Md. Rustam, Kolkata V. DCIT, Central Circle - XVI, Kolkata, Kolkata

ITSSA 34/KOL/2011

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 8869 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-02-2013
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 07-03-2011
• Court: TRIBUNAL
• Department Lawyers: ASOKE KUMAR DEY
• Assessee Lawyers: MANISH TIWARI
• Keywords: Search and seizure; Bad and doubtful debts; Corroborative evidences; Block assessment; Onus to prove

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [ () . .. . . .. . , ,, , , ! ''# $ ''# $ ''# $ ''# $ ] ]] ] [BEFORE HONBLE SRI P.K.BANSAL, AM & HONBLE SRI GEORGE MATHAN, JM] !& !& !& !& /IT(SS)A NO.34/KOL/2011 '( )*/ BLOCK PERIOD FROM 01.4.1996 TO 05.09.2002 ($, / APPELLANT ) - - ( ./$, /RESPONDENT) MD.RUSTUM D.C.I.T. CENTRAL CIRCLE-XVI, KOLKATA -VERSUS- KOLKATA ( PAN: AEUPM 0540 F) $, 0 1 / FOR THE APPELLANT: SHRI MANISH TIWARI ./$, 0 1 / FOR THE RESPONDENT: SHRI ASOKE KUMAR DEY, SR.DR 2 3 0 4 /DATE OF HEARING : 07.02.2013 5) 0 4 /DATE OF PRONOUNCEMENT : 14.02.2013. 6 / ORDER PER BENCH THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. C.I.T. (A)- CENTRAL-II, KOLKATA DATED 31.01.2011. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL FILED BY THE ASSESSEE IS RELATING TO THE SUSTENANCE OF DISALLOWANCE OF RS.27,88,438/- CLAIME D BY THE ASSESSEE AS BAD DEBTS. 3. THE BRIEF FACTS RELATING TO THIS GROUND ARE THA T THE ASSESSEE IS ENGAGED IN WHOLESALE COMMISSION BUSINESS OF FRUITS UNDER THE N AME AND STYLE OF MS./ MDR AT 4, BALLAV DAS STREET, KOLKATA-7. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 05.09.2002 AT THE BUSINESS PLACES OF THE ASSESSEE A S WELL AS HIS FOUR SONS. IN RESPONSE TO NOTICE U/S 158BC(A) OF THE ACT THE ASSESSEE FILE D BLOCK RETURN SHOWING AN INCOME OF RS.15,00,000/-. THE UNDISCLOSED INCOME OFFERED IN T HE BLOCK RETURN WAS ON UNDISCLOSED SALES NOTED IN THE SEIZED ACCOUNT MARKE D MDR-1 TO MDR-24 AND SM-1 TO SM-9 FOUND FROM THE PREMISES OF THE ASSESSEE AS WELL AS CERTAIN OTHER DOCUMENTS IT(SS)A.34/KOL/2011 2 FOUND FROM THE POSSESSION OF THE SONS WHICH WERE OW NED UP BY THE ASSESSEE. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESS EE SUBMITTED BREAK UP OF UNDISCLOSED INCOME ALONG WITH THE DETAILED WORKING UNACCOUNTED SALES WERE SHOWN AT RS.28,58,91,667/-. THE COMMISSION WAS WORKED OUT @3 % AND THE GROSS COMMISSION WAS RS.85,76,747/-. AGAIN AT THIS, THE ASSESSEE CLA IMED BAD DEBT AMOUNTING TO RS.72,07,147/- LEAVING A NET AMOUNT AT RS.13,69,600 /-. THE ASSESSEE SUBMITTED THE NAME AND ADDRESS OF THE PARTIES AGAINST WHOM BAD DE BT OF RS.72,07,147/- WAS CLAIMED. EVEN THREE DEBTORS WERE PRODUCED FOR CROSS EXAMINATION AND THEIR DEPOSITIONS WERE RECORDED. THE AO WORKED OUT THE TO TAL UNDISCLOSED SALE FIGURE AT RS.32,03,97,778/- BUT ADMITTED THE RATE OF COMMISSI ON CLAIMED BY THE ASSESSEE. THE AO ALLOWED THE CLAIM OF THE TAX TO THE EXTENT OF RS .26,50,272/- AND MADE THE DISALLOWANCE TO THE EXTENT OF RS.42,73,115/-. IN AL L THE TOTAL ADDITION WAS MADE TO THE EXTENT OF RS.54,61,661/-. THE ASSESSEE WENT IN APPE AL BEFORE THE LD. CIT(A). THE LD. CIT(A) CONFIRMED THE DISALLOWANCE ON ACCOUNT OF TAX TO THE EXTENT OF 27,88,438/- BY HOLDING AS UNDER :- 6.4. THE CLAIM OF APPELLANT, TO ALLOW THE BALANCE AMOUNT OF BAD DEBT OF (RS.42,73,115 (-) RS.14,84,677 = RS.27,88,438/- ON THE BASIS OF T HE LIST OF DEBTORS, WHO ARE VERY SMALL DEBTORS AND ON SUCH CONSIDERATION THAT SUCH LOSSES DO OCCUR IN PERISHABLE FRUIT MARKET AND ASSESSING OFFICER CALLED ONLY 8 DEBTORS FOR VER IFICATION DURING THE REMAND PROCEEDINGS, HAS BEEN EXAMINED. I FIND THAT THE LIS T OF DEBTOR AS THE COPY OF SEIZED DOCUMENT SUBMITTED BY THE REPRESENTATIVE OF APPELLA NT DURING THE APPELLATE PROCEEDING SHOWS THE ASSET OF RS.1.34 CRORE OF APPELLANT IS PA RKED WITH MORE THAN 250 DEBTORS IN THE FRUIT MARKET WITHOUT CONSIDERING THE BAD DEBTS. THE REFORE THE NET COMMISSION, CALCULATED BY ASSESSING OFFICER AT A RATE OF 3% OF THE UNRECORDED SALES IS SUPPORTED BY SUCH UNRECORDED ASSETS IN THE FORM OF DEBTORS AS EV IDENCED BY THE LIST OF DEBTORS. THE BURDEN OF PROOF IS CERTAINLY ON APPELLANT TO PRODUC E SUCH DEBTORS AND ESTABLISH THAT THE DEBTS PARKED WITH THEM ARE LOST. APPELLANT WAS GIVE N SUFFICIENT OPPORTUNITY DURING THE APPELLANT PROCEEDINGS TO PRODUCE THE DEBTORS BEFORE THE ASSESSING OFFICER WHO DID NOT REPAY THE DEBT TO APPELLANT. THE PLEA OF APPELLANT THAT ASSESSING OFFICER ASKED HIM TO PRODUCE ONLY 8 DEBTORS FOR VERIFICATION DURING APPE LLANT PROCEEDINGS IS NOT RELEVANT BECAUSE THE BURDEN WAS ON THE APPELLANT TO PROVE TH AT 113 DEBTS OUT OF THE LIST OF MORE THAN 250 DEBTORS WERE BAD. THE LIST OF DEBTORS WAS SUFFICIENT EVIDENCE FOR ASSESSING OFFICER TO SUPPORT THE CALCULATION OF UNDISCLOSED N ET COMMISSION INCOME WITH CORRESPONDING ASSET. THE EXISTENCE OF DEBTOR IS PRE SUMED TO REFLECT SALE OR INCOME UNLESS APPELLANT PROVES IT OTHERWISE. THEREFORE, I FIND THAT EVIDENCE PRODUCED IN THE FORM OF EXAMINATION OF DEBTORS IN PERSON BEFORE THE ASSESSING OFFICER CAN BE CONSIDERED FOR ALLOWING THE LOSS TO APPELLANT ON AC COUNT OF NON PAYMENT OF DUES BY THESE PERSON AND THE REMAINING CLAIM OF LOSS OF RS. 27,88,438/- ON ACCOUNT OF NON PAYMENT BY THE DEBTORS FROM THE LIST OF DEBTORS, WI THOUT ANY SUPPORTING EVIDENCE, CANNOT BE ENTERTAINED. IT(SS)A.34/KOL/2011 3 6.5. IN NUTSHELL I DIRECT THE ASSESSING OFFICER TO ALLOW A FURTHER THE CLAIM OF BAD DEBT OF RS.2,83,760 + RS.14,84,677 = RS.17,68,437 IN ADD ITION OF THE CLAIM OF BAD DEBT ALREADY ALLOWED BY HIM IN THE ASSESSMENT ORDER AND REDUCE THE UNDISCLOSED INCOME OF BLOCK ASSESSMENT YEAR ACCORDINGLY. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. THE LD. AR EVEN THOUGH BROUGHT TO OUR ATTENTION THE COPY OF THE SEIZED PAPERS MARKED IE-16 WHICH CONTAINS THE LIST OF DEBTS AND HE STATED THAT THE DEBTS CONTAINS THE BAD DEBTS TO THE EXTENT OF RS.72,07,147/- FOR WHICH ATTENTION WA S DRAWN TO PAGES 38 TO 40 OF THE PAPER BOOK BUT COULD NOT BRING ANY EVIDENCE TO OUR KNOWLEDGE WHICH MAY PROVE THAT THESE DEBTS WERE WRITTEN OFF IN THE BOOKS OF THE AS SESSEE PRIOR TO THE SEARCH BEING TAKEN AT THE PREMISES OF THE ASSESSEE U/S 158BC (A) OF THE IT ACT. THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD HAD TO BE COMPUTED IN R ESPECT OF THE PREVIOUS YEARS FALLING WITH THE BLOCK PERIOD IN ACCORDANCE WITH TH E PROVISION OF THE INCOME TAX ACT ON THE BASIS OF THE EVIDENCES FOUND AS A RESULT OF SUCH REQUISITION OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS SUCH OTHER MATERIAL OR INFORMATI ON ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCES. THE INCOME SO COMPUTED IS TO BE REDUCED BY THE AGGREGATING OF THE TOTAL INCOME OR I S TO BE INCREASED BY AGGREGATE OF THE TOTAL LOSS OF SUCH PREVIOUS YEAR AS HAS BEEN ME NTIONED U/S 158BB(1)(A) TO 158BB(1)(F). THE BAD BETS ARE DEDUCTIBLE U/S 36(1) (VII) OF THE IT ACT. THE PRIME CONDITION U/S 36(1)(VII) IN ADDITION TO THE COMPLIA NCE WITH SECTION 36(2) IS THAT THE DEBTS MUST BE WRITTEN OFF AS IRRECOVERABLE IN THE A CCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. NO DOUBT THERE HAD BEEN SEARCH IN TH E CASE OF THE ASSESSEE WHERE CERTAIN DOCUMENTS WERE SEIZED IN THE CASE OF THE AS SESSEE WHICH CONSISTS OF LIST OF THE DEBTS BUT NO EVIDENCE HAD BEEN FOUND OR SEIZED WHIC H MAY PROVE THAT THE ASSESSEE HAD WRITTEN OFF THESE DEBTS. THE ASSESSEE CAN CLAIM THE DEBTS IN THE REGULAR ASSESSMENT WHEN THESE DEBTS ARE BEING WRITTEN OFF. BUT IN OUR OPINION, IN THE BLOCK ASSESSMENT THE ASSESSEE IS NOT ENTITLED TO CLAIM THE DEDUCTION. TH ERE IS NO EVIDENCE RECORDED WHICH MAY PROVE THAT THE EVIDENCE HAS BEEN FOUND OR SEIZE D DURING THE COURSE OF THE SEARCH WHICH MAY PROVE THAT THE DEBTS CLAIMED BY THE ASSES SEE AS BAD DEBT WERE WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. UNDER THESE FACTS AND CIRCUMSTANCES WE DO NOT HAVE ANY OTHER ALTERNATIVE EXCEPT TO CONFIRM THE ORDER OF TH E LD. CIT(A) EVEN THOUGH THE LD. IT(SS)A.34/KOL/2011 4 CIT(A) AND THE AUTHORITIES BELOW HAS ALLOWED PART O F THE DEDUCTION ON ACCOUNT OF THE BAD DEBTS TO THE ASSESSEE. THIS TRIBUNAL DO NOT HAV E ANY POWER FOR ENHANCEMENT. WE THEREFORE SUSTAIN THE ADDITION ON ACCOUNT OF THE B AD DEBTS ONLY TO THE EXTENT OF RS.27,88,438/- OUT OF WHICH DEBTS CLAIMED BY THE AS SESSEE BEFORE THE AO TO THE EXTENT OF RS.72,07,147/- 5. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 14.02.2013. SD/- SD/- [ .''# $ , ] [ .., ,, , ] GEORGE MATHAN ] [P.K.BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (4 4 4 4) )) ) DATE: 14.02.2013 R.G.(.P.S.) 6 0 .''7 87)9- COPY OF THE ORDER FORWARDED TO: 1. MD.RUSTAM, 4, BALLAV DAS STREET, KOLKATA-700007.. 2 D.C.I.T., CENTRAL CIRCLE-XVI, KOLKATA 3 . CIT KOLKATA 4 . CIT(A)-CENTRAL-II, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. /7 .'/ TRUE COPY, 62/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES