Shri Rajnikant Chimanlal Patel, Ahmedabad V. The Asstt. Commissioner of Income Tax, Circel-2(2), Ahmedabad

ITA 298/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3647 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-03-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 03-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A C SHAH
• Keywords: Business expenditure; Opportunity of being heard; Bad and doubtful debts
• Section: 13

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV , VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMB ER ./ I.T.A. NO. 298/AHD/2017 ( ASSESSMENT YEARS : 2012-13) RAJNIKANT CHIMANLAL PATEL PROP. MUKHI CONSTRUCTION, 4A, ACHALAYATAN SOCIETY, NR. THUMBELINA SCHOOL, NARANPURA, AHMEDABAD - 380013 / VS. THE A.C.I.T. CIRCLE-2(2), 1 ST FLOOR, C. U. SHAH BUILDING, ASHRAM ROAD, AHMEDABAD - 380009 ./ ./ PAN/GIR NO. : ACNPP1772F ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI A. C. SHAH, A.R. / RESPONDENT BY : SHRI VINOD TANWANI, SR.D.R. DATE OF HEARING 03/03/2020 !'# / DATE OF PRONOUNCEMENT 04/03/2020 / O R D E R PER T. S. KAPOOR - AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED CIT(A)-10, AHMEDABAD, DATED 15/12/2016 RELATING TO ASSESSMENT YEAR 2012-13. 2. THE ONLY GROUND TAKEN BY THE ASSESSEE IN THIS CA SE IS REPRODUCED BELOW: ITA NO. 298/AHD/17 [RAJNIKANT C. PATEL VS. ACIT] A.Y. 2012-13 - 2 - 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS / TRADING LOSS OF RS. 10,00.000 ON THE GR OUND THAT THE ASSESSEE HAS NOT PROVED THE ADVANCE WAS FALL THE PU RPOSE OF BUSINESS AND THAT THE RECEIPT FURNISHED WAS IN THE NAME OF ASSESSEE AND NOT IN THE NAME OF MUKHI CONSTRUCTION IN WHICH NAME THE ASSESSEE IS CARRYING ON THE BUSINESS IN AS MUCH AS THE LOSS IS A BUSINESS EXPENDITURE AND THEREFORE IT IS A TRADING LOSS AND THAT THE RECEIPT ISSUED IN THE NAME OF ASSESSEE IS ONE AND THE SAME. WHETHER RECEIPT ISSUED EITHER IN THE NAME OF ASSESSEE INDIVIDUALLY OR IN THE NAME OF MUKHI CONSTRUCTION, IT MAKES NO DIFFERENCE. 3. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT ASS ESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND DURING THE Y EAR UNDER CONSIDERATION HE HAS DEBITED AN AMOUNT OF RS.10 LAK HS IN THE PROFIT & LOSS ACCOUNT WHICH HE HAD GIVEN AS ADVANCE FOR PURC HASE OF LAND BUT SINCE THE DEAL COULD NOT MATERIALIZE, THEREFORE, TH E ASSESSEE HAD TO WRITE IT OFF AS BAD DEBT DURING THE YEAR UNDER CONSIDERAT ION. INVITING OUR ATTENTION TO THE COPY OF SUCH AGREEMENT PLACED AT P APER BOOK PAGE NOS. 15 TO 17, THE LEARNED AR SUBMITTED THAT THOUGH THIS ADVANCE WAS GIVEN IN AY 2007-08, BUT WAS NOT WRITTEN OFF IN EARLIER YEAR S AS THE ASSESSEE WAS PERSUADING THE PAYEE TO REPAY THE AMOUNT BUT WHEN T HE ASSESSEE FAILED TO RECOVER THE SAME, HE WROTE IT OFF IN THE PROFIT & L OSS ACCOUNT. IT WAS SUBMITTED THE LEARNED CIT(A) DID NOT AGREE WITH THE CONTENTIONS OF ASSESSEE AS IN HIS OPINION THE ASSESSEE WAS NOT ABL E TO DEMONSTRATE AS TO WHETHER DURING AY 2007-08 THE ASSESSEE WAS ENGAGED IN THE CONSTRUCTION BUSINESS OR NOT. IN THIS RESPECT, LEARNED AR TOOK US TO THE COPY OF BALANCE SHEET FOR AY 2007-08 PLACED AT PAPER BOOK P AGE NOS.8 TO 13 AND OUR SPECIFIC ATTENTION WAS INVITED TO PROFIT & LOSS ACCOUNT WHERE THE NATURE OF EXPENSES DEBITED AND AS WELL AS RECEIPTS CLEARLY DEMONSTRATE THAT ASSESSEE WAS ENGAGED IN THE CONSTRUCTION BUSIN ESS. OUR ATTENTION WAS ALSO INVITED TO COPY OF BALANCE SHEET WHERE UND ER THE HEAD LOAN & ADVANCE THE AMOUNT OF RS.10LAKHS WAS INCLUDED WITH IN THE AMOUNT OF RS.28,21,379/-. THE LEARNED AR ALSO TOOK US TO ASS ESSMENT ORDER FOR AY 2006-07 PLACED AT PAPER BOOK PAGE NOS. 21 TO 23 WHE RE THE AO HIMSELF HAS MENTIONED THE NATURE OF BUSINESS AS CIVIL CONST RUCTION. THEREFORE, IT WAS PRAYED THAT THE WRITING OFF OF RS.10 LAKHS BEIN G NOT RECEIVABLE WAS ITA NO. 298/AHD/17 [RAJNIKANT C. PATEL VS. ACIT] A.Y. 2012-13 - 3 - A BUSINESS EXPENSE AND THEREFORE, THE AUTHORITIES B ELOW HAD WRONGLY DISALLOWED THE SAME. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE AO DISALLOWED T HE DEDUCTION ON ACCOUNT OF BAD DEBT BY HOLDING THAT IN VIEW OF SECT ION 36(2) OF THE ACT, THE SAME CAN BE DISALLOWED ONLY IF THE SAME HAS BEE N DECLARED AS INCOME IN A PREVIOUS YEAR. THE AO FURTHER HELD THAT ASSES SEE FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE IN RESPECT OF ALLEGED ADVA NCE FOR PURCHASE OF LAND AND THEREFORE, HE DID NOT ALLOW THE DEDUCTION EVEN UNDER THE RESIDUARY SECTION I.E. UNDER S.37 OF THE ACT. THE LEARNED CIT(A) HELD THAT RECEIPT OF RS.10LAKHS WAS DATED 9 TH MAY, 2006, WHICH WAS NOT IN THE NAME AND STYLE OF M/S. MUKHI CONSTRUCTION BUT IN TH E NAME OF MR. RAJNIBHAI C. PATEL. THE LEARNED CIT(A) HELD THAT I F THE ASSESSEE WAS RUNNING THE BUSINESS OF CONSTRUCTION IN THE NAME AN D STYLE OF M/S. MUKHI CONSTRUCTION, THE RECEIPT FOR PURCHASE OF LAND SHOU LD HAVE BEEN IN THE NAME OF M/S. MUKHI CONSTRUCTION ONLY. THEREFORE, H E HELD THAT THE ADVANCE WAS MADE BY THE ASSESSEE IN HIS PERSONAL CA PACITY. THE LEARNED CIT(A) FURTHER HELD THAT ASSESSEE DID NOT FILE ANY DETAILS/EVIDENCES TO PROVE THAT HE WAS ENGAGED IN THE BUSINESS OF REAL E STATE IN FY 2006-07 WHEN THE ADVANCE WAS ACTUALLY MADE. THEREFORE, HE UPHELD THE FINDINGS OF AO AND FURTHER HELD THAT THE RELIANCE PLACED BY THE ASSESSEE ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT WAS NOT APPLICABLE. HOWEVER, BEFORE US, THE LEARNE D AR HAD INVITED OUR ATTENTION TO COPY OF ASSESSMENT ORDER FOR AY 2006-0 7 PLACED AT PAPER BOOK PAGE NOS. 21 TO 23 WHERE THE NATURE OF BUSINES S HAS BEEN MENTIONED AS CIVIL CONSTRUCTION AND NAME OF THE ASSESSEE HAS BEEN MENTIONED AS SHRI RAJNIKANT C. PATEL PROPRIETOR OF M/S. MUKHI CO NSTRUCTION. WE WERE ALSO TAKEN TO COPY OF BALANCE SHEET FOR THE YEAR EN DING 31 ST MARCH, 2007 WHEREIN THE ASSESSEE HAD DISCLOSED THE AMOUNT OF AD VANCE OF RS.10 LAKHS UNDER THE HEAD LOANS & ADVANCES IN THE TOTA L OF LOANS AND ITA NO. 298/AHD/17 [RAJNIKANT C. PATEL VS. ACIT] A.Y. 2012-13 - 4 - ADVANCES AMOUNTING TO RS.28,21,379/-. THIS FACT IS ALSO VERIFIABLE FROM PAPER BOOK PAGE NO.11 WHERE THE BREAKUP OF LOANS & ADVANCES IS PLACED. SINCE THE AUTHORITIES BELOW HAVE HELD THAT ASSESSEE DID NOT PRODUCE ANY DOCUMENT TO DEMONSTRATE THAT HE WAS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION DURING AY 2007-08 WHEREAS BEFORE US SU FFICIENT MATERIAL WAS PLACED, THEREFORE, WE DEEM IT APPROPRIATE TO RE MIT THE MATTER BACK TO AO WITH THE DIRECTION TO RE-ADJUDICATE THE ISSUE AF TER TAKING ACCOUNT THE ASSESSMENT ORDER FOR AY 2006-07 & 2007-08 AND ALSO BALANCE SHEET AND P&L ACCOUNT FOR AY 2007-08 FOR THE PURPOSES OF DETE RMINING AS TO WHETHER THE ASSESSEE WAS ENGAGED IN THE CONSTRUCTIO N BUSINESS OR NOT. IN THE LIGHT OF ABOVE DOCUMENTS, THE ASSESSING OFFICER WILL FURTHER EXAMINE THE ALLOWABILITY OF THE CLAIM AS BAD DEBTS DURING T HE YEAR UNDER CONSIDERATION. NEEDLESS TO SAY THAT ASSESSEE WILL BE PROVIDED SUFFICIENT OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. SD/- SD/- (RAJPAL YADAV) (T. S. KAPOOR) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD: DATED 04/03/2020 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT 04/03/2020