J. MAHESHKUMAR PETOCHEMICALS P. LTD, MUMBAI v. DCIT RG 8(2), MUMBAI

ITA 4562/MUM/2009 | 2004-2005
Pronouncement Date: 06-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 456219914 RSA 2009
Assessee PAN AAACJ1687K
Bench Mumbai
Appeal Number ITA 4562/MUM/2009
Duration Of Justice 1 year(s) 2 month(s) 1 day(s)
Appellant J. MAHESHKUMAR PETOCHEMICALS P. LTD, MUMBAI
Respondent DCIT RG 8(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 06-10-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 06-10-2010
Date Of Final Hearing 23-09-2010
Next Hearing Date 23-09-2010
Assessment Year 2004-2005
Appeal Filed On 05-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER ITA NO. 4562/MUM/2009 (ASSESSMENT YEAR: 2004-05) J. MAHESHKUMAR PETROCHEMICALS P LTD. DCIT RANGE 8( 2) 6/18 'SANJAY' MITTAL ESTATE AAYAKAR BHAVAN M.K. ROAD SIR M.V. ROAD ANDHERI (E) VS. MUMBAI 400020 MUMBAI 400059 PAN - AAACJ 1687 K APPELLANT RESPONDENT APPELLANT BY: MS. VASANTI PATEL RESPONDENT BY: SHRI SURENDRA KUMAR O R D E R PER D.K. AGARWAL J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 01.06.2009 PASSED BY THE LEARNED CIT(A) FOR A .Y. 2004-05. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS CARRYING OUT ITS ACTIVITY AS CONSIGNMENT STOCKIEST AND DISTRIBUTOR HAS FILED RETURN DECLARING TOTAL INCOME AT ` 2 69 72 600/-. HOWEVER THE ASSESSMENT WAS COMPLETED DETERMINING TOTAL INCOME AT ` 2 85 21 150/- INCLUDING DISALLOWANCE OF BAD DEBTS OF ` 13 77 099/- AND OUT OF TELEPHONE EXPENSES ` 1 70 446/- VIDE ORDER DATED 29.12.2006 PASSED UNDER SECTION 143(3) OF THE I.T. ACT 1961 (THE ACT). ON APPEAL THE LEARNED CI T(A) PARTLY ALLOWED THE APPEAL. 3. GROUND NOS. 1 TO 4 ARE AGAINST THE SUSTENANCE OF DI SALLOWANCE OF BAD DEBTS OF ` 13 77 099/-. 4. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS D EBITED AN AMOUNT OF ` 35 47 328/- TO THE P & L ACCOUNT ON ACCOUNT OF BAD DEBTS. ASSESSEE WAS ASKED TO FURNISH THE REASONS FOR ALLOWABILITY OF TH E SAME IN RESPONSE THE ASSESSEE FILED ITS EXPLANATION STATING THAT THE AMO UNT OF ` 21 70 229/- DUE ITA NO. 4562/MUM/2009 J. MAHESHKUMAR PETROCHEMICALS P LTD. 2 FROM M/S. MARVEL INDUSTRIES LTD. WAS NOT RECOVERAB LE DESPITE THE FACT THAT THE ASSESSEE HAS FILED CASE AGAINST THEM HENCE IT WAS DEBITED AS BAD DEBTS. WITH REGARD TO THE OUTSTANDING DUES OF ` 13 77 098.96 FROM M/S. GES POLYMERS PVT. LTD. IT WAS STATED THAT THE ASSESSEE ENQUIRED FROM THE MARKET SOURCES THE CHANCES OF RECOVERY FROM THE CUSTOMER. LOOKING TO THE VERY PRECARIOUS FINANCIAL CONDITION OF THE PARTY AND NEG ATIVE CREDITWORTHINESS REPORTS FROM THE MARKET THE ASSESSEE DEBITED THE AB OVE AMOUNT AS BAD DEBTS. THE A.O. AFTER CONSIDERING THE ASSESSEES S UBMISSIONS ACCEPTED THE BAD DEBTS IN THE CASE OF M/S. MARVEL INDUSTRIES LTD . OF ` 21 70 229/-. HOWEVER THE A.O. WITH REGARD TO THE BAD DEBTS OF ` 13 77 098.96 IN THE ACCOUNT OF M/S. GES POLYMERS PVT. LTD. AFTER RELYIN G ON CERTAIN DECISIONS AS MENTIONED IN THE ASSESSMENT ORDER AT PAGE 3 TO 5 W AS OF THE VIEW THAT THE BAD DEBT WRITTEN OFF MADE BY THE ASSESSEE IN RESPEC T OF M/S GES POLYMERS PVT. LTD. AMOUNTING TO ` 13 77 099/- IS NOT ALLOWABLE AND ACCORDINGLY HE DISALLOWED THE SAME. ON APPEAL THE LEARNED CIT(A) WHILE OBSERVING THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO PROVE THAT T HE BAD DEBTS CLAIM HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT OF THE ASS ESSEE COMPANY AND SECONDLY NO EVIDENCE HAS BEEN PRODUCED TO PROVE THA T THIS HAS BEEN SHOWN AS INCOME IN THE EARLIER YEAR CONFIRMED THE DISALL OWANCE MADE BY THE A.O. 5. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. VS. C IT [2010] 323 ITR 397 (SC) WHEREIN IT HAS BEEN HELD THAT AFTER THE AMEND MENT OF SECTION 36(1)(VII) OF THE ACT W.E.F. 01.04.1989 IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE: IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IN THE LIGHT OF THE ABOVE DECISION SHE SUBMITS THAT SINCE THE ASSESSEE HAS PA SSED NECESSARY ENTRIES THEREFORE THE DISALLOWANCE OF BAD DEBTS OF ` 13 77 099/- BE DELETED. IN THE ALTERNATIVE SHE SUBMITS THAT SHE HAS NO OBJECTION IF THE ISSUE IS SET ASIDE TO THE FILE OF THE A.O. ITA NO. 4562/MUM/2009 J. MAHESHKUMAR PETROCHEMICALS P LTD. 3 6. ON THE OTHER HAND THE LEARNED D.R. SUPPORTS THE OR DERS OF THE A.O. AND LEARNED CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT IT HAS BEEN OBSERVED BY THE LEARNED CIT(A) THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO PROVE TH AT THE BAD DEBTS CLAIMED IS WRITTEN OFF IN THE BOOKS OF ACCOUNT OF THE ASSES SEE COMPANY. SECONDLY NO EVIDENCE HAS BEEN PRODUCED TO PROVE THAT THIS HAS B EEN SHOWN AS INCOME IN EARLIER YEAR. THERE IS NO QUARREL ON THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT IN TRF LTD. (SUPRA). HOWEVER THE LEA RNED COUNSEL FOR THE ASSESSEE EVEN AT THIS STAGE HAS NOT PLACED ANY MA TERIAL ON RECORD TO SHOW THAT THE AMOUNT CLAIMED AS BAD DEBT HAS BEEN SHOWN AS INCOME IN EARLIER YEAR AS OBSERVED BY THE LEARNED CIT(A). IN CIT VS. D.B. (INDIA) SECURITIES [2009] 318 ITR 26 (DEL) WHICH HAS BEEN FOLLOWED IN CIT VS. BONANZA PORTFOLIO LTD. [2010] 320 ITR 178 (DEL) IT HAS BEE N OBSERVED THAT THE BROKERAGE RECEIVED BY THE ASSESSEE WAS SHOWN AS INC OME IN ITS BOOKS OF ACCOUNT IN THE IMMEDIATE PREVIOUS YEAR. IN THE ABSE NCE OF ANY SUPPORTING MATERIAL TO SHOW THAT THE ASSESSEE HAS SHOWN THE SA ME AS INCOME IN THE EARLIER YEAR WE ARE OF THE VIEW THAT THE MATTER SHO ULD GO BACK TO THE FILE OF THE A.O. AND ACCORDINGLY WE SET ASIDE THE ORDERS PA SSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTE R TO THE FILE OF THE A.O. WHO SHALL EXAMINE THE ISSUE AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW INCLUDING THE RECE NT DECISION OF THE HON'BLE APEX COURT IN TRF LTD. (SUPRA) AFTER PROVI DING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NOS. 5 & 6 ARE AGAINST SUSTAINING THE DISALL OWANCE OF 50% OUT OF TELEPHONE EXPENSES. 9. THE A.O. OBSERVED THAT THE ASSESSEE COMPANY HAS INC URRED AN AMOUNT OF ` 98 732/- AND ` 71 714/- ON ACCOUNT OF RESIDENTIAL TELEPHONE AND MO BILE PHONE EXPENSES OF SHRI MAHESH R. THAKKER AND SHRI V IRESN R. THAKKAR RESPECTIVELY. THE A.O. AFTER CONSIDERING ASSESSEE S SUBMISSION THAT THE ITA NO. 4562/MUM/2009 J. MAHESHKUMAR PETROCHEMICALS P LTD. 4 ENTIRE EXPENSES ARE FOR BUSINESS PURPOSES WAS OF T HE VIEW THAT IT CANNOT BE ACCEPTED CONSIDERING THE PERSONAL ELEMENT INVOLVED WHICH CANNOT BE RULED OUT AND ACCORDINGLY HE DISALLOWED THE ENTIRE AMOUNT OF ` 1 70 446/- AND ADDED TO THE INCOME THE ASSESSEE. ON APPEAL THE LEA RNED CIT(A) HOWEVER REDUCED THE DISALLOWANCE TO 50%. 10. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE A.O. AND THE LEARNED CIT(A) FURTHER SUBMITS THAT THE DISALLOWAN CE OF TELEPHONE EXPENSES SUSTAINED BY THE CIT(A) IS ON HIGHER SIDE AND THERE FORE THE SAME MAY BE REDUCED. 11. ON THE OTHER HAND THE LEARNED D.R. SUPPORTS THE OR DERS OF THE A.O. AND THE LEARNED CIT(A) 12. HAVING CAREFULLY CONSIDERED THE SUBMISSION OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE ARE O F THE VIEW THAT THERE IS NO DISPUTE THAT THE ABOVE SAID TELEPHONE EXPENSES HAVE BEEN CLAIMED BY THE ASSESSEE IN RESPECT OF RESIDENTIAL TELEPHONES AND M OBILE EXPENSES OF SHRI MAHESH R. THAKKER AND SHRI VIRSEN R. THAKKER DIREC TORS OF THE COMPANY. SINCE THE PERSONAL ELEMENT OF USE OF TELEPHONES HAS NOT BEEN RULED OUT WE ARE OF THE VIEW THAT THE A.O. WAS JUSTIFIED IN MAKI NG DISALLOWANCE OF TELEPHONE EXPENSES. HOWEVER KEEPING IN VIEW THE TO TALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE IS RESTR ICTED TO 25% AS AGAINST 50% SUSTAINED BY THE LEARNED CIT(A). THE GROUNDS TA KEN BY THE ASSESSEE ARE THEREFORE PARTLY ALLOWED. 13. IN THE RESULT ASSESSEES APPEAL STANDS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH OCTOBER 2010. SD/- SD/- (PRAMOD KUMAR) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 6 TH OCTOBER 2010 ITA NO. 4562/MUM/2009 J. MAHESHKUMAR PETROCHEMICALS P LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VIII MUMBAI 4. THE CIT VIII MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.