M/s. Akash Ganga Courier Ltd., JODHPUR V. JCIT, BIKANER

ITA 399/JODH/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7853 (ITAT-JODHPUR)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 09-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: U C JAIN
• Keywords: Reasonable cause; Bad and doubtful debts; Corroborative evidences
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 399 /JODH/2014 (A.Y. 20 1 0 - 11 ) M/S. AKASH GANGA COURIER LTD., OPP. RAILWAY STATION, LOONKARANSAR, BIKANER. VS. J CIT, RANGE - 1, BIKANER . PAN NO. AABCA 4081 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI RAJENDRA JAIN. DEPARTMENT BY : SHRI MAHESH KUMAR - D.R. DATE OF HEARING : 18 / 0 9 /201 4 . DATE OF PRONOUNCEMENT : 22 /0 9 /201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 22 /0 5 /2014 OF L D . CIT(A), BIKANER . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNTS FOR RS. 2,74,700/ - ON THE FINDING THAT THE BALANCES 2 RECOVERABLE FROM DEBTORS HAS BEEN WRITTEN OFF WITHOUT ANY REASONABLE CAUSE. THE ARBITRA R Y DISALLOWANCE CONTRARY TO THE STATUTORY PROVIS I ON AND JUDICIAL PRONOUNCEMENT WAS SUSTAINED BY THE LD. CIT(A) IS ERRONEOUS AND CONTRARY TO THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF TR F LTD. VS. CIT [(20 10) 323 ITR 397 (SC)] CITED DURING THE APPELLATE PROCEEDING . 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 1,06,988/ - BEING 10% OF VEHICLE RUNNING AND MAINTENANCE EXPENSES OF RS. 10,69 ,988/ - AND RS. 78,751/ - BEING 10% OF TELEPHONE & MOBILE EXPENSES OF RS. 7,87,510/ - WHICH WAS DISALLOWED BY THE LD. A.O. TREATING THE SAME AS PERSONAL. THE DISALLOWANCE WAS ARBITRARY SUSTAINED BY THE LD. CIT(A) CONTRARY TO JUDICIAL PRONOUNCEMENT REFERRED WITHOUT ASSIG N ING ANY REASON. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, INTEREST LEVIED U/S. 234B & 234C IS ERRONEOUS. 4. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO RAISE ANY ADDITIONAL OR ALTERNATIVE GR O UND AT OR BEFORE THE TIME OF HE ARING. 5. THE PETITIONER PRAYS FOR JUSTICE & RELIEF. 2 GROUNDS NO. 4 & 5 ARE GENERAL IN NATURE, SO DO NOT REQUIRE ANY COMMENT ON OUR PART . THE GRIEVANCE OF THE ASSESSEE VIDE GROUND NO. 1 RELATES TO THE SUSTENANCE OF DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BAD DEBTS WRITTEN OFF AMOUNTING TO RS. 2, 7 4,700/ - . 3. FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE CLAIMED SUNDRY BALANCE WRITTEN OFF AMOUNTING TO RS. 2,74,701/ - IN THE BOOKS OF ACCOUNTS. HE ASKED THE ASSESSEE TO FURNISH THE DETAILS OF SUCH CLAIM AND TO PROVE GE NUINENESS OF THE SAME. ACCORDING TO THE ASSESSING 3 OFFICER, THE ASSESSEE F A ILED TO EXPLAIN AND SUBMITTED ONLY LIST, BUT COULD NOT PRODUCE SUPPORTING EVIDENCES TO PROVE THAT THE ASSESSEE HAD MADE EFFORTS FOR RECOVERY . HE WAS OF THE VIEW THAT THE MAJOR PORTION OF BAD DEBTS PERTAINED TO F.Y. 2007 - 08 AND THE BALANCE S HAD BEEN WRITTEN OFF IN A SHORT PERIOD WITHOUT ANY COGENT EVIDENCE . HE, THEREFORE, DISALLOWED THE CLAIM OF RS. 2,74,700/ - . 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER FAILED TO CONSIDER THAT THE ASSESSEE HAD COMP L IED WITH ALL THE BASIC CONDITIONS OF SECTION 36(1 )(VII) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) FOR CLAIMING BAD DEBTS. IT WAS FURTHER STATED THAT BAD DEBTS WRITTEN OFF WERE ESTABLISHED DEBTORS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR COURIER SERVICES PRO VIDED TO THEM AND AMOUNT SO WRITTEN OFF HAD ALREADY BEEN ACCOUNTED FOR AS INCOME OF RELEVANT YEAR OR IN EARLIER YEAR . RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - 1) TRF LTD. VS. CIT (323 ITR 397) 2) RA JENDRA Y SHAH (313 ITR 3) 3) PUNJAB TRACTORS LTD. (320 ITR 153) ; AND 4) CB RICHARDS ELLIS MAURITIUS LTD. VS. DCIT (38 SOT 236) 4 IT WAS FURTHER STATED THAT THE ASSESSING OFFICER HAD NOT CONSIDER ED THE EXPLANATION GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT BAD DEBTS WRITTEN OFF IN BRANCHES WERE NOT INTER BRANCH BALANCES . 5. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT AS PER I.T. ACT THE BAD DEBTS SHOULD BE INCI DENTAL IN NATURE BUT THE ASSESSEE COULD NOT FURNISH SUPPORTING EVIDENCE TO PROVE THAT THE ASSESSEE HAD MADE EFFORTS FOR RECOVE RY . HE THEREFORE, SUSTAINED DISALLOWANCE MADE BY THE ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL. 6 . LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE BAD DEBTS WERE PROPER AND ADMITTED DEBTS , THOSE WERE INCIDENTAL AND ARISING OUT OF OPERATION OF BUSINESS CARRYING ON BY THE ASSESSEE . IT WAS STATED THAT THOSE DEBTS WERE TAKEN INTO ACCOUNT IN COMPUTING ASSESSABLE INCOME AND WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS, SO THOSE WERE ALLOWABLE. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT (2010) 323 ITR 397. 5 7 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT THE DEBTS OF THE ASSESSEE WERE APPEARING IN THE BOOKS OF ACCOUNTS AND WERE RELATED TO THE COURIER SERVICES PROVIDED TO THEM AND AMOUNT SO WRITTEN OFF HAD ALREADY BEEN ACCOUNTED FOR AS AN INCOME IN THE EARLIER YEARS , T HE DEBTS WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS . THEREFORE, THOSE WERE ALLOWABLE AS PER RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER: - AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE INCOME - TAX ACT, 1961 , WITH EFFECT FROM APRIL 1, 1989 , IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE : IT IS ENOUGH IF THE BAD DEBTS IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 9 . WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE AFORESAID REFERRED TO CASE, ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE AND THE LD. CIT(A) WRONGLY SUSTAINED 6 THE SAME. IN THAT VIEW OF THE MATTER, WE DELETE THE IMPUGNED DISALLOWANCE SUSTAINED BY THE LD. CIT(A). 10 . NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE SUSTENANCE OF DISALLOWANCE OUT OF VEHICLE RUNNING & MAINTENANCE EXPENSES AND TELEPHONE & MOBILE EXPENSES . 11 . FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSEE CLAIMED VEHICLE RUNNING & MAINTENANCE EXPENSES AT RS. 10,69,884/ - AND TELEPHONE & MOBILE EXPENSES AT RS. 7,87,510/ - TOTALING TO RS. 18,57,394/ - . THOSE EXPENSES WERE CLAIMED UNDER THE HEAD ADMINISTRATIVE EXPENSES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THOSE EXPENSES WERE FULLY VOUCHED BUT MOST OF THE EXPENSES WERE SUPPORTED THROUGH HAND MADE INTERNAL VOUCHERS. HE DISALLOWED 10% OF THE EXPENSES . ACCORDINGLY, DISALLOWANCE OF RS. 1,85,739/ - WAS MADE. 12. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED AND NO SPECIFIC DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER IN THE DETAILS FILED. IT WAS FURTHER STATED THAT THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES AND CONSIDERING THE TURNOVER OF THE ASSESSEE , THE 7 DISALLOWANCE MADE WAS UNJUSTIFIED. THE LD. CIT(A) , HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . NOW THE ASSESSEE IS IN APPEAL. 13 LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE IS A LIMITED COMPANY. SO, IT IS A SEPARATE ENTITY FROM ITS DIRECTORS AND SHAREHOLDERS AND BEING A JURISTIC PERSON, IT CANNOT MAKE USE OF EXPENSES FOR ITSELF . THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - 1) DINESH MILL LTD. VS. CIT (2002) 254 ITR 673 (GUJ.) 2) SWASTIK SUITING & SHIRTING PVT. LTD. VS. ACIT (2003) 34 DTC 236 (JODH. TRIB.) 14 IN HIS RIVAL SUBMISSIONS, LEARNED D.R. STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE EXPENSES INCURRED BY THE ASSESSEE WERE NOT FULLY VERIFIABLE, THEREFORE, DISALLOWANCE MADE BY THE ASSESSING OFFICER @ 10% OF THOSE EXPENSES W AS FAIR AND REASONABLE AND THE LD. CIT(A) WAS FULLY JUSTIFIED IN SUSTAINING THE DISALLOWANCE. 8 15 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE DULY AUDITED AND NO SPECIFIC DEFECT HAD BEEN POINTED OUT IN THOSE BOO KS MAINTAINED IN REGULAR COURSE OF BUSINESS. THE ASSESSING OFFICER DID NOT POINT OUT ANY SPECIFIC INSTANCE WHERE THE EXPENSES WERE USED FOR PERSONAL PURPOSES OR WERE NOT RELATED TO THE BUSINESS OF THE ASSESSEE . THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED PARTICULARLY WHEN THE ASSESSEE IS A LIMITED COMPANY AND A SEPARATE ENTITY FROM ITS DIRECTORS AND SHAREHOLDERS , S O, IT CANNOT USE THE EXPENSES FOR ITSELF . THEREFORE, WE DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) . FOR THE AFORESAID VIEW WE ARE FORTIFIED BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF SWASTIK SUITING & SHIRTING PVT. LTD. VS. ACIT (SUPRA) . 16 . V IDE GROUND NO. 3 , THE GRIEVANCE OF THE ASSESSEE RELATES TO THE CHARGING OF INTEREST U/S. 234B & 234C OF THE ACT. AS REGARDS TO THIS ISSUE, IT WAS THE COMMON CONTENTION OF BOTH THE PARTIES THAT IT IS CONSEQUENTIAL IN NATURE. WE ORDER ACCORDINGLY. 9 1 7 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ( ORDER PRONOUNCED IN THE COURT ON 22 ND SEPTEMBER , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22 ND SEPTEMBER , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .