Mohan Kallaya Jangam,, Sangli v. Joint Commissioner of Income-tax,,

ITA 1906/PUN/2013 | 2010-2011
Pronouncement Date: 30-04-2015 | Result: Partly Allowed

Appeal Details

RSA Number 190624514 RSA 2013
Assessee PAN ADZPJ6802H
Bench Pune
Appeal Number ITA 1906/PUN/2013
Duration Of Justice 1 year(s) 6 month(s) 5 day(s)
Appellant Mohan Kallaya Jangam,, Sangli
Respondent Joint Commissioner of Income-tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 30-04-2015
Assessment Year 2010-2011
Appeal Filed On 25-10-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE MS. SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO.1906/PN/2013 ASSESSMENT YEAR : 2010-11 MOHAN KALLAYA JANGAM 17 SHANTIBAN COMPLEX 100 FEET ROAD NEMINATHNAGAR SANGLI 416 415. PAN : ADZPJ6802H . APPELLANT VS. THE JT. COMMISSIONER OF INCOME TAX RANGE-1 SANGLI. . RESPONDENT APPELLANT BY : SHRI C. H. NANIWADEKAR RESPONDENT BY : SHRI CHANDIP SINGH DATE OF HEARING : 28-04-2015 DATE OF PRONOUNCEMENT : 30-04-2015 ORDER PER SUSHMA CHOWLA JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A) KOLHAPUR DATED 20.08.2013 RELATING TO ASSESSMENT YEAR 2010-1 1 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF RS.25 37 311/- CLAIMED AS BAD DEBTS BY THE ASSESSEE . HE FAILED TO CONSIDER THE FACTS IN ITS PROPER PERSPECTIVE. IN ANY CASE HE O UGHT TO HAVE APPRECIATED THAT THE DEDUCTION IS ALLOWABLE UNDER SECTION 28/29 OF T HE ACT. 2. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF RS.6 00 592/- OUT OF LABOUR CHARGES. HE FAILED TO APPRECIATE THE ARGUMENTS AND CONTENTIONS ADVANCED IN THIS BEHALF. 3. THE APPELLANT CRAVES LEAVE TO ADD ALTER DELETE OR SUBSTITUTE ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE ISSUE IN GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS IN RELATION TO DISALLOWANCE OF RS.25 37 311/- CLAIMED AS BAD DEBTS BY THE ASSESSEE. ITA NO.1906/PN/2013 2 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE WAS ENGAGED IN CIVIL CONSTRUCTION PARTICULARLY FOR MAHARASHTRA KR ISHNA VALLEY DEVELOPMENT CORPORATION. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DEBITED A SUM OF RS.25 37 311/- UNDER THE HEAD BAD DEBTS IN THE PROFIT & LOSS ACCOUNT. THE EXPLANATION OF THE ASSESSEE VIS--VIS THE SAID BAD DEBTS WAS THAT THE SAME INCLUDED IRRECOVERABLE TENDER DEPOSIT SECURITY DEP OSIT AND OTHER MISCELLANEOUS DEPOSITS WHICH WERE LONG OUTSTANDING AND NOT TRACEA BLE HENCE IRRECOVERABLE. THE ASSESSEE FURTHER EXPLAINED THAT THE EMD REPRESE NTS AMOUNT DEPOSITED WITH THE PRINCIPAL AT THE TIME OF THE BIDDING THE TENDER . THE SD REPRESENTS AMOUNT DEDUCTED FROM CONTRACT BILL BY THE PRINCIPAL AS PER AGREEMENT AND KEPT WITH THEM DURING THE DEFECT LIABILITY PERIOD. AS PER THE ASS ESSEE BOTH THE TENDER DEPOSIT AND SECURITY DEPOSIT WERE DEBTS OF THE BUSINESS AND REVENUE IN NATURE. SINCE THE ASSESSEE HAD WRITTEN-OFF OF THE SAID DEPOSITS A S IRRECOVERABLE IN ITS BOOKS OF ACCOUNT THE PLEA OF THE ASSESSEE WAS THAT THE SAME WAS ALLOWABLE AS BAD DEBTS IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE SUPRE ME COURT IN TRF LTD. VS. CIT 230 CTR 14 (SC). 5. THE ASSESSING OFFICER NOTED THAT THE AFORESAID B AD DEBTS WERE THE AMOUNT WHICH WERE OUTSTANDING FROM THE STATE GOVERNMENT ON ACCOUNT OF TENDER DEPOSIT SECURITY DEPOSIT MISCELLANEOUS DEPOSIT E TC.. SINCE ASSESSEE COULD NOT PRODUCE THE DOCUMENTARY EVIDENCE TO SUBSTANTIATE TH AT THE DEPOSITS KEPT WITH GOVERNMENT DEPARTMENT WERE OUTSTANDING SINCE LONG THE ASSESSING OFFICER HELD THAT THE SAME CANNOT BE TREATED AS BAD DEBTS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DUES FROM THE GOVERNMENT DEPARTMENT C ANNOT BE TREATED AS IRRECOVERABLE AND ACCORDINGLY AN ADDITION OF RS.25 37 311/- WAS MADE IN THE HANDS OF THE ASSESSEE. 6. BEFORE THE CIT(A) ASSESSEE EXPLAINED THAT HE WA S A PARTNER IN THE FIRM M/S SHIVSHAKTI CONSTRUCTION COMPANY WHICH WAS DISS OLVED ON 29.12.2008 AND THE ASSESSEE TOOK OVER THE BUSINESS ALONG WITH ALL ASSETS AND LIABILITIES OF THE ITA NO.1906/PN/2013 3 FIRM. THE AMOUNTS OF BAD DEBTS WERE LONG OUTSTANDI NG AND WERE NOT TRACEABLE WHICH WERE WRITTEN-OFF IN THE BOOKS OF ACCOUNT AS I RRECOVERABLE. THE PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE SAME HAD BE EN TAKEN INTO ACCOUNT FOR COMPUTING THE INCOME OF THE ASSESSEE RELEVANT TO TH E PREVIOUS YEAR OR EARLIER YEAR. THE CIT(A) NOTED THAT IN FACTS IN ALL THE DE POSITS PERTAINED TO THE PERIOD PRIOR TO THE DISSOLUTION OF FIRM BUT THE NATURE OF DEBT COULD NOT BE ASCERTAINED FROM THE LIMITED DETAILS PROVIDED BY THE ASSESSEE. THE CIT(A) WAS OF THE VIEW THAT DUE TO ABSENCE OF DETAILS IT COULD NOT BE ASC ERTAINED HOW THE OUTSTANDING FROM THE GOVERNMENT DEPARTMENT AND GOVERNMENT AGENC IES COULD BE TREATED AS BAD DEBTS. IN VIEW THEREOF THE CIT(A) HELD THAT T HE DETAILS FROM THE GOVERNMENT DEPARTMENT COULD BE TREATED AS IRRECOVERABLE AND TH E CLAIM OF THE ASSESSEE IN THIS REGARD WAS THUS DISALLOWED. 7. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE SAID BAD DEBTS WERE RELATING TO THE PARTNERSHIP FIR M AND DUE TO THE DISPUTE BETWEEN THE PARTNERS THE NECESSARY DETAILS COULD N OT BE FURNISHED BEFORE THE AUTHORITIES BELOW. THE FIRST CONTENTION RAISED BY THE ASSESSEE WAS THAT THE ASSESSEE BEING THE SUCCESSOR IN BUSINESS COULD CLAI M THE SAID DEDUCTION IN ITS HAND IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. T. VEERABHADRA RAO. K. KOTESWARA RAO & CO. 155 ITR 152 (SC). SECONDLY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT AN APPLICATION WAS BEING MADE WITH THE PRAYER FOR ADMI SSION OF ADDITIONAL EVIDENCE IN THE FORM OF EXTRACT FROM THE M/S SHIVSHAKTI CONS TRUCTION COMPANY IN WHICH THE AFORESAID AMOUNTS OF SECURITY DEPOSITS MISCELLANEO US DEPOSITS ETC. WERE REFLECTED WHICH WERE TREATED AS CONTRACT RECEIPTS B Y THE ASSESSEE IN THE RELEVANT YEARS TO WHICH IT PERTAINED. THE SAID AMOUNT HAS N OT BEEN RECOVERED AND THE SAME WAS TREATED AS BAD DEBTS. THE PLEA OF THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US WAS THAT SOME OF THE COP IES OF ACCOUNT WERE BEING FILED AND IN CASE THE MATTER IS REMITTED TO THE FIL E OF THE ASSESSING OFFICER ITA NO.1906/PN/2013 4 COMPLETE EVIDENCE IN RELATION TO THE AFORESAID CLAI M WOULD BE FURNISHED BEFORE THE ASSESSING OFFICER IN ORDER TO JUSTIFY THE PROVI SIONS OF SECTION 36(2) OF THE ACT. 8. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE PLACING RELIANCE ON THE ORDER OF THE CIT(A) POINTED OUT THAT THERE WAS FORFEITURE OF THE AMOUNTS BECAUSE OF NON-COMPLETION OF THE CONSTRUCTION AND S UCH FORFEITURE WAS IN THE NATURE OF PENALTY AND THE ASSESSEE COULD NOT TAKE T HE BENEFIT OF THE SAME BY WAY OF WRITE-OFF OF THE AMOUNTS AS BAD DEBTS IN ITS BOO KS OF ACCOUNT. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING BEFORE US BY WAY OF GROUND OF APPEAL NO.1 I S IN RELATION TO THE ALLOWABILITY OF THE AMOUNTS WRITTEN-OFF IN THE BOOKS OF ACCOUNT AS BAD DEBTS BY THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AD CLAIMED THAT SUM OF RS.25 37 311/- WHICH WAS DUE FROM THE MAHARASHTRA K RISHNA VALLEY DEVELOPMENT CORPORATION HAD BECOME IRRECOVERABLE AN D HENCE THE SAME WAS WRITTEN-OFF IN ITS BOOKS OF ACCOUNT. THE ASSESSEE WAS A PARTNER OF A PARTNERSHIP FIRM WHICH WAS CARRYING ON CIVIL CONSTRUCTION WORK FOR MAHARASHTRA KRISHNA VALLEY DEVELOPMENT CORPORATION. THIS FIRM WAS DISS OLVED ON 29.12.2008 AND THE BUSINESS OF THE ERSTWHILE FIRM WAS TAKEN OVER BY TH E ASSESSEE AS SOLE PROPRIETOR ALONG WITH ALL THE ASSETS AND LIABILITIES. THE FOL LOWING AMOUNTS HAVE BEEN WRITTEN- OFF BY THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION :- (I) TENDER DEPOSIT - RS. 5 89 000/- (II) SECURITY DEPOSIT - RS.18 58 810/- (III) MISCELLANEOUS DEPOSIT - RS. 89 501/- TOTAL - RS.25 37 311/- 10. THE EXPLANATION OF THE ASSESSEE BEFORE THE AUTH ORITIES BELOW WAS THAT SINCE THE DETAILS OF THE VARIOUS AMOUNTS WHICH WER E SHOWN AS RECOVERABLE IN THE BOOKS OF ACCOUNT WERE NOT AVAILABLE WITH IT THE S AME WERE WRITTEN-OFF AS BAD DEBTS. THE AMOUNT OF TENDER DEPOSIT OF RS.5 89 000 /- AS PER CLAIM OF THE ITA NO.1906/PN/2013 5 ASSESSEE WAS RECOGNIZED AS PART OF THE CONTRACT REC EIPTS AND WAS WRITTEN-OFF BEING IRRECOVERABLE. WITH REGARD TO THE SECURITY D EPOSIT THE ASSESSEE CLAIMED THAT THE BALANCE AS ON 29.12.2008 WAS RS.62 20 495/ - OUT OF WHICH A SUM OF RS.18 58 810/- WAS WRITTEN-OFF AS BAD DEBTS. SINCE THE PARTNERSHIP FIRM BETWEEN ERSTWHILE PARTNERS WAS DISSOLVED BECAUSE OF DIFFERE NCES EARLIER THE DETAILS WERE NOT WITH THE ASSESSEE AND THE ASSESSEE WAS HANDICAP PED IN FURNISHING THE SAME BEFORE THE AUTHORITIES BELOW. HOWEVER THE ASSESSE E NOW CLAIMS THAT IT WAS IN POSSESSION OF ALL THE RELEVANT DATA AND COPIES OF A CCOUNT WHICH REFLECT THAT ALL THESE AMOUNTS WERE PART OF ITS CONTRACT RECEIPTS AN D SINCE THE SAME HAVE NOT BEEN RECOVERED TILL DATE THEY ARE IRRECOVERABLE AN D WERE WRITTEN-OFF IN THE BOOKS OF ACCOUNT AS BAD DEBTS. WE FIND THAT THE ASSESSEE HAD FAILED TO FURNISH THE REQUISITE DETAILS BEFORE THE AUTHORITIES BELOW WITH REGARD TO THE CLAIM OF WRITE-OFF AS BAD DEBTS UNDER SECTION 36(1)(VII) OF THE ACT. 11. UNDER THE PROVISIONS OF SECTION 36(1)(VII) OF T HE ACT THE AMOUNTS WHICH ARE WRITTEN-OFF AS IRRECOVERABLE IN THE BOOKS OF AC COUNT BY THE ASSESSEE CAN BE ALLOWED AS A DEDUCTION IN THE HANDS OF THE ASSESSEE SUBJECT TO FULFILLMENT OF THE CONDITIONS LAID DOWN SECTION 36(2) OF THE ACT WHICH INTER-ALIA PROVIDES THAT THE AMOUNT TO BE WRITTEN-OFF SHOULD HAVE BEEN RECOGNIZE D AS INCOME IN THE INSTANT ASSESSMENT YEAR OR IN ANY OF THE PRECEDING YEARS. THE WRITE-OFF OF THE BAD DEBTS AND THE FULFILLMENT OF THE CONDITIONS LAID DOWN IN SECTION 36(2) OF THE ACT ARE BOTH TO BE FULFILLED IN ORDER TO CLAIM THE BENEFIT OF DE DUCTION UNDER SECTION 36(1)(VII) OF THE ACT. IN THE INTERESTS OF JUSTICE WE ARE OF TH E VIEW THAT THE ISSUE NEEDS TO BE SET-ASIDE TO THE FILE OF THE ASSESSING OFFICER WHO IN TURN SHALL CONSIDER THE ADDITIONAL EVIDENCE NOW AVAILABLE WITH THE ASSESSEE AND ADJUDICATE THE ISSUE AFTER VERIFYING THE CLAIM OF THE ASSESSEE AND IN AC CORDANCE WITH LAW. REASONABLE OPPORTUNITY SHALL BE AFFORDED TO THE ASS ESSEE BY THE ASSESSING OFFICER. THE GROUND OF APPEAL NO.1 RAISED BY THE A SSESSEE IS THUS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1906/PN/2013 6 12. NOW COMING TO THE ISSUE IN GROUND OF APPEAL NO .2 THE ASSESSEE IS AGGRIEVED BY AD-HOC DISALLOWANCE OF 10% OUT OF LABO UR CHARGES. THE CASE OF THE ASSESSEE BEFORE US WAS THAT THE WORK OF THE ASSESSE E WAS LABOUR ORIENTED AND SINCE THE ASSESSEE WAS CARRYING ON THE CONSTRUCTION AT DIFFERENT SITES THE LABOUR HAD TO BE EMPLOYED AND THE LABOUR CHARGES WERE SUPP ORTED BY SELF-MADE VOUCHERS. THE ASSESSING OFFICER ON THE OTHER HAND NOTED THAT SOME OF THE BILLS WERE SUPPORTED BY SELF-MADE VOUCHERS AND SOME OF TH E VOUCHERS MAINTAINED BY THE ASSESSEE WERE NOT VERIFIABLE AND HE DISALLOWED 5% OUT OF RS.1 10 11 840/- I.E. RS.6 00 592/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER. 13. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES WHE RE THE ASSESSEE IS ENGAGED IN CIVIL CONSTRUCTION WORK WHICH IS MAJORLY LABOUR ORIENTED JOB THERE IS NECESSITY TO INCUR THE EXPENDITURE ON LABOUR. IN THE CASE OF THE ASSESSEE THE SAID EXPENDITURE IS SUPPORTED BY BILLS AND VOUCHERS OUT OF WHICH SOME OF THE VOUCHERS ARE SELF-MADE AND AS PER THE ASSESSING OFF ICER SOME OF THE VOUCHERS ARE NOT FULLY VERIFIABLE. IN THE ENTIRETY OF THE F ACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT THE DISALLOWANCE OF RS.2 00 000/- WOU LD MEET THE ENDS OF JUSTICE AND ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE OF RS.2 00 000/- IN THE HANDS OF THE ASSESSEE ON ACCOU NT OF LABOUR CHARGES. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THU S PARTLY ALLOWED. 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF APRIL 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 30 TH APRIL 2015 SUJEET ITA NO.1906/PN/2013 7 COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A) KOLHAPUR; 4) THE CIT KOLHAPUR; 5) THE DR A BENCH I.T.A.T. PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T. PUNE