Hosa Ram Mali, Sirohi V. ITO, Sirohi

ITA 42/JODH/2021

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3421 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-03-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 10-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREM PRAKASH MEENA
• Keywords: Presumptive income; Bad and doubtful debts; Condonation of delay
• Section: 44AD; 234B; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR(SMC). BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No.42/Jodh/2021 Assessment Year: 2013-14 Hosaram Mali S/o Sshri nava ji Mali V&P, Barloot, Sirohi. [PAN: APXPM7897R] (Appellant) Vs. Income Tax Officer, Sirohi. (Respondent) Appellant by Sh. Amit Kothari, C.A. Respondent by Sh. Prem Prakash Meena,Sr.DR Date of Hearing 11.03.2024 Date of Pronouncement 13.03.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of the Learned Commissioner of Income Tax (Appeals)-1, Jodhpur dated 19.06.2018 [here in after “ld.CIT(A)”] for assessment year 2013-14, which in turn arise from the order dated 22.02.2016 passed under section 143(3)of the Income Tax Act (here in after “Act”) by the ITO, Sirohi. I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 2 2.1 At the outset of hearing, the Bench observed that there is a substantial delay of 1006 days in filing of the appeal by the assessee for which the ld. AR of the assessee filed an application for condonation of delay with following prayers and the assessee to this effect also filed an affidavit :- “1. The applicant, is a salary employee at present working as a sales person in a hardware shop. In the year under consideration under appeal the assessee had taken sub- brokership of a share trader and was work at Sirohi. 2. The return of income was submitted u/s 44AD, and the assessment was made u/s 143(3), in which the main issue related to deduction of bad debts which was deducted by the principal for the business of shares transactions done by the clients of the assessee through the main broker. The said bad debts was deducted from the commission income payable to the appellant by the broker. 3. The assessee went in appeal, which was filed in 2016 before the CIT(A). However in the meantime on account of heavy losses the said business was closed and the appellant joined the service. The appeal order was made on 19.6.2018 which was perhaps received by the office but I was never aware that such order was being made. Only recently when I approached the bank for some house loan, for renovation of my old house, I came to know that the bank account are lying attached for income tax demand, and I came to know that even my appeal had been decided. I am not very educated and I am only 12 th standard passed, and was not aware what should be done. 4. In these circumstances the delay occurred may kindly be condoned. When such orders came to the notice of the appellant I contacted the local persons, who told me that the same would be filed at Jodhpur. Further due to lock down on account of Covid, further delay occurred to visit Jodhpur and file the appeal. 5. The delay so occurred was on bonafide grounds and were not wilful, and the same may kindly be condoned. The appellant had derived no benefit in filing the appeals belatedly. 6. It is therefore very humbly prayed that the delay so occurred may kindly be condoned.” I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 3 The ld. AR of the assessee also relied upon the certain judgment in support of the condonation petition filed by the assessee. 2.2 During the course of hearing, the ld. DR strongly opposed to the reasons advanced and submitted that the assessee is working as stock broker and he should be more vigilant about this rights which are attached with duties and the delay is not fully attributable to the Covid-19 and therefore, the reasons advanced by the assessee does not warrant for condonation of delay the appeal of the assessee but at the same time prayed that court may decide the issue as deem fit and proper in the case. 2.3. We have heard the rival contentions and perused the materials available on record. The prayer for the condonation of delay is filed when the assessee is failed to bring the appeal within the statutory time period and the authority is based on the reasons advanced by the assessee may or may not consider the contention raised in the petition filed to condone the delay. In the present case the assessee submitted that he is a salary employee at present working as a sales person in a hardware shop. In the year under consideration under appeal the assessee had taken sub- brokership of a share trader and was work at I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 4 Sirohi. The assessee filed the return of income based on the provision of section 44AD of the Act, and the assessment was made u/s 143(3), in which the main issue related to deduction of bad debts which was deducted by the principal for the business of shares transactions done by the clients of the assessee through the main broker has not been considered even though the assessee brought on record all the relevant facts. The said bad debts was deducted from the commission income payable to the appellant by the same broker. Against the order of the assessment the assessee went in appeal, which was filed in 2016 before the CIT(A), in the meantime due to heavy losses the said business was closed and the appellant joined the service. The appeal order was made on 19.6.2018 which was perhaps received by the office, but assessee was not aware that such order was being made. He came to know only when he approached the bank for house loan, for renovation of old house he came to know that the bank account are lying attached for income tax demand, and the appeal which the assessee has filed has been decided and the order is passed. The ld. AR of the assessee further contended as the assessee was passing through the mental trauma of heavy losses and being not much educated the failure is not willful and even the covid-19 period it got further delayed. The assessee submitted these facts stated in the condonation petition which was also I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 5 confirmed on an affidavit. Condonation petition is a remedy and not a right of the assessee but considering the fact that the vitalfacts of the case is not considered on its merits and if the appeal of the assessee is not admitted that the assessee has to suffer irreparable loss recovery of demand which he has not received on the commission on account of bad debts. The Hon’ble Supreme court has dealt the principle relating to consideration of “sufficient cause” for condonation of delay and the factors that are required to be kept in mind in case of Collector, Land Acquisition, Anantnag &Anr.vs. Katiji&Ors., 1987(2) SCC 107 wherein it is held as that “3. The legislature has conferred the power to condone delay by enacting Section 5 [ Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.] of the Indian Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on ”merits”. The expression “sufficient cause” employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice — that being the life- purpose for the existence of the institution of courts. It is common I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 6 knowledge that this Court has been making a justifiably liberal approach in matters instituted in this Court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that: “1. Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. “Every day’s delay must be explained” does not mean that a pedantic approach should be Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational common-sense pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. 6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 7 is expected to do so. Making a justice-oriented approach from this perspective, there was sufficient cause for condoning the delay in the institution of the appeal. The fact that it was the “State” which was seeking condonation and not a private party was altogether irrelevant. The doctrine of equality before law demands that all litigants, including the State as a litigant, are accorded the same treatment and the law is administered in an even-handed manner. There is no warrant for according a step-motherly treatment when the “State” is the applicant praying for condonation of delay. In fact experience shows that on account of an impersonal machinery (no one in charge of the matter is directly hit or hurt by the judgment sought to be subjected to appeal) and the inherited bureaucratic methodology imbued with the note-making, file-pushing and passing-on-the-buck ethos, delay on its part is less difficult to understand though more difficult to approve. In any event, the State which represents the collective cause of the community, does not deserve a litigant-non grata status. The courts therefore have to be informed with the spirit and philosophy of the provision in the course of the interpretation of the expression “sufficient cause”. So also the same approach has to be evidenced in its application that sufficient facts of the case has remained to be placed before the authority concerned and if the delay is not condone considering the aspect of the matter the I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 8 assessee has to suffer a lot. Keeping in mind the reasons and the decision of the apex court as referred we condone the delay. 3. In this appeal, the assessee has raised following grounds: - “ 1. The appellant pray for condonation of delay in submission of appeal. The appellant came to know about the order being made only recently, when demand was being pursued and when assessee approached bank for some house loan, it came to notice that account were attached. Further due to Covid the delay occurred for which the appellant prays for condonation. 2. The ld. CIT(a0 has erred in upholding the action of ld. Ao in taking the gross commission income at Rs. 24,25,004/- as against Rs. 24,10,268/- declared by the appellant. 3. The ld. CIT(A) has erred in not granting deduction of Rs. 17,52,795/- deducted by the principal on account of bad debts of customers deducted from the commission income. 4.The ld. CIT(A0 has erred in not accepting the income declared u/s 44AD of the Act. 5. The entire addition to the returned income is bad in law and bad on facts. 6. The interest charged u/s 234B and 234A is bad in law and bad on facts. 7. The appellant crave liberty to add, amend, alter or modify any of the ground of appeal on or before its hearing before your honour.” 4. Brief fact of the case is that the return of income declaring gross total income at Rs. 4,04,790/- was filed by the assessee on 05/08/2013 through e-filing The case selected for scrutiny as recommended by CPC. A notice u/s 143(2) was issued on 30/09/2014 which was duly served on 30/09/2014, In response to the said notice the assessee attended office from time to time and produced Bank Statement and other documents. The assessee also produced written submission, and other requisite I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 9 details/ information. The assessee received income from commission and brokerage as sub broker. He works under the name and style Ketan investment Sirohi. During the course of assessment proceedings, it is noticed that the assessee has received Commission and brokerage of Rs. 24,25,006/ as per 26AS from following companies:- 1. Angel Commodities Broking Private Ltd., Rs. 18,88,667/- 2. Angel Broking Private Ltd. Rs. 5,21,602/- 5. During the course of assessment proceedings, assessee was asked to substantiate as to how he computed his income to the tune of Rs. 4,36,630/- in his return of income for AY 2013-14. The section 44AD of the Income tax Act, 1961 is not applicable on commission and brokerage income therefore, the total receipts of the commission should be the income of the assessee for the year under consideration. The assessee was show caused why the total income received as commission income Rs. 24,25,006/- may not be considered as income of the assessee. The assessee did not maintain books of Accounts. The P&L submitted during the course of assessment proceedings also not contain anything about bad debts. He merely claims that the amount not recovered by the company from the clients through sub-broker (Assessee) was adjusted by Angel broking and commodities Pvt. Ltd., I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 10 Mumbai. The amount of bad debts claimed was not taken into account in computing the total income of the relevant previous year or of any earlier previous year as the assessee filed income after calculating income u/s 44AD and the claim of the assessee was not considered and it was contended by the ld AO that assessee is not entitled for deduction for bad debts. 6. Aggrieved from the order of the assessing officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds of the appeal so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated here in below:- “4.2. I have considered the assessment order, appellant's submissions and documents on record. I find that the return of income was filed on the basis of gross receipts of Rs. 24,25,006/- u/s 44AD which is higher than 8% of the gross receipts. The section 44AD of the act is not applicable on commissions and brokerage income. Therefore the total receipts of the commissions should be the income of the assessee for the year under consideration. The assessee did not maintain books of accounts. The P&L submitted during the course of assessment proceedings also did not contain anything about bad debts. He merely claims that the amount not recovered by the company from the clients through sub-broker was adjusted by the Angel broking and commodities Pvt. Ltd., Mumbai. The amount of bad debts claimed was not taken into account in computing the total income of the relevant previous year as the appellant filed ITR after calculating income u/s 44AD. In the light of the detailed discussion, submission, I find that the appellant is not entitled for deduction for so-called bad debts write off as appellant failed to prove that so- called bad debts have actually been written off by him; judgment in the case of Ahmedabad Electricity Co. Ltd [High Court Of Gujarat] [29-01-2003] [Cite Count: 36] [2003- LL-0129-5] is relied upon. Nor, any effort has been proved to have been taken for making recoveries from the clients who are said to have failed to make due payments; judgment in the case of Glass Miniature Bulb Industries, 204 ITR I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 11 352 (SC) is relied upon. The appellant fails on this ground of appeal. This ground of appeal is treated as dismissed.” 7. As the assessee did find any favour on account of the appeal so filed before ld. CIT(A), the present appeal filed against the said order of the ld. CIT(A) before this tribunal on the grounds as reiterated in para 3 above.The ld. AR of the assessee also filed a detailed paper book in support of the contention so raised. The index of the document submitted by the ld. AR of the assessee are as under:- S. No. Particulars Page No. 1. Submission to Ld. CIT(A) 1-6 2. ITR-V, Computation of income and 26AS 7-11 3. Summary of bad debts written off and broker’s account statement 12-26 4. Copies of the judgement relied upon a. Rakesh Garg vs. PCIT &Anr. (2022) 325 CTR (Raj.) 440 27-39 b. Oracle India (p) Ltd. Vs. DCIT (2009) 27 SOT 293 40-47 c. CIT vs. DB (India) Securities Ltd. (2009) 226 CTR (Del.) 48-51 d. H.M. Kashiparekh& Co. Ltd. Vs. CIT (1960) 39 ITR 706(Bom) 52-64 e. Arth Stock Broking Pvt. Ahd. Vs. DIT 65-84 8. The ld. AR of the assessee submitted that the purpose of the income is to assessee the real income and net receipt and not the gross income [ Mitesh Rolling Mills P. Ltd. (Guj-HC)] since in this case the assessee is able to demonstrate that whatever commission that he has received from that commission itself the recovery has been made and therefore, taxing the gross commission is against the principles of taxing I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 12 the income and not the gross income and therefore, the submission filed before the ld. CIT(A) be considered and the assessee may be given the justice. 9. On the other hand, ld. DR relied upon the orders of the lower authorities and opposed the contentions so raised and submitted that these contentions were rejected by the lower authorities and therefore, there is no merits in the arguments advanced in this appeal. 10. We have heard the rival contentions, perused the material placed on record and gone through the written submission and judicial precedent cited by both the parties to drive home their respective contentions. The bench noted that the it is duty of the assessing officer to tax the income of the assessee and while doing so he has also a duty being the co-judicial officer of the revenue that the eligible deduction when made in the assessment proceeding supported by the evidence. Here in this case though the assessee has filed the return of income on presumptive taxation u/s. 44AD of the Act but when the assessee bring all the evidence in support of the claim of bad debts and also files an affidavit the same should have been considered. Even the ld. CIT(A) has simply stated that the presumptive taxation scheme is not applicable to I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 13 the fact of the case of the assessee and simply stated that the assessee has not made any efforts for recovery of the bad debts and therefore, the same is not allowed. Whereas we note from the records that the payer of the commission has already deducted the amount of the commission on account of non receipt of the money and the commission has been paid net of the recovery. Since the assessee is no collecting the money and the same is directly payable to the account of the principle broker under whom the assessee is serving as sub broker the deduction made by the principal broker cannot be denied to the assessee and therefore, we direct the ld. AO to allow the claim of bad debts to the assessee. In terms of this observation ground no. 2 & 3 raised by the assessee is allowed. Ground no. 1 and 4 to 7 either consequential or technical in nature the same are not required to be adjudicated. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 13/03/2024. Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) JudcialMember Accountant Member Dated 13/03/2024 Santosh (On Tour) I.T.A. No. 42/Jodh/2021 Hosaram Mali vs. ITO 14 Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order