THE ITO 4(1)(1), MUMBAI V. LATE SHRI CHANDRAVADAN J DALAL THROUGH L/H SHRI DEEPAK C DALAL, MUMBAI

ITA 3795/MUM/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49303 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 15-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARTHA SARATHI NAIK
• Assessee Lawyers: R S KHANDELWAL
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 3795/MUM/2007 (ASSESSMENT YEAR: 2003-04) INCOME TAX OFFICER - 4(1)(1) VS. LATE SHRI CHANDRAVADAN J. DALAL ROOM NO. 678, AAYAKAR BHAVAN (THROUGH L/H SHRI DEEP AK C. DALAL) M.K. ROAD, MUMBAI 400020 GROUND FLOOR, BHPEN CHAMBE RS 9 DALAL STREET, MUMBAI 400023 PAN - AAEPD 90001 A APPELLANT RESPONDENT CO NO. 216/MUM/2007 (ASSESSMENT YEAR: 2003-04) LATE SHRI CHANDRAVADAN J. DALAL VS. INCOME TAX OFFICER - 4(1)(1) (THROUGH L/H SHRI DEEPAK C. DALAL) ROOM NO. 678, AAYAKAR BHAVAN GROUND FLOOR, BHPEN CHAMBERS M.K. ROAD, MUMBAI 4000 20 9 DALAL STREET, MUMBAI 400023 PAN - AAEPD 9001 A CROSS OBJECTOR APPELLANT IN APPEAL APPELLANT BY : SHRI PARTHASARATHI NAIK RESPONDENT BY: R.S. KHANDELWAL O R D E R PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY REVENUE AGAINST THE ORD ER OF THE LEARNED CIT(A) IV, MUMBAI DATED 14.02.2007 AND THE SAME IS BEING DISPOSED OFF ALONGWITH THE CROSS OBJECTION FILED BY THE ASSESSEE BEING CO NO. 216/MUM/ 2007. 2. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LEARN ED REPRESENTATIVES OF BOTH SIDES, THE SOLITARY ISSUE INVOLVED IN THE APPEAL OF REVENUE RELATING TO THE CLAIM OF ASSESSEE, WHO IS A SHARE BROKER, FOR DEDUC TION ON ACCOUNT OF BAD DEBT WRITTEN OFF AMOUNTING TO RS.10,11,793/- IS SQU ARELY COVERED IN FAVOUR 2 ITA NO.3795/MUM/007 ASSTT. YEAR : 2003-04. OF THE ASSESSEE BY THE DECISION OF THE MUMBAI SPECI AL BENCH OF THE ITAT IN THE CASE OF DCIT VS. SHREYAS S. MORAKHIA (MUM) (SB) 40 SOT 432 WHEREIN IT WAS HELD THAT THE AMOUNT RECEIVABLE BY THE ASSESSEE , WHO IS A SHARE BROKER, FROM HIS CLIENTS AGAINST TRANSACTIONS OF PURCHASE O F SHARES ON THEIR BEHALF CONSTITUTED A DEBT, WHICH IS A TRADING DEBT. IT WAS HELD THAT THE BROKERAGE INCOME/ COMMISSION INCOME ARISING FROM SUCH TRANSAC TIONS VERY MUCH FORMED PART OF THE DEBT AND WHEN THE AMOUNT OF SUCH BROKERAGE/COMMISSION HAD BEEN TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEA R OR ANY EARLIER YEAR, IT SATISFIED THE CONDITION STIPULATED IN SECTION 36(2) (I) AND THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 36(1)(VII) BY W AY OF BAD DEBTS, AFTER HAVING WRITTEN OFF THE SAID DEBTS FROM HIS BOOKS OF ACCOUNT AS IRRECOVERABLE. AS FURTHER SUBMITTED BY THE LEARNED D.R., THE ISSUE INVOLVED IN THE PRESENT CASE RELATING TO ASSESSEES CLAIM FOR BAD DEBT THUS NEED TO BE SENT BACK TO THE A.O. FOR THE LIMITED PURPOSE OF QUANTIFICATION OF THE AMOUNT OF BAD DEBT AFTER HAVING TAKEN INTO ACCOUNT THE MARGIN MONEY OR SHARES HELD AS SECURITY, IF ANY, AS HELD BY THE MUMBAI SPECIAL BEN CH OF ITAT IN THE CASE OF SHREYAS S. MORAKHIA (SUPRA). 3. IN THE CROSS OBJECTION, A NEW GROUND, HOWEVER, HAS BEEN RAISED ON BEHALF OF THE ASSESSEE CLAIMING THAT THE ASSESSEE H AVING ALREADY EXPIRED ON 29.11.2004, I.E. WELL BEFORE THE DATE OF PASSING OF THE ASSESSMENT ORDER BY THE A.O. ON 30.11.2005, THE ASSESSMENT MADE BY THE A.O. IN THE NAME OF A DEAD PERSON IS A NULLITY AND THE SAME IS LIABLE TO BE QU ASHED. IN SUPPORT OF THIS STAND, THE LEARNED COUNSEL FOR THE ASSESSEE HAS REL IED ON THE DECISION BY THE COORDINATE BENCH OF THIS TRIBUNAL PASSED IN ASSESSE ES OWN CASE FOR A.Y. 2004-06 VIDE ORDER DATED 19 TH MARCH 2010 IN ITA NO. 7131/MUM/2008 WHEREIN THE ASSESSMENT MADE BY THE A.O. VIDE ORDER DATED 11.12.2007 IN THE NAME OF THE ASSESSEE WHO HAD ALREADY EXPIRED ON 29. 11.2004 WAS QUASHED BY THE TRIBUNAL HOLDING THE SAME TO BE A NULLITY. I T IS OBSERVED THAT IN THE CASE OF DALUMAL SHYAMUMAL, THE ORDER OF ASSESSMENT MADE BY THE A.O. AGAINST A DEAD PERSON WAS SIMILARLY QUASHED BY THE TRIBUNAL TREATING THE SAME TO BE A NULLITY AND WHEN THE MATTER REACHED TH E HON'BLE M.P. HIGH 3 ITA NO.3795/MUM/007 ASSTT. YEAR : 2003-04. COURT, THEIR LORDSHIPS BY JUDGEMENT REPORTED IN 276 ITR 62 UPHELD THE DECISION OF THE TRIBUNAL TREATING THE ASSESSMENT FR AMED BY THE A.O. AGAINST A DEAD PERSON TO BE A NULLITY. THE HON'BLE M.P. HIGH COURT, HOWEVER, HELD THAT THE TRIBUNAL, AFTER HAVING HELD THE ASSESSMENT TO B E A NULLITY, SHOULD HAVE REMITTED THE CASE TO THE A.O. FOR ENSURING COMPLIAN CE OF SECTION 159 AND FOR PASSING PROPER ORDERS OF ASSESSMENT AFTER DUE NOTIC E TO THE LEGAL REPRESENTATIVES OF THE DECEASED ASSESSEE. IT WAS HE LD THAT ONCE THE ASSESSMENT ORDER WAS HELD TO BE A NULLITY THEN IN S UCH AN EVENT CONSEQUENTIAL DIRECTION AS CONTEMPLATED UNDER SECTI ON 159 OF ACT SHOULD HAVE BEEN GIVEN TO THE A.O. SO THAT PROPER ASSESSME NT ORDER CAN BE PASSED. KEEPING IN VIEW THE DECISION OF THE HON'BLE M.P. HI GH COURT IN THE CASE OF DALUMAL SHYAMUMAL (SUPRA), WE QUASH THE ORDER OF AS SESSMENT DATED 30.11.2005 PASSED BY THE A.O. UNDER SECTION 143(3) IN THE NAME OF A DECEASED ASSESSEE AND REMIT THE CASE TO THE A.O. FO R PASSING PROPER ORDER OF ASSESSMENT AFTER COMPLYING WITH THE REQUIREMENTS OF SECTION 159 OF THE ACT. 4. IN THE RESULT, CROSS OBJECTION FILED BY THE ASSESSE E IS PARTLY ALLOWED WHEREAS THE APPEAL OF REVENUE IS DISMISSED AS THE S AME HAS BECOME INFRUCTUOUS IN VIEW OF OUR DECISION QUASHING THE AS SESSMENT MADE BY THE A.O. WHILE DISPOSING OFF THE CROSS OBJECTION OF THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE 2011. SD/ - SD/ - ( VIJAY PAL RAO ) ( P.M. JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH JUNE 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IV, MUMBAI 4. THE CIT IV, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITA T, MUMBAI BENCHES, MUMBAI N.P.