Income Tax Officer-Ward-30(1), Kolkata, Kolkata v. Kirti Jhunjhunwala, Kolkata

ITA 2852/KOL/2013 | 2002-2003
Pronouncement Date: 14-10-2016

Appeal Details

RSA Number 285223514 RSA 2013
Assessee PAN ACUPJ1908Q
Bench Kolkata
Appeal Number ITA 2852/KOL/2013
Duration Of Justice 2 year(s) 9 month(s) 21 day(s)
Appellant Income Tax Officer-Ward-30(1), Kolkata, Kolkata
Respondent Kirti Jhunjhunwala, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 14-10-2016
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 14-10-2016
Date Of Final Hearing 21-09-2016
Next Hearing Date 21-09-2016
Assessment Year 2002-2003
Appeal Filed On 24-12-2013
Judgment Text
1 ITA NO. 2852/KOL/2013 KIRTI JHUNJHUNWALA AY 2002-03 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN JM & SHRI M. BALAGAN ESH AM] I.T.A NO. 2852/KOL/2013 ASSESSMENT YEAR: 2002-03 INCOME-TAX OFFICER WD-30(1) KOLKATA. VS. KIRTI JHUNJHUNWALA (PAN: ACUPJ1908Q) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 21.09.2016 DATE OF PRONOUNCEMENT: 14.10.2016 FOR THE APPELLANT: SHRI RAJAT KR. KUREEL JCIT SR. DR FOR THE RESPONDENT: SHRI RAVI TULSIYAN FCA ORDER PER SHRI M. BALAGANESH AM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XIV KOLKATA VIDE APPEAL NO. 169/CIT(A)-XIV/09-10 DATED 02.09.2013. ASSESSME NT WAS FRAMED BY ITO WARD- 30(1) KOLKATA U/S. 147/143(3) OF THE INCOME TAX AC T 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2002-03 VIDE HIS ORDER DATED 03.12.20 09. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN DELETING THE ADDITION MADE TOWARDS INTEREST RECEIVA BLE ON LAND ON NOTIONAL BASIS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS A HUF FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE AO OBSERVED THAT THE ASSESSEE H AD ADVANCED LOAN TO ONE SHRI ASHOK KUMAR PODDER WHO WAS A RECOGNIZED STOCK BROKER IN S TOCK MARKET DURING AY 2001-02 BEARING AN INTEREST RATE OF 18% PER ANNUM. ACCORDI NGLY FOR AY 2001-02 A TOTAL PROVISION OF RS.7 84 603/- WAS MADE ON ACCOUNT OF INTEREST ON THE SAID LOAN ON ACCRUAL BASIS AND OFFERED THE TAX OUT OF WHICH AN AMOUNT OF RS.5 95 4 79/- WAS REALIZED. THE ASSESSEE DID NOT CHARGE INTEREST ON THE SAID LOAN DURING THE AY 2002 -03. ACCORDINGLY THE ASSESSEE WAS SHOW CAUSED AS TO WHY INTEREST INCOME ON THE SAID L OAN SHOULD NOT BE TAXED IN THE YEAR UNDER APPEAL AT THE INTEREST RATE OF 18%. THE ASSE SSEE REPLIED BY STATING THAT THE SAID PARTY BECAME A DEFAULTER IN THE STOCK EXCHANGE AT KOLKATA AND GOT ARRESTED AROUND SEPTEMBER/OCTOBER 2002. IT WAS ALSO SUBMITTED THA T THE ASSESSEE ALONG WITH OTHER FAMILY 2 ITA NO. 2852/KOL/2013 KIRTI JHUNJHUNWALA AY 2002-03 MEMBERS HAD FILED A CASE AGAINST THE SAID PARTY IN THE CALCUTTA HIGH COURT FOR SUCH DEFAULT VIDE CASE NO. C.S. NO. 60 OF 2004 DATED 11.03.2004. CRIMINAL PROCEEDINGS WERE ALSO INITIATED BY THE FAMILY MEMBERS OF THE ASSESSEE AGA INST THE SAID DEFAULTER IN THE COURT OF LD. 12 TH METROPOLITAN MAGISTRATE IN G.R. NO. 3439 OF NOVEMB ER 2001. ACCORDINGLY IT WAS SUBMITTED THAT THE PARTY TO WHOM LOAN WAS ADVANCED BECAME A DEFAULTER DURING THE FY 2001-02 RELEVANT TO AY UNDER APPEAL AND IT IS FOR T HIS REASON ONLY NO PROVISION FOR INTEREST WAS CREDITED IN THE ACCOUNTS OF THE ASSESSEE DURING AY 2002-03 AS REVENUE COULD NOT BE RECOGNIZED AND THE SAID PARTY BEING A DEFAULTER TH ERE WAS NO EXPECTATION OF THE PRINCIPAL AMOUNT BEING RECOVERED FROM AND THE POSSIBILITY OF RECOVERING THE INTEREST WAS VERY DOUBTFUL. IT WAS ALSO SUBMITTED THAT THE SAID PART Y WAS ABSCONDING AND SO A CRIMINAL COMPLAINT WAS ALSO LODGED AGAINST HIM IN NOVEMBER 2 001 AND SUBSEQUENTLY AN ARREST WARRANT WAS ALSO OBTAINED TO ARREST THE PARTY. THU S THE ASSESSEE EXPLAINED THAT IN THE YEAR UNDER APPEAL IT HAD COME TO THE KNOWLEDGE OF THE AS SESSEE THAT PRINCIPAL AMOUNT ITSELF WAS NOT RECOVERABLE AND AS SUCH THE QUESTION OF CHARGI NG INTEREST ON THE DOUBTFUL LOAN DOES NOT ARISE. THE LD. AO HOWEVER NOT BEING CONVINCED WI TH THIS ARGUMENT PROCEEDED TO ADD THE INTEREST COMPONENT @ 18% PER ANNUM AND COMPLETED TH E ASSESSMENT. 4. BEFORE THE LD CITA THE ASSESSEE REITERATED THE SUBMISSIONS AND ALSO STATED THAT SUBSEQUENTLY I.E. IN AY 2003-04 BOTH THE PRINCIPAL AND THE INTEREST PORTION WHICH WAS OUTSTANDING IN THE SAID PARTYS ACCOUNT WAS WRITTEN OFF AS BAD DEBT BY THE ASSESSEE AND CLAIMED AS DEDUCTION WHICH WAS ALSO ALLOWED BY THE AO IN THE ASSESSMENT. IT WAS ARGUED THAT THE SUBSEQUENT ACTION ITSELF STRENGTHENS THE N ON-CHARGING OF INTEREST IN AY 2002-03 AND PARTY BECOMING A DEFAULTER AND THEREBY THE CHANCE O F RECOVERING INTEREST BEING DOUBTFUL IS PROVED BEYOND DOUBT. THE LD. CIT(A) DULY APPRECIAT ED THE CONTENTIONS OF THE ASSESSEE AND DELETED THE ADDITION VIDE PARA 4.2 OF HIS ORDER BY OBSERVING AS UNDER: 4.2. I HAVE CONSIDERED THE SAID SUBMISSIONS OF TH E APPELLANT AND I AM IN AGREEMENT WITH THE SAME. ACTION OF THE APPELLANT BY FILING VARIOUS CA SES AGAINST THE DEFAULTER SHOWS THAT THE SAID LOAN HAD BECOME BAD DURING THE FY 2001-02 RELATING TO AY 2002-03 ITSELF. ONCE THE PRINCIPLE AMOUNT ITSELF HAD BECOME IRRECOVERABLE AND BAD THER EAFTER NO PRESUMPTION OF ACCRUAL OF INTEREST CAN BE DRAWN ON THE SAID PRINCIPAL AMOUNT. IN FACT THE AO HIMSELF HAS ACCEPTED THAT THE SAID LOAN HAD BECOME BAD BY ALLOWING THE APPEL LANTS CLAIM IN ITS ASSESSMENT DONE UNDER SECTION 143(3) FOR THE AY 2003-04. THEREFORE THER E IS NO DOUBT ON THE FACTS THAT THE SAID LOAN HAD BECOME BAD AND IRRECOVERABLE IN THE FY 2001-02 ITSELF RELATED TO THE PRESENT ASSESSMENT YEAR. EVEN AS9 MAKES IT CLEAR THAT INCOME CANNOT B E SAID TO HAVE ACCRUED UNLESS AN ASSESSEE IS CERTAIN OF RECEIVING THE SAME. IN THE PRESENT C ASE EVEN THE PRINCIPAL AMOUNT HAD BECOME UNCERTAIN AND WAS ALSO SUBSEQUENTLY WRITTEN OFF IN THE IMMEDIATELY SUBSEQUENT YEAR AND WAS ALSO ALLOWED BY THE AO. IN VIEW OF THE SAME I HOLD THAT THE ADDITION OF RS.8 33 535/- MADE BY THE AO IS NOT AS PER LAW AND I DELETE THE SAME. 3 ITA NO. 2852/KOL/2013 KIRTI JHUNJHUNWALA AY 2002-03 AGGRIEVED REVENUE IS IN APPEAL BEFORE US ON THE FO LLOWING GROUNDS: 1. THE CIT(A) ERRED IN IGNORING THE FACT THAT DUR ING THE AY 2002-03 THE LOAN DEBTOR OF ASSESSEE WAS TRACEABLE SOLVENT AND ASSESSEE SHOULD HAVE DISCLOSED ACCRUED INTEREST ON LOAN ASSET EXISTING IN BALANCE SHEET AS AT 31.3.2002 AS THE RECEIPT. 2. THE CIT(A) ERRED IN NOT CONSIDERING THE FACT TH AT ANY INCIDENT HAPPENED TO ASSESSEE IN A LATER YEAR CANNOT BE REFERRED TO GET RELIEF IN PRES ENT YEAR. 5. LD. DR RELIED ON THE ORDER OF THE AO. IN RESPON SE TO THIS THE LD. AR VEHEMENTLY RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND LOT OF FORCE IN THE ORDER OF THE LD. CIT(A) WHEREIN A CATEGORICAL FINDING HAS BEEN GIVEN THAT THE CONCERNED LOAN DEBTOR SHRI ASHO K KR. PODDER HAD BECOME A DEFAULTER AND THE CHANCE OF RECOVERING EVEN THE PRINCIPAL AMO UNT WAS VERY DOUBTFUL MUCH LESS THE INTEREST THEREON. THIS FINDING HAS NOT BEEN CONTROV ERTED BY THE REVENUE BEFORE US. UNDER THESE CIRCUMSTANCES FOLLOWING THE PRINCIPLES OF RE AL INCOME THEORY WE HOLD THAT THE INTEREST SHOULD NOT BE BROUGHT TO TAX ON NOTIONAL BASIS WHEN IT IS PROVED BEYOND DOUBT EVEN THAT THE RECOVERY OF PRINCIPAL ITSELF IS IN JEOPARDY. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) AND THE SAME IS HEREBY UPHELD. APPEA L OF REVENUE IS DISMISSED. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.10.2016 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 14 TH OCTOBER 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO WARD-30(1) KOLKATA. 2 RESPONDENT SHRI KIRTI JHUNJHUNWALA 68 BALLYGUNGE CIRCULAR ROAD KOLKATA-700 019. 3 . THE CIT(A) KOLKATA 4. 5. CIT KOLKATA DR KOLKATA BENCHES KOLKATA / TRUE COPY BY ORDER ASSTT. REGISTRAR .