ACIT, Gwalior V. M.P. Overgeadlines Pvt. Ltd., Morena

ITA 279/AGR/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7000 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-06-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 04-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SHRI
• Keywords: Bad and doubtful debts
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 279/AGRA/2009 ASSTT. YEAR : 2002-03 A.C.I.T., CIRCLE-II, VS. M/S. OVERHEADLINES PV T. LTD., GWALIOR. BANMORE, MORENA (M.P.) (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI VINOD KUMAR, JR. D.R. FOR RESPONDENT : SHRI PANKAJ GARGH, ADVOCATE. ORDER PER P.K. BANSAL, A.M. : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 17.03.2009 BY TAKING FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.12,00,0 00/- MADE ON ACCOUNT OF SHARE CAPITAL INVESTMENT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.11,74,0 00/- OUT OF RS.14,29,366/- MADE ON ACCOUNT OF PENALTY AND FAILURE ON THE PART OF THE ASSESSEE BY THE MSEB, MUMBAI AND KERALA STATE ELECTRICITY BOARD. 2. GROUND NO. 1 RELATES TO THE ADDITION OF RS.12,00 ,000/- AS INVESTMENT IN SHARES BY SHRI UDAY GUPTA. THE BRIEF FACTS RELATING TO THIS ADDITI ON ARE THAT RS.12,00,000/- WAS SUBSCRIBED TOWARDS THE SHARES BY SHRI UDAY GUPTA, THE MINOR SO N OF SHRI LALIT GUPTA. BEFORE THE ASSESSING OFFICER, FOLLOWING DOCUMENTS WERE FILED BY THE ASSE SSEE : (I). INTIMATION U/S. 143(1)(A) OF THE INCOME TAX AC T, 1961 FOR A.Y. 1989-90 AND 1992-93. (II). COPY OF ACKNOWLEDGEMENT OF INCOME TAX RETURN . 2 (III). COPY OF ACKNOWLEDGEMENT OF WEALTH TAX RETUR N FOR A.Y. 1991-92. (IV). CAPITAL ACCOUNT AND BALANCE SHEET FOR THE FIN ANCIAL YEAR 1996-97 TO 2001-02 ALONGWITH DETAILS OF ADDITION. (V). STATEMENT OF ACCOUNT OF DENA BANK, NEW DELHI. (VI). CERTIFICATE OF DIVIDEND INCOME OF RS.25,95,00 0/- RECEIVED FROM TILAK EXPORTS & IMPORTS LTD.. 3. FROM THE ASSESSMENT YEAR 1993-94, DUE TO THE CLU BBING PROVISIONS U/S. 64(1A) OF THE INCOME-TAX ACT, THE INCOME OF THE MINOR SON, SINCE GOT CLUBBED WITH FATHER, THEREFORE, NO SEPARATE ASSESSMENT WAS MADE. THE SUM OF RS.12,00,0 00/- WERE INVESTED VIDE CHEQUE NO. 7375784 DATED 29.12.2001 OF DENA BANK, GWALIOR. THI S AMOUNT WAS RECEIVED FROM M/S. TILAK EXPORT, NEW DELHI. NOTICE U/S. 133(6) WAS ISSUED TO M/A. TILAK EXPORTS WHO CONFIRMED THE PAYMENT BEING MADE TO THE ASSESSEE. THE ASSESSING O FFICER STILL WAS NOT SATISFIED AND MADE THE ADDITION. WHEN THE MATTER WENT BEFORE THE CIT(A), T HE CIT(A) DELETED THE ADDITION BY HOLDING THAT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WAS DULY PROVED. 4. BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHILE THE LEARNED AR RELIED ON THE ORDER OF CIT(A). 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND CAREFULLY CONSIDERED THE SAME. RECORD. WE NOTED THAT IN THIS CASE, THE ASSESSEE HA S DULY DISCHARGED HIS ONUS. THE IDENTITY OF THE SHARE HOLDER IS DULY PROVED. EVEN THE ASSESSEE HAS PROVED THE SOURCE OF THE FUNDS BEYOND THE GENUINENESS OF THE TRANSACTION IN THIS CASE. THIS I SSUE, IN OUR OPINION, IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF CIT VS. LOVELY EXPORT PVT. LTD., 3 216 CTR 195 (SC). NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE BY THE LEARNED DR. THEREFORE, WE ARE OF THE OPINION THAT NO INTERFEREN CE IS CALLED FOR IN THE ORDER OF CIT(A) AND THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 6. GROUND NO. 2 RELATES TO THE DELETION OF ADDITION OF RS.11,74,700/- OUT OF RS.40,29,366/-. THE FACTS RELATING TO THIS ADDITION ARE THAT THE AS SESSEE HAS WRITTEN-OFF THE FOLLOWING AMOUNTS AS BAD DEBTS : CHIEF ACCOUNTS OFFICER, M.S.E.B., MUMBAI RS.11,74 ,700/- F.A. & C.A.O., M.S.E.B. KALLAYI RS. 2,54,666/- 7. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT H E HAS SUPPLIED CONDUCTORS TO STATE ELECTRICITY BOARDS ON DIFFERENT RATES AS PER TERMS AND CONDITIONS. IN CASE THERE IS A DELAY IN SUPPLY, THESE ELECTRICITY BOARDS DEDUCT THE LIQUIDA TED DAMAGES. THE AMOUNT DEDUCTED BY STATE ELECTRICITY BOARD REPRESENTS THE LIQUIDATED DAMAGES AND THE AMOUNT SHORT REALIZED ARE WRITTEN-OFF AND CLAIMED AS BAD DEBTS BY CREDITING THE AMOUNT IN THE ACCOUNT OF STATE ELECTRICITY BOARD. IT WAS POINTED OUT THAT THE LIQUIDATED DAMAGES ARE CLEARLY ALLOWABLE. THE DELIVERY WAS MADE ON THE STIPULATED DATE BUT IN FEW CASES, THERE WAS DELAY I N SUPPLY AND THE STATE ELECTRICITY BOARD DEDUCTED THE LIQUIDATED DAMAGES. THE ASSESSEE HAS W RITTEN-OFF THIS AMOUNT AND CLAIMED IT AS BAD DEBT U/S. 36((1)(VII). THE CIT(A) DELETED THE DISAL LOWANCE BY OBSERVING AS UNDER : AS REGARDS THE FIRST AMOUNT SHOWN AS BAD DEBT IN T HE CASE OF M.S.E.B., MUMBAI, THE SUM WAS CLAIMED U/S. 36(1)(VII) OF THE I.T. ACT WHICH WAS WRITTEN OF AS IRRECOVERABLE. AS REGARDS THE NATURE, THE SAME P ERTAINED TO LIQUIDATED DAMAGES ON ACCOUNT OF A FEW DAYS DELAY IN EXECUTING THE CONTRACT WITH M.S.E.B. THE DELAY IS SHOWN AS OF 42, 32, 15, 17 AND 46 DAYS RESPECTIVELY. THE DELAY IN EXECUTING THE WORK AS PER THE AGREEMENT AND MENTION ED IN THE PROVISIONS THEREOF IS NOT CONSIDERED IN THE NATURE OF PENALTY AND HENC E THE SAME IS AN ALLOWABLE DEDUCTION. THE APPELLANT HAS ADMITTEDLY TAKEN THE E NTIRE BILL RAISED TO THE PARTY AS 4 INCOME AND UNDER THE PROVISIONS OF SECTION 36(1)(VI I) AS IN FORCE FROM APRIL 1, 1989, THE DEBT IS AN ALLOWABLE EXPENDITURE U/S. 36( 1)(VII) OF THE I.T. ACT WHICH IS ALSO NOT HELD AS IN THE NATURE OF PENALTY. THE DISA LLOWANCE OF RS.11,74,700/- IS, THEREFORE, DELETED HEREBY. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TAX AUTHORITIES BELOW AND THE FOLLOWING DECISIONS CITED BY THE LD. AR : (I). NAND LAL JAISWAL & CO. VS. CIT, 232 ITR 540. (II). CIT VS. ALKEM LABORATORIES PVT. LTD., 314 IT R 329 (III). CIT VS. SHRI GANESH STORES, 266 ITR 595. WE NOTED THAT THE SUM OF RS.11,74,700/- WAS CLAIMED BY THE ASSESSEE AS BAD DEBTS, AS THE SAID AMOUNT WAS DEDUCTED BY M.S.E.B., MUMBAI OUT OF THE AMOUNT PAID BY THEM TO THE ASSESSEE AGAINST SUPPLY OF CONDUCTORS. THE ASSESSING OFFICER DISALLOWED THE SAME, BUT THE CIT(A) ALLOWED IT AS BAD DEBT U/S. 36(1)(VII). WE DO NOT A GREE WITH THE FINDING OF THE CIT(A), AS IN OUR OPINION, THE AMOUNT WRITTEN-OFF DOES NOT REPRESENT A DEBT, BUT THE SAID AMOUNT REPRESENTS THE AMOUNT WHICH HAS BEEN DEDUCTED BY M.S.E.B. AS PER T HE AGREEMENT TOWARDS THE DELAY CAUSED BY THE ASSESSEE IN EXECUTING THE CONTRACT AS CLAIMED B Y THE ASSESSEE. IT IS NOT A CASE WHERE THE SUPPLY HAS BEEN MADE BY THE ASSESSEE TO M.S.E.B. AN D A DEBT HAS BEEN CREATED AGAINST SUPPLY WHICH WOULD HAVE BEEN SUBSEQUENTLY BECOME BAD. FOR CLAIMING THE DEDUCTION U/S. 36(1)(VII), IT IS NECESSARY THAT THE CONDITION AS STIPULATED U/S. 36(2) MUST BE COMPLIED WITH. IT APPEARS THAT THE CIT(A) HAS NOT PROPERLY APPRECIATED THE PROVISIONS OF SECTION 36(1)(VII) WHILE TREATING THE CLAIM OF THE LIQUIDATED DAMAGES DEDUCTED BY M.S.E.B. OUT OF THE AMOUNT RECOVERABLE BY THE ASSESSEE AS BAD DEBT. THIS IS NOT CORRECT IN LAW. 5 9. THE LEARNED AR BEFORE US VEHEMENTLY CONTENDED TH AT HE HAS CLAIMED THE DEDUCTION BEFORE THE CIT(A) U/S. 37 ALSO. BUT FROM THE COPY O F THE REPORT FROM THE ASSESSING OFFICER AS PLACED ON RECORD, IT IS NOT CLEAR WHETHER THE ASSES SEE HAS MADE ANY SUCH CLAIM U/S. 37 OF THE ACT. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE CIT(A) WITH THE DIREC TION THAT THE CIT(A) SHALL ADJUDICATE THIS ISSUE AND DECIDE THE SAME AFRESH IN CASE THE ASSESSEE HAD MADE ANY CLAIM U/S. 37 OF THE ACT. IN CASE THE ASSESSEE HAS MADE ANY SUCH CLAIM, THE CIT(A) IS DIRECTED TO DECIDE THIS ISSUE WHETHER DEDUCTION IS ALLOWABLE TO THE ASSESSEE U/S. 37, AFT ER GIVING PROPER AND DUE OPPORTUNITY TO THE ASSESSING OFFICER AS WELL AS TO THE ASSESSEE. THUS, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17.06.11. SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 TH JUNE, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY