SHREE STOCKVISION SECURITIES LTD, MUMBAI V. DCIT 4(2), MUMBAI

ITA 3320/MUM/2010

• Counselvise Citation: 332019914 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 01-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Opportunity of being heard; Earning of tax free income; Bad and doubtful debts; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, J, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND B.RAMAKOTAIAH(A. M ) ITA NO.3320/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S SHREE STOCK VISION SECURITIES LTD. 6/2, BUONA COSA, 1 ST FLOOR, SIR P.M.ROAD, FORT, MUMBAI-400001. PAN:AAFCS0713G DY. COMMISSIONER OF INCOME TAX, 4(2), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 APPELLANT V/S RESPONDENT DATE OF HEARING : 1.12.2011 DATE OF PRONOUNCEMENT : 9.12.2011 APPELLANT BY : SHRI BHUPENDRA SHAH RESPONDENT BY : SHRI D.S.SUNDER SINGH O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 8.2.2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF SHAR E BROKERAGE AND INVESTMENT. IT FILED RETURN DECLARIN G TOTAL INCOME AT RS.16,35,940/-. HOWEVER, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF ITA NO.3320/MUM/2010 (ASSESSMENT YEAR: 2006-07) 2 RS.20,35,600/- INCLUDING DISALLOWANCE U/S 14A OF TH E INCOME TAX ACT, 1961(IN SHORT THE ACT) OF RS.97,064 /- AND BAD DEBTS OF RS.1,81,979/- VIDE ORDER DATED 22.10.2008 PASSED U/S 143(3) OF THE ACT. ON APPEAL, THE LD. CIT(A) WHILE PARTLY ALLOWING THE APPEAL CONFIRMED THE ABOVE DISALLOWANCE MADE BY THE AO. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO.1 IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF RS.97,064/- U/S 14A OF THE ACT. 5. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE AO INTERALIA OBSERVED THAT THE ASSESSEE HAS EARNED TAX FREE DIVIDEND INCOME OF RS.29,500/- AND CLAIMED AS EXEMPT. ON BEING ASKED AS TO WHY THE DISALLOWANCE U/S 14A SHOULD NOT BE MADE, IT WAS INTERALIA EXPLAI NED BY THE ASSESSEE THAT NO EXPENSES HAVE BEEN INCURRE D TO EARN EXEMPT INCOME. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEES SUBMISSIONS. THE AO WHILE APPLYING THE PROVISIONS OF SECTION 14A READ WITH RU LE 8D OF THE INCOME TAX RULES, 1962 CALCULATED THE DISALLOWANCE AT RS.97,604/- AS PER CALCULATION ITA NO.3320/MUM/2010 (ASSESSMENT YEAR: 2006-07) 3 APPEARING AT PAGE 12 OF THE ASSESSMENT ORDER. ON APPEAL, THE LD. CIT(A) WHILE RELYING ON THE DECISIO N OF THE SPECIAL BENCH OF THE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 (MUM)(SB) CONFIRMED THE DISALLOWANCE MADE BY THE AO. 6. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE AGREED THAT THIS ISSUE STANDS COVERED BY THE JUDGME NT OF HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BO YCE MFG. CO. LTD., V/S. DCIT (2010) 328 ITR 81 (BOM.) THEREFORE, THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 7. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE O N RECORD, WE FIND MERIT IN THE PLEA OF THE PARTIES T HAT THE ISSUE STANDS COVERED BY THE RECENT JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD., V/S. DCIT (SUPRA), WHEREIN TH EIR LORDSHIPS AFTER CONSIDERING THE DECISION OF THE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 (MUM)(SB), WHILE HOLDING THAT THE PROVISION S OF SUB-SECTIONS (2) AND (3) OF SEC.14A OF THE ACT A RE ITA NO.3320/MUM/2010 (ASSESSMENT YEAR: 2006-07) 4 CONSTITUTIONALLY VALID HAVE HELD VIDE PLACITUM 88( VI) APPEARING AT PAGE 138 OF THE 328 ITR AS UNDER : (VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT WE SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FILE O F THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH I N THE LIGHT OF THE DIRECTIONS OF THE HON'BLE JURISDIC TIONAL HIGH COURT IN THE ABOVE CITED CASE AND ACCORDING T O LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ACCORDINGLY THE GROUND TAKEN BY THE ASSESSEE IS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 8. GROUND NO.2 IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF BAD DEBTS OF RS.1,81,759/-. ITA NO.3320/MUM/2010 (ASSESSMENT YEAR: 2006-07) 5 9. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO INTERALIA OBSERVED THAT THE ASSESSEE HAS WRITTEN OFF BAD DEBT S OF RS.1,81,759/-. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS NOT FILED THE DETAILS OF BAD DEBTS. I N THE ABSENCE THEREOF, THE AO HELD THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS OF SECTIONS 36(1)(VII) AND 36(2) OF THE ACT AND HENCE HE DISALLOWED THE CLAIM OF BAD DEBTS OF RS.1,81,759/- AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD.CIT(A) HELD THA T AS THE APPELLANT HAS NOT GIVEN THE DETAILS OF BAD DEBT S AND HAS NOT PROVED THE BONAFIDE OF THE WRITTEN OFF OF BAD DEBTS, HENCE, THE CONDITIONS OF SECTION 36(1)( VII) ARE NOT FULFILLED. HE, FURTHER HELD THAT THE APPEL LANT HAS NOT GIVEN THE DETAILS TO SHOW THAT THE AMOUNT OF BAD DEBTS HAS BEEN SHOWN AS INCOME IN ANY PREVIOUS YEAR, THEREFORE, THE CONDITION OF SECTION 36(2) ARE ALSO NOT SATISFIED. THE CLAIM OF THE ASSESSEE AS BUSIN ESS LOSS IS NOT ALLOWABLE AND THEREBY HE CONFIRMED THE DISALLOWANCE MADE BY THE AO. 10. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE WHILE RELYING ON THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V/S SHRE YAS ITA NO.3320/MUM/2010 (ASSESSMENT YEAR: 2006-07) 6 S.MORAKHIA (2010) 5 ITR (TRIB) 1 (MUM)(SB); 131 TTJ 641(SB) AND THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. V/S CIT (2010) 32 3 ITR 397 (SC) SUBMITS THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, THEREFORE, THE ISSUE MAY BE DECIDED ACCORDINGLY. 11. ON THE OTHER HAND, THE LD. DR WHILE RELYING ON THE ORDERS OF THE AO AND LD. CIT(A) SUBMITS THAT SI NCE THE ASSESSEE HAS FAILED TO FILE THE RELEVANT DETAIL S OF BAD DEBTS, THE ISSUE MAY BE SET ASIDE TO THE FILE O F THE AO. 12. IN THE REJOINDER, THE LD. COUNSEL FOR THE ASSES SEE SUBMITS THAT HE HAS NO OBJECTION IF THE ISSUE IS SE T ASIDE TO THE FILE OF THE AO. 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE OBSERVE FROM THE ASSESSMENT ORDER AND THE APPELLATE ORDER THAT THE ASSESSEE HAS NOT FILED THE DETAILS OF BAD DEBTS. EVEN AT THIS STAGE, THE ASSE SSEE HAS FAILED TO FILE ANY EVIDENCE TO SHOW THAT SUCH DETAILS OF BAD DEBTS WAS FILED BEFORE THE AO OR LD . CIT(A). IN THE ABSENCE THEREOF AND KEEPING IN VIEW ITA NO.3320/MUM/2010 (ASSESSMENT YEAR: 2006-07) 7 THE RATIO OF AFORESAID DECISIONS RELIED ON BY HE LE ARNED COUNSEL FOR THE ASSESSEE, WE IN THE INTEREST OF JUS TICE CONSIDER IT FAIR AND REASONABLE THAT THE MATTER SHO ULD GO BACK TO THE FILE OF THE AO AND ACCORDINGLY WE S ET ASIDE THE ORDERS PASSED BY THE REVENUES AUTHORIZES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FIL E OF THE AO TO DECIDE THE SAME AFRESH IN THE LIGHT OF O UR OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND TAKEN BY THE ASSESSEE, IS THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO.3 IS AGAINST THE LEVY OF INTEREST U/S 234B, 234C AND 234D OF THE ACT. 15. AFTER HEARING THE RIVAL PARTIES AND PERUSING T HE MATERIAL AVAILABLE ON RECORD, WE DIRECT THE AO TO A LLOW CONSEQUENTIAL RELIEF IN RESPECT OF THE AFORESAID LE VY OF INTEREST WHILE GIVING EFFECT OF THIS ORDER. THE GR OUND TAKEN BY THE ASSESSEE, IS THEREFORE, PARTLY ALLOWED . 16. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.3320/MUM/2010 (ASSESSMENT YEAR: 2006-07) 8 ORDER PRONOUNCED IN THE OPEN COURT ON 9TH DEC.,2011 . SD SD (B. RAMAKOTAIAH ) (D.K.AGARW AL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 9TH DECEMBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI