BDP (INDIA) P.LTD. ( NOW KNOWN AS ARSHIYA INTERNATIONAL LTD.), MUMBAI V. ACIT OCD 2(1), MUMBAI

ITA 3739/MUM/2010

• Counselvise Citation: 373919914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 17-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: GOLI SRINIWAS RAO
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, H BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI R.S.PADVEKAR, JUDICIAL MEMBER I.T.A NO.3738/ MUM/2010: ASSESSMENT YEAR: 2005-06 I.T.A NO.4078/ MUM/2010: ASSESSMENT YEAR: 2006-07 BDP (INDIA) PRIVATE LIMITED, .. APPELLANT (NOW KNOWN AS ARSHIYA INTERNATIONAL LTD.) ARSHIYA INTERNATIONAL LTD., 7 TH FLOOR, C WING, TWIN ARCADE, MILITARY ROAD, MAROL MAROSHI, ANDHERI(E), MUMBAI-059 PA NO.AABCB 5917 D VS ACIT (OSD) 2(1) .. RESPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. I.T.A NO. 3739/ MUM/2010: ASSESSMENT YEAR: 2005-06 ACIT (OSD) 2(1) .. APPELLANT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. VS BDP (INDIA) PRIVATE LIMITED, .. RESPONDENT (NOW KNOWN AS ARSHIYA INTERNATIONAL LTD.) ARSHIYA INTERNATIONAL LTD., 7 TH FLOOR, C WING, TWIN ARCADE, MILITARY ROAD, MAROL MAROSHI, ANDHERI(E), MUMBAI-059 APPEARANCES: ASHWIN KUMAR, FOR THE ASSESSEE GOLI SRINIWAS RAO, , FOR THE REVENUE 2 DATE OF HEARING : 17.8.2011 DATE OF PRONOUNCEMENT : 26 -08-2011 O R D E R PER PRAMOD KUMAR: 1. THE CROSS APPEALS FOR THE ASSESSMENT YEAR 2005-0 6 ARE DIRECTED AGAINST THE ORDER DATED 29.3.2010 OF THE CIT(A)-4, MUMBAI AND T HE APPEAL FOR THE ASSESSMENT YEAR 2006-07 FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER DATED 5.3.2010 OF THE CIT(A)-4. THE IMPUGNED ASSESSMENTS ARE FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. ASSESSMENT YEAR: 2005-06: 2. THE ONLY GRIEVANCE RAISED BY THE ASSESSEE IS CIT (A)S CONFIRMING THE DISALLOWANCE OUT OF OPERATIONAL EXPENSES AT 2% OF T HE TOTAL EXPENDITURE ON ADHOC BASIS AND GROUND NO.1 RAISED BY THE ASSESSEE IS AGA INST CIT(A)S RESTRICTING THE DISALLOWANCE TO 2% OUT OF 5% MADE BY THE ASSESSING OFFICER. 3. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS INCURRED VARIOUS EXPENSES UNDER THE BROAD HEADS AIR IMPORT EXPENSES , AIR EXPORT EXPENSES, OCEAN IMPORT EXPENSES AND OCEAN EXPORT EX PENSES TOTALING TO RS.2,99,251,304. SINCE THE EXPENSES WERE INCURRED UNDER NUMEROUS HEADS, THE ASSESSEE WAS ASKED TO PRODUCE LEGAL TENABLE VOUCHER S ALONGWITH LEDGER ACCOUNTS OF THE RESPECTIVE PARTIES FOR VERIFICATION. IN REPLY, THE ASSESSEE HAS FURNISHED ONLY PARTY WISE DETAILS OF EXPENSES AS UPTO THE YEAR END ING ON 31.3.2006 BUT COULD NOT FURNISH THE LEDGER ACCOUNTS, THE BILLS/VOUCHERS IN SUPPORT OF THE EXPENSES CLAIMED. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER DISALLOWED 5% OF THE ABOVE EXPENSES ON ESTIMATE BASIS ON THE GROUND THAT SOME OF THE EXPENSES ARE NOT 3 VERIFIABLE AND NOT INCURRED FOR THE PURPOSE OF BUSI NESS U/S.37(1) OF THE ACT. ACCORDINGLY, AN AMOUNT OF RS.1,27,01,261 WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED THE ASSESSEE CARRIED THE MATT ER IN APPEAL BEFORE THE CIT(A). 5. THE CIT(A) NOTED THAT THE ASSESSEE WAS CALLED UP ON TO FURNISH ONLY PARTY WISE DETAILS BEFORE THE AO AND NOT OTHER DETAILS, W HICH WAS COMPLIED WITH. THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACC OUNT. HOWEVER, AS THE ASSESSEE HAS NOT SUBMITTED THE MODE OF PAYMENT I.E. CASH OR CHEQUE AND FULL ADDRESS OF THE PARTIES, THE CIT(A) RESTRICTED THE DISALLOWANCE TO 2% OUT OF 5% MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE STAND SO TAK EN BY THE CIT (A), THE ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE US. WHILE REV ENUE IS AGGRIEVED OF PARTIAL RELIEF GRANTED BY THE CIT(A), THE ASSESSEE IS AGGRIEVED TH AT NO ADHOC DISALLOWANCE SHOULD HAVE BEEN MADE AT ALL. 6. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE FIND THAT AT THE TIME OF ASSESSMENT PROC EEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH ONLY PARTY-WISE DETAI LS. THE ASSESSING OFFICER HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO REPLY FOR THE PROPORTIONATE DISALLOWANCE OF EXPENSES. WE HAVE NOTED THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND IN THE PRECEDING YEARS ALSO, THERE WAS NO SUCH DISALLOWANCE. THE CIT(A) HAS RESTRICTED THE DISALL OWANCE ONLY ON THE GROUND THAT THE MODE OF PAYMENT AND FULL ADDRESS OF THE PARTIES ARE NOT AVAILABLE. AS THE EXPENSE IS A ROUTINE EXPENDITURE, THERE WAS NO DIS ALLOWANCE IN EARLIER YEARS, AND THAT THE ASSESSEE HAS REASONABLY COMPLIED WITH ALL THE REQUISITES, THE ADHOC DISALLOWANCE OF EXPENDITURE IS NOT WARRANTED ON THE FACTS OF THIS CASE. WE HAVE NOTICED THAT THE ASSESSEE HAS FURNISHED REQ UISITE DETAILS BEFORE THE ASSESSING OFFICER. BEARING IN MIND ALL THESE FACTO RS, AS ALSO ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND ARE OF THE VIEW THAT NO DISALLOWANCE IS CALLED FOR. 4 7. GROUND NO.1 OF THE REVENUE IS DISMISSED AND ONLY GROUND TAKEN BY THE ASSESSEE IS ALLOWED. 8. IN GROUND NO.2, THE ASSESSING OFFICER IS AGGRIEV ED CIT(A)S ALLOWING BAD DEBTS OF RS.5,69,270 AND SUNDRY BALANCES OF RS.6,82,481 W RITTEN OFF. 9. FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED BAD DEBTS WRITTEN OFF OF RS.5,69,270 AND SUNDRY BALANCES WRITTEN OFF OF RS.6 ,82,481 IN THE PROFIT AND LOSS ACCOUNT. FROM THE DETAILS FILED BY THE ASSESSEE, T HE ASSESSING OFFICER NOTED THAT THESE DETAILS ARE NOTHING BUT ONLY THE NAMES OF THE PARTI ES WITHOUT MENTIONING THEIR ADDRESS AND AMOUNT. IT WAS IN THIS BACKDROP THAT T HE ASSESSING OFFICER DISALLOWED THE BAD DEBTS OF RS.5,69,270 AND SUNDRY BALANCES WRITT EN OFF OF RS.6,82,481. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E CIT(A). THE CIT(A) FOLLOWING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF STAR CHEMICALS, 313 ITR 126 (BOM), AND IN THE CASE OF OMAN INTERNATIONAL BANK SOAG, 313 ITR 128(BOM) ALLOWED THE CLAIM OF THE ASSESSEE. THE ASSESSING O FFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 10. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUS ED THE MATERIAL ON RECORD, WE DO NOT FIND ANY REASON TO INTERFERE IN T HE ORDER OF THE CIT(A). IN THE IMPUGNED ORDER, THE CIT(A) NOTED THAT UNDER THE AM ENDED PROVISIONS OF SECTION 36(1)(VII), THE ASSESSEE IS NOT REQUIRED TO FURNIS H DEMONSTRATIVE PROOF THAT THE DEBT HAS BECOME BAD. THE HONBLE SUPREME COURT IN THE C ASE OF TRF LTD VS CIT (323 ITR 397), HAS HELD THAT IT IS NOT NECESSARY FOR THE ASS ESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF TH E BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THE ASSESSEE HAS WRITTEN OFF THE AMOUNT IN THE BOOKS OF ACCOUNT AS THEY BECOME BAD. IN VIEW OF THIS, WE REJECT THE GRIEVANCE RAISED BY THE REVENUE. 11. GROUND NO.2 TAKEN BY THE REVENUE IS THUS DISMIS SED. 5 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AND THE APPEAL OF THE REVENUE IS DISMISSED. ASSESSMENT YEAR: 2006-07 13. THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ADDITION OF RS.6 ,75,205 ON ACCOUNT OF DIFFERENCE BETWEEN THE INCOME AS PER AIR AND THE AM OUNT SHOWN BY THE APPELLANT IN ITS BOOKS OF ACCOUNT. 14. THE IMPUGNED DISALLOWANCE WAS MADE BECAUSE THE ASSESSEE WAS NOT ABLE TO RECONCILE THE INFORMATION ABOUT COMMISSION RECEIVED BY THE ASSESSEE GATHERED THROUGH THE AIRS, WHICH WAS CONFRONTED TO THE ASSES SEE BY THE ASSESSING OFFICER WITH THE INFORMATION AS PER ASSESSEES FIGURES OF C OMMISSION RECEIVED. THE STAND OF THE ASSESSEE WAS THAT IN VIEW OF NUMBER OF ENTRIES, WHICH WERE RUNNING INTO HUNDREDS OF PAGES, IT WAS NOT POSSIBLE TO RECONCILE ALL THE ENTRIES. THE ASSESSING OFFICER WAS, HOWEVER, OF THE VIEW THAT AS THERE ARE DISCREPANCIES IN COMMISSION FIGURES, AS PER AIR, AND AS PER ASSESSEES RECORDS, THE DIFFERENCE IS REQUIRED TO BE ADDED TO ASSESSEES INCOME. AGGRIEVED BY THE ADDIT ION SO MADE, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 15. HAVING HEARD THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE ARE NOT INCLINED TO UPHOLD THE GRIEVANCE OF THE ASSESSEE. WHATEVER BE THE LEVEL OF EFFORTS REQUIRED, THE ONUS IS ON THE ASSESSEE TO DEMONSTRAT E THAT ENTRIES AS PER AIR ARE DULY ACCOUNTED FOR BY THE ASSESSEE, OR THERE IS REASONAB LE EXPLANATION FOR EXCLUSION OF THE SAME. SINCE ASSESSEE HAS NOT DISCHARGED THE ONUS A ND HAS NOT EVEN DOUBTED CORRECTNESS OF AIR INFORMATION, THE CIT(A) WAS QUIT E JUSTIFIED IN UPHOLDING THE IMPUGNED ADDITION. WE CONFIRM THE ORDER OF THE CIT (A) AND DECLINE TO INTERFERE IN THE MATTER. 6 16. THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2006-07 IS THUS DISMISSED. 17. TO SUM UP, WHILE APPEAL OF THE ASSESSEE FOR A.Y . 2005-06 IS ALLOWED, APPEAL OF THE REVENUE FOR A.Y. 2005-06 AS ALSO APPEAL OF THE ASSESSEE FOR A.Y. 2006-07 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2011 SD/- (R.S.PADVEKAR) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 26 TH AUGUST, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),4, MUMBAI 4. COMMISSIONER OF INCOME TAX,2 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH H MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI