WEST END INVESTMENT & FINANCE CONSULTANCY P. LTD, MUMBAI V. ITO 4(20(3), MUMBAI

ITA 3024/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48487 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 16-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: O P SHARMA
• Keywords: Bad and doubtful debts
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G : MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA. NO. 3024/MUM/2010 ASSESSMENT YEAR 2002-2003 M/S. WEST END INVESTMENT & FINANCE CONSULTANCY PVT. LTD. MUMBAI 400001 PAN AAACW0973H VS. INCOME TAX OFFICER 4(2)(3) MUMBAI (APPELLANT) (RESPONDENT) APPEARANCES: HENEEL PATEL, FOR THE ASSESSEE O.P.SHARMA, FOR THE REVENUE ORDER PER PRAMOD KUMAR, A.M. 1. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICATE IN THIS APPEAL IS, WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISAL LOWANCE OF RS.2,97,180/- ON ACCOUNT OF BAD DEBTS. THE ASSESSMENT YEAR INVOLVED IS 20 02-2003 AND THE IMPUGNED CIT(A)S ORDER DATED 7-1-2010 WAS PASSED IN THE MATTER OF ASSESSMENT UNDER SECTION 143 (3) OF THE I.T. ACT, 1961. 2. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE LIK E THIS. THE ASSESSEE IS A MEMBER OF NATIONAL STOCK EXCHANGE AND DURING THE RE LEVANT PREVIOUS YEAR IT CARRIED ON BUSINESS AS A SHARE BROKER. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED DEDU CTION ON ACCOUNT OF BAD DEBTS AMOUNTING TO RS.2,97,118/-. THE ASSESSING OFFICER N OTED THAT THE ASSESSEE DID NOT MAKE ANY EFFORT FOR RECOVERY OF THE DEBTS WHICH WERE CLAIMED AS BAD DEBTS. THE ASSESSING OFFICER FURTHER OBSERVED THAT ANY CLAIM OF BAD DEBT CAN ONLY BE CONSIDERED FOR DEDUCTION WHEN PARTIES INTENTIONALLY REFUSED TO SE TTLE THE ACCOUNT, WHEN THE LIABILITY OF THE DEBT IS NOT ACCEPTED OR WHEN THE ASSE SSEE HAS TAKEN SUFFICIENT EFFORTS ITA. NO. 3024/MUM/2010 M/S. WEST END INVESTMENT & FINANCE CONSULTANCY PV T . LTD 2 FOR RECOVERING THE SAID DEBT. AS NONE OF THESE CONDITI ONS WERE SATISFIED, THE ASSESSING OFFICER PROCEEDED TO DISALLOW THE CLAIM OF DED UCTION OF BAD DEBT. WHILE DOING SO, THE ASSESSING OFFICER TOOK NOTE OF THE SPECIAL BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF OMAN INTERNATIONAL BANK SAOG 100 SB 285 BUT DECLINED TO FOLLOW THE SAME ON THE GROUND THAT AN APPEAL IS FILED AGAINST THE SAID SPECIAL BENCH DECISION IN THE HONBLE BOMBAY HIGH COURT. 3. AGGRIEVED BY THE STAND SO TAKEN, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IN PROCEEDINGS BEFORE THE LEARNED COMMISSI ONER (APPEALS), IT WAS POINTED OUT BY THE ASSESSEE THAT THE SPECIAL BENCH DECI SION HAS NOW BEEN CONFIRMED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT VS. OMAN INTERNATIONAL BANK. LEARNED COMMISSIONER (APPEALS) HOWEVER, ADOPTED A DIFF ERENT REASONING TO CONFIRM DISALLOWANCE. HIS REASONING WAS THAT AS A SHARE BROKER THE AMOUNT WHICH ACTUALLY GETS CREDITED TO THE P & L ACCOUNT IS ONLY IN RESPE CT OF BROKERAGE AND THEREFORE, ENTIRE DEBT, WHEN WRITTEN OFF, WOULD NOT SATISFY THE CONDI TIONS OF SECTION 36 (2). AS REGARDS ASSESSEES RELIANCE ON HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. BONANZA PORTFOLIO LTD. 320 ITR 178 (DEL.), LEAR NED CIT(A) WAS OF THE VIEW THAT BEING FROM NON-JURISDICTIONAL HIGH COURT THE SAID DEC ISION DOES NOT BIND HIM. ACCORDINGLY, THE SAID DISALLOWANCE WAS CONFIRMED AND W HILE DOING SO CIT(A) OBSERVED AS FOLLOWS : 1.3. DECISION : (I) THE CONDITIONS OF SECTION 36 (1) (VII) ARE MET IN V IEW OF BOMBAY HIGH COURT DECISION IN CASE OF OMAN INTERNATIONAL BANK 313 ITR 128. (II) THE CONDITIONS OF SECTION 36 (2) ARE MET ONLY UP TO THE AMOUNT OF BROKERAGE EARNED FROM MR. JAY N. SHAH WHICH WAS INC LUDED IN THE INCOME OF ANY PREVIOUS YEAR. THE APPELLANT SHALL FU RNISH THE DETAILS OF BROKERAGE EARNED FROM MR. JAY N. SHAH AND THE A. O. SHALL ALLOW THE AMOUNT OF BAD DEBTS UP TO THE AMOUNT OF BROKERA GE. (III) SO FAR AS THE SMALL BALANCES OF RS.10,000/- IS CONC ERNED, THESE ARE LOSSES INCURRED IN REGULAR COURSE OF BUSINESS AND A RE, THEREFORE, ALLOWABLE.' 4. THE ASSESSEE IS AGGRIEVED AND IS IN FURTHER APPEAL BEF ORE US ITA. NO. 3024/MUM/2010 M/S. WEST END INVESTMENT & FINANCE CONSULTANCY PV T . LTD 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 6. AS LEARNED REPRESENTATIVES FAIRLY AGREE THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. SHREYAS S. MORAKHIA 131 TTJ 641, WHEREIN IT HAS BEEN HELD THAT IN THE CASE OF A SHARE BROKER IF CLIENT DOES NOT PAY PURCHASE PRICE OF THE SHARES PURCHA SED AND EVEN THOUGH ONLY BROKERAGE AMOUNT IS CREDITED TO THE P & L ACCOUNT, T HE ENTIRE ISSUE ON ACCOUNT OF SHARE PURCHASE CONSTITUTES ADMISSIBLE AS BAD DEBT AND DEDU CTION IS PERMISSIBLE. RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE SPEC IAL BENCH OF THE TRIBUNAL, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSE SSING OFFICER TO DELETE THE DISALLOWANCE. THE ASSESSEE GETS RELIEF ACCORDINGLY. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-4-2011. SD/- SD/- (D.MANMOHAN) (PRAMOD KUMAR) VICE PRESIDENT ACCOUNTANT MEMBER MU MBAI, DATE 25 TH APRIL, 2011 VBP/- COPY TO 1. M/S. WEST END INVESTMENT & FINANCE CONSULTANCY PVT. LTD ., 38, 2 ND FLOOR, BOMBAY MUTUAL BUILDING, DR. D.N. ROAD, FORT , MUMBAI 400001 PAN AAACW0973H 2. INCOME TAX OFFICER 4(2)(3), AAYAKAR BHAVAN, MUMBAI 3. CIT(A)-8, MUMBAI 4. CIT-4, MUMBAI 5. DR G BENCH 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI. ITA. NO. 3024/MUM/2010 M/S. WEST END INVESTMENT & FINANCE CONSULTANCY PV T . LTD 4