SMD TRAVEL CORPORATION, MUMBAI V. ITO 18(3)(4), MUMBAI

ITA 3026/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3799 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 30-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: MUKESH JOTWANI
• Keywords: Bad and doubtful debts

Judgement Text

1 , INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/3026/MUM/2013, /ASSESSMENT YEARS: 20007-08 M/S.SMD TRAVEL CORPORATION 4/5, NEW UDYOG MANDIR, BHAGOJ KEER MARG,MUMBAI-400 016. PAN:AABFS 6181 K VS. INCOME TAX OFFICER-18(3)(4) ROOM NO.206, PIRAMAL CHAMBERS PAREL ,MUMBAI-400 012. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI R.K. SAHU -AR ASSESSEE BY: SHRI MUKESH JOTWANI / DATE OF HEARING: 28.07.2016 / DATE OF PRONOUNCEMENT: 10.08.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 23.02.2012 OF CIT(A)-29 , MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-FIRM,A TRAVEL AGENT,FILED ITS RETURN OF INCOME 31.10 2007,DECLARING TOTAL INCOME AT RS.NIL. THE ASSESSING OFFICER (AO)COMPLETED THE ASSESSMENT,U/S.143 OF THE ACT,ON 30.12.2009 DETERMINING ITS INCOME AT RS.(-) 54.71 LAKHS. 2. THE APPEAL FILED BY THE ASSESSEE IS TIME BARRED BY 361 DAYS.EXPLAINING THE DELAY,THE ASSESSEE HAD SUBMITTED THAT IT DECIDED, AS PER THE ADVICE GIVEN BY THE THEN CHARTERED ACCOUNTANT(CA),NOT TO CONTEST THE O RDER OF THE FIRST APPELLATE AUTHORITY (FAA)CONSIDERING THE AMOUNT INVOLVED IN T HE ASSESSMENT ORDER, THAT ON GETTING PENALTY ORDER,THE PRESENT CA SUGGESTED T O FILE THE APPEAL FOR THE ADDITIONS MADE BY THE AO, THAT ASSESSEE WAS GUIDED BY THE PROFESSIONAL ADVICE ON BOTH THE OCCASIONS,THAT THERE WAS REASONABLE CAU SE IN NOT FILING THE APPEAL IN TIME AND SO,THE SAME SHOULD NOT BE REJECTED.THE AUT HORISED REPRESENTATIVE (AR)REITERATED THE ARGUMENTS MENTIONED IN THE AFFID AVIT OF THE PARTNER OF THE FIRM AND IN THE CONDONATION APPLICATION.DEPARTMENTA L REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH.AFTER CONS IDERING THE PECULIAR FACTS AND CIRCUMSTANCE OF THE CASE I.E., THE PROFESSIONAL ADV ICE,WE ARE OF THE OPINION THAT IT IS A FIT CASE TO CONDONE THE DELAY. 3026/M/13-SMD TRAVEL 2 3. THE EFFECTIVE GROUND OF APPEAL IS ABOUT CONFIRMING THE ADDITION MADE BY THE AO,U/S. 41 OF THE ACT,AMOUNTING TO RS.29.06 LAKHS.D URING THE ASSESSMENT PROCE -EDINGS THE AO ASKED THE ASSESSEE TO SUBMIT THE DET AILS OF SUNDRY CREDITORS AND ITS SUBSEQUENT SETTLEMENTS. AFTER GOING THROUGH THE LIST OF SUNDRY CREDITORS AND THE DETAILS FILED,THE AO FOUND THAT FOLLOWING AMOUN TS WERE NOT PAID TO THE CREDITORS AND WERE OUTSTANDING FOR A LONG PERIOD, T HAT THE ASSESSEE HAD NOT FILED ANY CONFIRMATION ABOUT THOSE CREDITORS: I)MODILUFT -RS.26,96,502/- II)GEETA TRAVELS AND CRAGO- RS.1,20,334/- III)JASRAJ KALINA & CO. RS.89,823/- ACCORDINGLY,THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE UNPAID CREDITORS OF RS.29.06 LAKHS SHOULD NOT BE TAKEN AS INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1)OF THE ACT. VIDE ITS LET TER,DT.21.9.2009,THE ASSESSEE STATED THAT THE CREDITORS WERE GENUINE AND PAYMENT HAD TO BE MADE TO THEM, THAT DUE TO FINANCIAL CRISIS AND ALL OF SUDDEN STOPPAGE OF MODILUFT ITS MONEY WAS STUCK UP AND IT COULD NOT MAKE PAYMENT TO CREDITORS ON TIME.HOWEVER, THE AO HELD THAT CONTENTION OF THE ASSESSEE WAS NOT ACCEPT ABLE. ASSESSEE HAD NOT PAID THE CREDIT LIABILITY, THAT IT WAS TO RECEIVE DEPOSI TS FROM MODILUFT DURING THE COURSE OF OPERATION OF BUSINESS AND IT HAD ALREADY WRITTEN OFF BAD DEBTS WITH REGARD TO MODILUFT, THAT IT HAD NOT OFFERED TRADE L IABILITY FOR TAXATION.FINALLY, HE HELD THAT TRADE LIABILITY OF RS.29.06 LAKHS WAS TO BE TREATED AS DEEMED PROFIT FOR THE YEAR UNDER CONSIDERATION AS PER PROVISIONS OF S ECTION 41(1) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE IS IN APPEAL BEFORE THE FAA. BEFORE HIM,IT WAS ARGUED THAT IT HAD TO RECEIVE FRO M MODILUFT AN AMOUNT OF RS.295 LAKHS, THAT THE CROSS CLAIMS WERE PENDING BE FORE THE HONBLE DELHI HIGH COURT, THAT THE AO WAS NOT JUSTIFIED IN ADDING THE DISPUTED CREDIT LIABILITY. AFTER CONSIDERING THE ASSESSMENT ORDER, THE SUBMISSION OF THE ASSESSEE, THE FAA HELD 3026/M/13-SMD TRAVEL 3 THAT THE ASSESSEE HAD WRITTEN OFF BAD DEBTS FROM M ODILUFT IN AY 2003-04, THAT IT WAS IMPOSSIBLE THAT ASSESSEE HAD TO PAY TO MODILUF T, THAT IT SHOULD HAVE WRITTEN OFF ONLY NET AMOUNT AFTER ADJUSTING PAYABLE, IF ANY , THAT IT HAD NOT FILED CONFIRMATION LETTERS FROM MODILUFT, THAT THE AO WAS JUSTIFIED IN MAKING THE ADDITION. 5. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) STATED THAT OUT OF RS.2.95 CRORES,THE ASSESSEE HAD WRITTEN OFF ONLY RS.1.75 CRORES ONLY,THAT MATTERS ABOUT THE COUNTER CLAIMS WERE PEN DING IN THE DELHI HIGH COURT,THAT TRIBUNAL HAD ALLOWED BAD DEBTS (TRIBUNAL ORDER PG-39 PARA-6 ),THAT THE LIABILITY ON RECEIVABLE SIDE HAD NOT ATTAINED F INALITY,THAT LIABILITIES HAD NOT CEASED TO EXIST.THE DR ARGUED THAT ASSESSEE WAS GIV ING TWO DIFFERENT TREATMENTS TO RECEIVABLES AND THE PAYABLES,THAT IT HAD WRITTEN OFF HUGE AMOUNT AS BAD DEBTS AND HAD REFUSED TO PAY TAXES FOR THE AMOUNTS RECEIV ABLE.HE REFERRED TO THE CASES OF T.V. SUNDARAM IYENGAR & SONS LTD. (222ITR344); M /S. SOLID CONTAINERS LTD. (308 ITR 407). IN THE REJOINDER THE AR STATED THAT ALLOWANCE OF BAD DEBTS WAS NOT LINKED WITH THE PROVISIONS OF SECTION 41(1) OF THE ACT, THAT BOTH WERE APPLICABLE IN DIFFERENT SITUATIONS, THAT THERE WAS NO PROVISION OF NETTING OF BAD DEBTS AND CREDITORS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE AVAILABLE MATERIAL. WE FIND THAT WHILE DECIDING THE APPEAL,THE FAA HAD MEN TIONED THAT THE ASSESSEE HAD WRITTEN OFF BAD DEBTS AMOUNTING TO A FEW CRORE S. BUT,HE HAD NOT GIVEN THE EXACT FIGURE THOUGH, IT WAS AVAILABLE WITH HIM. IT IS ALSO A FACT, THAT MODILUFT AND ASSESSEE ARE BEFORE THE COURT AND DISPUTING THE LIA BILITIES TOWARDS EACH OTHER. IT 3026/M/13-SMD TRAVEL 4 IS NOT DENIED THAT OUT OF RS.2.95 CRORES, THE ASSE SSEE HAD WRITTEN OF ONLY RS.1.75 CRORES ONLY.IN THESE CIRCUMSTANCES,WE ARE OPINION,T HAT ORDER OF FAA IS NOT REASONED AND SELF SPEAKING.HE HAD NOT DEALT THE ISS UE OF PENDING AMOUNT I.E. RS.1.20 CRORES (RS.2.95CR-1.75CR).THEREFORE,IN OUR OPINION, IN THE INTEREST OF JUSTICE, THE MATTER SHOULD BE RESTORED BACK TO FAA FOR FRESH ADJUDICATION. HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE WITH REGARD TO THE AMOUNT TO BE PAID TO MODILUFT.AS FAR AS THE REMAINING TWO AMOUNTS ARE CONCERNED, THEIR DETAILS ARE AVAILABLE IN THE PAPER BOOK WHICH HAVE NOT BEEN CONSIDERED BY BOTH THE AUTHORITIES.THEREFO RE, FAA WOULD MAKE FURTHER VERIFICATION FOR THOSE MATTERS ALSO.EFFECTIVE GROUN D OF APPEAL FILED BY THE ASSESSEE IS ALLOWED IN ITS FAVOUR,IN PART. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PA RTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST,2016. 10 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 10.08.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.