ACIT, New Delhi V. M/s. MMW Finmart, New Delhi

ITA 4291/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53209 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 16-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: YOGESH K JAGI A
• Keywords: Bad and doubtful debts
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 4291(DEL)2010 ASSESSMENT YEAR: 2006-07 ASSTT.COMMISSIONER OF INCOME TAX M/S. MMW FINMART, CIRCLE 33(1), NEW DELHI. V. 10172-73, IIND FLOOR, ABDUL AZIZ ROAD, KAROL BAGH, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.S. NEGI, SR. DR RESPONDENT BY: SHRI YOGESH K. JAGI A, ADV. ORDER PER A.D. JAIN, J.M . THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2006-07, TAKING THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN FACT IN GIVING RELI EF TO THE ASSESSEE ON THE GROUND THAT IN REMAND REPORT, THE AO SUBMITTED THAT THE BAD DEBTS MAY BE ALLOWED TO THE EXTENT OF THE DEBT CONFIRMED BY THE TWO DEBTORS DESPITE THE FACT THAT NOWHERE IN THE REMAND REPORT HAD THE AO STATED THAT BAD DEBTS MAY BE ALLOWED TO THE EXTENT OF THE DEBT CONFIRMED BY THE TWO DEBTORS, ORDER OF THE CIT(A) THUS BEING WIT HOUT BASIS. 2. THE LD. CIT(A) HAS ERRED IN ALLOWING REBATE ON COMMISSION ` 14,85,876/- IN RESPECT OF M/S. ICICI BANK, WHEN TH E AO WAS PREVENTED, IN REMAND PROCEEDINGS, FROM EXAMINING EI THER THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. ICICI BANK (FR OM 01.04.2005 TILL DATE) OR EXAMINING WHETHER ANY ADJUSTMENTS WERE MAD E IN THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. ICICI BANK (FROM 1.4.2005 TILL DATE), COPY OF ACCOUNT OF THE ASSESSE E IN THE BOOKS OF M/S. ITA NO. 4291(DEL)2010 2 ICICI BANK (FROM 1.4.2005 TILL DATE), NOT HAVING BE EN PROVIDED BY M/S. ICICI BANK DURING REMAND REPORT PROCEEDINGS, D ESPITE THE AO HAVING ASKED FOR IT U/S 133(6) AND M/S. ICICI BANK ALSO NOT HAVING INTIMATED WHETHER AND ADJUSTMENT HAD BEEN MADE IN T HE ACCOUNT OF THE ASSESSEE AND THAT BANK MERELY STATING THAT THE CHEQUE ISSUED IS STILL UNUSED AND THE PAYMENT OF THE SAME WILL NOT B E MADE IN FUTURE. 3. THE LD. CIT(A) HAS ERRED IN ALLOWING REBATE ON C OMMISSION IN RESPECT OF M/S. ICICI BANK, WITHOUT EXAMINING THE A CCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. ICICI BANK (FROM 1.4 .2005 TILL DATE) AND WITHOUT EXAMINING ANY ADJUSTMENTS WERE MADE IN THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. ICICI BANK (FROM 1.4. 2005 TILL DATE) AND WITHOUT EXAMINING THE NATURE OF ADJUSTMENTS, IF ANY , AND WITHOUT GIVING ANY FINDING THEREON. 4. THE LD. CIT(A) ERRED IN ALLOWING PART OF ` 4,95,064/- REBATE ON COMMISSION IN RESPECT OF M/S. CITI FINANCIAL, DESPI TE THE FACT THAT ADJUSTMENTS HAVE BEEN MADE IN THE ACCOUNT OF THE AS SESSEE IN THE BOOKS OF M/S. CITI FINANCIAL, WITHOUT EXAMINING THE NATURE OF THE ADJUSTMENTS AND WITHOUT GIVING A FINDING ON THE NAT URE OF THE SAID ADJUSTMENTS. 5. THE LD. CIT(A) ERRED IN ALLOWING REBATE ON COMMI SSION IN RESPECT OF THE TWO ENTITIES WITHOUT GIVING A FINDIN G ON WHETHER THE TWO ENTITIES M/S. ICICI BANK AND M/S. CITI FINANCIAL HA VE SHOWN THE ITEMS AS REMISSION OF THEIR LIABILITY IN THEIR BOOKS. 2. THE ASSESSEE FIRM IS IN THE BUSINESS OF SALES A GENCY FOR ARRANGING OF FINANCE FOR PURCHASE OF CARS. DURING THE YEAR, IT HAD DEBITED AN AMOUNT OF ` 19,80,940/- ON ACCOUNT OF BAD DEBTS IN RESPECT OF T HE REBATE ON COMMISSION FROM ICICI BANK, AMOUNTING TO ` 14,85,876/- AND FROM M/S. CITI FINANCIAL OF ` 4,95,064/-. ON QUERY, THE ASSESSEE SUBMITTED BEFO RE THE AO THAT EVEN THOUGH THESE AMOUNTS WERE SHOWN AS COMMISSION IN TH E PROFIT AND LOSS ITA NO. 4291(DEL)2010 3 ACCOUNT, THEY WERE NOT RECOVERABLE AND SO THEY REPR ESENTED BAD DEBTS. THE ASSESSEE PRODUCED BEFORE THE AO, A LETTER FROM CITI FINANCIAL, CONFIRMING THAT AN AMOUNT OF ` 2,13,092/- HAD NOT BEEN PAID, WHEREAS THE ASSESSEE HAD CLAIMED A SUM OF ` 4,95,064/-. THE AO, HOWEVER, DID NOT ALLOW THE CL AIM OF BAD DEBT. WHILE DOING SO, IT WAS OBSERVED THAT BA D DEBT HAD NOT BECOME DUE, AS CITI FINANCIAL HAD ACKNOWLEDGED THE AMOUNT OF ` 2,13,092/-, BUT HAD NOT DECLARED THAT SUCH AN AMOUNT SHALL NOT BE PAID. 3. APROPOS THE AMOUNT CONCERNING ICICI BANK, THE A O OBSERVED THAT THERE ALSO, THE BANK HAD NOT HITHERTO SETTLED THE M ATTER. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD NOT PRODUCED ANY DOC UMENTARY EVIDENCE TO PROVE THAT REBATES HAD BEEN GIVEN OR THE AMOUNT HAD BECOME BAD DEBT, BE CLAIMED U/S 36(1)(VII) OR SECTION 36(2) OF THE I.T. ACT. THE AO, THEREFORE, DISALLOWED THE AMOUNT OF ` 19,80,940/- AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. 4. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) OBSERVED THAT THE TWO DEBTORS HAD CONFIRMED THE AMOUNTS OF ` 14,61,221/- AND ` 2,62,647/-, RESPECTIVELY, AS OUTSTANDING IN THEIR RESPECTIVE CA SES AND HAD CLEARLY STATED THAT SUCH AMOUNTS HAD NOT BEEN PAID TO THE ASSESSEE ; THAT SINCE THE ASSESSEE HAD ALREADY SHOWN THE RELEVANT INCOME IN THE PROFIT AND LOSS ACCOUNT, IN ITA NO. 4291(DEL)2010 4 VIEW OF THE CONFIRMATIONS OF THE DEBTORS, IT WAS CL EAR THAT THE TWO AMOUNTS HAD RIGHTLY BEEN TREATED BY THE ASSESSEE AS BAD DEB TS. OBSERVING THAT THE ASSESSEE HAD NOT GIVEN ANY COPY OF TDS CERTIFICATE IN SUPPORT OF THE CONTENTION THAT THE ENTIRE AMOUNT OF ` 19,80,940/- WAS BAD DEBT, THE LD. CIT(A) REDUCED THE BAD DEBT TO ` 17,23,668/-. 5. BEFORE US, THE LD. DR HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN OBSERVING THAT IN THE REMAND REPORT SUBMITTED BY TH E AO, THE AO HAD OBSERVED THAT THE BAD DEBT HAD BEEN ALLOWED TO THE EXTENT OF THE DEBT CONFIRMED BY THE TWO DEBTORS; THAT THE AO, ON THE OTHER HAND, IN THE REMAND REPORT, HAD STATED THAT BAD DEBTS MAY BE ALLOWED TO THE EXTENT OF THE DEBT CONFIRMED BY THE TWO DEBTORS; THAT IN THE REMAND PR OCEEDINGS, THE AO WAS PREVENTED FROM EXAMINING EITHER THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. ICICI BANK OR AS TO WHETHER ADJUSTMENTS HAD BE EN MADE IN THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE BANK; THAT THE LD. CIT(A) FAILED TO HIMSELF EXAMINE THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE BANK OR AS TO WHETHER ANY ADJUSTMENTS WERE MADE IN THE ACCOUNTS O F THE ASSESSEE IN THE BOOKS OF THE BANK; THAT THE LD. CIT(A) ERRED IN ALL OWING PART OF ` 4,95,064/- AS REBATE ON COMMISSION IN RESPECT OF CITI FINANCIA L, IN SPITE OF THE FACT THAT ADJUSTMENTS HAD BEEN MADE IN THE ACCOUNT OF THE ASS ESSEE IN THE BOOKS OF CITI FINANCIAL; THAT THIS ALLOWANCE WAS GIVEN BY TH E LD. CIT(A) WITHOUT ITA NO. 4291(DEL)2010 5 EXAMINING THE NATURE OF ADJUSTMENTS AND WITHOUT REC ORDING ANY FINDING THEREON; THAT THE LD. CIT(A) ALSO FAILED TO RECORD A FINDING AS TO WHETHER ICICI BANK AND CITI FINANCIAL HAD SHOWN THE ITEMS A S REMISSION OF THEIR LIABILITY IN THEIR BOOKS. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT AS A RESULT OF THE AMENDMENT IN SECTION 36(1)(VII) OF THE ACT, THERE IS NO REQUIREMENT TO PROVE THAT THE DEBT BECAME DOUBTFUL IN THE YEAR IN THE CLAIM; THAT THE FACTUM OF WRITING OFF OF THE DEBT IN THE BOOKS IS SUFFICIE NT; THAT THE CONFIRMATION FROM CITI FINANCIAL SHOWED THAT AN AMOUNT OF ` 49,161/- WAS OUTSTANDING IN THE BOOKS, WHEREAS A BALANCE OF ` 4,64,926/- WAS NOT PAYABLE TO THE ASSESSEE AS IT HAD BEEN ADJUSTED IN THE CUSTOMERS ACCOUNT; T HAT ON REMAND, AFTER DUE INVESTIGATION, THE AO SUBMITTED THAT ICICI BANK HAD ACKNOWLEDGED AN OUTSTANDING OF ` 14,61,221/-, NARRATING THAT THE CHEQUE WAS STILL IN USE AND THE PAYMENTS THEREOF WOULD NOT BE MADE IN THE FUTUR E; AND THAT CITI FINANCIAL HAD CONFIRMED, LIKEWISE, THAT PAYMENT OF ` 2,62,647/- WAS NOT TO BE PAID IN FUTURE; THAT IN THE REJOINDER TO THE REMAND REPORT OF THE AO, THE ASSESSEE HAD SUBMITTED THAT ` 19,80,940/- WAS THE ACTUAL AMOUNT PAYABLE TO THE AS SESSEE, AS EVIDENCED BY THE TDS CERTIFICATE ISSUED BY BOTH THE PARTIES; THAT THE TWO ITA NO. 4291(DEL)2010 6 PARTIES HAD CONFIRMED THE AMOUNTS OF ` 14,61,221/- AND ` 2,62,647/- AS OUTSTANDING AND HAD CLEARLY STATED THAT THESE AMOUN TS WERE NOT TO BE PAID TO THE ASSESSEE; THAT THE ASSESSEE HAD ALREADY SHOWN T HE RELEVANT INCOME IN THE PROFIT AND LOSS ACCOUNT; THAT THE LD. CIT(A) HAS DU LY TAKEN INTO CONSIDERATION ALL THESE FACTS AND IT WAS ON THIS BASIS ONLY THAT THE IMPUGNED ORDER WAS PASSED; AND THAT THEREFORE, THERE BEING NO MERIT IN THE APPEAL FILED BY THE DEPARTMENT, THE SAME BE ORDERED TO BE DISMISSED. 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. THE LD. CIT(A) HAS DELINEATED ALL THE MATERIAL FAC TS IN THE ORDER. COPY OF THE REMAND REPORT IS AT PAGES 1 TO 2 OF THE DEPARTM ENTS PAPER BOOK. THE RELEVANT PORTION THEREOF READS AS FOLLOWS:- AS PER THE DIRECTIONS ISSUED BY YOUR GOODSELF, ENQ UIRIES WERE GOT CONDUCTED WITH M/S. ICICI BANK AND M/S. CITI FINANC IAL CONSUMER FINANCE INDIA LTD. WHO HAS SUBMITTED AS UNDER:- M/S. ICICI BANK M/S.ICICI BANK VIDE THEIR LETTER DATED 6.11.2009 HA S SUBMITTED THAT AS REGARDS PAYMENT OF COMMISSION OF ` 14,61,221/- THE CHEQUE ISSUED IS STILL UNUSED AND THE PAYMENT OF TH E SAME WILL NOT BE MADE IN THE FUTURE.(COPY ENCLOSED). M/S. CITI FINANCIAL CONSUMER FINANCE LTD. M/S. CITI FINANCIAL CONSUMER FINANCE LTD. VIDE THEI R LETTER DATED 3.12.2009 HAS SUBMITTED THAT THE PAYMENT OF ` 2,62,647/- IS NOT PAID AND WOULD NOT BE PAID IN FUTURE (COPY ENCLOSED). ITA NO. 4291(DEL)2010 7 IN THIS REGARD IT MAY BE STATED THAT THE ASSESSEE I S CLAIMING AN AMOUNT OF ` 4,95,064/- TO BE PAID FROM M/S. CITI FINANCIAL CONSUMER FINANCE LTD. HOWEVER, AS PER THEM, AN AM OUNT OF ` 2,62,647/- ONLY IS OUTSTANDING. WITH THE ABOVE FACTS, THE SUBMISSIONS OF THE ASSESS EE ARE RETURNED HEREWITH IN ORIGINAL. 8. FROM THE ABOVE, IT IS EVIDENT THAT IN THE CASE O F ICICI BANK, AN AMOUNT OF ` 14,61,221/- WAS OUTSTANDING AND IT WAS SPECIFICALLY STATED THAT PAYMENT THEREOF WOULD NOT BE MADE IN THE FUTURE. I N THE CASE OF CITI FINANCIAL, PAYMENT OF ` 2,62,647/-, THE OUTSTANDING AMOUNT, WAS STATED AS N OT TO BE MADE TO THE ASSESSEE IN THE FUTURE. THE ASS ESSEE HAD SHOWN THE RELEVANT INCOME IN THE PROFIT AND LOSS ACCOUNT. T HE LD. CIT(A) HAD DULY TAKEN INTO CONSIDERATION THE CONFIRMATIONS FROM ICI CI BANK AND CITI FINANCIAL AND IT WAS ONLY THEREAFTER THAT THE IMPUG NED ORDER WAS PASSED. 9. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HEREBY CONFIRMED, IN VIEW OF THE ABOVE DISCUSSION. 10. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.11.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA NO. 4291(DEL)2010 8 DATED: 16.11.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ASSISTANT REGISTRAR