Shri Rajendra Singh, Sendhwa V. The DCIT, Khandwa

ITSSA 81/IND/2010

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8087 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 19-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Keywords: Search and seizure; Bad and doubtful debts
• Section: 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER IT(SS)A NO. 81/IND/2010 A.Y. : 2003-04 SHRI RAJENDRA SINGH, PROP. OF M/S. MANJEET GINNING, JAWAHAR GANJ, SENDHWA PAN ABAPR679D APPELLANT VS DY.CIT,KHANDWA RESPONDENT ASSESSEE BY : SHRI PRAKASH JAIN, C. A. DEPARTMENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 19.8.2011 DATE OF PRONOUNCEMENT : 16.9.2011 O R D E R PER JOGINDER SINGH THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER DA TED 19.03.2010 OF THE LEARNED CIT(A),-II, INDORE, ON TH E GROUND THAT 2 THE LD. FIRST APPELLATE AUTHORITY ERRED IN MAINTAIN ING ADDITION OF RS. 1,55,000/- ON ACCOUNT OF BAD DEBTS. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I PRAKASH JAIN, LD. COUNSEL FOR ASSESSEE, AND SHRI AR UN DEWAN, LD. SR. DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS IDENTICAL TO GROUNDS RAISED BY FURTHER SUBMITTING T HAT THE INSURANCE COMPANY DID NOT GIVE THE INSURED AMOUNT, CONSEQUENTLY THE SAME WAS WRITTEN AS BAD DEBTS. ON THE OTHER HAND, THE LD. SR. DR DEFENDED THE IMPUGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BRIEF FAC TS ARE THAT DURING THE YEAR THE ASSESSEE CLAIMED BAD DEBT OF RS . 1,55,000/-. THE LD. ASSESSING OFFICER ASKED THE ASS ESSEE TO EXPLAIN THE NATURE OF BAD DEBT. THE ASSESSEE EXPLAI NED THAT ONE TRUCK OF THE ASSESSEE MET WITH AN ACCIDENT IN A SSESSMENT YEAR 1997-98 AND THE IMPUGNED AMOUNT WAS CLAIMED AS REPAIRING EXPENSES FROM THE INSURANCE COMPANY. THE IMPUGNED AMOUNT WAS SHOWN AS RECOVERABLE FROM THE 3 INSURANCE COMPANY IN ITS BALANCE SHEET SINCE 1997-9 8, BUT THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE INSURANCE COMPANY, THEREFORE, THE IMPUGNED AMOUNT WAS DEBITED TO PROFI T AND LOSS ACCOUNT DURING IMPUGNED YEAR AS BAD DEBT. THIS REPL Y OF THE ASSESSEE COULD NOT FIND FAVOUR DURING ASSESSMENT ST AGE. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A), WHERE IT WAS AFFIRMED AND IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. IF THE TOTALITY OF THE FACTS AND THE RIVA L CONTENTIONS PUT FORTH BY THE LD. RESPECTIVE COUNSEL ARE ANALYSED, W E FIND THAT THE ASSESSEE FILED RETURN IN RESPONSE TO NOTICE U/S 153A, CONSEQUENT UPON A SEARCH AND SEIZURE OPERATION CARR IED OUT IN THE GROUP CASES, DECLARING TOTAL INCOME AT RS.19,11 ,711/- ON 12.12.2008. THE ASSESSING OFFICER DISALLOWED THE CL AIMED BAD DEBT OF RS.1,55,000/-, WHICH WAS ON ACCOUNT OF REJE CTION OF INSURANCE CLAIM, MADE WITH AN ACCIDENT IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1997-98, DEBITED TO P & L ACCOUNT IN THE YEAR UNDER CONSIDERATION. THE SAID CLAIM WAS MADE IN LIEU OF REPAIRING EXPENSES FROM INSURANCE COMPANY A ND WAS SHOWN AS DUE IN THE BALANCE-SHEET SINCE PRIOR TO AS SESSMENT 4 YEAR 1995-96. HOWEVER, THE CLAIM WAS REJECTED BY TH E INSURANCE COMPANY AND THE AMOUNT WAS SHOWN AS IRRECOVERABLE, THEREFORE, THE ASSESSEE CLAIMED IT A S BAD DEBT. IF THIS ISSUE IS ANALYSED U/S 36(2) OF THE ACT, WHICH PROVIDES THAT NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH AMOU NT ARE PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTI NG INCOME OF RELEVANT PREVIOUS YEAR OR EARLIER PREVIOUS YEAR OR REPRESENTS MONEY, LENT IN THE ORDINARY COURSE OF BUSINESS OF B ANKING OR MONEYLENDING CARRIED OUT BY THE ASSESSEE. HOWEVER, THE IMPUGNED AMOUNT WAS NEVER ADDED IN TRUE SENSE AS TH E CLAIM WAS MERELY PREFERRED BEFORE THE INSURANCE COMPANY A ND THE INSURANCE COMPANY NEVER ADMITTED THE SAID CLAIM TO BE VALID CLAIM, THEREFORE, THIS AMOUNT NEVER REPRESENTS MONE Y LENT IN THE ORDINARY COURSE OF BUSINESS. THEREFORE, THE ASS ESSEE CANNOT BE PERMITTED TO CLAIM IT A BAD DEBT SINCE IT WAS NOT ACCOUNTED AS INCOME IN EARLIER YEARS, THEREFORE, IT CANNOT BE ALLOWED U/S 36(1)(VII) OF THE ACT. AT BEST, IT CAN BE ALLOWED ONLY AS BUSINESS LOSS U/S 28 OF THE ACT. TAXABILITY OF T HE AMOUNT PAID ON SETTLEMENT OF THE CLAIM BY THE INSURANCE COMPANY DEPENDS 5 BOTH ON THE NATURE OF PAYMENT AND PURPOSE OF INSURA NCE. RESULT MAY BE SAME WHERE THE PAYMENTS WERE MADE FOR GOODS IN WHICH ASSESSEE CARRIED OUT BUSINESS. ANY PAYMENT BEING ACCRETION FROM BUSINESS, THE EXCESS OR SURPLUS ACCR UING FOR ANY REASON MAY BE NOTHING BUT PROFIT. THE ASSESSEE DID NOT FURNISH ANY DOCUMENTARY EVIDENCE ABOUT SUCH CLAIM BEING PRE FERRED BEFORE INSURANCE COMPANY AND THE REASONS SUCH REJEC TION. THIS FACTUAL FINDING IN THE IMPUGNED ORDER WAS NOT CONTR OVERTED BY THE ASSESSEE. THEREFORE, THE ASSESSEE CANNOT DRAW A NY SUPPORT FROM THE DECISIONS RELIED BEFORE US. IT IS SETTLED POSITION OF LAW THAT EACH AND EVERY ASSESSMENT YEAR IS A SEP ARATE UNIT OF ASSESSMENT AND THE AMOUNT WHICH IS REQUIRED TO B E CLAIMED AS DEDUCTIBLE IN A PARTICULAR ASSESSMENT YEAR CANNO T BE ALLOWED TO BE DEDUCTED IN ANY LATER YEAR OR EARLIER YEAR UNLESS AND UNTIL IT HAS A NEXUS. IT SEEMS MERELY AN AFTERT HOUGHT. THEREFORE, WE FIND NO INFIRMITY IN THE IMPUGNED ORD ER. THE SAME IS UPHELD. 6 FINALLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 SEPTEMBER, 2011. SD SD (R.C.SHARMA) (JOGINDERSINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16.9.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE CPU*