Prabhu Shankar Agarwal, Kolkata v. DCIT, Central Circle - XIII, Kolkata, Kolkata

ITA 260/KOL/2011 | 2003-2004
Pronouncement Date: 18-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 26023514 RSA 2011
Assessee PAN ADEPA4448F
Bench Kolkata
Appeal Number ITA 260/KOL/2011
Duration Of Justice 9 month(s) 1 day(s)
Appellant Prabhu Shankar Agarwal, Kolkata
Respondent DCIT, Central Circle - XIII, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 18-11-2011
Date Of Final Hearing 19-07-2011
Next Hearing Date 19-07-2011
Assessment Year 2003-2004
Appeal Filed On 17-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE /AND . ! . '# ) [BEFORE SRI MAHAVIR SINGH JM & SHRI C. D. RAO AM] $ $ $ $ / I.T.A NO. 260/KOL/2011 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR: 2003-04 PRABHU SHANKAR AGARWAL VS. DEPUTY COMMISSIONER O F INCOME-TAX (PAN:ADEPA 4448 F) CENTRAL CIRCLE-XIII KOLKATA (*+ /APPELLANT ) ( -*+/ RESPONDENT ) DATE OF HEARING: 16.11.2011 DATE OF PRONOUNCEMENT: 18/11/2011 FOR THE APPELLANT: SHRI S. M. SURANA FOR THE RESPONDENT: SHRI B. D. HAZRA '. / ORDER PER MAHAVIR SINGH JM ( ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A) CENTRAL-II KOLKATA IN APPEAL NO.112/CC-XIII/CIT(A)C-II/KOL/06-07 DATED 29.10.201 0. ASSESSMENT WAS FRAMED BY ACIT CC-XIII KOLKATA U/S. 143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2003-04 VIDE HIS ORDER DATED 30 .03.2006. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF BAD DEBT ON THE GROUND THAT LOAN WA S NOT ADVANCED IN ORDINARY COURSE OF BUSINESS SINCE THE MONEY LENDING BUSINESS WAS DISCL OSED BY THE ASSESSEE IN THE COURSE OF SEARCH EVEN THOUGH SUCH MONEY LENDING BUSINESS WAS ACCEPTE D. FOR THIS ASSESSEE HAS RAISED FOLLOWING GROUND NOS.2 & 3: 2) FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.7 00 000/- BEING BAD DEBT WRITTEN OFF ON THE GROUND THAT THE LOAN WAS NO T ADVANCED IN ORD. COURSE OF BUSINESS SINCE THE MONEY LENDING BUSINESS WAS DISCLOSED BY T HE ASSESSEE IN THE COURSE OF SEARCH EVEN THOUGH SUCH MONEY LENDING BUSINESS WAS ACCEPTE D. 3) FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ADDITION OF RS.7 00 000/- WAS NOT JUSTIFIED. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED T HIS BAD DEBT OF RS.7 LACS BY RECORDING THAT 2 ITA 260/K/2011PRABHU SHANKAR AGARWAL A.Y.03-04 EXPENSES ARE NOT FOR THE PURPOSE OF MONEY LENDING B USINESS RATHER IT IS RELATED TO A PURPOSE WHICH IS AN OFFENCE PROHIBITED BY LAW. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO DISALLOWED BY STATING THAT ORDINARY COURSE OF B USINESS OF MONEY LENDING REPRESENTS LOANS AND ADVANCES DISCLOSED IN THE BOOKS OF ACCOUNT AND NOT THE AMOUNT ASSESSED AS UNDISCLOSED U/S. 158BC OF THE ACT IN CONSEQUENCE TO SEARCH CONDUCTED U/S. 132 OF THE ACT. ACCORDING TO HIM UNDISCLOSED LOANS AND ADVANCES IN A CLANDESTINE BUS INESS OF MONEY LENDING OF ASSESSEE CANNOT BE CALLED MONEY LENDING IN ORDINARY COURSE OF BUSIN ESS. ACCORDINGLY HE CONFIRMED THE DISALLOWANCE. 4. WE FIND THAT THE CLAIM OF BAD DEBTS WRITTEN OFF AMOUNTING TO RS.7 LACS DURING THE RELEVANT ASSESSMENT YEAR RELATES TO UNDISCLOSED INC OME ASSESSED ON ACCOUNT OF LOAN TRANSACTIONS ARISING OUT OF SEIZED MATERIAL IN CONSEQUENCE TO SE ARCH CONDUCTED ON 24.09.2001 U/S. 132 OF THE ACT AND CONSEQUENT ASSESSMENT FRAMED U/S. 158BC OF THE ACT. WE FIND THAT VARIOUS LOAN ACCOUNTS APPEARING IN THE SEIZED DOCUMENTS INVENTOR ISED AS HR-28 PAGES 3 TO 7 WHICH ORIGINATED BEFORE COMMENCEMENT OF BLOCK PERIOD AS W ELL AS LOAN ACCOUNTS ORIGINATED WITHIN BLOCK PERIOD HAVING BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT ALONG WITH INTEREST EARNED ON THIS DURING THE BLOCK PERIOD 01.04.1995 TO 24.09.20 01 DISCLOSING INTEREST INCOME FROM SUCH MONEY LENDING AND ASSESSED UNDER THE HEAD PROFIT OR GAINS OF BUSINESS OR PROFESSION. WE FURTHER FIND THAT THE DETAILS OF RECEIPT OF LOANS F ROM ASSESSEE DATE-WISE ARE AS UNDER: DATE OF ORIGIN NAME OF ACCOUNT AMOUNT 21.01.1992 SUDHA TEXTILES 350000.00 25.04.1994 BELLE CONSTRUCTION 200000.00 01.02.1994 UMESH 150000.00 700000.00 WE FIND THAT THE AO ASSESSED THESE LOANS AS UNDISCL OSED INCOME OF BLOCK PERIOD AFTER NOTICING THE SAME FROM SEIZED DOCUMENTS EVEN WHICH SHOWED T HAT THESE ENTRIES LIES OUTSIDE THE BLOCK PERIOD. AS RELIED ON BY LD. COUNSEL FOR THE ASSESS EE THE CASE LAW OF THIS TRIBUNAL ITAT CHENNAI D THIRD MEMBER BENCH IN THE CASE OF ACIT VS. M. N. RAJENDHRAN IN IT(SS)A NO.130/MAD/2005 BLOCK PERIOD 01.04.1995 TO 24.01.2 002 DATED 29.01.2010 WHEREIN LD. 3 RD MEMBER CONCURRING WITH LD. AM HAS DECIDED THE ISSUE AS UNDER: I HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND T HE MATERIAL ON RECORD. I HAVE ALSO CONSIDERED THE WRITTEN SUBMISSIONS PLACED ON RECORD BY BOTH THE PARTIES. AS MENTIONED EARLIER THE FACTS ARE NOT IN DISPUTE AND HENCE ARE NOT REPEATED. IT IS NOT IN DISPUTE THAT THE CHEQUES WHICH WERE FOUND IN THE COURSE OF SEARCH WE RE CHEQUES ISSUED BY VARIOUS PARTIES TO WHOM ADVANCES WERE MADE IN CASH OUT OF UNDISCLOS ED INCOME. THE CHEQUES WERE OBTAINED AS SECURITY. ADDITION ON THE BASIS OF SAME FACTS WAS MADE IN THE BROTHERS CASE. THE TRIBUNAL ACCEPTED THE PLEA OF THE ASSESSEE THAT NO INCOME ACCRUED TO THE ASSESSEE AS 3 ITA 260/K/2011PRABHU SHANKAR AGARWAL A.Y.03-04 THE CHEQUES REMAINED UNENCASHED. ACCORDINGLY THE T RIBUNAL AFTER OBSERVING THAT THE ADDITION WAS MADE ON THE BASIS OF THESE CHEQUES ONL Y ALLOWED THE TELESCOPING OF THE AMOUNT CLAIMED AS BAD DEBT. IN MY VIEW THE DESCRIP TION BAD DEBT IN THE FACTS OF THE PRESENT CASE IS SOMEWHAT MISLEADING. CORRECT TERMIN OLOGY HAS BEEN USED BY THE TRIBUNAL IN THE BROTHERS CASE AND THAT IS THE AMOUNT WHICH HAS NOT BEEN RECOVERED BY THE ASSESSEE IS TELESCOPED AGAINST THE UNDISCLOSED INCOME ASSESS ED ON THE BASIS OF THE SAME CHEQUES. THEREFORE I AM IN AGREEMENT WITH THE CONTENTION OF THE LEARNED COUNSEL THAT THE NAMES OF THE CREDITORS DO NOT MATTER. THOUGH THE LEARNED JM HAS MENTIONED IN PARA 6 OF HIS ORDER THAT THE DECISION IN THE CASE OF THE BROTHER IS ENT IRELY ON DIFFERENT POINT I FIND NO DIFFERENCE WHATSOEVER IN THE FACTS OF THE TWO CASES . IN FACT THE LEARNED JM HAS NOT EXPRESSED AS TO HOW THE CASE OF THE BROTHER IS DIFF ERENT FROM THE PRESENT CASE. THEREFORE IT WAS INCUMBENT ON THE LEARNED JM TO FOLLOW THE EARLI ER ORDER OF THE TRIBUNAL ON THE BASIS OF THE JUDGMENTS RELIED UPON BY THE LEARNED AM IN H IS ORDER. IT IS WELL ESTABLISHED THAT ON THE SAME SET OF FACTS A CO-ORDINATE BENCH OF THE T RIBUNAL CANNOT COME TO A DIAMETRICALLY OPPOSITE CONCLUSION THAN ARRIVED AT IN THE EARLIER CASE. ACCORDINGLY I CONCUR WITH THE VIEW TAKEN BY THE LEARNED AM IN DELETING THE ADDITI ON OF RS. 5 75 000. 5. WE AFTER GOING THROUGH THE FACTS IN THE PRESENT CASE ARE OF THE VIEW THAT THE BAD DEBTS ARE ARISING OUT OF UNDISCLOSED INCOME ASSESSEE BY A O IN THE BLOCK ASSESSMENT AND ONCE LOANS ARE ASSESSED AS UNDISCLOSED INCOME THE ASSESSEE CA N CLAIM THE BAD DEBTS ARISING OUT OF MONEY LENDING BUSINESS IN THE ORDINARY COURSE OF BUSINESS . EVEN OTHERWISE WE HAVE SUPPORT OF DECISION OF THIS TRIBUNAL THIRD MEMBER CASE IN THE CASE OF M. N. RAJENDHRAN (SUPRA). ACCORDINGLY WE ALLOW THE CLAIM AND REVERSE THE ORD ERS OF THE LOWER AUTHORITIES. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 6. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE ADDITION BY MAKING DISALLOWANCE U/S. 40A(3) OF THE ACT FOR CASH PAYMENT FOR EXPENSES. FOR THIS ASSESSEE HAS RAISED FOLLOWING GROUND NO.4: 4 .FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE AD DITION OF RS.1 08 900/- U/S. 40A(3) WHEN NO DISALLOWANCE CAN BE MADE CONSIDERING THE BU SINESS EXPEDIENCY. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSING OFFICER NOTED IN THE ASS ESSMENT ORDER THAT A SUM OF RS.5 44 504/- WAS PAID BY ASSESSEE TO CESC LTD. IN CASH FOR ELECT RICITY CHARGES. ASSESSEE CLAIMED BEFORE ASSESSING OFFICER THAT PAYMENT WAS MADE IN CASH TO CLAIM REBATE IMMEDIATE CONFIRMATION AND AVOID DELAY. ASSESSING OFFICER FOUND THAT THIS EXP LANATION IS NOT FALLING IN ANY OF THE EXCEPTION AS PROVIDED IN RULE 6DD OF THE I. T. RULES 1962 (H EREINAFTER REFERRED TO AS THE RULES). HENCE HE DISALLOWED 20% OF SUCH PAYMENT AT RS.1 08 900/- BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. AGGRIEVED ASSESSEE PRE FERRED APPEAL BEFORE CIT(A) WHO CONFIRMED THE ACTION OF ASSESSING OFFICER IN GIVING FOLLOWING FINDING IN PARA 4 OF HIS APPELLATE ORDER: 4 ITA 260/K/2011PRABHU SHANKAR AGARWAL A.Y.03-04 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMI SSIONS OF APPELLANT. THE CLAUSE (J) AS UNDER WAS OMITTED BY THE IT (FOURTEENTH AR NDT.) RULES 1995 W.E.F. 25-7-1995. PRIOR TO OMISSION CLAUSE (J) READ AS UNDER: I) IN ANY OTHER CASE WHERE THE ASSESSEE SATISFIES THE ASSESSING OFFICER THAT THE PAYMENT COULD NOT BE MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT (1) DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCE S OR (2) BECAUSE PAYMENT IN THE MANNER AFORESAID WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE HAVING REGA RD TO THE NATURE OF THE TRANSACTION AND THE NECESSITY FOR EXPEDITIOUS SETTL EMENT THEREOF; AND ALSO FURNISHES EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER AS TO THE GENUINENESS OF THE PAYMENT AND THE IDENTITY OF THE PAYEE. APPELLANT HAS RELIED ON CLAUSE (J) OF RULE 6DD OF T HE I. T. RULE WHICH HAS BEEN OMITTED SINCE 1995 AS MENTIONED ABOVE AND HAS NO APPLICATIO N FOR ASSESSMENT YEAR UNDER APPEAL. THERE IS NO CLAUSE UNDER RULE 6DD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL WHICH ALLOWS THE PAYMENT OF MORE THAN RS. 20.000/- IN CASH ON ACCOUNT OF EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES OR PAYMENT OTHERWISE THAN CASH WAS NOT PRACTICAL OR GENUINELY DIFFICULT FOR APPELLANT AS EARLIER. FOR T HE ASSESSMENT YEAR UNDER APPEAL THE ABOVE CLAUSE (J) WAS OMITTED AND REPLACED BY THREE CLAUSES (J) (K) AND (I) VIDE I T RULES 1995 AS UNDER: (J) WHERE THE PAYMENT IS MADE BY AN ASSESSEE BY W AY OF SALARY TO HIS EMPLOYEE AFTER DEDUCTING THE INCOME-TAX FROM SALARY IN ACCOR DANCE WITH THE PROVISIONS OF SECTION 192 OF THE ACT AND WHEN SUCH EMPLOYEE (I) IS TEMPORARILY POSTED FOR A CONTINUOUS PERIOD O F FIFTEEN DAYS OR MORE IN A PLACE OTHER THAN HIS NORMAL PLACE OF DUTY OR ON A SHIP; A ND II) DOES NOT MAINTAIN AN ACCOUNT IN ANY BANK AT SUC H PLACE OR SHIP (K) WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE; (L) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH OR GOODS OR SERVICES ON BEHALF OF S UCH PERSONS; THE CIRCUMSTANCES DESCRIBED BY THE APPELLANT SUCH A S CHEQUE SIGNING AUTHORITY WAS OUT OF STATION TO AVAIL THE REBATE FOR IMMEDIATE RES TORATION OF THE SUPPLY NON ACCEPTANCE OF CHEQUE/DRAFT AGAINST A NOTICE BILL BY CESC LTD. TO EXPEDITE THE PAYMENT ARE NOT COVERED BY THE CLAUSES (J) TO (I) WHICH REPLACED TH E EARLIER CLAUSE (J) VIDE I.T. (TWENTY FIRST AMENDMENT) RULES 1995 AND WHICH WERE APPLICAB LE FOR THE ASSESSMENT YEAR UNDER APPEAL. SUCH CIRCUMSTANCES ARE NOT COVERED IN OTHER CLAUSES OF RULE 6DD ALSO AND THEREFORE I HOLD THAT THE ASSESSING OFFICER HAS COR RECTLY DISALLOWED 20% OF THE RS.544504/- PAID IN CASH TO CESC LTD AMOUNTING OF R S. 1 08 900/- U/S 40A(3) OF THE I.T. ACT. 6. WE FIND THAT EVEN NOW BEFORE US ASSESSEE COULD N OT SUBSTANTIATE AS TO HOW THE ASSESSEES CASE FALLS UNDER RULE 6DD OF THE RULES A ND ONCE ASSESSEES CASE DOES NOT FALL UNDER ANY OF THE EXCEPTION AS PROVIDED IN RULE 6DD OF THE RULES ACTIONS OF LOWER AUTHORITIES DISALLOWING 20% OF RS.5 44 504/- I.E. RS.1 08 900/- U/S. 40A(3) OF THE ACT ARE NOT TO BE INTERFERED WITH. ACCORDINGLY THIS GROUND OF APPEA L OF ASSESSEE IS DISMISSED. 5 ITA 260/K/2011PRABHU SHANKAR AGARWAL A.Y.03-04 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 8. ORDER PRONOUNCED IN OPEN COURT ON 18.11.2011 SD/- SD/- . ! . '# (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( !# !# !# !#) )) ) DATED : 18TH NOVEMBER 2011 /0 %12 3 JD.(SR.P.S.) '. 4 5''6- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT SHRI PRABHU SHANKAR AGARWAL P-420 KAZ I NAZRUL ISLAM AVENUE KOLKATA-52. 2 -*+ / RESPONDENT DCIT CENTRAL CIRCLE-XIII KOLKATA. 3 . .% ( )/ THE CIT(A) KOLKATA 4. .% / CIT KOLKATA 5 . => % / DR KOLKATA BENCHES KOLKATA - / TRUE COPY '.%?/ BY ORDER 2 /ASSTT. REGISTRAR .