M/s. Remik Trading Corporation Pvt.Ltd., Ahmedabad v. The ACIT.,Circle-5,, Ahmedabad

CO 139/AHD/2009 | 2006-2007
Pronouncement Date: 18-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 13920523 RSA 2009
Assessee PAN AABCR3003L
Bench Ahmedabad
Appeal Number CO 139/AHD/2009
Duration Of Justice 1 year(s) 7 month(s) 28 day(s)
Appellant M/s. Remik Trading Corporation Pvt.Ltd., Ahmedabad
Respondent The ACIT.,Circle-5,, Ahmedabad
Appeal Type Cross Objection
Pronouncement Date 18-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 18-03-2011
Date Of Final Hearing 09-03-2011
Next Hearing Date 09-03-2011
Assessment Year 2006-2007
Appeal Filed On 20-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. N. PAHUJA AM) ITA NO.2182/AHD/2009 A. Y.: 2006-07 THE D. C. I. T. CIRCLE-5 2 ND FLOOR C. U. SHAH CHAMBERS ASHRAM ROAD AHMEDABAD VS M/S. REMIK TRADING CO. PVT. LTD. PRAFUL NIWAS GROUND FLOOR OPP. BANK OF INDIA ELLISBRIDGE AHMEDABAD 380 006 PA NO. AABCR 3003L (APPELLANT) (RESPONDENT) C. O. NO. 139/AHD/2009 (IN ITA NO.2182/AHD/2009: AY: 2006-07) M/S. REMIK TRADING CO. PVT. LTD. PRAFUL NIWAS GROUND FLOOR OPP. BANK OF INDIA ELLISBRIDGE AHMEDABAD 380 006 VS THE D. C. I. T. CIRCLE-5 2 ND FLOOR C. U. SHAH CHAMBERS ASHRAM ROAD AHMEDABAD PA NO. AABCR 3003 L (APPLICANT) (RESPONDENT) DEPARTMENT BY SHRI C. K.MISHRA SR. DR ASSESSEE BY SHRI KETAN M. BHATT AR O R D E R PER BHAVNESH SAINI: THE DEPARTMENTAL APPEAL AS WELL AS THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDER OF THE LEARNED CIT(A)-XI AHMEDABAD DATED 17 TH APRIL 2009 FOR ASSESSMENT YEAR 2006-07. ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 2 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO.1 OF THE CROSS OBJECTION OF THE ASSESS EE IS GENERAL IN NATURE AND NEEDS NO FINDING. 4. ON GROUND NO.1 THE REVENUE HAS CHALLENGED THE D ELETION OF ADDITION OF RS.8 99 188/- ON ACCOUNT OF COMMISSION EXPENSES. THE ASSESSEE ON GROUND NO.2 OF THE CROSS OBJECTION CHAL LENGED THE ORDER OF THE LEARNED CIT(A) IN UPHOLDING PART OF TH E DISALLOWANCE OF RS.1 22 499/- OUT OF THE COMMISSION PAYMENT. THE AO NOTED THAT THE ASSESSEE HAS DEBITED COMMISSION EXPENSES OF RS.8 99 118/-. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF RECIPI ENTS OF THE COMMISSION ALONG WITH EVIDENCE IN RESPECT OF SERVIC ES RENDERED BY THEM. THE ASSESSEE FURNISHED DETAILS OF THE RECIPIE NTS OF COMMISSION AGREEMENTS AS WELL AS COPIES OF CREDIT NOTES ISSUE D BY THE ASSESSEE COMPANY. IT HAS BEEN CONTENDED THAT THE SAID EXPEND ITURE IS FOR THE PURPOSE OF BUSINESS. THE ASSESSEE PAID COMMISSION E XPENSES TO 8 PARTIES INCLUDING SHRI CHANDULAL M. THAKKAR AND SHR I VIPUL CHANDULAL THAKKAR. THE NAMES ARE MENTIONED IN PARA 3.1 OF THE ASSESSMENT ORDER. IT WAS SEEN THAT ONLY JOINT VENTURE ENTRY HA S BEEN PASSED ON 31-3-2006 CREDITING THE ACCOUNTS OF THE PARTIES AND DURING THE YEAR NO PAYMENT IN RESPECT OF THE ABOVE AMOUNT HAS BEEN MADE. THE ASSESSEE HAS FURNISHED COPIES OF CREDIT NOTES FOR A LL THE PARTIES. ALL THE CREDIT NOTES ARE IDENTICALLY WORDED AND THE RAT E OF COMMISSION VARIES FROM 0.75% TO 2%. THE ASSESSEE HAS NOT STATE D ANYTHING ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 3 ABOUT VARIATION IN THE RATE. THE ASSESSEE ALSO SUBM ITTED COPIES OF THE AGREEMENTS FOR COMMISSION. THE TERMS OF THE SAME AR E REPRODUCED IN THE ASSESSMENT ORDER AND WORDINGS OF THE COMMISS ION AGREEMENTS ARE SAME IN RESPECT OF ALL THE 8 PARTIES. THE AGREE MENTS BRIEFLY CONTAINED THE PERIOD OF THE COMMISSION AGREEMENTS SALES MADE BY THE COMMISSION AGENTS OF THE PRODUCT OF THE ASSESSE E AGENTS WILL PROVIDE INFORMATION ABOUT MARKET SITUATION AGENTS SHALL ATTEND THE COMPLAINTS OF THE CUSTOMERS AGENTS WILL HELP FOR R ECOVERY OF THE OUTSTANDING AMOUNT RATE OF COMMISSION AND CREDIT N OTES WILL BE PROVIDED BY THE AGENTS ON DOING THE SERVICES WITH T HE ASSESSEE. THE AO ON PERUSAL OF THE COMMISSION AGREEMENTS AND DETA ILS NOTED THAT THE RECIPIENTS ARE APPOINTED AS AGENTS FOR SALE OF PRODUCTS OF THE ASSESSEE COMPANY TO ALL THE CUSTOMERS AND DETAILS A RE ATTACHED WITH THE ANNEXURE. THE NAMES OF THE PARTIES ARE MENTIONE D IN THE CREDIT NOTES BY THE ASSESSEE. THOUGH THE COMMISSION AGENTS SHALL HAVE TO DO SALES SERVICES AND ATTEND THE COMPLAINTS OF THE CUSTOMERS ETC. AND RECOVER THE PAYMENT BUT THE ASSESSEE HAS NOT FU RNISHED ANY EVIDENCE AS TO HOW THESE SERVICES WERE RENDERED BY THE COMMISSION AGENTS. THE ASSESSEE WAS REQUESTED TO PRODUCE SALES BILLS IN ORDER TO KNOW WHETHER THE NAMES OF THE COMMISSION AGENTS ARE MENTIONED IN THE SALES BILLS PREPARED BY THE ASSESSEE. BUT NO SUCH EVIDENCE WAS PRODUCED. THE AGREEMENTS STATED THAT CREDIT NOT ES WILL BE ISSUED ON HALF YEARLY BASIS BY THE AGENTS. BUT THE CREDIT NOTES ARE ISSUED AT THE END OF THE YEAR. IT WAS FOUND FROM THE CREDIT N OTES THAT THE NAMES OF THE PARTIES AND TOTAL SALES ARE MENTIONED BUT TH E ADDRESSES AND PLACES ARE NOT MENTIONED. THEREFORE IT WAS DIFFICU LT TO LOCATE AND CONTACT THE PARTIES. THE AO FURTHER NOTED THAT BUSI NESS OF CHEMICALS ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 4 WHICH THE ASSESSEE IS DOING IS OF COMPLEX NATURE AN D REQUIRE SOME BACKGROUND OF CHEMISTRY BUT NONE OF THE COMMISSION AGENTS HAS ANY EXPERTISE AND KNOWLEDGE OF CHEMICAL BUSINESS. THIS FACT CAME TO LIGHT AFTER MAKING ENQUIRY IN RESPECT OF COMMISSION AGENTS SHRI VIPUL CHANDULAL THAKKAR AND SHRI CHANDULAL M. THAKKAR. TH E INSPECTOR OF THE DEPARTMENT WAS DIRECTED TO CONTACT THESE TWO PE RSONS. IT HAS BEEN REPORTED BY THE INSPECTOR THAT BOTH THE ABOVE PERSONS ARE DOING KIRANA BUSINESS THEREFORE IT IS NOT EXPLAINED HOW THESE PERSONS DOING GROCERY/KIRANA BUSINESS CAN KNOW INTRICACIES OF CHEMICAL BUSINESS. IT HAS ALSO BEEN REPORTED THAT SHRI CHAND ULAL M. THAKKAR DOES NOT KNOW ANYTHING ABOUT CHEMICAL BUSINESS. EVE N HIS SON SHRI VIPUL CHANDULAL THAKKAR ALSO DOES NOT KNOW THE NAME OF CHEMICALS WHICH HAVE BEEN SOLD ON BEHALF OF THE ASSESSEE COMP ANY. SHRI CHANDULAL M. THAKKAR HAD REPORTED THAT ALL THE WORK RELATING TO THE CHEMICAL ACTIVITY IS DONE BY HIS SON. HOWEVER BOTH THE PERSONS COULD NOT TELL THE CHEMICALS SOLD RATES AT WHICH THEY WE RE SOLD WHAT SERVICES WERE RENDERED IN THE MATTER FOR RECEIPT OF COMMISSION AND HOW THEY CAME TO KNOW ABOUT THE PARTIES TO WHOM THE SALE TRANSACTIONS WERE EFFECTED. THE AO THEREFORE NOTE D THAT THEY HAVE CLAIMED THE AMOUNT OF COMMISSION IN PRECEDING YEAR BUT ONLY JV ENTRIES PASSED. IT IS DIFFICULT TO BELIEVE THAT A P ERSON WHO WORK FOR 12 MONTHS WAS NOT PAID OF THE CHARGES. THE AO ACCORDIN GLY DISALLOWED THE ENTIRE COMMISSION PAYMENT OF RS.8 99 118/-. 5. THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE T HE LEARNED CIT(A) AND IT WAS BRIEFLY EXPLAINED THAT COMPLETE DETAILS WERE FILED AND THE COMMISSION AGENTS PROMOTED THE BUSINESS OF THE ASSESSEE. ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 5 THE EXPENDITURE WAS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ENQUIRY REPORT SUBMITTED BY THE INSPEC TOR OF THE DEPARTMENT WAS NOT CONFRONTED TO THE ASSESSEE AND C OPY OF THE SAME IS NOT SUPPLIED. IT WAS SUBMITTED THAT SALE BI LLS WERE NOT BEARING THE NAMES OF THE COMMISSION AGENTS BUT COMPLETE DET AILS WERE FILED TO SHOW THAT SALES WERE MADE THROUGH THE COMMISSION AGENTS. THEREFORE THE ASSESSEE HAS DISCHARGED THE BURDEN T O PROVE THAT COMMISSION IS PAID FOR THE SERVICES RENDERED BY THE COMMISSION AGENTS FOR THE BUSINESS OF THE ASSESSEE. CERTAIN DE CISIONS WERE RELIED UPON BY THE ASSESSEE IN SUPPORT OF HIS CONTE NTION. 6. THE LEARNED CIT(A) CONSIDERING THE FINDINGS OF T HE AO IN THE LIGHT OF THE EVIDENCES AND MATERIAL ON RECORD NOTED THAT THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE THAT TH E PERSONS TO WHOM THE ASSESSEE COMPANY HAD MADE PAYMENTS ARE REL ATED TO THE DIRECTORS OF THE ASSESSEE COMPANY. NO EXCESSIVE OR UNREASONABLE PAYMENT IS PROVED. THE LEARNED CIT(A) HELD THAT CO MMISSION IS PAID WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HOWEVER THE LEARNED CIT(A) NOTED THAT WHEN TWO PARTIES WERE CON TACTED BY THE INSPECTOR NAMELY SHRI CHANDULAL M. THAKKAR AND SHRI VIPUL CHANDULAL THAKKAR THEY DENIED HAVING ANY KNOWLEDGE OF BUSINESS ACTIVITY OF THE ASSESSEE. THE LEARNED CIT(A) THERE FORE CONFIRMED THE ADDITION TO THE EXTENT OF RS.1 22 499/- (RS.66 002/ - PLUS RS.56 497/-) IN RESPECT OF THESE TWO PARTIES. REST OF THE ADDITI ON WAS DELETED. THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 6 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT COMPLETE DETAILS WERE FILED BEFORE THE AUTHORITIES BELOW TO SHOW THAT GENUINE COMMISSION HAS BEEN PAID TO THE PARTIES WHO HAVE RENDERED SERVICES FOR THE ASSESSEE. THE BUSINESS OF THE ASSE SSEE WAS PROMOTED BY THE COMMISSION AGENTS. COPY OF THE CRED IT NOTES AND COMMISSION AGREEMENTS ARE FILED ON RECORD. HE HAS R EFERRED TO PB-57 TO SHOW THAT COMMISSION PAYMENT IS ALLOWED IN THE P ROCEEDINGS U/S 143(3) OF THE IT ACT IN ASSESSMENT YEAR 2008-09. HE HAS REFERRED TO PB-18 WHICH IS THE DETAILS OF COMMISSION PAID TO AL L THESE 8 PARTIES ON WHICH TDS WAS ALSO DEDUCTED. HE HAS ALSO REFERR ED TO PB-17 WHICH IS THE DETAILS OF COMMISSION PAID TO THE 8 PA RTIES IN THE ASSESSMENT YEAR UNDER APPEAL AND SOME OF THE SAME P ARTIES WERE ALSO PAID COMMISSION IN THE PRECEDING ASSESSMENT YE AR. HE HAS SUBMITTED THAT THE REPORT OF THE INSPECTOR REGARDIN G SHRI CHANDULAL M. THAKKAR AND SHRI VIPUL CHANDULAL THAKKAR COMMISSIO N AGENTS WERE NEVER PROVIDED TO THE ASSESSEE. THEREFORE THE MATT ER REQUIRES RECONSIDERATION BY THE AO. HE HAS SUBMITTED THAT EV EN IN ASSESSMENT YEAR 2003-04 COMMISSION PAYMENT IS ALLOW ED BY THE AO IN THE PROCEEDINGS U/S 143(3) OF THE IT ACT (PB-15) . THE LEARNED COUNSEL FOR THE ASSESSEE THEREFORE SUBMITTED THAT IT WAS A PRACTICE OF THE BUSINESS TO PAY COMMISSION. THEREFORE THE L EARNED CIT(A) WAS JUSTIFIED IN DELETING THE SAME. HOWEVER THE LE ARNED CIT(A) SHOULD HAVE DELETED THE COMPLETE ADDITION. ON THE O THER HAND THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIE S BELOW. ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 7 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. THE ASSESSEE FILED COMPLETE D ETAILS BEFORE THE AO TO SHOW THAT THE COMMISSION IS PAID TO 8 PARTIES THROUGH THE COMMISSION AGREEMENTS. THE AGREEMENTS ARE IDENTICAL AND SAME IN ALL THE CASES AND IN ALL THE CASES COMMISSION IS PA ID @ 0.75% TO 2% DETAILS OF WHICH ARE NOTED IN THE ASSESSMENT ORDER. THE ASSESSEE EXPLAINED THAT IT WAS THE PRACTICE TO PAY COMMISSIO N IN THE PAST ALSO TO SOME OF THE SAME PARTIES WHICH WE FIND FROM THE STATEMENT OF COMMISSION (PB-17) IN WHICH IN ASSESSMENT YEAR 2003 -04 COMMISSION PAYMENT WAS MADE TO SIMILAR 5 PARTIES AN D IN ASSESSMENT YEAR 2002-03 COMMISSION PAYMENT WAS MADE TO 3 PARTIES OUT OF THE SAME 8 PARTIES. THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED BY THE AO IN THE PROCEEDINGS U/S 143 (3) O F THE IT ACT AND EVEN IN ASSESSMENT YEAR 2008-09 THE COMMISSION PAYM ENT IS ACCEPTED SUBSTANTIALLY EXCEPT IN THE CASE OF SHRI C HANDULAL M. THAKKAR AND SHRI VIPUL CHANDULAL THAKKAR IN THE PRO CEEDINGS U/S 143(3) OF THE IT ACT (PB-57). SINCE THE ASSESSEE HA S FILED COMPLETE DETAILS THE LEARNED CIT(A) ON PROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD RIGHTLY DELETED SUBSTANTIAL ADDI TION IN RESPECT OF 6 PARTIES. THE LEARNED CIT(A) WAS THEREFORE JUSTIFI ED IN HOLDING THAT COMMISSION PAYMENT IS MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE DEPARTMENT HAS WRO NGLY TAKEN THE ENTIRE FIGURE OF THE DISALLOWANCE OF COMMISSION IN GROUND NO.1. ACCORDINGLY DEPARTMENTAL APPEAL HAS NO MERIT. THE SAME IS ACCORDINGLY DISMISSED. HOWEVER AS REGARDS THE DISA LLOWANCE CONFIRMED BY THE LEARNED CIT(A) IN A SUM OF RS.1 22 499/- IN RESPECT OF TWO PARTIES NAMELY SHRI CHANDULAL M. THAKKAR AND SHRI VIPUL ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 8 CHANDULAL THAKKAR WE FIND THAT THE INSPECTOR CONDU CTED INQUIRY FROM THESE PARTIES AND INQUIRY REPORT WAS RELIED UPON F OR THE PURPOSE OF MAKING THE DISALLOWANCE AND CONFIRMING THE DISALLOW ANCE BUT THE REPORT OF INSPECTOR WAS NEVER CONFRONTED TO THE ASS ESSEE FOR REPLY. TO THAT EXTENT THE ORDERS OF THE AUTHORITIES BELOW CA NNOT BE SUSTAINED IN LAW. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AU THORITIES BELOW TO THAT EXTENT OF DISALLOWANCE MADE IN A SUM OF RS.1 2 2 499/- IN RESPECT OF THESE TWO COMMISSION AGENTS AND RESTORE THIS ISS UE TO THE FILE OF THE AO WITH DIRECTION TO SUPPLY THE COPY OF THE REP ORT OF THE INSPECTOR TO THE ASSESSEE AND AFTER HEARING OBJECTION OF THE ASSESSEE THE AO SHALL PASS REASONED ORDER BY GIVING REASONABLE SUFF ICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT GROU ND NO.2 OF THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. 9. IN THE RESULT GROUND NO.1 OF THE APPEAL OF THE REVENUE IS DISMISSED WHEREAS GROUND NO.2 OF THE CROSS OBJECTI ON OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 10. ON GROUND NO.2 THE REVENUE CHALLENGED THE DE LETION OF ADDITION OF RS.8 64 909/- MADE ON ACCOUNT OF BAD DE BTS. THE AO NOTED THAT CLAIM OF BAD DEBT IS DEBITED IN RESPECT OF 10 PARTIES. THE AO ON VERIFICATION OF THE ACCOUNTS OF THESE PARTIES NOTED THAT EVEN THE TRANSACTIONS HAVE BEEN MADE DURING THE YEAR UND ER CONSIDERATION. IT IS HOWEVER NOT CLEAR AS TO WHY T HE ASSESSEE HAD CHOSEN TO WRITE OFF THE AMOUNT OF BAD DEBT WHEN THE ASSESSEE WAS HAVING TRANSACTIONS WITH THE SAME PARTIES. THE AO R ELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF DHALL ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 9 ENTERPRISES AND REJECTED THE CLAIM OF THE ASSESSEE BECAUSE ASSESSEES CLAIM FOR DEDUCTION OF BAD DEBT WAS NOT TENABLE. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED CIT(A) A ND IT WAS SUBMITTED THAT COMPLETE DETAILS WERE FILED ON RECOR D AND CIRCUMSTANCES WERE EXPLAINED UNDER WHICH THE DEBT H AS BECOME BAD AND ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT TO W RITE OFF THE BAD DEBT AS PER LAW. IT WAS SUBMITTED THAT THERE IS AME NDMENT IN THE PROVISIONS OF SECTION 36(1) (VII) OF THE IT ACT AND ACCORDING TO THE AMENDED PROVISIONS THE CLAIM OF THE ASSESSEE IS ALL OWABLE FOR DEDUCTION. THE LEARNED CIT(A) CONSIDERING THE EXPLA NATION OF THE ASSESSEE AND MATERIAL ON RECORD ACCEPTED THE CLAIM OF THE ASSESSEE WHICH WAS IN ACCORDANCE WITH THE PROVISIONS OF LAW AND ACCORDINGLY DELETED THE ADDITION. 11. ON CONSIDERATION OF THE SUBMISSIONS OF THE PART IES WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE ASSESSEE HAS FILED CHART SHOWING NAME OF THE PARTIES AND THE TRANSACTIONS AND REASONS FOR WHICH THE AMOUNTS WERE WRITTEN OFF IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE. IT WAS ALSO POINTED OUT TH AT IN ASSESSMENT YEAR 2008-09 ALSO SIMILAR CLAIM HAS BEEN ALLOWED BY THE AO IN THE ORDER U/S 143 (3) OF THE IT ACT (PB-57). THE LEARNE D DR CONCEDED THAT THE ISSUE IS NOW COVERED BY THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. VS CIT 323 ITR 397 IN WHICH IT HAS BEEN HELD AS UNDER : THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 10 IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER IN THE PRESENT CASE THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS IN FACT BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED THUS CLOSING THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER IN FACT THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. CONSIDERING THE ABOVE FACTS IT IS CLEAR THAT THE B AD DEBT WAS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSE E IN THE PREVIOUS YEAR. THEREFORE CONDITIONS OF SECTION 36(1) (VII) OF THE IT ACT ARE SATISFIED IN THE CASE OF THE ASSESSEE. THE ISSUE IS THEREFORE COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE JUDGMENT OF THE HONBLE SUPREME COURT. THERE IS NO MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. SAME IS ACCORDINGLY DISMISSED. 12. ON GROUND NO.3 THE REVENUE CHALLENGED THE ORDE R OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.1 1 66 087/- U/S 40A(2) (B) OF THE IT ACT. THE AO ON VERIFICATION OF THE PROFIT & LOSS ACCOUNT NOTED THAT THE ASSESSEE HAS CLAIMED INTERES T EXPENSES OF RS.48 60 897/- WHICH WAS PAID TO 30 ENTITIES. THE A SSESSEE FURNISHED DETAILS OF INTEREST EXPENSES RATE OF INTEREST AND NAME OF THE PARTIES. ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 11 IT WAS FOUND THAT INTEREST HAS BEEN PAID TO THESE P ARTIES @12%. THE PROVISIONS OF SECTION 40A (2) (B) OF THE IT ACT APP LY TO THESE PARTIES. THE AO ALSO NOTED THAT THE ASSESSEE HAS RECEIVED IN TEREST @ 8% ON THE DEPOSITS MADE BY THE ASSESSEE COMPANY WITH VARI OUS PERSONS. THE AO CONSIDERING THE EXPLANATION OF THE ASSESSEE NOTED THAT 9% RATE WOULD BE REASONABLE AND EXCESSIVE INTEREST WAS FOUND BY 3 PER CENT AND ACCORDINGLY THE SAME WAS DISALLOWED IN A SUM OF RS.11 65 087/-. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE FILED COMPLETE DETAILS OF INTEREST PAID WH ICH WAS PAID WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AS SESSEE BORROWED FUNDS FROM VARIOUS PARTIES WHO ARE NOT RELATIVE OF THE DIRECTORS AND BORROWED FUNDS FROM BANK ALSO. ALL THE BORROWED FUN DS WERE UTILIZED FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAS ALSO PAID ADVANCE AND DEPOSITS TO OTHER PARTIES FOR BUSINESS PURPOSES . THEREFORE BENCHMARK OF 9% OF INTEREST AS NOTED BY THE AO IS U NJUSTIFIED. IT WAS SUBMITTED THAT THE ASSESSEE PAID INTEREST @ 12.75% TO THE NATIONALIZED BANK AND COPY OF THE LETTER DATED 10-1 2-2006 ISSUED BY THE BANK OF INDIA WAS FILED IN SUPPORT OF THE CONTE NTION (CORRECT DATE OF CERTIFICATE IS 10-01-2006). IT WAS THEREFORE S UBMITTED THAT RATE OF INTEREST PAID BY THE ASSESSEE IS REASONABLE. THE LE ARNED CIT(A) CONSIDERING THE FACTS AND MATERIAL ON RECORD NOTED THAT PAYMENT OF INTEREST FOR BUSINESS PURPOSE IS NOT DOUBTED BY THE AO. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT BOR ROWED FUNDS HAVE NOT BEEN UTILIZED FOR BUSINESS PURPOSE. THE LEARNED CIT(A) ALSO NOTED THAT LOAN FROM BANKS WERE ALSO TAKEN AND THE ASSESS EE HAD TO BORROW MONEY FROM OTHER PERSONS IN ORDER TO AVOID THE DELA Y IN COMPLETING THE FORMALITIES WHICH IS CONVENIENT TO THE BUSINESS OF THE ASSESSEE. ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 12 THE LEARNED CIT(A) THEREFORE NOTED THAT THE ASSES SEE HAS PAID REASONABLE RATE OF INTEREST AND ACCORDINGLY DELETED THE ENTIRE ADDITION. 13. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND R EFERRED TO THE LETTER OF BANK OF INDIA DATED 10-1-2006 THROUGH WHI CH THE ASSESSEE PAID RATE OF INTEREST TO THE NATIONALIZED BANK @ 12 .75%. COPY OF THE LETTER IS FILED ON RECORD. HE HAS ALSO FILED ANOTHE R LETTER OF BANK OF INDIA DATED 17-4-2008 TO SHOW THAT EVEN RATE OF INT EREST PAYABLE TO NATIONALIZED BANKS WAS 13.75%. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ASSESSMENT YEAR 2008 -09 INTEREST WAS PAID @ 12% ON WHICH NO DISALLOWANCE HAS BEEN MA DE BY THE AO IN THE ORDER U/S 143(3) OF THE IT ACT (PB-57). T HE LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO PB-59 WHICH IS ST ATEMENT OF INTEREST TO SHOW THAT EVEN IN SUBSEQUENT YEAR THE RATE OF IN TEREST WAS 12% WHICH WAS PAID TO THE SAME PARTIES AND NO DISALLOWA NCE HAS BEEN MADE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE AO HAS FAILED TO MAKE OUT ANY CASE OF EXCESSIVE OR UNR EASONABLE PAYMENT OF INTEREST. 14. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE A RE OF THE VIEW NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE ASSES SEE HAS EXPLAINED BEFORE THE AUTHORITIES BELOW THAT INTEREST WAS PAID @ 12% TO THE PARTIES FOR BUSINESS PURPOSES WHICH WERE ALSO PAID IN THE SUBSEQUENT YEAR AT THE SAME RATE. NO DISALLOWANCE HAS BEEN MAD E IN THE ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 13 SUBSEQUENT YEAR EVEN IN THE PROCEEDINGS U/S 143 (3) OF THE IT ACT. THE AO HAS NOT CITED ANY COMPARABLE CASE TO SHOW IF THE RATE OF INTEREST OF 12% WAS EXCESSIVE OR UNREASONABLE. THE LETTERS FROM THE BANK OF INDIA ARE FILED ON RECORD TO SHOW THAT EVEN THE INTEREST PAID TO NATIONALIZED BANK WAS @ 12.75% AND 13.75%. AS COMPA RED TO THE INTEREST PAID TO NATIONALIZED BANK THE ASSESSEE HA S PAID LESSER INTEREST. MERELY BECAUSE THE ASSESSEE RECEIVED 8% I NTEREST ON TRADING DEPOSITS WOULD NOT BE A GROUND TO MAKE DISA LLOWANCE IN THE CASE OF THE ASSESSEE. IN ANY CASE EVEN FOR APPLYIN G PROVISIONS OF SECTION 40A (2) (B) OF THE IT ACT IT IS FOR THE AO TO MAKE OUT A CASE THAT THE EXPENDITURE INCURRED IS EXCESSIVE OR UNREA SONABLE IN REGARD TO THE FAIR MARKET VALUE OF SUCH SERVICES. NO EFFOR T IN THIS REGARD HAS BEEN MADE BY THE AO. THE HONBLE SUPREME COURT IN THE CASE OF UPPER INDIA PUBLISHING HOUSE PVT. LTD. 117 ITR 569 HELD THAT BEFORE PROVISIONS OF SECTION 40A (2) IS APPLIED T HE AO SHOULD HAVE PROVED EXPENDITURE IS EXCESSIVE OR UNREASONABL E. CONSIDERING THE FACTS AND CIRCUMSTANCES AND MATERIA L AVAILABLE ON RECORD WE DO NOT FIND ANY JUSTIFICATION TO INTERFE RE WITH THE ORDER OF THE LEARNED CIT(A). WE CONFIRM HIS FINDINGS AND DIS MISS GROUND NO.3 OF THE APPEAL OF THE REVENUE. 15. NO OTHER GROUND IS ARGUED OR PRESSED. 16. IN THE RESULT THE DEPARTMENTAL APPEAL IS DISMI SSED. ITA NO.2182/AHD/2009 AND CO NO.139/AHD/2009 M/S.REMIX TRADING CO.PVT. LTD. 14 17. RESULTANTLY THE DEPARTMENTAL APPEAL IS DISMISS ED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18-03-2011 SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 18-03-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD