Appeal details
Counselvise Citation
[2013] 120 COUNSELVISE.COM (IT) 1902 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
01-02-2013
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Assessment Year
2008-2009
Appeal Filed On
27-11-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC : MUMBAI BEFORE SHRI R.K.GUPTA, JUDICIAL MEMBER ITA. NO.7085/MUM/2012 ASSESSMENT YEAR 2008-2009 KANTI BEVERAGES PVT. LTD. A-101, SAI DARSHAN COMPLEX, 1 ST FLOOR, MAMLATDAR WADI ROAD NO.1, MALAD (W), MUMBAI 400 064. PAN AABCK7186K VS. DCIT 3 (2) AAYAKAR BHAVAN MUMBAI. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI PARAS SAVLA FOR RESPONDENT : SHRI SHEKHAR L. GAJBHIYE DATE OF HEARING : 14-01-2013 DATE OF PRONOUNCEMENT : 01-02-2013 ORDER PER R.K.GUPTA, J.M. 1. THIS APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E CIT(A) FOR THE ASSESSMENT YEAR 2008-2009. THE FIRST ISSUE IS AGAIN ST THE DISALLOWANCE OF SUNDRY BALANCE WRITTEN OFF AT RS.20,72,038/- ON THE GROUND THAT ASSESSEE- COMPANY HAD WRITTEN OFF CERTAIN DEPOSITS WHICH WAS CAPITAL IN NATURE. 2. THE ASSESSEE-COMPANY WAS ENGAGED IN THE MANUFAC TURING ACTIVITY LIKE FLOUR MILLS & BOTTLING PLANT AT INDORE AND JUI CE PLANT AT NEWAI, JAIPUR. DURING THE COURSE OF RUNNING OF THOSE INDUSTRIAL UN ITS VARIOUS KINDS OF DEPOSITS WERE GIVEN TO VARIOUS GOVERNMENT AUTHORITI ES FOR FOOD LICENSES, GAS CYLINDER, ELECTRICITY DEPOSIT ETC., WHICH ARE REQUI RED FOR RUNNING THE BUSINESS. THERE WERE SOME RECEIVABLES FROM MANY CUSTOMERS ON ACCOUNT OF SALE OF GOODS TO THEM. THE COMPANY HAD IN THE PAST SOLD ALL THESE MANUFACTURING UNITS TO VARIOUS COMPANIES. HOWEVER, THE RECEIVABLE DEPOSITS PERTAINS TO THESE UNITS WERE STILL SHOWN AS RECOVERABLE/DEPOSITS. 2 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD CLOSED DOWN AND SOLD ITS BUSINESS. WHEREAS, CERTAIN DEPOSITS ON DEBTORS REMAINS OUTSTA NDING WHICH WERE WRITTEN OFF IN THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE THAT THESE DEPOSITS ETC., ARE IN RESPE CT OF ASSETS OR BUSINESS THAT HAS BEEN SOLD AND HENCE, THESE ARE CAPITAL IN NATUR E, WHICH HAS BEEN OBJECTED BY THE ASSESSEE BEFORE CIT(A). IT WAS SUBMITTED BEF ORE THE CIT(A) THAT TO RUN INDUSTRIAL UNITS AND FOR CHANGE OF NAME IN VARIOUS GOVERNMENT RECORDS, DEPOSITS IN ONE FIRM OR OTHER IS REQUIRED TO BE GIV EN BY THE COMPANIES AND TO GET THE REFUND BY THE SELLER OF THESE INDUSTRIAL UN ITES IS VERY DIFFICULT FOR WANT OF MANY REQUIREMENTS. HOWEVER, LEARNED CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE NOTED THAT ASSESSEE HAD CLOSED DOWN ITS BUSINESS AND SOLD VARIOUS ASSETS AND PROPERTIES. TH EREFORE, THERE IS NO BUSINESS RECEIPT DURING THE YEAR UNDER CONSIDERATIO N. THE ONLY INCOME IS RENTAL INCOME, INTEREST AND INSURANCE CLAIM. THEREFORE, TH ERE IS NO INCOME ASSESSABLE UNDER THE HEAD BUSINESS INCOME AND THEREFORE, NO BUSINESS EXPENDITURE IS ALLOWABLE TO THE ASSESSEE. ABOUT BALANCES WRITTEN O FF, THE CIT(A) NOTED THAT ASSESSEE HAS CLAIMED THAT THERE ARE GENERALLY DEPOS ITS WITH STATUTORY AUTHORITIES, WHEREAS, AS PER THE DETAILS FILED BY A SSESSEE, ONLY FEW OF THEM ARE OF SUCH NATURE AND OTHERS ARE IN RELATION TO OTHER THAN GOVERNMENT AUTHORITIES ALSO. ASSESSEE HAS NOT FILED ANY DETAILS, ITEM-WISE AS TO HOW WAS IT INCURRED AND WHAT IS THE RELATION OF THESE BALANCES WITH THE ASSESSEE AND ITS BUSINESS. THE CIT(A) ALSO NOTED THAT SINCE ASSESSEE HAS SOLD BUSINESS AND CONTINUE WITH SALE OF ASSETS HAS ALSO NOT BEEN DISCLOSED. THEREFO RE, HE HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. 4. COUNSEL OF THE ASSESSEE FILED SMALL WRITTEN NOT E. ON THE OTHER HAND, LEARNED D.R. PLACED RELIANCE ON THE ORDER OF THE CIT(A). 5. AFTER CONSIDERING THE ORDER OF THE ASSESSING OF FICER AND CIT(A) AND SUBMISSIONS OF THE ASSESSEE, I FOUND THAT THIS MATT ERS NEEDS RE-VERIFICATION. IN THE WRITTEN SUBMISSIONS IT HAS BEEN EXPLAINED THAT THE AMOUNTS WRITTEN OFF 3 WERE NOT AT ALL RECEIVABLE AND NO DEDUCTION WAS CLA IMED IN EARLIER YEAR OR LATER YEAR. THE DISALLOWANCE LEADS TO TOTAL TAXATION AS I T WAS NOT CLAIMED WHEN THE UNITS WERE SOLD. RELIANCE IS PLACED IN THE CASE OF G.R.PANDYA SHARE BROKING LTD. VS. ITO (2008) 26 SOT 431 (MUM.). THESE FACTS EXPLAINED IN THE WRITTEN SUBMISSIONS WERE NOT RAISED BEFORE THE ASSESSING OF FICER OR BEFORE CIT(A). THE ASSESSEE HAS CATEGORICALLY STATED THAT THEY HAVE NO T CLAIMED ANY DEDUCTION. IF THEY HAVE NOT CLAIMED ANY DEDUCTION, THEN, HOW THES E AMOUNTS RECEIVABLE FROM GOVERNMENT AUTHORITIES OR ANYBODY ELSE ARE TAXABLE INCOME OR WRITTEN OFF ? THIS FACT HAS TO BE ASCERTAINED. OF COURSE, ASSESSE E ALSO CANNOT CLAIM ANY SET OFF AGAINST RENTAL INCOME ETC., AS THERE IS NO BUSI NESS INCOME DURING THE YEAR UNDER CONSIDERATION. SINCE, FACTS ARE NOT CLEAR, TH EREFORE, THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR PASSING A FRESH ORDER, AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. I ORDER ACCORDINGLY. 6. REMAINING ISSUE IS IN RESPECT OF DISALLOWING CL AIM OF BAD DEBTS ON ACCOUNT OF INTEREST RECEIVABLE AT RS.43,88,119/- ON THE GROUND THAT COMPANY HAD CLAIMED BAD DEBT WHICH ARE COLLECTIBLE AND COMP ANY HAS NOT TAKEN PROPER EFFORT TO COLLECT THE SAME. 7. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER NOTICED THAT THERE ARE SUNDRY INTEREST RECEIVABLE FROM VARI OUS PARTIES WHICH HAS BEEN WRITTEN OFF BY THE ASSESSEE AND THE COMPANY HAS FAI LED TO RECOVER THESE SUMS INSPITE OF CONTINUOUS EFFORTS AND CORRESPONDENCE. T HIS INTEREST WAS RELATING TO FOUR PERSONS AS PER THE DETAILS GIVEN IN THE ASSESS MENT ORDER. BUT, THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER HOLDING THAT NO EVIDENCE AS TO EFFORTS MADE TO COLLECT THESE AMOUNTS HAS BEEN F URNISHED. THESE, INTEREST INCOME WERE ALREADY OFFERED TO TAX IN EARLIER YEARS AND SINCE THE COMPANY HAD FAILED TO RECOVER THESE SUMS, IT HAS BEEN WRITTEN O FF. HOWEVER, LEARNED CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. THE CIT(A) NOTED THAT ASSESSEE HAS FILED LOAN CONFIRMATION FROM THE PARTIES WHO ARE THE DIRECTORS OF THE ASSESSEE-COMPANY. THEREFORE, IT IS, DIFFICUL T TO IMAGINE THAT ASSESSEE WOULD HAVE BEEN SERIOUSLY INTERESTED IN RECOVERING THE LOAN AND INTEREST 4 WHEREAS, WITH A VIEW TO REDUCE THE RENTAL AND INTER EST INCOME ASSESSEE HAS CLAIMED SUCH EXPENSES WITHOUT GIVING ANY OTHER DETA ILS. ACCORDINGLY, HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 8. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE ORDERS OF THE AUTHORITIES BELOW, I FOUND THAT ORDER OF CIT(A) DOE S NOT SUFFER FROM INFIRMITY. THE LEARNED CIT(A) HAS GIVEN A SPECIFIC FINDING THA T LOAN AND INTEREST WAS RECEIVABLE FROM THE DIRECTORS OF THE ASSESSEE-COMPA NY. SINCE THE LOAN AND INTEREST WAS RECEIVABLE FROM THE DIRECTORS OF THE A SSESSEE-COMPANY ITSELF, THEREFORE, IN MY CONSIDERED VIEW WRITTEN-OFF THE SA ME AS BAD DEBT WAS NOT JUSTIFIED AT THE END OF THE ASSESSEE-COMPANY. THE D IRECTOR OR THE PERSON WHO MANAGES THE AFFAIRS OF THE ASSESSEE-COMPANY, HOW TH E DIRECTORS CAN TAKE A VIEW THAT THE LOAN PAID BY THEM ALONG WITH INTEREST HAS BECOME BAD ? IT MEANS THEY WANT TO WRITE-OFF THE AMOUNT WHICH IS PAYABLE BY THEMSELVES ONLY. IT IS CLEAR THAT THE AMOUNT WRITTEN-OFF BY THE DIRECTORS OF THE ASSESSEE-COMPANY WAS JUST TO AVOID THE TAXABILITY WHICH HAS ARISEN ON AC COUNT OF INTEREST AND RENTAL INCOME. I FURTHER NOTED THAT LEARNED COUNSEL FOR TH E ASSESSEE HAS NOT COMMENTED UPON ANYTHING IN RESPECT OF THE FINDING O F THE LEARNED CIT(A) THAT LOAN WAS RECEIVABLE FROM THE DIRECTOR OF THE ASSESS EE-COMPANY AND NOT BY ANY OTHER THIRD PARTY OR CUSTOMERS. IN VIEW OF THESE FA CTS AND CIRCUMSTANCES, I HOLD THAT THE LEARNED CIT(A) WAS CORRECT IN DENYING THE CLAIM OF BAD DEBT WRITTEN-OFF. THEREFORE, THE ORDER OF THE LEARNED CIT(A) IS CONFI RMED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01 ST FEBRUARY, 2013. ` SD/- (R.K.GUPTA) JUDICIAL MEMBER MUMBAI, DATE 01 ST FEBRUARY, 2013. VBP/- 5 COPY FORWARDED TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A)-4, R.NO.550, AAYAKAR BHAVAN, M.K. ROAD, MUMB AI-400 020. 4. CIT-3, MUMBAI 5. DR SMC BENCH 6. GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI.
