DCIT, Circle -5 Kolkata, Kolkata V. M/S VRB Investment Pvt. Ltd., Kolkata

ITA 654/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8135 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2012
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 23-04-2012
• Court: TRIBUNAL
• Department Lawyers: P S DUTTA
• Assessee Lawyers: VIKAS JAIN CAAR
• Keywords: Wrong claim; Bad and doubtful debts
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI, SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO. 654/KOL/2012 ASSESSMENT YEAR:2005-06 THE DY. CIT, CIRCLE- 5, KOLKATA V/S . VRB INVESTMENT (P) LTD., 26, STRAND ROAD, KOLKATA-700 001 [PAN: AABCV 1184 E] (APPELLANT) .. (RESPONDENT) /BY APPELLANT SHRI P.S. DUTTA, SR. DR /BY RESPONDENT SHRI VIKAS JAIN, CA-AR /DATE OF HEARING 31-08-2012 /DATE OF PRONOUNCEMENT 25-09-2012 O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)VI, KOLKATA ( CIT(A) FOR SHORT) DATED 12-12- 2011, DELETING THE LEVY OF PENALTY BY THE ASSESSING OFFICER (AO) U/S. 271(1)( C) OF THE INCOME-TAX ACT, 1961 (THE ACT HEREINAFTER) FOR TH E ASSESSMENT YEAR (A.Y.) 2005-06 VIDE HIS ORDER DATED 30-06-2008. 2.1 THE ONLY ISSUE, THUS, ARISING IN THE INSTANT CA SE BY THE REVENUE, IS THE EXIGIBILITY IN LAW OF THE LEVY OF PENALTY U/S. 271( 1)(C) OF THE ACT QUA THE DISALLOWANCE OF THE ASSESSEE'S CLAIM FOR RS. 8,94,706/- IN RESPECT OF THE PROVISION FOR BAD AND DOUBTFUL DEBTS. IN ASSESSMENT PROCEEDINGS U/S. 143( 3), ON BEING CALLED UPON TO EXPLAIN ITS CASE; THE PROVISION AGAINST A BAD DEBT BEING NO T ALLOWABLE AS A DEDUCTION U/S. 36(1)(VII) OF THE ACT, IT WAS SUBMITTED BY THE ASSE SSEE THAT THE CLAIM IS QUA BAD DEBTS, 2 I.E., WHICH HAD BECOME IRRECOVERABLE. FURTHER, WHIL E RS. 2,69,706/- RELATED TO DEBTS CARRIED OVER FROM AN EARLIER YEAR/S, THE BALANCE RS . 6.25 LACS PERTAINED TO THE CURRENT YEAR. THE PRIMARY CONDITION FOR A VALID CLAIM U/S. 36(1)(VII), I.E., WRITE OFF OF THE DEBT/S UNDER REFERENCE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT, BEING NOT MET, THE AO DISALLOWED THE SAID CLAIM VIDE ASSESSMENT U/S. 143( 3) DATED 28-12-2007 AS WELL AS INITIATED PENALTY PROCEEDINGS IN ITS RESPECT. NO AP PEAL AGAINST THE SAID ASSESSMENT WAS PREFERRED BY THE ASSESSEE. 2.2 IN THE PENALTY PROCEEDINGS, THE ASSESSEE-COMPAN Y EXPLAINED THAT THE AMOUNT UNDER REFERENCE WAS NOT RECOVERABLE FROM THE CONCER NED DEBTORS. THE RELEVANT DETAILS HAD BEEN SUBMITTED, AND THERE WAS NO INTENTION OR A TTEMPT TO EITHER CONCEAL OR TO FURNISH INACCURATE PARTICULARS OF INCOME. A MERE DI FFERENCE OF OPINION, I.E., OF THE CLAIM BEING REQUIRED TO BE MADE BY WAY OF A WRITE O FF OF THE RELEVANT ASSET/S IN ITS BOOKS, AS AGAINST A PROVISION IN ITS RESPECT, OUGHT NOT TO OUST THE ASSESSEE'S CASE AS BEING NOT BONA FIDE ; ALL THE DETAILS BEING ON RECORD. THE AO, HOWEVER, WAS OF THE CLEAR VIEW THAT A PROVISION FOR BAD AND DOUBTFUL DEBT IN ACCOUNTS DOES NOT AMOUNT TO ITS WRITE OFF AND, THEREFORE, THERE IS NO BASIS FOR A C LAIM U/S. 36(1)(VII) OF THE ACT, MUCH LESS A VALID ONE. IN FURTHER APPEAL, THE ASSESSEE F OUND FAVOUR WITH THE LD. CIT(A), AND ON THE SAME BASIS, I.E., THAT A MERE TECHNICAL ERRO R IN CLAIMING AN IRRECOVERABLE AMOUNT, I.E., BY WAY OF A PROVISION AS AGAINST A WR ITE OFF OF THE RELEVANT ASSET, WOULD NOT ATTRACT PENALTY. IT WAS ONLY A CASE OF WRONG NO MENCLATURE BEING EMPLOYED BY THE ASSESSEE, AND WHICH COULD NOT LEAD AN ADD BACK OF T HE CLAIMED EXPENSE, MUCH LESS MAKE IT LIABLE FOR PENALTY U/S. 271(1)(C) OF THE AC T. RELIANCE WAS PLACED BY HIM ON THE DECISION IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P.) LTD . (2010) 322 ITR 158 (SC). 3. BEFORE US, LIKE SUBMISSIONS WERE RAISED BY EITHE R SIDE. ON THE BENCH ENQUIRING OF THE LD. AR IF THE IMPUGNED PROVISION STANDS DEDU CTED FROM THE AMOUNT OF THE TOTAL DEBTS IN THE BALANCE-SHEET AS AT THE YEAR-END AND, THUS, SHOWN THEREIN AT A NET FIGURE, HE REPLIED IN AFFIRMATIVE, SEEKING LEAVE TO PLACE A COPY THEREOF ON RECORD, AND WHICH, BEING GRANTED, WAS DONE BY HIM ON THE NEXT DATE OF HEARING. 3 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. 4.1 THE REVENUES CASE IS THAT THE ASSESSEE HAS MADE A WRONG CLAIM, I.E., ONE WHICH IS NOT VALID IN LAW, IN VIEW OF THE ESSENTIAL CONDI TION OF WRITE OFF OF THE RELEVANT DEBTS AS IRRECOVERABLE BEING ADMITTEDLY NOT SATISFIED. TH E ASSESSEE'S CASE, ON THE OTHER AND, IS THAT ITS CLAIM WAS MADE BONA FIDE , WITH THE RELEVANT DETAILS BEING ON RECORD, AND WHICH HAVE NOT BEEN FOUND TO BE INCORRECT OR INACCU RATE, SO THAT THERE IS NO QUESTION OF LEVY OF PENALTY. 4.2 THE LAW IN THE MATTER IS CLEAR, SO THAT THE ONLY ISSUE THAT WE DISCERN IN THE INSTANT CASE IS THAT OF ITS APPLICABILITY IN THE FACTS OF T HE CASE. A CLAIM FOR DEDUCTION THAT IS UNSUSTAINABLE IN LAW WOULD YET NOT ATTRACT PENALTY U/S. 271(1)(C) OF THE ACT IF THE ASSESSEE EITHER SUBSTANTIATES HIS EXPLANATION (TOWA RD MAKING THE CLAIM AS PER THE RETURN OF INCOME) OR, EVEN IF NOT SUBSTANTIATED, PR OVES HIS BONA FIDES , DISCLOSING ALL THE FACTS MATERIAL TO THE COMPUTATION OF INCOME FOR THE RELEVANT YEAR. THIS DISCLOSURE, OF COURSE, HAS TO BE PER THE RETURN OF INCOME, INCLUDI NG THE ACCOMPANYING DOCUMENTS. HOWEVER, IF THERE IS NO EXPLANATION OR THAT OFFERED IS NEITHER SUBSTANTIATED NOR SHOWN TO BE BONA FIDE (COUPLED WITH PROPER DISCLOSURE), EXPLANATION 1 TO THE PROVISION WOULD COME INTO PLAY AND OPERATE TO MAKE THE ASSESSEE LIA BLE FOR PENALTY THERE-UNDER (SECTION 271(1)(C)). THIS IS TRITE LAW, AS WOULD BE CLEAR FR OM THE RELEVANT PROVISION READ WITH EXPLANATION 1 THERETO, BESIDES HAVING BEEN AMPLY CLARIFIED AND ENDORSED BY THE HIGHER COURTS OF LAW TIME AND AGAIN, EVEN AS LATELY BY THE HONBLE COURT IN CIT V. ZOOM COMMUNICATION (P.) LTD . [2010] 327 ITR 510 (DELHI), AFTER A REVIEW OF THE LAW IN THE MATTER, WITH PARTICULAR REFERENCE TO THE DECISION B Y THE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P.) LTD . (SUPRA), RELIED UPON BY THE ASSESSEE IN THE INSTA NT CASE. 4.3 THE ISSUE THUS BOILS DOWN TO THE ASSESSEE'S EXPLANATION. IT IS CLAIMED THAT THE PROVISION WAS MADE ONLY BY WAY OF A TECHNICAL MI STAKE; THE IMPUGNED AMOUNT BEING NOT RECOVERABLE, SO THAT IT MAY WELL HAVE BEE N BY WAY OF A WRITE OFF AND, THEREFORE, OUGHT TO BE CONSIDERED AS SO; THE AMOUNT HAVING NOT BEEN RECEIVED SUBSEQUENTLY. IN FACT, IF SO, I.E., WHERE THE ASSES SEE IS ABLE TO EXHIBIT WHAT IT STATES, NO 4 DISALLOWANCE, MUCH LESS A LEVY OF PENALTY, EVEN AS OBSERVED BY THE LD. CIT(A), OUGHT TO RISE; IT BEING TRITE THAT WHAT IS THE MATERIAL I S THE SUBSTANCE OF THE TRANSACTION AND NOT ITS FORM, WHICH MAY BE DEFICIENT OR TECHNICALLY NOT CORRECT. HOWEVER, IT IS TO BE, FIRSTLY, NOTED THAT THE DIFFERENCE BETWEEN A WRITE OFF OF A DEBT AS IRRECOVERABLE AND A PROVISION AGAINST THE SAME ON ACCOUNT OF OR FOR IT BEING BAD AND DOUBTFUL FOR RECOVERY, IS NOT TECHNICAL BUT FACTUAL AND, FURTHER, REAL AND NOT IMAGINARY, OR ONLY ONE OF FORM OR NAME, AS CONSIDERED OR UNDERSTOOD BY THE LD. CIT(A) . THIS IS MORE SO IN VIEW OF THE EXPRESS PROVISION OF LAW BY WAY OF EXPLANATION TO SECTION 36(1)(VII) OF THE ACT, BROUGHT ON STATUTE BY THE FINANCE ACT, 2001 W.E.F. 01-04-1989; THE PROVISION READING AS UNDER:- 36. OTHER DEDUCTIONS . (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CL AUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREI N, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), THE AMOUNT OF ANY DEBT OR PART THEREOF, WHICH IS WRITTEN OFF AS I RRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR; PROVIDED THAT EXPLANATION . - FOR THE PURPOSE OF THIS CLAUSE, ANY BAD DEBT O R PART THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE AC COUNTS OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISION FOR BAD A ND DOUBTFUL DEBTS MADE IN THE ACCOUNTS OF THE ASSESSEE; THE PREMISE OF THE ASSESSEE'S CASE IS THAT THE DIFF ERENCE IS ONLY IN THE FORM, WITH IT CHOOSING TO PASS AN ENTRY IN ITS ACCOUNTS F OR A PROVISION, RATHER THAN FOR A WRITE OFF. THE MOOT QUESTION IN THIS REGARD, HOWE VER, IS: HOW WOULD A PROVISION AGAINST THE DEBT WHICH IS BAD AND DOUBTFUL FOR RECO VERY, TO WHATEVER EXTENT, BE MADE IN ACCOUNTS EXCEPT BY PASSING AN ACCOUNTING ENTRY I N ITS ACCOUNTS IN ITS RESPECT, REFLECTING SO ? THAT IS, WHERE AN ASSESSEE/BUSINESSMAN ACTUALLY I NTENDS TO MAKE A PROVISION IN HIS ACCOUNTS, HE WOULD HAVE TO PASS AN ENTRY IN ITS ACCOUNTS, AS HAS 5 ACTUALLY BEEN DONE OR AS THE ASSESSEE DOES IN THE P RESENT CASE. THE CONNOTATION OF A PROVISION AGAINST AN ASSET (IMPLYING A PROVISION OR A SET ASIDE OF PROFITS TOWARD THE ANTICIPATED DIMINUTION IN THE VALUE AT WHICH IT IS CARRIED IN THE BOOKS OF AN ENTERPRISE), IN ACCOUNTING WHICH IS THE LANGUAGE OF THE BUSINESS IS VASTLY DIFFERENT FROM A CLEAR WRITE OFF OF THE RELEVANT ASSET. WE AR E, HOWEVER, NOT INCLINED TO DWELL ON THE SAME AT ANY LENGTH IN VIEW OF THE CLEAR PROVISI ON OF LAW BARRING DEDUCTION IN RESPECT OF A PROVISION. AS SUCH, ASSERTING, ON TH E STRENGTH OF AN ACCOUNTING ENTRY ITSELF, OF THERE BEING A MISTAKE, AND A TECHNICAL O NE AT THAT, AND THAT IT HAD INTENDED TO WRITE OFF AN IRRECOVERABLE AMOUNT, WOULD NOT HOLD. IT CANNOT, BY ANY MEANS, BE SAID TO BE A MERE DIFFERENCE OF NAME OR EVEN OF OPINION, AS HELD BY THE LD. CIT(A). 4.4 THE FOREGOING, HOWEVER, DOES NOT MEAN TO SAY THAT THIS FORECLOSES THE ASSESSEE'S CASE, BUT ONLY THAT A MERE ASSERTION, UNSUPPORTED B Y FACTS, PRECLUDES ITS ACCEPTANCE AS SUCH. IT WAS NEVERTHELESS FULLY OPEN TO THE ASSESSE E TO SHOW THAT THE PROVISION IS IN SUBSTANCE AND IN FACT A WRITE OFF, AS WHERE BOTH T HE PROVISION ACCOUNT AND THE CORRESPONDING DEBTOR ACCOUNT/S ARE NOT CARRIED OVER IN ITS ACCOUNTS TO THE FOLLOWING YEAR, SO THAT THERE HAS BEEN IN FACT A WRITE OFF. THE ASSESSEE HAS TOWARD THIS END SUBMITTED ITS BALANCE-SHEET. THE SAME, HOWEVER, IS AGAIN NOT CERTIFIED AND, THUS, CANNOT BE ACCEPTED AS SUCH. IT IS ONLY WHERE THE AS SESSEE'S ACCOUNTS FOR THE FOLLOWING YEAR (I.E., THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR 2006-07) SHOW THAT THERE HAS BEEN NO CARRY OVER OF THE PROVISION AS WELL AS, AND CORRESPONDINGLY, THE RELEVANT DEBTORS ACCOUNT/S, THAT IT WOULD STAND ESTABLISHED AS A FACT THAT THE PROVISION HAS BEEN WRITTEN OFF AGAINST THE RELEVANT DEBT AND, THEREFOR E, THOUGH STATED TO BE A PROVISION, THE IMPUGNED AMOUNT ACTUALLY REPRESENTS A WRITE OFF, I. E., IN SUBSTANCE, EVEN AS HELD BY THE APEX COURT IN THE CASE OF VIJAYA BANK V. CIT & ANR . (2010) 323 ITR 166 (SC). RATHER, AS AFORE-STATED, IN SUCH CIRCUMSTANCE(S), IF SHOWN, THERE IS NO OCCASION FOR A DISALLOWANCE, NOT TO SPEAK OF THE LEVY OF PENALTY. THE ASSESSEES CLAIM BEFORE US, OF HAVING NOT RECEIVED THE AMOUNTS UNDER REFERENCE EVE N SUBSEQUENTLY, IS, AGAIN, UNSUBSTANTIATED, NOR BORNE OUT BY ANY MATERIAL ON R ECORD. UNDER THE CIRCUMSTANCES, THEREFORE, ONLY A REMISSION BACK TO THE FILE OF THE AO TO ENABLE THE ASSESSEE AN OPPORTUNITY TO EXHIBIT THE FACTS OF ITS CASE WOULD ENABLE A RESOLUTION OF THE MATTER. 6 4.5 CONTINUING FURTHER, EVEN SO, I.E., DE HORS THE REMISSION AFORE-STATED AND THE CONSEQUENT FINDINGS, COULD IT BE SAID THAT THE CLAI M PER A PROVISION FOR BAD AND DOUBTFUL DEBTS, I.E., CONSIDERING IT TO BE ONLY A P ROVISION AND, THUS, NOT LIABLE PER SE FOR DEDUCTION U/S. 36(1)(VII) OF THE ACT, WOULD ENTAIL LEVY OF PENALTY IN ITS RESPECT U/S. 271(1)(C) OF THE ACT? IN OUR VIEW IT WOULD NOT, AND FOR THE REASON THAT THE ASSESSEE HAS CLAIMED THE SAID AMOUNT UNEQUIVOCALLY ONLY AS A PR OVISION, BOTH IN ITS ACCOUNTS AS WELL AS PER THE RETURN OF INCOME. THE PROFIT AND L OSS ACCOUNT BEARS THE ENTRY PROVISION FOR BAD DEBTS. SIMILARLY, SCHEDULE 4 TO ITS BALANCE-SHEET CONTAINS THE ENTRY PROVISION FOR DOUBTFUL DEBTS, AND WHICH AMOUNT IS THEN NETTED FROM THE TOTAL VALUE OF THE LOANS AND ADVANCES . PARA 5 OF THE NOTES TO THE ACCOUNTS (SCHEDULE 9 TO ITS BALANCE-SHEET AS ON 31-03-2005), READS AS UNDER:- (5) PROVISION FOR BAD DEBTS OF RS. 894706/- (P.Y. NIL) IS PROVIDED AGAINST LOANS AND ADVANCES BY MANAGEMENT AFTER CONS IDERING ITS RECOVERABILITY. THERE IS, AS SUCH, NO DOUBT THAT THE ASSESSEES CL AIM, AS MADE, IS ONLY FOR AND IN RESPECT OF A PROVISION FOR BAD AND DOUBTFUL DEBTS . ACCORDINGLY, THOUGH THE ASSESSEES CLAIM IS NOT LEGALLY VALID, AND IT HAS NOT SHOWN TH E SAME TO REPRESENT AN ACTUAL WRITE OFF, IN VIEW OF THE ABUNDANT AND EXPLICIT DEPICTION THEREOF PER ITS AUDITED FINAL ACCOUNTS, FORMING PART OF ITS RETURN OF INCOME, INC LUDING THE REDUCTION OF THE PROVISION AMOUNT FROM THE ASSET VALUE IN THE BALANCE-SHEET - EVEN IF FOR PRESENTATION PURPOSES, IT CANNOT BE SAID THAT THE ASSESSEE HAS NO EXPLANATION AT ALL, OR THAT ITS CLAIM IS NOT BONA FIDE , I.E., SUFFERS FROM MALA FIDES . IT IS, IN FACT, ONLY ON ACCOUNT OF SUCH UNABASHED DEPICTION OF THE PROVISION THAT THE SAME STOOD NOTI CED AND, CONSEQUENTLY, DISALLOWED BY THE AO. IT IS APPARENT THAT IN VIEW OF THE UNCER TAINTY AS TO ITS REALIZABILITY, THE ASSESSEE MADE A PROVISION AGAINST ITS DUES UNDER TH E BONA FIDE BELIEF THAT THE SAME WAS ALLOWABLE, AND THERE WAS NO ATTEMPT TO CONCEAL THIS FACT. PUT DIFFERENTLY, THE INFERENCE AS TO THE ASSESSEES BONA FIDES FLOW FROM ITS CONDUCT OF FULL DISCLOSURE. IT IS NO T NECESSARY THAT THE SAME, I.E., THE BONA FIDES OF ITS EXPLANATION, WHICH NO DOUBT ARE TO BE SHOWN BY AN ASSESSEE, IS TO BE SO ONLY ON THE BA SIS OF SOME MATERIALS. 7 4.6 THE ONLY RIDER, HOWEVER, WOULD BE WHERE T HE CONDITION(S) OF SECTION 36(2) ARE NOT SATISFIED. WE SAY SO, AS WOULD BE PRESENTLY SEE N, FOR MORE THAN ONE REASON. THERE WAS, FIRSTLY, NO EXAMINATION OF THIS ASPECT AT ANY STAGE, AND WHICH IS VITAL TO THE ASSESSEE'S CLAIM, WHOSE ONLY EXPLANATION HAS BEEN T HE IRRECOVERABILITY OF THE IMPUGNED AMOUNT, AND ON WHICH BASIS IN FACT WE HAVE HELD ITS CLAIM TO BE BONA FIDE , SO THAT IT (EXPLANATION) WAS PRIMA FACIE VALID. THE ASSESSEE, WHILE DIVULGING THE PRIMARY FACTS DURING THE COURSE OF ASSESSMENT PROCE EDINGS, SUBMITTED THE DETAILS OF ITS CLAIM AS UNDER:- 1. CHEQUE IN TRANSIT RS. 54,333/- 2. SUSPENSE A/C RS.1,15,373/- 3. TATA IRON & STEEL LTD. RS.7,25,000 /- FURTHER, THAT WHILE THE AMOUNT OF RS. 2,69,706/- LA CS PERTAINS TO EARLIER YEAR (S), THAT FOR RS. 6.25 LACS RELATES TO THE CURRENT YEAR. THE ASSESSEE'S ONLY INCOME (RS. 2.40 LACS, P.Y. RS. 3.60 LACS) IS BY WAY OF RENT RECEIVED, BES IDES A NEGLIGIBLE AMOUNT AS INTEREST ON FDR/S. A FEW QUESTIONS SPRING IMMEDIATELY IN THE MIND, AND WHICH WOULD REQUIRE BEING ANSWERED: HOW COULD BE THE AMOUNT OF SUSPENSE AND CHEQUE I N TRANSIT QUALIFY FOR INCLUSION AS INCOME, AS REQUIRED U/S. 3 6(2)(I) OF THE ACT ? HOW COULD RS. 6.25 LACS PERTAIN TO THE CURRENT YEAR WHEN ITS GRO SS INCOME FOR THE YEAR IS AT RS. 2.40 LACS ONLY ? THE ENTIRE AMOUNT OF PROVISION FORMS PART OF THE ASSESSEES LOANS AND ADVANCES PORTFOLIO AND, THUS, IT IS NOT CLEAR AS TO HOW THE SAME FORMS PART OF ITS INCOME FOR ANY YEAR, A PRE-REQUISITE IN TERMS OF S. 36(2). THE PREMISE OF A CLAIM FOR A BAD DEBT, IT MAY BE APPRECIATED, IS THAT THE SAME HAVING ALRE ADY OFFERED AS INCOME (FOR ANY YEAR), ITS SUBSEQUENT NON-RECOVERY WOULD WARRANT A REDUCTION IN INCOME (FOR THE YEAR OF WRITE OFF). FURTHER, IT COULD ALSO BE THAT THE S AME (LOAN AND ADVANCES) REPRESENT A PART OF THE ASSESSEES MONEY LENDING BUSINESS, TO W HICH THE LAW DRAWS AN EXCEPTION AS THE SAME REPRESENTS A PART OF THE STOCK-IN-TRADE OF SUCH BUSINESS (S. 36(1)(VII) R/W S. 36(2)(I)). HOWEVER, THERE IS NOTHING ON RECORD WHIC H INDICATES SO, OR EVEN IF THE ASSESSEE IS IN MONEY LENDING BUSINESS. THAT IS, THE RE IS AN APPARENT NON-SATISFACTION OF THE ESSENTIAL CONDITION OF SEC. 36(2), AND WHICH CL EARLY IMPACTS NOT ONLY THE ASSESSEES CLAIM U/S. 36(1)(VII), WHICH IN ANY CASE STANDS DIS ALLOWED, BUT ALSO, CONCOMITANTLY, THE MERITS OF ITS CLAIM AND, THUS, THAT OF ITS EXPLANAT ION IN THE PENALTY PROCEEDINGS. THE 8 SAME OF COURSE CANNOT OPERATE TO THE ASSESSEES PRE JUDICE, AS, THOUGH THERE IS NO EXPLANATION TOWARD SATISFACTION OF SECTION 36(2) OF THE ACT, IT WAS NOT SPECIFICALLY QUERIED IN ITS RESPECT; THE CASE ALL THROUGH CENTER ING AROUND THE DETERMINATION AS TO WHETHER OR NOT ITS CLAIM CONSTITUTES A WRITE OFF, O R WHETHER ITS EXPLANATION FOR IT BEING SO IS, UNDER THE CIRCUMSTANCES, A PLAUSIBLE ONE. TH E SAME, I.E., A POSITIVE SATISFACTION OF THE CONDITIONS OF SECTION 36(2), HOWEVER, IS VIT AL. THIS IS AS IF THE PRIMARY CONDITIONS OF THE SAID PROVISION ARE NOT SATISFIED, TO WHICH A CLAIM U/S. 36(1)(VII) IS SUBJECT, THE SAME WOULD NOT HOLD EVEN IF THE ASSESS EES CLAIM SATISFIES THE CONDITION OF WRITE OFF. HOW COULD THEN, I.E., UNDER SUCH CIRCUMSTANCES, ONE MAY ASK, THE ASSESSEES CLAIM BE, OR CONSIDERED TO BE, BONA FIDE, OR AN EXP LANATION IN ITS RESPECT BE SO ? 4.7 IN VIEW OF THE FOREGOING, WE ONLY DEEMED FI T AND PROPER THAT THE MATTER IS RESTORED BACK TO THE FILE OF THE AO TO ADJUDICATE T HE SAME AFRESH PER A SPEAKING ORDER IN ACCORDANCE WITH LAW, ALLOWING THE ASSESSEE A PRO PER OPPORTUNITY TO PRESENT ITS CASE ON ALL ASPECTS THEREOF, I.E., TO SHOW AS TO HOW, DE SPITE AN UNCONTESTED DISALLOWANCE IN ITS RESPECT, THE DEDUCTION CLAIMED U/S. 36(1)(VII) OF THE ACT DOES NOT SUFFER FROM LACK OF ANY BONA FIDES OR DOES NOT FALL WITHIN EITHER EXPLANATION 1(A) OR 1(B) OF SECTION 271(1)(C) OF THE ACT. WE DECIDE ACCORDINGLY. 4.8 IT MAY APPEAR THAT WE HAVE, IN DECIDING THIS AP PEAL, AND IN THE MANNER DONE, TRAVELED OUTSIDE ITS SCOPE. THE CLAIM, IF LEVELED, WOULD BE MISPLACED. THE SCOPE OF THE ISSUE ARISING FOR OUR ADJUDICATION IN THE INSTANT C ASE HAS BEEN AS SET OUT AT THE BEGINNING OF THIS ORDER (REFER PARA 2.1). IN SO DEL INEATING THE ISSUE, WE HAVE ACTED WELL WITHIN OUR POWERS; THE PROVINCE OF THE TRIBUNAL BEI NG TO DETERMINE AND DECIDE THE ISSUE ARISING BY APPLYING THE LAW AS EXPLAINED AND EXPOUN DED BY THE HIGHER COURTS OF LAW. IF IN DOING SO, IT FINDS THAT THE RELEVANT FACTS REQUI RE DETERMINATION, IT IS RATHER DUTY BOUND TO CAUSE THE SAME. THOUGH THE LAW IN THE MATT ER IS TRITE, WE MAY, TO THIS END, REFER TO THE DECISION BY THE HON'BLE APEX COURT IN THE CASE OF KAPURCHAND SHRIMAL VS. CIT (1981) 131 ITR 451 (SC), QUOTING FROM THE SAME AS UNDER:- IT IS WELL KNOWN THAT AN APPELLATE AUTHORITY HAS TH E JURISDICTION AS WELL AS THE DUTY TO CORRECT ALL ERRORS IN THE PROCEEDINGS U NDER APPEAL AND TO ISSUE, IF NECESSARY, APPROPRIATE DIRECTIONS TO THE AUTHORI TY AGAINST WHOSE 9 DECISION THE APPEAL IS PREFERRED TO DISPOSE OF THE WHOLE OR ANY PART OF THE MATTER AFRESH, UNLESS FORBIDDEN FROM DOING SO BY ST ATUTE . 5. IN THE RESULT, THE REVENUES APPEAL IS ALL OWED FOR STATISTICAL PURPOSES. SD/- SD/- (GEORGE MATHAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, *MISHRA - 25/09/2012 ! ' ! ' ! ' ! ' ##$ ##$ ##$ ##$ % $ % $ % $ % $ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. &#' ! !( / CONCERNED CIT 4. ! !( - / CIT (A) 5. $)* ###' , ! #' , / DR, ITAT, KOLKATA 6. *+, -. / GUARD FILE. BY ORDER/ ! ' , ASSTT. REGI STRAR, KOLKATA BENCHES ORDER PRONOUNCED ON 25/9/12 SD/- SD/- [ GEORGE MATHAN ] [ C.D RAO ]