SHRI. HANUMAN INTERNATIONAL CORPORATION, Mumbai V. ITO WARD 25 (3) (4), Mumbai

ITA 4450/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4951 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 01-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHREERAM BAJAJ
• Keywords: Bad and doubtful debts
• Section: 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , ! BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 4450 / / 2019 (%. 2012-13 ) ITA NO. 4450/MUM/2019 (A.Y 2012-13) SHRI HANUMAN INTERNATIONAL CORPORATION, C-201, EASTERN COURT, INTERSECTION OF TEJPAL ROAD AND PARLESHWAR ROAD, VILE PARLE (EAST), MUMBAI 400 057 PAN: AAAFH 0152Q ...... ' / APPELLANT % VS. INCOME TAX OFFICER,WARD 25(3)(4), C-10/605, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI 400 051. ..... ()/ RESPONDENT '*/ APPELLANT BY : SHRI SHREERAM BAJAJ ()*/ RESPONDENT BY : SHRI SANJAY J. SETHI %+) / DATE OF HEARING : 07/01/2021 ,-. +) / DATE OF PRONOUNCEMENT : 05/04/2021 / ORDER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX APPEALS-37, MUMBAI [IN SHORT THE CIT(A) ], DATED 14/06/2019 FOR THE ASSESSMENT YEAR 2012-13. 2. SHRI SHREERAM BAJAJ APPEARING ON BEHALF OF THE A SSESSEE NARRATING THE FACTS OF CASE SUBMITTED THAT THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF SUPPLY OF CHEMICALS. THE BUSINESS MODEL OF THE ASSESSEE I S THAT THE ASSESSEE PROCURES 2 . 4450 / / 2019 (%. 2012-13 ) ITA NO.4450/MUM/2019 (A.Y 2012-13) CHEMICALS FROM M/S. STANDARD MILLS LTD. (IN SHORT SML) AND SUPPLY THE SAME TO GANESH BENZOPLAST LTD. (IN SHORT GBL) AND OTHERS ON COMMISSION BASIS. THE GOODS ARE DIRECTLY SUPPLIED BY SML TO GBL. THE TRA NSPORT OF GOODS IS ORGANIZED BY THE ASSESSEE. THE PAYMENT OF GOODS IS DIRECTLY M ADE BY GBL TO SML AND THE TRANSPORTER. THIS MODE OF BUSINESS IS GOING ON FOR MANY YEARS. IN ONE OF THE TRANSACTIONS IN FY 2002-03, AN AMOUNT OF RS.1,66,80 6/- DUE FROM GBL FOR SUPPLIES MADE BY SML WAS OUTSTANDING ON ACCOUNT OF SOME DISPUTE. GBL DID NOT PAY THE SAID AMOUNT TO SML. SML ADJUSTED THE S AID AMOUNT DUE FROM GBL AGAINST THE COMMISSION PAYABLE TO THE ASSESSEE. TH E ASSESSEE IN ITS BOOKS DEBITED THE SAID AMOUNT TO GBLS ACCOUNT AS RECOVER ABLE AND REFLECTED THE SAME UNDER THE SCHEDULE SUNDRY DEBTORS SINCE FINA NCIAL YEAR 2003-04. DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL , THE ASSESSEE WRITE OFF SAID AMOUNT AS BAD DEBT IRRECOVERABLE. 2.1. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESS EE FURTHER SUBMITTED THAT DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR U NDER APPEAL THE ASSESSEE HAD FURTHER WRITTEN OFF A SUM OF RS.3,658/- RECEIVA BLE FROM H. ESMAIL & CO. ON ACCOUNT OF TRANSPORTATION CHARGES OF MATERIAL SUPPL IED BY SML TO GBL. THE ASSESSEE WAS FORCED TO PAY TRANSPORTATION CHARGES A S H. ESMAIL & CO. FAILED TO PAY TRANSPORT CHARGES TO THE TRANSPORTER. THE SAID AMOUNT IS ALSO OUTSTANDING SINCE FY 2003-04. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS WRITTEN OFF IRRECOVERABLE DUE S AS BAD DEBTS DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL IN ACCORDANCE WITH THE LAW LAID DOWN BY HON'BLE SUPREME COURT OF INDIA IN TRF LTD. VS CIT, 323 ITR 397. 2.2. THE ASSESSING OFFICER WITHOUT EXAMINING THE DO CUMENTS FURNISHED BY THE ASSESSEE REJECTED ASSESSEES CLAIM OF BAD DEBTS WRITTEN OF UNDER SECTION 3 . 4450 / / 2019 (%. 2012-13 ) ITA NO.4450/MUM/2019 (A.Y 2012-13) 36(1)(VII) OF THE INCOME TAX ACT, 1961 (IN SHORT T HE ACT). AGGRIEVED BY THE ASSESSMENT ORDER DATED 27/10/2014, THE ASSESSEE FIL ED APPEAL BEFORE THE CIT(A). IN FIRST APPELLATE PROCEEDINGS, THE ASSESSE E MADE ALTERNATE PRAYER THAT THE AMOUNT MAY BE ALLOWED AS BUSINESS LOSS UNDER SE CTION 28 OF THE ACT. THE CIT(A) REJECTED BOTH THE CONTENTIONS OF THE ASSESSE E AND CONFIRMED THE ADDITION. THE LD.AUTHORIZED REPRESENTATIVE OF THE A SSESSEE POINTED THAT THE AMOUNTS WRITTEN OFF AS BAD DEBT WERE OUTSTANDING FR OM THE RESPECTIVE PARTIES SINCE FINANCIAL YEAR 2003-04 AND WERE DULY REFLECTE D IN THE BOOKS. SINCE, THE AMOUNT HAD BECOME IRRECOVERABLE, THE ASSESSEE HAS W RITTEN OFF THE SAME IN ITS BOOKS. AS PER THE AMENDED PROVISIONS OF SECTION 36( 1)(VII), THE ASSESSEE IS NOT UNDER OBLIGATION TO SHOW THAT THE DEBT HAS IN FACT BECOME IRRECOVERABLE. 3. PER CONTRA, SHRI SANJAY J. SETHI REPRESENTING TH E DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSI NG THE APPEAL OF ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMI TTED THAT THE ASSESSEE HAS FAILED TO PRODUCE INVOICES RAISED ON THE SAID P ARTIES TO SHOW THAT THE AMOUNT WAS OUTSTANDING. 4. BOTH SIDES HEARD, ORDER OF AUTHORITIES BELOW EXA MINED. THE SHORT ISSUE RAISED IN APPEAL BY THE ASSESSEE IS DISALLOWANCE OF ASSESSEES CLAIM OF BAD DEBTS WRITTEN OFF AMOUNTING TO RS.1,70,464/-. THE A SSESSEE SUPPLY CHEMICALS ON COMMISSION BASIS. THE MODUS OPERANDI OF THE ASSE SSEES BUSINESS IS, THE ASSESSEE PROCURES CHEMICALS FROM SML, ARRANGE FOR T HE TRANSPORTATION AND SUPPLY THE SAME TO VARIOUS PARTIES. THE PAYMENT FOR GOODS SUPPLIED AND TRANSPORTATION CHARGES ARE DIRECTLY MADE BY THE PAR TIES TO SML AND THE TRANSPORTERS, RESPECTIVELY. IN THE IMPUGNED ASSESS MENT YEAR, THE ASSESSEE HAS WRITTEN OFF A SUM OF RS.1,70,464/- AS BAD DEBTS IRR ECOVERABLE, AS THE ASSESSEE 4 . 4450 / / 2019 (%. 2012-13 ) ITA NO.4450/MUM/2019 (A.Y 2012-13) FAILED TO RECOVER THE AMOUNT FROM THE PARTIES TO WH OM GOODS WERE SUPPLIED BY SML THROUGH THE ASSESSEE IN THE FINANCIAL YEAR 2003 -04. ONE OF THE COMPANY TO WHOM GOODS WERE SUPPLIED I.E. GBL FAILED TO MAKE PAYMENT TO SML. SML RECOVERED THE AMOUNT I.E. RS.1,66,806/- FROM THE CO MMISSION PAYABLE TO THE ASSESSEE. THE ASSESSEE DEBITED THE SAID AMOUNT TO G BLS ACCOUNT AS RECOVERABLE, HOWEVER THE ASSESSEE FAILED TO RECOVER THE SAME OVER THE PERIOD OF TIME. SIMILARLY, IN THE CASE OF H. ESMAIL & CO . TO WHOM THE ASSESSEE HAD SUPPLIED GOODS FAILED TO PAY TRANSPORTATION CHARGES RS.3,658/-, THE ASSESSEE HAD TO PAY TRANSPORTATION CHARGES, THEREAFTER, THE ASSESSEE FAILED TO RECOVER THE SAID AMOUNT FROM H. ESMAIL & CO. SINCE, THE DE BTS HAD BECOME IRRECOVERABLE, THE ASSESSEE WRITE OFF THE DEBTS IN THE IMPUGNED ASSESSMENT YEAR. THE HON'BLE SUPREME COURT OF INDIA IN THE CA SE OF TRF LTD. (SUPRA) HAS HELD THAT POST AMENDMENT TO CLAUSE (VII) OF SECTION 36(1) W.E.F. 1-4-1989, THE ONLY REQUIREMENT IS THAT THE DEBT SHOULD BE WRITTEN OFF IN THE BOOKS. THE ASSESSEE IN ITS BOOKS HAD SHOWN THE AMOUNT AS IRREC OVERABLE FROM GBL AND H. ESMAIL & CO. AND HAS WRITTEN OF THE SAME IN ACCORDA NCE WITH THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT. THIS AMOUNT IS REFLE CTED IN THE BOOKS OF THE ASSESSEE SINCE FINANCIAL YEAR 2003-04. THIS FACT H AS NOT BEEN DISPUTED BY THE REVENUE. IN LIGHT OF THE FACTS OF THE CASE, PROVISIONS OF SE CTION 36(1)(VII) OF THE ACT AND THE JUDGEMENT OF HONBLE APEX COURT, I FIND MER IT IN THE PRIMARY CONTENTION RAISED BY THE ASSESSEE. ACCORDINGLY, GRO UND NO.1 OF THE APPEAL IS ALLOWED. 5 . 4450 / / 2019 (%. 2012-13 ) ITA NO.4450/MUM/2019 (A.Y 2012-13) 5. SINCE, THE PRIMARY CONTENTION OF THE ASSESSEE HA S BEEN ACCEPTED, THE ALTERNATE CLAIM TO TREAT THE AMOUNT AS BUSINESS LOS S HAS BECOME ACADEMIC, HENCE, THE SAME IS NOT DELIBERATED UPON. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN THE TERMS AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY , THE 05 TH DAY OF APRIL, 2021. SD./- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, 0%/ DATED: 05/04/2021 VM , SR. PS (O/S) COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT , 2. () / THE RESPONDENT. 3. 1) ( )/ THE CIT(A)- 4. 1) CIT 5. 23()% , . . . , / DR, ITAT, MUMBAI 6. 34567 / GUARD FILE. BY ORDER, //TRUE COPY// DY./ASSTT. REGISTRAR) ITAT, MUMBAI