M/s Shreekunj Securities Pvt. Ltd., Kolkata V. ITO, WD-3(1), KOLKATA, Kolkata

ITA 378/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1903 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 10-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-03-2016
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR PANDE
• Assessee Lawyers: J N GUPTAFCA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAI NI, AM ./ ITA NO.378/KOL/2016 ( / ASSESSMENT YEAR :2010-2011) M/S SHREEKUNJ SECURITIES PVT. LTD. 6, TURF ROAD, KOLKATA-700025 VS. ITO, WARD-3(1), AAYAKAR BHAWAN, 4 TH FLOOR P-7, CHOWRING SQUARE, KOLKATA-700069 ./ ./PAN/GIR NO. : AAECS4082M ( /APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : ANIL KUMAR PANDE, ADDL. CIT.DR /ASSESSEE BY : SHRI J.N. GUPTA,FCA / DATE OF HEARING : 18/04/2017 /DATE OF PRONOUNCEMENT 21/04/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAI NING TO THE ASSESSMENT YEAR 2010-2011, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, KOLKATA , IN APPEAL NO.61/CIT(A)-1/W-3(1)/2013-14/KOL, DATED 28.01.2016 , WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFI CER U/S.143(3) OF THE INCOME TAX ACT 1961, (HEREINAFTER REFERRED TO AS TH E ACT), DATED 11.03.2013. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND HAS SUBMITTED ITS RETUR N OF INCOME ON 09/10/2010 DISCLOSING TOTAL INCOME OF RS.10,575/-. THE RETURN OF INCOME OF THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE ACT ON 27/05/2011. LATER ON, THE ASSESSEES CASE WAS SELECTED FOR SCRU TINY U/S.143(3) OF THE ITA NO.378/KOL/2016 M/S SHREEKUNJ SECURITIES PVT.LTD. 2 ACT AND THE AO FRAMED ASSESSMENT MAKING ADDITION AT RS.16,53,171/- ON ACCOUNT OF BAD DEBTS CLAIMED BY THE ASSESSEE. THE A SSESSEE HAS WRITTEN OFF SUNDRY BALANCES CONSISTING SIX PARTIES. THE ASS ESSING OFFICER OBSERVED THAT NATURE OF THESE SUNDRY BALANCES WRITTEN OFF, A S SHOWN IN THE BALANCE SHEET WAS DIFFERENT FROM THE NATURE OF SUNDRY BALAN CES AS CLAIMED BY THE ASSESSEE IN HIS WRITTEN SUBMISSION MADE DURING THE ASSESSMENT PROCEEDINGS AND THEREFORE, BECAUSE OF DIFFERENCES I N NOMINICULTURE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE FOR BAD DEBTS. 3. DISSATISFIED WITH THE ORDER OF THE ASSESSING OFF ICER, THE ASSESSEE FILED AN APPEAL BEFORE THE LD COMMISSIONER OF INCOME TAX (APPEALS) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. THE LD CIT (A) HAS JUST REITERATED THE STAND TAKEN BY THE ASSESSING OF FICER AND HELD THAT SUNDRY BALANCES WRITTEN OFF AMOUNTING TO RS. 16,53, 171/- IS NOT IN THE NATURE OF BAD DEBTS AND THE SAME SHOULD NOT BE ALLO WED. 4. NOT BEING SATISFIED WITH THE ORDER PASSED BY THE LD CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND HAS TAK EN THE FOLLOWING GROUNDS OF APPEAL: 1.THAT ON FACTS AND CIRCUMSTANCES OF THE CASE , THE LD.A.O. ERRED IN NOT STATING WHY THE BAD DEBTS WRITTEN OFF, WERE NOT ALL OWABLE DEDUCTIONS U/S 36(1) (VII) READ WITH SECTION 36(2) (I), SINCE THE DEBTS, WHICH HAVE BEEN WRITTEN OFF, REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING OR MONEY LENDING WHICH IS CARRIED ON BY THE ASSESSES. 2 . THAT ON FACTS AND CIRCUMSTANCES OF THE CASE , THE LD.A.O. ERRED IN HOLDING THAT THE DEBTS, WRITTEN OFF, DID NOT COMPLY WITH THE CONDITION OF ALLOWABILITY U/S 36(2) (I). 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE , THE LD A.O. ERRED IN DISALLOWING BAD DEBTS AMOUNTING TO RS.16,53,171/-. ITA NO.378/KOL/2016 M/S SHREEKUNJ SECURITIES PVT.LTD. 3 5. THE LD AR FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT NEITHER THE ASSESSING OFFICER NOT THE LD CIT(A) UNDERSTOOD THE NOMINICULTURE USED BY THE ASSESSEE IN THE BALANCE SHEET AND IN THE WRITTE N SUBMISSION MADE BEFORE ASSESSING OFFICER. FOR INSTANCE IN CASE OF L EADER CONSTRUCTION PVT. LTD. RS. 5,34,125/- THE NOMINICULTURE USED IN THE B ALANCE SHEET WAS ADVANCES WHEREAS THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE AO CONTAINS THE NOMINICULTURE AS RENT, IT IS MEAN T AS RENT RECEIVABLE. THE TERMINOLOGY ADVANCE AND RENT RECEIVABLE, IN FACT BOTH ARE ASSETS AND SHOWN IN THE BALANCE SHEET IN ASSET SIDE. IF B OTH BECOME IRRECOVERABLE THEN BOTH MAY BE BAD DEBTS. IN CASE OF ADVANCES OF RS.2,00,000/- STANDING IN THE NAME OF MOTILAL OSWAL HAS ALSO BECOME IRRECOVERABLE BECAUSE OF A DIFFERENT REASONS. THE L D AR FOR THE ASSESSEE ALSO SUBMITTED THAT WHATEVER ADVANCES SHOWN BY THE ASSESSEE IN THE BALANCE SHEET AND OUT OF THEM IF ANY ADVANCE BECOME S IRRECOVERABLE BECAUSE OF ANY CIRCUMSTANCES THEN IT IS ASSESSEE`S PREROGATIVE RIGHT TO WRITE IT OFF. 6. ON THE OTHER HAND, THE LD DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS BEING NOT REPEATED FOR THE SAKE OF BREVITY. 7. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD, WE NOTICED THAT ASSESSEE HAVE SHOWN IN H IS BALANCE SHEET, ADVANCES, LOANS AND DEBTORS AND JUST BECAUSE THE AS SESSEE HAS USED THE DIFFERENT NOMINICULTURE IN THE WRITTEN SUBMISSI ONS MADE BEFORE THE ASSESSING OFFICER DO NOT CHANGE THE CHARACTER OF TH ESE ASSETS. THE ITA NO.378/KOL/2016 M/S SHREEKUNJ SECURITIES PVT.LTD. 4 ADVANCES, LOAN GIVEN TO EMPLOYEES, AND DEBTORS ARE THE CURRENT ASSETS OF THE ASSESSEE AND IF THESE BECOME IRRECOVERABLE T HEN ASSESSEE MAY WRITE IT OFF IN THE BOOKS OF ACCOUNTS. WE ALSO NOTE D THE HON`BLE SUPREME COURT RULING IN CASE OF BAD DEBTS IN THE LANDMARK J UDGMENT OF T.R.F. LTD.( 2010) 230 CTR 0014. THIS IS WHAT THE HON`BLE SUPREM E COURT HELD: AFTER 1ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. I T IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACC OUNTS OF THE ASSESSEE. CONSIDERING THE FACTUAL WE ARE OF THE VIEW THAT ASS ESSEE HAS USED DIFFERENT NOMINICULTURE IN RESPECT OF ITS ADVANCES (ASSETS), AND THE SAME SHOULD NOT BE A GROUND TO DISALLOW THE CLAIM O F THE ASSESSEE. BESIDES, THE HON`BLE SUPREME COURT IN THE CASE T.R.F. LTD.( 2010) 230 CTR 0014. (SUPRA) HAS HELD THAT A FTER 1ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FAC T, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THE ASSESSEE HAS WRITTEN OF ADVANCES/DEBTORS AND THE SAME DO FALL WI THIN THE AMBIT OF SUPREME COURT RULING EXPLAINED ABOVE. THEREFORE, TH E ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD CI T(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADDITION OF RS. 16,53,171/- 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE, IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21/04 /2017. SD/ - (S.S.VISWANETHRA RAVI) S D/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; $% DATED 21/04/2017 & ()* /PRAKASH MISHRA ,SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT- M/S SHREEKUNJ SECURITIES PVT. LTD. ITA NO.378/KOL/2016 M/S SHREEKUNJ SECURITIES PVT.LTD. 5 / BY ORDER, / ( ASSTT. REGISTRAR) & ' , / ITAT, KOLKATA 2. / THE RESPONDENT.-ITO WD-3(1), KOLKATA 3. 4 ( ) / THE CIT(A), KOLKATA. 4. 4 / CIT 5. 56 7 8 , 8 , / DR, ITAT, KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//