ANAGEL COMMODITEES BROKING P. LTD, MUMBAI V. ACIT 8(1), MUMBAI

ITA 5119/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54948 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P K B MENON
• Keywords: Bad and doubtful debts; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A NO.5119/ MUM/2009 ASSESSMENT YEAR: 2006-07 ANGEL COMMODITIES BROKING PVT.LTD. .. APPELLANT G-1, AKRUTI TRADE CENTRE, ROAD NO.7, MIDC, ANDHERI(EAST), MUMBAI-93. PA NO.AAACK 3472 D VS ACIT, CIRCLE 8(1) .. RESPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: ADITYA MAHESWARI, FOR THE APPELLANT P.K.B. MENON , FOR THE RESPONDENT DATE OF HEARING : 9.8.2011 DATE OF PRONOUNCEMENT : 26 -08-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED I NTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 11 TH AUGUST, 2009 , IN THE MATTER OF ASSESSMENT UNDER S ECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESS MENT YEAR 2006-07. I.T.A NO.5119/ MUM/2009 ASSESSMENT YEAR: 2006-07 2 2. IN FIRST GROUND OF APPEAL, THE ASSESSEE IS AGGRI EVED IN DISALLOWING STOCK EXCHANGE EXPENSES OF RS.37,294. 3. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT AN AMOUNT OF RS.37,294 WAS EXPENDED TOWARDS PENALTY CHARGES TO STOCK EXCH ANGE AND NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER DISALLOWED RS.37,294. ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IT WAS, INTER ALIA, SUBMITTED THAT THE AMOUNT IS NOT IN THE NATURE OF PENALTY BUT IT IS OF COMPENSATORY NATURE AS THE DEFAULT DOE S NOT ENSURE CRIMINAL PROCEEDINGS. THE CIT(A) WAS OF THE VIEW THAT AS PE R PROVISIONS OF INCOME TAX ACT, PENALTY IS NOT ALLOWABLE AS DEDUCTION AND, ACCORDI NGLY, UPHELD THE STAND TAKEN BY THE ASSESSING OFFICER. THE ASSESSEE IS NOT SATISFI ED AND IS IN APPEAL BEFORE US. 4. LEARNED REPRESENTATIVE FAIRLY AGREE THAT THE ISS UE IS COVERED BY THE DECISION OF A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. BRICS SECURITIES LIMITED IN ITA NO.5504/M/2009 FOR THE ASSESSMENT YEAR 2006- 07 ORDER DATED 11.6.2010, WHEREIN, ON SIMILAR FACTS, THE TRIBUNAL FOLLOWING T HE DECISION OF ANOTHER COORDINATE BENCH IN THE CASE OF DCIT VS. ENAM SECURITIES PRIVA TE LIMITED DATED 14.5.2010 IN ITA NO.4178/M/2009, IT WAS HELD THAT PENALTY/FEES P AID BY THE ASSESSEE TO BSE, STOCK HOLDING CORPORATION OF INDIA AND NSCCI CANNOT BE DISALLOWED BY RESORTING TO EXPLANATION TO SECTION 37(1). SIMILAR ISSUE HAS AL SO BEEN TAKEN IN GOLDCREST CAPITAL MARKETS LTD VS ITO(2010) 36 DTR (MUMBAI)(TRI) 177. RESPECTFULLY FOLLOWING THE PRECEDENTS, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS.37,294. 5. GROUND NO.1 IS THUS ALLOWED. 6. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED BY TH E DISALLOWANCE OF RS.6,59,053 TOWARDS BUSINESS LOSS (BAD DEBTS). I.T.A NO.5119/ MUM/2009 ASSESSMENT YEAR: 2006-07 3 7. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED RS.34,45,747 ON ACCOUNT OF BUSINESS LOSS. THESE DEBTS PERTAIN TO THE ASSESSEES BUSINESS OF C OMMODITIES BROKERAGE. THE AO ASKED THE ASSESSEE TO EXPLAIN THE ALLOWABILITY OF T HIS EXPENDITURE. AFTER EXAMINING THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFI CER WAS OF THE VIEW THAT THE BAD DEBTS CLAIMED BY THE ASSESSEE DOES NOT FIT INTO ANY OF THE ITEMS OF DEDUCTION AND IS NOT ALLOWABLE AS PER THE PROVISIONS OF SECTION 37(1 ). ACCORDINGLY, HE DISALLOWED THE BUSINESS LOSS OF RS.34,45,747. ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE THE CIT(A). WHILE THE CIT(A) DELETED THE BAD DEBTS TO THE EXTENT OF RS.27,86,695 BUT THEN CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS .6,59,053. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 8. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE FIND THAT AGAINST THE DELETION OF RS.27, 86,695, THE REVENUE HAD COME IN APPEAL BEFORE THE TRIBUNAL AND THE SAID ACTION OF T HE CIT(A) WAS SET ASIDE TO THE FILE OF THE AO FOR FRESH VERIFICATION IN ITA NO.5754/M/0 9 ORDER DATED 12.1.2011. SINCE THE AMOUNT INVOLVED IN THIS GROUND IS A PART OF THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE CIT(A), WE, FOLLOWING THE DECISION OF THE COORDINATE BENCH REMIT THE MATTER TO THE FILE OF THE AO WITH A DIRECTION T O VERIFY THE CLAIM OF THE ASSESSEE AFRESH IN LINE WITH THE DECISION OF THE SPECIAL BEN CH IN THE CASE OF SHRI SHREYAS S. MORAKHIA, 210 ITR 1. 9. GROUND NO.2 IS TREATED AS ALLOWED FOR STATISTICA L PURPOSES. 10. IN THE RESULT, APPEAL IS ALLOWED IN THE TERMS I NDICATED A BOVE. PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2011 SD/- (VIJAY PAL RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 26 TH AUGUST, 2011 PARIDA I.T.A NO.5119/ MUM/2009 ASSESSMENT YEAR: 2006-07 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),VIII MUMBA I 4. COMMISSIONER OF INCOME TAX, 8, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI