Sabarkantha Tractors Pvt.Ltd., Modasa V. The Dy.CIT.,S.K. Circle, Himatnagar

ITA 343/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5745 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 31-01-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N.S. SAINI, A M) ITA NO.343/AHD/2008 A.Y.: 2005-06 SABARKANTA TRACTORS PVT. LTD., SHAMLAJI ROAD, MODASA VS THE D. C. I. T., SABARKANTHA CIRCLE, HIMATNAGAR PA NO. AAACR 5454 R (APPELLANT) (RESPONDENT) APPELLANT BY SMT. ARTI N. SHAH, AR RESPONDENT BY SHRI R. K.DHANESTA, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-X, AHMEDABA D DATED 14-12-2007 FOR ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUND S: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-X, AHMEDABAD HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,13,816/- MADE BY THE ASSESSING OFFICER OUT OF KASAR VATAV EXPENDITURE OF RS.1,33,000/- AFTER HOLD ING THAT THERE IS NO BASIS FOR ALLOWING KASAR & VATAV T O THE VARIOUS PARTIES. 2. YOUR APPELLANT PRAYS TO DELETE DISALLOWANCE OF RS.1,13,816/- MADE OUT OF KASAR AND VATAV EXPENDITURE. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE P ARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL ON RECORD POINTED OUT BY THE PARTIES. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO O BSERVED THAT THE ASSESSEE HAD DEBITED KASAR VATAV ONLY ON 01-04-2004 . KASAR VATAV WAS GIVEN FOR EARLIER YEARS SALES. THE AO PROPOSED WHY DISALLOWANCE BE NOT ITA NO.343/AHD/2008 SABARKANTHA TRACTORS PVT. LTD. VS DCIT, SABARKANTA CIRCLE 2 MADE AS IT BELONG TO EARLIER YEARS. IT WAS NOTICED THAT THE ASSESSEE HAD DEBITED THE EXPENDITURE ONLY ON 01-04-2004 WHICH WA S SOLD IN EARLIER YEARS AND NOT IN THE YEAR UNDER APPEAL. THEREFORE, IT CANNOT BE ALLOWED. THE ASSESSEE EXPLAINED THAT KASAR VATAV EXPENSES AR E ALLOWED TO THE PARTIES TO WHOM SALES WERE MADE WHICH WERE DULY CRE DITED IN THE PROFIT & LOSS ACCOUNT IN THE YEAR IN WHICH SALES WERE MADE. KASAR VATAV WAS ALLOWED WHEN FINALLY PAYMENTS WERE RECEIVED AFTER N EGOTIATION AND AMOUNT OF KASAR WAS FINALIZED. THE ASSESSEE SUBMITT ED CONFIRMATIONS OF 4 PARTIES TO WHOM KASAR WAS ALLOWED. THUS, KASAR VA TAV EXPENSES WERE ALLOWED DURING ORDINARY COURSE OF BUSINESS AND INCU RRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT WAS SUB MITTED THAT MERELY BECAUSE SALES WERE EFFECTED IN EARLIER YEARS AND KA SAR WAS ALLOWED IN THE SUBSEQUENT YEAR WOULD NOT MAKE THE EXPENDITURE DISA LLOWABLE. THE ASSESSEE FILED DETAILS OF MORE THAN RS.10,000 CASES IN WHICH KASAR WERE ALLOWED. THE AO NOTED THAT THE ASSESSEE HAS GIVEN K ASAR VATAV TO REDUCE THE PROFIT AND THAT THE ASSESSEE HAS DEBITED THE AM OUNT WHICH WERE GIVEN ON SALES OF EARLIER YEARS OF FINANCIAL YEAR 2 000-01, 2001-02, 2002- 03 AND 2003-04. THEREFORE, SAME WERE HELD TO BE NOT ALLOWABLE IN THE ASSESSMENT YEAR UNDER APPEAL. 4. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED C IT(A) AND THE ASSESSEE REITERATED THE SAME SUBMISSIONS. IT WAS AL TERNATIVELY SUBMITTED THAT IN CASE DEDUCTION IS NOT ALLOWED, ALTERNATIVEL Y WRITE OFF OF OLD BALANCES BE ALLOWED AS BAD DEBTS WRITTEN OFF. THE L EARNED CIT(A) HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND C ONFIRMED THE DISALLOWANCE AND DISMISSED THE APPEAL OF THE ASSESS EE. THE FINDINGS OF THE LEARNED CIT(A) IN PARA 6 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 6. I HAVE CONSIDERED THE ISSUE CAREFULLY. ATTENTIO N OF THE LD. A. R. INVITED TO THE DETAILS OF KASAR & VATAV SUB MITTED AT PAGE 44 OF THE PAPER BOOK. IT WAS POINTED OUT THAT THERE IS NO ITA NO.343/AHD/2008 SABARKANTHA TRACTORS PVT. LTD. VS DCIT, SABARKANTA CIRCLE 3 BASIS FOR ALLOWING THIS KASAR & VATAV WHICH VARIE S FROM 0.001% TO 100%. FOR EG. ON SALE DATED 21.5.03 OF RS.3,32,300/-, KASAR OF RS.950/- WAS ALLOWED WHILE IN SEVERAL INSTANCES AT SR. NO.11, 12, 13, 14, 15, 16, 17, 20, 21, 23, 26, 27, 28, 29 & 30, 100% AMOUNT ON SALE HAS BE EN ALLOWED AS KASAR VATAV. IN OTHER CASES ALSO THERE IS NO DEFINITE RATE. THE LD. AR POINTED OUT THAT EVEN THO UGH THERE IS NO DEFINITE RATE BUT IN THAT CASE THE SAME SHOULD B E ALLOWED AS BAD DEBT. EVEN THIS PLEA IS NOT ACCEPTABLE BECAU SE AS PER RECENT DECISION OF JURISDICTIONAL HIGH COURT, TO CL AIM A BAD DEBT, THE ASSESSEE HAS TO TAKE REASONABLE EFFORT TO RECOVER THE AMOUNT. NO SUCH EFFORTS WERE SHOWN TO BE TAKEN AND AS DISCUSSED EARLIER THERE IS NO METHODOLOGY AVAILABLE FOR ALLOWING SUCH KASAR & VATAV. THE DISALLOWANCE IS, THEREFORE, CONFIRMED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT KASAR VATAV IS THE AMOUNT WHICH THE PARTIES HAVE NOT PAID IN RESPECT OF SALES MADE IN EARLIER YEARS. THEREFORE, IT WAS WRITTEN OF F IN THE BOOKS IN THE SUBSEQUENT YEAR. 6. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO BA SIS TO ALLOW DEDUCTION OF KASAR VATAV AND THAT TRANSACTIONS PERTAIN TO EAR LIER YEARS, THEREFORE, DEDUCTION CANNOT BE ALLOWED IN THE ASSESSMENT YEAR UNDER APPEAL. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NO T FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE ON THESE GROUNDS OF A PPEAL. THE LEARNED CIT(A) SPECIFICALLY NOTED IN THE IMPUGNED ORDER THA T THERE WAS NO BASIS FOR ALLOWING KASAR VATAV TO THE PARTIES BECAUSE THE RE IS A VAST DIFFERENCE IN THE DEDUCTION BECAUSE THERE WAS NO DEFINITE RATE TO ALLOW DEDUCTION. THE ASSESSEE ALTERNATIVELY CLAIMED THAT IT MAY BE A LLOWED AS BAD DEBT. THE SUBMISSIONS OF THE ASSESSEE BEFORE THE LEARNED CIT(A) WOULD SHOW THAT THE ASSESSEE WAS NOT DEFINITE OF THE DEDUCTION CLAIMED ON THIS ISSUE. THE AO HAS ALSO GIVEN SPECIFIC FINDING THAT KASAR V ATAV EXPENDITURE WAS DEBITED ON THE SALES FOR EARLIER FINANCIAL YEARS 20 00-01 TO 2003-04. THE ITA NO.343/AHD/2008 SABARKANTHA TRACTORS PVT. LTD. VS DCIT, SABARKANTA CIRCLE 4 ASSESSEE ADMITTEDLY MAINTAINED BOOKS OF ACCOUNTS ON MERCANTILE BASIS, THEREFORE, IF ANY EXPENDITURE WAS DEBITED AGAINST S ALES MADE FOR EARLIER YEARS, NO DEDUCTION COULD BE ALLOWED IN THE SUBSEQU ENT ASSESSMENT YEAR UNDER APPEAL 2005-06. SINCE THE TRANSACTIONS IN QUE STION DO NOT PERTAIN TO THE ASSESSMENT YEAR UNDER APPEAL, THEREFORE, NO DEDUCTION COULD BE ALLOWED TO THE ASSESSEE IN THE ASSESSMENT YEAR UNDE R APPEAL. THE ASSESSEES COUNSEL SUBMITTED THAT KASAR VATAV IS TH E AMOUNT WHICH REMAINS TO BE PAID BY THE PARTIES. IT IS, THEREFORE , CLEAR THAT THE ASSESSEE HAS NOT EXPLAINED AS TO HOW THE SAID TRANSACTIONS W OULD TAKE THE CHARACTER OF BAD DEBTS, WHEN IT WAS ORIGINALLY CLAI MED A CASE OF EXPENSE DEDUCTION ON SALES. THE CONTRADICTORY STAND OF ASSE SSEE WOULD NOT PROVE ITS CASE. THE CONDITIONS OF CLAIMING BAD DEBTS AS PER LAW HAVE NOT BEEN SATISFIED IN THIS CASE. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE. THE SAME IS ACCORDINGLY DISMISSED ON BOTH THE GROUNDS. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED ON 16-07-2010 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 16-07-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD