M/S Brijnath Khandelwal & Co, Kolkata V. D.C.I.T Cir - 34,kolkata., Kolkata

ITA 392/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100115 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 27-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BISWAS
• Assessee Lawyers: S M SURANA
• Keywords: Wrong claim; Bad and doubtful debts; Assessment record
• Section: 143(3)

Judgement Text

I.T.A. NO. 392/KOL./2013 ASSESSMENT YEAR: 2006-2007 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 392/KOL/ 2013 ASSESSMENT YEAR : 2006-2007 M/S. BRIJNATH KHANDELWAL & CO.,.................... ..................APPELLANT C/O. G.R. SHARMA, ADVOCATE, 7, RABINDRA SARANI, KOLKATA-700 001 [PAN : AADFB 6267 H] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. .............RESPONDENT CIRCLE-34, KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 APPEARANCES BY: SHRI S.M. SURANA, ADVOCATE , FOR THE ASSESSEE SHRI M.K. BISWAS, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : NOVEMBER 26, 2015 DATE OF PRONOUNCING THE ORDER : NOVEMBER 30, 2015 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DA TED 04.09.2012 FOR THE ASSESSMENT YEAR 2006-07, WHEREBY HE CONFIRMED T HE PENALTY OF RS.11,00,234/- IMPOSED BY THE ASSESSING OFFICER UND ER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES AND SECURITIES. THE RETURN OF INCOME FOR YEAR UNDER CONSIDERATION WAS F ILED BY IT ON 30.10.2006 DECLARING A LOSS OF RS.20,79,640/-. IN T HE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS.32,68,760/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WRI TTEN OFF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COUL D NOT ESTABLISH ON EVIDENCE THAT THE SAID AMOUNT OF BAD DEBTS WAS INCL UDED IN ITS INCOME FOR I.T.A. NO. 392/KOL./2013 ASSESSMENT YEAR: 2006-2007 PAGE 2 OF 6 THE EARLIER YEARS. THE ASSESSING OFFICER, THEREFORE , DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 24. 11.2008. THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS CONF IRMED BY THE LD. CIT(APPEALS) DISMISSING THE APPEAL OF THE ASSESSEE. THEREAFTER A NOTICE WAS ISSUED BY THE ASSESSING OFFICER REQUIRING THE A SSESSEE TO SHOW-CAUSE AS TO WHY PENALTY UNDER SECTION 271(1)(C) SHOULD NO T BE IMPOSED IN RESPECT OF THE ADDITION MADE TO ITS TOTAL INCOME ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS WRITTEN OFF. THE EXPLANAT ION OFFERED BY THE ASSESSEE IN THIS REGARD WAS NOT FOUND SATISFACTORY BY THE ASSESSING OFFICER AND REJECTING THE SAME, HE IMPOSED THE PENA LTY OF RS.11,00,234/- UNDER SECTION 271(1)(C) BEING 100% OF THE TAX SOUGH T TO BE EVADED BY THE ASSESSING OFFICER IN RESPECT OF THE ADDITION MADE T O ITS TOTAL INCOME ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS. 3. THE PENALTY IMPOSED BY THE ASSESSING OFFICER UND ER SECTION 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPE AL FILED BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF APPELLATE PROCEE DINGS BEFORE THE LD. CIT(APPEALS), THE FOLLOWING SUBMISSIONS WERE MADE B Y THE ASSESSEE:- (A) THE APPELLANT DURING THE COURSE OF HEARING BEFO RE THE LEARNED ASSESSING OFFICER HAD DULY FILED THE DETAIL S OF NAME AND ADDRESS OF PARTIES ALONGWITH THE LIST OF SUNDRY DEB TORS SINCE MARCH 2002 TO MARCH 2006 AND COPIES OF THEIR ACCOUN TS. (B) RELEVANT REQUEST WAS ALSO MADE BEFORE THE ASSES SING OFFICER TO EXAMINE THE ACCOUNTS OF THE APPELLANT FIRM IF AN Y FURTHER DETAILS, OF PARTICULARS WERE DESIRED BY HIM. (C) COPIES OF LETTERS ADDRESSED AND SENT TO THE DEB TORS FOR AMOUNTS RECOVERABLE FROM THEM WERE ALSO FILED DURIN G THE COURSE OF ASSESSMENT. (D) THERE IS NO REQUIREMENT IN LAW TO ESTABLISH THA T THE DEBT HAS BECOME BAD IN THE PREVIOUS YEAR. IN OTHER WORDS IT IS NOT OBLIGATORY FOR THE ASSESSEE TO PLACE DEMONSTRATIVE PROOF FOR ESTABLISHING A DEBT AS BAD. IF IT HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR IT WILL SUFFICE FOR CLAIMING IT AS BAD DEBT, - TRF LIMITED VS.- CIT (2010) 190 TAXMAN 391 (SC). I.T.A. NO. 392/KOL./2013 ASSESSMENT YEAR: 2006-2007 PAGE 3 OF 6 ON THE BASIS OF THE ABOVE SUBMISSIONS, IT WAS CONTE NDED ON BEHALF OF THE ASSESEE BEFORE THE LD. CIT(APPEALS) THAT THE DISALL OWANCE MADE ON ACCOUNT OF BAD DEBTS WRITTEN OFF PER SE COULD NOT MEAN THAT THERE WAS FURNISHING OF INACCURATE PARTICULARS OF INCOME JUST IFYING LEVY OF PENALTY UNDER SECTION 271(1)(C). THE LD. CIT(APPEALS) DID N OT FIND MERIT IN THE CONTENTION OF THE ASSESSEE AND PROCEEDED TO CONFIR M THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) FO R THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 3.2 OF HIS IMPUGNED ORDER:- 3.2. I HAVE PERUSED THE PENALTY ORDER AND CONSIDER ED THE SUBMISSION OF THE APPELLANT. THE APPELLANT FILED AP PEAL AGAINST THE ADDITION MADE IN THE ASSESSMENT ORDER A LSO ON WHICH PENALTY U/S N271(1)9C) WAS INITIATED, ON THE QUANTUM ADDITION, THE THEN CIT(A) DISMISSED THE APP EAL ON THE GROUND THAT THE APPELLANT COULD NOT PROVE THE F ACT THAT AMOUNT OF THESE DEBTS WERE TAKEN AS INCOME IN ANY O F THE PREVIOUS YEAR. THIS FACT SHOWS THAT THE APPELLANT I TSELF ADMITTED THEIR MISTAKE FOR FILING INACCURATE PARTIC ULARS OF THEIR INCOME. THE APPELLANT COULD NOT FILE ANY REAS ONABLE EXPLANATION IN THIS REGARD. THESE FACTS SHOW THAT T HE INTENTION OF THE APPELLANT FOR FILING INACCURATE PA RTICULARS AND THEREBY REDUCING THEIR TAX LIABILITY WAS NOT BO NAFIDE. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I DO NOT FIND ANY INFIRMITY IN THE PENALTY ORDER. THEREFORE, THE GROUND RAISED IS DISMISSED. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESESE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, TOOK US THROUGH THE VARIOUS SUBMISSIONS FILED BY THE ASSESSEE BEFORE TH E ASSESSING OFFICER TO POINT OUT THAT THE RELEVANT BAD DEBTS WRITTEN OFF B Y THE ASSESSEE ACTUALLY PERTAINED TO TWO BROKER FIRMS, WHICH HAD MERGED INT O THE ASSESSEE FIRM. HE SUBMITTED THAT ALL THESE DEBTS WERE CONSISTENTLY SHOWN BY THE SAID TWO FIRMS AS WELL AS BY THE ASSESSEE-FIRM AS SUNDRY DEBTS, WHICH BY ITSELF IS SUFFICIENT TO SHOW THAT THEY REPRESENTED TRADE D EBTORS OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE COULD NOT ESTABLISH THAT THE AMOUNT OF THE SAID DEBS, EITHER PARTLY OR FULLY, WAS INCLUDED IN THE INCOME OF THE EARLIER YEARS DUE TO SUBSTANTIAL TIME GAP, BUT A REQUEST, T HEREFORE, WAS MADE BY THE ASSESSEE TO THE ASSESSING OFFICER TO INSPECT TH E RELEVANT ASSESSMENT I.T.A. NO. 392/KOL./2013 ASSESSMENT YEAR: 2006-2007 PAGE 4 OF 6 RECORD TO FIND OUT AND FURNISH SUCH DETAILS. HE CON TENDED THAT THIS CONDUCT OF THE ASSESSEE CLEARLY SHOWS HIS BONAFIDE AND IN THE ABSENCE OF ANYTHING BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE CLAIM OF THE ASSESSEE FOR BAD DEBTS WRITTEN OFF WAS WRONG PENALTY UNDER SECTION 271(1)(C) CANNOT BE JUSTIFIABLY IMPOSED. HE ALSO SUBMITTED THAT BOTH THE ERSTWHILE FIRMS MERGED WITH THE ASSESSEE-F IRM WERE ENGAGED IN BROKERS BUSINESS AND PART OF INCOME ON ACCOUNT OF THE RELEVANT DEBTS IN THE FORM OF BROKERAGE MUST HAVE BEEN OFFERED BY THE M AS INCOME IN THE EARLIER YEARS. HE CONTENDED THAT THE CLAIM OF THE A SSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF THUS WAS A BONA FIDE CLAIM AND JUST BECAUSE THE SAME HAS BEEN DISALLOWED IN THE QUANTUM PROCEEDINGS FOR WANT OF RELEVANT EVIDENCE TO ESTABLISH THAT THE AMO UNT OF SUCH DEBTS WAS OFFERED AS INCOME IN THE EARLIER YEARS AND THE SAID DISALLOWANCE IS ACCEPTED BY THE ASSESSEE, PENALTY CANNOT BE IMPOSED UNDER SECTION 271(1)(C). 6. THE LD. D.R., ON THE OTHER HAND, STRONGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE THAT THE PRESENT CASE IS A FIT CASE TO IMPOSE PENALTY UNDER SECTION 271(1)(C ). HE CONTENDED THAT ONE OF THE CONDITIONS TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS WAS NOT SATISFIED BY THE ASSESSEE AND THE FACT THAT THE DIS ALLOWANCE MADE ON THIS ISSUE IS ACCEPTED BY THE ASSESEE CLEARLY SHOWS THAT ITS CLAIM ON ACCOUNT OF BAD DEBTS WRITTEN OFF WAS A WRONG CLAIM ATTRACTING THE PENAL PROVISIONS OF SECTION 271(1)(C). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT T HE RELEVANT DEBTS WRITTEN OFF BY THE ASSESSEE DURING THE YEAR UNDER C ONSIDERATION PERTAINED TO THE ERSTWHILE TWO SHARE BROKER FIRMS THAT HAD ME RGED INTO THE ASSESEE- FIRM. AS DEMONSTRATED BY THE LD. COUNSEL FOR THE AS SESSEE BEFORE THE AUTHORITIES BELOW AS WELL AS BEFORE US, THE SAID DE BTS WERE SHOWN BY THE TWO ERSTWHILE FIRMS AS THEIR SUNDRY DEBTORS AND KEE PING IN VIEW THE NATURE OF THE BUSINESS OF THE SAID TWO FIRMS AS WEL L AS THE TREATMENT GIVEN I.T.A. NO. 392/KOL./2013 ASSESSMENT YEAR: 2006-2007 PAGE 5 OF 6 TO THE RELEVANT DEBTS IN THEIR BOOKS OF ACCOUNT, IT CAN REASONABLY BE INFERRED THAT THE SAID DEBTS REPRESENTED TRADE DEBT ORS OF THE CONCERNED TWO FIRMS. EVEN AFTER MERGER, THE ASSESSEE-FIRM CON TINUED TO SHOW THE SAID DEBTS AS SUNDRY DEBTORS IN ITS BOOKS OF ACCOUN T AND AFTER HAVING WRITTEN OFF THE SAME AS IRRECOVERABLE FROM ITS BOOK S OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION, DEDUCTION UNDER SECTION 3 6(1)(VII) WAS CLAIMED BY THE ASSESSEE. HAVING REGARD TO ALL THESE FACTS A ND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WAS A BONAFIDE ON E BASED ON A POSSIBLE VIEW OF THE MATTER AND ALTHOUGH THE SAME HAS BEEN D ISALLOWED IN THE QUANTUM PROCEEDINGS AND THE DISALLOWANCE SO MADE HA S BEEN ACCEPTED BY THE ASSESSEE, THERE IS NOTHING BROUGHT ON RECORD TO SHOW THAT THE CLAIM MADE BY THE ASSESSEE WAS A WRONG ONE. ON THE OTHER HAND, THE FAILURE OF THE ASSESSEE TO ESTABLISH THAT THE AMOUNT OF RELEVA NT DEBTS WAS NOT INCLUDED, EITHER PARTLY OR FULLY, IN ITS INCOME WAS DUE TO A SUBSTANTIAL TIME LAG AS EXPLAINED BY THE ASSESSEE AND THE CONDU CT OF THE ASSESSEE TO FURNISH ALL THE RELEVANT DETAILS AND TO SEEK INSPEC TION OF ASSESSMENT RECORDS TO FIND OUT AND FURNISH THE RELEVANT DETAIL S TO SUPPORT AND SUBSTANTIAL ITS CLAIM FOR BAD DEBTS WRITTEN OFF CLE ARLY SHOW ITS BONAFIDE. AS SUCH CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE SAID TO BE GUI LTY OF CONCEALING THE PARTICULARS OF ITS INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME WARRANTING IMPOSITION OF PENALTY UNDER SECTI ON 271(1)(C). IN THAT VIEW OF THE MATTER, WE CANCEL THE PENALTY IMPOSED B Y THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) AND A LLOW THIS APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 30, 2015. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 30 TH DAY OF NOVEMBER, 2015 I.T.A. NO. 392/KOL./2013 ASSESSMENT YEAR: 2006-2007 PAGE 6 OF 6 ORDER PRONOUNCED BY SD/- SD/- (S.S.V.R.) (W.A.) J.M. A.M. COPIES TO : (1) M/S. BRIJNATH KHANDELWAL & CO., C/O. G.R. SHARMA, ADVOCATE, 7, RABINDRA SARANI, KOLKATA-700 001 (2) DEPUTY COMMISSIONER OF INCOME TAX,. CIRCLE-34, KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 (3) COMMISSIONER OF INCOME-TAX (APPEALS)- XX, KOL KATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.