Shri Kashyap R.Chokhawala(HUF), Surat v. The ACIT.,Circle-2,, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI A.N.PHAUJA ACCOUNTANT MEMBER ITA NO.2800/AHD/2009 ASSESSMENT YEAR:2006-07 DATE OF HEARING:1.4.10 DRAFTED:9.4.10 KASHYAP R CHOKHAWALA (HUF) DALIASHERI NAVAPURA SURAT PAN NO.AACHK1910R V/S. ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE-2 SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI RASESH B SHAH AR RESPONDENT BY:- SMT. NEETA SHAH SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-II SURAT IN APPEAL NO.CAS/II/3 37/08-09 DATED 28-07-2009. THE ASSESSMENT WAS FRAMED BY THE ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE-2 SURAT U/S.143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 26-12-2008 FOR THE ASSESSMENT YEAR 2006 -07. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND DISALLOWING THE CLAIM OF BAD DEBT MADE IN PROFIT & LOSS A/C. OF THE ASSESSEE. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE IS ENGAGED IN BUSINESS OF CHEQUES DISCOUNTING AND EARNING COMMISS ION INCOME UNDER THE PROPERTY CONCERN OF M/S. K.R. CORPORATION. DURING THE YEAR UNDER CONSIDERATION SURVEY U/S. 133A OF THE ACT WAS CONDUCTED ON THE BUSINESS PREMI SES OF THE ASSESSEE AND DURING THE COURSE OF SURVEY ASSESSEE DISCLOSED UND ISCLOSED INCOME OF RS.1 25 34 173/-. THE ASSESSEE DISCLOSED THE INCOME DECLARED DURING THE COURSE OF ITA NO.2800/AHD/2009 A.Y.2006-07 KASHYAP R CHOKHAWALA V. ACIT CIR- SURAT P AGE 2 SURVEY IN THE RETURN OF INCOME AND ALSO CLAIMED BAD DEBTS OF RS.62 04 328/-. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF CLAIM OF BAD DEB TS. THE ASSESSEE FURNISHED LIST OF NAMES OF PARTIES ADDRESSES AMOUNT CHEQUES NO. AN D BANK ON WHICH THE CHEQUES WERE DRAWN AND PAID IN ANNEXURE-A. ACCORDING TO ASS ESSING OFFICER THIS LIST ALSO CONTENTS COURT CASE NO. WHEREIN SUITS HAVE BEEN FIL ED BY THE ASSESSEE. BEFORE THE ASSESSING OFFICER ASSESSEE CONTENDED THAT ALL THE C HEQUES WERE GIVEN FOR DISCOUNTING BY M/S. SURAJ CORPORATION TO WHOM THE C ASH IN RETURN WAS PAID EQUIVALENT TO THE CHEQUES AMOUNT AFTER DEDUCTING CO MMISSION. ACCORDING TO THE ASSESSEE THE CHEQUES SUBSEQUENTLY DISOWNED AND RET URNED BY THE BANK WITH THE REASONS AND PAYMENT STOPPED BY DRAWER. THE ASSESSE E STATED THAT CHEQUES TOTALING TO RS.97 LAKH WAS RECEIVED FROM M/S.SURAJ CORPORATION FOR DISCOUNTING AND IN LIEU THEREOF CASH TO PAID TO M/S. SURAJ CORPORATION . ACCORDING TO ASSESSEE THE CHEQUES GOT DISOWNED AND BAD DEBT TO THE TUNE OF RS .34 LAKH WAS CLAIMED IN ASSESSMENT YEAR 2005-06 AND BALANCE RS.63 LAKHS WAS CLAIMED IN THE YEAR UNDER CONSIDERATION. AS PER THE CHEQUES BOOK THE ASSESS EE HAS PAID CASH BUT THE ASSESSING OFFICER NOTED THAT THE CASH BOOK DOES NOT GIVE THE NAME OF CLIENT TO WHOM CASH IS PAID AND ACCOUNT OF WHOSE CHEQUES. ACCORDIN G TO ASSESSING OFFICER AS THE ASSESSEE COULD NOT PROVE THAT M/S. SURAJ CORPORATIO N IS DEBTOR AND THE CHEQUES DISOWNED BELONGING TO M/S. SURAJ CORPORATION AND HE PROPOSED TO DISALLOW ADD THIS CLAIM OF BAD DEBT. THE AO ALSO POINTED OUT THAT ON E MORE DISCREPANCY THAT THE CHEQUES OF M/S. SURAJ CORPORATION IS STAMPED WITH I DENTIFICATION MARK NO.15 IN THE CASE OF M/S. SURAJ CORPORATION. ACCORDING TO ASSESS ING OFFICER ONLY TWO CHEQUES NOS. 05940 AND 059505 DATED 19-05-2004 ISSUED BY SI MRAN TEXTILES IN THE NAME OF K.R. CORPORATION DISCOUNTED BY THE ASSESSEE. ACCORD ING TO AO THESE CHEQUES DO NOT BEAR THE STAMP NO.15 AND ACCORDINGLY THE CLAIM OF THE ASSESSEE IS NOT SUBSTANTIATE. HE FURTHER NOTED THAT THE UNACCOUNTE D INCOME UNEARTHED DURING THE SURVEY AND CONSEQUENTLY OTHER BY THE ASSESSEE UNDER THE HEAD UNACCOUNTED ADVANCE AMOUNTING TO RS.1 08 50 000/- IS OUT OF THE CLAIM OF BAD DEBTS AND ACCORDING TO AO THE MONEY LENDING IS NOT THE BUSINE SS OF THE ASSESSEE WHEREAS THE BUSINESS OF ONLY CHEQUES DISCOUNTING AND SINCE THE MONEY SO FAR AS THE BUSINESS OF ASSESSEE IS NOT MONEY-LENDING THE INCOME DECLARED IS NOT ON ACCOUNT OF INTEREST INCOME AND ASSESSEE HAS INVESTED HIS OWN CAPITAL TO DISCOUNT THE CHEQUES OF THIRD PARTY AND EARNED COMMISSION INCOME AND AT THE BEST THIS CAN BE SAID THAT THE CAPITAL ITA NO.2800/AHD/2009 A.Y.2006-07 KASHYAP R CHOKHAWALA V. ACIT CIR- SURAT P AGE 3 OF HIS BUSINESS IS LOST DUE TO DISOWNING OF CHEQUES AND DRAFTS BY THE BANK. ACCORDING TO AO THE CLAIM OF BAD DEBT CANNOT BE ALLOWED. 4. FOR THIS HE PARTICULARLY GIVEN A FINDING IN PARA-8 OF HIS ORDER AS UNDER:- 8. IN THE ASSESSEE OF THE ASSESSEE IT IS SEEN THAT THE AMOUNT CLAIMED AS BAD DEBTS HAS NOT BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE I.E. IT HAS NOT BEEN OFFERED AS INCOME IN ANY OF THE EARLIER YEARS. FURTHER AS PER THE ASSESSEE HIMSELF IT IS NOT INTO MONEY LENDING BUSINESS BUT IS IN THE BUSINESS OF CHEQUES AND DRAFT DISCOUNTING . THIS ALSO GETS EVIDENT FROM THE FACT THAT THE ASSESSEE HAS NOT SHOWN ANY I NTEREST INCOME BUT HAS SHOWN DISCOUNTING AND COMMISSION INCOME WHICH CANNO T BE SAID TO HAVE BEEN EARNED IN THE BUSINESS OF MONEY LENDING SINCE IN THE BUSINESS OF MONEY LENDING A ASSESSEE EARNS INTEREST INCOME. IN THIS CASE THE ASSESSEE HAD INVESTED HIS OWN CAPITAL SO AS TO DISCOUNT THIR D PARTY CHEQUES AND DRAFTS WHICH WERE DISCOUNTED HAVE BEEN DISHONORED BY THE B ANK. THUS THIS IS A CLEAR CASE OF A CAPITAL LOSS AND NOT A REVENUE LOSS . THE ACT IS VERY CLEAR IN CASE OF CLAIM OF BAD DEBTS SUCH THAT BAD DEBTS ARE ALLOWABLE ONLY IN CASE IF THE SAID AMOUNT HAS BEEN OFFERED AS INCOME IN ANY O F THE EARLIER YEARS WHICH IS NOT THE FACT IN THE PRESENT CASE. THE ACT ALSO A LLOWS BAD DEBTS IN RESPECT OF THE ORDINARY BUSINESS OF BANKING OR MONEY LENDING B USINESS HOWEVER THE ASSESSEE HAS HIMSELF STATED THAT HE IS INTO CHEQUES DISCOUNTING BUSINESS AND NOT INTO MONEY LENDING BUSINESS AND HENCE HE IS NO T ELIGIBLE TO CLAIM THE SUBJECT AMOUNT AS BAD DEBTS. 5. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT( A). THE CIT(A) ALSO DISMISSED THE CLAIM OF THE ASSESSEE VIDE PARA-5 OF HIS APPELLATE ORDER WHICH READS AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE FINDINGS AND CO NCLUSION OF THE AO ON ONE HAND AND THE WRITTEN SUBMISSIONS OF THE AR ON THE O THER. AT THE VERY OUTSET I AM OF THE VIEW THAT THE AO WAS FULLY JUSTIFIED IN R EJECTING THE ASSESSEES CLAIM OF BAD DEBTS TO THE EXTENT OF RS.62 04 328. FIRSTLY AS NOTED BY THE AO THERE WAS NO ENTRY IN THE CASH BOOK OF THE NAMES OF THE P ARTIES WHOSE CHEQUES HAD ALLEGEDLY BEEN DISCOUNTED BY THE ASSESSEE TO THE EX TENT OF RS.62 04 328. THE ASSESSEES CLAIM IS THAT IT HAD REDISCOUNTED CHEQU ES GIVEN TO IT BY M/S. SURAJ CORPORATION DRAWN BY DIFFERENT PARTIES THE DETAILS OF WHICH WERE FURNISHED BEFORE THE AO WHO HAS ANNEXED THE LIST TO THE ASST. ORDER. THE ASSESSEE HAS CLAIMED TO HAVE FILED COURT CASES NOT ONLY AGAINST M/S. SURAJ CORPORATION AND ITS PARTNERS BUT ALSO AGAINST THE PARTIES WHO HAD D RAWN THE CHEQUES. IF THAT WAS THE CASE THEN THE ASSESSEES RECORDS ESPECIALL Y THE CASH BOOK OUGHT TO HAVE REFLECTED THE NAMES OF THE PARTIES TO WHOM CAS H HAD BEEN GIVEN BY THE ASSESSEE WHILE DISCOUNTING THEIR CHEQUES. NOT ONLY THIS THE CASH BOOK OUGHT TO HAVE SHOWN THE FLOW OF CASH AND THE AVAILABILITY OF CASH IN THE HANDS OF THE ASSESSEE BEFORE BEING GIVEN TO THE SAID PARTIES. WH AT MUST BE NOTED IS THAT MOST OF THE BUSINESS OF CHEQUES DISCOUNTING IS DONE OUTSIDE THE BOOKS. IT IS A BUSINESS WHICH INVOLVES DEALING IN CASH WHICH IS N OT ALWAYS AVAILABLE IN THE HANDS OF THE CHEQUES DISCOUNTER OF SHROFF. CASH I S THEREFORE BORROWED FROM FINANCIERS AND OTHER PARTIES WHICH IS ALMOST ALL TH E TIME NOT ACCOUNTED FOR EITHER BY THE FINANCIERS THEMSELVES OR BY THE SHRO FF OR THE DISCOUNTER. THIS ITA NO.2800/AHD/2009 A.Y.2006-07 KASHYAP R CHOKHAWALA V. ACIT CIR- SURAT P AGE 4 OBSERVATION IS SUPPORTED BY THE BREAK-UP OF THE DIS CLOSURE OF RS.1 25 34 173 MADE BY THE ASSESSEE IN COURSE OF THE SURVEY U/S.13 3A OF THE IT ACT WHICH HAS BEEN REPRODUCED BY THE AO ON PAGE-2 OF THE ASST . ORDER AND FURTHER REPRODUCED EARLIER IN THIS ORDER. THE EXCESS CASH F OUND WITH THE ASSESSEE WAS RS.11 31 173 . THE UNACCOUNTED ADVANCES ADMITTE D BY THE ASSESSEE WAS RS.1 08 50 000 WHILE THE UNACCOUNTED INTEREST INCOME WAS RS.5 53 000. GIVEN SUCH A SCENARIO IT WAS NECESSARY FOR THE ASS ESSEE TO SHOW COMPLETE ENTRIES IN THE CASH BOOK REGARDING THE SOURCE OF TH E CASH AS ALSO THE NAMES OF THE PARTIES TO WHOM SUCH CASH WAS GIVEN AGAINST THE CHEQUES RECEIVED. IN HIS WRITTEN SUBMISSION THE AR HAS NOT ADDRESSED THI S ISSUE WHICH WAS JUSTIFIABLY RAISED BY THE AO. THE AR HAS ONLY STATE D THAT THE CONTENTION OF THE ASSESSEE COULD NOT BE REGARDED AS BASELESS ON THE G ROUND THAT THE CASH BOOK DID NOT INDICATE THE NAMES OF THE CLIENTS WHOS E CHEQUES WERE DISCOUNTED. SINCE THE SOURCE OF THE CASH AND THE CA SH TRANSACTIONS WERE NOT PROPERLY RECODED AND ACCOUNTED FOR THE CLAIM OF BA D DEBTS WAS JUSTIFIABLY DISALLOWED. AGGRIEVED ASSESSEE CAME IN SECOND APPEAL BEFORE US . 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED TH E CASE RECORDS INCLUDING THE ASSESSMENT ORDER THE ORDER OF CIT(A) THE ASSESSEE S PAPER BOOK AND THE SUBMISSIONS AND RELIANCE PLACED ON CASE LAWS BY BOT H THE SIDES. WE FIND THAT THE FACTS ARE UNDISPUTED AS ASSESSEE HAS GIVEN COMPLETE DETAILS RELATING TO THE CLAIM OF BAD DEBTS BY FILING THE COPY OF ACCOUNT OF M/S. SUR AJ CORPORATION THE DEBTOR. THE BAD DEBT WAS RELATING TO THE CHEQUES RECEIVED FROM M/S. SURAJ CORPORATION FOR DISCOUNTING AND THE ASSESSEE PAID CASH AGAINST THE RECEIPT OF THE CHEQUES TO M/S SURAJ CORPORATION RECEIVED FROM HIS CLIENTS FOR DIS COUNTING. DURING THE YEAR UNDER CONSIDERATION CHEQUES WORTH RS.97 LAKLHS WERE RETU RNED BY THE BANK AS THE PARTNERS HARI MALPANI AND SURAJNATH SIDH CLOSED THE FIRM AND THEY DID NOT PAY THE AMOUNT BORROWED FROM PUBLIC AND EVEN TILL TODAY HAS NOT P AID ANY AMOUNT TO ANY TO ASSESSEE AND THUS ASSESSEES AMOUNT OF RS.95 25 154 /- LAKH HAVE BECOME IRRECOVERABLE. ASSESSEE HAS FIELD COURT SUITS AGAIN ST DRAWER OF THE CHEQUES SURAJNATH SIDDH HARI MALPANI AND THE FIRM M/S. SUR AJ CORPORATION. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE USED TO PUT MARK OF 15 ON BACK OF THE CHEQUES DISCOUNTED WITH ASSESSEE. ASSESSEE HAS WRITTEN OFF BAD DEBT OF RS.34 LAKHS DURING HE PREVIOUS ENDING AS ON 31-03-2005 AND AMOUNT OF R S.62 04 328/- WAS WRITTEN OFF DURING PREVIOUS YEAR ENDING AS ON 31-03-2006 RELEVA NT TO ASSESSMENT YEAR UNDER CONSIDERATION. ASSESSEE ALSO RECOVERED AMOUNT FROM THREE PARTIES TWO PARTIES MADE PAYMENT AT THE NOTICE STAGE AND ONE PARTY MADE PAYMENT AFTER FILING OF SUIT ITA NO.2800/AHD/2009 A.Y.2006-07 KASHYAP R CHOKHAWALA V. ACIT CIR- SURAT P AGE 5 AGAINST THEM. THE TWO PARTIES HAVE ALSO CONFESSED I N THEIR CONFIRMATION LETTER THAT CHEQUES WERE DISCOUNTED BY THEM WITH SURAJ CORPORAT ION AND THE SAME WAS REDISCOUNTED WITH ASSESSEE. ASSESSEE EXPLAINED THE ABOVE NARRATED FACTS VIDE LETTER DATED 22-11-2008 IN RESPONSE TO SHOW CAUSE NOTICE I SSUED BY AO ON 11-11-2008. ASSESSEE ALSO FILED DETAILS OF THE COURT CASES LODG ED BY HIM IN CIVIL COURT AGAINST SUJARNATH SIDDH HARI MALPANI AND THEIR FIRM M/S. S URAJ CORPORATION. THE CIVIL SUITS WERE ALSO FILED AGAINST THE DRAWER OF THE CHEQUES A ND THEIR COMPLETE NAMES AND ADDRESSES WERE ALSO GIVEN. ASSESSEE FILED THE STATE MENT INDICATING CASE NO. OF THE COURT NAME OF THE DRAWER OF THE CHEQUES ADDRESS O F THE DRAWER AMOUNT OF THE CHEQUES CHEQUES NO. AND NAME OF THE BANK IN RESPEC T OF BAD DEBT CLAIMED. 7. WE FIND THAT AN INQUIRY WAS MADE BY CENTRAL EXCI SE DEPARTMENT REGARDING CHEQUES DRAWN BY EOU UNITS WHEREIN MR. SURAJNATH H AS CONFIRMED THAT SAID CHEQUES WERE RECEIVED BY HIM FROM EOU UNITS AND HE HAS REDISCOUNTED SUCH CHEQUES WITH K.R. CORPORATION. WE FURTHER FIND FROM THE RECORDS THAT SHRI SURAJNATH APPEARED BEFORE EXCISE AUTHORITY AND IN HIS STATEME NT HE CONFIRMED TO HAVE GIVEN THE CHEQUES FOR DISCOUNTING TO M/S. K.R. CORPORATIO N. ASSESSEE ALSO FILED THE COPY OF THE STATEMENTS OF ASSESSEE AND SURAJNATH SIDDH GIVE N BEFORE EXCISE AUTHORITY. THE SHOW CAUSE NOTICE ISSUED BY AO WAS BASED ON THE STA TEMENT GIVEN BY MR. SURAJNATH WHERE HE STATED THAT HE DID NOT EVER DEAL WITH THE ASSESSEE. AO THEREFORE CLEVERLY IGNORED THE ASSESSEES SUBMISSION BY OBSERVING THAT NO MARK OF 15 WAS FOUND ON THE CHEQUES THAT WERE RETURNED. IN FACT ALL THE RET URNED CHEQUES THAT WERE GIVEN TO AO BORE MARK 15 ON THE REVERSE OF THE CHEQUES. WE F IND THAT THE ASSESSEE HAS GIVEN COMPLETE DETAILS RELATING TO THE NAME AND ADD RESS OF THE DRAWERS OF CHEQUES THE AO COULD HAVE MADE INQUIRY ON HIS OWN IF HE WAS NOT SATISFIED WITH THE EXPLANATION OF ASSESSEE. THE CONTENTION OF ASSESSEE CANNOT BE REGARDED AS BASELESS ON THE GROUND THAT CASH BOOK DO NOT INDICA TE NAME OF THE CLIENTS WHOSE CHEQUES WERE DISCOUNTED. IN FACT ASSESSEE HAS ACTU ALLY PARTED WITH THE CASH AT THE TIME OF DISCOUNTING OF CHEQUES AND SAID CHEQUES WER E STAMPED WITH NO.15 WHICH IS THE IDENTIFICATION MARK OF SURAJ CORPORATION. THE O BSERVATIONS OF AO IN THE ASSESSMENT ORDER ON THE BASIS OF STATEMENT OF SURA J NATH SIDDH PROP. OF SURAT CORPORATION AND ON THE ALLEGED PERUSAL OF CHEQUES R EFERRED TO IN SAID STATEMENT THAT THE SAME DO NOT BEAR STAMP NO.15 WHICH IS IDENTIFI CATION MARK OF SURAT CORPORATION IS NOT CORRECT FACT. IN FACT IT IS ALSO PERTINENT T O POINT OUT HERE THAT EXCISE AUTHORITIES ITA NO.2800/AHD/2009 A.Y.2006-07 KASHYAP R CHOKHAWALA V. ACIT CIR- SURAT P AGE 6 RECORDED THE STATEMENT OF ASSESSEE AND OF SURAJ NAT H SIDDH ON 22-07-2004 AND ASSESSEE CLEARLY EXPLAINED IN THE STATEMENT THAT HE RECEIVED FIVE CHEQUES OF VARIOUS PARTIES FROM SURAJ NATH SIDDH PROP. OF SURAT CORPOR ATION FOR THE PURPOSE OF DISCOUNTING. HE ALSO MENTIONED IN THE STATEMENT THA T THE STAMP OF NO.15 IS ALSO PUT ON THE REVERSE SIDE OF ALL THE SAID 5 CHEQUES. SUBS EQUENTLY EXCISE AUTHORITIES ALSO RECORDED THE STATEMENT OF SURAJ NATH SIDDH AND DURI NG THE COURSE OF RECORDING OF HIS STATEMENT ASSESSEES STATEMENT WAS ALSO SHOWED TO H IM AND HE CATEGORICALLY STATED THAT HE FULLY AGREE WITH THE CONTENT OF THE SAME. I N FACT HE WAS NOT HAVING ANY OTHER OPTION BUT TO STATE THAT HE DOES NOT HAVE ANY DEALI NG WITH ASSESSEE BECAUSE ASSESSEE HAS FILED SUIT AGAINST HIM ON ACCOUNT OF D ISHONORED OF CHEQUES OF VARIOUS PARTIES AGGREGATING TO RS.95 25 154/- WHICH WERE RE CEIVED FROM HIM. THE ASSESSEE HAS FILED ABOVE SUIT AFTER THE DATE ON WHICH THE ST ATEMENT WAS RECORDED BY THE EXCISE AUTHORITIES AND BECAUSE OF THIS DEVELOPMENT THE ABOVE PARTY CHANGED HIS STAND AS HE HAD NO OTHER OPTION. HOWEVER ASSESSEE HAS FILED ENOUGH EVIDENCES WHICH CLEARLY JUSTIFIES THE CHEQUES WERE RECEIVED F ROM SURAJ CORPORATION. WE FIND THAT ASSESSEE HAS FILED SUITS AGAINST VARIOUS PARTI ES AND HAS TAKEN ALL THE POSSIBLE STEPS FOR RECOVERY OF AMOUNT BUT TILL TODAY NOTHING HAS BEEN RECEIVED. THE ASSESSEE HAS FILED COMPLETE DETAILS IN THE COURSE OF ASSESSM ENT PROCEEDINGS WHICH CLEARLY SUBSTANTIATE THE GENUINENESS OF LOSS SUFFERED BY HI M. 8. THE CONTENTION OF AO THAT LOSS IS CAPITAL LOSS A ND THEREFORE NOT DEDUCTIBLE IS ALSO NOT CORRECT BECAUSE LOSS WHICH IS ARISING IN T HE NORMAL COURSE OF BUSINESS IS REQUIRED TO BE TREATED AS REVENUE LOSS AND NOT CAPI TAL LOSS. THE ASSESSEE IS INTO THE BUSINESS OF CHEQUES DISCOUNTING AND IN THIS BUSINES S THERE IS A BIG RISK PERTAINING TO DISHONOR OF CHEQUES FOR WHICH PAYMENTS ARE ALREADY MADE AT THE TIME OF DISCOUNTING AFTER DEDUCTING COMMISSION. AS SUCH LOSS IS VERY MU CH A REVENUE LOSS AND THE CLAIM OF ASSESSEE CANNOT BE REJECTED ON THE GROUND THAT T HE SAME REPRESENTS CAPITAL LOSS. IN SUPPORT OF THE CONTENTION THAT THE LOSS IS REQUI RED TO BE ALLOWED AS TRADING LOSS RELIANCE IS PLACED BY THE ASSESSEE ON THE HONBLE C ALCUTTA HIGH COURT DECISION IN THE CASE OF CIT V. W.HOWRAH & CO. P. LTD. (1992) 194 ITR 345 (CAL) WHEREIN PAYMENT BY ASSESSEE (PRINCIPAL BROKER) OF 50% OF LO SSES SUFFERED BY JUTE MILL ON ACCOUNT OF FAILURE OF ASSESSEE TO SUPPLY RAW MATERI AL TO JUTE MILLS WAS HELD TO BE ALLOWABLE. FURTHER RELIANCE WAS PLACED ON JURISDICT IONAL HIGH COURT IN THE CASE OF CIT V. ABDUL RAZAK & CO. (1982) 136 ITR 825 (GUJ) WHEREIN IT WAS HELD THAT WHERE ITA NO.2800/AHD/2009 A.Y.2006-07 KASHYAP R CHOKHAWALA V. ACIT CIR- SURAT P AGE 7 COMMISSION AGENT ADVANCES MONEY FOR INTEREST TO CON STITUENTS IN THE NORMAL COURSE OF SUCH AGENCY BAD DEBTS ARISING ON ADVANCES NOT P AID IS ALLOWABLE AS A TRADING LOSS U/S.28. RATIO OF THIS DECISION IS ALSO DIRECTL Y APPLICABLE TO THE FACTS OF ASSESSEES CASE AND AS SUCH NO DISALLOWANCE CAN BE MADE. FURTH ER THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S. EQUTORIAL PVT. LTD. 1974 TAX 37(3)-82 IN ITR NO.12 OF 1971 DATED 23-11-1973 HELD THAT IF THE AMOUNT IS N OT ALLOWABLE AS BAD DEBT IT CAN BE ALLOWED AS TRADING LOSS. AS REGARDS THE CONTENTION OF AO IN PARA NO.5 THAT ALLEGED BAD DEBT IS PART OF UNACCOUNTED INCOME UNEARTHED DU RING THE COURSE OF SURVEY AND THEREFORE THE LOSS IS NOT DEDUCTIBLE IT WAS SUBMIT TED THAT THE SURVEY WAS CONDUCTED ON 25-01-2006 WHEREAS ASSESSEE HAS ACTUALLY MADE CA SH PAYMENTS AGAINST DISCOUNTING OF VARIOUS INSTRUMENTS MUCH EARLIER IN THE PRECEDING YEAR I.E. BEFORE THE DATE OF SURVEY AND IT IS NOT THE CASE OF CLAIMING A NY LOSS IN RESPECT OF INCOME WHICH IS DISCLOSED IN THE COURSE OF SURVEY. 9. WE FURTHER FIND FROM THE ACCOUNTS FOR THE YEAR E NDED 31 ST MARCH 2005 THAT THERE IS SUNDRY DEBTOR IN THE NAME OF SURAJ CORPORA TION TO THE EXTENT OF RS.62 49 328/- AND BALANCE RS.34 LAKH WAS CLAIMED A S BAD DEBT IN ASSESSMENT YEAR 2005-06. BOTH THE AUTHORITIES BELOW HAS NOT DOUBTE D THE TRANSACTIONS AS THERE IS CONCURRENT FINDING THAT THIS LOSS IS A CAPITAL LOSS AND NOT A TRADING LOSS OR BAD DEBTS. WE FIND THAT THE ASSESSEE IS INTO THE BUSINESS OF C HEQUES DISCOUNTING AND IN THIS BUSINESS THERE IS A BIG RISK PERTAINING TO DISHONOR OF CHEQUES FOR WHICH PAYMENTS ARE ALREADY MADE AT THE TIME OF DISCOUNTING AFTER DEDUC TING COMMISSION. AS SUCH LOSS IS VERY MUCH A REVENUE LOSS AND THE CLAIM OF ASSESSEE CANNOT BE REJECTED ON THE GROUND THAT THE SAME REPRESENTS CAPITAL LOSS. ACCO RDINGLY THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 10. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30/04/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 30/04/2010 *DKP COPY OF THE ORDER FORWARDED TO :- ITA NO.2800/AHD/2009 A.Y.2006-07 KASHYAP R CHOKHAWALA V. ACIT CIR- SURAT P AGE 8 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-II SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD