M/S MADAN LAL HARI NARAIN, JAIPUR V. INCOME TAX OFFICER , JAIPUR

ITA 882/JPR/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6122 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 28-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONAM ROY DCIT DHK
• Assessee Lawyers: RISHABH AGARWAL
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA-@ ITA NO. 882/JP/2017 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2012-13 M/S MADAN LAL HARI NARAIN, 98, PETROL PUMP, BAGRU, TEHSIL- SANGANER, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 7(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACFM 0949 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RISHABH AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM ROY (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/05/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 21/05/2018 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THE APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A)-3 JAIPUR DATED 26/09/2017 FOR THE A.Y. 20 12-13. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADIN G OF PETROL, DIESEL AND OTHER LUBRICATED ITEMS ON BEHALF OF INDI AN OIL CORPORATION LTD.. THE RETURN OF INCOME FOR THE YEAR UNDER CONSID ERATION WAS FILED ON 15/9/2012 DECLARING TOTAL INCOME OF RS. 54,660/-. T HE ASSESSING OFFICER FINALIZED THE ASSESSMENT U/S 143(3) OF THE INCOME TA X ACT, 1961 (IN SHORT THE ACT) AT AN TOTAL INCOME OF RS. 7,51,980/- . THE LD. CIT(A) HAS GIVEN PART RELIEF TO THE ASSESSEE. ITA 882/JP/2017_ MADAN LAL HARI NARAIN VS. ITO 2 3. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT BY T AKING FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT(A) GROSSLY ERRED IN DISALLOWING SALARY EXPE NSE BY RS. 94,320/- BEING 10% OF TOTAL EXPENSE OF RS 9,43,200/ - IGNORING THE FACT THAT THE EXPENSE WAS INCURRED FOR BUSINESS AND ALL THE PAYMENTS ARE SUPPORTED BY VOUCHERS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) GROSSLY ERRED IN DISALLOWING TANKER RUNN ING EXPENSE BY RS. 1,14,449 /- BEING 10% OF TOTAL EXPENSE OF RS. 1 1,44,480/- IGNORING THE FACT THAT THE EXPENSE WAS INCURRED FOR BUSINESS AND IS SUPPORTED BY BILLS / VOUCHERS AND AGAINST THIS E XPENSE THE ASSESSEE EARNED RENTAL INCOME FROM TANKER OF RS. 13 ,07,504/- THEREBY GENERATING NET INCOME FROM TANKER OF RS. 1, 63,204/- FOR THE BUSINESS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) GROSSLY ERRED IN SUSTAINING A DISALLOWAN CE OF RS. 94,724/- ON ACCOUNT OF BAD DEBTS CLAIMED U/S 36(1 ) (VII) OF THE INCOME-TAX ACT, 1961, THEREBY IGNORING THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT [2010 ] 190 TAXMAN 391 (SC). 4. THAT THE HUMBLE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MODIFY, SUBSTITUTE OR DELETE ANY GROUND OR GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF THE APPEAL. 4. IN THE GROUNDS NO. 1 AND 2 OF THE APPEAL THE ISS UE INVOLVED ARE SUSTAINING DISALLOWANCE OF RS. 94,320/- OUT OF SALA RY EXPENSES BEING 10% OF THE TOTAL SALARY EXPENSES AND ALSO SUSTAIN D ISALLOWANCE OF RS. 1,14,449/- OUT OF TANKER RUNNING EXPENSES BEING 10 % OF THESE EXPENSES DEBITED IN THE BOOKS OF ACCOUNT. THE LD CIT( A) HAS DEALT THIS ISSUE BY HOLDING AS UNDER: ITA 882/JP/2017_ MADAN LAL HARI NARAIN VS. ITO 3 5.3 I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFORE ME. I FIND THAT ASSESSING OFFICER MADE DISALLOWANCE @ 25% OUT OF VA RIOUS EXPENSES MAKING OBSERVATION THAT THE EXPENSES ARE NOT FULLY VOUCHED. THE A/R OF THE APPELLANT SUBMITTED THAT THE APPELLANT HAVIN G THE BILL VOUCHER WHICH ARE SELF MADE AND SOME PAYMENT MADE IN CASH. FROM THE ABOVE, IT IS ESTABLISHED THAT THE EXPENSE S ARE NOT FULLY VOUCHED BUT THE ASSESSING OFFICER MADE DISALLOWANCE @ 25% OF THE EXPENSES WITHOUT ANY BASIS. THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER IS UNREASONABLE AND EXCESSIVE. THEREFORE, C ONSIDERING THE FACTS OF THE CASE AND NATURE OF THE EXPENSES, I RESTRICTE D THE ALLOWANCE @ 10% OF TOTAL EXPENSES WHICH COMES AS UNDER: S. NO. NAME OF EXPENSES DISALLOWANCE MADE BY THE ASSESSING OFFICER CONFIRM 1. GENERAL EXPENSES 3373 1350 2. GENERATOR EXPENSES 15890 6356 3. JEEP REPAIR & MAINTENANCE 23122 9249 4. PUMP EXPENSES 24317 9727 5. REPAIR & MAINTENANCE EXPENSES 4591 1847 6. SALARY EXPENSES 235800 94320 7. STATIONERY EXPENSES 2199 880 8. TANKER RUNNING EXPENSES 286120 114449 THESE GROUNDS ARE PARTLY ALLOWED. 5. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND A LSO CONSIDERED THE CASE LAWS RELIED UPON. IT IS NOTICED THAT THE L D. CIT(A) HAS SUSTAINED 10% OF THE VARIOUS DISALLOWANCES OF THE EXPENSES. THE ASSESSEE HAS CHALLENGED ONLY THE DISALLOWANCES UNDER THE HEAD SA LARY EXPENSES AND TANKER RUNNING EXPENSES. THE OTHER DISALLOWANCES OF 10% OF EXPENSES LIKE GENERAL EXPENSES, GENERATOR EXPENSES, JEEP REP AIR AND ITA 882/JP/2017_ MADAN LAL HARI NARAIN VS. ITO 4 MAINTENANCE, PUMP EXPENSES, REPAIR AND MAINTENANCE EXPENSES AND STATIONARY EXPENSES HAVE BEEN ACCEPTED BY THE A SSESSEE. THE ASSESSING OFFICER HAS RECORDED THE FINDINGS THAT TH E ASSESSEE HAS FAILED TO PRODUCE ALL THE RELEVANT BILLS/VOUCHERS FOR VERI FICATION WITH REGARD TO THESE EXPENSES. NON PRODUCTION OF BILLS/VOUCHERS FO R VERIFICATION DEFINITELY INVITES SOME DISALLOWANCES. IN OUR CONSID ERED VIEW, THE LD. CIT(A) WAS JUSTIFIED IN SUSTAINING 10% ADDITION FOR WA NT OF VERIFICATION OF THESE EXPENSES. ACCORDINGLY, GROUNDS NO. 1 AND 2 OF THE ASSESSEE STAND DISMISSED. 6. IN THE GROUND NO. 3 OF THE APPEAL, THE ISSUE INV OLVED IS SUSTAINING DISALLOWANCE OF RS. 94,724/- ON ACCOUNT OF BAD DEBTS . THE LD. CIT(A) HAS DEALT THIS ISSUE IN HIS ORDER AT PARA 6.3 AND H ELD AS UNDER: 6.3 I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFOR E ME. I FIND THAT THE APPELLANT FAILED TO FILE ANY EVIDENCE WHICH PROVE T HAT RS. 32,400/- WAS SHOWN AS INCOME OF ANY EARLIER YEAR. THIS IS PRIMAR Y CONDITION FOR TREATING THE BAD DEBTS. IN THE CASE OF SP RURAL POLICE THANA BAGRU. THESE DUES ARE AGAINST THE RAJASTHAN GOVERNMENT. THE DUES AGAINST ANY STATE GO VERNMENT CANNOT BE TREATED AS BAD DEBTS. THEREFORE, CONSIDERING THE ABOVE OBSERVATION, I AM OF THE VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 94724 /- DISALLOWANCE BAD DEBTS IS AS PER LAW. THIS GROUND IS NOT ALLOWED. ITA 882/JP/2017_ MADAN LAL HARI NARAIN VS. ITO 5 7. AFTER HEARING BOTH THE SIDES ON THIS ISSUE, WE AR E OF THE VIEW THAT THE ASSESSEE HAS WRITTEN ALL THESE AMOUNTS IN I TS BOOKS OF ACCOUNT AS ON 31/3/2012. IN VIEW OF THE CBDT CIRCULAR NO. 12/ 2016 DATED 30/6/2016 WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS NO T JUSTIFIED IN SUSTAINING THIS ADDITION. SIMILARLY THE HON'BLE SUP REME COURT IN THE CASE OF TRF VS. CIT (2010) 190 TAXMAN 391 (SC) HAS HELD THA T IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBTS IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. MORE OVER, THIS FACT ON THE RECORD SHOWS THAT THE AMOUNT WITH SP RURAL POLICE THAN A BAGRU WAS OUTSTANDING TOWARDS THE SALES. NON RECOVERY OF SALE AMOUNT IS BUSINESS LOSS. IT IS ALLOWABLE EXPENSES AS PER LAW. ACCORDINGL Y, WE DIRECT TO DELETE THE ADDITION SUSTAIN BY THE LD. CIT(A). 8. GROUND NO. 4 OF THE APPEAL IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/05/2018. SD/- SD/- FOT; IKY JKO HKKXPAN (VIJAY PAL RAO) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21 ST MAY, 2018 *RANJAN ITA 882/JP/2017_ MADAN LAL HARI NARAIN VS. ITO 6 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S MADAN LAL HARI NARAIN, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD 7(2), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 882/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR