Easun Reyrolle Ltd., CHENNAI V. DCIT, CHENNAI

ITA 781/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4359 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 29-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: M VISWANATHAN
• Keywords: Business expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . . , BEFORE SHRI DUVVURU RL REDDY , JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH ACCOUNTANT MEMBER ./ I.T.A.NO. 7 8 1 /MDS/2016 / ASSESSMENT YEAR :20 06 - 07 M/S. EASUN REYROLLE LTD., 672, ANNA SALAI, 6 TH FLOOR, TEMPLE TOWER, NANDANAM, CHENNAI 600 035. [PAN: A A ACE2032P ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX , CO MPANY CIRCLE II(1) , C OIMBATORE 6 00 034 . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI M. VISWANATHAN, C.A. / RESPONDENT BY : S HRI S HIVA SRINIVAS , J CIT / DAT E OF HEARING : 30 . 03 .201 7 / DATE OF P RONOUNCEMENT : 09 . 0 6 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMIS SIONER OF INCOME TAX (APPE ALS) 6 , C HENNAI DATED 03 . 0 2 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 06 - 07 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ADVANCES PAID TO CREDITORS WRITTEN OFF OF .49,44,48 8/ - . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 2 1 . 11 .20 06 FOR THE ASSESSMENT YEAR 2006 - 07 DECLARING TOTAL I.T.A. NO . 781 / M/ 1 6 2 INCOME OF . 20,92,90,012 / - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY BY ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT DATED 16 . 1 0.20 07 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ASSESSING TOTAL INCOME OF THE ASSESSEE AT . 21,94,74,391 / - AFTER MAKING VARIOUS ADDITIONS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. ON BEING AGGRIE VED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND CHALLENGED THE ADDITION TOWARDS ADVANCES PAID TO CREDITORS, WHICH WAS WRITTEN OFF . THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS PAID ADVANCES TO THE CREDITORS FOR SUPPLYING GOOD S AND SINCE THE GOODS HAVE NOT BEEN SUPPLIED AND THE ADVANCES GIVEN TO THE CREDITORS HAVE NOT BEEN REALIZED FOR LONG TIME, THE SAID ADVANCES WERE WRITTEN OFF IN THE BOOKS OF ACCOUNT AND PLEADED THAT THE SAME IS ALLOWABLE UNDER SECTION 36(1)(VII) OF THE ACT . ALTERNATIVELY, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE SAME IS ALLOWABLE UNDER SECTION 37(1) OF THE ACT AS BUSINESS EXPENDITURE SINCE THE AMOUNT PAID COULD NOT BE RECOVERED AND PRAYED THAT THE ADDITION MADE ON THIS ACCOUNT SHOULD BE DELET ED. I.T.A. NO . 781 / M/ 1 6 3 5. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSEE WAS ASKED TO FURNISH SPECIFIC DETAILS REGARDING BAD DEBT, WITH REASON FOR WRITE OFF, DOCUMENTARY EVIDENCES SHOWING THE NATURE OF THE DEBTS AND EFFORTS MADE FOR ITS RECOVERY IN RESPECT OF THE ABOVE AMOUNT IN ORDER TO EXAMINE THE CLAIM IN AC CORDANCE WITH THE PROVISIONS OF SECTION 36(1)(VII) R.W. SECTION 36(2) OF THE ACT. HOWEVER, THE ASSESSEE HAS NOT FILED ANY EVIDENCE ABOUT THE BONAFIDE OF THE ASSESSEE TO CLAIM THESE DEBTS AS HAVING GONE BAD WITHIN A SHORT PERIOD OF RAISING THE DEMAND. FURTH ER, THE ASSESSEE HAS NOT PROVED ITS HONEST EFFORTS TO WRITE OFF THESE DEBTS. IN THE ABSENCE OF ANY DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE SAME AND BROUGHT TO TAX. EVEN BEFORE THE LD. CIT(A), THE ASSESSEE HAS NOT FURNISHED A NY DETAILS ABOUT THE CREDITORS AND THEREFORE, HE CONFIRMED THE ADDITION MADE ON THIS ACCOUNT. BEFORE US, IT WAS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS PAID ADVANCES TO THE CREDITORS FOR SUPPLYING GOODS AND SINCE THE GOODS HAVE NOT BEEN SUPPLIED AND THE ADVANCES GIVEN TO THE CREDITORS HAVE NOT BEEN REALIZED FOR LONG TIME, THE SAID ADVANCES WERE WRITTEN OFF IN THE BOOKS OF ACCOUNT AND CONTENDED THAT THE SAME IS ALLOWABLE UNDER SECTION 36(1)(VII) I.T.A. NO . 781 / M/ 1 6 4 OF THE ACT OR THE SAME IS ALLO WABLE UNDER SECTION 37(1) OF THE ACT AS A BUSINESS EXPENDITURE SINCE THE AMOUNT PAID COULD NOT BE RECOVERED. TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE, WE FIND THAT THE INITIAL ONUS CAST UPON THE ASSESSEE BY FURNISHING DETAILS WITH REGARD TO THE CREDITORS, SUCH AS, GENUINENESS OF THE TRANSACTION, MODE OF TRANSACTION, IDENTITY OF THE CREDITORS OR ANY OTHER DETAILS AS MAY BE REQUIRED BY THE AUTHORITIES BELOW FOR VERIFICATION AND TO ADMIT THE CLAIM OF THE ASSESSEE. IN THIS CASE, ADMITTEDLY, THE ASSESSEE HAS NO T FILED ANY DETAILS BEFORE ANY AUTHORITY EVIDENCING THAT THE ASSESSEE HAS ACTUALLY MADE ADVANCES FOR SUPPLY OF GOODS TO THE CREDITORS. UNDER THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE CLAIM OF THE ASSESSEE CANNOT BE ENTERTAINED UNDER SECTION 36(1)(VII) OF THE ACT SINCE THE ASSESSEE HAS NOT FILED ANY DETAILS/EVIDENCE FOR THE DEBTS, WHICH HAVE BECOME BAD. THUS, WE SUSTAIN THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) AND ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 6.1 IF AT ALL TO CONSIDER THE SAID DEBT AS BUSINESS EXPENDITURE, THE ASSESSEE SHOULD HAVE SUBSTANTIATED WITH EVIDENCES AND COMPLETE DETAILS THAT IT HAS INCURRED THE EXPENDITURE ; NOT BEING THE NATURE OF EXPENDITURE OF THE NATURE DESCRIBED UNDER SECTION 30 TO 36 OF THE ACT, NOT BEING THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE, LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR I.T.A. NO . 781 / M/ 1 6 5 P ROFESSION AND THEN ONLY THE SAME SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . SINCE THE ASSESSEE HAS NOT FURNISHED ANY DETAILS ABOUT THE TRANSACTIONS MADE WITH THE CREDITOR, THE CLAIM OF THE ASSESSEE CANNOT BE ENTERTAINED AS BUSINESS EXPENDITURE EVEN UNDER SECTION 37(1) OF THE ACT. THUS, THE ALTERNATIVE PLEA RAISED BY THE ASSESSEE STANDS DISMISSED. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED ON TH E 09 TH JUNE , 201 7 AT CHENNAI. SD/ - SD/ - ( D.S. SUNDER SINGH ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 09 . 0 6 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.