M/s Reliance Jute Mills International ltd., Kolkata V. ITO, Wd-1(1), Kolkata, Kolkata

ITA 696/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9359 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 21-04-2014
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL
• Assessee Lawyers: S M SURANA
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM ./ ITA NO.696/KOL/2014 ( / ASSESSMENT YEAR:2008-09) M/S RELIANCE JUTE MILLS INTERNATIONAL LIMITED, SOUTH BLOCK, 4 TH FLOOR, IDEA PLAZA, 11/1, SARAT BOSE ROAD, KOLKATA-700020 VS. ITO, WARD-1(1), P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA-69 ./ ./PAN/GIR NO.: AABCR 4761 R ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI S.M.SURANA, ADVOCATE REVENUE BY : SHRI RAJAT KUMAR KUREEL, JCIT / DATE OF HEARING : 21/02/2017 /DATE OF PRONOUNCEMENT 23/02/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAIN ING TO THE ASSESSMENT YEAR 2008-09, IS DIRECTED AGAINST THE OR DER PASSED BY LD. CIT(A)-I, KOLKATA IN APPEAL NO.281/CIT(A)-I/W-(1)/2 010-11, DATED 30.01.2014, WHICH IN TURN ARISES OUT OF AN ORDER PA SSED BY THE ASSESSING OFFICER (AO) UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961, (HEREINAFTER REFERRED TO AS THE ACT), DATED 28.12 .2010. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.09.2008 DECLARING TOTAL INCOME AT NIL. THE RETURN OF THE ASSESSEE WAS PROCESSED U/S.143(1) ON 12.03.2010. LATER ON, THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY U/S,1 43(3) OF THE ACT AND THE AO HAS COMPLETED THE ASSESSMENT BY MAKING ADDIT ION OF RS.4,31,648/- ON ACCOUNT OF BAD DEBTS/ADVANCES IRRE COVERABLE AND OTHER DISALLOWANCES. ITA NO.696/14 M/S RELIANCE JUTE MILLS INTERNATIONAL LIMITED 2 3. AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS CONFIRMED THE ORDER PASSED BY THE AO OBSERVING THE FOLLOWINGS :- 5.2 THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONS IDERED. HOWEVER IT IS SEEN THAT AS POINTED OUT BY THE AO, T HE ADVANCES WERE GIVEN TO THE VARIOUS PARTIES AND WHICH NOT REC OVERABLE BY THE APPELLANT FROM THESE PARTIES. IT IS ALSO CLEAR FROM THE PROVISIONS OF SEC.36(1)(VII) THAT ANY CLAIM OF BAD DEBTS, THE. AM OUNT HAD TO BE FIRST SHOWN AS INCOME IN THE ACCOUNTS OF THE APPELL ANT BEFORE THE SAME CAN BE CLAIMED AS BAD DEBTS, THEREFORE THESE A MOUNTS CANNOT BE CLAIMED AS BAD DEBTS. WITH RESPECT TO THE CLAIM AS BUSINESS LOSS U/S 37, THE ONUS WAS ON THE APPELLANT TO ESTABLISH THAT THESE ADVANCES HAD BECOME IRRECOVERABLE AND TO SUBMIT EVIDENCE THAT THE SAME WERE TRADE ADVANCES AND COUL D NOT BE RECOVERED. BUT IN THIS CASE IT SEEN THAT THE APPELL ANT IT IS SEEN THAT ONLY THE COPIES OF THE RESPECTIVE LEDGERS HAVE BEEN SUBMITTED, BUT NO EVIDENCE WAS PROVIDED TO ESTABLISH THAT THE APPE LLANT WAS UNABLE TO MAKE RECOVERY OR EVEN MADE EFFORTS TO DO SO, MERELY PROVIDING COPIES OF LEDGER ACCOUNTS DOES NOT ESTABL ISH THESE ADVANCES AS IRRECOVERABLE. IN THE ABSENCE OF THE SA ME, THE CLAIM OF THE APPELLANT IS NOT ACCEPTED AND THE DISALLOWANCE MADE BY THE AO OF RS.4,31,648/- IS CONFIRMED. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN THE FOLLOWIN G GROUNDS OF APPEAL :- 1. FOR THAT THE ORDER OF THE LD.CIT(A) IS ARBITRAR Y, ILLEGAL AND BAD IN LAW. 2. FOR THAT THE LD.CIT(A) ERRED IN CONFIRMING THE A DDITION OF RS.4,31,648/- BEING BUSINESS LOSS CLAIMED AS BAD DE BT WHICH AROSE IN THE COURSE OF BUSINESS AND WAS ALLOWABLE D EDUCTION. 3. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ORDER OF THE CIT BE MODIFIED AND THE ASSESSEE BE GIVEN THE R ELIEF PRAYED FOR. 5. ALTHOUGH IN THIS APPEAL, THE ASSESSEE HAS RAISED THREE GROUNDS OF APPEAL BUT AT THE TIME OF HEARING, THE SOLITARY GRI EVANCE OF THE ASSESSEE HAS BEEN CONFINED TO GROUND NO.2, THAT IS, THE ISSUE RELATING TO ADDITION OF RS.4,31,648/- MADE BY THE A O ON ACCOUNT OF BUSINESS LOSS AS BAD DEBTS CLAIMED BY THE ASSESSEE. ITA NO.696/14 M/S RELIANCE JUTE MILLS INTERNATIONAL LIMITED 3 5.1. LD. AR FOR THE ASSESSEE HAS SUBMITTED BEFORE U S THAT ASSESSEE HAS GIVEN ADVANCES TO VARIOUS PARTIES TO PURCHASE STORE S ITEMS (STORES ADVANCES). THE SUPPLIERS OF STORE ITEMS SUPPLIED TH E STORE MATERIALS TILL 2001, AFTER THAT THEY DISCONTINUED TO SUPPLY THE ST ORE ITEMS. THE ADVANCES GIVEN BY THE ASSESSEE TO THE STORE SUPPLIERS AND AF TER DISCONTINUED SUPPLY, THEY DID NOT PAY THE AMOUNT IN SPITE OF REP EATED REMINDERS. THESE ADVANCES ARE TIME BARRED AND IT SEEMED TO THE ASSES SEE THAT THESE ARE NOT RECOVERABLE, THEREFORE, THE ASSESSEE TOOK THE D ECISION TO WRITE IT OFF IN THE BOOKS OF ACCOUNT. LD. AR FOR THE ASSESSEE HAS P OINTED OUT THAT IT IS A BUSINESS LOSS, NOT A BAD DEBTS, BECAUSE THE ADVANCE S GIVEN BY THE ASSESSEE TO THE STORE SUPPLIERS AND THE STORE IS CO NNECTED WITH THE BUSINESS. THE PERSONS TO WHOM THE ADVANCES WERE GIV EN, DENIED TO PAY THE AMOUNT TO THE ASSESSEE, THEREFORE, AMOUNT BECAM E IRRECOVERABLE AND THE ASSESSEE WRITTEN OFF THESE AMOUNTS AS BUSINESS LOSS/BAD DEBTS. LD. AR HAS POINTED OUT THAT THESE BUSINESS LOSS/BAD DEB T IS ALLOWABLE EXPENDITURE. 5.2. ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS PRIMARILY RELIED ON THE FINDINGS OF THE AO WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 5.3. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMI SSIONS OF THE ASSESSEE, AS THE PROPOSITION CANVASSED BY LD. AR FOR THE ASSE SSEE ARE SUPPORTED BY THE FACTS NARRATED BY HIM ABOVE. AS LD. AR FOR THE ASSESSEE HAS POINTED OUT THAT THE ASSESSEE GAVE ADVANCE TO STORE SUPP LIERS AND THE SAID ITA NO.696/14 M/S RELIANCE JUTE MILLS INTERNATIONAL LIMITED 4 STORE SUPPLIERS DISCONTINUED IN SUPPLY SINCE 2001-0 2 AND AFTER THAT THE ASSESSEE MADE SEVERAL ATTEMPTS AND SENT REMINDERS T O THE CUSTOMER TO WHOM THE ADVANCES WERE GIVEN BUT THEY DID NOT REPAY THE MONEY TO THE ASSESSEE. THEREFORE, IT IS ASSESSEES DECISION AND THE PREROGATIVE TO DECIDE THAT IF ANY AMOUNT BECOMES IRRECOVERABLE THE SAME CAN BE WRITTEN OFF AS BAD DEBTS/BUSINESS LOSS. CONSIDERING THE FAC TUAL POSITION, WE ARE OF THE VIEW THAT ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADD ITION. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE, IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23/02/ 2017. SD/ - (A.T.VARKEY) S D/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 23/02/2017 ' $%& /PRAKASH MISHRA , 0 . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, 1. / THE APPELLANT-M/S RELIANCE JUTE MILLS INTERNATIONAL LTD 2. / THE RESPONDENT.- ITO, WARD-1(1), KOLKATA 3. 1 ( ) / THE CIT(A), KOLKATA. 4. 1 / CIT 5. 23 4 0056 , 56 , / DR, ITAT, KOLKATA 6. 4 78 / GUARD FILE. 2 0 //TRUE COPY//