT.LTD. HAD SUBMITTED BEFORE THE A.O. ABOUT THEIR ADVANCES AS WE HAVE RETAINED THE AMOUNTS IN OUR BOOKS AS LOANS AND ADVANCES TO M/S.ZAVERI & CO.EXPORTS. THE APPE LLANT HAD ALSO CREDITED THESE AMOUNTS AS A LIABILITY IN ITS BALANC E-SHEET OF THE YEAR ENDED 31/3/1998. IN OTHER WORDS, THE RECEIPTS OF T HESE AMOUNTS FROM THESE TWO CONCERNS WAS NOT REQUIRED TO BE TREATED A S RECOVERY AGAINST THE OUTSTANDING DUES OF M/S.SHREE CORPORATION AT LE AST IN THE ASSESSMENT YEAR 1998-99. ADDED TO THIS, IS THE FAC T THAT M/S.SHREEJI MEDICAL AGENCY AND M/S.SILVER PHARMACHEM PVT.LTD.WE RE SEPARATE ENTITIES AND WERE NOT SYNOUNMOUS WITH M/S.SHREE COR PORATION. IN THE EVENT, THE ACTION OF THE A.O. I DISALLOWING PART OF THIS BAD DEBT CLAIM WAS HURRIED. THUS ON A HOLISTIC CONSIDERATION OF T HE FACTS/DETAILS ON RECORD, IT IS HELD THAT THE ACTION OF THE A.O. IN D ISALLOWING THE CLAIM OF RS.15,66,500/- IN A.Y. 1998-99, OUT OF THE TOTAL CL AIM OF BAD DEBTS WAS NOT JUSTIFIED. THE DISALLOWANCE MADE IS THEREFORE DELETED. 4.1. THE AO HAS DISALLOWED THE CLAIM OF BAD DEBTS O N THE GROUND THAT TWO CONCERNS; NAMELY, M/S.SHREEJI MEDICAL AGENCY AN D M/S.SILVER PHARMACHEM PVT.LTD. HAS ALREADY MADE PAYMENT OF RS. 10 LAKHS AND RS.5,66,500/- RESPECTIVELY ON BEHALF OF M/S.SHREEJI CORPORATION. THE AO RELIED ON THE STATEMENT OF ONE SHRI UDAYAN B.CHO KSHI. HOWEVER, LD.CIT(A) HAS GIVEN A FINDING IN THE LETTER DATED 1 1/02/2000 THAT THE AFOREMENTIONED CONCERNS; I.E. M/S.SHREEJI MEDICAL A GENCY AND M/S.SILVER PHARMACHEM PVT.LTD. HAVE STATED THAT AMO UNT IN QUESTION IS RECORDED IN THEIR BOOKS AS LOANS AND ADVANCES. IN OUR CONSIDERED VIEW, IF AN AMOUNT IS OUTSTANDING AS LOANS AND ADVANCES AND DISPUTES ARE PENDING IN THE COMPETENT COURT, SUCH AMOUNT CANNOT BE TREAT ED AS PAID FOR SATISFACTION OF LIABILITY SINCE THE RIGHTS AND LIAB ILITIES RELATED MOU ARE ITA NO.2640/AHD /2007 DCIT VS. M/S.ZAVRI & CO.EXPORTS ASST.YEAR 1998-99 - 5 - UNDER ADJUDICATION. MOREOVER, ONE OF THE REVENUE A UTHORITY HAS ACCEPTED THE EXPLANATION OF THE ASSESSEE. UNDER T HESE FACTS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE L D.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND NOS.1 & 2 RAISED IN TH IS APPEAL ARE ALLOWED. 5. GROUND NOS.3 & 4 ARE GENERAL IN NATURE WHICH REQ UIRE NO INDEPENDENT ADJUDICATION. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 17 TH DAY OF JULY, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( . ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 17/ 07 /2015 6/..-, .-../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-III, AHMEDABAD 5. ;< )-89 , / 893 , 7 / DR, ITAT, AHMEDABAD 6. <= . / GUARD FILE. / BY ORDER, *; ) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD