The DCIT, Circle-5, Ahmedabad V. Niraj Cargo Movers Pvt.Ltd., Ahmedabad

ITA 755/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73156 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-03-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 09-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Bad and doubtful debts; Corroborative evidences
• Section: 143(3)

Judgement Text

, , , , B, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH , , , , , , , , . .. . . . . . ! ! ! !, , , , '# ' $ '# ' $ '# ' $ '# ' $ BEFORE S/SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AN D N.S. SAINI, ACCOUNTANT MEMBER) ITA NO.755/AHD/2011 [ASSTT.YEAR : 2004-2005] DCIT, CIR.5 AHMEDABAD. /VS. NIRAJ CARGO MOVERS P. LTD. 38, HIRABHAI MARKET NR. NEW CLOTH MARKET O/S.RAIPUR GATE, AHMEDABAD. ( (( (&' &' &' &' / APPELLANT) ( (( (()&' ()&' ()&' ()&' / RESPONDENT) * + , '/ REVENUE BY : SHRI P.L. KUREEL, SR.DR . + , '/ ASSESSEE BY : SHRI SAKAR SHARMA / + 0#/ DATE OF HEARING : 25 TH MARCH, 2014 123 + 0#/ DATE OF PRONOUNCEMENT : 31-03-2014 '4 / O R D E R PER MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE HAS ARISEN FROM THE ORDER OF T HE CIT(A)-XI DATED 13.1.20112, AND THE SUBSTANTIVE GROUND IS GROUND NO .1, WHICH IS REPRODUCED BELOW: ITA NO.755/AHD/2011 -2- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF BAD DEBT SHOWN IN THE NAME OF M/S.M ARDIA CHEMICALS LTD. OF RS.11,89,453/- 2. THE FACTS IN BRIEF, AS EMERGING FROM THE CORRESP ONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 DATED 25.12.2009 WERE THAT THE ASSESSEE-COMPANY HAS WRITT EN OFF BAD DEBT OF RS.14,63,046/-. THE CASE WAS REOPENED BY ASSIGNING FOLLOWING REASONS: ON VERIFICATION OF BALANCE AND P&L A/C. IT IS FOUN D THAT THE ASSESSEE COMPANY HAS CLAIMED AND WRITTEN OFF BAD DE BTS OF RS.14.63 LACS WHICH INCLUDE RS.11.89 LACS FROM M/S. MARDIA CHEMICALS LTD. HOWEVER, THE DEBTOR OF THE ASSESSEE COMPANY HAS SUBMITTED A RECONCILIATION STATEMENT, ACCORDING TO WHICH, IT HAS ALREADY MADE THE ENTIRE PAYMENT AND THERE IS NOTHIN G OUTSTANDING IN HIS BOOKS IN THE ACCOUNT OF THE ASSE SSEE COMPANY. THE FACTS CLEARLY PROVES THAT THE DEBTS WRITTEN OFF BY THE COMPANY WERE BOGUS AND WERE REQUIRED TO BE DISALLOWED IN VI EW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF DHALL ENTERPRISES & ENGG. PVT. LTD. VS. CIT, 207 ITR 729 (2007). 3. THE EXPLANATION OF THE ASSESSEE IN RESPECT OF TH E CLAIM OF BAD DEBTS WAS AS UNDER, ONLY RELEVANT PORTIONS ARE REPR ODUCED BELOW: IN THIS RESPECT, WE WOULD LIKE TO STATE A SUM OF R S.1275110 WAS OUTSTANDING WITH M/S.MARDIA CHEMICALS IN DECEMBER, 1999. THE SAID COMPANY HAD DEDUCTED CLAIMS AT VARIOUS OCC ASIONS WITHOUT ANY JUSTIFICATION WHICH WAS NOT ACCEPTABLE TO US. THEREAFTER, IT WAS PROMISED BY SHRI RAJIVJI MARTHA, THE JT.MANAGING DIRECTOR OF THE COMPANY THAT THE ENTIRE OUTSTANDING AMOUNT WOULD BE PAID WITHIN SHORT TIME AND A SUM OF RS.10,00,000/- (500000+500000) WAS PAID TO AGAIN CO MMENCE THE TRANSPORT BUSINESS. IN VIEW OF THAT, BUSINESS ACTIVITIES HAD BEEN RE-STARTED WITH THEM DURING THE PERIOD 2001-20 03. ITA NO.755/AHD/2011 -3- AFTERWARDS WE HAVE COME TO KNOW THAT COURT RECEIVER HAD TAKEN POSSESSION OF FACTORIES OF MARADIA GROUP ON BEHALF OF BANKS TO RECOVER THEIR OUTSTANDING DUES OVER RS.1400 CRORES IN THIS RESPECT, COPY OF MEDIAS REPORT IS SUBMITTED HEREWI TH IN ANNEXURE-1. BEING THE OUTSTANDING DUES OF THE GOVE RNMENT AND BANKS WERE HUGE AND THERE WAS NO POSSIBILITY TO REC OVER UNSECURED CREDITORS FOR GOODS & SERVICES IN THE PRE VAILING FINANCIAL POSITION OF THE COMPANY, WE HAD WRITTEN O FF WHOLE OF THE OUTSTANDING DUES OF RS.1189453 ON 31 ST MARCH, 2004. IN THIS RESPECT, A SUMMARY OF YEAR WISE TRANSACTION S WITH DETAILED COPY OF ACCOUNTS WITH MARDIA CHEMICALS ARE SUBMITTE D IN ANNEXURE-2. IN VIE OF ABOVE, WE MOST RESPECTFULLY SUBMITS THAT ALL THE GROUP COMPANIES OF MARADIAS HAD GONE INTO LIQUIDATIONS/WI NDING UP DURING FINANCIAL YEARS 2003-05 AND THERE WERE NO PO SSIBILITY OF RECOVERY OF ANY OUTSTANDING BALANCE FROM THE MANAGE MENT OF THE COMPANY, THEREFORE, WE HAD TRANSFERRED THE ENTIRE O UTSTANDING FROM THE PARTY IN THE BAD DEBTS IN A.Y.2004-05. 4. THE AO WAS NOT CONVINCED AND MADE AN OBSERVATION THAT THE SAID MARDIA CHEMICALS IN THE RECONCILIATION STATEMENT HA S STATED THAT THE AMOUNT HAD ALREADY BEEN PAID TO THE ASSESSEE-COMPAN Y, AND THEREFORE, THE CLAIM OF BAD DEBTS WAS WRONG. THE AO HAD NOTED THAT THE CLAIM OF BAD DEBTS PERTAINED TO M/S.MARDIA CHEMICALS WAS RS. 11,89,453/- WHICH WAS TAXED IN THE HANDS OF THE ASSESSEE BY FOL LOWING DHALL ENTERPRISE & ENGINEERING P. LTD. VS. CIT, 207 ITR 7 29 (2007). BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE T HE FIRST APPELLATE AUTHORITY. ITA NO.755/AHD/2011 -4- 5. AFTER APPRECIATING THE FACTS OF THE CASE, THE LE ARNED CIT(A) HAS HELD THAT THE PAYMENT MADE BY M/S.MARDIA CHEMICALS LTD. PERTAINED TO THE EARLIER YEARS, BECAUSE, AFTER THE SAID PAYMENT, THE BUSINESS TRANSACTION HAD REVIVED AND THE PRESENT OUTSTANDING AMOUNT WAS AS ON 31.3.2004. FOR READY REFERENCE, THE RELEVANT OBSER VATIONS OF THE LEARNED CIT(A) IS REPRODUCED BELOW: 2.2.1 AS SEEN FROM PARA 3.2 OF THE ASSESSMENT ORDE R, AO OBSERVED THAT THE DEBTOR STATED THAT THE ENTIRE PAY MENT HAD BEEN MADE AND THEREFORE THE QUESTION OF WRITING OFF THE DEBT DOES NOT ARISE. HOWEVER, AS SEEN FROM THE WRITTEN SUBMISSIO NS (ALONG WITH SUPPORTING EVIDENCE), THE SAID ASSERTION OF THE DEB TOR WAS PERTAINING TO AN EARLIER PERIOD I.E. AS ON 31.12.19 99. SUBSEQUENTLY, THE DEBTOR MADE PAYMENTS AND LOT OF B USINESS ACTIVITY WAS CARRIED OUT SUBSEQUENTLY UPTO 31.3.200 4. THE IMPUGNED AMOUNT WAS THE BALANCE OUTSTANDING AS ON 3 1.3.204. THE FACT OF DEBTOR GOING INTO LIQUIDATION IS UNDISP UTED. AS SEEN FROM PARA 3.1 OF THE ASSESSMENT ORDER, THESE FACTS WERE SUBMITTED BEFORE AO. 2.2.2 THEREFORE, DISALLOWANCE OF BAD DEBTS WRITTEN OFF BY RELYING ON RECONCILIATION STATEMENT PREPARED IN DEC EMBER, 1999 IS NOT IN ORDER. APPELLANTS CONTENTIONS IN THE S UBMISSIONS FILED ON 30.12.2010 ARE TENABLE. IMPUGNED DISALLOWANCE I S CONTRARY TO FACTS AND UNWARRANTED. IT IS DELETED. THIS GRO UND OF APPEAL IS ALLOWED. 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND AFTER CONSIDERING THE EVIDENCE PLACED ON RECORD, IT IS CO RRECT THAT IN THE PAST UPTO 31.12.1999, THERE WAS PAYMENTS BY THE DEBTORS I.E. M/S.MARDIA CHEMICALS. THEREAFTER, THE BUSINESS ACTIVITY WAS C ARRIED ON WITH THE ASSESSEE AND THE AMOUNT REMAINED OUTSTANDING FOR TH AT PERIOD UPTO ITA NO.755/AHD/2011 -5- 31.3.2004. THE SAID COMPANY ALONG WITH OTHER GROUP COMPANIES HAD GONE UNDER LIQUIDATION. THE FACT ABOUT THE APPOINT MENT OF THE LIQUIDATOR HAS NOT BEEN DENIED OR DISPUTED BY THE R EVENUE DEPARTMENT. IN THIS REGARD, THE EVIDENCE, SUCH AS A LETTER OF O FFICIAL LIQUIDATOR HAS ALSO BEEN PLACED ON RECORD. IN THE GROUP CASES V IZ. M/S. MARDIA STEEL LTD., HONBLE GUJARAT HIGH COURT IN COMPANY PETITIO N NO.38 OF 1998 ORDER DATED 8.12.2003 HAS APPOINTED OFFICIAL LIQUID ATOR AND DIRECTED TO TAKE CHARGE OF THE ASSETS OF THE COMPANY. WE HAVE BEEN INFORMED THAT THERE WERE HUGE OUTSTANDING DUES AGAINST THE SAID D EFUNCT COMPANY, WHICH WERE SECURED CREDITORS, THEREFORE, THE ASSESE E-COMPANY HAD DECIDED TO WRITE OFF THE SAID OUTSTANDING AMOUNT. IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TRF LTD., 323 ITR 397 (SC), WE HEREBY CONFIRM THE FACTUAL AS WELL AS LEGAL FINDINGS OF THE LEARNED CIT(A), RESULTANTLY, THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- . . ! /N.S. SAINI '# /ACCOUNTANT MEMBER ( /MUKUL KR. SHRAWAT) /JUDICIAL MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT.