MR. JAY ASHKARAN SHAH, MUMBIA V. INCOME TAX OFFICER 18(1)(5), MUMBAI

ITA 5596/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5242 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 28-08-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Bad and doubtful debts; TDS

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI , !'#,$%!'&! BEFORE SHRI PRAMOD KUMAR, VICE-PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER !. 5596 / /201 9 (%-. . 2014-15 ) ITA NO.5596/MUM/2019 (A.Y. 2014-15) MR. JAY ASHKARAN SHAH, 7, KOLBHAT LANE, KALBADEVI ROAD, MUMBAI 400 002 PAN: AYKPS9495B ...... #/ / APPELLANT - VS. INCOME TAX OFFICER 18(1)(5), EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 021. ..... %0/ RESPONDENT #/1/ APPELLANT BY : SHRI MIHIR NANIWADEKAR %01/ RESPONDENT BY : MS. USHA GAIKWAD ! -2%0 #/ DATE OF HEARING : 08/02/2021 34 2%0 #/ DATE OF PRONOUNCEMENT : 03/05/2021 &/ ORDER PER VIKAS AWASTHY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-53, MUMBAI [IN SHORT THE CIT( A)] DATED 19/06/2019 FOR THE ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE IN APPEAL HAS PRIMARILY ASSAILED TH E FINDINGS OF CIT(A) IN REJECTING ASSESSEES CLAIM OF WRITE OFF OF BAD DEBTS IN RESPE CT OF LOSS SUFFERED DURING TRADING AT 2 ITA NO.5596/MUM/2019(A.Y. 2014-15) NATIONAL SPOT EXCHANGE, AS WELL REJECTION OF ALTERN ATE CLAIM OF ALLOWING IRRECOVERABLE BAD DEBTS AS BUSINESS LOSS UNDER SECTION 28(1)/37 (1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 3. SHRI. MIHIR NANIWADEKAR APPEARING ON BEHALF OF T HE ASSESSEE NARRATING FACTS OF THE CASE SUBMITTED THAT: THE ASSESSEE WAS ENGAGED IN TRADING OF VARIOUS COMMODITIES AT NATIONAL SPOT EXCHANGE LTD. (IN SHOR T THE NSEL). THE TRADING AT NSEL WAS ABRUPTLY STOPPED BY THE GOVERNMENT IN JULY 2013 . DUE TO SUDDEN CLOSURE OF TRADING, THE ASSESSEE COULD NOT RECOVER OUTSTANDING PAYMENTS TO THE EXTENT OF RS.1,26,61,739/- FROM THE BROKERS. IN THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE WROTE OFF IRRECOVERABLE AMOUNTS AS BAD DEBTS. THE ASSESSEE HAS WRITTEN OFF BAD DEBTS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT AND JUDGEMENT RENDERED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF TRF LTD VS. CIT REPORTED AS 323 ITR 397. THE ASSESSING OFFI CER REJECTED ASSESSEES CLAIM OF WRITE OFF OF BAD DEBTS STATING IT TO BE PREMATURE. 3.1. AGGRIEVED BY THE ASSESSMENT ORDER DATED 25/12/ 2016 THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PLACING RELIA NCE ON THE DECISION IN THE CASE OF ACIT VS. A.U FINANCIAL INDIA LTD. REPORTED AS 102 T AXMANN.COM 290 (JAIPUR-TRIB.) AND OMNI LENS PVT. LTD. VS DCIT, 99 TAXAMNN.COM. 333 HE LD THE LOSS AT NSEL IS SPECULATIVE AND HENCE, CANNOT BE ALLOWED AGAINST OTHER SOURCES INCOME AND DISMISSED ASSESSEES CLAIM. THE LD. AUTHORIZED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT THE CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT THE TRAN SACTION CARRIED OUT BY THE ASSESSEE AT NSEL WERE SPECULATIVE. THE LD. AUTHORIZ ED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE TRANSACTIONS WERE ON ACTUAL DELI VERY BASIS. IN EARLIER ASSESSMENT YEAR THE ASSESSEE HAD OFFERED PROFIT FROM SIMILAR T RANSACTIONS AS BUSINESS INCOME AND THE SAME WAS ACCEPTED BY THE REVENUE. THERE IS NO CHANGE IN THE NATURE AND MANNER OF TRANSACTION WHEREIN THE ASSESSEE COULD NO T RECOVER THE AMOUNTS. THE 3 ITA NO.5596/MUM/2019(A.Y. 2014-15) ASSESSEE COULD NOT RECOVER THE AMOUNT ONLY FOR THE REASON OF ABRUPT SUSPENSION OF TRADING AT NSEL BY THE GOVERNMENT. 3.2. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSES SEE SUBMITTED THAT IN CASE IRRECOVERABLE AMOUNTS CANNOT BE ALLOWED AS BAD DEBT S, THE SAME BE ALLOWED AS BUSINESS LOSS UNDER SECTION 28(1) OF THE ACT. TO SU PPORT HIS ALTERNATE CONTENTION, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE PLACE D RELIANCE ON THE DECISION IN THE CASE OF CHAUDHARY ASSOCIATE VS. ACIT, 117 TAXAMANN. COM 840 (DEL). 4. MS. USHA GAIKWAD REPRESENTING THE DEPARTMENT VEH EMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSING THE APPEAL OF ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IN THE C ASE OF A.U FINANCIAL INDIA LTD. (SUPRA) THE TRIBUNAL HAS HELD THE TRANSACTIONS AT N SEL ARE SPECULATIVE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE EXAMINED THE ORDERS OF AUTHORITIES BELOW. THE SHORT POINT INVOL VED IN PRESENT APPEAL IS: WHETHER THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF WRITE O FF OF BAD DEBTS ON AMOUNTS IRRECOVERABLE FROM TRANSACTIONS AT NSEL? THE CONTEN TION OF ASSESSEE IS THAT THE TRANSACTIONS CARRIED OUT AT NSEL ARE DELIVERY BASED AND NOT SPECULATIVE. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS POINT ED THAT IN PRECEDING ASSESSMENT YEARS, THE ASSESSEE HAS OFFERED PROFIT FROM TRANSAC TIONS AT NSEL AS, BUSINESS INCOME AND THE SAME WAS ACCEPTED BY THE REVENUE. IN SUPPOR T OF LATER ARGUMENT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE . 6. THE CIT(A) HAS REJECTED THE CLAIM OF ASSESSEE IN TER ALIA ON THE GROUND THAT THE LOSS FROM TRANSACTIONS AT NSEL IS SPECULATIVE. WE O BSERVE THAT THE CIT(A) HAS GIVEN THE SAID FINDING MERELY ON THE BASIS OF TWO DECISIO NS OF THE TRIBUNAL. THE CIT(A) HAS NOT EXAMINED THE CONTRACT NOTES, DELIVERY ALLOCATIO N REPORT, LEDGER ACCOUNTS ETC. FURNISHED BY THE ASSESSEE. WITHOUT ACTUAL EXAMINATI ON OF RELEVANT DOCUMENTS, THE 4 ITA NO.5596/MUM/2019(A.Y. 2014-15) OBSERVATION MADE BY THE CIT(A) ARE MERELY ON SURMIS ES AND CONJUNCTURES, HENCE, UNSUSTAINABLE. 7. THE CIT(A) HAS REFERRED TO THE FINDINGS OF TRIBU NAL IN THE CASE OF AU FINANCERS (INDIA) LTD.(SUPRA). IN THE SAID CASE THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE TRANSACTIONS WERE DELIVERY BASED, HENCE, THE TRANSA CTIONS WERE HELD TO BE SPECULATIVE. THE FACTS IN THE SAID CASE ARE DIFFERE NT FROM THE FACTS IN PRESENT CASE. IN THE INSTANT CASE, EXERCISE TO VERIFY THE TRANSACTIO NS BY THE ASSESSEE AT NSEL HAS NOT BEEN DONE. THEREFORE, THE DECISION OF TRIBUNAL IN T HE CASE OF AU FINANCERS (INDIA) LTD. (SUPRA) WOULD NOT SUPPORT THE CAUSE OF REVENUE, UNL ESS IT IS PROVED THAT THE TRANSACTIONS ARE SPECULATIVE IN NATURE. THE SECOND DECISION ON WHICH THE CIT(A) HAS PLACED RELIANCE IS OMNI LENS (P.) LTD. (SUPRA). WE FIND THAT IN THE SAID CASE, IN PRI NCIPLE THE TRIBUNAL AGREED WITH THE CONTENTION OF ASSESSEE IN ALLOWABILITY OF CLAIM OF WRITE OFF OF BAD DEBTS. SINCE, THE TRANSACTION OF PURCHASE AND SALE WITH RESPECT TO AC TUAL DELIVERY WERE NOT EXAMINED BY THE AUTHORITIES BELOW, THE TRIBUNAL REMITTED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER TO ASCERTAIN WHETHER TRANSACTIONS WERE BACKED BY ACTUAL DELIVERY BEFORE ALLOWING THE CLAIM OF WRITE OFF OF BAD DEBTS . THE TRIBUNAL NO WHERE OBSERVED THAT ALL TRANSACTIONS AT NSEL ARE SPECULATIVE AND H ENCE CANNOT BE ALLOWED AS BAD DEBTS WITHIN THE MEANING OF SECTION 36(1)(III) OF T HE ACT. THEREFORE, RELIANCE PLACED BY THE CIT(A) ON THE ABOVE DECISIONS WITHOUT ASCERT AINING THE FACTS IS MISPLACED. 8. IN SO FAR AS THE FINDINGS OF THE ASSESSING OFFIC ER THAT THE CLAIM OF WRITE OFF OF BAD DEBTS IS PREMATURE, THE SAME IS WITHOUT ANY SUB STANCE. THE AMOUNTS ARE OUTSTANDING SINCE 2013. THE ASSESSEES CLAIM OF WRI TE OFF OF IRRECOVERABLE DEBTS CANNOT BE STATED TO BE PREMATURE FOR THE REASON THA T THE CENTRAL/STATE GOVERNMENTS ARE DEVISING SOME MECHANISM TO RECOVER THE AMOUNTS BY ATTACHING THE ASSETS AND AUCTIONING THE SAME FOR MAKING PAYMENTS TO TRADERS/ BROKERS ETC. THE ASSESSING 5 ITA NO.5596/MUM/2019(A.Y. 2014-15) OFFICER HAS NOT DISPUTED THE FACT THAT THE ASSESSEE HAS CARRIED OUT TRADING OF COMMODITIES AT NSEL AND THERE WERE OUTSTANDING AMOU NTS THAT REMAINED TO BE RECOVERED BY THE ASSESSEE ON ACCOUNT TO ABRUPT EMBA RGO ON TRADING AT NSEL. ONCE THE AMOUNT HAS BECOME IRRECOVERABLE AND THE ASSESSE E WRITES OFF THE SAME, THERE IS NO STATUTORY REQUIREMENT FOR THE ASSESSEE TO ESTABL ISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS SUFFICIENT IF THE BAD D EBTS ARE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. [RE. TRF LTD. VS. CIT (SUPRA) ]. LATER, IF AT ANY STAGE, THE ASSESSEE RECOVERS ANY MONEY AGAINST THE SUM WRI TTEN OFF AS BAD DEBT, THE ASSESSEE IS UNDER OBLIGATION TO DECLARE IT AS INCOM E. 9. WE FIND THAT IN THE CASE OF M/S. MEGH SAKARIYA INTERNATIONAL P. LTD. VS. DCIT IN ITA NO.59/CHENY/2018 DECIDED ON 05/09/2018, UNDER SOMEWHAT SIMILAR SET OF FACTS WHERE THE ASSESSEE THEREIN HAD CLAIMED WRITE OFF OF BAD DEBTS IN RESPECT OF TRANSACTIONS AT NSEL, THE ASSESSING OFFICER REJECTE D ASSESSES CLAIM BEING PREMATURE, THE TRIBUNAL ALLOWED THE CLAIM OF ASSESSEE. SIMILAR VIEW WAS TAKEN BY INDORE BENCH OF THE TRIBUNAL IN IDENTICAL SET OF FACTS IN THE CA SE OF MOHAN JAIN VS ITO IN ITA NO.605/IND/2017 FOR AY2014-15 DECIDED ON 05/2/2019. 10. WE OBSERVE THAT THERE IS DISCREPANCY IN QUANTUM OF CLAIM OF WRITE OFF OF DEBTS BEFORE THE ASSESSING OFFICER AND THE CIT(A). TAKING INTO CONSIDERATION ENTIRE FACTS, WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE BACK TO T HE FILE OF ASSESSING OFFICER FOR EXAMINING ASSESSEES RETURN OF INCOME/ASSESSMENT OR DER IN THE PRECEDING ASSESSMENT YEARS WHEREIN THE INCOME FROM TRANSACTIO NS AT NSEL WERE ALLEGEDLY OFFERED AND ACCEPTED AS BUSINESS INCOME, CONTRACT NOTES ETC. TO ASCERTAIN THE TRANSACTIONS BEING ACTUAL DELIVERY BASED AND TO IRO N OUT INCONSISTENCIES IN THE AMOUNT OF CLAIM. THE ASSESSING OFFICER SHALL ALLOW REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE, IN ACCORDANCE WITH LAW. IN VIEW OF OUR ABOVE FINDINGS, GROUND NO. 1 TO 4 OF THE APPEAL ARE ALLOWED FOR STATISTICAL PURP OSE, IN THE TERMS AFORESAID. 6 ITA NO.5596/MUM/2019(A.Y. 2014-15) 11. IN GROUND NO.5, THE ASSESSEE HAS MADE ALTERNATE CLAIM OF ALLOWING IRRECOVERABLE AMOUNT AS LOSS U/S. 28(1) OF THE ACT. SINCE, IN PRINCIPLE WE HAVE ACCEPTED PRIMARY CONTENTION OF THE ASSESSEE, THE AL TERNATE PLEA RAISED BY THE ASSESSEE BECOMES ACADEMIC, HENCE, IS NOT DELIBERATE D UPON. 12. IN GROUND NO.6 OF APPEAL, THE ASSESSEE HAS ASSA ILED THE FINDING OF CIT(A) IN NOT GIVING DIRECTIONS TO THE ASSESSING OFFICER IN ALLOW ING TAX CREDIT OF RS.8,18,565/-. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSING OF FICER HAS NOT ALLOWED TDS CREDIT OF THE ENTIRE AMOUNT OF RS.8,18,565/-. THE ASSESSING OFFICER HAS ALLOWED CREDIT ONLY TO THE EXTENT OF RS.6,67,127/-. WE DEEM IT APPROPRIAT E TO RESTORE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR RE-VERIFICATION/RECON CILIATION OF TDS CREDIT CLAIMED BY THE ASSESSEE WITH THE DOCUMENTS/STATEMENTS FURNISHED BY THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FURNISH RELEVANT DOCUMENTS BEFORE THE A SSESSING OFFICER FOR RECONCILIATION OF TAX CREDIT. THE ASSESSING OFFICER SHALL GRANT TH E BENEFIT OF TAX CREDIT AFTER EXAMINING THE STATEMENTS AND RECONCILIATION, IN ACC ORDANCE WITH LAW. THE GROUND NO.6 IS ALLOWED FOR STATISTICAL PURPOSE. 13. THE GROUND NO.7 & 8 ARE GENERAL IN NATURE, HENC E, REQUIRE NO ADJUDICATION. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY THE 03 RD DAY OF MAY, 2021. SD/- SD/- (PRAMOD KUMAR) (VIKAS AWASTHY) / VICE PRESIDENT $%!' / JUDICIAL MEMBER / MUMBAI, 6-/ DATED: 03/05/2021 VM , SR. PS(O/S) 7 ITA NO.5596/MUM/2019(A.Y. 2014-15) COPY OF THE ORDER FORWARDED TO : 1. #/ / THE APPELLANT , 2. %0 / THE RESPONDENT. 3. 70 ( )/ THE CIT(A)- 4. 70 CIT 5. 89%0%- , . . . , / DR, ITAT, MUMBAI 6. 9:;< / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI