RJD Impex Pvt.Ltd., Mehsana V. The Dy.CIT., Mehsana Circle, Ahmedabad

ITA 65/AHD/2012

• Counselvise Citation: 6520514 RSA 2012
• Duration Of Justice: 3 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: S N DIVATIA
• Keywords: Principle of natural justice; Additional evidence; Bad and doubtful debts
• Section: 143(3)

Judgement Text

ITA NO S . 65 & 416 /AHD/ 20 1 2 ASSESSMENT YEAR S : 2 0 0 8 - 09 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] ITA NO. 65 / AHD / 2 0 1 2 ASSESSMENT YEAR: 20 0 8 - 09 RJD IMPEX PVT. LTD. ....... .. . ..... APPELLANT 5, ASHOK NAGAR SOCIETY, RADHANPUR ROAD , MEHSANA. [PAN AA CFR 2804 C ] VS. DY. COMMISSIONER OF INCOME TAX .... .................. .... .. RESPONDENT CIRCLE, MEHSANA. ITA NO. 416/AHD/2012 ASSESSMENT YEAR: 2008 - 09 ASSTT. COMMISSIONER OF INCOME TAX ....... .. . .....APPELLANT MEHSANA CI RCLE, MEHSANA. VS. RJD IMPEX PVT. LTD. .... .................. .... .. RESPONDENT 5, ASHOK NAGAR SOCIETY, RADHANPUR ROAD, MEHSANA. [PAN AACFR 2804 C] APPEARANCES BY: S.N. D IV A TIA FOR THE A SSESSEE SONIA K U MAR FOR THE RE VENUE DATE OF CONCLUDING T HE HEARING : JUNE 30 TH , 201 5 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 29 TH , 2015 O R D E R PER PRAMOD KUMAR AM: ITA NO S . 65 & 416 /AHD/ 20 1 2 ASSESSMENT YEAR S : 2 0 0 8 - 09 PAGE 2 OF 7 1. TH ESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 22 ND NOVEMBER, 2011 PASSED BY THE LEARNED CIT(A) IN THE MAT T ER OF ASSESSMENT UND ER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 2008 - 09 . WE WILL TAKE UP THESE APPEALS TOGETHER. 2. GRIEVANCES RAISED BY THE PARTIES ARE AS FOLLOW S : - GRIEVANCE RAISED BY THE ASSESSEE 1.1 THE ORDER PASSED U /S. 250 ON 22.11.2011 FOR A.Y. 2008 - 09 BY CIT(A) - GNR, ABAD UPHOLDING THE DISALLOWANCE OF RS.10,11,887 MADE BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD . CIT ( A ) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT C ONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGNED ADDITIONS. 2.1 THE LD . CI T(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF THE CL A IM OF BAD DEBTS/TR A DING LO SS FOR RS.10,11,887 IN RESPECT OF M/S. QUALITY FOODS AND S.N. DAS FREIGHT FORWARDERS PVT. LTD. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT OUGHT NOT TO HAVE UPHELD THE DISALLOWANCE OF THE CLAIM OF BAD DEBTS/TRADING LO SS FOR RS.10,11,887/ - IN RESPECT OF M/S. QUALITY FOODS AND S.N. DAS FREIGHT FORWARDERS PVT. LTD. GRIEVANCE RAISED BY THE ASSESSING OFFICER 1. THE LEARNED CIT( APPEALS ) HAS ERRED IN LAW AND ON FACT S IN DELETING DISALLOWANCE OF RS.4,95,02,105/ - WITHOUT APP RECIATING THE FACT THAT THE CLAIM OF THE ASSESSEE IS NOT INCIDENTAL TO REGULAR BUSINESS ACTIVITY CA R RIED ON BY THE ASSESSEE. TRADING OF GOODS IN WHICH THE DEBTS A RE ST A TED TO BE INCURRED IS NOT EVEN COVERED IN MAIN OBJECTS OF THE COMPANY TO BE PURSUED BY IT ON ITS INCORPORATION. 2. THE LEARNED CIT(APPE A LS) HAS ERRED IN LAW A ND ON FACTS BY ADMITTING ADDITIONAL EVIDENCES WHICH WERE NOT PRODUCED DURING ASSESSMENT PROCEEDINGS AND WHICH ARE NOT COVERED IN EXEMPTION PROVIDED UNDER RULE 46A(1) OF THE I . T . RULES, 1962. 3 . AS THE GRIEVANCE S A RE INTERCONNECTED AND ARISE ON THE SAME SET OF FACTS, WE WILL TAKE UP A LL THESE GRIEVANCES TOGETHER. ITA NO S . 65 & 416 /AHD/ 20 1 2 ASSESSMENT YEAR S : 2 0 0 8 - 09 PAGE 3 OF 7 4 . THE MAIN BUSINESS PURSUED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR, AS NOTED IN THE ASSESSMENT ORDER ITSELF, WAS O F TRADING IN GOLD JEWELLERY, LAND AND SHARES. THE ASSESSING OFFICER NOTED THAT THE TURNOVER OF THE ASSESSEE IN THIS YEAR WAS ONLY RS.71,81,811 AS AGAINST THE TURNOVER IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR AT RS.35,32,77,269 . THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAS CLAIMED BAD DEBTS AMOUNTING TO RS.5,24,59,472. IT WAS NOTED THAT FOLLOWING DEBTS WERE CLAIMED TO HAVE BECOME BAD: - (1) A.P. SAYONA TRADE ASSOCIATION, SINGAPORE F.Y. 2004 - 05 RS.9,06,980 FOR SALES OF GOODS (2) DEVKINANDAN T RADING CO. F.Y. 2004 - 05 RS.10,38,500 DEMURRAGE CHARGES PAID DUE TO DELAY (3) QUALITY FOODS F.Y. 2004 - 05 RS.7,12,500 ADVANCE GIVEN FOR PURCHASE OF ONION POWDER (4) S.Y.P. EXPOR T ER F.Y. 200 4 - 05 RS.17,00,000 ADVANCE GIVEN FOR PURCHASE OF POTATO POWDER (5) S.N. DAS FREIGHT FORWARDERS PVT. LTD. F.Y. 200 5 - 0 6 RS.2,99,387 IRRECOVERABLE AMOUNT ON TRANSPORTATION (6) SAKAR OVERSEAS PVT. LTD. F.Y. 200 4 - 05 RS.2,72,11,993 ADVANCE GIVEN FOR PURCHASE OF DEHYDRATED ONION FLAKES (7) SHREE RAM TRADING CO. F.Y. 200 4 - 05 R S.2,05,90,112 ADVANCE GIVEN FOR PURCHASE OF SESAME SEEDS TOTAL RS.5,24,59,472/ - 5 . THE ASSESSING OFFICER, HOWEVER, DECLINED THIS CLAIM IN RESPECT OF ITEM NOS.2 TO 7 ABOVE . THE BAD DEBTS DEDUCTION IN RESPECT OF A.P. SAYONA TRADE ASSOCIATION WAS ITA NO S . 65 & 416 /AHD/ 20 1 2 ASSESSMENT YEAR S : 2 0 0 8 - 09 PAGE 4 OF 7 ALLOWE D. AS FOR THE AMOUNTS DUE FROM SAKAR OVERSEAS PVT. LTD. A ND SHR EE R AM TRADING CO., HE, INTER ALIA, NOTED THAT THESE ADVANCES WERE NOT DEBTS WHICH HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME AND THAT AS THE ASSESSEE HAS FILED CASES AGAINST T HESE ENTITIES AND AS JUDGEMENT ON THESE COURT CASES ARE YET TO BE DELIVERED BAD DEBTS ARE NO ALLOWED AT THIS STAGE . IT WAS ALSO NOTED THAT GOODS WERE NOT RECEIVED , THE PAYMENTS WERE MADE IN ADVANCES AND THAT, THEREFORE, THESE AMOUNTS COULD NOT BE TREATED AS BAD DEBTS. AS REGARDS DUES FROM Q UALITY FOODS AND S .Y.P. EXPORT ER , THE ASSESSING OFFICER WAS OF THE VIEW THAT THESE WERE TRADE ADVANCES FOR PURCHASES WHICH COULD NOT BE TREATED AS BAD DEBTS. AS REGARDS S . N . DAS FREIGHT FORWARD ERS PVT. LTD. , THE ASSESSING OFFICE NOTED THAT THIS REPRESENT EXCESS PAYMENT MADE FOR FORWARDING EXPENSES . IN ANY CASE, ACCOR DING TO THE ASSESSING OFFICER, THERE WAS NOTHING TO SHOW THAT AMOUNTS HAVE ACTUALLY TURNED BAD. IT WAS IN THIS BACKGROUND THAT THE ASSESSING OFFICER DISALLOW ED RS.5,15,52,492. AGGRIEVED , ASSESSEE CARRIED TH E MATTER IN APPEAL BUT WITHOUT COMPLETE SUCCESS. IN APPEAL, THE ASSESSEE ALSO TOOK T HE S T AND, WITHOUT PREJUDICE TO IT S ORIGINAL CLAIM OF BAD DEBTS , THAT THE AMOUNT SHOULD BE ALLOWED AS A BUSINESS LOSS. T HE SUBMISSIONS RECEIVED FROM THE ASSESSEE, AS ALSO ACCOMPANYING SUPPORTING DOCUMENTS, WERE CONFRONTED TO THE ASSE SS ING OFFICER AND REMAND REPORT WAS ALSO OBTAINED FROM THE ASSESSING OFFICER. LEARNED CIT(A) CONCLUDED THAT TO THE EXTENT TRANSACTIONS IN QUES TION WERE NOT DISPUTED AND THE ASSESSEE HAS DEMONSTRATED THAT LOSS HAS ACTUALLY INCURRED , THE SAME IS TO BE ALLOWED AS DEDUCTION A S BUSINESS LOSS. IT WAS ALSO NOTED THAT THE ASSESSEE HAD EXPORTED SUBSTANTIAL QUALITIES OF AGRICULTURAL PROCESSED GOODS, INCL UDING DEHYDRATED GARLIC FLAKES AND WHITE ONION POWER, AND IT W A S IN THIS CONNECTION THAT THE ASSESSEE BONAFIDE AND IN THE COURSE OF NORMAL BUSINESS GAVE ADVANCES TO S . Y . P . EXPORT ER , SAKAR OVERSEAS PVT. LTD. A ND S HREE RAM TRADING CO. IT WAS ALSO NOTED THAT ITA NO S . 65 & 416 /AHD/ 20 1 2 ASSESSMENT YEAR S : 2 0 0 8 - 09 PAGE 5 OF 7 CRIMINAL CASES WERE ALSO INSTITUTED AGAINST THE PERSONS WHO WERE GIVEN THESE ADVANCES, WHO TURNED OUT TO BE FRAUDULENT IN THEIR CONDUCT. THESE ADVANCES WERE HELD TO BE BUSINESS LOSSES. AS REGARDS THE AMOUNT DUE FROM DEVKINANDAN TRADING CO., THE LD . CIT( A) NOTED THAT THE DUES WERE IN RESPECT OF DEMURRAGE CHARGES PAID DUE TO DELAY BUT THE SAID ENTITY NEVER ACKNOWLEDGED THE LIABILITY IN RESPECT OF THE SAME . HOWEVER , THE LD. CIT(A) UPHELD THE DISALLOWANCE AND THE MATTER RESTS THERE. AS REGARDS DUES FROM QU ALITY FOODS AND S . N . DAS FREIGHT FORWARDERS PVT. LTD., LEARNED CIT(A) UPHELD THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE COULD NOT ESTABLISH THAT THESE A MOUNTS HAVE ACTUALLY BECOME UNRECOVERABLE AND AS SUCH BUSINESS LOSS WAS NOT ESTABLISHED. 6 . NONE OF THE PARTIES IS SATISFIED BY THE S T AND TAKEN BY THE LD CIT(A). WHILE ASSESSEE IS AGGRIEVED OF T HE LD . CIT(A) S CONFIRMING THE DISALLOWANCE OF BUSINESS LOSS IN RESPECT OF AMOUNTS WRITTEN OFF I.E. RS. 7,12,500/ - DUE FROM QUALITY FOODS AND RS.2,99,387 DUE FROM S . N . DAS FREIGHT FORWARDERS PVT. LTD . , THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF GRANTED BY THE LD . CIT(A). BOTH THE PARTIES ARE THUS IN APPEAL BEFORE US. 7 . WE HAVE HEARD THE RIV A L CONTENTIONS, PERUSED T HE MA TERIAL ON RECORD AND DULY CONSIDE RED FACTS OF THE C A SE IN THE LIGHT OF THE APPLICABLE LEG A L POSITION. 8 . LEARNED DEPARTMENTAL REPRESENTATIVE S BASIC THRUST OF THE ARGUMENTS IS THAT SINCE THE LOSS IS NOT INCURRED IN THE COURSE OF BUSINESS CARRIED ON BY THE ASSESSEE, IT SHOULD NOT BE ALL OWED AS A DEDUCTION. HOWEVER, IT IS AN UNDISPUTED POSITION THAT THE ITA NO S . 65 & 416 /AHD/ 20 1 2 ASSESSMENT YEAR S : 2 0 0 8 - 09 PAGE 6 OF 7 ASSESSEE DID IN FACT TRADE IN PROCESSED AGRICULTURAL PRODUCE , IN CONNECTION WITH WHICH ADVANCES IN QUESTION WERE MADE, AND IT WAS IN THE COURSE OF THIS TRADING THAT BUSINESS LOSS OF MAKIN G UNRECOVERABLE ADVANCES WAS INCURRED. THE LOSSES WERE THUS WHOLLY INCIDENTAL TO THE BUSINESS CARRIED ON BY THE ASSESSEE. THERE MAY NOT BE ANY TRADING TRANSACTIONS OF THESE PRODUCTS IN THE CURRENT YEAR BUT THE BUSINESS OF THE ASSESSEE HAS NOT COME TO A H ALT. NO DOUBT, CRIMINAL COMPLAINT FILED BY THE ASSESSEE HAD NOT REACHED FINALITY AND THE PERSONS, WHO ALLEGEDLY AND FRAUDULENTLY OBTAINED THESE ADVANCES, WERE ON BAIL GIVEN BY HON BLE HIGH COURT, THE REMOTE POSSIBILITIES OF RECOVERY DID NOT T A KE AWAY ASSE SSEE S RIGHT TO CLAIM REASONABLY FORESEEABLE BUSINESS LOSS. LEARNED CIT(A) HAS GIVEN CATEGORICAL AND DETAILED FINDINGS ABOUT THESE ADVANCES HAVING BECOME ACTUALLY BAD AND THESE FINDINGS REMAIN UNCONTROVERTED. WE, THEREFORE, CONFIRM AND APPROVE THE RELIEF GRANTED BY THE LD . CIT( A ) AND DECLINE TO INTERFERE IN THE MATTER. 9 . AS REGARD S LEARNED CIT(A) S HAVING CONFIRMED THE DISALLOWANCE OF BUSINESS LOSS IN RESPECT OF MONIES UNRECOVERABLE FROM QUALITY FOODS (RS.7,12,500) AND S.N. D A S FREIGHT FORWARDERS PVT. L TD. (RS. 2,99,387), THE ASSESSEE COULD NOT BRING ON RECORD ANY MATERIAL , TO ESTABLISH THE FACT OF LOSS, BEFORE US EITHER. LEARNED COUNSEL FOR THE ASSESSEE HAS MADE ELABORATE ARGUMENTS ON ADMISSIBILITY OF SUCH LOSSES BUT, IN THE ABSENCE OF SUFFICIENT MATERI AL TO ESTABLISH THE FACT OF THE ALLEGED LOSS, WE A RE NOT SWAYED BY THESE ARGUMENTS . WE, THEREFORE , CONFIRM THE STAND OF THE LD. CIT(A) ON THIS ASPECT AS WELL. 1 0 . F OR THE REASONS SET OUT ABOVE, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LD. CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. ITA NO S . 65 & 416 /AHD/ 20 1 2 ASSESSMENT YEAR S : 2 0 0 8 - 09 PAGE 7 OF 7 1 1 . IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF SEPTEMBER, 2015. SD/ - SD/ - S.S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD , THE 29 TH DAY OF SEPTEMBER , 201 5 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD