ITO 6(1)(1), MUMBAI V. AAREY DRUGS & PHARMACEUTICALS LTD, MUMBAI

ITA 8938/MUM/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3768 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 03-08-2016
• Assessment Year: 1999-2000
• Appeal Filed On: 22-12-2010
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Opportunity of being heard; Additional evidence; Bad and doubtful debts
• Section: 40A(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI AMIT SHUKLA (JM) I.T.A. NO. 8938 /MUM/ 20 1 0 (ASSESSMENT YEAR 1999 - 2 0 00 ) ACIT CIRCLE 6(1) ROOM NO. 506 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/ S. AAREY DRUGS & PHARMACEUTICALS LTD. 107, SAHAKAR BHAVAN 340/348 NARSI NATHA STREET MASJID BUNDER MUMBAI - 400 009. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACA5253A ASSESSEE BY NONE DEPARTMENT BY SHRI A. RAMACHANDRAN DATE OF HEARING 3 .8. 201 6 DA TE OF PRONOUNCEMENT 3 . 8 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL IS FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 22.9.2010 PASSED BY LEARNED CIT(A) - 14, MUMBAI AND IT RELATES TO A.Y. 1999 - 2000. THE REVENUE IS AGGRIEVED BY THE DECISION RENDERED BY LEARNED CIT(A) ON FOLLOWING ISSUES : - A) DISALLOWANCE OF EXPENSES INCURRED BY WAY OF CASH B) DISALLOWANCE OF BAD DEBTS CLAIM C) DELETION OF ADDITION MADE U/S. 68 OF THE ACT 2. NONE APPEARED ON BEHALF OF THE ASSESSEE, EVEN THOUGH NOTICE OF HEA RING WAS SENT BY REGISTERED POST ON MORE THAN ONE OCCASION AND ASSESSEE HAD ALSO SOUGHT ADJOURNMENTS ON EARLIER OCCASIONS. HENCE WE PROCEED TO DISPOSE OF THE APPEAL EX - PARTE, WITHOUT PRESENCE OF THE ASSESSEE. AAREY DRUGS & PHARMACEUTICALS LTD. 2 3. WE HAVE HEARD LEARNED DEPARTMENTAL REPRE SENTATIVE AND PERUSED THE RECORD. T HE FIRST ISSUE RELATES TO DISALLOWANCE OF CASH EXPENSES . THE ASSESSEE HAS INCURRED A PORTION OF EXPENSES BY WAY OF CASH AG GREGAT ING TO ` 40,18,825/ - THE ASSESSEE IT SELF DISALLOWED 20% OF THE ABOVE SAID AMOUNT BY INVOKING PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ASSESSING OFFICER TOOK THE VIEW THAT THE GENUINENESS OF EXPENSES WAS NOT BE PROVED BY THE ASSESSEE , APART FROM INCURRING THE EXPENDITURE BY WAY OF CASH. ACCORDINGLY, HE DISALLOWED REMAINING PORTION OF CASH EXPE NSES AMOUNT ING TO ` 32,15,061/ - ALSO . THE LEARNED CIT(A) AGREED WITH THE CONTENTION S OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 40A(3) , A S APPLICABLE FOR THE YE AR UNDER CONSIDERATION, PROVIDE FOR DISALLOWANCE OF 20% OF THE EXPENSES ONLY. ACCORDINGLY H E DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFIC ER HAS DISALLOWED THE BALANCE PORTION OF CASH EXPENSES ON THE REASONING THAT T HE GENUINENESS THEREOF WERE BE PROVED . 5. HAVING HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ALSO UPON GOING THROUGH THE RECORD, WE NOTICED THAT LEARNED CIT(A) HAS DELETED THE ADDITION UNDER IMPRESSION THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE U/S. 40A(3) OF THE ACT ONLY . FROM THE ASSESSMENT ORDER, WE NOTICED THAT THE ASSESSING OFFICER HAS DOUBTED THE GENUINENESS OF EXPENSES ALSO . S INCE THIS POINT WAS NOT CONSIDERED BY LEARNED CIT(A), WE ARE OF THE VIEW THAT THIS REQUIRES FRESH EXAMINATION AT THIS END. ACCORDINGLY, WE SET ASIDE THE ORDER PASS ED BY LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO HIS FILE FOR EXAMINING THE SAME AFRESH. 6. NEXT ISSUE RELATES TO DISALLOWANCE OF BAD DEBTS CLAIM OF ` 20,22,655/ - . THE ASSESSING OFFICER DISALLOWED BAD DEBTS CLAIM SINCE THE DIRECTOR OF THE ASSESS EE COULD NOT FURNISH DETAILS OF BAD DEBTS. LEARNED CIT(A), HOWEVER ALLOWED THE CLAIM BY FOLLOWING THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. (323 ITR 397), WHEREIN THE HON'BLE SUPREME AAREY DRUGS & PHARMACEUTICALS LTD. 3 COURT HAS STATED THAT IT IS ENOUGH IF BAD DEBTS IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 7. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH ANY DETAILS RELATING TO BAD DEBTS CLAIM AND HAS ALSO FAILED TO SHOW THAT THE SAME HAS BEEN OFF ERED AS INCOME IN ANY OF THE YEARS. 8. WE FIND MERITS IN THE CONTENTION S OF LEARNED DEPARTMENTAL REPRESENTATIVE. THE CONDITIONS PRESCRIBED U/S. 36(1)(VII) & 36(2) ARE REQUIRED TO BE FULFILLED BY THE ASSESSEE IN ORDER TO CLAIM DEDUCTION TOWARDS BAD DEBTS. IN THE ABSENCE OF DETAILS, IT WOULD BE DIFFICULT FOR THE TAX AUTHORITIES TO VERIFY AS TO WHETHER THE ASSESSEE IS COMPLIED WITH THESE CONDITIONS. FURTHER, IT IS THE RESPONSIBILITY OF THE ASSESSEE TO SHOW THAT THE AMOUNTS REPRESENTED BY BAD DEBTS HAD BEEN OFFERED TO TAX IN ANY OF THE YEARS AS PROVIDED IN SEC. 36(2) OF THE ACT. WE NOTICED THAT LEARNED CIT(A) HAS FAILED TO EXAMINE THIS BASIC ASPECT I.E. HE HAS NOT PROVIDED ON RECORD RELEVANT FACTS RELATING TO THE CLAIM. HENCE, WE ARE OF THE VIEW THAT THIS IS SUE ALSO REQUIRES FRESH EXAMINATION AT HIS END. ACCORDINGLY WE SET ASIDE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF LEARNED CIT(A) FOR FRESH EXAMINATION. THE ASSESSEE IS ALSO DIRECTED TO FURNISH THE DETAILS OF BAD DEBTS AND THE COMPLIANCE OF PROVISIONS OF SEC. 36(2) OF THE ACT, WHICH MAY ALSO BE CONFRONTED WITH THE AO. 9. THE LAST ISSUE RELATES TO DELETION OF ` 11,36,596/ - ASSESSED BY THE ASSESSING OFFICER U/S. 68 OF THE ACT. THE ASSESSEE HAD TAKEN LOANS FROM THREE PERSO NS AGGREGATING TO ` 19,40,596/ - . THE ASSESSING OFFICER ASSESSED THE SAME U/S. 68 OF THE ACT. LEARNED CIT(A), HOWEVER DELETED THE SAME. OUT OF THE THREE CREDITS RECEIVED BY THE ASSESSEE, LEARNED CIT(A) HAS DELETED CASH CREDIT OF ` 11,36,596/ - RECEIVED FROM M/S. CHIRAG SALES CORPORATION BY ADMITTING CERTAIN ADDITIONAL EVIDENCES, WITHOUT CONFRONTING THE SAME WITH THE ASSESSING OFFICER. ACCORDINGLY, IT IS CONTENDED BY THE REVENUE THAT LEARNED CIT(A) HAS VIOLATED THE PROVISIONS OF RULE 46A OF THE I.T. RULES. AAREY DRUGS & PHARMACEUTICALS LTD. 4 10 . LEARNED DEPARTMENTAL REPRESENTATIVE REITERATED THE ABOVE SAID FACTS AND SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE BEEB CONFRONTED WITH THE ADDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE BEFORE LEARNED CIT(A). 11. WE FIND MERIT IN THE SUBMISSIONS MADE BY LEARNED DEPARTMENTAL REPRESENTATIVE. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LEARNED CIT(A) ON THE ABOVE SAID ISSUE AND RESTORE THE SAME TO HIS FILE WITH THE DIRECTION TO CONFRONT THE ADDITIONAL EVIDENCES FURNISHED BY THE ASSE SSEE WITH THE AS SESSING OFFICER. AFTER RECEIVING THE REPORT OF THE ASSESSING OFFICER AND AFTER CONFRONTING THE SAME WITH THE ASSESSEE, THE LD CIT(A) MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 12. NEEDLESS TO MENTION, THE ASSESSEE SHOULD ALSO BE PROVIDED WI TH ADEQUATE OPPORTUNITY OF BEING HEARD. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 03. 8 .2016 SD/ - SD/ - (AMIT SHUKLA ) (B.R.BASKARAN) JU DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 03 / 8 / 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBA I 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS