Shakti Transport Corporation, Surat v. The ACIT.,Circle-11,, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 4058/AHD./2007 ASSESSMENT YEAR : 2004-2005 SHAKTI TRANSPORT CORPORATION SURAT -VS.- ASSI STANT COMMISSIONER OF INCOME TAX (PAN : AAKFS 9084 L) CIRCLE-II SURAT (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAPNESH SHETH RESPONDENT BY : SHRI SANJEEV KASHYAP SR. D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 06.08.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SURAT FOR THE ASSESSMENT YEAR 2004-05. 2. VARIOUS GROUNDS RAISED BY THE ASSESSEE IN ITS AP PEAL READ AS UNDER :- (1) THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMIN G THE DISALLOWANCE OF CLAIM FOR BAD DEBTS OF RS.1 21 000/- U/S. 36(VII) WITHOUT CONSIDERING THE AMENDMENT MADE TO THIS SECTION W.E.F. 1.4.89. (2) THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMIN G ADDITION OF RS.45 043/- BEING 1/4 TH OF THE CAR MAINTENANCE AND PETROL EXPENSES. (3) THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMIN G ADDITION OF RS.41 672/- BEING 1/4 TH OF THE TELEPHONE EXPENSES. (4) THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMIN G ADDITION OF RS.38 005/- BEING 1/4 TH OF THE MOTOR CAR DEPRECIATION. 3. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN GROUND NO. 1 OF THIS APPEAL ARE THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER DISALLOWED BAD DEBTS CLAIM AMOUNTING TO RS.1 21 000/-. ON APPEAL IN THE IMPUGNED ORDER THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) CONFIRMED THE SAID DISALLOWANCE FOR THE REASONS GIVEN IN PARA 6.2 & 6.3 WHICH READ AS UNDER :- 6.2. AN EXAMINATION OF THE DOCUMENTS FURNISHED BY THE AR WHICH INCLUDES BILLS RAISED BY THE ASSESSEE AS ALSO THE WORKING OF COMMI SSION PAYABLE TO THE ASSESSEE 2 ITA NO. 4058/AHD/200 7 BY M/S. VRL SHOWS THAT THE ASSESSEE HAD RAISED TWO BILLS NO. 33 DATED 14.08.03 FOR A SUM OF RS.2 21 000/- AND NO. 34 DATED 16.09.2 003 FOR A SUM OF RS.20 000/-. THE ASSESSEE ACTED AS A COMMISSION AGENT OF M/S. VR L. THE AR HAS PRODUCED A DOCUMENT UNDER THE LETTER HEAD OF M/S. VRL WHICH IS DATED 21.9.2005 WHICH SHOW THE WORKING OF THE COMMISSION AND OTHER CHARGES PAY ABLE TO THE ASSESSEE FOR SAID MONTHS. FROM THESE DOCUMENTS IT IS SEEN THAT THE A SSESSEE WAS REFUNDED A SUM OF RS.1 20 000/- WHICH HAD EARLIER BEEN DEDUCTED FROM THE COMMISSION FOR THE MONTH OF AUGUST 2003. THIS MEANS THAT THE SUM OF RS.2 41 000/- WAS PAYABLE BY M/S. POONAM INDUSTRIES NOT TO THE ASSESSEE BUT TO M/S. V RL. THE ASSESEE WAS ONLY A COMMISSION AGENT. SINCE THIS AMOUNT WAS NOT PAID BY M/S. POONAM INDUSTRIES M/S. VRL HAD DEDUCTED 50% OF THE AMOUNT FROM THE CO MMISSION PAYABLE TO THE ASSESSEE IN THE MONTH OF AUGUST 2003. SUBSEQUENTLY 50% OF THE TOTAL AMOUNT RECEIVABLE WAS REIMBURSED TO THE ASSESSEE IN THE MO NTH OF NOVEMBER. THUS IT WAS NOT A DEBT OF THE ASSESSEE BUT OF M/S. VRL. IT WAS DEDUCTED FROM THE COMMISSION RECEIVED FROM THE ASSESSEE AND 50% WAS LATER RELEAS ED BY M/S. VRL POSSIBLY BECAUSE THE SAID SUM HAD BEEN RECEIVED BY M/S. VRL FROM M/S. POONAM INDUSTRIES. THEREFORE FIRSTLY THE ASSESSEE WAS NOT COMPETENT TO CLAIM THE SAID SUM AS A DEBT IN THE FIRST PLACE. SECONDLY THE ASSESSE E HAS MADE AN EFFORT TO MAKE THE DEBT LOOK TO BE A GENUINE BAD DEBT BY CLAIMING THAT 50% OF THE AMOUNT WAS REIMBURSED BY M/S. VRL. THOUGH TRUE THIS HOWEVER WAS ONLY HALF THE TRUTH. THE FACT OF THE MATTER WAS THAT THE ASSESSEE WAS DENIE D COMMISSION OF RS.2 41 000/- A SUM WHICH WAS OUTSTANDING FROM M/S. POONAM INDUSTRI ES IN THE BOOKS OF M/S. VRL. THIS WAS BECAUSE IT WAS THE ASSESSEES RESPONS IBILITY AS AN AGENT TO ENSURE COLLECTION. SUBSEQUENTLY 3 MONTHS LATER M/S. VRL RELEASED 50% OF THE SAID SUM OF RS.1 20 000/-. THIS WAS NOT A REIMBURSEMENT AGAI NST THE BAD DEBT BUT WAS ONLY PAYMENT OF COMMISSION WHICH EARLIER HAD FALLEN DUE IN AUGUST 2003. 6.3. THUS FROM ALL ACCOUNTS THE ASSESSEE WAS NEITH ER JUSTIFIED NOR COMPETENT TO CLAIM THE BAD DEBT OF RS.1 21 000/-. THE ADDITION O F THE SAID SUM IS THEREFORE CONFIRMED. AGGRIEVED BY THE ORDER OF LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING ON BEHALF OF ASSESEE SHR I SAPNESH SHETH APPEARED AND CONTENDED THAT BAD DEBTS ARE ACTUALLY WRITTEN OFF IN THE BOOK S OF ACCOUNTS. AFTER 1 ST APRIL 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT IN FACT HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVER ABLE IN THE ACCOUNTS OF THE ASSESSEE. IN SUPPORT OF THIS THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE LATEST JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LIMITED VS.- CIT REPOR TED IN [2010] 230 CTR (SC) 14. HE CONTENDED THAT THE ORDER OF LD. CIT(A) BE DELETED. 3 ITA NO. 4058/AHD/200 7 5. ON THE OTHER HAND ON BEHALF OF REVENUE SHRI SAN JEEV KASHYAP APPEARED AND COULD NOT CONTROVERT THE AFORESAID SUBMISSIONS MADE BY THE LD . COUNSEL OF THE ASSESSEE. 6. AFTER HEARING BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND PERUSED THE MATERIAL PLACED BEFORE US. AD MITTEDLY THE ASSESSEE HAS WRITTEN OFF THE BAD DEBTS IN QUESTION IN ITS BOOKS OF ACCOUNTS. AFTER 1 ST APRIL 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS B ECOME IRRECOVERABLE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LIMITED VS.- C IT (SUPRA). WE THEREFORE FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F T.R.F. LIMITED (SUPRA) DIRECT THE ASSESSING OFFICER TO ALLOW THE BAD DEBTS TO THE EXT ENT OF RS.1 21 000/- WHICH IS CONFIRMED BY THE LD. CIT(A) IN THE IMPUGNED ORDER. RESULTANTLY THIS GROUND OF APPEAL IS ALLOWED. 7. IN RESPECT OF THE REMAINING GROUNDS THE LD. COU NSEL OF THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE MADE OUT OF CAR MAINTENANCE AND PETROL EXPENSES TELEPHONE EXPENSES AND MOTOR CAR DEPRECIATION IS EXCESSIVE. HE CONTENTED THAT DI SALLOWANCE BE RESTRICTED TO 10%. 8. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) IS FAIR AND REASONABLE. 9. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. FROM THE RECORD WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF GOODS. LOOKING TO THE FACTS IN OUR OPINION THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE LD. CIT(A) IS EXCESSIVE. IN OUR OPINION IT WILL MEET THE END OF JUSTICE IF DISALL OWANCE IS RESTRICTED TO 20%. WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE 20% OF CAR MAINTENANCE AND PETROL EXPENSES TELEPHONE EXPENSES AND MOTOR CAR DEPRECIATION AND R E-WORK OUT THE DISALLOWANCES ACCORDINGLY. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 21.05.2010 . SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 / 05 /2010 4 ITA NO. 4058/AHD/200 7 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.