RAJARAM STOCK BROKING CO. (MUMBAI), MUMBAI V. ITO WD 4(2)(1), MUMBAI

ITA 4049/MUM/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1826 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 31-01-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 30-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DIPAK KUMAR SINHA
• Assessee Lawyers: VIPUL B JOSHI
• Keywords: Depreciation; Peak credit; Bad and doubtful debts
• Section: 133(6); 68

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI .. , ! ' #. $.. % , & ', ' BEFORE SHRI R.S.SYAL, AM AND DR.T.M.PAVALAN, JM ITA NO.4049/MUM/2009 : ASST.YEAR 2004-2005 M/S.RAJARAM STOCK BROCKING CO. (MUMBAI) PRIVATE LIMITED 919, P.J.TOWER, DALAL STREET, FORT MUMBAI 400 023. PAN : AABCR1110Q. THE INCOME TAX OFFICER WARD 4(2)(1) MUMBAI. ( () / // / APPELLANT) % % % % / VS. ( +,()/ RESPONDENT) () - -- - . . . . / APPELLANT BY : SHRI VIPUL B.JOSHI +,() - . - . - . - . / RESPONDENT BY : SHRI DIPAK KUMAR SINHA % - /! / / / / DATE OF HEARING : 31.01.2013 012 - /! / DATE OF PRONOUNCEMENT : 05.02.2013 ' 3 ' 3 ' 3 ' 3 / / / / O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 03.04.2009 IN RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. IN THE FIRST GROUND THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER FOR THE REASON THAT NO PROPER OPPORTUNITY WAS GRANTED TO THE ASSESSEE BY THE LEARNED CIT(A). GROUND NO.2 IS AGAI NST THE CONFIRMATION OF ADDITION OF ` 18,00,000 ON ACCOUNT OF UNEXPLAINED ITA NO.4049/MUM/2009. M/S.RAJARAM STOCK BROCKING CO. 2 CREDITS. BRIEFLY STATED THE FACTS OF THE CASE ARE T HAT THE ASSESSEE IS A SHARE BROKER EARNING INCOME FROM BROKERAGE AS WELL AS TRADING IN SHARES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTED FROM BANK RECONCILIATION STATEMENT TH AT TWO CHEQUES ISSUED IN THE NAME OF M/S.NEELAM SALES AMOUNTING T O ` 5,00,000 EACH WERE NOT CLEARED. THE ASSESSEE WAS CALLED UPON TO FURNISH THE COPY OF ACCOUNT OF M/S NEELAM SALES. THE ASSESSEE S UBMITTED BEFORE THE A.O. THAT THE NAME OF M/S NEELAM SALES WAS INA DVERTENTLY RECORDED WHEREAS THE CORRECT PARTIES FROM WHOM THES E TWO CHEQUES OF ` 5 LAKH EACH WERE RECEIVED WERE M/S.RUCHITA ENTERPRI SES AND M/S.DEEPAK CORPORATION. THE ASSESSING OFFICER REQUI RED THE ASSESSEE TO PRODUCE THESE TWO PARTIES. THE ASSESSEE REQUESTE D THE A.O. TO ISSUE SUMMONS / NOTICE U/S 133(6) IN ORDER TO VERIFY THE CORRECTNESS OF CREDIT ENTRIES. AT THE SAME TIME THE ASSESSEE SUBMI TTED COPY OF ACCOUNT OF DEEPAK CORPORATION IN THE BOOKS OF THE A SSESSEE DULY CONFIRMED BY THE PARTY. THE ASSESSING OFFICER ISSUE D SUMMONS TO SHRI KAILASH KABRA, PROPRIETOR OF BOTH THE ABOVE RE FERRED CONCERNS. THE A.O. ALSO OBTAINED INFORMATION FROM THE BANKERS OF THESE CONCERNS AND OBTAINED THEIR COPY OF ACCOUNTS. IT F URTHER TRANSPIRED THAT THE ASSESSEE HAD CERTAIN SQUARED UP TRANSACTIO NS WITH THESE TWO CONCERNS AND FURTHER THERE WAS ONE MORE CONCERN, NA MELY, M/S.ANTIMA CORPORATION, AGAIN A PROPRIETORSHIP CONC ERN OF SHRI KAILASH KABRA. SINCE SHRI KABRA COULD NOT BE PRODU CED BEFORE THE ASSESSING OFFICER AND THERE WAS NO CONFIRMATION OF THE ACCOUNTS OF THESE TWO CONCERNS EXCEPT DEEPAK CORPORATION, THE A SSESSING OFFICER ITA NO.4049/MUM/2009. M/S.RAJARAM STOCK BROCKING CO. 3 COMPUTED PEAK OF THE LOAN TRANSACTION IN ALL THE TH REE CONCERNS OF SHRI KABRA AT ` 18 LAKH AND MADE ADDITION OF THE SAME U/S 68. DURIN G THE COURSE OF FIRST APPELLATE PROCEEDINGS THE ASSES SEE PLEADED THAT THE ASSESSING OFFICER HAD NOT CONFRONTED THE MATERIAL C OLLECTED BY HIM AND USED AGAINST IT FOR THE PURPOSES OF MAKING ADDI TION. THE LEARNED CIT(A) REMANDED THE MATTER TO THE A.O. A COPY OF RE MAND REPORT IS AVAILABLE ON PAGE 161 OF THE PAPER BOOK. BY THIS RE PORT DATED 23 RD OCTOBER, 2008, THE ASSESSING OFFICER HAS NOTED THAT HE RECORDED THE STATEMENT OF SHRI KAILASH KABRA ON 15.05.2008 AND S HRI DEVI KRISHNA KENI, A DIRECTOR OF THE ASSESSEE-COMPANY ON 14.05.2008. IT HAS FURTHER BEEN OBSERVED IN PARA 2 OF THE REMAND R EPORT THAT THE ASSESSEE REQUESTED FOR CROSS-EXAMINATION OF SHRI KA BRA. THE ASSESSING OFFICER TRIED TO PROVIDE THIS OPPORTUNITY , BUT SHRI KABRA DID NOT APPEAR FOR CROSS-EXAMINATION. THE ASSESSEE S REQUEST FOR CROSS-EXAMINATION ONCE AGAIN COULD NOT BE PUT INTO ACTION BY THE ASSESSING OFFICER ON THE SECOND OCCASION FOR NON-AP PEARANCE BY SHRI KABRA. ON THE BASIS OF THE STATEMENT OF SHRI KAILAS H KABRA RECORDED BY THE A.O. IN REMAND PROCEEDINGS, HE CAME TO HOLD THAT THE ADDITION OF ` 18 LAKH WAS RIGHTLY MADE. A SUMMARY OF THE RELEVANT PORTIONS OF THE STATEMENT OF SHRI KAILASH KABRA HAVE BEEN MADE BY THE A.O. IN THE REMAND ORDER. THE ASSESSEE ONCE AGAIN ARGUED BE FORE THE LEARNED CIT(A) THAT THE CONTENTS OF THE STATEMENT OF SHRI K ABRA RECORDED BY THE ASSESSING OFFICER WERE INCORRECT AND THE ASSESS EE SHOULD BE ALLOWED CROSS-EXAMINATION. NOT CONVINCED WITH THE A SSESSEES SUBMISSION, THE LEARNED CIT(A) UPHELD THE ADDITION. ITA NO.4049/MUM/2009. M/S.RAJARAM STOCK BROCKING CO. 4 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED FROM TH E STATEMENT OF SHRI KAILASH KABRA THAT HE ADMITTED TO HAVE ONLY ONE CON CERN, NAMELY, M/S.DEEPAK CORPORATION. IN RESPONSE TO QUESTION NO. 6, HE STATED THAT HE WAS FUNDING THE ASSESSEE THROUGH HIS CONCERN DEE PAK CORPORATION. THE ASSESSING OFFICER VIDE HIS QUESTION NO.8 ASKED SHRI KAILASH KABRA THAT IF HE WAS HAVING ONLY ONE CONCERN, THEN HOW THE CONFIRMATIONS IN RESPECT OF M/S.RUCHITA ENTERPRISE AND M/S.ANTIMA CORPORATION WERE SIGNED. SHRI KABRA REPLIED THAT TH E STATEMENTS WERE SIGNED BY HIM, : BUT THESE CONCERNS ARE BELONGING TO M/S.RAJARAM STOCK BROKING CO. PVT. LTD. I HAVE OPENED THE BANK ACCOUNTS IN THE NAME OF M/S.RUCHITA ENTERPRISE AND M/S.ANTIMA CORPO RATION. IN RESPONSE TO QUESTION NO.9, HE SUBMITTED THAT HE OPE NED THE ACCOUNTS IN RESPECT OF THESE TWO CONCERNS BUT THESE COMPANIE S WERE RUN BY THE ASSESSEE FOR ITS OWN TRANSACTIONS. WHEN WE PERUSE TH IS STATEMENT GIVEN BY SHRI KABRA, IT APPEARS THAT HE ADMITTED TO HAVE ONLY ONE CONCERN, NAMELY, DEEPAK CORPORATION AND THE OTHER TWO CONCERNS, NAMELY, RUCHITA ENTERPRISE AND ANTIMA CORPORATION W ERE CLAIMED TO BE OPERATED BY HIM FOR AND ON BEHALF OF THE ASSESSE E ALONE. THE LEARNED AR CONTENDED THAT THE STATEMENT GIVEN BY SH RI KABRA IS INCORRECT INASMUCH AS THE BANK ACCOUNTS OF THESE TW O CONCERNS WOULD DEMONSTRATE THAT THERE WERE SEVERAL TRANSACTIONS CO NDUCTED BY SHRI KABRA HIMSELF WITH OTHER PARTIES INCLUDING HIS CRED IT CARD PAYMENTS AND NOT OF THE ASSESSEE ALONE. PAGE NO.40 OF THE PA PER BOOK IS A COPY ITA NO.4049/MUM/2009. M/S.RAJARAM STOCK BROCKING CO. 5 OF ACCOUNT OF DEEPAK CORPORATION IN THE BOOKS OF AS SESSEE BY WHICH VARIOUS TRANSACTIONS HAVE BEEN RECORDED STARTING FR OM 22.04.2003 UP TO 31.03.2004. PAGE NO.41 OF THE PAPER BOOK IS A CO PY OF ACCOUNT OF RUCHITA ENTERPRISES IN THE BOOKS OF ASSESSEE BY WHI CH VARIOUS TRANSACTIONS HAVE BEEN RECORDED STARTING FROM 06.05 .2003 UP TO 31.03.2004. PAGE 109 IS A COPY OF ACCOUNT OF ANITA CORPORATION IN THE BOOKS OF THE ASSESSEE. THE CORRECTNESS OF THESE THREE ACCOUNTS IN THE BOOKS OF ASSESSEE HAS NOT BEEN DISPUTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. IT IS FURTHER WORTH NO TING THAT THE PEAK CREDIT FROM THESE THREE ACCOUNTS COMES AT ` 18 LAKH, WHICH IS THE AMOUNT ADDED BY THE A.O. U/S 68 OF THE ACT. THESE F ACTS EX FACIE BRING TO LIGHT THAT THE ASSESSEES TRANSACTIONS WIT H THESE THREE CONCERNS OF SHRI KABRA ARE LIMITED TO THOSE RECORDE D ON SUCH PAGES. IT NEEDS TO BE ASCERTAINED AS TO WHETHER THE STATEMENT OF SHRI KABRA ABOUT THE ACCOUNTS OF RUCHITA ENTERPRISES AND ANTIM A CORPORATION MAINTAINED BY HIM FOR AND ON BEHALF OF THE ASSESSEE IS CORRECT OR NOT. THE LEARNED AR HAS PLACED ON RECORD COPIES OF BANK STATEMENTS OF RESPECT OF RUCHITA ENTERPRISES AND ANTIMA CORPORATI ON. FROM THESE BANK STATEMENT OF ABN AMRO BANK HOLDING ACCOUNT OF ANTIMA CORPORATION AND THE CITY CO-OPERATIVE BANK LIMITED HOLDING THE ACCOUNT OF RUCHITA ENTERPRISES, IT CAN BE SEEN THAT THERE ARE SEVERAL TRANSACTIONS ENTERED INTO THESE BANK ACCOUNTS. IF T HE CONTENTION OF SHRI KABRA IS ACCEPTED THAT HE WAS MAINTAINING BANK ACCOUNT IN RESPECT OF THESE TWO CONCERNS FOR AND ON BEHALF OF THE ASSESSEE, THEN OBVIOUSLY ALL THE TRANSACTIONS IN THESE TWO BANK AC COUNTS WOULD HAVE ITA NO.4049/MUM/2009. M/S.RAJARAM STOCK BROCKING CO. 6 BEEN LIMITED ONLY TO THE ASSESSEE. IT CAN BE SEEN T HAT THE TRANSACTIONS OF ASSESSEE WITH RUCHITA ENTERPRISES AND ANTIMA COR PORATION ARE IN THE RANGE OF 10% OF THE TOTAL BANK TRANSACTIONS APP EARING IN THE BANK ACCOUNTS OF THESE TWO CONCERNS. PRIMA FACIE IT APPEARS THAT THE STATEMENT GIVEN BY SH. KABRA BEFORE THE AO IS NOT M ATCHING WITH THE MATERIAL ON RECORD. IN OUR CONSIDERED OPINION, THER E IS A NEED TO ALLOW AN OPPORTUNITY TO THE ASSESSEE FOR CROSS EXAMINING SH. KABRA, SO THAT THE CORRECTNESS OR OTHERWISE OF HIS STATEMENT COULD BE ASCERTAINED. EQUALLY, THERE ARE CERTAIN CIRCUMSTANCES, WHICH ALS O PRIMA FACIE BELIE THE ASSESSEES CONTENTION ABOUT THE GENUINENESS OF THE CREDIT ENTRIES. AT THIS STAGE, WE DO NOT PROPOSE TO ELABORATELY DIS CUSS THE FACTORS FOR AND AGAINST THE ASSESSEE. IN OUR CONSIDERED OPINION THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE ASSESSEE IS ALLOWED AN OPPORTUNITY TO CROSS EXAMINE SH. KABRA. WE ORDER ACCORDINGLY. THE IMPUGNED ORDER IS THEREFORE, SET ASIDE AND THE MATTER IS SEN T BACK TO THE AO FOR DOING THE NEEDFUL IN THIS REGARD AS PER OUR ABOVE D IRECTIONS AND THEREAFTER DECIDING THE ISSUE AFRESH AS PER LAW. 4. THE SECOND GROUND IS AGAINST THE CONFIRMATION OF ADDITION OF BAD DEBTS. THE ASSESSEE CLAIMED DEDUCTION OF ` 4,84,269, BEING THE AMOUNT OF BAD DEBTS. THIS WAS NOT ALLOWED BY THE AU THORITIES BELOW ON THE GROUND THAT THE ASSESSEE WAS A STOCK BROKER AND HENCE THE CONDITIONS OF SECTION 36(2) WERE FULFILLED ONLY TO THE EXTENT OF BROKERAGE AS SHOWN AS INCOME IN ANY PREVIOUS YEAR. ITA NO.4049/MUM/2009. M/S.RAJARAM STOCK BROCKING CO. 7 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THIS ISSU E IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT V. SHREYAS S.MORAKHIA [(2012) 342 ITR 285 (BOM.)] . IN THIS JUDGMENT THE DEDUCTION HAS BEEN HELD TO B E ALLOWABLE. HOWEVER, WE WANT TO MAKE IT CLEAR THAT T HE DEDUCTION SHOULD BE ALLOWED ONLY TO THE EXTENT OF THE DEBTS A S REDUCED BY THE VALUE OF SHARES OF THESE PARTIES IN THE HANDS OF TH E ASSESSEE. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE FACTS AND ALLOW THE APPROPRIATE AMOUNT OF DEDUCTION OF BAD DEBTS AFTER ALLOWING AN OPPORTUNITY TO THE ASSESSEE. 6. THE LAST GROUND IS ABOUT THE CLAIM FOR DEDUCTION ON ACCOUNT OF REPAIRS AND MAINTENANCE CHARGES WITH RESPECT OF COM PUTERS. THE ASSESSEE PAID A SUM OF ` 1,16,150 FOR PROCURING COMPUTERS AND DEDUCTION WAS CLAIMED. THE A.O. HELD THE AMOUNT TO BE CAPITAL IN NATURE AND AFTER ALLOWING DEPRECIATION AT THE RATE OF 30%, HE DISALLOWED THE REMAINING AMOUNT. THE LEARNED CIT(A) UPHELD THE ACTION OF THE A.O. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE DO NOT FIND ANY INF IRMITY IN THE IMPUGNED ORDER ON THIS SCORE. IT HAS NOT BEEN CONCL USIVELY PROVED BEFORE US THAT THE PAYMENT WAS MADE FOR REPAIR OF C OMPUTERS AND NOT FOR PURCHASE. WE, THEREFORE UPHOLD THE IMPUGNED ORDE R. ITA NO.4049/MUM/2009. M/S.RAJARAM STOCK BROCKING CO. 8 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 05 TH DAY OF FEBRUARY, 2013. ' 3 - 012 4'%5 1 - 6 SD/- SD/- (DR.T.M.PAVALAN) (R.S.SYAL) & ' & ' & ' & ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; 4'% DATED : 05 TH FEBRUARY, 2013. DEVDAS* ' 3 - +&/78 9 82/ ' 3 - +&/78 9 82/ ' 3 - +&/78 9 82/ ' 3 - +&/78 9 82// COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. +,() / THE RESPONDENT. 3. : () / THE CIT(A)-IV, MUMBAI. 4. : / CIT 5. 8=6 +&/&% , , / DR, ITAT, MUMBAI 6. 6 > / GUARD FILE. ' 3% ' 3% ' 3% ' 3% / BY ORDER, ,8/ +&/ //TRUE COPY// ? ? ? ?/ // /@ A @ A @ A @ A ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI