The ITO, Ward-3(1),, Ahmedabad v. Shri Gopalbhai Revabhai Patel,, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND N. S. SAINI AM) ITA NO.1802/AHD/2007 A. Y: 2004-05 THE INCOME TAX OFFICER WARD 3(1) 5 TH FLOOR INSURANCE BUILDING ASHRAM ROAD AHMEDABAD VS GOPALBHAI REVABHAI PATEL 8 DHANLAXMI SOCIETY ODHAV AHMEDABAD PA NO. AGAPP 5087 E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAJA RAM SHAH DR RESPONDENT BY SHRI P. M. MEHTA AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER OF THE CIT(A)-VII AHMEDABAD DATED 13 -02-2007 FOR THE ASSESSMENT YEAR 2004-05 ON THE FOLLOWING GROUND: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO WORK OUT THE INTEREST AFTER EXCLUDING THE INTEREST OF BAD DEBT ALLOWED. 2. BRIEFLY THE FACTS ARE THAT IN THIS CASE SEARCH WAS CONDUCTED U/S 132 OF THE IT ACT AT THE RESIDENCE AND BUSINESS PRE MISES OF THE ASSESSEE ON 8 TH DECEMBER 1998. IT WAS FOUND THAT APART FROM THE B USINESS OF WEIGHBRIDGE THE ASSESSEE WAS ALSO INVOLVED IN THE BUSINESS OF MONEY LENDING. IN THIS SARAFI BUSINESS THE ASSESSEE HAS G IVEN CASH LOANS FROM HIS OWN UNDISCLOSED INCOME AND WAS EARNING INTEREST THEREON. THIS FACT WAS ACCEPTED BY THE ASSESSEE IN HIS STATEMENT RECOR DED U/S 132 (4) OF THE IT ACT. ON THE BASIS OF THE LOANS AND ADVANCES FOUND FROM THE DOCUMENTS SEIZED IN THE COURSE OF SEARCH THE INTER EST ACCRUED ON THESE LOANS WAS ADDED AS INTEREST INCOME DURING THE SUBSE QUENT ASSESSMENT YEAR. THE ISSUE OF LOANS AND ADVANCES WAS CONSIDERE D BY THE LEARNED CIT(A)-I AHMEDABAD IN THE ORDER RELATING TO BLOCK ASSESSMENT AND VIDE ITA NO.1802/AHD/2007 GOPALBHAI REVABHAI PATEL 2 ORDER DATED 26-02-2002 THE CLAIM OF THE ASSESSEE WA S ALLOWED. HE HAS HELD THAT A PART OF THE OUTSTANDING LOANS AS ON T HE DATE OF THE SEARCH HAS TO BE TREATED AS BAD DEBTS. THE DEPARTMENT FILE D APPEAL BEFORE THE TRIBUNAL. DURING THE SUBSEQUENT PERIOD THE AO IN T HE ASSESSMENT PROCEEDINGS ADDED INTEREST INCOME RELATING TO THE L OANS GIVEN BY THE ASSESSEE AS PER THE BOOKS OF ACCOUNT SEIZED AND MAD E THE ADDITION IN THE ASSESSMENT YEARS 1999-2000 AND 2000-01. THE LEARNED CIT(A) HELD THAT THE LOANS AND ADVANCES WHICH WERE TREATED AS BAD DE BTS IN THE BLOCK ASSESSMENT ORDER SHOULD BE EXCLUDED FOR THE PURPOSE OF COMPUTING INTEREST INCOME. BY FOLLOWING THE ORDER FOR THE ASS ESSMENT YEARS 1999- 2000 AND 2000-01 IT WAS HELD THAT THE ASSESSEE IS L IABLE TO PAY TAX ON INTEREST INCOME ON THE LOAN OTHER THAN THE CASE OF BAD DEBTS AS DECIDED VIDE ORDER DATED 26-02-2002. THE LEARNED CIT(A) TH EREFORE HELD THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE LEARNED CIT(A) FOR ASSESSMENT YEARS 1999-2000 AND 2000-01. THE AO WAS ACCORDINGLY DIRECTED TO EXCLUDE THE AMOUNT OF BAD D EBTS ALLOWED AND WORK OUT THE CORRECT AMOUNT OF INTEREST TO BE ADDED TO THE INCOME. 3. THE LEARNED COUNSEL FOR THEE ASSESSEE AT THE OUT SET SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF ITAT AHMEDABAD BENCH IN THE CASE OF THE SAME ASSESSEE IN IT(SS) A NO.81/AHD/2002 AND IT (SS) A NO.112/AHD/2002 IN WHICH THE TRIBUNAL DIRECTED THE AO TO VERIFY THE QUANTUM OF BAD DEBTS CLAIMED BY THE ASSESSEE AND AL LOW THE DEDUCTION ACCORDINGLY. HE HAS ALSO FILED COPY OF THE ORDER IN THE CASE OF THE SAME ASSESSEE FOR ASSESSMENT YEARS 1999-2000 AND 2000-01 IN ITA NO.3904/AHD/2002 AND 3052/AHD/2003 AND ITA NO.3344/ AHD/2003 IN WHICH THE DEPARTMENTAL APPEAL ON IDENTICAL ISSUE HA S BEEN DISMISSED. THE LEARNED DR ADMITTED HAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE LEARNED CIT(A) AS WELL AS BY THE ORDER OF THE TRIBUNAL AS NOTED ABOVE. ITA NO.1802/AHD/2007 GOPALBHAI REVABHAI PATEL 3 4. ON CONSIDERATION OF THE ABOVE FACTS WE DO NOT F IND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE LEARNED CIT(A) FOR THE BLOCK PERIOD AS WELL AS REGULAR ASSESSMENT ORDER FOR ASSESSMENT YEARS 1999- 2000 AND 2000-01. THE TRIBUNAL ALSO CONFIRMED THE VIEW OF THE LEARNED CIT(A) IN THE ORDERS REFERRED TO ABOVE BY THE LEARNED COUNSEL FOR THE AS SESSEE. THE DEPARTMENTAL APPEAL THEREFORE FAILS AND IS DISMIS SED. 5. AS A RESULT THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-04-2010. SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 23- 04-2010 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