The ITO, Ward-3, Navsari V. M/s. Pramukh Gas Agency, Navsari

ITA 2700/AHD/2010

• Counselvise Citation: 270020514 RSA 2010
• Duration Of Justice: 3 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 17-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Keywords: Bad and doubtful debts; Commercial expediency
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2700/AHD/2010 ASSESSMENT YEAR :2006-07 INCOME-TAX OFFICER, WARD-3, NAVSARI V/S . M/S. PRAMUKH GAS AGENCY AT & PO. SONWADI, TAL. GANDEVI, DIST.NAVSARI PAN NO. AAD F P1674J (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI J.P. JHANGID, SR.D.R. /BY RESPONDENT NONE /DATE OF HEARING 31.07.2013 /DATE OF PRONOUNCEMENT 27.09.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT(A), VALSAD, DATED 25.06.2010 FOR A.Y. 2006-07. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS .43,355./- MADE ON ACCOUNT OF CONTRAVENTION OF PROVISIONS OF SECTION 4 0A(3) OF THE I.T.ACT. ITA NO. 2700/AHD/10 A.Y. 06-07 PAGE 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS .5,50,260/- MADE ON ACCOUNT OF DISALLOWANCE OF CLAIM OF BAD DEBTS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS .1,52,318/- MADE ON ACCOUNT OF DISALLOWANCE OUT OF VARIOUS EXPENSES. 2. THE ASSESSEE IS A DEALER OF INDUSTRIAL AND LPG G AS OF ASHOK JYOT OXYGEN PVT. LTD. ON VERIFICATION OF CASH BOOK, IT WAS FOUND THAT THE ASSESSEE HAS MADE CASH PAYMENT AS UNDER: SR. NO. DATE AMOUNT INVOLVED 1 10/06/2005 68,157/- 2 10/06/2005 16,934/- 3 04/07/2005 72,379/- 4 04/07/2005 18,821/- 5 18/11/2005 25,000/- 6 22/11/2005 61,239/- TOTAL. 2,62,530/ - THE A.O. GAVE SHOW CAUSE NOTICE ON THIS ISSUE AS VI OLATED SECTION 40A(3) OF THE IT ACT. THE ASSESSEES EXPLANATION CONSIDERED BY THE A.O. AND IT WAS FOUND THAT ACTUAL CASH PAYMENT AND AMOUNT PAID BY C ASH AS SHOWN IN THE CHART BEFORE HIM, WAS NOT TALLIED. THE A.O. ALSO V ERIFIED THE AGREEMENT BETWEEN ASSESSEE AND ASHOK JYOT OXYGEN PVT. LTD. T HE EXPLANATION SUBMITTED BY THE APPELLANT BEFORE THE A.O. WAS NOT FOUND CONVINCING TO HIM. THUS, HE DISALLOWED 20% ON RS. 2,26,775/- U/S 40A(3) OF THE IT ACT. THE ITA NO. 2700/AHD/10 A.Y. 06-07 PAGE 3 CIT(A) HELD THAT APPELLANT GAVE THE CHEQUE BUT WHIC H WERE UNPAID BY THE BANK DUE TO FINANCIAL CONSTRAINT AND ASSESSEE HAD T O PAY CASH IMMEDIATELY TO THE SUPPLIER FOR COMMERCIAL EXPEDIENCY. THUS, HE D ELETED THE ADDITION. LD. SR. D.R. RELIED UPON THE ORDER OF THE A.O. AT THE OUTSET, NO ONE APPEARS ON BEHALF OF ASSESSEE. THEREFORE, WE DECIDE THIS CASE ON THE BASIS OF FACTS AVAILABLE IN THE FILE. THE LD. COUNSEL FOR THE ASS ESSEES ARGUMENT BEFORE CIT(A) THAT THIS WAS BEYOND CONTROL OF THE ASSESSEE TO PAY THE CASH AS CHEQUE HAS BEEN UNPAID BY THE BANK. HE ALSO RELIED UPON VARIOUS CASE LAWS AND ARGUED THAT GENUINENESS OF PAYMENT HAS NOT BEEN DOUBTED BY THE A.O. AND IT SHOULD BE ALLOWED. AFTER CONSIDERING THE FA CTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT HAD FINANCIAL PROBLEM AND CHEQU ES HAD NOT BEEN CLEARED BY THE BANK. THEREFORE, TO HAVE GOOD REPO WITH THE SUPPLIER, HE HAS TO MAKE PAYMENT IN CASH FOR BUSINESS EXPEDIENCY. THEREFORE , WE CONFIRM THE ORDER OF THE CIT(A). 3. THE SECOND GROUND OF APPEAL IS AGAINST DELETING THE TOTAL ADDITION OF RS.5,50,260/- MADE ON ACCOUNT OF DISALLOWANCE OF CL AIM OF BAD DEBTS. THE A.O. FOUND THAT ASSESSEE HAS CLAIMED BAD DEBT OF RS .5,50,260/- IN THE NAME OF VARIOUS PARTIES. AFTER ANALYZING THE FACTS OF E ACH PARTY, HE HELD THAT THIS BAD DEBT IS NOT ALLOWABLE. THUS, HE MADE ADDITION OF RS.5,50,260/- U/S. 36(1)(VII). LD. CIT(A) HELD THAT THE ASSESSEE HAD WRITTEN OFF THIS AMOUNT AS IRRECOVERABLE IN THE ACCOUNTS OF ASSESSEE AND HONB LE SUPREME COURT IN CASE OF TRF LTD. V CIT (2010) 323 ITR 397 (SC), HAD HELD THAT AS PER SECTION ITA NO. 2700/AHD/10 A.Y. 06-07 PAGE 4 36(1)(VII), THE ASSESSEE IS REQUIRED TO WRITE OFF C LAIM OF BAD DEBT IS REQUIRED. LD. SR. D.R. RELIED UPON THE ORDER OF THE A.O. THE A.O. HAS ADMITTED THE ASSESSMENT ORDER THAT ASSESSEE HAD WRITE OFF VARIOU S BAD DEBTS IN THE NAME OF VARIOUS PARTIES. AS PER SECTION 36(1)(VII), IT IS SUFFICIENT TO CLAIM THE BAD DEBT IS A BAD AS HELD BY THE SUPREME COURT IN TRF L TD. VS. CIT (SUPRA). ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A). 4. GROUND NO.3 IS AGAINST DELETING THE ADDITION OF RS.1,52,318/- MADE ON ACCOUNT OF DISALLOWANCE OUT OF VARIOUS EXPENSES. T HE A.O. FOUND THAT ASSESSEE HAS DEBITED VARIOUS EXPENSES IN TOTAL RS. 10,89,895/-. THE A.O. ASKED TO PRODUCE THE BILL/VOUCHER TO SUBSTANTIATE I TS CLAIM. IT WAS OBSERVED BY HIM THAT ALL THE EXPENSES WERE NOT SUPPORTED BY BIL L/VOUCHER. IN ABSENCE OF FULL BILL/VOUCHER, THE EXPENSES CANNOT BE VERIFIED AND CANNOT BE HELD AS INCURRED FOR WHOLLY AND EXCLUSIVELY FOR BUSINESS PU RPOSES. HE ALSO RELIED UPON VARIOUS CASE LAWS ON PAGE 8 OF THE ASSESSMENT ORDER AND FINALLY HE DISALLOWED 1/5 TH OUT OF RS.10,89,895/- AT RS.1,81,650/- FOR WANT OF COMPLETE CHEQUE OVER THE EXPENSES. THE LD. CIT(A) HELD THAT OUT OF TOTAL EXPENSES RS.10,87,845/-, THE APPELLANT PAID BY CHEQUE AT RS. 9,41,183/- AND BALANCE OF RS.1,46,662/- WAS PAID IN CASH ON WHICH THE ASSESSE E WAS AGREED TO DISALLOW 20%. THUS, HE PARTLY CONFIRMED ADDITION TO RS. 29, 332/-. LD. SR. D.R. RELIED UPON THE ORDER OF THE A.O. AS MOSTLY PAYMENTS WERE MADE BY CHEQUE AND REMAINING AMOUNT WAS PAID IN CASH WHICH HAVE BEEN C ONFIRMED BY THE CIT(A). ITA NO. 2700/AHD/10 A.Y. 06-07 PAGE 5 AFTER GOING THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY REASON TO INTERVENE IN THE ORDER OF THE CIT(A). 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 27.09.2013 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;