KDL BIOTECH LTD., RAIGAD V. ACIT CEN CIR -30, MUMBAI

ITA 5111/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84136 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 10-07-2013
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIR
• Assessee Lawyers: YASH SINGHAL
• Keywords: Opportunity of being heard; Principle of natural justice; Bad and doubtful debts
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER I.T.A.NO. 5111/M/2013 (AY: 2009 - 2010 ) KDL BIOTECH LTD., VILLAGE SAVROLI, TALUKA, KHALAPUR DIST, RAIGAD, KHAPOLI, RAIGAD - 410202. PAN: AAACK5958L VS. ACIT, CENTRAL CIRCLE - 30, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YASH SINGHAL RESPONDENT BY : SHRI ASGHAR ZAIR DATE OF HEARING: 5.11.2014 DATE OF ORDER: 1 9 .11.2014 O R D E R PER D. KARUNAKARA RAO, AM : THIS APPEAL FILED BY THE ASSESSEE ON 10.7.2013 IS AGAINST THE ORDER OF THE CIT (A) - 39, MUMBAI DATED 9.1.2013 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, ASSESEE RAISED THE FOLLOWING GROUND WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN CONFIRMING THE LD AOS ACTION OF MAKING A DISALLOWANCE OF RS. 20,66,158/ - ON ACCOUNT OF BAD DEBTS. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF BULK DRUGS. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE LOSS OF RS. 10,51,63,885/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE A CT AND DETERMINED THE LOSS AT RS.10,27,43,740/ - . IN THE ASSESSMENT, AO MADE ADDITION OF RS. 20,66,158/ - TOWARDS BAD DEBTS. ASSESSEE MADE CLAIM OF BAD DEBTS AMOUNTING TO RS. 36,59,097/ - . AFTER SCRUTINIZING THE SAME, AO NOTICED THAT THE ADVANCES GIVEN TOW ARDS MATE RIAL AND OTHER PURCHASES ARE NOT ALLOWABLE BAD DEBTS. THEREFORE, AO MADE THE ABOVE ADDITION BY MENTIONING THAT THE ASSESSEE FAILED TO FULFILL THE CONDITIONS PROVIDED U/S 36(2) OF THE ACT. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). 4 . DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE DID NOT REPRESENT ITS CASE. INSTEAD, ASSESSEE FILED WRITTEN SUBMISSIONS. AFTER CONSIDERING 2 THE SUBMISSIONS OF THE ASSESSEE, CIT (A) CONFIRMED THE DISALLOWANCE OF RS. 20,66,158/ - MADE BY THE AO. PARA 5 OF THE IMPUGNED ORDER IS RELEVANT IN THIS REGARD. IN THE SAID PARA, CIT (A) HELD THAT THE ASSESSEE FAILED TO FILE REQUISITE DETAILS TO ASCERTAIN THAT THE BAD DEBTS TRADING LOSS CLAIMED IS INCIDENTAL TO THE BUSINESS CARRIED ON BY THE AS SESSEE AND IT HAS ARISEN I N THE NORMAL COURSE OF ITS BUSINESS. IN THE SAID WRITTEN SUBMISSIONS BEFORE THE CIT (A) , ASSESSEE RELIED ON THE DECISION IN THE CASE OF CIT VS. J.K. COTTON SPINNING AND WEAVING MILLS, 123 ITR 911 IN SUPPORT OF ITS CONTENTION . ACCORDINGLY , CIT (A) CONFIRMED THE ADDITION MADE BY THE AO. 5. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, SUBMITTED THAT THIS ISSUE MAY BE REMANDED TO THE FILE OF TH E AO SO THAT HE COULD ESTABLISH GENUINENESS OF TH E BUSINESS LOSS / BAD DEBTS . 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE AO / CIT (A) DUTIFULLY. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. THE ISSUE FOR ADJUDICATION BY US RELATES TO THE ALLOWABILITY OF BAD DEBTS / BUSINESS LOSS. WE FIND, THE CIT (A) ADJUDICATED THE ISSUE MERELY BASED ON THE WRITTEN SUBMISSIONS. NO DETAILS ARE FILED TO ESTABLISH THAT THE CLAIM OF BUSINESS LOSS / BAD DEBTS AROSE IN THE NORMAL COURSE OF THE BUSINESS ACTIVITIES OF THE ASSESSEE. AS SUCH, THERE WAS NONE TO REPRESENT THE ASSESSEE BEFORE THE CIT (A). THE ONUS IS ON THE ASSESSEE TO DEMONSTRATE THE GENUINENESS OF THE CLAIM WHEN A DEDUCTION OF BAD DEBTS OR BUSINESS LOSS IS MADE IN THE RETURN. THOUGH, IT IS THE SUBMISSION OF THE ASSESSEE THAT THE BAD DEBTS ARE RELATED TO THE TRADE ADVANCES, THE SAME IS NOT SUPPORTED WITH EVIDENCES. THEREFORE, IN OUR OPINION, THE REQUEST OF THE LD COUNSEL FOR REMANDING MATTER TO THE FILE OF THE AO DESERVES MERIT. ACCORDINGLY, WE REMAND THE GR OUND RAISED BY THE ASSESSEE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 3 ORDER PRONOUN CED IN THE OPEN COURT ON 1 9 T H NOVEMBER, 2014. S D / - S D / - (H.L. KARWA) (D. KARUNAKARA RAO) PRESIDENT ACCOUNTANT MEMBER DATE: 1 9 .11.2014. AT :MUMBAI OKK COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR A, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI