M/s. Status Mark Finvest Ltd., Delhi V. DCIT, New Delhi

ITA 5412/DEL/2011

• Counselvise Citation: 541220114 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 16-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR SENIOR
• Assessee Lawyers: R K KAPOOR
• Keywords: Bad and doubtful debts
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.5412/DEL./2011 (ASSESSMENT YEAR : 2008-09) M/S. STATUS MARK FINVEST LTD., VS. DCIT, CIRCLE 9 (1), 601, COPIA CORPORATE SUITES, NEW DELHI. 9, JASOLA COMMERCIAL COMPLEX, DELHI 110 025. (PAN : AAACS2964E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.K. KAPOOR, CA REVENUE BY : SHRI B.R.R. KUMAR, SENIOR DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XII, NEW DELHI DATED 25.08.2011 FOR T HE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE IS A COMPANY. THE RETURN OF INCOME FILED ON 30.09.2008 DECLARING LOSS OF RS.10,43,063/- UNDER N ORMAL PROVISIONS OF INCOME-TAX ACT, 1961 AND INCOME U/S 115JB OF THE AC T AT RS.15,30,816/-. THE ASSESSING OFFICER MADE THE ADDITION OF RS.1,60, 087/- BY INVOKING THE PROVISIONS OF SECTION 14A OF THE INCOME-TAX ACT, 19 61 READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 AND ALSO DISALLOWED R S.10,50,000/- OF BAD 2 ITA NO.5412/DEL/2011 DEBTS CLAIMED BY HOLDING THAT IT WAS A CAPITAL LOSS . THE CIT (A) HAS CONFIRMED THE ADDITION. NOW, THE ASSESSEE IS IN AP PEAL BY TAKING THE FOLLOWING GROUNDS:- 1. THAT THE ORDER OF THE COMMISSIONER OF INCOME-T AX (APPEALS) - XII, NEW DELHI, DATED 25.08.2011, IS WR ONG ON FACTS AND BAD IN LAW; 2. THAT THE COMMISSIONER (APPEALS) ERRED IN CONFIR MING THE LOSS ON BAD DEBTS OF RS.10,50,000/- AS CAPITAL LOSS INSTEAD OFF REVENUE LOSS. 3. THAT THE COMMISSIONER (APPEALS) ERRED IN NOT AL LOWING RS.1,60,087/- UNDER SECTION 14A OF THE ACT. HE FAIL ED TO APPRECIATE THAT NO EXPENDITURE WAS INCURRED FOR EARNING THE DI VIDEND INCOME; 4. THAT THE CONCLUSIONS AND INFERENCES OF THE ASSE SSING OFFICER AND/OR COMMISSIONER (APPEALS) ARE BASED ON SUSPICIONS, CONJECTURES, SURMISES AND EXTRANEOUS AND IRRELEVANT CONSIDERATIONS; 5. THAT THE RELIEFS PRAYED FOR MAY KINDLY BE ALLOW ED AND THE ORDER(S) OF THE ASSESSING OFFICER AND/ OR COMMISSIO NER (APPEALS) MAY KINDLY BE QUASHED, SET ASIDE, ANNULLED OR MODIF IED; 6. THAT THE AFORESAID GROUNDS OF APPEAL ARE WITHOU T PREJUDICE TO EACH OTHER; 7. THAT THE APPELLANT CRAVES LEAVE TO VARY, ALTER, AMEND OR ADD TO THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE ABOVE APPEAL. 3. GROUNDS NO.1 AND 4 TO 7 ARE GENERAL IN NATURE AN D HAVE NOT RAISED ANY SPECIFIC ISSUE, THEREFORE, THE SAME ARE BEING D ISPOSED OFF WHILE DISPOSING OFF GROUNDS NO.2 & 3. 4. IN THE GROUND NO.2, THE ISSUE INVOLVED IS NOT AL LOWING BAD DEBTS OF RS.10,50,000/- HOLDING IT AS A CAPITAL LOSS INSTEAD OF REVENUE LOSS. 3 ITA NO.5412/DEL/2011 5. THE ASSESSEE DEBITED RS.10,50,000/- IN THE PROFI T & LOSS ACCOUNT AS BAD DEBTS WRITTEN OFF. THE ASSESSEE PURCHASED A PI ECE OF LAND AT VILLAGE MAMNATHAN, DISTT. NOIDA FOR A SUM OF RS.10,50,000/- FROM ONE SHRI SURENDER, SON OF SHRI KEHER SINGH THROUGH ONE SHRI RISHI CHAUHAN. THE REGISTRY WAS DONE IN THE NAME OF DIRECTOR, SHRI RAT TI RAM AGGARWAL ON 07.03.2005. THE SALE CONSIDERATION WAS PAID BY DE MAND DRAFT DATED 05.03.2005 IN FAVOUR OF SHRI SURENDER SINGH, SON OF SHRI KEHER SINGH PAYABLE AT STATE BANK OF BIKANER AND JAIPUR, NEW DE LHI. THE SAME DEMAND DRAFT WAS ENCASHED ON 08.03.2005. AFTER THE SALE, IT WAS FOUND THAT THIS DOCUMENT WAS REGISTERED BY FORGING A BOGU S IDENTITY PROOF BY SHRI SURENDER, THEREFORE, THE MUTATION OF THE LAND COULD NOT BE DONE IN THE HANDS OF THE ASSESSEE. THE ASSESSEE FILED AN FIR. MEANWHILE, SHRI SURENDER WAS GOT MURDERED AND ASSESSEE COULD NOT RE COVER ANY AMOUNT AND THE SAME WAS DEBITED AS BAD DEBTS IN THE PROFIT AND LOSS ACCOUNT. 6. WHILE PLEADING ON BEHALF OF THE ASSESSEE LD. AR SUBMITTED THAT BUYING OF THIS LAND WAS FOR BUSINESS PURPOSES AND I T HAS RESULTED INTO LOSS AND THAT SHOULD BE ALLOWED AS BUSINESS LOSS. THIS TRANSACTION WAS TAKEN IN NORMAL COURSE OF BUSINESS OF THE ASSESSEE OF INVEST ING AND TRADING IN THE LAND. SINCE THE ASSESSEE FELL IN THE TRAP AND INCU RRED SUCH LOSSES WHICH HAVE BEEN WRITTEN OFF IN PROFIT & LOSS ACCOUNT, THE REFORE, THE ASSESSEE DESERVES TO BE ALLOWED SUCH LOSSES AS REVENUE LOSS. HE ALSO CLAIMED THAT 4 ITA NO.5412/DEL/2011 ITAT HAS ALREADY ALLOWED LOSS IN THE ASSESSMENT YEA R 2006-07 AND WHENEVER THE ASSESSEE RECOVERS THE AMOUNT THE SAME SHALL BE ACCOUNTED AS ITS INCOME IN THE SUBSEQUENT YEARS. THEREFORE, THE ASSESSEES INTENTION WAS TO CLAIM THE GENUINE LOSS AND WHENEVER THE LOSS IS RECOVERED, CREDIT THE SAME AND OFFER FOR TAXES. 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F THE AUTHORITIES BELOW AND PLEADED THAT THE ASSESSEE WAS NEVER INDUL GED IN THE BUSINESS OF REAL ESTATE. THE ASSESSEE FAILED TO ESTABLISH THAT THE ASSET WAS PURCHASED FOR TRADING. THEREFORE, THIS LOSS IS A CAPITAL LO SS AND IT CANNOT BE CLAIMED AS REVENUE OR BUSINESS LOSS. HE PLEADED TO SUSTAIN THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE H AVE ALSO GONE THROUGH THE PAPER BOOK SUBMITTED BEFORE US. WE HAV E ALSO PERUSED THE CASE LAWS RELIED UPON. AFTER HEARING, WE FIND THAT ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF REAL ESTATE. THE ASSESS EE HAS FAILED TO ESTABLISH THAT TRANSACTION BY WHICH THE LAND WAS PURCHASED WA S PURCHASED AS TRADING ASSETS. SINCE THE ASSESSEE HAS FAILED TO S UBSTANTIATE THE CLAIM WITH ANY OF THE CORROBORATIVE EVIDENCE THAT ASSESSEE WAS IN THE BUSINESS OF REAL ESTATE AND THIS TRANSACTION ENTERED INTO WAS FOR TR ADING ASSETS, THEREFORE, WE UPHOLD THE ORDERS OF THE AUTHORITIES BELOW BY HO LDING THAT LOSS SUFFERED BY THE ASSESSEE ON THIS TRANSACTION WAS A CAPITAL LOSS AND THE 5 ITA NO.5412/DEL/2011 SAME CANNOT BE CLAIMED AS BUSINESS LOSS IN PROFIT & LOSS ACCOUNT. THE ASSESSEE IS A NBFC AND DOES NOT DEAL IN THE REAL ES TATE. FOR THAT REASON ALSO, WE SUSTAIN THE ORDERS OF THE AUTHORITIES BELO W. 9. IN THE GROUND NO.3, THE ISSUE INVOLVED IS CONFIR MING THE DISALLOWANCE OF RS.1,60,087/- U/S 14A OF THE INCOME -TAX ACT, 1961. 10. WE HAVE HEARD BOTH THE SIDES. ON THIS ISSUE, W E FIND THAT ASSESSEE HAS RECEIVED DIVIDEND OF RS.1,87,500/- AND HAS ALSO EARNED PROFIT ON THE SALE OF INVESTMENTS. THEREFORE, WE FIND THAT THE M AIN ACTIVITY OF THE ASSESSEE WAS INVESTING IN SHARES AND SECURITIES. T HE EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT MAINLY RELATED TO TH IS ACTIVITY OF THE ASSESSEE. IN VIEW OF THIS FACTUAL MATRIX, WE FIND THAT MAJORITY OF THE EXPENSES IN PROFIT AND LOSS ACCOUNT ARE TOWARDS THE INVESTMENT IN SHARES AND FOR EARNING DIVIDEND INCOME. THIS IS THE ASSESS MENT YEAR 2008-09 WHERE RULE 8D IS APPLICABLE, THEREFORE, WE FIND NO FAULT IN THE ORDER OF THE AUTHORITIES BELOW. WE DISMISS THIS GROUND OF A SSESSEE APPEAL. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF NOVEMBER, 2014. SD/- SD/- (I.C. SUDHIR) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 14 TH DAY OF NOVEMBER, 2014 TS 6 ITA NO.5412/DEL/2011 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR/ITAT