BLB MALL MANAGEMENT CO. P.LTD, MUMBAI V. ITO 9(2)(1), MUMBAI

ITA 6847/MUM/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3744 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 22-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bad and doubtful debts; Notional interest; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6847/M/2016 ASSESSMENT YEAR: 2012-13 M/S. BLB BALL MANAGEMENT CO. PVT. LTD., E-1601, ANMOL CHS LTD., E-TOWER, OPP PATEL AUTO, S.V. ROAD, GOREGAON WEST, MUMBAI 400 020 PAN: AACCB6758P VS. INCOME TAX OFFICER- 9(2)(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SANJAY PARIKH, A.R. REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 09.07.2019 DATE OF PRONOUNCEMENT : 09.08.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 07.03.2015 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. IN THE GROUND NO.1 & 2, THE ASSESSEE HAS CHALLEN GED THE CONFIRMATION OF ADDITION OF RS.48,75,000/- BY LD. C IT(A) AS MADE BY THE AO ON THE GROUND OF NOTIONAL INTEREST O N LOAN OF RS.5 CRORE ADVANCED TO M/S. GULMOHAR PARK PVT. LTD. 3. THE FACTS IN BRIEF ARE THAT THE AO DURING THE CO URSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS D EBITED TO ITA NO.6847/M/2016 M/S. BLB BALL MANAGEMENT CO. PVT. LTD. 2 THE P&L ACCOUNT RS.5 CRORE AS EXCEPTIONAL ITEM AND ACCORDINGLY CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS THE REOF. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE SAID AMOU NT REPRESENTED THE WRITE OFF OF THE LOAN GIVEN TO M/S . GULMOHAR PARK PVT. LTD. THE AO ALSO CALLED FOR THE BALANCE SHEET OF M/S. GULMOHAR PARK PVT. LTD. AND VERIFIED THAT THE SAID AMOUNT HAS BEEN WRITTEN BACK IN THE BOOKS OF ACCOUNTS, HOWEVER , OBSERVED THAT NO INTEREST HAS BEEN WAIVED OFF BY THE ASSESSE E AS WELL AS SHOWN IN THE BOOKS OF ACCOUNTS AND ACCORDINGLY ISSU ED A SHOW CAUSE TO THE ASSESSEE AS TO WHY THE PROPORTIONATE M ARK UP INTEREST SHOULD NOT BE ADDED TO THE INCOME OF THE A SSESSEE. THE ASSESSEE SUBMITTED BEFORE THE AO THAT SINCE THE PRI NCIPAL AMOUNT COULD NOT BE RECOVERED FROM M/S. GULMOHAR PA RK PVT. LTD., THERE WAS NO HOPE OF RECOVERING ANY INTEREST FROM THE SAID PARTY AND THUS IT WAS NOT PROVIDED IN THE BOOKS OF ACCOUNT. THE AO BRUSHING ASIDE THE SUBMISSIONS OF THE ASSESSEE E STIMATED THE INTEREST BY APPLYING A MARK UP OF 1.25% ON THE RATE CHARGED BY THE BANK WHICH WAS 8.50% AND THUS APPLIED THE RA TE OF 9.75% THEREBY CALCULATING THE NOTIONAL ADDITION ON ACCOUNT OF INTEREST NOT PROVIDED AT RS.48,75,000/-. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE COULD NOT FURNISH EVEN A SINGLE DOCUMENT OR CORRESPONDENCE BE TWEEN THE ASSESSEE AND M/S. GULMOHAR PARK PVT. LTD. QUA THE L OAN ADVANCED IN THE APPELLATE PROCEEDINGS DESPITE SPECI FIC DIRECTION TO THE ASSESSEE. THE LD. CIT(A) ALSO NOTED THAT TH E LOAN WAS WRITTEN OFF WITHIN A YEAR BEFORE THE EXPIRY OF THE PERIOD FOR WHICH IT WAS GRANTED AND THE ASSESSEE HAS FAILED TO PRODU CE EVEN A SINGLE DOCUMENT TO PROVE THAT EFFORTS WERE MADE TO RECOVER THE ITA NO.6847/M/2016 M/S. BLB BALL MANAGEMENT CO. PVT. LTD. 3 SAID LOAN ALONG WITH THE INTEREST AND THUS JUSTIFIE D THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST OF RS.48,75,000/-. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE LOAN HAS B EEN ADVANCED BY THE ASSESSEE TO M/S. GULMOHAR PARK PVT. LTD. OF RS. 5 CRORE AT A MARK UP INTEREST OF 1.25% ON THE INTEREST WHIC H WAS PAYABLE TO THE BANK BY THE ASSESSEE. THE SAID LOAN WAS WRITTEN OFF BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS EXCEPTIONAL ITEM. HOWEVER, THE DISPUTE IS ONLY WIT H REGARD TO THE INTEREST NOT PROVIDED ON THE SAID LOAN IN THE BOOKS OF ACCOUNTS WHICH WAS CALCULATED BY THE AO AT RS.48,75,000/- BY APPLYING 9.75% CALCULATED AT A MARK UP OF 1.25% ON THE INTER EST RATE OF 8.5% PAID BY THE ASSESSEE TO THE UNION BANK OF INDI A. AS PER THE AOS VERSION THE ASSESSEE HAS NOT WAIVED OFF TH E INTEREST AND THEREFORE IT HAS TO BE PROVIDED IN THE BOOKS OF ACC OUNTS AND ALSO THAT NO DOCUMENTARY EVIDENCES WERE FILED WHEN SPECI FICALLY CALLED UPON BY THE AO. SIMILARLY, THE LD. CIT(A) C ALLED UPON THE ASSESSEE DURING THE APPELLATE PROCEEDINGS TO FURNIS H THE EVIDENCES IN THIS REGARD, HOWEVER, THE ASSESSEE COU LD NOT FURNISH ANY EVIDENCE IN SUPPORT OF HIS DEFENCE. UN DER THESE CIRCUMSTANCES, WE ARE IN OPINION THAT ASSESSEE SHOU LD BE GIVEN ONE MORE CHANCE TO DEFEND ITSELF. ACCORDINGLY, THE ISSUE IS RESTORED TO THE FILE OF THE AO WITH THE DIRECTION T O DECIDE THE SAME AS PER FACTS AND LAW AFTER A REASONABLE OPPORT UNITY TO THE ASSESSEE AND THE ASSESSEE IS ALSO DIRECTED TO PRODU CE THE NECESSARY EVIDENCES. 6. GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.6847/M/2016 M/S. BLB BALL MANAGEMENT CO. PVT. LTD. 4 7. THE ISSUE RAISED IN 2 ND GROUND OF APPEAL IS AGAINST THE DISALLOWANCE OF RS.67,94,000/- BY LD. CIT(A) AS MA DE BY THE AO ON ACCOUNT OF PROVISION FOR BAD DEBTS AMOUNTING TO RS.67,94,000/-. 8. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE VIDE LETTER DATED 25.02.2014 R EQUESTED THE AO TO ALLOW A DEDUCTION OF RS.67,94,000/- UNDER SEC TION 36 OF THE ACT AS BAD DEBT WHICH HE HAS ADDED BACK IN THE COMPUTATION OF INCOME FILED ALONG WITH THE INCOME T AX RETURN. THE AO OBSERVED THAT ASSESSEE HAS DEBITED THE SAID AMOUNT AS PROVISION FOR DOUBTFUL DEBTS IN THE P&L ACCOUNT AND RIGHTLY ADDED BACK THE SAME WHILE COMPUTING THE INCOME AS T HE SAME IS NOT ALLOWABLE UNDER SECTION 36 OF THE ACT AND THUS REJECTED THE CLAIM OF THE ASSESSEE. 9. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAS NEVER WRITTEN OFF THE DEBTS WHICH HAS BEEN CLAIMED AS BAD IN THE BOOKS OF ACCOUNTS NOR PROVED THAT IT WAS OFFERED FO R TAXATION IN THE EARLIER YEAR. THE LD. CIT(A) OBSERVED THAT ASS ESSEE HAS ONLY MADE PROVISION FOR BAD DEBTS AND IT WAS NOT PROVED BY THE ASSESSEE THAT DEBT HAS ACTUALLY BECOME BAD DURING T HE YEAR AND THUS DISMISSED THE APPEAL OF THE ASSESSEE. 10. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THOUGH THE ASSESSEE HAS DEB ITED THE PROVISION FOR DOUBTFUL DEBTS OF RS.67,94,635/- UNDE R THE HEAD OTHER EXPENSES DETAIL WHEREOF IS FILED AT PAGE NO .24 OF THE PAPER BOOK BUT THE SAME WAS REDUCED FROM THE TRADE RECEIVABLE ITA NO.6847/M/2016 M/S. BLB BALL MANAGEMENT CO. PVT. LTD. 5 IN SCHEDULE 13 FILED AT PAGE NO.22 OF THE PAPER BO OK. IN OTHER WORDS THE ASSESSEE HAS REDUCED THE TRADE RECEIVABLE BY THE CORRESPONDING AMOUNT AND SHOWN THE NET AMOUNT IN TH E BALANCE SHEET. WE FURTHER FIND FROM THE PERUSAL OF PAGE NO.54 TO 59 WHICH ARE THE DETAILS IN RESPECT OF 20 PARTIES Q UA WHOM THESE DEBTS WERE DUE AND RECOVERABLE BUT WRITTEN OFF IN THE BOOKS OF ACCOUNTS WHEN THE ASSESSEE LOST THE HOPE OF RECOVER Y AFTER MAKING DUE EFFORTS. THE ASSESSEE HAS ALSO GIVEN TH E PERIOD FOR WHICH THESE AMOUNTS WERE OUTSTANDING AND REASONS FO R WRITING OFF ALONG WITH THE EFFORTS MADE FOR RECOVERY. IT I S ALSO PROVED THAT THE SAID ITEMS OF CLAIM HAVE ALREADY BEEN ROUT ED THROUGH P&L ACCOUNT IN THE EARLIER YEARS. THE CASE OF THE ASSESSEE ALSO FINDS FAVOUR FROM THE DECISION OF THE APEX COURT IN THE CASE OF VIJAY BANK VS. CIT (2010) 323 ITR 166 AND ACCORDINGL Y UNDER THESE CIRCUMSTANCES, WE ARE NOT IN AGREEMENT WITH T HE CONCLUSION DRAWN BY THE LD. CIT(A) THAT THESE CAN N OT BE ALLOWED WHEN THE ASSESSEE HAS CLAIMED THESE AS PROV ISION FOR DEBTS. IN OUR OPINION THESE ARE THE ACTUAL DEBTS W RITTEN OFF BY THE ASSESSEE DURING THE YEAR AS IS APPARENT FROM TH E AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE AND THEREFORE ARE ALLOWABLE AS BAD DEBTS. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THESE BAD DEBTS. 11. APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOS ES. ORDER PRONOUNCED IN THE OPEN COURT ON 09.08.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 09.08.2019. * KISHORE, SR. P.S. ITA NO.6847/M/2016 M/S. BLB BALL MANAGEMENT CO. PVT. LTD. 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.