Sant Parmanand Blind Relief Mission, Delhi V. ITO, New Delhi

ITA 958/DEL/2013

• Counselvise Citation: 95820114 RSA 2013
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 23-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Assessee Lawyers: SANJAY NATH
• Keywords: Bad and doubtful debts
• Section: 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI T.S. KAPOOR ITA NO. 958/DEL/2013 ASSTT. YR: 2009-10 M/S SANT PARMANAND BLIND RELIEF VS. INCOME-TAX OFF ICER, MISSION 18 SHAM NATH MARG, TRUST WARD 1, NEW DEL HI. ALIPUR ROAD, CIVIL LINES, DELHI-110054. PAN : AAATS 4865 P ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI SANJAY NATH ADV. RESPONDENT BY : SMT. RENUKA JAIN GUPTA SR. DR O R D E R PER R.P. TOLANI, J.M: : THIS IS ASSESSEES APPEAL AGAINST THE CONSOLIDATED ORDER OF CIT(A)- XXI, NEW DELHI DATED 2-1-2013 RELATING TO A.Y. 2009 -10. SOLE ISSUE RAISED IS IN RESPECT OF ADDITION OF RS. 5,86,052/- ON FOLL OWING GROUNDS: 1. THE ACTION OF THE LEARNED CIT(A) IN UPHOLDING T HE ADDITION MADE BY A.O. OF RS. 5,86,052/- BEING BAD D EBTS WRITTEN OFF IS UNJUST, ILLEGAL, ARBITRARY, ILLUSORY AND THE EXPENDITURE MAY KINDLY BE ALLOWED. 2. THAT HIS ACTION IN MAKING THE ADDITION OF RS. 5, 86,052/- BASED ON ASSUMPTIONS, SUSPICION, SURMISES THAT THEY RELATE TO PERSONS SPECIFIED U/S 13(3) IS WITHOUT ANY BASIS AN D THEREFORE THE ADDITION IS UNJUST, ILLEGAL, ARBITRARY, ILLUSOR Y AND THE EXPENDITURE MAY KINDLY BE ALLOWED. 2 3. THAT HIS ACTION IN NOT ALLOWING THE BENEFIT OF S ECTION 11 & 12 IN RESPECT OF RS. 5,86,052/- IS UNJUST, ILLEGA L, ARBITRARY, ILLUSORY6 AND THE EXPENDITURE MAY KINDLY BE ALLOWED . 2. BRIEF FACTS ARE: ASSESSEE IS A CHARITABLE HOSPIT AL FOR RELIEF OF BLINDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER, INTER ALIA, MADE ADDITION OF RS. 20,19,950/- BY OBSERVING THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 20,19,950/- BEING UNPAID MEDICAL B ILLS AS BAD DEBTS. VIDE ORDER SHEET ENTRY DATED 15-9-2011 THE ASSESSING OFF ICER REQUIRED THE ASSESSEE TO FILE DETAILS AND REASONS THEREON. IN RESPONSE TH E ASSESSEE SUBMITTED THAT THE AMOUNT WAS OUTSTANDING SINCE LONG FROM THE PATI ENTS WHO HAD UNDERGONE TREATMENT IN THE HOSPITAL AND HAVE FAILED TO PAY TH EM. ACCORDING TO A.O., THE ASSESSEE FAILED TO FURNISH THE ADDRESSES OF THE PATIENTS; SINCE THE ASSESSEE FAILED TO CORROBORATE THE CLAIM OF BAD DEBTS, THE C LAIM WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 2.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, WH EREIN THE CIT(A) CALLED FOR A REMAND REPORT IN WHICH THE ASSESSING OFFICER ACCEPTED THE FOLLOWING POSITION: AFTER CONSIDERING THE ABOVE SUBMISSION OF THE ASSE SSEE IT CAN BE SAID THAT THE PERSONS/ PATIENTS TO WHOM THE TREA TMENT WAS GIVEN ARE NOT VERIFIABLE. FURTHER, IN ABSENCE OF DE TAILS AND EFFORTS OF THE ASSESSEE TO RECOVER THE OUTSTANDING BILLS, THE UNDERSIGNED DO NOT FIND IN POSITION TO ALLOW BAD DE BTS OF RS.5,86,052/-. SO OUT OF THE TOTAL BAD DEBTS CLAIM OF RS.20,19,250/-, AN AMOUNT OF RS.5,86,052/- REMAINS UNVERIFIED. 3 THE CONTENTION OF THE ASSESSEE THAT THE BAD DEBTS C ANT BE VERIFIED AT THIS STAGE, BECAUSE THE INCOME HAS ALRE ADY BEEN TAKEN IN THE PREVIOUS YEARS CAN'T BE ACCEPTED. THES E PERSONS COULD BE THE SPECIFIED PERSONS OF THE TRUST WHICH A TTRACT SECTION 13 OF THE INCOME TAX ACT, 1961. ' 2.2. THE ASSESSEE FILED A REJOINDER THEREON AND CON TENDED ON THIS ISSUE AS UNDER: 2. AN AMOUNT OF RS.20,10,950/- WAS CLAIMED AS BAD DEBTS WRITTEN OFF U/S. 36(2) OF IT ACT. OUT OF THIS A SUM OFRS.5,86,052/- RELATED TO UNPAID BILLS OF INDIVIDUAL PATIENTS WHOS E NAMES, ADDRESSES COULD NOT BE TRACED SINCE THEY RELATED TO BILLS MADE IN THE PRECEDING FINANCIAL YEARS. SECTION 36(2) READS AS UNDER:- I) NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN IN COMPUTING TH E INCOME OF ASSESSEE OF PREVIOUS YEAR IN WHICH THE AM OUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR FOR AN EARLIER PREVIOUS YEAR, OR REPRESENTS MONEY LENGTH IN THE OR DINARY COURSE OF BUSINESS OF BANKING OR MONEY LANDING WHIC H IS CARRIED ON BY THE ASSESSEE. ' IT MAY BE APPRECIATED THAT THE SECTION DOES NOT REQ UIRE ANY CONFIRMATION FROM THE PARTY BEFORE ALLOWING THE BAD DEBT. THIS CLAIM IS ONLY MADE WHEN THE DEBTOR IS EITHER NOT TR ACEABLE OR REFUSES TO CO-OPERATE IN ANY MANNER. FURTHER DEBTS NORMALLY RELATE TO A PERIOD EXCEEDING THREE YEARS AND THEREF ORE MORE DIFFICULT TO CONFIRM AS PER DETAILS ENCLOSED WE HAD SHOWN THAT DEBTS WRI TTEN OFF WERE TAKEN IN COMPUTING THE INCOME OF ASSESSEE IN A N EARLIER YEAR. NOTHING ELSE IS REQUIRED TO BE DONE AT THE AS SESSEE'S END. IT IS THUS REQUESTED THAT THE ADDITION OF RS.5,86,0 52/- PROPOSED BY THE AO IS NOT JUSTIFIED EITHER IN LAW OR IN FACT S OF THE CASE. 4 THEREFORE, THIS ADDITION DOES NOT DESERVE TO BE RET AINED AND MAY KINDLY BE DROPPED. ' 2.3. CIT(A), HOWEVER, UPHELD THE ADDITION BY FOLLOW ING OBSERVATIONS: 6. GROUND NO 1(C) PERTAINS TO BAD DEBTS WRITTEN OF F AMOUNTING TO RS. 20,19,950/-. IN THIS REGARD VIDE PARA 3 OF THE REMAND REPORT DATED 16.11.2012 AO HAS WORKED OU T THAT A SUM OF RS. 5,86,052/- RELATES TO BILLS RAISED ON PRIVATE PARTIES BUT WHICH COULD NOT BE RECOVERED FROM THEM. SO, HE HAS OBSERVED THAT PERSONS COULD BE SPECIFIED PERSON S OF THE TRUST WHICH ATTRACT PROVISIONS OF SEC. 13 OF THE IT ACT. IN THIS REGARD REPLY HAS BEEN FILED VIDE LETTER DATED 14. I 2.20 I 2, WHEREIN, IT HAS BEEN CONTENDED TH AT B AD DEBTS HAVE BEEN WRITTEN BACK U/S 36(2) OF THE IT ACT AND A SUM OF RS. 5,86,052/- RELATED TO UNPAID BILLS OF INDIVIDUAL PA TIENTS WHOSE NAMES, ADDRESSES COULD NOT BE TRACED. IN THIS REGAR D OBSERVATION OF THE AO IN THE REMAND REPORT HAS NOT BEEN CONTROVERTED THAT THESE BILLS D O NOT RELATE TO PERSONS SPECIFIED U/S. 13(3) OF THE IT ACT, WHIC H HAS BEEN OBSERVED BY AO THAT BILLS COULD BE PERTAINING TO PE RSONS SPECIFIED U/S. 13(3) OF THE IT ACT. SO, THESE ARE T HE PERSONS COVERED U/S. 13 OF THE IT ACT. IN THIS REGARD SPECI FIC OPPORTUNITY WAS GIVEN SO AS TO GIVE REJOINDER ON TH E OBSERVATION AND FINDING OF THE AO IN THE REMAND REPORT, BUT, LD AR OF THE APPELLANT HAS TRIED TO GET SHELTER OF SEC. 36(2) OF THE I.T. ACT. HE SHOULD HAVE GIVEN SPECIFIC REPLY O F THE OBSERVATION OF THE AO THAT THESE15ILS ARE NOT PERTA INING TO PERSONS SPECIFIED U/S. 13 OF THE IT ACT. IN MY CONS IDERED OPINION TAXABILITY OF THE TRUST REGISTERED U/S. 12A OF THE IT ACT ARE DECIDED AS PER PROVISIONS OF SEC. 11 TO 13 OF T HE I.T ACT, NOT BY THE OTHER SECTIONS. WHEN VIOLATION U/S. 13(3 ) OF THE I.T. ACT HAS BEEN NOTICED AND IT HAS NOT BEEN FULLY CONT ROVERTED, THE APPELLANT CANNOT TAKE THE SHELTER OF SEC. 36(2) OF THE IT ACT. SO, ADDITION PERTAINING TO RS.5,86,052/- WHICH IS IN THE NATURE OF BAD DEBTS IS SUSTAINED. GROUND NO.1 ( C) OF THE APPELLANT IS DISMISSED. 5 7. GROUND NO.2 PERTAINS TO NOT ALLOWING BENEFIT OF SEC. 11 AND 12 OF THE IT ACT. AS VIOLATION HAS BEEN NOTED U/S. 13 OF THE IT ACT BY AO, WHICH HAS BEEN UPHELD, GROUND NO.2 OF T HE APPEAL IS DISMISSED. 2.4. AGGRIEVED, ASSESSEE IS BEFORE US. 3. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT IT HA S NOT BEEN DISPUTED THAT THE ASSESSEE CARRIES ON A CHARITABLE HOSPITAL FOR THE PURPOSE OF RELIEF TO BLIND PERSONS. FOR TREATMENT, PATIENTS FROM VARIO US PARTS OF COUNTRY COME, AT TIMES DUE TO PROLONGED TREATMENT POVERTY OR DIF FICULTIES, SOME OF THE BILLS PAYABLE BY THEM TO HOSPITAL OVER RUN THEIR MEANS. AS PER GOVERNMENT REGULATIONS, A PATIENT CANNOT BE DETAINED IN HOSPIT AL IN CASE OF NON-PAYMENT OR DEFICIENT PAYMENT OF MEDICAL BILL. THE PATIENTS GOT DISCHARGED AND UNDERTOOK TO REPAY THE BALANCE DUES. BEING A CHARIT ABLE HOSPITAL THE ASSESSEE CANNOT BE INHUMAN TO DETAIN OR REFUSE THEM AS ITS A VERRED OBJECT IS OF CHARITY I.E. RELIEF TO BLINDS. SINCE THE BILLS ARE RAISED, THEY ARE SHOWN AS INCOME OF THE HOSPITAL IN THE RESPECTIVE YEARS. THUS IT IS CL EAR THAT THE OUTSTANDING BILLS FORM PART OF THE HOSPITAL INCOME IN EARLIER YEARS, A FACT WHICH HAS NOT BEEN DISPUTED BY THE DEPARTMENT. AS THESE BILLS WERE OUT STANDING SINCE COUPLE OF YEARS AND THERE WAS BLEAK HOPE OF THEIR RECOVERY T HE ASSESSEE TRUST BY A PROPER DECISION WROTE OFF THESE AS BAD DEBTS IN BOO KS OF ACCOUNTS. THE LOWER AUTHORITIES HAVE DISALLOWED THE CLAIM ON TWO COUNTS : (I) THAT THE ADDRESSES ARE NOT VERIFIABLE; AND 6 (II) THERE IS POSSIBILITY THAT SECTION 13 MAY HAVE BEEN VIOLATED. 3.1. RELIANCE IS PLACED ON HONBLE SUPREME COURT JU DGMENT IN THE CASE OF TRF LTD. VS. CIT 323 ITR 397 FOR THE PROPOSITION TH AT AFTER AMENDMENT IN LAW IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLI SH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE. FOR ALLOWABILITY OF CLAIM IT IS SUFFICIENT THAT THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUN TS OF THE ASSESSEE. THE FACT THAT THESE OUTSTANDING BILLS WERE INCLUDED IN THE I NCOME OF THE HOSPITAL IN EARLIER YEAR WHICH INDICATES THAT THE PATIENTS AND TREATMENT GIVEN WAS GENUINE AND SUCH BILLS REMAINED PARTLY UNPAID. IN V IEW OF HONBLE SUPREME COURT JUDGMENT IN TRF LTD. (SUPRA) THE ASSESSEE HAS NO FURTHER OBLIGATION TO DEMONSTRATE THAT THE DEBTS HAVE BECOME ACTUALLY BAD . BESIDE, THE REVENUES INTEREST IS PROTECTED INASMUCH AS IF ANY RECOVERY I N THIS BEHALF IS MADE IN SUBSEQUENT YEARS THE SAME WILL BE CREDITED TO THE I NCOME AS PER THE PROVISIONS OF THE ACT. 3.2. APROPOS THE SECOND ASSUMPTION THAT THERE MAY B E POSSIBILITY OF VIOLATION OF SEC. 13, IT IS PLEADED THAT IN THE ASS ESSMENT ORDER THE ASSESSING OFFICER HA NOT EVEN WHISPERED ABOUT THIS ASPECT AND IT IS ONLY IN THE REMAND REPORT THAT BY A LAST LINE THE ASSESSING OFFICER HA S RAISED A DOUBT ABOUT POSSIBILITY OF VIOLATION OF SEC. 13. THE CIT(A) OUG HT TO HAVE APPRECIATED THAT WHEN THE ASSESSING OFFICER DID NOT RAISE THIS QUEST ION IN THE ORIGINAL 7 PROCEEDINGS THERE WAS NO JUSTIFICATION ON HIS PART TO RACK UP THE ISSUE IN REMAND PROCEEDINGS. BESIDES, LD. CIT(A) ALSO HAS NO T PUT FORTH ANY COGENT REASONING OR EVIDENCE TO SUGGEST WHICH OF THE BENEF ICIARIES WERE RELATED TO WHICH OF THE TRUSTEES. THUS IN THE ABSENCE OF ANY A LLEGATION IN THE ORIGINAL ASSESSMENT ORDER AND ON A VAGUE AND GENERALIZE PRE SUMPTION IN REMAND PROCEEDINGS WHICH ARE DENIED BY THE ASSESSEE SEC. 1 3(1) CANNOT BE INVOKED ON SURMISES AND CONJECTURES. 4. LD. DR SUPPORTED THE ORDER OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE RECORD IT CLEARLY EM ERGES THAT THE AMOUNTS IN QUESTION ARE UNPAID HOSPITAL BILLS OF EARLIER YEAR S, WHICH WERE INCLUDED IN THE INCOME OF THE CHARITABLE HOSPITAL. IT HAS NOT B EEN DISPUTED THAT ASSESSEE COULD NOT HAVE DETAINED THE PATIENTS AND NOT DISCHA RGE THEM DUE TO UNPAID BILLS. THIS WOULD HAVE BEEN A MATTER OF JEOPARDY FO R THE ASSESSEE AS THESE PATIENTS HAD NO MONEY AND FOR DETAINING THEM THE LO DGING AND BOARDING WAS TO BE PROVIDED BY THE ASSESSEE. BESIDES, ITS OBJEC T BEING CHARITABLE, IF SOME AMOUNT REMAINED UNPAID, THE LETTING GO OF THE PATI ENT DOES NOT MILITATE AGAINST THE OBJECT OF THE ASSESSEE. RELYING ON HON BLE SUPREME COURT JUDGMENT IN THE CASE OF TRF LTD. (SUPRA), WE HAVE N O HESITATION TO HOLD THAT THE ASSESSEE HAS NO OBLIGATION TO GIVE A DEMONSTRAT IVE PROOF THAT THE DUES HAVE BECOME ACTUALLY BAD. 5.1. APROPOS THE SECOND PRESUMPTION THAT THERE IS A POSSIBILITY THAT THESE PATIENTS MAY BE RELATED TO SOME OF THE TRUSTEES, TH ERE IS NO INSTANCE OR 8 MATERIAL AVAILABLE ON RECORD TO SUGGEST ANY SPECIFI C ALLEGATION. NOT EVEN A SINGLE INSTANCE HAS BEEN PUT FORTH BEFORE US. BESID ES, THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDING HAS NEITHER MADE ANY WHISPER NOR ANY ALLEGATION THAT THE PATIENTS MAY BE RELATED TO THE TRUSTEES. IT IS ONLY IN REMAND PROCEEDINGS THAT A NEW CASE WAS BEING SOUGHT TO BE MADE OUT ON ASSUMPTIONS WHICH, IN OUR VIEW, IS NOT TENABLE. IN ANY CASE SUCH OBSERVATIONS BEING PURELY BASED ON SURMISE AND CONJ ECTURES, WE SEE NO MERIT IN SUCH ASSUMPTIONS. IN VIEW THEREOF, WE ALLOW THE CLAIM OF WRITING OFF OF THE BAD DEBT OF THE ASSESSEE 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 28-01-2014. SD/- SD/- ( T.S. KAPOOR ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28-01-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR