Rakesh Sarin, CHENNAI V. DCIT, CHENNAI

ITA 615/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51901 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 07-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: N K MOHNOT ITP
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO.615(MDS)/2011 ASSESSMENT YEAR: 2004-05 SHRI RAKESH SARIN, 5E, MOOKAMBIKA COMPLEX, 4-LADY DESIKA ROAD, CHENNAI-600 004. PAN ADXPR7428R. VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE II(1), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K. MOHNOT, ITP RESPONDENT BY : SHRI SHAJI P JACOB, IRS, SR.DR. DATE OF HEARING : 19 TH SEPTEMBER, 2011 DATE OF PRONOUNCEMENT : 19 TH SEPTEMBER, 2011 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2004-05. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-II AT CHENNAI DATED 20-1-2011. THE APPEAL ARISES OUT OF THE ASSE SSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961. - - ITA NO.615 OF 2011 2 2. THE FIRST GROUND RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN CO NFIRMING THE DISALLOWANCE OF A SUM OF ` 25,000/- TOWARDS LEGAL EXPENSES. 3. THE ABOVE LEGAL EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE IN CONNECTION WITH THE PROCEEDINGS THA T FOLLOWED A SEARCH BY THE INCOME-TAX DEPARTMENT. IN THE COURSE OF THE SEARCH, CERTAIN FINANCIAL ASSETS OF THE ASSESSEE WE RE SEIZED AND THEY WERE ENCASHED AND THE PROCEEDINGS WERE APPROPR IATED TOWARDS THE DEMAND AND IN THAT PROCESS, IN ORDER TO DEFEND HIS CASE, THE ASSESSEE HAD APPROACHED THE HONBLE HIGH COURT IN WRIT JURISDICTION AND THIS EXPENDITURE WAS INCURRED . 4. WE FIND THAT, IN EFFECT, THE ABOVE EXPENDITURE WAS INCURRED BY THE ASSESSEE, EVEN THOUGH LEGAL CHARGES , IN CONNECTION WITH COMPUTING HIS TAXABLE INCOME. THE EXPENDITURE HAS BEEN INCURRED FOR INCOME-TAX MATTERS. SUCH EXP ENDITURE IS IN THE NATURE OF PERSONAL EXPENDITURE OF THE ASSESS EE. IT CANNOT BE TREATED AS BUSINESS EXPENDITURE. THEREFORE, THE LOWER AUTHORITIES ARE JUSTIFIED IN DISALLOWING THE SUM OF ` 25,000/- INCURRED BY THE ASSESSEE AS LEGAL CHARGES PERTAININ G TO - - ITA NO.615 OF 2011 3 ASSESSEES INCOME-TAX MATTERS. THIS ISSUE IS DECI DED AGAINST THE ASSESSEE. 5. THE NEXT GROUND RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN CO NFIRMING THE DISALLOWANCE OF THE CLAIM OF BAD DEBTS OF ` 14 LAKHS, MADE BY THE ASSESSEE, ON THE GROUND THAT THE DEBTS WERE NOT WRITTEN OFF IN THE BOOKS OF ACCOUNT. THE LEARNED COUNSEL A PPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD NO OCC ASION TO PRODUCE THE BOOKS OF ACCOUNT BEFORE THE ASSESSING A UTHORITY, AS THE BOOKS WERE NOT SUMMONED. HE ALSO STATED THAT C OPIES OF ACCOUNTS WERE FURNISHED BEFORE THE ASSESSING OFFICE R, MORE PARTICULARLY THE COPIES OF THE PERSONAL ACCOUNTS OF THE DEBTORS AND THEREBY IT IS CLEAR THAT THE ASSESSEE HAD WRITT EN OFF THE DEBTS IN ITS BOOKS OF ACCOUNT. WE FIND THAT THIS ASPECT IS TO BE RE- EXAMINED BY THE ASSESSING AUTHORITY. THIS ISSUE IS REMITTED BACK TO THE ASSESSING OFFICER. HE IS DIRECTED TO CALL F OR THE ACCOUNTS OF THE ASSESSEE AND VERIFY WHETHER THE DEBTS WERE W RITTEN OFF BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT. IF HE IS SO SATISFIED, RELIEF MAY BE GRANTED IN ACCORDANCE WITH LAW. - - ITA NO.615 OF 2011 4 6. IN RESULT THIS APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME O F HEARING ON MONDAY, THE 19 TH OF SEPTEMBER, 2011 AT CHENNAI. SD/- SD/- (GEORGE MATHAN) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 19 TH SEPTEMBER, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.