M/s. Orient Supply Enterprise, Ahmedabad V. The Dy.CIT.,Circle-10, Ahmedabad

ITA 745/AHD/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6142 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-02-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 08-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SUTARIA HEARING CONCLUD
• Assessee Lawyers: H V VASA
• Keywords: Bad and doubtful debts; Corroborative evidences
• Section: 144

Judgement Text

I.T.A. NO.: 745/AHD/2011 ASSESSMENT YEARS: 2006 - 07 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD SMC BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM ] I.T.A. NO. : 745/AHD/2011 ASSESSMENT YEAR S: 2006 - 07 ORIENT SUPPLY ENTERPRISE ............APPELLANT CJD WING, GF, MADHUSUDAN HOUSE N A VRANGPURA, AHMEDABAD [PAN: AAAFO7177L] VS DY COMMISSIONER OF INCOME TAX CIRCLE 10, AHMEDABAD ...........RESPONDENT APPEARANCES BY H V VASA FOR THE APPELLANT DEEPAK SUTARIA FOR THE RESPONDENT HEARING CONCLUDED ON: 10 /0 2 /1 7 ORDER PRONOUNCED ON : 26 /04 /1 7 O R D E R 1. THIS APPEAL, FILED BY THE ASSESSEE, IS DIRECTED AGAINST THE ORDER DATED 3 RD JANUARY 2011 PASSED BY THE CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 144 OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2006 - 07. 2. ALTHOUGH THE ASS ESSEE HAS RAISED AS MANY AS SEVEN GROUNDS OF APPEAL, THE ONLY GRIEVANCE PRESSED BEFORE US, WHICH IS REQUIRED TO BE ADJUDICATED ON MERITS, IS AGAINST THE LEARNED CIT(A) CONFIRMING THE DISALLOWANCE OF RS 15,07,448 IN RESPECT OF THE AMOUNTS WRITTEN OFF AS UNR ECOVERABLE FROM DIFFERENT PARTIES. 3. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THIS IS A CASE OF BEST JUDGMENT ASSESSMENT UNDER SECTION 144 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CL AIMED DEDUCTION OF RS 15,07,448 IN RESPECT OF BAD DEBTS BUT THERE IS NO SUPPORTING EVIDENCE IN RESPECT OF THE SAME. ACCORDINGLY, THE DEDUCTION WAS DECLINED. IN APPEAL BEFORE THE CIT(A), A GRIEVANCE WAS RAISED AGAINST THIS DISALLOWANCE. THE REQUISITE DETAI LS WERE FURNISHED BY I.T.A. NO.: 745/AHD/2011 ASSESSMENT YEARS: 2006 - 07 PAGE 2 OF 3 THE ASSESSEE, AND THE CIT(A) ALSO CALLED FOR A REMAND REPORT ON THE SUBMISSIONS MADE BY THE ASSESSEE AND THE DETAILS FURNISHED BY THE ASSESSEE. THERE WERE THREE DEBIT BALANCES WHICH WERE WRITTEN OFF DURING THE RELEVANT FINANCIAL PERIOD - FIRST, OF RS 11,155 IN RESPECT OF NANDLAL ARVIND AND CO; - SECOND, OF RS 1,014 IN RESPECT OF SHRENIKBHAI SHETH MEHSANA; AND - THIRD , OF RS 14,95,279 IN RESPECT OF M/S CONTRACTS. THE COPIES OF ACCOUNTS OF THESE PERSONS WERE DULY FURNISHED. IT WAS NOTED TH AT SO FAR AS M/S CONTACTS WAS CONCERNED, THE ASSESSEE HAD ADVANCED RS 5,00,000 IN THE MONTH OF JUNE 1998 AND INTERES T @ 24% PA WAS CHARGED ON THE SAME TILL 2003 - 04 WHEN THE INTEREST WAS SCALED DOWN TO 18% PA, AND FINALLY, EFFECTIVE ASSESSMENT YEAR 2004 - 05, NO INTEREST WAS CHARGED THEREON AT ALL. THE INTEREST INCOME EARNED BY THE ASSESSEE WAS OFFERED TO TAX FROM TIME TO TIME. HOWEVER, AS THE SAID CONCERN WAS NOT TRACEABLE, EVENTUALLY THE AMOUNT OUTSTANDING WAS WRITTEN OFF BY THE ASSESSEE. THE ASSESSING OFFIC ER, IN THE REMAND REPORT, NOTED THAT THE ASSESSEE WAS STATED TO BE IN THE BUSINESS OF DEALING IN FANS, AND THAT THERE WAS NOTHING TO SHOW THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MONEY LENDING. THE ASSESSEE S EXPLANATION WAS THAT THE ADVANCE WAS GI VEN PRIMARILY TO OBTAIN AN AGE NCY FOR FANS BUT THEN THERE WAS NOTHING TO SUBSTANTIATE THE SAME. ON THESE FACTS, THE CIT(A) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE ADVANCES WERE NOT GIVEN IN THE COURSE OF BUSINESS. THE ASSESSEE IS NOT SATISFIED A ND IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. 4 . I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5 . I HAVE NOTICED THAT ENTIRE DISCUSSION BY THE CIT (A) HAS REMAINED CONFINED TO THE AMOUNT WRITTEN OFF IN RESPECT OF M/S CONTACTS. AS REGARDS THE TWO REMAINING PARTIES, I.E. RS 11,155 IN RESPECT OF NANDLAL ARVIND AND CO; - SECOND, OF RS 1,014 IN RESPECT OF SHRENIKBHAI SHETH MEHSANA, NO SPECIFIC OBJECTIONS ARE RAISED BY THE ASSESSING OFFICER AS ALSO THE CIT(A). TO THIS EXTENT, THEREFORE, THE CLAIM FOR DEDUCTION IS VIRTUALLY UNCONTESTED AND MUST BE ALLOWED. I DIRECT SO. AS REGARDS THE WRITE OFF OF THE AMOUNT OF RS 14,95,279 IN RESPECT OF M/S CONTACTS, THERE IS NOTHING ON THE RECORD TO SHOW AS TO ON WHAT CONSIDERATIONS THE AMOUNT WAS ADVANCED TO THE SAID CONCERN. IT IS, THEREFORE, NOT POSSIBLE FOR ME TO COME TO A CONCLUSION THAT THE SAID AMOUNT WAS ADVANCED IN THE COURSE OF BUSINESS WHICH IS A SINE QUA NON FOR DEDUCTIBILITY OF THE SAID AMOUNT AS BAD DEBT. HOWEVER, SO FAR AS DEBITS ON ACCOUNT OF INTEREST CHARGED ON THE SAID AMOUNT ARE I.T.A. NO.: 745/AHD/2011 ASSESSMENT YEARS: 2006 - 07 PAGE 3 OF 3 CONCERNED, AS LONG AS ASSESSEE CAN DEMONSTRATE THAT THESE INTEREST DEBITS, AT THE TIME OF CORRESPONDING CREDIT TO INTEREST INCOME , WERE OFFERED TO TAX, THE ASSESSEE WILL BE FULLY ENTITLED TO CLAIM DEDUCTION IN RESPECT OF THE WRITE OFF AN INCOME WHICH NEVER FRUCTIFIED. ON THIS ASPECT OF THE MATTER, I DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ALLOW DEDUCTION IN RESPECT OF WRITING OFF INTEREST DEBITED TO THE ACCOUNT OF M/S CONTACTS, IN CASE THE ASSESSEE CAN DEMONSTRATE THAT THE CORRESPONDING INTEREST INCOME WAS INDEED OFFERED TO TAX IN THE EARLIER YEARS. WITH THESE DIRECTIONS, TH E MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER SO FAR AS THE CLAIM OF DEDUCTION OF RS 14,95,279 IS CONCERNED. GRIEVANCES OF THE ASSESSEE, IN EFFECT, ARE UPHELD PARTLY TO THE EXTENT INDICATED ABOVE. 6 . IN THE RESULT, T HE APPEAL IS PARTY ALLO WED IN THE TERMS INDICATED ABOVE . PRONOUN CED IN THE OPEN COURT TODAY ON THE 26 TH DAY OF APRIL, 2017 . SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: AHMEDABAD, THE 26 TH DAY OF APRI L , 2 017 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD