INDERRAJ KAPOOR, MUMBAI V. ITO 11(10(2), MUMBAI

ITA 3698/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9419 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 05-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Keywords: Gift; Bad and doubtful debts; Capital receipt
• Section: 37(1); 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . . , , ! '#$% , & ' BEFORE S/SHRI DINESH KUMAR AGARW AL,JM AND N.K. BILLAIYA, AM ./I.T.A. NO.3698/MUM/2011 ( ( ( ( ( / ASSESSMENT YEAR :2007-08 SHRI INDERRAJ KAPOOR, 7/8 NAAZ BUILDING, LAMINGTON ROAD, MUMBAI-400 004 / VS. THE ITO 11(1)(2), MUMBAI ) & ./ *+ ./PAN/GIR NO. : AAMPK 1909L ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY: SHRI AMIT AGARWAL -.), 0 / / RESPONDENT BY : SHRI NAVEEN GUPTA 0 1& / DATE OF HEARING :08.11.2012 23( 0 1& / DATE OF PRONOUNCEMENT : 21.11.2012 4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-3 , MUMBAI DT.22.2.2011 PERTAINING TO A.Y. 2007-08. 2. THE ASSESSEE HAS RAISED FIVE GROUNDS OF APPEAL A LONGWITH FORM NO. 36 AND TWO ADDITIONAL GROUNDS SEPARATELY. 3. GROUND NO. 1 RELATES TO THE ADDITION OF RS. 18,3 4,659/- OUT OF PRINT EXPENSES DISALLOWED U/S. 40(A)(IA) OF THE ACT. DUR ING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE AUDITORS HAVE ITA NO. 3698/MUM/2011 2 POINTED OUT IN THE AUDIT REPORT AT S. NO. 4, ANNEXU RE NO. VII(F), NO DEDUCTION OF TDS ON PRINT & PUBLICITY AMOUNTS TO RS. 18,34,65 9/-. TAKING A LEAF OUT OF THE QUALIFICATIONS MADE BY THE AUDITORS IN THE AUDIT REPORT, THE AO DI SALLOWED THE ENTIRE EXPENSES OF RS. 18,34,659/- U/S. 40(A)(I A) OF THE ACT. 4. BEFORE THE LD. CIT(A), THE ASSESSEE AGITATED THA T NO TDS WAS MADE BECAUSE THERE WAS NO LIABILITY TO DEDUCT TAX. HOWE VER, THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE LD. CIT(A) WHO WAS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO ESTABLISH HIS CLAIM FOR NON DEDUCTION OF TAX AT SOURCE AND CONFIRMED THE DISALLOWANCE MADE BY THE AO. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE I TSELF IN ITA NO. 3697/MUM/2011 PERTAINING TO ASSESSMENT YEAR 2006-07 AND CONTENDED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNA L. 6. WE HAVE CAREFULLY PERUSED THE ORDER OF THE TRIBU NAL IN ITA NO. 3697/M/2011 (SUPRA). WE FIND THAT AT PAGE-5 PARA-5 , THE TRIBUNAL HAS HELD THAT THIS DECISION OF THE CIT(A) CANNOT BE SUSTAINED IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS M/S. CHANDABHOY & JASSOBHOY (SUPRA) IN WHICH IT HAS BEEN HELD THAT THE PROVISIONS OF SEC TION 40(A)(IA) COULD BE INVOKED ONLY IN CASE OF NON DEDUCTION OF TAX AT SOU RCE AND NOT FOR LESSER DEDUCTION OF TAX AT SOURCE. SECONDLY, AS HELD BY T HE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSP ORTS VS ACIT (SUPRA) THE PROVISIONS OF SECTION 40(A)(IA) COULD BE APPLIED ON LY TO THE EXPENSES ALREADY INCURRED AND PAID DURING THE YEAR CANNOT BE COVERED BY THE PROVISIONS OF SEC. 40(A)(IA). IN OUR VIEW, THE CASE OF THE ASSESSEE R EQUIRES FRESH EXAMINATION IN THE LIGHT OF THE ABOVE DECISIONS OF THE TRIBUNAL. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE F ILE OF THE AO PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGH T OF THE OBSERVATIONS MADE IN THIS ORDER AND AFTER ALLOWING OPPORTUNITY OF HEA RING TO THE ASSESSEE. ITA NO. 3698/MUM/2011 3 7. AS THE FACTS AND THE CIRCUMSTANCES FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL WITH THE FACTS OF A.Y. 2006-07, RESPE CTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ITA NO. 3697/M/2011(SUPRA), WE R ESTORE THIS ISSUE BACK TO THE FILE OF THE AO WITH SIMILAR DIRECTION TO THE AO FOR PASSING FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF THE OBSERVATI ON MADE BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR A.Y. 2006-07. GROUND NO. 1 IS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO. 2 RELATE TO THE DISALLOWANCE OF RS. 9 ,12,371/- CLAIMED AS BAD DEBTS BY THE ASSESSEE. DURING THE COURSE OF TH E ASSESSMENT PROCEEDINGS VIDE ORDER SHEET NOTING DT. 17.11.2009, ASSESSEE WA S ASKED TO EXPLAIN AND GIVE JUSTIFICATION FOR THE CLAIM OF BAD DEBT AMOUNT ING TO RS. 9,12,371/-. THE AO OBSERVED THAT THE ASSESSEE HAS FAILED TO BRING A NY COGENT MATERIAL ON RECORD RELATING TO THE DEBTORS WRITTEN OFF AND ALSO FAILED TO SHOW THAT THE SAME HAS BEEN INCLUDED IN HIS INCOME IN EARLIER YEA RS AND OFFERED FOR TAX AS THE ASSESSEE FAILED TO SATISFY THE CONDITION LAID D OWN IN SECTION 36(1)(VII) R.W.S. 36(2) OF THE ACT. THE AO DISALLOWED THE ENT IRE DEBTS WRITTEN OFF AMOUNTING TO RS. 9,12,371/-. 9. THE MATTER WAS CARRIED OVER BEFORE THE LD. CIT(A ) BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS FAILED TO EXPLAIN WHY NO REASONS WERE FURNISHED BEFORE THE AO. HOWEV ER, THE LD. CIT(A) CONSIDERED THE DETAILS FURNISHED BY THE ASSESSEE AN D OBSERVED THAT THE BAD DEBT REPRESENTS OLD BALANCES FROM DEBTORS NAMELY F. A. PICTURE INTERNATIONAL, TIME CINEMA PVT. LTD. TILAK ENTERPRISES, INOX LEISU RE LTD (EXHIBITOR). IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT AS THE ASSESSE E HAS WRITTEN OFF THE AMOUNTS IN ITS BOOKS OF ACCOUNTS, THE BAD DEBTS SHO ULD BE ALLOWED. THE ASSESSEE FURTHER CLAIMED THAT INCOME ON THESE ACCOU NTS WERE DULY REFLECTED BY THE ASSESSEE AS ITS INCOME IN EARLIER YEAR AND H AS OFFERED THE SAME FOR TAXATION IN THE RESPECTIVE YEARS. HOWEVER, THE LD. CIT(A) OBSERVED THAT THE AMOUNTS PAID TO INOX, TIME CINEMA PVT. LTD AND TILA K ENTERPRISES WERE ADVANCES FOR EXHIBITION OF FILMS. IN RESPECT OF F .A. PICTURE INTERNATIONAL, THE ITA NO. 3698/MUM/2011 4 AMOUNT WAS PAID AS ADVANCE FOR ACQUIRING DISTRIBU TION, EXHIBITION AND EXPLOITATION RIGHTS OF THE FILM CHAND BUJH GAYA FOR MUMBAI CIRCUIT. IT WAS ALTERNATIVELY CONTENDED BY THE ASSESSEE THAT THE SA ID AMOUNTS SHOULD BE ALLOWED AS LOSS FROM BUSINESS U/S. 29 READ WITH SE C. 37(1) OF THE ACT. THE LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT AS THE ASSESSEE HAS MADE ADVANCES TO THESE FOUR PARTIES, T HERE WAS NO QUESTION OF OFFERING THESE AS INCOME IN EARLIER YEARS AND THER EFORE VIOLATED THE CONDITIONS PRECEDENT OF SEC.36(1)(VII) R.W.S. 36(2) OF THE ACT . THE LD. CIT(A) FURTHER REJECTED THE ALTERNATIVE PLEA OF THE ASSESSEE ON TH E GROUND THAT NEITHER THE ASSESSEE HAS RAISED THIS PLEA IN ITS GROUNDS OF AP PEAL NOR IT WAS CLAIMED BEFORE THE AO AT THE ASSESSMENT STAGE. 10. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REI TERATED THAT THE CLAIM OF BAD DEBTS IS TO BE ALLOWED AS PER PROVISIONS OF SEC . 36(1)(VII) AND 36(2) OF THE ACT. 11. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON T HE FINDINGS OF THE LOWER AUTHORITIES. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT INSPITE OF OP PORTUNITY GIVEN BY THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CLAIM OF BAD DEBTS AS WELL AS BUSI NESS LOSS. WE HAVE ALSO PERUSED FORM NO. 35 WHICH IS GROUNDS OF APPEAL TAKE N BEFORE THE LD. CIT(A). WE AGREE WITH THE FINDING OF THE LD. CIT(A) THAT TH E ASSESSEE HAS NOT CLAIMED THE WRITE OFF AS BUSINESS LOSS BUT ONLY AS BAD DEBT S. EVEN BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT RAISED ANY ALTERNA TIVE PLEA SO FAR AS HIS CLAIM OF RS. 9,12,371/- AS BUSINESS LOSS U/S. 28 R. W.S. 37(1) OF THE ACT. AS MENTIONED EARLIER, THE ASSESSEE HAS NOT TAKEN ANY A LTERNATIVE PLEA EITHER IN THE GROUNDS OF APPEAL FILED WITH FORM NO. 36 OR IN THE ADDITIONAL GROUNDS OF APPEAL RAISED LATER ON AS THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE IMPUGNED AMOUNTS ARE NOTHING BUT ADVANCES GIVEN BY THE ASSESSEE, ITA NO. 3698/MUM/2011 5 THEREFORE, THERE CANNOT BE ANY QUESTION OF THEM BEI NG OFFERED FOR TAXATION IN EARLIER YEARS. THE ASSESSEE HAS FAILED TO SUBSTANTI ATE HIS CLAIM FOR BAD DEBTS AS PER PROVISIONS OF SEC. 36(1)(VII) R.W.S. 36(2) O F THE ACT. WE ACCORDINGLY CONFIRM THE FINDING OF THE LD. CIT(A). GROUND NO. 2 IS ACCORDINGLY DISMISSED. 13. GROUND NO. 3 RELATES TO THE ADDITION OF RS. 25, 000/-. THE ISSUE FIND PLACE AT PARA-5 OF THE ASSESSMENT ORDER WHEREIN THE AO HAS EXHIBITED THE QUALIFICATION MADE BY THE AUDITORS IN THEIR AUDIT R EPORT AT S. NO. 2 ANNEXURE V(E) CASH RECEIVED SHOWN AS CAPITAL RECEIPT RS. 2 5,000/-. IT WAS THE CONTENTION OF THE ASSESSEE THAT HE HAS RECEIVED GIF T FROM HIS AILING BROTHER. HOWEVER, EXCEPT FOR THIS, THE ASSESSEE HAS NOT FILE D ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE HIS CLAIM. THE AO ADDED R S. 25,000/- TO THE INCOME OF THE ASSESSEE. 14. WHEN THE MATTER WAS AGITATED BEFORE THE LD. CIT (A), IT WAS CONTENDED BY THE ASSESSEE, SINCE ASSESSEES BROTHER WAS NOT K EEPING WELL, THEREFORE, THE ASSESSEE IS NOT IN A POSITION TO FILE ANY CONFIRMAT ION OF THE GIFT. THE LD. CIT(A) HELD THAT NO EVIDENCE HAS BROUGHT ON RECORD TO ESTABLISH THAT THE ASSESSEE HAS ACTUALLY RECEIVED GIFT FROM HIS BROTH ER AND CONFIRMED THE ADDITION MADE BY THE AO. 15. BEFORE US ALSO THE ASSESSEE FAILED TO BRING ANY COGENT MATERIAL EVIDENCE ON RECORD WHICH COULD SUGGEST THAT THE ASS ESSEE HAS RECEIVED GIFT OF RS. 25,000/- FROM HIS BROTHER. AS NOTHING HAS BEEN BROUGHT ON RECORD, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDING O F THE LD. CIT(A). GROUND NO. 3 IS ACCORDINGLY DISMISSED. 16. GROUND NO. 4 RELATES TO THE ADHOC ADDITION OF R S. 43,440/- BEING 20% OF EXPENSES CLAIMED. THE EXPENSES CLAIMED AMOUNTIN G TO RS. 2,17,198/- ARE EXHIBITED AT PAGE-2 OF THE ASSESSMENT ORDER. THE A O WAS OF THE OPINION THAT THE EXPENSES SO CLAIMED ARE NOT FULLY VERIFIABLE AN D THAT PERSONAL ELEMENT CANNOT BE DENIED. ITA NO. 3698/MUM/2011 6 17. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED T HAT SINCE BOOKS OF ACCOUNT ARE AUDITED, THEREFORE, NO ADHOC DISALLOWAN CE CAN BE MADE. THE LD. CIT(A) OBSERVED THAT SINCE THE ASSESSEE HAS FAILED TO ESTABLISH THE ALLOWABILITY OF THE EXPENSES IN ENTIRETY, THEREFORE, THERE WAS N O CAUSE TO DISTURB THE DISALLOWANCE MADE BY THE AO WHICH ACCORDING TO THE LD. CIT(A) IS REASONABLE. 18. BEFORE US THE LD. COUNSEL CONTENDED THAT CONSID ERING THE NATURE OF EXPENSES THE ADHOC DISALLOWANCE ARE ON HIGHER SIDE. 19. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS MADE BY THE ASSESSEE. ACCORDINGLY, FINDING OF THE LD. CIT(A) A RE CONFIRMED. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 5 16 51 0 7 80 9:; 4 <1 0 *1 =$ ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2012 4 0 3( & 7 > 6 21.11.2012 3 0 ? SD/- SD/- (DINESH KUMAR AGARWAL) (N.K. BILLAIYA) / JUDICIAL MEMBER & / ACCOUNTANT MEMBER MUMBAI; > DATED 21 /11 /2012 . . ./ RJ , SR. PS ITA NO. 3698/MUM/2011 7 4 4 4 4 0 00 0 -1' -1' -1' -1' '(1 '(1 '(1 '(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. @ ( ) / THE CIT(A)- 4. @ / CIT 5. 'A? -1 , , / DR, ITAT, MUMBAI 6. ? B / GUARD FILE. 4 4 4 4 / BY ORDER, .'1 -1 //TRUE COPY// 9 99 9 / = = = = * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI