ACIT 19(1), MUMBAI V. CHAWLA & SONS, MUMBAI

ITA 4959/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88109 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 28-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R N DSOUZA
• Keywords: Bad and doubtful debts
• Section: 37

Judgement Text

, , , , , ,, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI . . , ! '# , $ BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.4959/MUM/2013 ASSESSMENT YEAR: 2005-06 ACIT - 19(1), ROOM NO.322, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL MUMBAI-400012 / VS. M/S CHAWLA & SONS, LINKSIDE, 50, CARTER ROAD, BANDRA(W), MUMBAI-400052 ( '# / REVENUE) ( ()* /ASSESSEE) P.A. NO.AAAFC4799C '# + , + , + , + , / REVENUE BY SHRI . R.N. DSOUZA - DR ()* + , + , + , + , / // / ASSESSEE BY): NONE + *-! / / / / DATE OF HEARING : 27/01/2015 ./0 + *-! / DATE OF PRONOUNCEMENT : 27/01/2015 '1 '1 '1 '1 + *-! / DATE OF ORDER : 29/01/2015 '1 '1 '1 '1 / / / / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 12/04/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, ON THE GROUND THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN ALLOWING THE CLAIM OF BAD DEBTS AS AN ALLOWABLE BUSINESS LOSS M/S CHAWLA & SONS . 2 IN SPITE OF THE FACT THAT EXPENSES WERE NOT RECORDE D IN THE BOOKS OF ACCOUNT. DURING HEARING, THE LD. DR, SHRI R.N.D SOUZA, ADVANCED HIS ARGUMENTS WHICH ARE IDENTICAL TO THE G ROUND RAISED BY FURTHER SUBMITTING THAT ALLOWANCE OF ANY BAD DEB TS OR PART THEREOF CAN ONLY BE MADE WHEN SUCH AMOUNT IS PART O F COMPUTATION OF INCOME AND OFFERED FOR TAX IN ANY PR EVIOUS YEAR. IT WAS ALSO SUBMITTED THAT IN VIEW OF SECTION 37 OF THE ACT, ANY EXPENDITURE SHALL BE ALLOWED AS DEDUCTION IN THE YE AR OF INCURRING OF EXPENDITURE, THUS, THE EXPENDITURE IN THE YEAR 2000- 01 CANNOT BE ALLOWED TO BE DEDUCTED IN THE YEAR 200 5 FOR CLAIMING BUSINESS LOSS. 2. ON THE OTHER HAND, NOBODY APPEARED FOR THE ASSES SEE IN SPITE OF SERVICE OF NOTICE AS IS EVIDENT FROM THE RECORD/ACKNOWLEDGMENT SENT BY THE POSTAL AUTHORITIE S. IT SEEMS THAT THE ASSESSEE IS NOT INTERESTED TO RESPOND TO T HE APPEAL OF THE REVENUE I.E. THE ASSESSEE HAS NOTHING TO SAY, T HEREFORE, WE HAVE NO OPTION BUT TO PROCEED EX-PARTY QUA THE ASSE SSEE AND PROCEED TO DISPOSED OF THIS APPEAL ON THE BASIS MA TERIAL AVAILABLE ON RECORD. 2.1. WE HAVE CONSIDERED THE SUBMISSIONS ADVANCED BY LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORTS AND EXPORTS. DURING THE FINANCIAL YEAR 1999-2000 (RELEV ANT TO ASSESSMENT YEAR 2000-01), THE ASSESSEE ENTERED INTO A MOU FOR IMPORT AND BACK TO BACK SALE OF PETROLEUM PRODUCTS. THE GOODS IMPORTED WERE ON BEHALF OF M/S SHIVAM PETROLEUM AND THE DELIVERY OF THE SAME WAS MADE AT ADANI MUDRA PORT K ACHCHC. ON ARRIVAL OF SUCH GOODS AT THE PORT, IT WAS FOUND THAT GOODS M/S CHAWLA & SONS . 3 SUPPLIED BY THE OVERSEAS PARTY I.E. M/S AL. MULLAH TRADING AND CONTRACTING WAS NOT FUEL OIL BUT WAS A RUBBISH LIQU ID HAVING NO VALUE. THE OVERSEAS PARTY, IN WHOSE FAVOR L/C WAS OPENED, IN CASH THE AMOUNT OF RS.1,03,27,309/- AND WAS DEBITED BY THE BANK TOWARDS THE SAME. THIS AMOUNT WAS DEBITED TO M/S SHIVAM PETROLEUM AS RECOVERABLE FROM THEM FOR WHICH SUIT WAS ALSO FILED AGAINST M/S SHIVAM PETROLEUM FOR PERFORM ANCE OF CONTRACT. A LEGAL NOTICE WAS ALSO SERVED UPON TO M /S AL. MULLAH TRADING AND CONTRACTING ON 5TH JUNE 2000 THROUGH AN OVERSEAS ADVOCATE, M/S GALADARI & ASSOCIATES, FOR RECOVERY O F THE IMPUGNED AMOUNT OF RS.1,03,27,309/- ALONG WITH APPR OPRIATE DAMAGES. THE LEGAL PROCEEDINGS CONTINUED FOR FOUR YEARS AND IN THE ASSESSMENT YEAR 2005-06 (IMPUGNED ASSESSMENT YE AR), IT WAS DECIDED TO THE WRITE OFF THE AMOUNT AS NON-RECO VERABLE AS THE WHOLE CASE WAS MOVING TOWARDS NOWHERE AND THE C OST OF FIGHTING WAS ALSO IN EXORBITANT. THE ASSESSING OFF ICER HELD THAT THE ASSESSEE COULD NOT PROVE WITH SUPPORTING EVIDEN CE THAT THE SAID AMOUNT WAS OFFERED AS INCOME IN EARLIER YEAR A ND FINALLY THE IMPUGNED AMOUNT WAS NOT ALLOWED AS BAD DEBT AS PER SECTION 36(2) OF THE INCOME TAX ACT, 1961(HEREINAFTER THE A CT) AND WAS ADDED TO THE INCOME OF THE ASSESSEE. 2.2. ON APPEAL, BEFORE THE LD. FIRST APPELLATE AUTH ORITY, THE FACTS WERE DULY EXAMINED AND HELD THAT THE AMOUNT IS AN A LLOWABLE BUSINESS LOSS DURING THE RELEVANT ASSESSMENT YEAR A ND DECIDED IN FAVOUR OF THE ASSESSEE AGAINST WHICH THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDE R LEADING TO ADDING THE IMPUGNED AMOUNT TO THE TOTAL INCOME OF T HE M/S CHAWLA & SONS . 4 ASSESSEE, CONCLUSION DRAWN IN THE IMPUGNED ORDER, M ATERIAL FACTS AVAILABLE ON RECORD AND THE ASSERTIONS MADE B Y THE LD. DR, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE NOTE THAT THE LD. ASSESSING OFFICER HAS DEALT WITH THE ISSUE IN A LIM ITED CIRCUMFERENCE AND HAD NOT GONE INTO THE SCOPE OF SE CTION 37 OF THE ACT. ADMITTEDLY, THE ASSESSEE GOT AN ORDER FOR IMPORT OF FURNACE OIL FROM M/S SHIVAM PETROLEUM AND THE OVERS EAS PARTY FRAUDULENTLY SENT DIFFERENT ITEM CONTRARY TO THE TE RMS OF IMPORT CONTRACT/ITEM. IT IS ALSO UNDISPUTED FACT THAT PAY MENT HAD ALREADY BEEN MADE TO THE EXPORTER/OVERSEAS PARTY TH ROUGH AN L/C, THUS, UNDER THE FACTS NARRATED HEREINABOVE, IT CANNOT BE DENIED THAT IT WAS A BUSINESS LOSS TO THE ASSESSEE. THE ONLY CONTENTION REMAINS WHETHER IT IS TO BE ALLOWED DURI NG THE RELEVANT PERIOD (WHEN THE PAYMENT WAS MADE) OR FOR THE YEAR UNDER CONSIDERATION. LITIGATION ALSO AROSE IN THE COURT, THEREFORE, WHATEVER POSSIBLE WAS ALSO DONE BY THE A SSESSEE, CONSEQUENTLY, THE RIGOROUS OF THE TECHNICALITIES CA NNOT BE FASTENED UPON THE ASSESSEE. AT BEST, THE ASSESSEE TRIED TO SHORT OUT THE MATTER IN THE COURT AGAINST THE SUPPLIERS A ND THE BUYERS, HAVING FAILED TO ACHIEVE THE DESIRED RESULT , ULTIMATELY, THE AMOUNT WAS WRITTEN OFF AS NON-RECEIVABLE IN ITS BOOKS BY SHOWING LOSS IN THE PROFIT & LOSS ACCOUNT. WHAT IT MAY BE IT IS CERTAINLY A BUSINESS LOSS, THEREFORE, HAS TO BE ALL OWED DURING THE ASSESSMENT YEAR 2005-06, THUS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. IT IS UPHE LD. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. M/S CHAWLA & SONS . 5 THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 27/01/2015. '1 + ./0 2'3 27/01/2015 / + 9 SD/ - (N.K.BILLAIYA) SD/ - (JOGINDER SINGH) ! '# ! '# ! '# ! '# / ACCOUNTANT MEMBER '# '# '# '# / JUDICIAL MEMBER MUMBAI; 2' DATED :29/01/201 5 F{X~{T? P.S/. .. '1 + :* ;0* '1 + :* ;0* '1 + :* ;0* '1 + :* ;0*/ COPY OF THE ORDER FORWARDED TO : 1. <= / THE APPELLANT 2. :><= / THE RESPONDENT. 3. ? ( ) / THE CIT, MUMBAI. 4. ? / CIT(A)- , MUMBAI 5. A9 :* , , / DR, ITAT, MUMBAI 6. 9B( C / GUARD FILE. '1 '1 '1 '1 / BY ORDER, >* :* //TRUE COPY// D DD D/ // /E ' E ' E ' E ' (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI