ACIT, New Delhi V. M/s. Mark Buildtech Pvt. Ltd., New Delhi

ITA 3457/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3658 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 22-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 06-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Additional evidence; Bad and doubtful debts
• Section: 28

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SMT BEENA A PILLAI , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 3457/DEL/2014 (ASSESSMENT YEAR: 2010 - 11 ) ACIT, CIRCLE - 6(1), NEW DELHI VS. MARK BUILDTECH PVT LTD, FLAT NO. 714, 89, KEMJUNT CHAMBERS, NEHRU PLACE, NEW DELHI PAN:AAECM7261QW (APPELLANT) (RESPONDENT) REVENUE BY : SH. RAJESH KUMAR, SR. DR ASSESSEE BY: NONE DATE OF HEARING 22/02 / 2017 DATE OF PRONOUNCEMENT 10/04/2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - IX, PREFERS THIS APPEAL , NEW DELHI DATED 31.03.2014 FOR THE ASSESSMENT YEAR 2010 - 11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER IN THE FACT AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,00,00,000/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF BAD DEBT BY COMPLETING IGNORING THE FACT THAT THE ASSESSEE HAS FAILED TO ESTABLISH ITS CLAIM BEFORE THE AO. 2. WHETHER IN THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING RELIEF TO THE ASSESSEE AFTER ADMITTING THE ADDITIONAL EVIDENCE UNDER RULE 46A BY IGNORING THE REMAND REPORT OF THE AO? 3. THAT THE ORDER OF THE LD CIT(A) IS ERRONEOUS AND IS NOT TEN ABLE ON FACTS AND I LAW. 4. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE AND CONSTRUCTION FILED ITS RETURN OF INCOME ON 17 2010 SHOWING INCOME OF RS. 3 549 4475/ WILL STOP DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED THAT THE ASSESSEE COMPANY HAS CLAI MED BAD DEBT OF RS. ONE CRORE. THE ASSESSEE SUBMITTED THAT AN AGREEMENT TO PURCHASE THE LAND ON PAGE 2 OF 5 12/06/2008 WAS EXECUTED BY GIVING ADVANCE AMOUNT OF RS. ONE CRORE AND ULTIMATELY THE SALE DEED COULD NOT BE EXECUTED AS PER THE AGREEMENT HENCE THE EARNEST MONE Y WAS FORFEITED AND THE SAME HAS BEEN WRITTEN OFF AS BAD DEBT. THE ASSESSEE COULD NOT SUBMIT THE AGREEMENT AS IT WAS NOT TAXABLE AND IN ABSENCE OF SUCH AGREEMENT, THE LD. ASSESSING OFFICER DISALLOWED THE ABOVE CLAIM OF BAD DEBTS OF RS. ONE CRORE. ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE LD. AO PREFERRED AN APPEAL BEFORE THE LD. CIT (A) AGAINST THE ORDER OF THE ASSESSING OFFICER. THE LD. CIT (A) VIDE HIS ORDER DATED 21/03/2014 ALLOWED THE CLAIM OF THE ASSESSEE. REVENUE AGGRIEVED WITH THE ORDER OF THE FIRST APPELLATE AUTHORITY HAS PREFERRED APPEAL BEFORE US. 4. THE SOLITARY ISSUE INVOLVED IN THIS APPEAL IS ALLOWABILITY OF THE BAD DEBT CLAIM OF RS. ONE CRORE . BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CLAIM OF THE ASSE SSEE IS DEEMED TO FORFEITURE OF THE ADVANCE GIVEN FOR THE PURPOSE OF PURCHASE OF LAND IS CLAIMED AS BAD DEBT. THE BEFORE THE AO. THE LD. ASSESSING OFFICER HAS OBJECTED BEFORE THE LD. CIT APPEAL FOR ADMISSION SHALL OF THE ABOVE EVIDENCE FOR THE REASON THAT ASSESSEE WAS GIVEN A SUFFICIENT OPPORTUNITY AND THERE IS NO REASON THAT WHY ASSESSEE COULD NOT SUBMIT THE AGREEMENT BEFORE THE ASSESSING OFFICER. THEREFORE, THE MAIN CONTENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE WAS THAT THE ADMISSION OF THE ADDITIONAL EVIDENCES NOT JUSTIFIED. FURTHERMORE, IT WAS SUBMITTED THAT THE LD. CIT (A) HAS ERRED IN ALLOWING THE ABOVE CLAIM OF THE FORFEITURE OF THE ADVANCE GIVEN FOR PURCHASE OF LAND IS BAD DEBT. ACCORDING TO THE LD. DR IT DOES NOT SATISFY THE CONDITION OF SECTI ON 36 (1) (VII) OF THE INCOME TAX ACT READ WITH SUBSECTION 2. IT WAS FURTHER SUBMITTED THAT THAT ADVANCE FORFEITED IS A BUSINESS LOSS AND NOT A BAD DEBT THIS ASPECT IS NOT AT ALL BEEN CONSIDERED BY THE LD. CIT (A) AND IF IT IS A LOSS IT IS ALLOWED WHEN IT IS INCURRED AND NOT IN THE YEAR OF WRITE OFF. IT WAS FURTHER SUBMITTED THAT THERE ARE DISTINCT CONDITION FOR A LIABILITY OF THE LOSS AS WELL AS OF THE BAD DEBT, WHICH HAS BEEN TOTALLY IGNORED BY THE LD. CIT (A). IN THE RESULT IT WAS SUBMITTED THAT THE ORDE R OF THE LD. CIT (A) IS NOT IN ACCORDANCE WITH THE LAW SO FAR AS THE ALLOWABILITY OF THE BAD DEBT IS CONCERNED AS WELL AS ON THE ADMISSION OF THE ADDITIONAL EVIDENCE IN THE FORM OF AGREEMENT. 5. DESPITE NOTICE, NONE APPEARED ON BEHALF OF THE ASSESSEE AND THER EFORE THE ISSUE IS NOW DECIDED BASED ON MATERIAL AND FACTS AVAILABLE ON RECORD. PAGE 3 OF 5 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE LD. CIT (A) HAS DEALT WITH THIS ISSUE IS UNDER: - 5.3 THE REASON GIVEN BY AO, THE SUBMISSION OF THE APPELLANT AND FACTS ON RECORD ARE CONSIDERED. IN THIS CASE, THE APPELLANT SUBMITTED A COPY OF THE AGREEMENT ENTERED WITH SH. CHANDER SEN ON 12.06.2008 INDICATING THE AMOUNT OF ADVANCE TO BE MADE. THE AGREEMENT FILED IS FORWARDED TO THE AO TO EXAMINE UNDER REMAND PROCEEDINGS. THE AO VIDE LETTER DATED 20.01.2014 SUBMITTED THAT THE ASSESSEE WAS NOT PREVENTED BY SUFFICIENT CAUSE FOR FURNISHING OF DETAILS AS CALLED FOR BY THE AO. THE AO ALSO MENTIONED ABOUT THE EXPLANATION GIVEN BY THE ASSESSEE ABOUT THE CONDITIONS UNDER WHICH THE EARNEST MONEY GIVEN HAD TO BE SACRIFICED INCURRING THE LOSS. THE ASSESSEE EXPLAINED BEFORE THE AO THAT DUE TO SHARP FALL IN THE PRICES OF PROPERTY, THE COMPANY HAS DECIDED NOT TO MAKE THE BALANCE PAYMENT. THE AO MADE A COMPARATIVE STATEMENT OF THE SALE DE ED MADE BY APPELLANT DURING THE SAME PERIOD FOR ANOTHER PLOT OF LAND AT GURGAON. THE SALE DEED INDICATES THE PRICE PER ACRE AT RS.7.28 CRORE. THUS, THE AO FINDS THAT WHILE ASSESSEE IS SELLING A PLOT OF LAND AT RS.7.28 PER CRORE THERE IS NO LOGIC TO FOREGO THE ADVANCE GIVEN AT THE PRICE RS.2 CRORE PER ACRE. 5.3.1 IN A REJOINDER TO THE REMAND REPORT, THE APPELLANT VIDE LETTER DATED 19.03.2014 SUBMITTED THAT DURING THE ASSESSMENT PROCEEDING, THE APPELLANT GOT ONLY 15 DAYS TIME TO SUBMIT THE COPY OF AGREEMENT I N RESPECT OF BAD DEBT. DURING THIS PERIOD, THE APPELLANT COULD NOT TRACE THE AGREEMENT HENCE COULD NOT SUBMIT IT. THE APPELLANT STATED THAT, THE DOCUMENT WAS MORE THAN FOUR YEARS OLD AND RELATED TO THE PAYMENT MADE IN AN EARLIER ASSESSMENT YEAR (2009 - 10), THE SAME COULD NOT BE TRACED IN A SHORT SPAN OF TIME ALLOWED BY THE AO. THERE WAS NO TIME BARING LIMITATION ON THE AO TO COMPLETE THE ASSESSMENT IN HURRY ON 24.08.2012 WHEN THE AO HAD THE TIME TO COMPLETE THE ASSESSMENT TILL 31.03.2013. THE APPELLANT ALSO RELIED ON THE DECISION OF ELECTRA (JAIPUR) PVT. LTD. VS. IAC (1988) 26 ITD 236 (DEL) TO EMPHASIS THAT IN THE INTEREST OF JUSTICE, EVIDENCE SHOULD BE ACCEPTED EVEN IF IT IS NOT SUBMITTED BEFORE THE LOWER AUTHORITIES TO ASCERTAIN THE TRUTH. THE APPELLANT ALS O ARGUED THAT, BY NOT PAYING THE BALANCE AMOUNT OF AGREED PURCHASE CONSIDERATION OF RS.8.13 CRORE, THE APPELLANT HAS SAVED FURTHER LOSS THAT WOULD HAVE INCURRED IN THE BUSINESS TRANSACTION. THE COMPARATIVE SALE FIGURE GIVEN BY THE AO IS RELATED TO A DIFFER ENT LOCALITY WHICH MAY HAVE LARGE PRICE VARIATION. 5.3.2 THE APPELLANT CLAIMED THE AMOUNT UNDER THE BAD DEBT. AS PER THE DECISION IN THE CASE OF TRF LTD. VS. CIT (2010) 323 ITR 397 (SC), IT IS HELD THAT, THE ASSESSEE HAVING WRITTEN OFF CERTAIN DEBT, IT IS ENTITLED TO DEDUCTION THEREOF AS BAD DEBT.. THERE IS NO F URTHER REQUIREMENT TO PROVE THAT THE DEBT WAS A TRADE DEBT OR THAT IT IS IRRECOVERABLE. THERE IS NO DISPUTE THAT THE AMOUNT HAS BEEN WRITTEN OFF AS BAD DEBT BY THE APPELLANT. FOLLOWING THE DECISION OF THE APEX COURT, ON THIS ACCOUNT, THE ADDITION IS LIABL E TO BE DELETED. THE AO MADE THE ADDITION ONLY ON THE GROUND THAT THE COPY OF THE AGREEMENT WAS NOT SUBMITTED FOR VERIFICATION. THE COPY OF THE PAGE 4 OF 5 AGREEMENT WAS SUBMITTED DURING APPELLATE PROCEEDING CLAIMING THAT NO SUFFICIENT OPPORTUNITY WAS AVAILABLE TO THE APPELLANT TO SUBMIT THE DOCUMENT BEFORE AO. THE MAIN ISSUE REMAINS WHETHER THE COPY OF THE AGREEMENT CAN BE ACCEPTED AS ADDITIONAL EVIDENCE AND THE ADDITION CAN BE EXAMINED ACCORDINGLY. 5.3.4 THE AO CALLED FOR THE DOCUMENT ON 08.08.2012 AND COMPLETED THE ASSESSMENT ON 24.08.2012. SINCE THE DOCUMENT WAS FOUR YEARS OLD AND RELATED TO TRANSACTION IN THE EARLIER ASSESSMENT YEARS, IT IS POSSIBLE THAT THE APPELLANT NEED SOME MORE TIME TO COLLECT THE DOCUMENT AND SUBMIT BEFORE AO. THUS, IT IS A ABUNDANTLY CLEAR T HAT, THE APPELLANT WAS NOT GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD BY AO AND HENCE THE ADDITIONAL EVIDENCE SUBMITTED BEFORE ME IS ADMITTED WHICH ARE CRUCIAL FOR ADJUDICATION OF THE ISSUES RAISED IN THE GROUNDS OF APPEAL. IN THE CASE OF CIT VS. VIRGIN SEC URITIES CREDITS P. LTD. (2011) 332 ITR 396 (DEL.) THE JURISDICTIONAL HIGH COURT HELD THAT EVIDENCE CRUCIAL IN DISPOSAL OF THE CASE CAN BE ADMITTED. SINCE, THE DOCUMENT FILED BY THE APPELLANT BEFORE THE CIT(A) IS OF THE NATURE THAT MAY ADVANCE THE INTEREST OF JUSTICE AND SHOW THAT THERE WAS NO JUSTIFICATION FOR ADDITION MADE, THE SAME NEED TO BE ADMITTED AND CONSIDERED. APART FROM THE EVIDENTIARY VALUE OF THE DOCUMENT GIVEN, IT IS ADMISSIBLE U/R 46A, IN VIEW OF THE FACT THAT, ADMISSION OF ADDITIONAL EVIDENCE IS NOT EQUAL TO GIVING THE RELIEF BUT ONLY TO PROVIDE APPELLANT AN ADDED AND HONEST CHANCE OF BEING EXAMINED ON MERITS. SINCE THERE IS NO MORE POWER OF SET ASIDE TO CIT(A), ADDITIONAL EVIDENCE BECOMES CRUCIAL IN TAKING DECISIONS. IT CAN BE SEEN FROM THE A SSESSMENT ORDER THAT AT NO POINT OF TIME THE AO MADE ANY ATTEMPT TO COMMENT ON THE QUALITY OF EVIDENCE FURNISHED U/R 467TAND NO SHOW CAUSE NOTICE WAS ISSUED TO APPELLANT REGARDING PROPOSED ADDITION. IN VIEW OF THIS, THE AGREEMENT SUPPORTING THE TRANSACTION SUBMITTED BEFORE ME IS ACCEPTED AS EVIDENCE AND ACCORDINGLY THE ADDITION MADE IS DELETED AND THE GROUNDS OF APPEAL ARE ALLOWED. 7. IN THE PRESENT CASE, THE CLAIM OF THE ASSESSEE IS THAT THAT ASSESSEE HAS EXECUTED AN AGREEMENT TO PURCHASE THE LAND ON 12/06/ 2008 BY GIVING ADVANCE AMOUNT OF RS. ONE CRORE AND ULTIMATELY THE SALE DEED COULD NOT BE EXECUTED AND THEREFORE THE ASSESSEE HAS CLAIMED THE LOSS OF EARNEST MONEY AS BAD DEBT. 8. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT APPEAL WITH RESPECT TO ADMISSION OF THE ADDITIONAL EVIDENCES IN THE FORM OF AGREEMENT WHICH ASSESSEE COULD NOT SUBMIT BEFORE THE LD. ASSESSING OFFICER. IN THE RESULT GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMISSED. 9. COMING TO THE GROUND NO. 1 OF THE APPEAL OF THE REVENUE REGARDING ALLOWANCE OF BAD DEBT OF RS. ONE CRORE, A CCORDING TO THE PROVISIONS OF SECTION 36 (1) (VII) SUBJECT TO THE PROVISIONS OF SUB - SECTION (2), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS PAGE 5 OF 5 OF THE ASS ESSEE FOR THE PREVIOUS YEAR SHALL BE ALLOWED AS DEDUCTION PROVIDED NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, OR REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY - LENDING WHICH IS CARRIED ON BY THE ASSESSEE . APPARENTLY ASSESSEE IS NEITHER A MONEYLENDER NO ENGAGED IN THE BANKING BUSINESS THEREFORE UNLESS SUCH DEBT HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF HIS RETURN OF ALL OF AN EARLIER PREVIOUS YEAR THE CLAIM OF THE ASSESS EE PRIM A FACIE IS NOT SUSTAINABLE. FURTHER, MORE IF IT IS A BUSINESS LOSS IT SHALL BE ALLOWED TO THE ASSESSEE IN TERMS OF PROVISIONS OF SECTION 28 OF THE INCOME TAX ACT. SUCH LOSSES ARE LIABLE IF IT ARISES DURING THE COURSE OF BUSINESS AND IT HAS BEEN INCURRED IN THE YEAR IN WHICH IT IS CLAIMED. ON PERUSAL OF THE ORDER OF THE LD. CIT APPEAL, WE COULD NOT FIND THAT THE CLAIM OF THE ASSESSEE IS EXAMINED ON THESE ASPECTS. THEREFORE WE SET ASIDE GROUND NO. 1 AND 2 OF THE APPEAL OF THE REVENUE BACK TO THE FILE OF THE LD . CIT (A) TO DECIDE THE ISSUE OF AFRESH AFTER AFFORDING OPPORTUNITY OF HEARING TO THE ASSESSEE AND IF NEED ARISES TO THE LD. ASSESSING OFFICER ALSO. IN THE RESULT GROUND NO. 1 OF THE APPEAL OF THE REVENUE IS ALLOWED WITH ABOVE DIRECTION. 10. IN THE RESULT APP EAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. ORDER PRO NOUNCED IN THE OPEN COURT ON 1 0 / 0 4 / 2017 . - S D / - - S D / - ( BEENA A PILLAI ) (PRASHANT MAHARISHI) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED: 1 0 / 0 4 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI