M/s. Bedi Auto Engineer, Hoshiarpur V. The Income-tax Officer, Hoshiarpur

ITA 298/ASR/2012

• Counselvise Citation: 29820914 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 29-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 16-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Keywords: Bad and doubtful debts; Corroborative evidences
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.298(ASR)/2012 ASSESSMENT YEAR:2006-07 PAN :AAAFB8816H M/S. BEDI AUTO ENGINEER, VS. INCOME TAX OFFICER, JALANDHAR ROAD, HOSHIARPUR. WARD-3, HOSHIARPUR. (APPELLANT) (RESPONDENT) APPELLANT BY:WRITTEN SUBMISSIONS RESPONDENT BY:SH.AMRIK CHAND, DR DATE OF HEARING: 29/07/2013 DATE OF PRONOUNCEMENT:19/08/2013 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JALANDHAR DATED 04.05.2012 FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ASSESSMENT FRAMED IS ILLEGAL, UNJUSTIFIED AND AGAINST THE PROVISIONS OF LAW. 2. THAT LD. CIT(A) AND A.O. HAS FAILED TO APPRECIATE T HE FACTS AND LAW, IN SUSTAINING ADDITION OF RS.5 LACS AS UNEXPLA INED RECEIPT. 3. THAT LD. CIT(A) HAS LEGALLY ERRED IN LAW AND FACTS IN SUSTAINING THE ADDITION OF RS.216331/- ON ACCOUNT OF PAYMENT M ADE TO M/S. MOHINDRA AND MOHINDRA. 2 4. THAT THE ASSESSEE CRAVES THE RIGHT TO ALTER, ADD, A MEND OR DELETE ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAD SHOWN AN ADVANCE OF RS.30 LACS IN ITS BALANCE SHEET AS ON 31.03.2006 AS RECEIVED FROM ONE SMT. REEMA AGGARWAL FOR SALE OF BUILDING BY THE ASSESSE E FIRM TO HER. THE AO INVESTIGATED THE GENUINENESS OF THIS AMOUNT CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE BY DEPUTING HIS INSPECTOR. WHEN THE INSPECTOR VISITED THE PREMISE OF SMT. REEMA AGGARWAL, WHO WAS A PARTNER I N M/S. AGGARWAL FURNITURE HOUSE, KARTARPUR, SHE WAS REPORTED TO BE OUT OF STATION. THE STATEMENT OF SH. GYAN AGGARWAL, HER HUSBAND, WAS RE CORDED BY THE INSPECTOR. SH. GYAN AGGARWAL STATED THAT DURING A.Y . 2005-06 A PAYMENT OF RS. 25 LACS BY CHEQUE DATED 28.03.2006 WAS MADE TO M/S. BEDI AUTO ENGINEERS FOR PURCHASE OF BUILDING SITUATED AT PARB HAT CHOWK, HOSHIARPUR. HE STATED THAT NO OTHER PAYMENT HAD BEEN MADE DURIN G THE F.Y. 2005-06 TO THE ASSESSEE FIRM BY HIS WIFE. THE AO ISSUED SUMMON S TO SMT. REEMA AGGARWAL AND RECORDED HER STATEMENT ON 02.12.2008. IN HER STATEMENT SMT. REEMA AGGARWAL REITERATED HER HUSBANDS STATEMENT T O THE EFFECT THAT ONLY A SUM OF RS. 25 LACS HAD BEEN PAID AS ADVANCE DURING THE F.Y. 2006-07. A COPY OF THE STATEMENT OF SMT. REEMA AGGARWAL WAS SU PPLIED BY THE AO TO THE ASSESSEE. THE ASSESSEE SOUGHT CROSS EXAMINATION OF SMT. REEMA 3 AGGARWAL, FOR WHICH SUMMONS WERE ISSUED AGAIN TO S MT. REEMA AGGARWAL. IT WAS INFORMED THAT SHE WAS OUT OF STATION AND HER HUSBAND ATTENDED THE AOS OFFICE ON THE APPOINTED DATE. HE FILED A WRITT EN STATEMENT CONTENDING THAT HE MADE ALL THE FINANCIAL DEALS WITH PARTIES O N BEHALF OF HIS WIFE AND HE WAS RESPONSIBLE FOR ALL THE FACTS WHICH WERE RELATE D TO THE SAID CASE ON HIS BEHALF AND ON HIS WIFES BEHALF. THE ASSESSEE ACCEP TED TO CROSS EXAMINE SHRI GYAN AGGARWAL. IN THE CROSS EXAMINATION SH.GYAN AGG ARWAL AGAIN CONFIRMED THAT ONLY RS. 25 LACS HAD BEEN PAID IN F. Y. 2005-06. THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT HAD RECEIVED A TOKE N MONEY OF RS. 5 LACS ON 5.3.2006 AND A RECEIPT OF THIS AMOUNT WAS GIVEN TO SMT. REEMA AGGARWAL, THOUGH THE SAME HAD BEEN DENIED BY SH.GYAN AGGARWAL DURING CROSS EXAMINATION. SMT. REEMA AGGARWAL SUBMITTED IN HER R EPLY DATED 23.12.2008 THAT NO WRITTEN AGREEMENT HAD BEEN MADE IN RELATION TO THE PURCHASE OF THE PROPERTY, AND THAT IT WAS ORALLY AGREED TO PURCHASE THE BUILDING AT THE SETTLED PRICE AS PER REGISTRY. THE AO NOTED THAT THE TOTAL SALE CONSIDERATION OF RS.87,36,000/- HAD BEEN ADMITTED BY BOTH THE PARTIE S AND THE ONLY DISPUTE WAS ABOUT THE PAYMENT OF RS.5 LACS IN CASH, WHICH T HE ASSESSEE CLAIMED TO HAVE RECEIVED ON 5.3.2006 BUT THE PURCHASER CLAIMED TO HAVE PAID ON 10.04.2006. AS PER THE CAPITAL ACCOUNT OF SMT. REEM A AGGARWAL, THE BALANCE PAYMENT OF RS.62,36,000/- HAD BEEN PAID IN F.Y.2006 -07. THE ASSESSEE FILED 4 ON 24.12.2008 A PHOTOCOPY OF RECEIPT OF RS.5 LACS ISSUED TO SMT. REEMA AGGARWAL FOR RECEIPT OF PAYMENT ON 5.3.2006. THE AO NOTED THAT THE RECEIPT WAS NOT SIGNED BY THE OTHER PARTY AND HELD THAT THE SAME HAD NO VALUE. THE AO, THEREFORE, ADDED THE SUM OF RS. 5 LACS TO THE A SSESSEES TOTAL INCOME AS UNEXPLAINED RECEIPT. 3. BEFORE THE LD. CIT(A), THE LD. COUNSEL FOR THE A SSESSEE MADE WRITTEN SUBMISSIONS, WHICH WERE FORWARDED TO THE A.O. FOR C OMMENTS. THE COMMENTS OF THE AO WERE FORWARDED TO THE ASSESSEE A ND AFTER REJOINDER, THE LD. CIT(A) VIDE PARA 2.4 OF HIS ORDER CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER , THE LD. COUNSEL FOR THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS AND HAS PRAYED TO DECIDE THE APPEAL ON THE BASIS OF THE WRITTEN SUBMISSIONS. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE WRITTEN SUBMISSIONS PLACE D ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE AND THE ARGUMENTS MAD E BY THE LD. DR AND THE 5 REMAND REPORT OF THE A.O. WHICH IS PART OF THE CIT( A)S ORDER. THE LD. CIT(A) VIDE PARA 2.4 OF HIS ORDER HAS PASSED A REAS ONED ORDER BY GIVING FINDING THAT WHETHER THE ASSESSEE FIRM RECEIVED THE SUM OF RS. 5 LACS IN CASH FROM SMT. REEMA AGGARWAL ON OR BEFORE 31.3.2006 OR AFTER 31.3.2006. THE ASSESSEE HAS RECORDED THE RECEIPT OF RS. 5 LACS IN CASH ON 10.4.2006. THERE IS NO DIRECT EVIDENCE WITH THE ASSESSEE THAT IT HAD RE CEIVED THE SUM OF RS.5 LACS FROM SMT. REEMA AGGARWAL ON OR BEFORE 31.3.2006. IT CLAIMS TO HAVE BEEN ISSUED A RECEIPT OF THIS AMOUNT ON 5.3.2006 BUT THE RECEIPT IS ADMITTEDLY NOT SIGNED BY THE BUYER. THE ASSESSEES CASE IS BUILT O N PRESUMPTION I.E. THAT THE FIRST PAYMENT WAS USUALLY IN CASH THAT RECEIPT HAD BEEN ACCEPTED BY SMT. REEMA AGGARWAL TO BE ISSUED AGAINST CHEQUE BUT NOT AGAINST THE CASH ETC. THE LD. CIT(A) WAS NOT SATISFIED THAT THESE PRESUMP TIONS CAN ASSIST THE APPELLANT IN THE DISCHARGE OF THE ONUS CASH UPON IT . WHETHER OR NOT THE SUM OF RS. 5 LACS WAS PAID BY SMT. REEMA AGGARWAL ON 5. 3.2006 OR ON 10.4.2006, THE FACTS REMAINS THAT A CREDIT OF THIS AMOUNT HAS BEEN INTRODUCED IN THE BOOKS OF THE ASSESSEE AND THE ONUS LIES SQUA RELY UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTION RECORDED I N ITS BOOKS. THE PERSON FROM WHOM THE MONEY IS CLAIMED TO HAVE BEEN RECEIVE D ON 5.3.2006 IN CASH HAS DENIED THE TRANSACTION AND THERE IS NO IOTA OF DOCUMENTARY EVIDENCE WITH THE ASSESSEE TO PROVE THAT SMT. REEMA AGGARWAL ACTU ALLY PAID RS.5 LACS TO IT 6 ON 5.3.2006. THE ENTRIES IN THE BOOKS OF ACCOUNT AN D THE AFFIDAVIT OF SH.RAVINDER PAL SINGH, PARTNER OF THE ASSESSEE FIRM , ARE SELF SERVING DOCUMENTS AND CANNOT CORROBORATE THE SOURCE OF THE SUM OF RS. 5 LACS RECEIVED IN THE FACE OF CLEAR DENIAL BY THE PAYER. THE ASSESSEES CONTENTION THAT THE FIRST PAYMENT IS USUALLY MADE IN CASH IS N OT BACKED BY ANY SUPPORTING EVIDENCE OR CUSTOM. A CASH PAYMENT MAY B E MADE INITIALLY, BUT IS USUALLY ACCOMPANIED BY A WRITTEN AGREEMENT OR B IANA BETWEEN TWO PARTIES, WHICH IS ALSO WITNESSED BY AT LEAST TWO WI TNESSES. A CASH PAYMENT WITHOUT ANY WRITTEN AGREEMENT FOR PURCHASE OF BUILD ING DOES NOT APPEAR TO BE CUSTOMARY, AS HAS BEEN CLAIMED BY THE ASSESSEE. WHETHER OR NOT THE LAW REQUIRES THE RECEIPT TO BE SIGNED BY THE PURCHASER, THE LAW CERTAINLY REQUIRES THE ASSESSEE TO PROVE THE GENUINENESS OF THE SOURCE FROM WHICH ANY AMOUNT IS CLAIMED TO BE CREDITED IN ITS BOOKS. THE DECISIO N IN THE CASE OF CIT VS. P.K. NOORJAHAN (SUPRA) LAYS DOWN THAT THE SURROUNDI NG CIRCUMSTANCES MAY BE SEEN IF IT IS IMPOSSIBLE FOR THE ASSESSEE TO HAV E EARNED THE MONEY INVESTED IN AN ASSET. IN THE CITED CASE THE ASSESSEE WAS A Y OUNG LADY, WHO COULD NOT EXPLAIN SATISFACTORILY HER SOURCE OF INVESTMENT IN LAND, BECAUSE OF WHICH IT WAS HELD THAT THE INVESTMENT COULD NOT BE CONSIDERE D AS INCOME OF THE ASSESSEE. IT IS SEEN THAT THE FACTS IN CASE OF THE ASSESSEE ARE QUITE DIFFERENT FROM THAT OF CIT VS. P.K. NOORJAHAN (SUPRA), IN ASM UCH AS THE ASSESSEE WAS 7 RUNNING A BUSINESS FOR A LONG TIME. EVEN THOUGH IT HAD SUFFERED LOSSES, IT HAD A RUNNING OPERATION, STOCK IN TRADE OF THE VALUE OF MORE THAN RS.79 LACS AND SEVERAL OTHER FIXED ASSETS. ITS PARTNERS HAD INTROD UCED CAPITAL OF MORE THAN RS.55 LACS IN THE FIRM IN THE RELEVANT PREVIOUS YEA R AND HAD WITHDRAWN RS.33 LACS, SHOWING ADDITION TO THEIR CAPITAL ACCOUNT OF (APPROXIMATELY) RS.20 LACS. HENCE, THE ASSESSEE FIRM AND ITS PARTNER DID HAVE A CCESS TO MONEY. HENCE, IT WAS HELD THAT THE CITED DECISION DOES NOT ASSIST TH E ASSESSEE. IN THE FACE OF CLEAR DENIAL BY SMT. REENA AGGARWAL AND ABSENCE OF ANY POSITIVE EVIDENCE WITH THE ASSESSEE, THE LD. CIT(A) RIGHTLY UPHELD T HE ADDITION OF RS. 5 LACS MADE BY THE AO AS UNEXPLAINED MONEY RECEIVED BY THE ASSESSEE. THUS, GROUND NO.2 OF THE ASSESSEE IS DISMISSED. 7. AS REGARDS GROUND NO.3 RELATING TO SUSTAINING TH E ADDITION OF RS.216331/- ON ACCOUNT OF PAYMENT MADE TO M/S. MOHI NDRA AND MOHINDRA, THE BRIEF FACTS ARE THAT THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS.2,16,330/- AS BAD DEBT. WHEN ASKED TO JUSTIFY THE CLAIM, THE A SSESSEE SUBMITTED THAT SUM OF RS.13,83,669/- WAS OWED BY IT TO M/S. MAHINDRA & MAHINDRA LTD. AGAINST WHICH A PAYMENT OF RS.16 LACS WAS MADE TO THE CONCE RN. IT WAS CONTENDED THAT THE EXCESS PAYMENT HAD BECAME IRRECOVERABLE AN D HAD, THEREFORE, BEEN CLAIMED AS BAD DEBT. THE AO DID NOT ALLOW THE CLAIM FOR THE REASON THAT NO 8 REASONABLE EXPLANATION FOR MAKING THE EXCESS PAYMEN T HAD BEEN SUBMITTED AND HE WAS OF THE VIEW THAT NO PRUDENT BUSINESSMAN WOULD MAKE AN EXCESS PAYMENT. HE HELD THAT THE EXCESS PAYMENT HAD NOT BE EN LAID DOWN FOR BUSINESS PURPOSES AND DISALLOWED THE EXCESS PAYMENT OF RS.2,16,331/-. 8. THE LD. COUNSEL FOR THE ASSESSEE MADE THE SUBMIS SIONS WHICH WERE MADE BEFORE THE LD. CIT(A) AND THE SAME WERE FORWAR DED TO THE AO FOR COMMENTS AND AFTER TAKING COMMENTS OF THE AO AND TH E REJOINDER OF THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE ACTION OF TH E A.O. VIDE PARA 3.4 OF HIS ORDER. 9. WE HAVE CONSIDERED THE WRITTEN SUBMISSIONS MADE BY THE LD. COUNSEL AND ARGUMENTS MADE BY THE LD. DR, WHO HAS RELIED UP ON THE ORDERS OF BOTH THE AUTHORITIES BELOW. THE LD. CIT(A) HAS PASSED A WELL REASONED ORDER THAT THE CLAIM MADE BY THE ASSESSEE IS NOT ALLOWABLE AS DEDUCTION U/S 36(1)(VII) OF THE ACT SINCE THE CONDITION PRESCRIBED U/S 36(2 )(I) OF THE ACT RELATING TO BAD DEBTS IS NOT SATISFIED IN RESPECT OF THE EXCESS PAYMENT. THE DEBT DUE TO BE PAID BY THE ASSESSEE TO M/S. MAHINDRA & MAHINDRA LTD; WAS LESSER THAN THE AMOUNT ACTUALLY PAID BY THE ASSESSEE. THE EXCES S AMOUNT WAS, THUS, NEVER TAKEN INTO ACCOUNT IN COMPUTING INCOME OF THE ASSESSEE IN THE PRESENT 9 ASSESSMENT YEAR OR IN THE EARLIER YEAR PRIOR TO PRE SENT ASSESSMENT YEAR. IN FACT, THERE IS NOTHING TO SHOW THAT ANY SALES WERE MADE BY THE ASSESSEE TO M/S. MAHINDRA & MAHINDRA LTD. THE MERE FACT THAT A PAYMENT HAS BEEN MADE BY THE ASSESSEE WILL NOT MAKE THE PAYMENT ALLO WABLE AS DEDUCTION U/S 36(1)(VII) OF THE ACT. THE DECISION IN THE CASE OF SWASTIC ASBESTOS PRODUCTS LTD. VS. DCIT (SUPRA) STATES THAT A DEBT WRITTEN OF F IN THE BOOKS OF ACCOUNT WAS SUFFICIENT FOR ALLOWING DEDUCTION FOR BAD DEBTS U/S 36(1)(VII). THE ISSUE IN THE PRESENT CASE, HOWEVER, IS ABOUT THE APPLICAT ION OF SECTION 36(2)(I), AS NOTED EARLIER. HENCE, THIS DECISION DOES NOT ASSIST THE ASSESSEE. THE DECISION IN THE CASE OF ACIT VS. JAIN METAL COMPONENTS (SUPR A), AGAIN STATES THE SAME PRINCIPLE AND FOR THE REASON DISCUSSED ABOVE, DOES NOT ASSIST THE ASSESSEE. AS REGARDS THE CLAIM FOR DEDUCTION U/S 37 (1) OF THE ACT, IT IS SEEN THAT DEDUCTION U/S 37(1) OF THE ACT IS ALLOWED IN R ESPECT OF EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE O F ASSESSEES BUSINESS. THE ASSESSEE HAS NOT ABLE TO THROW ANY LIGHT ON THE PUR POSE FOR WHICH THE EXCESS PAYMENT WAS MADE. IT HAS NOT INFORMED AS TO HOW THE PAYMENT RESULTED IN AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS OR EVEN AS TO HOW IT WAS EXPENDITURE. EVEN M/S. MAHINDRA AND MAHINDRA LTD. HAVE NOT BEEN ABLE TO SUBMIT ANY INFO RMATION IN THIS REGARD, AND NO FURTHER INFORMATION HAS BEEN RECEIVED FROM T HEM. 10 10. IN VIEW OF THE ABOVE DISCUSSION, IT IS EVIDENT THAT THE LD. CIT(A) HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE. THUS, W E FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND DISMISS GROUND NO.3 OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.298(ASR)/2012 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH AUGUST, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19TH AUGUST, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. BEDI AUTO ENGINEERS, JALANDHAR. 2. THE ITO W-3, JLT 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.