Shri Puran Multimedia Limited, Kanpur V. Dy. Commissioner of Income Tax-VI, Kanpur

ITA 358/LKW/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9105 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 03-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: Y P SRIVASTA VA
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.358/LKW/2012 ASSESSMENT YEAR:2006 - 07 DY.C.I.T. - VI, KANPUR. VS SHRI PURAN MULTIMEDIA LIMITED, 2, SARVODAYA NAGAR, KANPUR. PAN:AABCS9219B (RESPONDENT) (APPELLANT) SHRI P. K. KAPOOR, C.A. APPELLANT BY SHRI Y. P. SRIVASTAVA, D. R. RESPONDENT BY 02/12/2014 DATE OF HEARING 23 /01/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, KANPUR DATED 01/05/2012 FOR THE ASSESSMENT YEAR 2006 - 2007. 2. GROUND NO. 1 & 2 ARE AS UNDER: 1. BECAUSE SELECTION OF CASE FOR SCRUTINY IS THE SOLE PREROGATIVE OF THE ASSESSING OFFICER BASED ON HIS 'OBJECTIVE OPINION' AS PER EXPRESS PROVISION CONTAINED IN CLAUSE (II) OF SUB SECTION (2) OF SECTION 143 AND IN DUE EXERCISE OF HIS PLENARY POWERS THE 'CIT(A)' SHOULD HAVE HELD THAT THE SELECTION OF THE INSTANT CASE FOR SCRUTINY UNDER COMPUTER AIDED SCRUTINY SCHEME(CASS) WAS WHOLLY ILLEGAL AND THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) WAS NULL AND VOID. 2. BECAUSE IN ANY CASE SELECTION OF THE CASE FOR SCRUTINY ASSESSMENT UNDER SECTION 143(3) NOT BEING IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN CLAUSE (II) AS APPEARING BELOW SUB - SECTION (2) OF SECTION 143, ENTIRE VARIATION 2 BETWEEN THE 'RETURNED INCOME' AND THE 'ASSESSED INCOME' AS IS BEING CONTESTED IN THIS APPEAL, IS WHOLLY UNLAWFUL WITH THE R ESULT THAT FOLLOWING ADDITIONS/DISALLOWANCES RS. (I) LEASED ASSET HAVING NIL VALUE 1105107 WRITTEN OFF (II) DISCARDED FIXED ASSETS 113702 WRITTEN OFF (III) BAD DEBIT WRITTEN OFF NOT ALLOWED 3500000 ----------- -- 4718809 ------------- SHOULD HAVE BEEN HELD BY LEARNED CIT(A) TO BE VOID AB - INITIO AND DELETED THE SAME HOLDING IT TO BE WHOLLY ILLEGAL. 3. IT WAS FAIRLY CONCEDED BY LEARNED A.R. OF THE ASSESSEE THAT THE ISSUE REGARDING SELECTION OF CASE FOR SCRUTINY UNDER COMPUTER AIDED SCRUTINY SCHEME (CASS) IS COVERED AGAINST THE ASSESSEE BY A RECENT DECISION OF LUCKNOW BENCH OF THE TRIBUNAL AND ACCORDINGL Y , THIS ISSUE IS DECIDED AGAINST THE ASSESSEE IN THE PRESENT CASE ALSO. THESE GROUNDS OF THE ASSESSEE ARE REJECTED. 4. GROUND NO. 3, 4 & 5 ARE INTERCONNECTED, WHICH ARE AS UNDER: 3. BECAUSE THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF THE APPELLANT'S CLAIM FOR LOSS ON ACCOUNT OF DIMINUTION IN THE VALUE OF; (A) LEASED ASSETS : RS.11,05,107 (B) DISCARDED FIXED ASSETS RS. 1,13,702 AS HAD BEEN WRITTEN OFF DURING THE YEAR. 4. BECAUSE THE LEARNED CIT(A) HAS FAILED TO CONSIDER IN RIGHT PERSPECTIVE EARNESTNESS THE APPELLANT'S EXPLANATION TO THE EFFECT THAT 'LEASED ASSETS' AND 'DISCARDED FIXED ASSETS HAD LOST ALL COMMERCIAL VALUE DUE TO DISUSE AND EFFLUX OF TIME AND NOT BEING UNDE R CONTROL OF THE 3 APPELLANT, HAD DULY BEEN WRITTEN OFF, AND ACCORDINGLY THE CLAIM FOR LOSS WAS FULLY ALLOWABLE. 5. BECAUSE THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT ALL SUCH DETAILS THAT WERE NECESSARY TO JUSTIFY THE APPELLANT'S CLAIM WERE AVAILABLE ON THE RECORD OF THE ASSESSING OFFICER AND THE ASSESSING OFFICER COULD NOT HAVE REJECTED THE APPELLANTS CLAIM FOR ALLOWING DEDUCTION FOR VALUE OF DISCARDED FIXED ASSETS WRITTEN OFF HOLDING THAT 'IT GOES WITHOUT SAYING THAT THE ASSESSEE HAD FAILED TO FURN ISH ANY DETAILS IN RESPECT OF VARIOUS LEASED ASSETS WHICH HAVE BEEN CLAIMED TO BE DISCARDED. THE ASSESSEE HAS ALSO NOT FURNISHED THE DETAILS OF THE DEBTS WHICH HAVE BEEN CLAIMED TO BE BAD DEBTS. THERE IS NOTHING ON RECORD TO JUSTIFY THAT THE LEASED ASSETS HAD BECOME USELESS AND COULD BE THROWN AWAY HAVING NO VALUE OF ITS OWN. IT HAS ALSO NOT BEEN EXPLAINED HOW THE FIXED ASSETS AND SUCH OTHER ASSETS HAVE BECOME OF ZERO VALUE AND THEY COULD BE DISCARDED AND WRITTEN OFF IN THE BOOKS OF ACCOUNTS. IN ABSENCE OF ANY DETAILS OF SUCH ASSETS AND ANY EVIDENCE IN SUPPORT OF THE CLAIM OF THE ASSESSEE FROM ALL THESE ASSETS HAD BECOME OF ZERO VALUE, THE CLAIM OF EXPENDITURE OF RS.11,05,107/ - ON ACCOUNT OF LEASED ASSETS WRITTEN OFF AND THE CLAIM OF RS.1,13,702/ - ON ACCOUNT OF DISCARDED FIXED ASSETS WRITTEN OFF WOULD BE DISALLOWED AND ADDED TO THE TOTAL INCOME.' 5. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE DETAILS REGARDING LEASED ASSETS WRITTEN OFF AND OWN FIXED ASSETS WRITTEN OFF ARE AVAILABLE ON PAGE NO. 49 & 50 OF THE PAPER BOOK AND HENCE, THIS ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. A SPECIFIC QUERY WAS RAISED BY THE BENCH AS TO WHETHER THERE IS ANY EVIDENCE ON RECORD REGARDING DISCARDING OF THE ASSETS AND IN REPLY , LEARNED A.R. OF THE ASSESS EE COULD NOT POINT OUT ANY SUCH EVIDENCE ON RECORD. 6. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT A CLEAR FINDING HAS BEEN GIVEN BY LEARNED CIT(A) IN PARA 4.2.2 OF HIS ORDER THAT NO SUCH DETAILS WERE FURNISHED BEFORE HIM ALSO, WHICH WERE REQUIRED BY THE ASSESSING OFFICER WITH RE GARD TO DISCARDING OF THESE LEASED ASSETS AND FIXED ASSETS. BEFORE US ALSO, NO EVIDENCE HAS BEEN BROUGHT ON RECORD REGARDING DIS CARDING OF THESE ASSETS AND THE DETAILS AVAILABLE ON PAGES 49 & 50 OF THE PAPER BOOK ARE SIMPLY THE DETAILS OF WDV OF VARIOUS ASSETS AS ON 31/03/2005. IN THE ABSENCE OF ANY EVIDENCE REGARDING DISCARDING OF THESE ASSETS, THE CLAIM OF THE ASSESSEE IS NOT AL LOWABLE AND THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 3, 4 & 5 ARE ALSO REJECTED. 8. GROUND NO. 6, 7 & 8 ARE INTERCONNECTED, WHICH READ AS UNDER: 6. BECAUSE THE LEARNED CIT(A) HAS FA ILED TO APPRECIATE THAT THE APPELLANT WAS ENGAGED IN FINANCE AND LEASING BUSINESS AND THE AMOUNT ADVANCED BY IT TO DIFFERENT PARTIES CONSTITUTED ITS SUNDRY DEBTORS/STOCK IN TRADE WHICH FELL WITHIN THE AMBIT OF SECTION 36(1)(VII) OF THE ACT AND THE APPELLAN TS CLAIM FOR WRITE OFF OF UNREALIZED AMOUNT COULD NOT HAVE BEEN DISALLOWED ON THE GROUND THAT THE SUM IN QUESTION HAD BEEN SHOWN UNDER THE HEAD LOAN AND ADVANCES WITH THE DESCRIPTION 'SECURED AND CONSIDERED GOOD LOANS AND ADVANCES TO PARTIES' AND IN CONCL UDING THAT WRITING OFF COULD NOT FALL WITHIN THE PROVISION OF SECTION 36(1)(VII) OF THE ACT. 7. BECAUSE THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF APPELLANT'S CLAIM FOR BAD DEBT WRITTEN OFF AMOUNTING TO RS.35,00,000/ - AS HAD BEEN MADE BY THE ASSESSING OFFICER, BY HOLDING THAT 'ADMITTEDLY, THE WRITTEN OFF IS OF SECURED LOANS AND ADVANCES MADE TO VARIOUS PARTIES, THUS WRITING OFF WOULD NOT FALL WITHIN THE PROVISIONS OF SEC. 36(1)(VII) OF THE ACT SINCE THAT SECTION REQUI RES THAT SUCH DEBT SHOULD HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE. 5 8. BECAUSE IN FULL AWARENESS OF THE FACT THAT WRITTEN OFF CONSISTED OF AMOUNT FINANCED INCLUSIVE OF INTEREST ACCRUED WHICH HAD BEEN TAKEN INTO ACCOUNT IN COMPUTING ITS INCOME BY THE APPELLANT AS IS DULY BORNE OUT FROM MATERIAL AND EVIDENCE ALREADY AVAILABLE ON RECORD, THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF APPELLANT'S CLAIM FOR BAD DEBTS (ACTUALLY WRITTEN OFF THE B OOKS) BY HOLDING THAT THE ASSESSEE HAS FAILED TO DEMONSTRATE AS TO HOW SUCH LOAN AND ADVANCES HAD BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE IN THE INSTANT PREVIOUS YEAR OR IN THE EARLIER ASSESSMENT YEAR. 9. IT WAS SUBMITTED BY LEARN ED A.R. OF THE ASSESSEE THAT THE DETAILS REGARDING THIS AMOUNT OF RS.35 LAC ARE AVAILABLE ON PAGES 51 TO 53 OF THE PAPER BOOK. HE PLACED RELIANCE ON A JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF T.R.F. LTD. VS. CIT [2010] 323 ITR 397 (SC) AND I T WAS CONTENDED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THIS JUDGMENT OF HON'BLE APEX COURT. 10. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY LEARNED CIT(A) AS PER PARA 5.2.2 OF HIS ORDER, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 5.2.2 ADMITTEDLY, THE 'WRITING OFF' IS OF SECURED LOANS AND ADVA NCES MADE TO VARIOUS PARTIES; THUS, SUCH 'WRITING OFF' WOULD NOT FALL WITHIN THE PROVISIONS OF SEC. 36(1)(VII) OF THE ACT, SINCE THAT SECTION REQUIRES THAT SUCH DEBT SHOULD HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE. IN THIS CASE, THE ASSESSEE HAS FAILED TO DEMONSTRATE AS TO HOW SUCH LOANS AND ADVANCES HAD BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE IN THE INSTANT PREVIOUS YEAR OR IN THE EARLIER ASSTT. YEARS. IN THIS VIEW OF THE MATTER, THE RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT 6 IN THE CASE OF TRF (SUPRA) IS MISPLACED. THE ADDITION MADE BY THE AO IS THEREFORE, CONFIRMED. 11.1 FROM THE ABOVE PARA FROM THE ORDER OF LEARNED CIT(A), WE FIND THAT A CLEAR FINDING HAS BEEN GIVEN BY HIM THAT TH IS AMOUNT IS IN FACT SECURED LOANS AND ADVANCES AND NOT DEBTS. WRITING OFF OF ADVANCES IS NOT ALLOWABLE U/S 36(1)(VII) OF THE ACT BECAUSE THE ESSENTIAL REQUIREMENT AS PER SECTION 36(2) IS NOT SATISFIED IN SUCH CASES . FOR THE SAME REASON , THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF T.R.F. LTD. (SUPRA) IS ALSO NOT APPLICABLE BECAUSE THIS JUDGMENT IS IN RESPECT OF WRITING OFF OF BAD DEBTS AND NOT FOR WRITING OFF OF ADVANCES . THESE FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED A.R. OF THE ASS ESSEE THAT THIS WRITING OFF OF RS.35 LAC IS IN RESPECT OF ADVANCE AND NOT BAD DEBTS. CONSIDERING THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A) ON THIS ISSUE. THESE GROUNDS ARE REJECTED. 12. IN TH E RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 /01/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR