DCIT, Jaipur V. SN KAPOOR EXPORTS, Jaipur

ITA 518/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5336 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA
• Keywords: Business income; Business expenditure; Opportunity of being heard; Bad and doubtful debts; Condonation of delay
• Section: 143(3); 37

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA- @ ITA NO. 518/JP/2013 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 D.C.I.T., CIRCLE-5, JAIPUR. CUKE VS. M/S S.N. KAPOOR EXPORTS, KHAWASJI KA BAAG, AMER ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AADFS 6912 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 01/JP/2016 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 518/JP/2013) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 M/S S.N. KAPOOR EXPORTS, KHAWASJI KA BAAG, AMER ROAD, JAIPUR. CUKE VS. A.C.I.T., CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AADFS 6912 J IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI O.P. BHATEJA (ADDL.CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S.L. JAIN (ADV) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 21/01/2016 MN?KKS'K .KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 21/03/2016 ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 2 VKNS'K@ ORDER PER: T.R. MEENA, A.M.: THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISE FROM THE ORDER DATED 04/3/2013 OF LD. CIT (A)-II, JAIPUR. EFFECTIVE GROUNDS OF APPEAL AS WELL AS C.O. ARE AS UNDER:- GROUNDS IN REVENUE APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN: (I) DELETING THE ADDITION OF RS. 1,45,00,000/- ON A CCOUNT OF BAD DEBTS AS AGAINST THE ADDITION MADE BY A.O. O F RS. 1,47,87,930/- GROUNDS IN CROSS OBJECTION (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) II WAS FULLY JUSTIFIED IN DELETING THE ADDITION OF RS.1,45,000,00/- MADE BY THE AO ON ACCOUNT OF BAD DEBTS / BUSINESS LOSS . (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) II HAS GROSSLY ERRED IN NOT ALLOWING TRAD ING ADVANCE GIVEN IN ORDINARY COURSE OF BUSINESS TO M/S SARASWATI EXPORTS AS BUSINESS LOSS. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) II HAS GROSSLY ERRED IN NOT ALLOWING BAD DEBTS IN THE NAME OF SHRI MOHIUDDIN OF RS. 2,87,930/-. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) II HAS GROSSLY ERRED IN RESTRICTING THE DISALLOWANCE TO 10% AGAINST 15% MADE BY THE AO ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 3 OUT OF THE VARIOUS EXPENSES AMOUNTING TO RS. 6,16,855/- 2. THE C.O. OF THE ASSESSEE WAS FILED ON 07/1/2016, I S DELAYED BY 934 DAYS. IN THIS REGARD, THE LD AR OF THE ASSESSEE HAS FILED AN AFFIDAVIT FOR CONDONATION OF DELAY ON THE BASIS OF ORDER OF T HE LD CIT(A). IT WAS SUBMITTED THAT THE ASSESSEE HAS FILED 154 APPLICATI ON AGAINST THE ORDER OF THE LD CIT(A) BUT TILL DATE, IT HAS NOT BEEN DEC IDED. WHEREAS THE REVENUE ON THIS ISSUE HAS FILED APPEAL BEFORE THE H ONBLE TRIBUNAL. THE AR HAS FURTHER ARGUED THAT THE ASSESSEE WAS UNDER TH E IMPRESSION THAT THE LD CIT(A) WOULD DECIDE ANOTHER GROUND OF APPEAL RAISED IN FORM NO. 35 BEFORE HIM, WHICH IS DIRECTLY RELATED TO THE APPE AL FILED BY THE REVENUE. THEREFORE, THIS DELAY WAS NOT INTENTIONAL BU T PROCEEDING PENDING BEFORE THE LOWER AUTHORITY. HENCE THE SAME M AY BE CONDONED. AT THE OUTSET, THE DR HAS VEHEMENTLY OPPOSED THAT THE ASSESSEES C.O. IS BELATED MORE THAN 2 YEARS, THEREFORE, SAM E MAY BE DISMISSED. AFTER CONSIDERING BOTH SIDES, WE HAVE FORMED AN OPI NION THAT THE DELAY WAS DUE TO NON PASSING THE ORDER U/S 154 OF TH E INCOME TAX ACT, 1961 (IN SHORT THE ACT) BY THE LD CIT(A) AND WHEREAS ON SAME ISSUE, THE REVENUE HAS FILED APPEAL BEFORE US. THEREFORE, WE CON DONE THE DELAY IN FILING THE C.O. BY THE ASSESSEE. ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 4 3. THE SOLE GROUND OF THE REVENUES APPEAL AND GROU NDS NO. 1 TO 3 OF THE ASSESSEES C.O. ARE AGAINST DELETING THE ADDITI ON OF RS. 1.45 CRORES. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANU FACTURING AND TRADING OF CARPETS AND TEXTILE ARTICLES. IT FILED I TS RETURN ON 27/09/2009 SHOWING INCOME OF RS. 96,14,540/-. THE CASE WAS SCRUTI NIZED U/S 143(3) OF THE ACT. THE LD ASSESSING OFFICER OBSERVED THAT D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DEBITED A SUM OF RS . 1,47,87,930/- UNDER THE HEAD BAD DEBTS. THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH WAS A VAILED BY THE ASSESSEE VIDE LETTER DATED 13/12/2011, WHICH HAS BEE N REPRODUCED BY THE ASSESSING OFFICER ON PAGES 2 TO 5 OF THE ASSESS MENT ORDER, WHICH ARE REPRODUCED AS UNDER:- 1. THAT THE ASSESSEE IS IN THE BUSINESS OF CARPET MA NUFACTURING AND EXPORT SINCE LAST 60 YEARS AND ENJOYS A PREMIER POSITION AND INCREDIBLE BUSINESS REPUTATION IN THE FIELD. THE ASSESSEE IS KNOWN FOR ITS UNIQUE DESIGN AND TECHNOLOGY INNOVA TIONS ALL OVER THE WORLD. MR. S N KAPOOR HAS REALTIONS WITH CAR PET BUYERS ALL OVER THE WORLD AND ALL THE GOODS MANUFACT URED AND PROCURED BY THE ASSESSEE ARE EXPORTED. THE MAIN MARKETS OF THE ASSESSEE ARE EUROPE AND USA. ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 5 2. THAT M/S SARASWATI EXPORTS IS ALSO IN THE BUSINESS OF MANUFACTURING AND EXPORTING THE CARPETS. THE CORE EX PERTISE OF M/S. SARASWATI EXPORTS LIES IN CARPETS PRODUCTION . 3. SINCE WHEN THE BUSINESS WAS ON PEAK ASSESSEE WAS U NABLE TO FULFILL ITS EXPORT OBLIGATION BY ITS OWN CAPACITY AND IN ORDER TO RETAIN ITS MARKET SHARE AND TO GAIN MAXIMUM BY I TS UNDISPUTABLE MARKET LEADER POSITION THE ASSESSEE HA S ENTERED INTO AN AGREEMENT WITH M/S SARASWATI EXPORTS. 4. THE AGREEMENT WAS OF MANUFACTURING OF THE CARPETS BY M/S SARASWATI EXPORTS FOR WHICH THE ASSESSEE WAS SUPPOSED TO GIVE DESIGN AND NECESSARY TECHNICAL KNOW HOW. THE EXPO RTS WERE TO BE DONE BY M/S SARASWATI EXPORTS TO THE CUSTO MER IDENTIFIED BY THE ASSESSEE. IN TURN THE ASSESSEE WAS SUPPOSED TO GET COMMISSION ON SALES ON TERMS MENTIO NED IN THE AGREEMENT. 5. M/S. SARASWATI EXPORTS REQUESTED ASSESSEE THAT H E WAS SHORT OF CAPITAL AND REQUIRED FINANCIAL ASSISTANCE IN HIS BUSINESS FOR SMOOTH FUNCTIONING OF BUSINESS. FOR TH IS ALL BUSINESS ASSESSEE AGREED TO GIVE FINANCIAL ASSISTAN CE IN THE FORM OF MOBILIZATION ADVANCE TO SARASWATI EXPORTS. A SSESSEE GIVEN A TOTAL ADVANCE OF RS. 1,47,87,930/- TO M/S S ARASWATI EXPORTS ON VARIOUS DATES. POST DATED CHEQUES WERE OB TAINED FOR NECESSARY SECURITY OF THE ADVANCE AND A FORMAL AGREEMENT WAS ENTERED BETWEEN THE PARTIES. A COPY OF LETTER ISSUED BY M/S. SARAWATI EXPORTS HEREWITH ENCLOSED. ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 6 6. THE RESPONDING PARTY M/S SARASWATI EXPORTS FAILS TO FULFILL ITS OBLIGATION AND THEREFORE ASSESSEE LODGED THE CHEQUE S FOR RECOVERING THE ADVANCE GIVEN BY US. THE CHEQUES WERE DISHONOURED AND THEREFORE CRIMINAL SUIT WAS FILED U/ S 138 OF THE NEGOTIABLE INSTRUMENT ACT, 1881 FOR BOUNCING OF CHEQUES FOR RECOVERY OF AMOUNT. THE ASSESSEE ALSO FI LED A CIVIL SUIT FOR RECOVERY OF THE FINANCIAL ASSISTANCE OF INR 1.45 CRORES. 7. IN THE FINANCIAL YEAR 2006-07 CORRESPONDING TO ASSESSMENT YEAR 2007-08 THE ASSESSEE LOST THE CASE FILED U/S 1 38 OF THE NEGOTIABLE INSTRUMENT ACT, 1881 FOR RETURNING OF CH EQUES. (COPY OF THE DECISION HEREWITH ENCLOSED) 8. SUBSEQUENT TO THAT EVEN THAN ASSESSEE WAS TRYING ITS BEST TO RECOVER THE AMOUNT FROM M/S SARASWATI EXPORTS. (C OPY OF A REPRESENTATION FILED WITH ADGP (CRIME), RAJASTHAN POLICE HEREWITH ENCLOSED. 9. SINCE THE MATTER WAS VERY OLD AND LOOKING THE C ONDUCT OF THE M/S SARASWATI EXPORTS FURTHER LOOKING THE JUDICI ARY SYSTEM THE ASSESSEE FEEL IT PROPER TO WRITE OFF THE AMOUNT IN BOOKS TAKING IT AS NO MORE RECOVERABLE. 10. SINCE THE AMOUNT WAS GIVEN FOR BUSINESS PURPOSE AND ASSESSEE IS DERIVING BUSINESS INCOME FROM THE SAME BUSINESS ASSESSEE CLAIMED THE WRITE OFF AS BUSINESS EXPENDITU RE IN IT FINANCIAL STATEMENT FOR THE YEAR 2008-09 CORRESPOND ING TO ASSESSMENT YEAR 2009-10. ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 7 11. THAT AN ADVANCE WAS EXTENDED TO MR. MOHINUDDIN W HO WAS A DESIGNER AT THE DESIGNING DEPARTMENT OF THE ASSES SES AND THE SAME WAS DULY DEDUCTED IN INSTALLMENTS FROM HIS REMUNERATION. HE SUDDENLY LEFT THE JOB AND ALL THE EFFORTS TO RECOVER THE MONEY WENT IN VAIN. THE AMOUNT OUTSTANDIN G TO HIS ACCOUNT HAS BEEN WRITTEN OFF AS BAD DEBTS. 12. WE WOULD LIKE TO SUBMIT THAT THE AMOUNT WRITTEN OFF IS VERY MUCH ALLOWABLE AS BUSINESS LOSS UNDER THE PROVISION OF INCOME TAX ACT., 1961. 13. SIR, WE HEREBY LIKE TO REFER AND VERY LATEST JUD GEMENT OF MADRAS HIGH COURT IN THE MATTER OF A. RAMAMURTHY VS . DCIT, SPECIAL RANGE - 1, MADURAI IN WHICH HON'BLE CO URT HAS GRANTED A RELIEF ON THE GROUND AND REMANDED BACK TO THE TRIBUNAL. THE RELEVANT PARA IS QUOTED AS UNDER : ' IN THE CIRCUMSTANCES, WE FEEL THAT PROPER COURSE WOULD BE TO SET ASIDE THE ORDER OF THE TRIBUNAL IN THIS REGARD AND DIRECT THE TRIBUNAL TO CONSIDER THE CLAI M OF THE ASSESSEE IN RESPECT OF SUM OF RS. 4,75,307/- A TO WHETHER THE SAID CLAIM CAN BE CONSIDERED AS A TRADI NG LOSS IN THE LIGHT OF THE DECISIONS OF THE APEX COUR T AS WELL AS THIS COURT AS REFERRED TO ABOVE.' (COPY OF THE DECISION HEREWITH ENCLOSED) 14. SIR, IN THE GIVEN CASE THE COURT HAS CONSIDERE D THE ISSUE THAT EVEN IF THE BAD DEBTS ARE NOT WRITTEN OFF IN BOOKS A ND THE SAME ARE NOT ALLOWABLE UNDER SECTION 36 (L)(VII) EVE N THAN POSSIBILITY TO BE CONSIDER TO ALLOW IT AS TRADING LO SS UNDER SECTION 28(I). ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 8 15. SIR, THE DECISION QUOTED ABOVE HAS TAKEN PLEA OF LAW MADE BY HON'BLE APEX COURT IN THE MATTER OF BADRDAS DAGA VS. CIT (34 ITR 10), CIT VS. WOODWARD GOVERNOR OF INDIA (P) LTD. (312 ITR 254) AND MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT (225 ITR 802). 16. SIR, APART FROM THESE DECISIONS THERE ARE SEVE RAL DECISION IN WHICH THE VIEW HAS BEEN AFFIRMED BY THE COURTS THAT I F ANY CLAIM IS INCIDENTAL TO BUSINESS AND IS BEING DONE O N THE GROUND OF ORDINARY COMMERCIAL PRACTICE OF THE TRADE THAN IT SHOULD BE ALLOWED AND FINALLY IT SHOULD BE ALLOWED UN DER SEC. 28(I). 17. IN THE MATTER OF CIT VS. INDEN BISELERS (47 TAX MANN 225) IT HAS BEEN HELD THAT ' WE FELL THAT IT IS NOT NECESSARY TO GO INTO THAT CONTENTION TO ANSWER THE REFERENCE AS WE AGREE WITH THE FINDIN G OF THE TRIBUNAL THAT EXPENDITURE IS ALLOWABLE AS A TRA DING LOSS. AS THAT CONCLUSION IS SUFFICIENT, WE ANSWER T HE REFERENCE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE SIR, IN THIS MATTER THE EXPENSES OF PAYMENT OF LORRIES WAS ALLOWED EVEN THAN ASSESSEE HAD NO BUSIN ESS IN THE RELEVANT YEAR IN WHICH THE EXPENDITURE WAS CLAI M. THE PAYMENT OF LORRIES WAS MADE ON BEHALF OF SOME OTHER PARTY BUT AS THE HONB'LE COURT OPINED THAT SINCE TH IS WAS IN ORDINARY COURSE OF BUSINESS, THE EXPENSES WAS ALLOW ED. 18. SIR, I WOULD ALSO LIKE TO SUBMIT THE LAW LAID DO WN BY HON'BLE APEX COURT IN THE MATTER OF DR. T. A. QUERESHI VS CI T, BHOPAL (157 TAXMANN 514). SIR, IN THIS CASE THE ASSE SSEE ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 9 WAS ENGAGED IN 'HEROIN DRUGS' AND SOME STOCK WAS SEIZ ED. THE ASSESSEE CLAIMED THE SEIZURE OF THAT LOSS AS BUS INESS LOSS AND THAT WAS ALLOWED BY THE HON'BLE COURT. THE C OURT HAS MENTIONED THAT SECTION 37 HAS REALLY NOTHING TO DO WITH THE PRESENT CASE AS IT IS NOT A CASE OF A BUSINESS EXPENDITURE, BUT OF BUSINESS LOSS. BUSINESS LOSSES ARE ALLOWABLE ON ORDINARY COMMERCIAL PRINCIPLES IN COMPU TING PROFITS. ONCE IT IS FOUND THAT THE HEROIN SEIZED FO RMED PART OF THE STOCK-IN-TRADE OF THE ASSESSEE, IT FOLLOWS THAT THE SEIZURE AND CONFISCATION OF SUCH STOCK-IN-TRADE HAS TO BE A LLOWED AS BUSINESS LOSS. LOSS OF STOCK - IN - TRADE HAS TO BE CONSIDERED AS A TRADING LOSS VIDE CIT VS S.N.A.S.A ANNAMALAI CH ETTIAR AIR 1973 SC 1032. 19. SIR, IN VIEW OF THE ABOVE SUBMISSION WE WOULD HUMB LY SUBMIT THAT ADVANCE GIVEN TO THE SARASWATI EXPORTS WA S A TRADING ADVANCE IN ORDINARY COURSE OF BUSINESS AND THEREFORE LOSS SHOULD BE ALLOWED UNDER THE PROVISION OF THE AC T. 20 WITHOUT PREJUDICE TO THE ABOVE SUBMISSION WE WOULD FURTHER LIKE TO SUBMIT THAT THE SAID ADVANCE WHICH HAS BEEN WRITTEN OFF IN THE ASSESSMENT YEAR 2009-10 HAS BEEN RECOVER ED IN FINANCIAL YEAR 2010-11 CORRESPONDING TO ASSESSMENT YEAR 2011-12 AND THE SAME HAS BEEN INCORPORATED AS INCOM E IN THE BOOKS OF THE ASSESSEE. (COPY OF THE INCOME TAX RETURN FILED FOR THE FINANCIAL YEAR 2010-11 CORRESPONDING ASSESSMENT YEAR 2011-12 IS HEREWITH ENCLOSED) ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 10 AFTER CONSIDERING THE ASSESSEES REPLY, THE LD ASSE SSING OFFICER CONSIDERED SECTION 36 OF THE ACT AND HELD THE AMOU NT GIVEN TO M/S SARASWATI EXPORTS HAS NOT BEEN DISCLOSED BY THE ASSE SSEE IN EARLIER AS INCOME, THEREFORE, IT DOES NOT FULFILL THE CONDITIO N LAID DOWN IN SECTION 36(1)(VII) OF THE ACT. HE ALSO CONSIDERED THE HON'B LE SUPREME COURT DECISION IN THE CASE OF HASIMARA INDISTRIES LTD. VS CIT 231 ITR 842 AND HON'BLE DELHI HIGH COURT DECISION IN THE CASE OF M/ S PRAGATI CONSTRUCTION CO. VS. DCIT (2011-TIOL-344-HC-DEL-IT). THE ASSESSEE HA S FAILED TO PROVE THAT AMOUNT CLAIMED AS BAD DEBT HAS BEEN ACCO UNTED FOR IN ITS INCOME IN ANY PREVIOUS YEAR. ALTERNATE CLAIM OF THE ASSESSEE IS ALSO NOT FOUND TENABLE TO THE ASSESSING OFFICER ON THE GROUN D THAT THE ASSESSEE HAD GIVEN THIS AMOUNT TO M/S SARASWATI EXPORTS AS A FINANCIAL ASSISTANCE TO COVER UP THE CAPITAL DEFICIT OF M/S SARASWATI EXP ORTS ON THE BASIS OF AGREEMENT MADE BETWEEN THEM. ACCORDINGLY HE MADE ADD ITION OF RS. 1,47,87,390/-. 4. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WH O HAD ALLOWED THE APPEAL PARTLY BY OBSERVING THAT THE CASE LAW CITED BY THE ASSESSING OFFICER I.E. DECISION IN THE CASE OF PRAGATI CONSTR UCTION (SUPRA) IS ON DIFFERENT ISSUE. THERE WAS AN AGREEMENT DATED 01/4/20 01 BETWEEN BOTH ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 11 THE PARTIES. CLAUSE- 5,6,7,12,19, AND 28 OF THE AGR EEMENT REPRODUCED BY THE LD CIT(A) IN HER ORDER. AFTER CONSIDERING THE TE RMS AND CONDITIONS OF THE AGREEMENT, IT HAS BEEN HELD THAT M/S SARASWATI E XPORTS HAD AGREED TO PAY COMMISSION TO THE APPELLANT BECAUSE THE APPE LLANT HAD AGREED TO HELP AND ASSIST M/S SARASWATI EXPORTS REGARDING PROD UCTION, DESIGNING, COLOURING, DYEING AND FINISHING OF CARPET AS PER IN TERNATIONAL MARKET REQUIREMENTS. AS PER AMENDED AGREEMENT DATED 01/4/2 003, FIXED COMMISSION PER MONTH OF RS. 17 LACS WAS TO BE PAID B Y M/S SARASWATI EXPORTS TO THE APPELLANT. THE APPELLANT HAD INFORMED THAT SUBSTANTIAL AMOUNT OF COMMISSION HAD BEEN SHOWN FROM A.Y. 2001- 02 TO A.Y. 2003- 04 BY THE APPELLANT AS PER TABLE GIVEN AT PAGE NO. 9 OF THE ORDER AND TOTAL COMMISSION WAS RECEIVED TO THE TUNE OF RS. 3,3 1,26,906/- FOR THE A.Y. 2002-03 TO 2004-05 IN THE HANDS OF PARTNERS I. E. S.N. KAPOOR AND VIKRAM KAPOOR BUT THE TOTAL LOAN GIVEN TO M/S SARAS WATI EXPORTS WAS WRITTEN BACK INCOME OF THE ASSESSEE, WHICH WAS ALSO R ECEIVED BACK IN A.Y. 2010-11. THE LD CIT(A) HAS VERIFIED THE P&L ACC OUNT OF THE ASSESSEE FOR A.Y. 2011-12 WHEREIN AMOUNT RECEIVED B ACK OF RS.1.45 CRORES HAS BEEN CREDITED. SHE HELD THAT THESE ADVAN CES FOR BUSINESS PURPOSES AS THE ASSESSEE ALSO HAD SHOWN ADVANCES IN THE BALANCE SHEET FOR A.Y. 2002-03, THE RECEIPTS FROM THE ADVANCES AL SO HAS BEEN SHOWN IN ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 12 FORK OF COMMISSION IN THE INCOME OF THE ASSESSEE. I T IS FURTHER HELD THAT CANTANKEROUS LITIGATION WAS GOING ON BETWEEN THE APPE LLANT AND M/S SARASWATI EXPORTS, THAT THE CHEQUES GIVEN BY M/S SAR ASWATI EXPORTS HAD BEEN DISHONOURED AND THAT THE APPELLANT HAD TO APPR OACH BOTH POLICE AND COURTS TO SEEK REMEDY. THEREAFTER SHE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. VS CI T IN APPEAL NO. 5294 OF 2003 ORDER DATED 09/2/2010 WHEREIN IT HAS BE EN HELD THAT AFTER 01/4/1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO E STABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSE E. THE ADVANCE TO M/S SARASWATI EXPORTS IS APPEARING IN THE LIST OF LOAN A ND ADVANCES GIVEN IN SCHEDULE-F OF THE BALANCE SHEET OF THE APPELLANT RI GHT FROM A.Y. 2002-03 TILL A.Y. 2008-09 AND IN THIS A.Y. IT HAS BEEN WRITT EN OFF IN ACCOUNTS. SHE ALSO CONSIDERED THE BIFURCATION OF BAD DEBT WRITTEN OFF, WHICH WAS FOUND TO BE IN THE NAME OF M/S SARASWATI EXPORTS AT RS. 1. 45 CRORES AND SHRI MOHIUDDIN AT RS. 2,87,930/-. IT WAS NOT CLEAR THAT A DVANCES GIVEN TO SHRI MOHIUDDIN, ON WHICH ANY INCOME HAS BEEN SHOWN IN TH E PREVIOUS YEAR OR NOT, THEREFORE, SHE CONFIRMED THE ADDITION TO TH E TUNE OF RS. 2,87,930/- AND ALLOWED THE BAD DEBT WRITTEN OFF AT R S. 1.45 CRORES IN THE NAME OF M/S SARASWATI EXPORTS. ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 13 5. NOW THE REVENUE IS IN APPEAL AND ASSESSEE IS IN C .O. BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT THE ASSESSEES CLAIM IS NOT COVERED U/S 36(1)(VII) OF THE ACT AS THE ASSESSEE GAVE ADVANCES TO M/S SARASWATI E XPORTS, WHICH HAS NOT BEEN ACCOUNTED FOR IN ANY EARLIER YEAR IN THE I NCOME OF THE ASSESSEE. THEREFORE, IT IS NOT COVERED IN BAD DEBT. 6. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS ARG UED THAT THESE ADVANCES WERE GIVEN FOR BUSINESS PURPOSES. THE ASSESS EE HAS SHOWN COMMISSION INCOME RECEIVED FROM THE EXPORT BUSINESS , WHICH WAS EXPORTED THROUGH M/S SARASWATI EXPORTS. THE LD CIT(A) HAD EXAMINED THOROUGHLY THIS ISSUE AND HE HAS DRAWN OUR ATTENTIO N ON PAGE NO.9 OF THE LD CIT(A)S ORDER WHEREIN BOTH THE PARTNERS OF TH E FIRM HAD SHOWN COMMISSION INCOME ON THIS BUSINESS MADE THROUGH M/S SARASWATI EXPORTS AT RS. 3,31,26,906/- FOR A.Y. 2002-03 TO 20 04-05. THERE WAS DISPUTE BETWEEN THE PARTIES, THE ASSESSEE HAS RECEIV ED POST DATED CHEQUES BUT SAME HAD BEEN DISHONOURED. THE ASSESSEE FILED CASE UNDER THE NEGOTIABLE INSTRUMENT ACT, (IN SHORT N.I. ACT), WHICH HAS BEEN DECIDED AGAINST THE ASSESSEE. THEREAFTER, HE FILED P OLICE COMPLAINT AND ALSO SOUGHT REMEDY FROM THE COURT AND ASSESSEE RECE IVED BACK THIS ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 14 AMOUNT IN A.Y. 2011-12, WHICH HAS BEEN SHOWN AS INCOM E OF THAT YEAR. THEREFORE, HE PRAYED TO ALLOW THE BAD DEBT IN A.Y. 20 09-10, OTHERWISE IT IS BUSINESS LOSS OF THE ASSESSEE U/S 28 OF THE ACT. HE FURTHER ARGUED THAT IF THIS LOSS/BAD DEBT IS NOT ALLOWED BY THE HONBLE BENCH, IT TANTAMOUNTS TO DOUBLE TAXATION OF SAME AMOUNT. THE LD CIT(A) HAS ALSO NOT ALLOWED BAD DEBT/BUSINESS LOSS CLAIMED IN THE NAME OF SHRI MOHIUDDIN AT RS. 2,87,930/-, WHICH WAS ALSO ADVANCED FOR BUSINESS PU RPOSES. THEREFORE, HE PRAYED TO ALLOW FURTHER LOSS OF RS. 2,87,930/-. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS UN DISPUTED FACT THAT THE ASSESSEE HAD MADE ADVANCES OF RS. 1.45 CRORES TO M/ S SARASWATI EXPORTS. THE POST DATED CHEQUES WERE OBTAINED BY THE ASSESSEE AS A SECURITY OF THE ADVANCE. THERE WAS A FORMAL AGREEMENT BETWEEN THE ASSESSEE AND M/S SARASWATI EXPORTS. M/S SARASWATI EXP ORTS HAS ALSO IN THE CARPET BUSINESS, IT HAS EXPERTISE IN DESIGN AND TECHNOLOGY AND KNOWS HOW IN THE CARPET LINE OF BUSINESS. THE BUSINESS BETWE EN BOTH THE PARTIES WAS GOING SMOOTHLY AS THE PARTNERS OF THE FI RM HAS SHOWN COMMISSION INCOME SUBSTANTIALLY FROM THIS BUSINESS AS MENTIONED BY THE LD CIT(A), WHICH HAS NOT BEEN CONTROVERTED BY THE LD DR. THE RESPONSE ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 15 TO M/S SARASWATI EXPORTS WAS NOT ACCORDING TO BUSINES S TERMS AND CONDITIONS, THEREAFTER THE ASSESSEE FIRM DEPOSITED THE CHEQUE IN THE BANK ACCOUNT, WHICH DISHONOURED. THEREAFTER THE ASS ESSEE FILED CRIMINAL SUIT U/S 138 OF THE N.I. ACT FOR RECOVERY OF AMOUNT . IT ALSO FILED A CIVIL SUIT FOR RECOVERY OF RS. 1.45 CRORES. THEREAFTER, HE FILED COMPLAINT BEFORE THE ADDITIONAL DIRECTOR GENERAL OF POLICE (CRIME), RAJASTHAN, THEREFORE, WHEN THE ASSESSEES EFFORTS WENT IN VAIN HE HAD WRITTE N OFF THIS AMOUNT AS BAD DEBT U/S 36(1)(VII) OF THE ACT. DURING THE A SSESSMENT PROCEEDINGS, IT ALSO CLAIMED THAT IF THIS AMOUNT IS NOT ALLOWABLE U/S 36(1)(VII) OF THE ACT, IT MAY BE ALLOWED AS A BUSINE SS LOSS IN THE HANDS OF ASSESSEE. BOTH THE GROUNDS ALSO TAKEN BEFORE THE LD CIT(A). HOWEVER, THE LD CIT(A) HAS DECIDED THIS CASE ON BAD DEBT WRITT EN OFF ITSELF. NO OPINION HAS BEEN EXPRESSED BY THE LD CIT(A) ON BUSIN ESS LOSS. WE FIND THAT THE ASSESSEE HAS ADVANCED THIS MONEY FOR THE B USINESS PURPOSES BUT THIS AMOUNT HAS NOT BEEN ACCOUNTED FOR IN PREVI OUS YEAR AS INCOME. THEREFORE, ORDER OF THE LD CIT(A) IS NOT JUSTIFIED AL LOWING THE BAD DEBT U/S 36(1)(VII) OF THE ACT, BUT IT IS BUSINESS LOSS AS AMOUNTS WERE ADVANCED FOR BUSINESS PURPOSES. ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 16 7.1 THE ASSESSEE ALSO CLAIMED BAD DEBT OF RS. 2,87,9 30/-, WHICH WAS ADVANCED TO SHRI MOHIUDDIN, WHO WAS DESIGNER AND SERV ED THE FIRM ON REMUNERATION BASIS. THE ADVANCE WAS ADJUSTED AGAINST THE SALARY BUT SUDDENLY HE LEFT THE ASSESSEES JOB AND RECOVERY CO ULD NOT BE MADE OUT BY THE ASSESSEE, BUT THERE IS NO EVIDENCE WITH THE A SSESSEE TO DEMONSTRATE THAT SHRI MOHIUDDIN WAS IN EMPLOYMENT AN D HAS EXPERTISE IN DESIGNING CARPET AND ALSO WORKED WITH THE ASSESSEE . NO INCOME FROM THIS ADVANCE HAS BEEN ACCOUNTED FOR IN THE PREVIOUS YEARS. THEREFORE, WE UPHELD THE ORDER OF THE LD CIT(A) FOR BUSINESS LOS S TO THE TUNE OF RS. 1.45 CRORES AND CONFIRMED THE ADDITION OF RS. 2,87, 930/- AS ADVANCED TO SHRI MOHIUDDIN AND CLAIMED AS BAD DEBT. ACCORDINGLY , REVENUES APPEAL IS DISMISSED ON THE SOLE GROUND AND ASSESSEES C.O. IS PARTLY ALLOWED ON THE GROUNDS DISCUSSED ABOVE. 8. THE 4 TH GROUND OF THE ASSESSEES C.O. IS AGAINST RESTRICTI NG THE DISALLOWANCE FROM 15% TO 10% UNDER THE HEAD VARIOUS EXPENSES. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DE BITED RS. 6,16,855/- UNDER THE HEAD STAFF WELFARE EXPENSES, PRINTING AND STATIONERY EXPENSES, COMPUTER REPAIRS AND MAINTENANCE EXPENSES, MISCELLA NEOUS EXPENSES AND DIWALI EXPENSES, WHICH WAS NOT FOUND TO THE ASSESS ING OFFICER FULLY ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 17 SUPPORTED WITH PROPER VOUCHERS AND SOME OF THE VOUCH ERS WERE PAID IN CASH OR CLAIMED SELF MADE VOUCHERS, THEREFORE, THE LD ASSESSING OFFICER DISALLOWED 15% OUT OF THESE EXPENSES, WHICH WAS CHALL ENGED BEFORE THE LD CIT(A), WHO HAD RESTRICTED THIS ADDITION @ 10% BY OBSERVING THAT THESE EXPENSES ARE NOT VERIFIABLE COMPLETELY AS SUP PORTED ONLY BY SELF MADE VOUCHERS. DURING THE ASSESSMENT PROCEEDINGS, T HE APPELLANT HAS NOT DISPUTED THIS FACT, THEREFORE, SHE RESTRICTED T HE ADDITION UP TO 10%. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THESE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES AND CLAIMED U/S 37 O F THE ACT. IT IS DIFFICULT TO GET BILL OF EACH AND EVERY EXPENDITURE INCURRED BY THE ASSESSEE PARTICULARLY TAXI, RICKSHAW, TEA ETC, THER EFORE, SAME IS TO BE ALLOWED BY THE HONBLE BENCH. THE LD DR HAS VEHEMENTL Y SUPPORTED THE ORDER OF THE LD CIT(A) AND ARGUED THAT THE LD CIT(A) HAS REASONABLY CONSIDERED THE ASSESSEES GROUND. AFTER CONSIDERING THE SUBMISSIONS OF BOTH SIDES, WE DO NOT FIND ANY REASON TO INTERVENE IN THE ORDER OF THE LD CIT(A ). ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD CIT(A). ASSESSEES C.O. O N THIS GROUND IS DISMISSED. ITA 518/JP/2013 & CO 01/JP/2016_ DCIT VS. SN KAPOOR EXPORTS 18 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND C.O. OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/03/2016. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21 ST MARCH, 2016 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE-5, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S S.N. KAPOOR EXPORTS, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 518/JP/2013 & CO 01/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR