MR. RAMESH JAIN, MUMBAI V. DEPUTY COMM. OFF INCOME TAX, CENTRAL CIRCLE-1, THANE

ITA 3113/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7527 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Bad and doubtful debts
• Section: 143(3); 153A; 139

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , AM & SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO . 3113 /MUM/201 6 ( / ASSESSMENT YEAR: 2009 - 10 ) MR. RAMESH JAIN PLOT NO. 35, 6 TH FLOOR, UDGITHVALLABHNAGAR SOCIETY, N. S. ROAD NO. 6, JVPD, VILLE PARLE (W), MUMBAI - 400056 . / VS. DCIT CENTRAL CIRCLE - 1, THANE, PIN - ./ ./ PAN/GIR NO. A A BPJ0921C ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENTBY : SHRI M. C. OMI NINGSHEN, DR / DATE OF HEARING : 10 /0 4 /201 8 / DATE OF PRONOUNCEMENT : 24/04/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 11 , PUNE, DATED 2 I.T.A. NO. 3113 /MUM/201 6 MR. RAMESH JAIN 09.02.16 FOR AY 20 09 - 10 O N THE GROUNDS MENTIONED HEREIN BELOW: - I. A. THE LEARNED COMM. OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,52,32,422/ - ON THE GROUND THAT IT IS A LOSS OF CAPITAL AND NOT A BUSINESS LOSS. B. THE LEARNED COMM. OF INCOME TAX (APPEALS) FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE IS UNWARRAN TED AND UNJUSTIFIED. C. THE APPELLANT PRAYS THAT DISALLOWANCE OF RS. 1,52,32,422/ - BE DELETED. II. THE APPELLANT CRAVES LEAVE, TO ADD, AMEND OR ALTER THE ABOVE GROUND OF APPEAL AT THE TIME OF HEARING. 2 . AT THE VERY OUTSET, IT IS NOTICED THAT NONE HAS APPE ARED ON BEHALF OF ASSESSEE IN SPITE OF SEVERAL CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED . ON THE OTHER HAND L D. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE 3 I.T.A. NO. 3113 /MUM/201 6 MR. RAMESH JAIN WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3. AS PER THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDING AND DEVELOPMENT AND OPERATES THIS BUSINESS THROUGH VARIOUS FIRMS, AND COMPANIES. THE RETURN F OR A. Y. 2009 - 10 U/S 139 WAS FILED ON 6TH SEPTEMBER, 2010, SHOWING AN INCOME OF RS. 1,77,46,180/ - AND RETURN FILED ON 6 TH AUGUST, 2013 U/S 153A ON SHOWING INCOME OF RS. 1,77,46,180/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICE AND SEEKING REPLY, ORDER OF ASSESSMENT U/S 143(3) WAS PASSED BY AO THEREBY MAKING DISALLOWANCE TREATING AS CAPITAL LOSS AND SET OFF AGAINST CAPITAL GAIN. AGGRIEVED BY TH E ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES DISMISSED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE APPEAL BY RAISING THE ABOVE GROUNDS. 4 I.T.A. NO. 3113 /MUM/201 6 MR. RAMESH JAIN 4 . THE SOLE GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CI T(A) IN CONFIRMING THE DISALLOWANCE OF RS. 1,52,32,422/ - ON THE GROUND THAT IT IS A LOSS OF CAPITAL AND NOT A BUSINESS LOSS. 5. WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROU NDS RAISE D BY THE ASSESSEE IN ITS DETAILED ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CI T(A) IS CON T AINED IN PARA NO. 4 TO 7 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 4. I HAVE CONSIDERED THE APPELLANT'S SUBMISSIONS AND THE FACTS OF THE CASE. I T IS STATED THAT THE APPELLANT WAS A PARTNER IN A FIRM BY NAME ALLIED ENGINEERS. THIS FIRM WAS DISSOLVED ON 30/04/2008. THE CLOSING BALANCE OF THE APPELLANT (PARTNERS CAPITAL ACCOUNT) WITH THIS FIRM ON THE DATE OF DISSOLUTION WAS RS. 1,87,78,584/ - . THE APP ELLANT CLAIMS THAT THIS CLOSING BALANCE TO THE EXTENT OF RS. 1,52,32,422/ - WAS ON ACCOUNT OF THE INTEREST 5 I.T.A. NO. 3113 /MUM/201 6 MR. RAMESH JAIN ACCRUED TO THE APPELLANT ON THE CAPITAL ACCOUNT IN THE PAST YEARS. THE APPELLANT FURTHER CLAIMS THAT DUE TO THE DISSOLUTION, THE APPELLANT COULD NOT R ECOVER THIS BALANCE AMOUNT AND HENCE THE SAME SHOULD BE ALLOWED AS A BUSINESS LOSS. THE APPELLANT'S ARGUMENTS ARE ALREADY REPRODUCED ABOVE. 5. I DO NOT AGREE WITH THE APPELLANT THAT IN THE FACTS OF THE CASE IT CAN BE SAID THAT THE APPELLANT HAS LOST THE AM OUNT DUE TO HIM FROM THE PARTNERSHIP FIRM ON DISSOLUTION OF THE FIRM. FURTHER, I ALSO DO NOT AGREE THAT ANY AMOUNT REMAINING UNRECOVERED OUT OF THE CAPITAL ACCOUNT OF A PARTNER, CAN BE CLAIMED AS BUSINESS LOSS ON DISSOLUTION OF THE FIRM. I HAVE GONE THROUG H THE DISSOLUTION DEED PRODUCED BY THE APPELLANT. THE DISSOLUTION DEED MENTIONS THAT THE ACCOUNTS OF THE PARTNERS HAVE BEEN MADE UP TO THE DATE OF THE DISSOLUTION. THE DEED FURTHER MENTIONS THAT ALL THE ASSETS OF THE FIRM HAVE BEEN DIVIDED AMONG THE PARTNE RS INCLUDING FIXED ASSETS. THE PARTNERS' OUTSTANDING CAPITAL BALANCES ARE THUS SETTLED BY MUTUAL CONSENT. THE APPELLANT HAS FURNISHED NO EVIDENCE THAT THE DISSOLUTION OF THE FIRM WERE LESS THAN THE CAPITAL ACCOUNT BALANCE INCLUDING THE SO CALLED INTEREST A MOUNT. NO DETAILS HAVE BEEN FURNISHED AS TO HOW MUCH CASH/BANK BALANCE WAS AVAILABLE WITH THE FIRM AS ON THE DATE OF THE DISSOLUTION AND HOW THE SAME WAS 6 I.T.A. NO. 3113 /MUM/201 6 MR. RAMESH JAIN DIVIDED. THE VALUE OF THE LAND ETC RECEIVED BY THE APPELLANT APPEARS TO BE MUCH MORE THAN THE BALANCE IN THE CAPITAL ACCOUNT. THUS THERE ARE ABSOLUTELY NO FACTS TO HOLD THAT THE APPELLANT HAS LOST ANY MONEY DUE TO DISSOLUTION OF THE FIRM. 6. LEGALLY THE APPELLANT HAS NOT BEEN ABLE TO POINT OUT THE PROVISIONS OF THE LAW UNDER WHICH SUCH A CLAIM OF BUSINESS LOSS CAN BE ALLOWED. THE APPELLANT WAS NOT DOING ANY BUSINESS WITH THE FIRM AND THE AMOUNTS OUTSTANDING FROM THE FIRM HAD NOT BEEN ADVANCED IN THE COURSE OF ANY BUSINESS. THUS THE AMOUNT EVEN IF UNRECOVERED CANNOT BE ALLOWED AS BAD DEBTS OR BUSINESS LOSS. THE INTEREST RECEIVED FROM THE FIRM WAS CREDITED TO THE APPELLANT'S CAPITAL ACCOUNT IN THE FIRM. IT WAS LIKE REINVESTING THE INCOME EARNED. THUS IT BECAME PART OF THE CAPITAL OF THE APPELLANT IN THE SUCCEEDING YEARS. IF THE FIRM IS UNABLE TO PAY BACK THIS CAPITAL, IT IS SIMPLE LOSS OF CAPITAL. THERE IS NO BUSINESS INVOLVED BETWEEN A FIRM AND ITS PARTNERS. WHEN A PERSON BECOMES A PARTNER BY INTRODUCING CAPITAL HE IS NOT DOING BUSINESS WITH THE FIRM. THERE IS NO BUSINESS LOSS TO THE PARTNER IF THE FIRM DOES N OT DO WELL AND THE CAPITAL IS LOST OR DIMINISHED. 7 I.T.A. NO. 3113 /MUM/201 6 MR. RAMESH JAIN 7. TO CONCLUDE IT IS HELD THAT THE AO HAD RIGHTLY DISALLOWED THE APPELLANT'S CLAIM. THE APPEAL FILED BY THE APPELLANT IS DISMISSED AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSI DERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMISSIONS MADE BY LD. DR, WE FIND THAT LD. CIT(A) HAS CORRECTLY DISMISSED THIS GROUND OF APPEAL RAISED BY THE ASSESSEE AFTER HOLDING THAT AS PER THE TERMS OF DISSOLUTION DEED, THE ACCOUNTS OF THE PARTNE RS HAVE BEEN MADE UP TO THE DATE OF THE DISSOLUTION AND ALL THE ASSETS OF THE FIRM HAVE BEEN DIVIDED AMONG THE PARTNERS INCLUDING FIXED ASSETS. ON THESE ADMISSIONS, LD. CIT(A) HAD CORRECTLY INFERRED THAT THE PARTNER S OUTSTANDING CAPITAL BALANCES HAVE THUS SETTLED BY MUTUAL CONSENT. EVEN NO EVIDENCE WAS PLACED ON RECORD TO SHOW THAT ASSETS RECEIVED BY THE ASSESSEE ON DISSOLUTION WERE LESS THAN THE CAPITAL ACCOUNT BALANCE INCLUDING THE SO CALLED INTEREST AMOUNT, THUS IN THIS WAY, THE ASSESSEE HAD NOT LOST AN Y MONEY DUE TO DISSOLUTION OF THE FIRM. WE CONCUR WITH THE FINDINGS RECORDED BY LD. CIT(A) IN PARA NO. 6 OF ITS ORDER. 8 I.T.A. NO. 3113 /MUM/201 6 MR. RAMESH JAIN MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD CIT (A) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REAS ONED. RESULTANTLY, THIS GROUND RAISED BY THE ASSESSEE STANDS DISMISSED . 6 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH APRIL, 2018. SD/ - SD/ - (R.C. SHARMA ) ( SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 24 . 04 .201 8 SR.PS . DHANANJAY 9 I.T.A. NO. 3113 /MUM/201 6 MR. RAMESH JAIN / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI