ITO 8(2)(2), MUMBAI V. INFOQUEST INFOTECH P.LTD, MUMBAI

ITA 3429/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92596 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Bench Allotted: I
• Next Hearing Date: 25-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 02-05-2013
• Court: TRIBUNAL
• Department Lawyers: SACCCHIDANAND DUBEY
• Keywords: Additional evidence; Corroborative evidences
• Section: 28

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI I BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL M EMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 3429 /MUM/2013, / ASSESSMENT YEAR - 200 6 - 07 INCOME TAX OFFICER 8(2 ) - 2 ROOM NO. 212/216A, 2 ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI - 400 020. VS M/S. INFOQUEST INFOTECH PVT. LTD. 1 01/104, SEEPZ SDF - IV ANDHERI - (E) , MUMBAI - 400 096 PAN: AAACI 2050 F ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI BHUPENDRA KARKHANIS / REVENUE BY :SHRI SACCCHIDANAND DUBEY - DR / DATE OF HEARING : 25 - 05 - 2015 / DATE OF PRONOUNCEMENT : 2 9 - 05 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 27/2/2013 OF THE CIT(A) - 17 , MUMBAI ,THE ASSESSING OFFICER(AO) HA S RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN ALLOWING THE CLAIM OF ADVANCES WRITTEN OFF OF RS.29,92,250/ - U/S. 36(1)(VII) R.W.S. 36(2) WITHOUT APPRECIATING THAT THESE AMOUNTS HAVE NEVER BEEN OFFERED TO TAX SO AS TO BE ELIGIBLE FOR WRITE OFF U/S. 36(2) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN ALLOWING THE CLAI M OF ADVANCES WRITTEN OFF OF RS.29,92,250/ - U/S. 36(1)(VII) R.W.S. 36(2) PLACING RELIANCE UPON THE ADDITIONAL EVIDENCES IN CONTRAVENTION OF RULE 46A OF THE IT RULES. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF I NCOME TAX(APPEALS) ERRED IN ALLOWING THE CLAIM OF ADVANCES WRITTEN OFF OF RS.29,92,250/ - U/S. 36(1)(VII) R.W.S. 36(2) WITHOUT APPRECIATING THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE GENUINENESS OF ITS CLAIM AS EVIDENT FROM PARA 4 OF THE ASSESSMENT O RDER AND THE REMAND REPORT DATED 22.03.2011. ASSESSEE - CO MPANY , ENGAGED IN THE BUSINESS OF DEVELOPMENT OF S ET T OP B OX,MARKETING AND DTP , FILED ITS RETURN OF INCOME ON 6.11.2006 DECLARING INCOME AT RS.( - )13.54 LACS. THE AO COMPLETED THE ASSESSMENT U/S. 143( 3) OF THE ACT ON 31.12.2008 DETERMINING THE INCOME OF THE ASSESSEE AT RS.70,72,540/ - . 2 . THE EFFECTIVE GROUND OF APPEAL IS ABOUT ADDITION OF RS.29,92,250/ - U/S.36(1)( VII ) R.W.S.36(2) OF THE ACT. DU RING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESS EE HAD CLAIMED SUNDRY BALANCE RETURN OF R S.29.92 LACS. HE DIRECTED THE ASSESSEE TO FURNISH THE DETAILS IN THIS REGARD AND TO JUSTIFY THE ALLOWABILITY OF THE C LAIM WITH SUPPORTING EVIDENCES. IN ITS SUBMISSION , THE ASSESSEE CONTENDED THAT DU RING THE MONTHS OF MARCH/ A PRIL 2000 THE ASSESSEE COMPANY G AVE ADVANCES TO INSUL PACK PVT.LTD.(IPPL) AND FX INFO T ECHNOLOGIES PVT. LTD. (FI T PL) OF RS.19.92 LACS AND RS. ITA/ 3429 /MUM/2013,AY. 06 - 07 2 10.00 LACS RESPECTIVELY, THAT IT COUL D NOT RECOVER THE MONEY FROM THO SE TW O SUPPLIERS, THAT IT HAD ISSUED NOTICE S TO BOTH THE PARTIES THROUGH ITS LAWYER, IN CASE OF FITPL THE COMPANY WAS DECLARED BANKRUPT, THAT CONSIDERING THE FINANCIAL STATUS OF THE LENDERS IT DECIDED TO WRITE - OFF THE BALANCE OF DEBTS NOT RECOVERABLE, THAT THE WRITE - OFF OF THE IRRECOVERABLE ADVANCES WAS THE LOSS INCIDENTAL TO BUSIN ESS CARRIED ON BY THE ASSESSEE. THE ASSESSEE RELIED UPON THE JUDGMENT OF SRI RAM GUPTA (296 ITR 212 ) ; A . W . FIGGIS CO. ( 254 ITR 63 ) ; IBM W ORLD TRADE CORPN. (186 ITR 412). IT WAS FURTHER ARGUED THAT THE ADVANCES WERE GIVEN FOR PURCHASE OF COMPONENTS THAT NON RECOVERY OF ADVANCES RESULTED INTO REV ENUE LOSS TO THE ASSESSEE , THAT SAME WAS FULLY ALLOWABLE AS BUSINESS LOSS U/S. 28 OF THE ACT.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO HELD THAT THE ASSESSEE DID NOT PRODUC E ANY EVIDENCE WHICH COULD PROVE THE EFFORTS MADE BY IT FOR RECOVERY OF THE AMOUNT FROM THE LENDERS, THAT THE ASSESSEE COULD NOT CONCLUSIVELY SUBSTANTIATE THAT THE ORDERS WERE PLACED AND ADVANCE WERE MADE , THAT NO BANK STATEMENT HAD BEEN FILED, THAT THERE W AS NO QUESTION OF ALLOWABLITY OF LOSS U/S. 28 OF THE ACT INCURRED OUT OF THE FICTITIOUS TRANSACTION. FINALLY , HE DISALLOWED THE AMOUNT IN QUESTION. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA ). BEFORE HIM, IT WAS ARGUED THAT THE ASSESSEE HAD MADE ADVANCES TO IPPL AND FXITPL FOR MANUFACTURE OF MOTHER BOARD FOR ITS SET - UP BOX PRODUCTS, THAT THE SUPPLIERS DID NOT DELIVER THE GOODS INSPITE OF REPEATED REMINDERS, THE AMOUNT WAS WRITTEN OFF AS NOT REC OVERABLE, THAT IT HAD SUBMITTED ADEQUATE MATERIAL TOTHE AO IN SUPPORT OF ITS CLAIM FOR DEDUCTION, THAT THE TRANSACTION IN QUESTION WERE DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THAT THE AO HAD NOT DIRECTED THE ASSESSEE TO SUBMIT THE BANK STAT EMENT. THE ASSESSEE MADE A REQUEST TO THE FAA UNDER RU LE 46A OF THE INCOME TAX RULES, 1962 FOR ADMITTING THE BANK STATE MENT AS AN ADDITIONAL EVIDENCE. IT WAS FURTHER ARGUED THAT THE WRITE - OFF OF THE DISPUTED AM OUN T WAS ALLOWABLE AS PER THE PROVISIONS OF SEC . 28/36(1)(VII) OF THE ACT. THE ASSESSEE REFERRED TO THE CASE OF STAR CHEMICLAS (313 ITR 126) DELIVERED BY THE HON'BLE BOMBAY HIGH COURT AND ARGUED THAT THE ASSESSEE HAD FULFILLED THE REQUIREMENT OF S ECTION 36(1)(VII), THAT THE ASSESSEE WAS NOT REQUIRED TO DEMONSTRATE THAT THE DEBT HAD BECOME BAD. THE FAA ADMITTED THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE AS PER PROVISION OF S.46 A OF THE RULES . HE CALLED FOR A REMAND REPORT FROM THE AO.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE ASSESSMENT ORD ER AND THE REMAND REPORT FILED BY THE AO, THE FAA HELD THAT PAYMENT OF DISPUTED AMOUNT WAS REFLECTED IN THE BANK ACCOUNT WITH STANDARD C HARTERED BANK, THAT THE ASSESSEE HAD PAID RS.29 . 92 LACS TO IPPL AND FXITPL, THAT THE TRANSACTIONS WERE MADE THROUGH CHEQ UES, THAT THE CHEQUES WERE ENCAHSED IN THE BANK ACCOUNT OF THE RESPECTIVE ENTITIES, THAT THE ASSESSEE HAD BEEN FOLLOWING UP THE MATTER WITH BOTH THE CO MPANIES TO RECOVER ITS DUES, THAT IN - SPITE OF LAPSE OF SIX YEARS NO AM OUN T HAD BEEN RECEIVED BY IT THAT WA S TO BE WRITTEN OFF, THAT IT DECIDE D TO WRITE - OFF THE AMOUNTS IN QUESTION , THAT THE AM OUN TS WERE ADVANCED FOR MAN UFACTURE OF SET TOP BOXES WHICH WAS PART OF TRADING RECEIPT, THAT THE SAME WAS REV ENUE IN NATURE .REFERRING TO JUDG M ENT OF MYSORE SUGAR CO. ( 46 IT R 649) AND TRF LTD. ( 323 ITR 397 ) OF THE HONBLE APEX COURT, THAT THE FAA HELD THAT SO LONG AS THE DEBT HAS BEEN WRITTEN OFF AS BAD DE B T SAME HAD TO BE ALLOWED, THAT THE ADVANCES IN THE INSTANT CASE WERE FOR TRADING PURPOSES, THAT THE WRITTEN OFF AMOUNTS H AD TO BE ALLOWED U/S.36(1) ( VII) OF THE ACT R.W.S. 36(2), THAT IN FUTURE IF THE ASSESSEE COULD RECOV E R THE AMOU N T THE AO COULD TAX IN THAT YEAR. FINALLY, THE FAA DELET E D THE ADDITION MADE BY THE AO. ITA/ 3429 /MUM/2013,AY. 06 - 07 3 4. B EFORE US , DEPARTMENTAL REPRESENTATIVE(DR) RELIED UPON TH E ORDER OF AO AND STATED THAT THE AM OUNT IN QUESTION WAS NOT BAD DEBT, THAT IT WAS ALSO NOT REV ENUE LOSS . AR SUPPORTED THE ORDER OF FAA AND STATED THAT THE ASSESSEE HAD REQUESTED BOTH THE PARTIES TO RETURN THE MONEY OR RETURN THE GOODS AS EARLY AS JULY 2000, IN THE YEAR UNDER CONSIDERING THE ASSESSEE RE A LISED THAT ADVANCE MADE BY IT WERE NOT RECOVERABLE, THAT IT DEC I DED TO WRITE - OFF THE SAME. 5. WE HAVE PERUSED THE MATERIAL BEFORE US.WE FIND THAT ASSESSEE HAD ADVANCED LOAN OF RS. 29. 92 LACS(1 9.92 LACS+ 1 0 LACS) TO IPPL AND FXITPL, THAT LOAN WAS ADVANCE D IN NORMAL COURSE OF BUSINESS, THAT THE SUPPLIERS DID NOT DELIVER THE GOODS OR RETURN BACK THE MONEY, THAT IT DECIDED TO WRITE - OFF THE SAME. AFTER THE AMENDMENT TO SEC.36 W.E.F. 1989 THERE IS NO NEED FOR THE AS SESSEE TO PROVE THAT THE DEBT HAD BECOME IRRECOVERABLE. THE WRITING OFF OF THE LOAN AMOUNTS IS NOT TO BE PROVED BY THE ASSESSEE , THE ASSESSEE HAD TAKEN DUE LEGAL COURSE IN CONSULTING THE ADVOCATES,THAT ONE OF THE SUPPLIER HAD B EEN DECLARED BANKRUPT, THAT TH E PAYMENT OF THE AM OUNT IN QUESTION WA S PROVED BY THE BANK STATEMENT AND SAME WAS DULY CONSIDERED BY THE FAA. IN THESE CIRCUMSTANCES THE AM OUNT OF RS. 29.92 LACS H AD TO BE ALLOWED EITHER U/S. 36 OR S.28 OF THE ACT. IN OU R OPINION, THE ORDER OF FAA DOE S NOT SUF FER FROM ANY LEGAL INFIRMITY . RESPECTFULLY FOLLOWING THE ABOVE AND CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE A O STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH ,MAY,2015. 29 , 2015 SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 29 .05. 201 5 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED C IT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.