ITO 19(3)(4), MUMBAI V. SANJAY A TOLANI, MUMBAI

ITA 6114/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56270 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 28-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: VISHWAS V MEHENDALE
• Keywords: Business income; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI J. SUDHAKAR REDDY (ACCOUNTANT MEMBER) ITA NOS.6114 & 6115/MUM/2010 ASSESSMENT YEARS-2005-06 & 2006-07 THE ITO 19(3)(4), 313, 3 RD FLOOR, PIRAMAL CHAMBER, PAREL, MUMBAI-400 012 VS. SHRI SANJAI A TOLANI, 9-B, CENCED APARTMENT, UNION PARK, KHAR-WEST, MUMBAI-400 052 PAN-AABPT 0376M (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI V.V. SHASTRI RESPONDENT BY: SHRI VISHWAS V. MEHENDALE DATE OF HEARING :28.12.2011 DATE OF PRONOUNCEMENT:28.12.2011 O R D E R PER B.R. MITTAL, JM : THE DEPARTMENT HAS FILED THESE TWO APPEALS FOR ASSE SSMENT YEARS 2005-06 & 2006-07 AGAINST ORDERS OF LD. CIT(A) DT. 25 TH MAY, 2010 AND 28 TH MAY, 2010 RESPECTIVELY ON SIMILAR GROUNDS WHICH ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT M ONIES WERE LENT TO THE PARTIES IN THE ORDINARY COURSE OF THE BUSINESS OF THE ASSESSEE AS MONEY LENDING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN COMPLETELY DISREG ARDING THE FACTS BROUGHT OUT CLEARLY IN THE ASSESSMENT ORDER REGARDING FUND DEPLOYMENT BY THE ASSESSEE OVER THE YEAR AND CONCL UDING FIT TO BE MONEY LENDING ACTIVITIES. 2. THE RELEVANT FACTS GIVING RISE TO APPEAL FOR ASS ESSMENT YEAR 2005-06 ARE THAT ASSESSEE CLAIMED BAD DEBTS IN RESPECT OF M /S. TUTU FILMS PVT. LTD OF ITA NOS. 6114 & 15/M/10 2 RS. 5,00,000/- AND M/S. LABH CONSTRUCTION PVT. LTD. OF RS. 15 LAKHS. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUN D THAT ASSESSEE IS NOT IN THE BUSINESS OF GIVING LOANS AND ADVANCES. THAT AS SESSEE DOES NOT HAVE A MONEY LENDING LICENCE. HENCE, LOANS WHICH WERE GIV EN BY ASSESSEE IF COULD NOT BE RECOVERED, COULD NOT BE CLAIMED AS BAD DEBT U/S. 36(I)(VII) OF THE ACT. 3. SIMILARLY IN RESPECT OF ASSESSMENT YEAR 2006-07, AO DISALLOWED CLAIM OF BAD DEBT OF ASSESSEE OF RS. 20 LAKHS IN RESPECT OF M/S. LABH CONSTRUCTION PVT. LTD ON THE SIMILAR REASONING AS WERE CONSIDERE D FOR ASSESSMENT YEAR 2005-06. 4. BEING AGGRIEVED, ASSESSEE FILED APPEALS BEFORE F IRST APPELLATE AUTHORITY. 5. LD. CIT(A) VIDE ITS ORDER DT. 25 TH MAY, 2010 FOR ASSESSMENT YEAR 2005- 06, AFTER CONSIDERING THE SUBMISSION OF ASSESSEE HE LD THAT ASSESSEE HAD GIVEN LOANS TO M/S. TUTU FILMS PVT. LTD & M/S. LABH CONS TRUCTION PVT. LTD. IN THE COURSE OF ITS BUSINESS. LD. CIT(A) HAS CONSIDERED THE SUBMISSION OF ASSESSEE THAT ASSESSEE HAD BEEN DISCLOSING INTEREST INCOME I N RESPECT OF LOANS AS ITS BUSINESS INCOME IN THE RETURNS FILED FOR ASSESSMENT YEARS 2000-01, 2001-02, 2002-03 AND 2004-05, WHICH WERE ACCEPTED BY AO U/S. 143(1) OF THE ACT AND WHEREAS RETURN OF INCOME FOR ASSESSMENT YEAR 2003-0 4 WAS SUBJECTED TO DETAILED SCRUTINY BY AO U/S. 143(3) OF THE ACT VIDE DT.12 TH SEPTEMBER, 2005 AND ACCEPTING BUSINESS INCOME ON ACCOUNT OF INTERES T ETC SUBJECT TO DISALLOWANCE OF ROUTINE NATURE. HENCE, LD. CIT(A) HAS STATED THAT BAD DEBTS CLAIMED BY ASSESSEE ARE GENUINE AND SAME ARE TO BE ALLOWED U/S. 36(I)(VII) AND 36(2)(I) OF THE ACT. LD. CIT(A) FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2005-06 ALSO ALLOWED THE CLAIM OF ASSESSEE FOR BAD DEBT FOR ASSESSMENT YEAR 2006-07 VIDE ORDER DT. 28 TH MAY, 2010. HENCE THESE APPEALS BY DEPARTMENT. 6. DURING THE COURSE OF HEARING, LD. DR DID NOT CON TROVERT THE FACTS THAT ASSESSEE HAD SHOWN INTEREST INCOME ON THE LOANS ADV ANCED AS HIS BUSINESS ITA NOS. 6114 & 15/M/10 3 INCOME IN THE PRECEDING ASSESSMENT YEARS BY DEPARTM ENT AND AO WHILE COMPLETING ASSESSMENT FOR ASSESSMENT YEAR 2003-04 A LSO ACCEPTED THAT ASSESSEE WAS IN THE BUSINESS OF FILM FINANCING WHIL E PASSING ASSESSMENT ORDER U/S. 143(3) OF THE ACT. THEREFORE, WE AGREE WITH L D. CIT(A) THAT BAD DEBTS CLAIMED BY ASSESSEE IN RESPECT OF LOANS ADVANCED BY ASSESSEE, WHICH WERE WRITTEN OFF IN THE ASSESSMENT YEARS UNDER CONSIDERA TION ARE ALLOWABLE AS BAD DEBTS U/S. 36(I)(VII) OF THE ACT. HENCE, WE UPHOLD BOTH ORDERS OF LD. CIT(A) FOR BOTH ASSESSMENT YEARS UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2005-06 AND 2006-07 BY DISMISSING GROUNDS OF APPEAL TAKEN B Y DEPARTMENT. 7. IN THE RESULT, BOTH APPEALS OF THE DEPARTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING I.E. ON 28 TH DECEMBER, 2011 SD/- SD/- ( J. SUDHAKAR REDDY) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 28 TH DECEMBER,2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI