ITO, Wd. 1(1), Solapur, v. Arti Company,, Solapur

ITA 1388/PUN/2005 | 2001-2002
Pronouncement Date: 21-12-2010 | Result: Dismissed

Appeal Details

RSA Number 138824514 RSA 2005
Assessee PAN AACFA4075H
Bench Pune
Appeal Number ITA 1388/PUN/2005
Duration Of Justice 5 year(s) 6 month(s) 17 day(s)
Appellant ITO, Wd. 1(1), Solapur,
Respondent Arti Company,, Solapur
Appeal Type Income Tax Appeal
Pronouncement Date 21-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 21-12-2010
Assessment Year 2001-2002
Appeal Filed On 03-06-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER I.T.A. NO. 1388/PN/2005 : A.Y. 2001-02 I.T.O. WARD 1(1) SOLAPUR : APPELLANT VS. M/S. ARTI COMPANY 640 WEST MANGALWAR PETH SOLAPUR PAN AACFA 4075 H RESPONDENT APPELLANT BY: SHRI HARESHWAR SHARMA RESPONDENT BY: SHRI S.R. KARWA ORDER PER SHAILENDRA KUMAR YADAV JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III PUNE DATED 16-3-2005 FOR A. Y. 2001- 02. 2. THE FIRST ISSUE IS WITH REGARDS TO ADDITION OF RS. 6 44 937/- MADE ON ACCOUNT OF HIRE PURCHASE CHA RGES ACCRUED FROM 21 PARTIES. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS NOTICED THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE FIRM HAS RECE IVED THE INCOME BY WAY OF REVENUE HIRE CHARGES AND INTER EST WORTH RS. 34 61 192/- AND AFTER DEBITING EXPENSES O F PAGE 2 OF 6 ITA 1388//PN/05 ARTI COMPANY A.Y. 2001-02 FINANCING CHARGES AND ADMINISTRATION AMOUNTING TO RS. 34 93 272/- THE ASSESSEE COMPANY HAS SHOWN LOSS OF RS. 3 281/-. THE ASSESSING OFFICER FURTHER OBSERVE D THAT THERE WERE CERTAIN ACCOUNTS WHEREIN INTEREST AND IN COME ACCRUED ON THESE ACCOUNTS WERE NOT CREDITED AND SHO WN IN THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER HAS TE ST CHECKED ABOUT 21 SUCH CASES AND ASKED THE ASSESSEE THAT WHY THE INTEREST ACCRUED ON SUCH ACCOUNTS SHOULD NO T BE TAXED IN THE YEAR OF ACCOUNT KEEPING IN VIEW THE SY STEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. FINALLY THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CON TENTION AND MADE AN ADDITION OF RS. 6 44 944/- ON ACCOUNT O F HIRE CHARGES AND INTEREST WITH THE REASONING THAT THE AS SESSEE FIRM HAS KEPT CHARGES ON THE VEHICLES AGAINST WHICH THE LOANS WERE ADVANCED AND AS SUCH THERE MUST BE SOME AGREEMENTS AND AS THE ASSESSEE HAS NOT PRODUCED ANY SUCH AGREEMENTS IN THIS REGARD. 2.1. THE MATTER WAS CARRIED IN APPEAL BEFORE THE CI T(A) WHEREIN RELIEF WAS GRANTED TO THE ASSESSEE VIDE DE TAILED REASONING GIVEN IN PARAS 3.3 AND 3.4 OF HIS ORDER. SAME HAS BEEN OPPOSED BEFORE US. PAGE 3 OF 6 ITA 1388//PN/05 ARTI COMPANY A.Y. 2001-02 THE LEARNED DR HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER WHILE THE LEARNED AR HAS HEAVILY RELIED ON THE ORDER OF THE CIT(A). 2.2 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL ON RECORD WE FIND THAT THE ASSESSING OFFICER HAS MADE THE ADDITION FOR INTEREST ACCRUED MAINLY O N THE FOLLOWING BASIS; (I) THE ASSESSEE IS IN THE BUSINESS OF SHARE PURCHA SE AND MONEY LENDING; (II) IN SOME OF THE ACCOUNT BEING TEST CHECKED BY T HE ASSESSING OFFICER NO INTEREST HAS BEEN CREDITED. BESIDES THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD THAT WHETHER INTEREST WAS ACTUALLY PAYABLE B Y THESE PARTIES. THERE IS NOTHING ON RECORD WHETHER THE ASS ESSEE IS HAVING ANY HIRE PURCHASE AGREEMENTS WITH THESE PART IES. DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASS ESSEE FILED EVIDENCES IN THE FORM OF CONFIRMATION AND HAS ALSO PRODUCED THE BOOKS OF ACCOUNTS WHICH REVEALED THAT (I) NO INTEREST WAS PAYABLE TO THESE PARTIES (II) THESE LOANS WERE NOT GIVEN IN THE SCHEME OF HI RE PURCHASE FOR PURCHASE OF VEHICLE; PAGE 4 OF 6 ITA 1388//PN/05 ARTI COMPANY A.Y. 2001-02 (III) THESE WERE THE INTEREST FREE ADVANCES GIVEN B Y THE ASSESSEE TO THESE PARTIES. 2.3 WE FIND NOTHING ON RECORD THAT ANY INTEREST ACC RUED TO THE ASSESSEE IN THIS CONNECTION. THE ASSESSEE PROD UCED THE BOOKS OF ACCOUNT AND ALSO THE BANK STATEMENT WH EREIN IT WAS FOUND THAT THESE ADVANCES HAVE NOT BEEN GIVE N OUT OF BORROWED FUNDS. HENCE ADDITION MADE BY THE ASSE SSING OFFICER ON ACCOUNT OF THE ACCRUED INTEREST WAS RIGH TLY DELETED BY THE CIT(A) WHICH NEEDS NO INTERFERENCE F ROM OUR SIDE. WE UPHOLD THE SAME. 3. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE O F BAD DEBT AMOUNTING TO RS. 10 03 807/-. FOR THE YEAR UN DER CONSIDERATION THE ASSESSEE FIRM HAS CLAIMED BAD DEB TS AMOUNTING TO RS. 10 03 807/-. TO VERIFY THE GENUIN ENESS OF THE ASSESSEES CLAIM THE ASSESSING OFFICER MADE INQUIRIES IN 6 CASES OUT OF 18 CASES WHEREIN THE BAD DEBTS HA VE BEEN CLAIMED BY THE ASSESSEE AND ON THE BASIS OF INQUIRI ES AND THE SUBMISSIONS FILED BY THE ASSESSEE THE ASSESSIN G OFFICER DISALLOWED THE CLAIM OF ASSESSEE ON ACCOUNT OF BAD DEBTS AMOUNTING TO RS. 10 03 807/- AS DISCUSSED IN PARA 6 7 AND 8 OF THE ASSESSMENT ORDER. PAGE 5 OF 6 ITA 1388//PN/05 ARTI COMPANY A.Y. 2001-02 THE MATTER WAS CARRIED IN APPEAL AND VARIOUS SUBMISSIONS WERE RAISED AND AFTER CONSIDERING THE S AME THE CLAIM OF THE ASSESSEE WAS ALLOWED BY THE CIT(A) . THE SAME HAS BEEN OPPOSED BEFORE US. 3.1 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL ON RECORD WE FIND THAT THE ASSESSEE H AS CLAIMED BAD DEBTS AMOUNTING TO RS. 10 03 807/-. TH ERE IS NO DISPUTE THAT THE BAD DEBT CLAIMED BY THE ASSESSE E HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. ALL THE BAD DEBTS CLAIMED AS BAD DEBTS HAVE BEEN TAKEN INTO ACCOUNT I N COMPUTING THE INCOME EITHER IN THIS YEAR OR IN THE EARLIER YEARS. THE BAD DEBTS ARE ALLOWABLE U/S 36(1)(VII) OF THE ACT PROVIDED THE FOLLOWING CONDITIONS ARE FULFILLED; I) IT HAS BEEN SHOWN AS INCOME BY THE ASSESSEE; II) THE BAD DEBT HAS ACTUALLY BEEN WRITTEN OFF IN T HE BOOKS OF ASSESSEE. 3.2 IN VIEW OF THE FACTS STATED ABOVE AND IN PARTIC ULAR THAT THE BAD DEBTS HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS THE DISALLOWANCE IN QUESTION IS NOT JUSTIF IED AND THE SAME HAS RIGHTLY BEEN DELETED BY THE CIT(A). WE UPHOLD THE SAME. PAGE 6 OF 6 ITA 1388//PN/05 ARTI COMPANY A.Y. 2001-02 THIS AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT O F HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS . CIT (2010) 230 CTR (SC) 14 WHEREIN IT HAS BEEN HELD AS UNDER: AFTER 1 ST APRIL 1989 IT IS NOT NECESSARY FOR THE ASSESSEE T O ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECO VERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. 4. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 21ST DEC EMBER 2010. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER PUNE DATED THE _21ST DECEMBER 2010 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-III PUNE 4. THE CIT- IV PUNE 5. THE D.R A BENCH PUNE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE