VIVIL EXPORTS P. LTD, MUMBAI V. ITO 2(3)(4),

ITA 2922/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3143 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: F
• Next Hearing Date: 31-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2013
• Court: TRIBUNAL
• Section: 143(3); 234B; 37

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.2922/MUM/2013 ASSESSMENT YEAR: 2009-10 VIVIL EXPORTS PVT. LTD., 3-A DHANNUR BLDG. 3 RD FLOOR, P.M. ROAD, FORT, MUMBAI-400002 / VS. ITO(2(3)(4) MUMBAI- (ASSESSEE) (REVENUE) P.A. NO.AAACV1752B / ASSESSEE BY SHRI K. GOPAL (AR) / REVENUE BY SHRI ARVIND KUMAR (DR) ! ' # $ / DATE OF HEARING : 3/09/2015 ! # $ / DATE OF ORDER: 30/09/2015 ! / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEAL S)-6, MUMBAI DATED 05.03.2013 FOR THE ASSESSMENT YEAR 200 9-10, VIVIL EXPORTS PVT. LTD 2 DECIDED AGAINST THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT. 2. IN THE FIRST GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF SUNDRY BALANCES WRITTEN OFF BY THE ASSESSEE FOR AN AGGREGATE AMOUNT OF RS.32,73,213/-. 3. THE BRIEF FACTS ARE THAT DURING THE YEAR ASSESSE E WAS ENGAGED IN THE BUSINESS OF TRADING EXPORTER AND DEALER IN BABY BOTTLES. THE ASSESSEE MADE A CLAIM OF RS.32,73,213/- ON ACCOUNT OF SUNDRY BALANC ES WRITTEN OFF. DURING THE ASSESSMENT PROCEEDINGS, ASS ESSEE EXPLAINED THAT THESE BALANCES WERE MAINLY IN THE NA TURE OF ADVANCES GIVEN TO ITS SUPPLIERS/SUPPORTING MANUFACT URERS FOR PURCHASING GOODS FROM THEM, FOR THE PURPOSES OF E XPORT. THESE ADVANCES WERE MADE IN THE COURSE OF TRADING B USINESS FOR PROCUREMENT OF GOODS AND SERVICES. IT WAS FURT HER SUBMITTED THAT NONE OF THE PARTIES WERE RELATED PAR TY COVERED U/S 40A(2)(B). COPIES OF LEDGER ACCOUNTS OF THESE P ARTIES IN THE BOOKS OF THE ASSESSE WERE ALSO SUBMITTED TO THE AO. BUT HE REJECTED CLAIM OF THE ASSESEE ON THE GROUND THAT A SSESSEE COULD NOT EXPLAIN THE CIRCUMSTANCES UNDER WHICH ADV ANCES WERE GIVEN AND COULD NOT PROVE WITH COGENT EVIDENC ES THAT THESE AMOUNTS WERE ADVANCED IN THE NORMAL COURSE OF ASSESSEES BUSINESS. FURTHER THE AO HELD THAT THERE WAS NO PROVISION UNDER THE INCOME TAX LAW UNDER WHICH ASSE SSEE COULD CLAIM THE BENEFIT OF WRITE OFF OF THESE ADVAN CES AS VIVIL EXPORTS PVT. LTD 3 EXPENDITURE. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHEREIN THE APPEAL OF THE AS SESSEE WAS DISMISSED ENDORSING THE OBSERVATIONS OF THE AO. 4. BEING AGGRIEVED, THE ASSESSEE HAS FILED AN APPEA L BEFORE THE TRIBUNAL. DURING THE COURSE OF HEARING BEFORE US, L D COUNSEL HAS TAKEN US THROUGH VARIOUS PAGES OF THE PAPER BOO K TO CLEAR DOUBTS RAISED BY THE AO AND LD CIT(A). THE LD COUNS EL HAS SUBMITTED THAT THESE ADVANCES WERE GIVEN IN THE NOR MAL COURSE OF BUSINESS AND ASSESSEE IS ELIGIBLE TO CLAI M BENEFIT OF WRITE OFF OF THESE ADVANCES U/S 37 OF THE ACT. IT W AS SUBMITTED THAT LD AO HAS WRONGLY REJECTED THE CLAIM OF THE AS SESSEE. ON THE OTHER HAND, LD DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES AND HAVE GONE THROU GH THE EVIDENCES FILED BY THE ASSESSEE IN THE PAPER BOOK. IT IS SEEN BY US THAT ASSESSEE HAD SUBMITTED REQUISITE DETAILS IN THE FORM OF COPY TO LEDGER ACCOUNTS OF THE PARTIES WHOSE BALANC E HAS BEEN WRITTEN OFF. THE ASSESSEE HAS ALSO SUBMITTED SAMPLE BILLS OF THESE PARTIES SHOWING THAT THE ASSESSEE HAS BEEN MA KING PROCUREMENT OF GOODS FROM THESE PARTIES. WITH THE A SSISTANCE OF LD COUNSEL, WE MADE RANDOM CHECKING OF SOME OF T HE BILLS AND MATCHED SOME OF THE ENTRIES WITH THE LEDGER ACC OUNTS OF SOME OF THE PARTIES ON RANDOM BASIS. ON VERIFICATIO N,. IT WAS FOUND BY US THAT THE ASSESSEES SUBMISSIONS APPEAR TO BE VIVIL EXPORTS PVT. LTD 4 FACTUALLY CORRECT. THESE ADVANCES WERE GIVEN IN THE NORMAL COURSE OF BUSINESS BY THE ASSESSEE, WHICH BECAME IRRECOVERABLE. THIS FACT HAS NOT BEEN CONTROVERTED BY LD DR OR BY AO OR BY LD. CIT(A) THAT NO RECOVERY HAS BEEN MA DE FROM THESE PARTIES. UNDER THESE CIRCUMSTANCES, THE ASSES SE HAD WRITTEN OFF THESE ADVANCES IN THE NORMAL COURSE OF BUSINESS. THE SAID WRITE OFF IS ELIGIBLE TO BE CLAIMED AS BUS INESS EXPENSES U/S 37 OF THE INCOME TAX ACT. OUR VIEW IS SUPPORTED BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. WACKHARDT INTERNATIONAL LTD. 314 ITR 11. SI MILAR VIEW HAS BEEN TAKEN BY HONBLE BOMBAY ITAT IN THE CASE O F MEMANT J. JOSHI VS. ITO (6985/-MUM/2008 DATED 09.09.2009); RELEVANT PORTION OF THIS ORDER IS REPR ODUCED AS UNDER: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSERVED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND OTHER MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE DESERVES TO SUCCEED IN ITS APPEAL . THERE IS NO DISPUTE THAT THE ASSESSEE ADVANCES MONEY FOR SUPPLY OF MATERIAL IN WHICH IT DEALS. FRO M THE CORRESPONDENCE PLACED ON RECORD, IT IS CLEARLY ESTABLISHED THAT NEITHER THE MATERIAL WAS SUPPLIED TO THE ASSESSEE NOR THE MONEY WAS REFUNDS IN SPITE OF BEST EFFORTS MADE BY THE ASSESSEE. EFFORTS WERE GOI NG ON; THEREFORE, IT CANNOT BE SAID THAT TRADING LOSS WAS INCURRED IN EARLIER YEAR AND NOT IN THE YEAR UNDER CONSIDERATION. 5.1 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF WACKHARDT INTERNATIONAL LTD. 314 ITR 11 HAS HELD THAT BUSINESS LOSS IS ALLOWABLE IN THE YEAR OF CLAI M. SIMILAR VIEWS HAVE BEEN EXPRESSED BY THE HONBLE RAJASTHAN HIGH COURT IN 259 TTR 115. THEREFORE, IN OUR CONSIDERED VIEW, THE CLAIM OF BUSINESS LOSS IS VIVIL EXPORTS PVT. LTD 5 ALLOWABLE IN ITS ENTIRETY AS THE ASSESSEE HAS SUCCESSFULLY ESTABLISHED THAT NEITHER THE ADVANCE GIVEN BY THE ASSESSEEE WAS RECEIVED BACK NOR MATERIAL SUPPLIED BY THE CHINA PARTY WHICH WAS NOT UP TO THE MARK AND THE SAME WAS OLD IN AUCTION WITH RESULTED A LOSS OF RS.1,51,302/- ARE BUSINESS LOSS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE ALLOW THI S GROUND OF THE ASSESSEE. 6. IT IS SEEN BY US THAT PERUSAL OF THE LEDGER ACCO UNTS SUBMITTED BY THE ASSESSEE REVEALS THAT IMPUGNED BAL ANCES WRITTEN OFF ARE OLD OUTSTANDING BALANCES LEFT OUT I N THE ACCOUNTS OF SUPPLIERS FROM WHOM ASSESSEE WAS BUYING SOME MATERIAL. SUBSEQUENTLY WHEN NO RECOVERY WAS MADE, N OR ANY SUPPLY OF GOODS WAS RECEIVED FROM THESE PARTIES, TH ESE WERE WRITTEN OFF BY THE ASSESSEE. IT HAS BEEN CONFIRMED BY THE ASSESSEE, WHICH REMAINED UNCONTROVERTED BY THE DR THAT TILL DATE NEITHER ANY MATERIAL WAS SUPPLIED BY THESE PAR TIES TO THE ASSESSEE NOR MONEY WAS REFUNDED BY THESE PARTIES TO THE ASSESSEE, IN SPITE OF BEST EFFORTS MADE BY THE ASSE SSEE. KEEPING IN VIEW TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, WE FIND THAT CLAIM OF THE ASSESSEE IS ALLOWAB LE BEING LEGALLY AND FACTUALLY CORRECT AND THEREFORE DISALLO WANCE MADE BY THE AO IN THIS REGARD IS DELETED AND FIRST GROUN D OF THE ASSESSEE IS ALLOWED. 7. IN THE SECOND GROUND THE ASSESSEE HAS CHALLENGED THE LEVY OF INTEREST UNDER 234B AND 234C. THIS GROUND I S CONSEQUENTIAL AND WAS NOT PRESSED BY THE LD COUNSEL DURING THE HEARING AND THEREFORE IT IS DISMISSED. VIVIL EXPORTS PVT. LTD 6 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2015. SD/- (SANJAY GARG ) SD/- (ASHWANI TANEJA) ' # / JUDICIAL MEMBER $ # / ACCOUNTANT MEMBER ! %' MUMBAI; & DATED : 30/09/2015 CTX? P.S/. .. ! %'&'( )(*& / COPY OF THE ORDER FORWARDED TO : 1. ()* / THE APPELLANT 2. +,)* / THE RESPONDENT. 3. - - ! . ( ( ) / THE CIT, MUMBAI. 4. - - ! . / CIT(A)- , MUMBAI 5. 12 +3 , - ($ 3 4 , ! %' / DR, ITAT, MUMBAI 6. 5 ' / GUARD FILE. ! / BY ORDER, ,1( + //TRUE COPY// +/, - (DY./ASSTT. REGISTRAR) , ! %' / ITAT, MUMBAI