Vadilal Enterprises Ltd., Ahmedabad V. The Jt.CIT.,Range-8, Ahmedabad

ITA 57/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60421 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N SAPORKAR
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT ME MBER I.T.A. NO.57/AHD/2012 A. Y. 2007-08 VADILAL ENTERPRISES LTD. VADILAL HOUSE, SHRIMALI SOCIETY, NAVRANGPUPRA, AHMEDABAD-380009 PAN-AABCV0988J APPELLANT VS. JOINT COMMISSIONER OF INCOME TAX, RANGE-8 AHMEDABAD RESPONDENT DEPARTMENT BY : SHRI VINOD TANWANI, SR. D.R. ASSESSEE BY : SHRI S.N. SAPORKAR, A.R. DATE OF HEARING : 09.05.2012 DATE OF PRONOUNCEMENT : 25.05.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A)-XIV, AHMEDABAD DATED 18.11.2011, PASSED IN APPEAL NO.CIT (A) XIV/JT.CIT R- 8/291/09-10. 2. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY ADJUDICATION. 3. GROUND NO.2 READS AS UNDER:- THE LD. COMMISSIONER(A) ERRED IN CONFIRMING THE A CTION OF THE A.O. IN DISALLOWING PROVISION FOR DOUBTFUL ADVANCES OF RS.7,78,000/- ITA NO.57/AHD/2012 , A.Y. 2007-08 2 ON THE GROUND THAT THE SAID AMOUNT IS MERE PROVISIO N FOR DOUBTFUL ADVANCES. 4. THE A.O., WHILE MAKING THE ADDITION OF RS.7,78, 000/- HAS OBSERVED AS UNDER:- IT IS SEEN FROM THE PROFIT AND LOSS ACCOUNT THAT T HE ASSESSEE HAS MADE PROVISION OF RS.7,78,000/- FOR DO UBTFUL ADVANCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE WAS ASKED TO EXPLAIN WHY SUCH PROVISION SHOULD NOT BE DISALLOWED . IN REPLY THE ASSESSEES REPRESENTATIVE STATES THAT DURING THE CO URSE OF BUSINESS, THE ASSESSEE COMPANY HAS MADE VARIOUS ADVANCES TO TRANS PORTERS FOR TRANSPORT OF GOODS, TO STAFF FOR INCURRING EXPENSES RELATING TO THE BUSINESS E.G. TRAVELING EXPENSES. THE ABOVE ADVANC E HAVE BEEN PROVIDED IN PROFIT AND LOSS ACCOUNT AS THE CONCERNE D PERSON HAS NOT SETTLED THEIR ADVANCES. SINCE, THE ADVANCES WERE G IVEN FOR THE PURPOSES OF BUSINESS, THE SAME IS ALLOWABLE AS BUSINESS EXPE NSES U/S 37(1) OF THE I.T. ACT, 1961. THE ASSESSEES EXPLANATION IS CAREFULLY CONSIDERED BUT FULLY NOT ACCEPTABLE. THE ASSESSEE COMPANY HAS MADE MERE PROVISIONS FOR DOUBTFUL ADVANCES AND NOT INCURRED ANY EXPENSES. T HEREFORE, IT IS NOT ALLOWABLE AS EXPENSES U/S 37(1) OF THE I.T. ACT, 19 61. 5. BEFORE LD. CIT(A) ASSESSEES WRITTEN SUBMISSION WAS AS UNDER:- ADVANCES. DURING THE COURSE OF ASSESSMENT THAT DUR ING THE COURSE OF BUSINESS THE COMPANY HAS MADE VARIOUS ADV ANCES TO TRANSPORTERS FOR TRANSPORT OF GOODS AND TO STAFF FO R INCURRING THE EXPENDITURE RELATING TO BUSINESS. THE PARTY WISE DETAIL OF PROVISION FOR ADVANCES IS ENCLOSED. THE ASSESSEE HAS GIVEN THE ADVANCES TO CONCERNED PE RSONS AND THEY HAVE NOT SUBMITTED THE ACCOUNT OF THE ADVANCES GIVE N AND LEFT THE ORGANIZATION. THEREFORE, AT THE TIME OF FINALIZATI ON OF THE ACCOUNT AN ADVICE OF THE AUDITOR IN BOOKS OF ACCOUNT THE ASSES SEE HAS MADE PROVISION. SINCE THE ADVANCES HAD BEEN GIVEN DURING THE COURSE OF BUSINESS, THE SAME IS ALLOWABLE AS BUSINESS LOSS. IN VIEW OF THE ABOVE YOUR HONOUR MAY ALLOW THE SAID EXPENDITURE U/S 37(1) OF THE ACT. 6. LD. CIT(A) HAS CONFIRMED THE ACTION OF THE A.O. OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A ND THE SUBMISSION FILED BY THE APPELLANT. THE FACTS SHOW THAT THE APPELLANT HAS CLAIMED DEDUCTION ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBT S IN COMPUTATION OF INCOME. THE PROVISION HAS BEEN MADE FOR VARIOUS ADVANCES GI VEN BY THE APPELLANT TO ITA NO.57/AHD/2012 , A.Y. 2007-08 3 VARIOUS PERSONS. THE APPELLANT HAS CLAIMED THAT TH E DEDUCTION SHOULD BE ALLOWABLE AS EXPENDITURE U/S 37 OF THE ACT. THE CL AIM OF THE APPELLANT IS NOT ALLOWABLE AS PROVISION FOR ANY EXPENSE WHICH IS NOT DETERMINED OR CERTAIN CANNOT BE ALLOWED AS DEDUCTION. THE APPELLANT IS NOT SURE WHETHER THE DEBT OR THE ADVANCE HAS BECOME FINALLY IRRECOVERABLE OR HAS REA LLY BECOME BAD. HAD THE ADVANCE BECOME IRRECOVERABLE OR BAD, THE APPELLANT SHOULD HAVE WRITTEN IT OFF AS BAD DEBT. THEREFORE, MERE PROVISION FOR DOUBTFUL A DVANCES CANNOT BE ALLOWED AS DEDUCTION U/S 37(1) OF THE I.T. ACT. THE ADDITION MADE BY THE A.O. IS, THEREFORE, UPHELD. THE GROUND OF APPEAL IS, THEREFORE, DELETE D. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORDS, WE FIND THAT SIMILAR ISSUE WAS DECIDED BY US IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.3307 OF 2011 WHEREIN WE HAVE DELETED THE ADDITI ON AND ALLOWED THE APPEAL OF THE ASSESSEE. FOR THE REASONS GIVEN IN THAT ORDER THE ADDITION OF RS.7,78,000/- IS HEREBY DELETED. 8. GROUND NO.3 WAS NOT PRESSED AT THE TIME OF HEAR ING, HENCE DISMISSED AS NOT PRESSED. 9. GROUND NO.4 OF THE ASSESSEE READS AS UNDER:- THE LD. COMMISSIONER (APPEAL) ERRED IN DISALLOWING RS.25,000/- ON ADHOC BASIS OUT OF DISALLOWANCE OF RS.50,000/- MADE BY THE ASSESSING OFFICER FOR WANT OF VERIFICATION OF EXPENSES. 10. THE A.O., DURING THE COURSE OF ASSESSMENT PROC EEDINGS OBSERVED THAT THE ASSESSEE HAS INCURRED VARIOUS EXPENDITURE UNDER THE HEAD MISCELLANEOUS EXPENSES. ON VERIFICATION HE FOUND THAT MANY OF SUCH EXPENSES WE RE NOT SUPPORTED BY THE VOUCHERS. THEREFORE, AN AMOUNT OF RS.50,000/- WAS DISALLOWED CONSIDERING SUCH EXPENSES BEING INCURRED FOR NON-BUSINESS PURPOSE. IN APPEAL THIS ADHOC AMOUNT WAS REDUCED TO RS.25,000/- BY LD. CIT(A). BEFORE US THIS GROUND W AS NOT SERIOUSLY PRESSED BY LD. COUNSEL OF THE ASSESSEE, THEREFORE, THE SAME IS HEREBY DISM ISSED. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALL OWED. SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JU DICIAL MEMBER ITA NO.57/AHD/2012 , A.Y. 2007-08 4 TRUE COPY N.K. CHAUDHARY, SR. P.S. - 25/05/2012 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. !' / CONCERNED CIT 4. !' - / CIT (A) 5. #$% , & , / DR, ITAT, AHMEDABAD 6. %'( )* / GUARD FILE. BY ORDER/ , + / , & ,