INDIA INFOLINE SECURITIES P.LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 8998/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70991 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 12-08-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 24-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: PRITESH MEHTA
• Keywords: Bad and doubtful debts
• Section: 28; 143(3)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 8998/MUM./2010 ( &) * !+* / ASSESSMENT YEAR : 200304 ) INDIA INFOLINE SECURITIES PVT. LTD. IIFL CENTRE, KAMALA CITY SENAPATI BAPAT MARG LOWER PAREL (W), MUMBAI 400 013 .. ,- / APPELLANT ) V/S DY. COMMISSIONER OF INCOME TAX CIRCLE4(1), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AABC10745G 1! 2 3 / ASSESSEE BY : MR. PRITESH MEHTA &) *4# 2 3 / REVENUE BY : MR. O.P. SINGH )! 2 # / DATE OF HEARING 12.08.2013 $ 5+ 2 # / DATE OF ORDER 28.08.2013 $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. THE PRESENT HAS BEEN PREFERRED BY THE ASSESSEE, CHA LLENGING THE IMPUGNED ORDER DATED 30 TH NOVEMBER 2010, PASSED BY THE LEARNED COMMISSIONER (APPEALS)XXXVIII, MUMBAI, FOR THE ASS ESSMENT YEAR 2003 04, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECT ION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). INDIA INFOLINE SECURITIES PVT. LTD. 2 2. AT THE OUTSET, THE LEARNED COUNSEL SUBMITTED BEFORE US THAT THE ISSUE RELATING TO ADDITION OF ` 49,16,694, ON ACCOUNT OF BAD DEBT OR BUSINESS LOSS , IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 200405 IN ITA NO.8358/MUM./2011, O RDER DATED 20 TH FEBRUARY 2013. THIS FACT HAS ALSO NOT BEEN DISPUTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. 3. AFTER CAREFULLY CONSIDERING THE RELEVANT FINDINGS O F THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) AS WELL AS T HE ORDER PASSED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 200405, IN ASSESS EES OWN CASE, WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL CITED SUPRA. 4. THE BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE BROKING AND IS A MEMBER OF BSE AND NSE. THE A SSESSING OFFICER HAS MADE AN ADDITION OF ` 50,26,060, VIDE ORDER DATED 31 ST AUGUST 2005 UNDER SECTION 143(3) ON ACCOUNT OF DISALLOWANCE OF CLAIM OF BAD DEBT. THIS DISALLOWANCE WAS ALSO CONFIRMED BY THE LEARNED COMM ISSIONER (APPEALS). HOWEVER, THE TRIBUNAL, VIDE ORDER DATED 30 TH JULY 2008, FOR THE A.Y. 2003-04, I.E. YEAR IN APPEAL HAS RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER, WHETHER THE LOSS CAN BE CONSIDERED AS DEDUCTION IN THIS YEAR UNDER SECTION 28. THE ASSESSING OFFICER, IN THE SET ASIDE PROCEEDINGS, HELD THAT THE CREDIT BALANCE OF THE ASSESSEES CLIENT IN THE LEDGER ACCOUNT WHICH HAS BEEN WRITTENOFF IN THE PREVIOUS YEAR CLAIMING IT TO BE BAD DEBT CANNOT BE CONSIDERED AS BUSINESS LOSS OR AS A DEDUCTION UN DER SECTION 28 IN THIS YEAR. ACCORDINGLY, THE TOTAL OF THE OPENING BALANCE IN THE LEDGER ACCOUNT OF THE ASSESSEES CLIENTS PERTAINED TO THE EARLIER YEA RS AT ` 46,16,694 WAS DISALLOWED AND THE BALANCE OF ` 1,09,366, WHICH PERTAINED TO THE RELEVANT PREVIOUS YEAR WAS ALLOWED AS BUSINESS LOSS FOR THE CURRENT YEAR. THE LEARNED COMMISSIONER (APPEALS) CONFIRMED THE DISALLOWANCE O N THE REASONING GIVEN BY THE ASSESSING OFFICER. HOWEVER THE TRIBUNAL IN A SSESSEES OWN CASE FOR ASSESSMENT YEAR 200405, HAS ALLOWED THE ASSESSEES SIMILAR GROUND AFTER OBSERVING AND HOLDING AS UNDER: INDIA INFOLINE SECURITIES PVT. LTD. 3 5. AGGRIEVED WITH THE SAID DECISION, THE ASSESSEE FILED THE PRESENT APPEAL. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL MENTIO NED THAT THE ISSUE IS NOW COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES LTD VS. ADDL. CIT, 318 1TR (A.T.) 268, MUMBAI DATED 26.8.20 08 AND ALSO THE HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. DB (INDIA) SECURITIES LTD VIDE ITA NO.415/2007 WHICH IS RELEVANT FOR THE PROP OSITION THAT WHERE THERE IS A VALID TRANSACTION BETWEEN THE ASSESSEE AND THE SU B-BROKER, THE AMOUNT WHICH COULD NOT BE RECOVERED, CONSTITUTES A RELIABL E DEBT AND THE SAME IS ALLOWABLE AS BUSINESS LOSS OF THE ASSESSEE. FURTHE R, ASSESSEE RELIED ON THE HONBLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF C IT VS. P.R. SHARE & STOCK BROKERS P. LTD, 1TA NO.79 2008 DATED 26.6.200 8, WHEREIN IT WAS HELD THAT THE AMOUNTS DUE FROM CLIENTS WHEN BECOME IRREC OVERABLE AND WRITTEN OFF IN THE BOOKS, ARE ALLOWABLE AS BUSINESS LOSS. ASSES SEE ALSO RELIED ON VARIOUS DECISIONS WHICH ARE AS UNDER: 1. ANGEL CAPITAL & DEBT MARKET LTD. VS. ACT [2008] 12 DTR 433 (MUM) (TRIB) 118 TN 351 (MUM); 2. CIT VS. ROHTAS INDUSTRIES LIMITED 120 ITR .110 ( CAL); 3. RAMCHANDAR SHIVNARAYAN CIT 111 ITR 263 (SC) 4. CIT VS. CHFTANV,S 6 ITC 453 (PC) 5. CIT VS. S. C. KOTHARI 82 JTR 794 (SC) 6. CIT VS. R.B. RUNGTA & CO 50 177? 233 (BORN) 7. DCJT VS V VRAJIAL LAIOOBHAI & SONS VIDE ITA NO.5 217/BOM/ 1991, PEAT MUMBAI 6. THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSE E IS A SHARE BROKER IE THE MEMBER OF THE BOMBAY STOCK EXCHANGE AND NATIONAL ST OCK EXCHANGE AND DEBTS ARE CONNECTED TO THE CLIENTS, WHO ARE DEBTORS TO THE ASSESSEE AND DEBTS ARE WRITTEN AS IRRECOVERABLE. IT IS AN ADMITTED POS ITION THAT THE BROKERAGE EARNED BY THE ASSESSEE IN CONNECTION WITH THE RELAT ED ORDERS FORMED PART OF THE INCOME IN EARLIER YEARS. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO RELIEF IN RESPECT OF BAD DEBTS OF ASSESSEE. IN OUR OPINION, THE REASONING GI VEN BY THE CIT(A) IS BASED ON THE HYPER-TECHNICAL APPROACH, WHICH IS NOT SUSTA INABLE IN LAW. THE ABOVE CITATION NARRATED ABOVE SUPPORTS THE CASE OF THE AS SESSEE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 5. THUS IN VIEW OF THE AFORESAID DECISION OF THE TRIBU NAL IN ASSESSEES OWN CASE, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND HOLD THAT AMOUNTS DUE FROM CLIENTS P ERTAINING TO EARLIER YEARS WHICH HAS BEEN WRITTEN OFF, BEING IRRECOVERABLE, IS ALLOWABLE AS BUSINESS LOSS, WHILE COMPUTING THE INCOME UNDER SECTION 28. ACCORD INGLY, THE GROUND RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. INDIA INFOLINE SECURITIES PVT. LTD. 4 6. INSOFAR AS THE GROUND RELATING TO THE ADDITION OF ` 1,09,366, THE LEARNED COUNSEL SUBMITTED BEFORE US THAT HE DID NOT WISH TO PRESS THIS GROUND, TO WHICH, THE LEARNED DEPARTMENTAL REPRESEN TATIVE DID NOT RAISE ANY OBJECTION. CONSEQUENTLY, THIS GROUND IS TREATED AS DISMISSED AS NOT PRESSED . 7. 4 #7 &) *4# 2 '$ !# 8 ) 1# 9: ; 7. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS P ARTLY ALLOWED. $ 2 5+ < =)7 28 TH AUGUST 2013 2 > ; ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST 2013 SD/- . .. . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, =) =) =) =) DATED : 28 TH AUGUST 2013 $ 2 .&#'? @?+# / COPY OF THE ORDER FORWARDED TO : (1) &) *4# / THE ASSESSEE; (2) 1! / THE REVENUE; (3) A () / THE CIT(A); (4) A / THE CIT, MUMBAI CITY CONCERNED; (5) ?!D> .&#&) , , / THE DR, ITAT, MUMBAI; (6) >E* F / GUARD FILE. /?# .&# / TRUE COPY $) / BY ORDER . 1. GH / PRADEEP J. CHOWDHURY !4I &)1 G! / SR. PRIVATE SECRETARY J / 9 1 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI