THE ACIT, CIRCLE-4(1), Visakhapatnam., Visakhapatnam V. Sri M.V.V.S. Murthy, Visakhapatnam

ITA 343/VIZ/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2036 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: I SARISH KUMAR
• Keywords: Business income; Bad and doubtful debts
• Section: 143(3); 148

Judgement Text

ITA NO.343/VIZAG/2012 M.V.V.S. MURTHY, VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.343/VIZAG/2012 ( / ASSESSMENT YEAR: 2007-08) ACIT CIRCLE - 4(1) VISAKHAPATNAM VS. M.V.V.S. MURTHY VISAKHAPATNAM [PAN: ACEPM0252G ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI I. SARISH KUMAR, DR / RESPONDENT BY : SHRI G.V.N. H ARI, AR / DATE OF HEARING : 21.01.2016 / DATE OF PRONOUNCEMENT : 19.02.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 27.6.2012 FOR THE ASSES SMENT YEAR 2007-08. ITA NO.343/VIZAG/2012 M.V.V.S. MURTHY, VISAKHAPATNAM 2 2. THE FACTS ARE IN BRIEF THAT THE ASSESSEE IS AN I NDIVIDUAL DERIVING INCOME FROM MONEY LENDING. THE ASSESSEE HAD FILED A RETURN OF INCOME, BY DECLARING TOTAL INCOME OF ` 21,92,780/-, WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED AS 'THE ACT'). THEREAFTER, THE ASSESSING OFFICER HAS ISSUED A NOTI CE U/S 148 OF THE ACT AND ASSESSMENT WAS REOPENED AND COMPLETED U/S 143(3 ) R.W.S. 147 OF THE ACT AND NOTED THAT THE ASSESSEE HAS SHOWN ` 1,09,78,744/- TOWARDS INTEREST ON DEPOSITS. ON SUCH INTEREST INCOME ASSE SSEE HAS CLAIMED BAD DEBTS OF ` 79,93,000/-. 3. THE ASSESSING OFFICER HAS QUESTIONED THE ASSESSE E AS TO WHY THE INTEREST INCOME SHOULD NOT BE TREATED AS INCOME FRO M OTHER SOURCES. IN RESPONSE TO THE OBJECTION RAISED BY THE ASSESSING O FFICER, THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT HE IS CARRYING ON BUSINESS OF MONEY LENDING AS REGULAR BUSINESS ACTIV ITY SINCE SEVERAL YEARS. IT IS FURTHER SUBMITTED THAT THE ACCOUNTS O F THE ASSESSEE HAVE BEEN SUBJECT TO TAX AUDIT AS PER THE PROVISIONS OF SECTION 44AB OF THE ACT. THEREFORE, SUBMITTED BEFORE THE A.O. THAT ASS ESSEES BUSINESS ACTIVITY IS TO LEND THE MONEY AND INTEREST INCOME E ARNED BY HIM SHOULD BE TREATED AS INCOME FROM BUSINESS. HE FURTHER SUB MITTED THAT EVEN IN THE ASSESSMENT YEAR 2006-07, THE ASSESSEES BUSINES S I.E. MONEY ITA NO.343/VIZAG/2012 M.V.V.S. MURTHY, VISAKHAPATNAM 3 LENDING IS TREATED BY THE DEPARTMENT AS BUSINESS OF THE ASSESSEE AND EVEN IN EARLIER YEARS ALSO, THE DEPARTMENT HAS ACCE PTED THAT THE BUSINESS OF MONEY LENDING IS THE BUSINESS OF THE AS SESSEE. 4. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE NOTED THAT IN THE EARLIER YEARS, TREATING THE INTEREST INCOME FROM MONEY LENDING AS AN INCOME FROM BUSINESS OR IN COME FROM OTHER SOURCES DID NOT MAKE ANY DIFFERENCE TO THE REVENUE AS THERE WAS NO CLAIM OF BAD DEBTS. THE CLAIM OF BAD DEBTS WHICH I S MADE DURING THE YEAR IS NOT ALLOWABLE OUT OF THE INTEREST INCOME AS THE SAME IS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE A.O. HAS DENI ED THE CLAIM OF THE ASSESSEE. 5. ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE CIT (A). BEFORE CIT(A), THE ASSESSEE REITERATED THE SAME SUBMISSION S WHICH HE WAS MADE BEFORE THE A.O. THE LD. CIT(A) AFTER CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE AND ALSO CONSIDERING THE ACTIVITIES OF THE ASSESSEE I.E. MONEY LENDING AND INTEREST RECEIVED (PG. 3 OF THE C IT(A) ORDER), CONSIDERING EVEN EARLIER YEARS, HE HAS HELD THAT TH E ACTIVITY OF THE ASSESSEE IS A BUSINESS ACTIVITY AND THE INCOME DERI VED FROM THE ACTIVITY IS BUSINESS INCOME AND ACCORDINGLY, THE CLAIM OF TH E BAD DEBTS HAS TO BE ALLOWED AND DIRECTED THE A.O., TO ALLOW THE CLAIM O F THE BAD DEBTS. ITA NO.343/VIZAG/2012 M.V.V.S. MURTHY, VISAKHAPATNAM 4 6. ON BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD. D.R. HAS SUPPORTED THE ORDER PASSED BY T HE ASSESSING OFFICER. 8. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE DEPARTMENT HAS ACCEPTED THE ACTIVITY OF TH E ASSESSEE I.E. MONEY LENDING AS BUSINESS INCOME FROM PAST SEVERAL YEARS EVEN ASSESSMENT YEAR 2006-07 WHICH IS U/S 143(3) OF THE ACT, THE IN COME OF THE ASSESSEE IS A BUSINESS INCOME. SIMPLY BECAUSE THERE IS A CL AIM OF BAD DEBTS IN THIS YEAR, THE INCOME OF THE ASSESSEE CANNOT BE TRE ATED AS INCOME FROM OTHER SOURCES AND SUBMITTED THAT THE DEPARTMENT HAS TO FOLLOW CONSISTENCY AND THE INCOME EARNED BY THE ASSESSEE I .E. INTEREST INCOME HAS TO BE TREATED AS A BUSINESS INCOME AND THE CLAI M OF THE BAD DEBTS HAS TO BE ALLOWED. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE IS IN MONEY LENDING BUSINESS FROM PAST SEV ERAL YEARS AND THE SAME IS REFLECTED IN THE BOOKS OF ACCOUNTS OF THE A SSESSEE AND THE ACCOUNTS OF THE ASSESSEE WERE AUDITED AS PER THE SE CTION 44AB OF THE ACT. THE ASSESSEE IS CARRYING THE SAME BUSINESS FR OM THE FINANCIAL YEAR 1999-2000. EVEN IN ASSESSMENT YEAR 2006-07, THE AS SESSING OFFICER HAS ITA NO.343/VIZAG/2012 M.V.V.S. MURTHY, VISAKHAPATNAM 5 TREATED THE INCOME OF THE ASSESSEE U/S 143(3) OF TH E ACT IS A BUSINESS INCOME. THE A.O. IN THE ASSESSMENT ORDER HAS OBSER VED THAT FOR EARLIER YEARS, THE ACTIVITY OF THE ASSESSEE WAS ACCEPTED AS A BUSINESS. SO FAR AS THE PRESENT ASSESSMENT YEAR UNDER CONSIDERATION, AS SESSEE HAS CLAIMED BAD DEBTS. THEREFORE, THE ACTIVITY OF THE ASSESSEE CANNOT BE TREATED AS A BUSINESS ACTIVITY AND THE CLAIM OF BAD DEBTS CANN OT BE ALLOWED. THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS O F THE BAD DEBT. FOR PAST SEVERAL YEARS, THE ASSESSEES INTEREST INC OME TREATED AS A BUSINESS INCOME. THE ASSESSING OFFICER HAS REJECTE D CLAIM OF THE ASSESSEE I.E. INTEREST INCOME TO BE TREATED AS A BU SINESS INCOME ON THE GROUND THAT ASSESSEE IS NOT HAVING VALID LICENSE TO CARRY OUT THE BUSINESS AND HE HAS CLAIMED THE BAD DEBT. IN THE A SSESSMENT YEAR 2006-07, WHEN THE ASSESSEE HAS OFFERED INTEREST INC OME AS A BUSINESS INCOME, THE SAME WAS ACCEPTED BY THE DEPARTMENT EVE N IN EARLIER YEARS. FROM YEAR 2000 ONWARDS, THE INCOME OFFERED BY THE A SSESSEE AS ACCEPTED BY THE DEPARTMENT AS A BUSINESS INCOME, TH E YEAR UNDER CONSIDERATION WHEN THE FACTS ARE SAME AND THE ACTIV ITY IS SAME, THE DEPARTMENT CANNOT CHANGE THE HEAD OF THE INCOME. T HE LD. CIT(A) BY CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF T HE CASE, HE HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE DEPARTMENT HAS NOT BROUGHT ANY MATERIAL TO SHOW BEFORE US THAT THE ACTIVITY CARRIED ITA NO.343/VIZAG/2012 M.V.V.S. MURTHY, VISAKHAPATNAM 6 BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION IS DIFFERENT FROM ASSESSMENT YEAR 2006-07. THUS, WE FIND NO REASON T O INTERFERE WITH THE ORDER PASSED BY THE CIT(A). THIS GROUND OF APPEAL RAISED BY THE DEPARTMENT IS DISMISSED. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED . THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19 TH FEB16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER # /VISAKHAPATNAM: ' /DATED : 19.02.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-4(1), VISAKHAPA TNAM 2. / THE RESPONDENT SRI M.V.V.S. MURTHY, 10-27-13, KAANCHNA, WALTAIR UPLANDS, VISAKHAPATNAM-3. 3. + / THE PRINCIPAL CIT-2, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM