Shree Bhagwati Flour Mills Ltd., Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 877/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76914 (ITAT-AHMEDABAD)
• Duration Of Justice: 44 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Capital asset; Bad and doubtful debts; Onus to prove
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, J.M. & SHRI ANIL CH ATURVEDI, A.M.) I.T. A. NO. 877/AHD/2011 (ASSESSMENT YE AR: 2007-08) SHREE BHAGWATI FLOUR MILLS LTD. 411/12, B.D. CHAMBERS, CHOKHA BAZAR, KALUPUR, AHMEDABAD V/S THE D.C.I.T., CIRCLE-1, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACB 8907E APPELLANT BY : SHRI VIJAY RANJAN, A.R. RESPONDENT BY : SHRI B.L. YADAV, SR. D.R. ( )/ ORDER DATE OF HEARING : 15-07-201 4 DATE OF PRONOUNCEMENT : 18-07-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-VI, AHMEDABAD DATED 15.02.2011 FOR A.Y. 2007-08. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF MANUFACTURING AND TRADING OF CHANA, WHEAT, PULSES A ND ITS BY-PRODUCTS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 07-08 ON 28.10.2007 DECLARING TOTAL INCOME OF RS. 51,51,090/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U /S. 143(3) VIDE ORDER ITA NO877/AH D/2011 . A.Y. 2007- 08 2 DATED 29.12.2009 AND THE TOTAL INCOME WAS DETERMINE D AT RS. 58,39,518/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 15.02.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSE E IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) ERRED IN NOT DELETING THE DISALLOWANCE OF RS. 5.50 LACS FOR THE AMOUNT WRITTE N OFF AS IRRECOVERABLE FROM M/S. D.S. MEHTA & CO. TO WHOM IT WAS GIVEN AS ADVANCE AGAINST PURCHASE OF MATERIAL SOME 15 YEARS AGO. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD CLAIMED BAD DEBTS TO THE EXTENT OF RS. 5,50,000 /-. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF BAD DEBTS AND SUPPO RT ITS CLAIM. THE ASSESSEE INTERALIA SUBMITTED THE COPY OF LEDGER ACC OUNT OF M/S. D.S. MEHTA AND CO. AND ALSO SUBMITTED THAT THE AMOUNT WA S OUTSTANDING FOR MORE THAN 5 YEARS AND THE SAME COULD NOT BE RECOVER ED FROM THE DEBTOR. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPT ABLE TO THE A.O. AS HE WAS OF THE VIEW THAT ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE DEBT WAS IRRECOVERABLE AND HAS ALS O NOT FILED ANY EVIDENCE TO PROVE THAT THE DEBTS HAD BECOME BAD. HE ACCORDINGLY REJECTED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY THE ORDER O F A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DISMISSED THE GROUND OF THE ASSESSEE AND UPHELD THE ORDER OF A.O BY HOLDING AS UNDER:- 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND AS SESSMENT ORDER AND APPELLANT'S SUBMISSION. APPELLAN T CLAIMED ADVANCE GIVEN AGAINST PURCHASES AS BAD DEBT S. IT IS NOT IN DISPUTE THAT THE SAID AMOUNT WAS NOT TAKEN INTO ACCOUNT WHILE COMPUTING INCOME OF- A NY YEAR AND THEREFORE CONDITIONS OF SECTION 36 (2) IS NOT FULFILLED. FOR CLAIMING ANY BAD DEBTS, TWO CONDITIONS ARE TO B E FULFILLED I.E. THE AMOUNT SHOULD BE WRITTEN OFF IN THE ACCOUNTS AND THE DEBT SHOULD HAVE BEEN TAKEN FOR COMPUTATION OF INCOME. SINCE THE CLAIM IS NOT IN RESPECT OF TRADE DEBTORS BUT IN RESPECT OF ADVANCES, IT DOES NOT FULFILL THE CONDI TIONS OF SECTION 36 (2) OF IT ACT AND ACCORDINGLY THE CLA IM IS NOT ALLOWABLE AS BAD DEBTS. THE ADDITION OF T HE CLAIM OF BAD DEBT MADE BY THE ASSESSING OFFICER IS CONFIRMED. COMING TO THE APPELLANT'S ALTERNATIVE CLAIM UNDER S ECTION 28 OF IT ACT AS BUSINESS LOSS, THE SAME NEED TO FULFILL FOLLOWING CONDITIONS- 1 - THE LOSS SHOULD BE IN THE NORMAL COURSE OF RUNN ING OF BUSINESS OF THE APPELLANT. IT SHOULD NOT BE AGAINST CAPITAL ASSET. ITA NO877/AH D/2011 . A.Y. 2007- 08 3 2- THE LOSS SHOULD BE ESTABLISHED AS BAD. SUCH LOSS IS NOT ALLOWABLE JUST ON WRITING OFF IN THE ACCOUN TS AS IN THE CASE OF BAD DEBTS. THE ONUS TO PROVE LOSS IS ON THE APPELLANT. APPELLANT SUBMITTED THAT ADVANCE WAS GIVEN FOR PURC HASE OF MATERIAL 15 YEARS BACK BUT FURTHER DETAILS WERE NOT SUBMITTED BY THE APPELLANT TO ESTABLISH TH AT THE ADVANCE WAS GIVEN IN THE NORMAL COURSE OF RUNNING THE BUSINESS. IN THE ABSENCE OF ANY DETAILS IT CANNOT BE HELD THAT ADVANCES WERE GIVEN FOR RUNNING OF THE BUSINESS. FURTHER, APPELLANT DID NOT ESTABLISH BY EVIDENCE THAT ADVANCE GIVEN IS NOT RECOVERABLE. DETAILS OF EFFORTS MADE FOR RECOVERY W AS NOT SUBMITTED AND THEREFORE IF CANNOT BE HELD THAT THE LOSS IS PERMANENT AND NO RECOVERY IS POSSI BLE. CONSIDERING THE FACTS, APPELLANT HAS NOT DISCHARGED ITS ONUS TO PROVE THE LOSS AS BUSINESS L OSS. JUDICIAL DECISIONS RELIED BY THE APPELLANT REQ UIRE FULFILLMENT OF AFORESAID CONDITIONS WHICH ARE NOT E STABLISHED HENCE THESE DO NOT HELP APPELLANT. ACCORDINGLY THE ALTERNATIVE CLAIM UNDER SECTION 28 IS ALSO REJECTED. 5. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW I N APPEAL BEFORE US. 6. BEFORE US. LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A). HE FURTHER SUBMITTED THAT IN CASE THE CLAIM OF BAD DEBTS IS NOT ALLOWED THEN ALTERNATIVELY THE CLAIM BE ALLOWED U/S . 28 OF THE ACT AND FOR THIS PROPOSITION HE RELIED ON THE DECISION OF HONB LE BOMBAY HIGH COURT IN THE CASE OF HARSHAD J. CHOKSI VS. CIT (2012) 349 ITR 250. 7. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT THE A SSESSEE HAS NOT PROVED THAT THE CONDITION STIPULATED U/S. 36(2) HAS BEEN FULFILLED FOR CLAIMING THE AMOUNT AS BAD DEBTS. WITH RESPECT TO T HE ALTERNATE CLAIM HE SUBMITTED THAT THE ASSESSEE HAS NOT PROVED THE LOSS . HE THUS SUPPORTED THE ORDER OF A.O AND CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THE WRITTEN SUBMISSION MADE BEFORE A.O AND WHICH HAS BEEN REPRODUCED BY A.O ON PAGE 2 AND 3 OF THE ORDER . ASSESSEE HAS INTERALIA SUBMITTED THAT THE AMOUNT OF RS. 5.5 LACS PERTAINS TO THE SALES MADE BY THE ASSESSEE. ON THE OTHER HAND WE FIND THA T THE ASSESSEE IN THE WRITTEN SUBMISSIONS MADE BEFORE LD. CIT(A) HAS STAT ED THAT THE AMOUNT OF ITA NO877/AH D/2011 . A.Y. 2007- 08 4 RS. 5.5 LACS WAS PAID TO M/S. D.S. MEHTA AND CO. BY WAY OF ADVANCE AGAINST PURCHASE OF MATERIALS AND EVEN IN THE GROUN D BEFORE US, THE ASSESSEE HAS STATED IT TO BE ADVANCE AGAINST PURCHA SE. THUS THE SUBMISSION BY ASSESSEE THAT THE AMOUNT IS A DEBT ON ACCOUNT OF SALES/IS AN ADVANCE FOR PURCHASE OF RAW MATERIAL ARE CONTRAR Y TO EACH OTHER. EVEN BEFORE US, NO MATERIAL HAS BEEN PLACED ON RECORD TO DEMONSTRATE THE ABOUT THE EXACT NATURE OF TRANSACTION. WITH RESPECT TO TH E ALTERNATE CLAIM OF DEDUCTION U/S. 28, WE FIND THAT CIT(A) HAS NOTED TH AT ASSESSEE HAS TO ESTABLISH THAT THERE IS LOSS INCURRED IN THE NORMAL COURSE OF RUNNING OF BUSINESS WHICH THE ASSESSEE HAS NOT BEEN ABLE TO ES TABLISH. BEFORE US LD. A.R. HAS NOT PLACED ANY MATERIAL TO CONTRADICT THE FINDINGS OF CIT(A). WE FURTHER FIND THAT THE DECISION RELIED BY THE ASS ESSEE ARE DISTINGUISHABLE ON FACTS AND THEREFORE NOT APPLICAB LE IN THE PRESENT CASE. IN VIEW OF THESE FACTS, WE FIND NO REASON TO INTERF ERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF ASSESSEE IS DISMISSE D. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18 - 07 - 2014. SD/- SD/- (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR IT AT,AHMEDABAD