PRAMOD CHAND SONI, Ajmer V. ITO, Ajmer

ITA 693/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99515 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 08-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 693/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2009-10 . PRAMOD CHAND SONI, SETH MOOLCHAND SONI MARG, ANUP CHOWK, KHAZANA GALI, AJMER. CUKE VS. INCOME-TAX OFFICER, WARD 1(1), AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AIZPS 0784 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI SANJEEV JAIN (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24.11.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 27/11/2015. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. CIT (A), AJMER DATED 15.07.2014. THE SOLITARY GROUND RAISED IN THE APPE AL IS AS UNDER :- THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALL OWING THE BAD DEBTS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS BY THE ASSESSEE. 2 ITA NO. 693/JP/2014 A.Y. 2009-10 PRAMOD CHAND SONI VS. ITO. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF MONEY LENDING. THE ASSESSEE HAS FILED THE RETUR N OF INCOME ON 20.09.2009 DECLARING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND ORDER WAS PASSED UNDER SECTION 143(3) OF THE IT ACT ON 14.12.2011 DETERMINING TOTA L INCOME OF THE ASSESSEE AT RS. 28,76,610/-. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO NOTICED THAT ASSESSEE HAS DEBITED RS. 36,52,560/- TO PROFIT & LO SS ACCOUNT ON ACCOUNT OF BAD DEBTS WRITTEN OFF. IN SUPPORT OF THE SAID CLAIM THE ASSES SEE HAS SUBMITTED THE LEDGER PRINT OF BAD DEBTS ACCOUNT AS WELL AS PRIYA SONI ACCOUNT AS APPEARING IN THE BOOKS OF THE ASSESSEE. FROM THE DETAILS FILED, IT WAS OBSERVED BY THE AO THAT THE ASSESSEE NOT ONLY LENT/ADVANCED MONEY TO HIS DAUGHTER PRIYA SONI IN T HE LAST YEAR BUT THIS YEAR ITSELF ALSO HE CONSIDERED THE DEBT AS UNRECOVERABLE AND WRITTEN OFF THE SAME IN THE BOOKS OF ACCOUNT. THEREFORE THE AO OBSERVED THAT AS TO WHY T HE ASSESSEE LENT/ADVANCED THE MONEY TO HIS DAUGHTER IN THE SAME YEAR WHEN HE WAS GOING TO WRITE OFF THE SAME AS BAD DEBTS. THE ASSESSEE COULD NOT EXPLAIN THE REAS ON FOR GIVING THE ADVANCE TO HIS DAUGHTER WHEN HE HAS NO SUCH BUSINESS. THE ASSESSEE VIDE NOTE SHEET DATED 28.11.2011 WAS ASKED TO SHOW CAUSE AS TO WHY THE CL AIM OF BAD DEBTS DEBITED TO PROFIT & LOSS ACCOUNT OF RS. 3652560/- SHOULD NOT BE DISAL LOWED. THE REPLY SUBMITTED BY ASSESSEE ON 05.12.2011 WAS CONSIDERED BY THE AO BUT COULD NOT FIND FAVOUR WITH THE AO AS THE ASSESSEE DOES NOT FULL FILL THE CONDITION NO. 1 OF SUB SECTION (2) OF SECTION 36 OF THE IT ACT, 1961. THUS HE MADE THE ADDITION. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT (A), WHO CONFIRMED THE DISALLOWANCE MADE BY THE AO BY OBSERV ING THAT THE ASSESSEE HAS NOT 3 ITA NO. 693/JP/2014 A.Y. 2009-10 PRAMOD CHAND SONI VS. ITO. SHOWN OR STATED THE PURPOSE FOR GIVING THE ADVANCE. THE ASSESSEE HAS MERELY CLAIMED THAT ASSESSEE IS IN THE BUSINESS OF MONEY LENDING A ND HAS SHOWN THE INTEREST INCOME AS INCOME FROM BUSINESS SO THE ABOVE PRINCIPAL AMOUNT WRITTEN OFF MAY BE ALLOWED AS BAD DEBTS. HOWEVER, THE AO HAS POINTED OUT THAT ASSESSE E IS NOT CARRYING OUT ANY MONEY LENDING BUSINESS AND ASSESSEE IS NOT HAVING PERMISS ION OF CARRYING OUT THE SAME BUSINESS AS PER THE RBI REGULATIONS NOR ASSESSEE HA S ANY LICENSE FOR CARRYING OUT THE MONEY LENDING ACTIVITY. THE ABOVE FINDING OF THE AO HAS NOT BEEN CONTROVERTED IN ANY MANNER BY THE ASSESSEE. THE LD. CIT (A) ALSO OBSER VED THAT THE ABOVE AMOUNT HAS NOT BEEN SHOWN AS STOCK IN TRADE BY THE ASSESSEE TO PRO VE THAT ASSESSEE IS IN MONEY LENDING BUSINESS. THE ASSESSEE CONTENDED BEFORE LD . CIT (A) THAT HE HAS BEEN CONSISTENTLY SHOWING THE COMMISSION INCOME AS BUSIN ESS INCOME. SO THE BAD DEBTS WRITTEN OFF MAY BE ALLOWED. THE LD.CIT (A) OBSERVED THAT THE PRINCIPLE OF RES JUDICATA HAS NO APPLICATION TO THE PROCEEDINGS UNDER THE INC OME TAX ACT AND FINDINGS IN A PARTICULAR ASSESSMENT YEAR CAN NOT BE HELD TO BE A BINDING FOR SUBSEQUENT YEAR. THE LD. CIT (A), THEREFORE, CONSIDERING THE VARIOUS ASPECTS OF THE MATTER, SUSTAINED THE ADDITION. 4. NOW THE ASSESSEE IS BEFORE US. 4.1. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE AMOUNT OF RS. 36,52,560/- WAS WRITTEN OFF BEING NOT RECOVERABLE I N THE FINANCIAL YEAR 2009-10. HE HAS SUBMITTED THAT IN THE ASSESSMENT YEAR 2008-09, THE AMOUNT OF RS. 25,92,571/- WAS GIVEN TO MS PRIYA SONI AND LATER ON THE AMOUNT OF R S. 10,59,989/- WAS GIVEN IN THE YEAR SUBSEQUENT THERETO. IT WAS CONTENDED THAT THE AMOU NT BEING NOT RECOVERABLE, THE 4 ITA NO. 693/JP/2014 A.Y. 2009-10 PRAMOD CHAND SONI VS. ITO. AMOUNT WAS WRITTEN OFF IN THE A.Y. 2009-10. THE LD . A/R HAS RELIED UPON THE JUDGMENT IN THE CASE OF TRF LTD. VS. CIT (2010) 323 ITR 397 WHICH STIPULATES AS UNDER :- THIS POSITION IN LAW IS WELL SETTLED. AFTER APRIL 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWE VER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINE D WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEB ITED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE A CCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION I S DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSING OFFI CER HAS NOT EXAMINED WHETHER, IN FACT, THE BAD DEBT OR PART THE REOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MAT TER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTE NT OF THE WRITE OFF. ON THE BASIS OF THE ABOVE, IT WAS CONTENDED THAT SI NCE THE AMOUNT WAS NOT RECOVERABLE, THEREFORE, THE SAME HAS BEEN WRITTEN OFF BY THE ASE SSEE. 4.2. PER CONTRA, THE LD. D/R FOR THE REVENUE HAS SU BMITTED THAT NO INTEREST HAS BEEN CREDITED TO THE ACCOUNT OF THE ASSESSEE FROM THE DA UGHTER, NAMELY, PRIYA SONI AND DESPITE NO AMOUNT HAS BEEN CREDITED IN THE ACCOUNT OF THE ASSESSEE TOWARDS THE INTEREST, THE AMOUNT HAS ALSO BEEN GIVEN IN A.Y. 20 09-10. IT WAS, THEREFORE, CONTENDED THAT THE AMOUNT WRITTEN OFF IN THE A.Y. 2009-10 IN WHICH THE AMOUNT WAS DUE AND IT 5 ITA NO. 693/JP/2014 A.Y. 2009-10 PRAMOD CHAND SONI VS. ITO. WAS SUBMITTED THAT THE WRITTEN OFF OF THE AMOUNT WA S NOT BONA FIDE AND WAS NOT TERMED UNDER THE CATEGORY OF BAD DEBT. HE HAS ALSO DRAWN OUR ATTENTION TO THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F SOVEREIGN SECURITIES PVT. LTD. VS. ITO, (2014) 48 TAXMANN.COM 105 (BOMBAY). 4.3. WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN OUR VIEW, THE FINDING OF THE AO AND THE LD. CIT (A) SEE MS TO BE CORRECT THAT THE ASSESSEE WAS NOT IN THE BUSINESS OF MONEY LENDING AND THE MO NEY HAS BEEN GIVEN BY HIM TO HIS OWN DAUGHTER FOR THE REASON BEST KNOWN TO HIM. IT IS ALSO THE CASE BEFORE US THAT THE MONEY WHICH HAS BEEN GIVEN BY THE ASSESSEE TO HIS D AUGHTER CAME BACK IN ONE OF THE FIRMS OF THE ASSESSEE. WE HAVE ALSO NOTICED THAT N O EFFORTS HAVE BEEN MADE BY THE ASSESSEE TO RECOVER THE AMOUNT OF LOAN GIVEN BY HIM TO HIS DAUGHTER. WE FULLY AGREE WITH THE JUDGMENTS CITED BY THE LD. D/R FOR THE REV ENUE. WE FIND THAT EVEN BEFORE THE EXPIRY OF LIMITATION FOR THE AMOUNT, THE ASSESSEE H AS WRITTEN OFF THE AMOUNT. THE AMOUNT WAS GIVEN ALLEGEDLY IN THE FINANCE YEAR 2007 -08 AND 08-09 AND THE SAME HAS BEEN WRITTEN OFF IN THE ACCOUNT IN A.Y. 2009-10 I.E . ASSESSMENT YEAR IN WHICH IT HAS BEEN GIVEN. THE JUDGMENT CITED THE LD. D/R SQUARELY COVERED THE ISSUE. THE RELEVANT PARA IS REPRODUCED HEREIN BELOW :- 4. IT IS NOT POSSIBLE TO ACCEPT THESE CONTENTION S FOR MORE THAN REASON. THE ATTEMPT IS TO HAVE A RE-APPRECIATION AND RE-APP RAISAL OF THE FACTUAL MATERIALS ON RECORD. IT HAS BEEN CONCURRENTLY FOUND BY THE ASSESSING OFFICER, COMMISSIONER OF INCOME TAX (APPEALS) AND I NCOME TAX APPELLATE TRIBUNAL THAT THE WHOLE CLAIM WAS BASED ON FIRSTLY TERMING THE OTHER PRIVATE LIMITED ENTITY AS A SUB BROKER. DURING THE ASSESSMENT 6 ITA NO. 693/JP/2014 A.Y. 2009-10 PRAMOD CHAND SONI VS. ITO. PROCEEDINGS, IT HAS BEEN REFERRED TO AS BUSINESS LO SS. THE ATTEMPT WAS TO ENABLE THE COMPANIES TO AVOID PAYING TAX ON PROFITS WHICH ARE TAXABLE. THAT CONCLUSION HAS BEEN ARRIVED AT BY PROBING AND PIERCING THE TRANSACTIONS AND DEALINGS. IF THE DEBTS WERE INDEED WRITTEN OFF AS BAD IN THE ACCOUNTS, THEN, THERE WAS NO REASON FOR CONFLIC TING VERSIONS EMERGING FROM THE RECORD. BOTH THE AUTHORITIES HAVE FOUND TH AT THE ATTEMPT WAS TO AVOID LIABILITY OF INCOME TAX ON TAXABLE PROFIT. TH E TRIBUNAL HAS FOUND THAT THE ASSESSEE WAS DOING BUSINESS WITH ITS SISTER CON CERN NAMELY SOVEREIGN NARIMAN BROKING (P) LTD. WHEREAS SOVEREIGN NARIMAN FINVEST LIMITED WAS ACTING AS THE ASSESSEE COMPANYS SUB BROKER. THAT C OMPANY WAS SUPPOSED TO PAY THE ASSESSEE COMPANY RS. 37.93 LACS TILL MAY 2003. FROM JUNE, 2003 TO AUGUST 2003 THE COMPANY MADE CERTAIN PAYMENTS AND IN AUGUST, 2003 WHEN THE AMOUNT RECEIVABLE FROM THE SU B-BROKER WAS RS. 26.93 LACS IT FINALLY CONVEYED TO THE ASSESSEE-COMP ANY THAT IT IS NOT POSSIBLE TO PAY ANY FURTHER MONEY. IT IS AT THAT ST AGE THE ASSESSEE COMPANY CLAIMED THAT IT WAS A BAD DEBT. THE TRIBUN AL REFERRED TO THE FACT THAT ONE MR. HARSHAD P. CHOKSHI IS HOLDING SUBSTANT IAL SHARES IN THE ASSESSEE COMPANY AND ALSO IN SNFPL. THIS SHOWS THAT THERE WAS A BOOK ENTRY WHEREIN THE ASSESSEE CLAIMED BAD DEBTS AS A M EANS TO REDUCE TAXABLE PROFITS. THE REASONS ASSIGNED IN PARA 12 OF THE ORDER OF THE TRIBUNAL THEREFORE, ARE ESSENTIALLY IN THE BACKDROP OF THE PECULIAR FACTS AND CIRCUMSTANCES EMERGING FROM THE RECORD. IN SUCH CIRCUMSTANCES, WE DO NOT FIND ANY SUBSTANTIAL QUESTIONS OF LAW ARISIN G FOR DETERMINATION AND CONSIDERATION IN THIS APPEAL. THIS IS NOT A CASE WH ERE THERE IS A CONTROVERSY OR THE DEBT WRITTEN OFF AS BAD IN THE A CCOUNTS BEING REQUIRED TO BE ESTABLISHED AS INDEED BAD DEBT. THIS IS A CON TROVERSY WHERE THE CLAIM OF BAD DEBTS WAS RAISED TO AVOID TAX LIABILIT Y. THAT HAVING BEEN PROVED AND THE ENTIRE VERSION IS TERMED AS A MERE E YE-WASH, THAT THIS IS 7 ITA NO. 693/JP/2014 A.Y. 2009-10 PRAMOD CHAND SONI VS. ITO. NOT A FIT CASE WHERE SUBSTANTIAL QUESTIONS OF LAW A RISE FOR DETERMINATION IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY MERITS AND IS DISMISSED. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS DISMISSED. 5. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/11/2015 . SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27/11/2015 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRAMOD CHAND SONI, AJMER. 2. IZR;FKHZ@ THE RESPONDENT- THE INCOME TAX OFFICER, WARD 1(1), AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 693/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 8 ITA NO. 693/JP/2014 A.Y. 2009-10 PRAMOD CHAND SONI VS. ITO.