DCIT, CC-VI, Kolkata, Kolkata v. M/s. Maithan Alloys Ltd., Kolkata

ITA 856/KOL/2011 | 2008-2009
Pronouncement Date: 06-09-2011

Appeal Details

RSA Number 85623514 RSA 2011
Assessee PAN AABCM7758B
Bench Kolkata
Appeal Number ITA 856/KOL/2011
Duration Of Justice 3 month(s)
Appellant DCIT, CC-VI, Kolkata, Kolkata
Respondent M/s. Maithan Alloys Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 06-09-2011
Appeal Filed By Department
Bench Allotted B
Tribunal Order Date 06-09-2011
Assessment Year 2008-2009
Appeal Filed On 06-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BEN CH B KOLKATA () BEFORE . .. . . .. . SHRI B.R.MITTAL JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . #$ SHRI C.D.RAO ACCOUNTANT MEMBER %& %& %& %& ' ' ' ' / ITA NO.856/KOL/2011 () *+/ ASSESSMENT YEAR : 2008-09 (-. / APPELLANT ) D.C.I.T. CENTRAL CIRCLE-VI KOLKATA - ( - - VERSUS - . (01-./ RESPONDENT ) M/S.MAITHON ALLOYS LTD. KOLKATA (PAN: AABCM 7758 B) -. 2 3 #/ FOR THE APPELLANT: SHRI SHISHIR SINHA 01-. 2 3 #/ FOR THE RESPONDENT: SHRI S.K.TULSIYAN #4 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ) #$ PER SHRI C.D.RAO AM THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER DATED 18.03.2011 OF THE CIT(A)-CENTRAL-II KOLKATA PERTAINING TO A.Y. 2008- 09. 2. IN THIS APPEAL THOUGH THE REVENUE HAS TAKEN SIX GROUNDS THEY ARE RELATING TO TWO DISALLOWANCES MADE BY LD. CIT(A) ONE ON ACCOUNT OF PROVISION FOR DOUBTFUL ADVANCE AND THE OTHER ON ACCOUNT OF UNEXPLAINED INVESTMENT. 3. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT WHILE DOING THE SCRUTINY ASSESSMENT AO OBSERVED THAT : A SEARCH & SEIZURE OPERATION WAS CARRIED OUT IN TH E PREMISES OF MAITHAN GROUP OF CASES ON 20.09.2007 AND SUBSEQUENT DATES. THE ASSESSEE BELONGS TO THAT GROUP. FACTORY-CUM-BUSINESS PRESMISES OF THE C OMPANY AT KALYANESWARI DIST. BURDWAN WAS SEARCHED ON 20.09.2007 AND BOOKS OF ACCOUNT AND 2 PARTICULARS OF INCOME ETC. WERE FOUND AND SEIZED UN DER IDENTIFICATION MARK ML1 TO ML5. 3.1. WHILE DOING THE SCRUTINY ASSESSMENT AO HAS FURTHER ADDED AN AMOUNT OF RS.2 43 53 385/- ON ACCOUNT OF PROVISION OF DOUBTFU L ADVANCE AND AN AMOUNT OF RS.3.50 CRORES ON ACCOUNT OF UNDISCLOSED SOURCES AN D ON ACCOUNT OF UNEXPLAINED LOAN BY OBSERVING AS UNDER :- PROVISION FOR DOUBTFUL ADVANCE : AN AMOUNT OF RS.2 43 53 000/- HAS BEEN DEBITED TO THE P/L ACCOUNT VIDE THE SUB-HEAD PROVISION FOR DOUBTFUL ADVANCE UNDER THE HEAD ADMINISTRATIVE SELLING AND OTHER EXPENSES VIDE S CHEDULE-20 OF THE AUDITED ACCOUNTS FOR THE YEAR ENDED 31/03/2008 THE ASSESSEE HAS EXPL AINED IN WRITING AS UNDER :- WE HAVE PLACED VARIOUS ORDERS FOR SUPPLY OF MANGAN ESE ORE ON M/S. AMIT MINES (P) LTD HAVING ITS REGD.OFFICE AT MAHANTA BASTI C/O BI SHIKESHAN MAHANTA WARD NO.7 BARBIL KEONJHAR-758035 AND LOCAL OFFICE AT QUALITY COMPLEX BHIRINGI MORE NACHAN ROAD DURGAPUR-713213 AGAINST WHICH WE HAVE MADE AD VANCE PAYMENTS TO THEM ON VARIOUS DATES TO THE TUNE OF RS.108365140/-. THE PA RTY HAS SUPPLIED US MATERIALS AGAINST THE SAID ADVANCE TO THE TUNE OF RS.86812207 /-. THERE WERE QUALITY AND QUANTITY DISPUTES IN THE MATERIAL SUPPLIED BY THEM. WE HAVE RAISED 4 DEBIT NOTES ON THE PARTY FOR QUALITY AND QUANTITY CLAIMS AMOUNTING TO RS.2 87 28 628/-. AFTER VARIOUS MEETINGS AND DISCUSSIONS WITH THE PARTY WE HAVE AS SESSED THAT THE PARTY WILL NOT ACCEPT OUR CLAIM TO THE TUNE OF RS.2 43 53 385/- AN D HENCE WE HAVE WRITTEN OFF THIS AMOUNT OF RS.2 43 53 385/-. THE ASSESSEE HAS ENCLOSED COPIES OF THE PURCHASE OR DERS DEBIT NOTES RAISED BY THE ASSESSEE COPY OF LEDGER ACCOUNT COPY OF COURT PET ITION FILED BY THE ASSESSEE. THE ASSESSEE HAS THUS CLAIMED THAT IT HAS WRITTEN O FF THIS AMOUNT OF RS.2 43 53 385/-. ON EXAMINATION OF THE COPY OF LEDGER ACCOUNT OF M/S . AMIT MINES (P) LTD IN THE ASSESSEES BOOKS AS FURNISHED IT IS SEEN THAT THE FOLLOWING ENTRY HAS BEEN PASSED :- 31/03/2008 JV 05441 BY DOUBTFUL ADVANCE RS.2 43 385/-(CR) BEING THE AMOUNT PROVIDED FOR DOUBTFUL ADVANCE FOR AMIT MINES PVT. LTD. AS PER VOUCHER . THE ASSESSEE HAS FILED A COPY OF A CERTIFICATE DATE D 29/12/2009 FROM D.K.CHHAJER & CO. IN WHICH HE HAS MENTIONED THAT THE AMOUNT IS AD VANCE WRITTEN OFF AND THAT THE AMOUNT IS WRITTEN OFF IN THE BOOKS OF ACCOUNT AS NO N-RECOVERABLE. BUT IT IS VERY CLEAR FROM THE ENTRIES PASSED IN THE LEDGER ACCOUNT OF THE PARTY IN THE BOOKS OF THE ASSESSEE COMPANY AND ALSO FROM THE NAR RATION GIVEN IN THE AUDITED AND APPROVED ACCOUNTS OF THE ASSESSEE COMPANY THAT PRO VISION FOR DOUBTFUL ADVANCE HAS BEEN MADE. THE AUDITORS CERTIFICATE DATED FILED NO W IS THEREFORE NOT CORRECT AND CANNOT BE RELIED UPON. IN VIEW OF THE ABOVE THE AS SESSEES CLAIM HAS NO MERIT AT ALL AND IS ACCORDINGLY REJECTED AND THE AMOUNT IS AD DED BACK TO THE TOTAL INCOME AS INADMISSIBLE BEING PROVISION. THE BOOK PROFIT U/S 115JB IS ALSO INCREASED BY THE SAID AMOUNT AS PER CLAUSE-(I) OF EXPLANATION-1 OF SECTION 115JB AMOUNT. UNEXPLAINED INVESTMENT :- PAGE NO.86 OF THE SEIZED DOCUMENTS :MAL-3(LOOSE BUN CH):- PAGE NO.86 IS HAND WRITTEN AND THE FOLLOWING ARE NOTED :- 3 MAL EQUITY A/C TOTAL EQUITY 20 CRORES _ 6_ 26 PD FOR SH 4.337500 PROPOSED NEW EQUITY 6.00 (AMOUNT PENNED THROUGH) _______ 10.33 (PENNED THROUGH) ADD 1.5931 5.93.06 LESS 0.0050 PROPOSED NEW EQUITY 6.00 11.9256 10/8 U/S LOAN TO PCL FROM MAL 170 60 007 TO GIVE FURTHER LOAN 429 39 993 (AMOUNT PENNED T HROUGH) 600 00 000 ADD LOAN 10/8/ 179 39 993 350 00 000 THE ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN THE NOTINGS IN THIS PAGE. THE WRITTEN EXPLANATION FILED ON 21/12/2009 IN THIS RESPECT IS AS UNDER :- REG. PAGE NO.86 OF MAL-3:- PLEASE NOTE THAT THIS S HEET IS A ROUGH WORKING OF AMOUNTS PAID/TO BE PAID FOR ACQUISITION OF PURBANCH AL CEMENT LTD. SHARES. PROPOSED WORD USED ALSO IN SHEET NO.86 OF MAL-3 AND ACCORDIN G TO THE PROPOSED PLAN . RS.11 44 54 625/- IS INVESTED ALSO BY WAY OF ACQUIS ITION OF SHARES OF PURBANCHAL CEMENTS LIMITED WHICH IS DULY ACCOUNT FOR IN THE RE GULAR BOOKS OF ACCOUNT. SCHEDULE- 8 OF BALANCE SHEET FOR A.Y.2007-08 REFLECTS THE FIG URE. A COPY OF PAYMENT OF THE SAME IS ENCLOSED HEREWITH FOR YOUR READY REFERENCE. REG. UNSECURED LOAN OF RS.3 50 00 000/- AS MENTIONE D IN YOUR LETTER DATED 07/12/2009 PLEASE NOTE THAT THIS IS A ROUGH NOTING ONLY. OUR C ONTENTION GETS SUPPORT FROM THE DETAIL OF PAYMENT FOR ACQUISITION OF SHARES WE ENCL OSED HEREWITH WHEREIN RS.179 39 993/- IS SHOWN IN SHARE AMOUNT DATED 10/0 8/2007 BY ACCOUNT PAYEE CHEQUE BEARING NO.830710 ON UTI BANK. FURTHER PLEASE NOTE THAT TOTAL OF RS.350 00 000 HAS GOT NO MEANING AS THERE IS NO FIGURE IN THE PAGE NO .86 OF MAL-3 FROM WHERE IT COMES. HENCE EXPLAINED AND NO ADVERSE INFERENCE SHO ULD BE DRAWN WITHOUT GIVING AN OPPORTUNITY OF BEING HEARD. THE CLAIM OF THE ASSESSEE REGARDING THE NOTINGS IN THE UPPER PART OF THE PAGE HAS BEEN EXAMINED AND IT IS FOUND THAT THERE IS REFLECTION O F PURCHASE OF SHARES OF PURBANCHAL CEMENT LTD. (PCL) IN THE BALANCE SHEET. BUT SO FAR THE ASSESSEES CONTENTION THAT THE NOTINGS IN THE LOWER PART IS ROUGH AND THAT THERE I S NO FIGURE IN THE PAGE WHEREFROM RS.3.50 CRORE COMES IS NOT REASONABLE OR JUSTIFIED . IT IS CLEARLY WRITTEN IN THE PAGE LOWER PART THAT LOAN OF RS.3.50 CRORE WAS GIVEN TO PCL I.E. PURBANCHAL CEMENT LTD. FROM MAL I.E. MAITHAN ALLOYS LTD. HOW THE TOTAL FIG URE HAS BEEN ARRIVED AT IS ALSO NOTED. THE SECOND AMOUNT OF LOAN CANNOT BE CORRELAT ED AS CLAIMED BY THE ASSESSEE WITH THE CHEQUE PAYMENT FOR SHARES TO TERM THE SEC OND PART AS ROUGH NOTING. IT APPEARS THAT THE LOANS GIVEN TO PCL ARE CASH AMOUNT S RECEIVABLE FOR GIVING SOME ENTRIES. THE ASSESSEE HAS NOT EXPLAINED ANYTHING IN THIS RESPECT. HOWEVER NO SUCH LOANS ARE REFLECTED IN REGULAR ACCOUNTS OF THE ASSE SSEE. PRESUMPTION IS AVAILABLE U/S 292C OFT EH ACT IN RESPECT OF SEIZED DOCUMENTS WHI CH HAS NOT BEEN REBUTTED IN THIS CASE. THEREFORE THE EXPLANATION OF THE ASSESSEE IN THIS RESPECT IS REJECTED AND THE 4 UNRECORDED LOAN GIVEN TO PCL OF RS.3.50 CRORE IS HE LD AS UNEXPLAINED AND ADDED TO THE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES . 3.2. ON APPEAL LD. CIT(A) AFTER TAKING INTO CONSIDE RATION THE SUBMISSIONS MADE BY ASSESSEE DELETED THE SAME BY OBSERVING AS UNDER :- 4.1. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF APPELLANT. I FIND THAT APPELLANT HAD ADVANCED RS.10.83 CRORE TO AMIT MINES (P) LTD AS PER THEIR PURCHASE ORDERS FROM AMIT MINES (P) LTD AMIT MINES (P) LTD SUPPLIED THE MATERIAL WORTH RS.8.68 CRORE TO APPELLANT AND RAISED THEIR P URCHASE INVOICES. HOWEVER APPELLANT DISCOVERED THAT AMIT MINES (P) LTD HAD SU PPLIED INFERIOR MATERIAL AND ALSO MATERIAL SHORT IN QUANTITY. THEREFORE APPELLANT ASK ED AMIT MINES (P) LTD TO REDUCE THE PURCHASE PRICE OF RS. 8.68 CRORE BY RS. 2.87 CRORE ON ACCOUNT OF SUCH SHORTCOMINGS IN SUPPLY OF MATERIAL AND FOR THIS REASON APPELLANT RA ISED CORRESPONDING DEBIT NOTES ON AMIT MINES (P) LTD. HOWEVER APPELLANT REALIZED AFT ER VARIOUS MEETINGS AND NEGOTIATIONS THAT AMIT MINES (P) LTD WOULD NOT AGRE E TO SUCH REDUCTION IN PURCHASE PRICE AND THEREFORE APPELLANT WROTE BACK THE DEBIT NOTES RAISED ON AMIT MINES (P) LTD BY CREDITING IT WITH RS 2.43 CRORE. IN NUTSHELL TH E APPELLANT COULD MANAGE A MINOR REDUCTION IN THE PURCHASE PRICE OF MATERIAL SUPPLIE D BY AMIT MINES (P) LTD FROM RS. 8.68 CRORE TO RS. 8.24 CRORE(8.68 2.87 + 2.43). I NSTEAD OF DEBITING PURCHASES AS RS. 8.24 CRORE APPELLANT HAS DEBITED THE PERCEIVED PUR CHASE COST AT RS 5.81 CRORE (RS. 8.68 CRORE RS. 2.87 CRORE) BY REDUCING THE PURCHA SE BILLS RAISED BY AMIT MINES (P) LTD WITH DEBIT NOTE ON SUCH PURCHASES RAISED BY APP ELLANT ON AMIT MINES (P) LTD. THEREAFTER APPELLANT SEPARATELY DEBITED RS 2.43 CR ORE UNDER THE HEAD PROVISION FOR DOUBTFUL ADVANCE WHICH IS THE PERCEIVED LOSS IN TH IS TRANSACTION OF PURCHASE DUE TO RECEIPT OF INFERIOR MATERIAL AND SHORT IN WEIGHT MA TERIAL. APPELLANT WAS REQUIRED TO SHOW THAT THE PRICE OF MATERIAL SUPPLIED BY AMIT MI NES (P) LTD TO APPELLANT WAS WORTH RS. 5.81 CRORE ONLY DUE TO SUPPLY OF INFERIOR MATER IAL AND SHORT IN WEIGHT MATERIAL BY AMIT MINES (P) LTD AND RS. 2.43 CRORE WAS ACTUALLY A LOSS TO APPELLANT FOR PAYING A HIGHER PRICE FOR SUCH MATERIAL. APPELLANT HAS FILED A SUIT IN ASANSOL CIVIL COURT AGAINST AMIT MINES (P) LTD FOR COMPENSATION AGAINST SUCH SU PPLY OF INFERIOR AND SHORT IN WEIGHT MATERIAL. THE EXTENT OF LOSS IN THE TRANSACT ION WAS REQUIRED TO BE PRESENTED IN THE ACCOUNTS FOR THE PURPOSE OF CIVIL SUIT FILED BY THE APPELLANT AGAINST AMIT MINES (P) LTD AND THEREFORE APPELLANT HAS SHOWN THE PART OF P URCHASE PRICE OF MATERIAL SUPPLIED BY AMIT MINES (P) LTD AS LOSS AND HAS GIVEN IT A NAME PROVISION FOR DOUBTFUL ADVANCE. IN REALITY RS 2.43 CRORE IS PART OF THE P URCHASE PRICE OF MATERIAL SUPPLIED BY AMIT MINES (P) LTD WHICH IT DID NOT AGREE TO REDUCE . IT IS ONLY BECAUSE APPELLANT HOPES TO RECOVER THIS PART OF PURCHASE PRICE OF RS 2.43 CRORE IF THE COURTS SO DECIDE IN FAVOUR OF APPELLANT THAT THE APPELLANT HAS NOT DEB ITED THIS AMOUNT AS PART OF PURCHASE PRICE BUT HAS SEPARATELY SHOWN IT AS PROVISION FOR DOUBTFUL ADVANCE. IN ANY CASE AT THE END OF THE FINANCIAL YEAR RELEVANT TO THE ASSES SMENT YEAR UNDER APPEAL APPELLANT REALIZED THAT AMIT MINES (P) LTD WOULD NOT AGREED T O THE DEBIT NOTES RAISED BY APPELLANT AGAINST THEIR INVOICES RAISED ON APPELLAN T FOR INFERIOR AND SHORT IN WEIGHT SUPPLY OF MATERIAL AND WITHDREW THESE DEBIT NOTES O F RS. 2.87 CRORE BY RAISING CREDIT NOTES OF RS. 2.43 CRORE. EFFECTIVELY APPELLANT INC URRED A PURCHASE COST OF RS. 8.24 CRORE(8.68 2.87 + 2.43) IN RESPECT OF MATERIAL SU PPLIED BY AMIT MINES (P) LTD AND THE ENTIRE AMOUNT IS A REVENUE EXPENDITURE FOR APPE LLANT WHETHER APPELLANT BIFURCATES IT IN TWO PARTS OF RS. 5.81 CRORE AND RS. 2.43 CROR E AND CALLS THE OTHER PART OF RS. 2.43 CRORE AS LOSS ON ACCOUNT OF SUPPLY OF INFERIOR AND SHORT IN WEIGHT MATERIAL OR GIVES IT 5 ANOTHER NAME OF PROVISION FOR DOUBTFUL ADVANCE. I N REALITY AS DISCUSSED ABOVE RS 2.43 CRORE IS PART OF THE PRICE PAID BY THE APPELLA NT FOR THE PURCHASE OF MATERIAL FROM AMIT MINES (P) LTD AND IS DEDUCTIBLE REVENUE EXPEND ITURE. IF IN FUTURE THE CIVIL COURTS DECIDE THE SUIT FILED BY APPELLANT AGAINST AMIT MIN ES (P) LTD IN RESPECT OF SUPPLY OF INFERIOR AND SHORT IN WEIGHT MATERIAL AND APPELLANT IS ALLOWED A RELIEF IN RESPECT OF EXCESS PURCHASE PRICE PAID BY IT THEN THE RELIEF S O RECEIVED BY THE APPELLANT WOULD BE TAXABLE U/S 41(1) OF THE I.T.ACT. HOWEVER FOR THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL THE PURCHASE PRICE OF RS. 8.24 CRORE OF THE MATERIAL SUPPLIED BY AMIT MINES (P) LTD WAS A MORE CERTAIN L IABILITY OF APPELLANT ON REVENUE ACCOUNT WHICH CANNOT BE REDUCED BY AN AMOUNT OF RS. 2.43 CRORE ON ACCOUNT OF AN UNCERTAIN PROBABILITY OF APPELLANT WINNING THE SUIT FILED AGAINST AMIT MINES (P) LTD SOMETIME IN FUTURE AND PROBABLY RECEIVING SOME AMOU NT OF RELIEF WHICH IS NOT YET DETERMINABLE. THEREFORE I FIND THAT THE NOMENCLATU RE OF THE ACCOUNT PROVISION FOR DOUBTFUL ADVANCES IN RESPECT OF RS 2.43 CRORE SHOU LD HAVE BEEN PURCHASE PRICE PAID BUT CLAIMED TO BE RECOVERABLE AND IN THAT CASE THE ACCOUNTS WOULD HAVE REPRESENTED THE REALITY IN A MORE APPROPRIATE MANNER. 4.2 ANOTHER WAY OF LOOKING INTO THE CLAIM OF SUCH PROVISION FOR DOUBTFUL ADVANCES IS THE CLAIM OF BAD DEBT. THE DEBIT NO TES OF RS. 2.87 CRORE RAISED BY APPELLANT AGAINST THE PURCHASES OF RS. 8.68 CRORE F ROM AMIT MINES (P) LTD ARE IN THE NATURE OF REDUCTION OF PURCHASE PRICE OR INDIRECTLY THE INCOME OF APPELLANT CREDITED TO PROFIT & LOSS ACCOUNT BY WAY OF REDUCTION IN PURCHA SE PRICE. THIS AMOUNT SATISFIES THE CONDITION MENTIONED U/S 36(2) OF THE L.T.ACT. WHEN APPELLANT REALIZED THAT AMIT MINES (P) LTD WAS NOT AGREEABLE TO SUCH DEBIT NOTES ON PURCHASES RAISED BY APPELLANT THE SAME WERE WRITTEN OFF TO THE EXTENT OF RS. 2.43 CRORE IN THE PROFIT AND LOSS ACCOUNT BY CREDITING THE ACCOUNT OF AMIT MINES (P) LTD AND DEBITING THE PROFIT AND LOSS ACCOUNT WITH RS 2.43 CRORE UNDER THE NAME PROVISIO N FOR DOUBTFUL ADVANCES FOR WHICH THE MORE SUITABLE NAME COULD HAVE BEEN BAD D EBT BECAUSE THIS ACCOUNT HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT AND THE ACC OUNT OF AMIT MINES (P) LTD HAS BEEN CREDITED. IT IS IMMATERIAL THAT THE APPELLANT WAS FURTHER TRYING RECOVERY OF THE AMOUNT OF RS. 2.43 CRORE BY FILING A CIVIL SUIT AGA INST AMIT MINES (P) LTD BECAUSE THE WRITING OFF OF ANY DEBT AS BAD DEBT IN THE BOOKS OF ACCOUNT IS SUFFICIENT CONDITION TO CLAIM THE DEDUCTION OF THE SAME U/S 36(1)(VII) READ WITH SECTION 36(2) OF THE 1.T.ACT AS HELD BY HBLE SUPREME COURT IN CASE OF T. R. F. LTD. V. CIT [2010] I TAXMANN.COM 106. THE CLAIM OF DEDUCTION OF RS. 2.43 CRORE BY AP PELLANT IS THEREFORE AN ALLOWABLE CLAIM. EVEN IF APPELLANT IS ALLOWED A RELIEF IN RES PECT OF SUIT FILED AGAINST AMIT MINES (P) LTD IN THE COURT IN FUTURE THE RELIEF SO RECE IVED BY THE APPELLANT WOULD BE TAXABLE U/S 4 1(4) OF THE I.T.ACT. 4.3. IF THE PROVISION FOR DOUBTFUL ADVANCE WAS A CTUALLY A PROVISION DEBITED TO P&L ACCOUNT THE CORRESPONDING CREDIT ENTRY WOULD A PPEAR AS SEPARATE LIABILITY IN THE BALANCE SHEET OF APPELLANT. HOWEVER THE FACTS SHOW THAT THE CORRESPONDING CREDITS HAVE BEEN MADE IN THE ACCOUNTS OF AMIT MINES (P) LT D WHICH SHOWS THAT IT IS IN THE NATURE OF BAD DEBT. ON SIMILAR FACTS HBLE SUPREM E COURT HAVE HELD IN CASE OF M/S VIJAYA BANK V. CIT IN CIVIL APPEAL NOS.3286-3287 OF 2010 THAT IF ANY AMOUNT IS DEBITED TO PROFIT AND LOSS ACCOUNT UNDER THE HEAD PROVISION FOR DOUBTFUL DEBT AND THE CORRESPONDING CREDIT ENTRY IS ELIMINATED FROM THE A CCOUNT OF ASSESSEE BY REDUCING THE CORRESPONDING AMOUNT FROM LOANS AND ADVANCES/DEBTOR S ON THE ASSET SIDE OF THE BALANCE SHEET SO THAT AT THE END OF THE YEAR THE F IGURE IN THE LOANS AND ADVANCES OR THE DEBTORS ON THE ASSET SIDE OF THE BALANCE SHEET IS SHOWN NET OF SUCH PROVISION THEN THE CLAIM OF SUCH PROVISION FOR DOUBTFUL DEBT IS IN THE NATURE OF WRITING OFF THE BAD 6 DEBT FROM THE ACCOUNTS. MOREOVER HBLE SUPREME COU RT HAVE HELD IN THIS JUDGEMENT THAT SOMETIMES THE BAD DEBTS WHICH ARE ACTUALLY WRI TTEN OFF IN THE BOOKS OF ACCOUNT BY WAY OF NETTING OFF AGAINST THE ADVANCES/LOANS/ DEBT ORS ETC MAY STILL APPEAR IN BOOKS OF ASSESSEE BECAUSE ASSESSEE HAS INSTITUTED RECOVERY S UITS IN COURTS AGAINST ITS DEBTORS. IF INDIVIDUAL ACCOUNTS ARE TO BE CLOSED THEN THE D EBTOR/DEFENDANT IN EACH OF THOSE SUITS WOULD RELY UPON THE BANK STATEMENT AND CONTEN D THAT NO AMOUNT IS DUE AND PAYABLE IN WHICH EVENT THE SUIT WOULD BE DISMISSED. THEREFORE FOLLOWING THE DECISION OF HBLE SUPREME COURT IN THE ABOVE MENTIONED CASE I HOLD THAT THE PROVISION FOR DOUBTFUL ADVANCE IN CASE OF APPELLANT IS IN THE NA TURE OF BAD DEBT ACTUALLY WRITTEN OFF FROM THE BOOKS OF ACCOUNT AND THEREFORE IT DOES NOT FALL IN THE CATEGORY OF A NORMAL PROVISION FOR DOUBTFUL DEBTS WHICH MAY BE ADDED BAC K TO THE BOOK PROFIT OF APPELLANT COMPANY FOR THE PURPOSE OF SECTION 1 15JB. 4.4. I THEREFORE DIRECT THE ASSESSING OFFICER TO A LLOW THE CLAIM OF DEDUCTION OF RS. 2 43 53 385/- UNDER THE HEAD PROVISION FOR DOUBTFU L ADVANCE AS BAD DEBT AND AS IT IS NOT A PROVISION AS ENVISAGED U/S 11 5JB THE ASSESS ING OFFICER IS DIRECTED NOT TO ADJUST THE BOOK PROFIT BY THIS AMOUNT. 3.3. AND ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS .3.50 CRORES BY OBSERVING THAT 4.1. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF APPELLANT. ASSESSING OFFICER HAS NOT DOUBTED THE FACT THAT THE ENTRIES APPEARING ON THE UPPER HALF OF THE SEIZED PAPER 86 ARE IN RESPECT OF PURCHASE O F SHARES OF PCL BY APPELLANT FOR A TOTAL COST OF RS.5.9306 CRORE. THE PAYMENTS HAVE BE EN MADE BY WAY OF CHEQUES FORM SBI IFB KOLKATA. THE DETAIL OF THIS INVESTMENT BY WAY OF PURCHASE OF SHARES OF PCL BY APPELLANT IS AS UNDER : DATE PURCHASED FROM AMOUNT 25-JUL-07 NORTH EAST SYNTHETICS(P)LTD. 23400000 25-JUL-07 PANSARI VEGETABLES & OILS LTD. 5100000 03-AUG-07 TIS FAB LTD. 3250000 03-AUG-07 JAMSHEDPUR WELPACK POLY IND LTD.830672 750000 03-AUG-07 MEGHA PLAST LTD. 750000 03-AUG-07 ANKITA MERCHANTS (P) LTD. 2225000 AUG-07 BIHAR RAFFIA IND LTD. 200000 03-AUG-07 NORTH EAST SYNTHETIC (P)LTD. 7650000 03-AUG-07 T C AGARWALLA 50000 04-AUG-07 MEGHA GREEN COAFIELD LTD. 15850000 21-AUG-07 BIMEX EXPORTS (P) LTD. 81000 59306000 IN THE BOTTOM HALF OF SEIZED PAPER 86 THE ENTRIES ARE APPEARING AS UNDER : 10/8 U/S LOAN PCL FROM MAL 170 60 007 ADD LOAN 10/8/ 179 39 993 350 00 000 APPELLANT HAS SUBMITTED THE COPY OF REPLY DATED 29- 12-2009 SUBMITTED BY APPELLANT BEFORE THE ASSESSING OFFICER. IN THIS REPLY APPELLA NT HAS EXPLAINED THAT THE AMOUNT OF RS.1 79 39 993/- IS PAYMENT BY APPELLANT VIDE CHEQU E NO.830710 ON UTI BANK IN THE ACCOUNT OF PCL FOR SHARE APPLICATION MONDEY. APPELL ANT HAD MENTIONED IN THE SAME LETTER THAT THE AMOUNT OF RS.1 70 60 007/- IS TOTAL OF SHARE APPLICATION MONEY APPLIED BY APPELLANT IN THE SHARE CAPITAL OF PCL ON 26-07-2 007 AND 30-07-2007. ASSESSING 7 OFFICER ALTOGETHER IGNORED THIS EXPLANATION AND PRE SUMED THAT THE AMOUNT OF RS.3 50 00 000/- IS A LOAN ADVANCED BY APPELLANT TO PCL IN CASH OUTSIDE THE BOOKS OF ACCOUNT. THE SCRUTINY OF SEIZED PAPER 86 REVEALS TH AT NOWHERE IN THIS PAPER AGAINST ANY AMOUNT THE WORD CASH HAS BEEN MENTIONED FOR A SSESSING OFFICER TO MAKE SUCH PRESUMPTION. FURTHER A LITTLE VERIFICATION BY ASSE SSING OFFICER OF THE EXPLANATION SUBMITTED BY APPELLANT WOULD HAVE REVEALED THAT RS. 170 60 007/- INDEED WAYS THE PAYMENT BY CHEQUE BY APPELLANT TOWARDS THE SHARE AP PLICATION MONEY OF PCL FROM 26-07-2007 TILL 31-07-2007 I.E BEFORE THE DATE 10- 08-2007 WHEN APPELLANT MADE FURTHER PAYMENT OF RS.179 39 993/- TOWARDS THE SHAR E APPLICATION MONEY THEREBY TAKING THE TOTAL AMOUNT OF PAYMENT TOWARDS SHARE AP PLICATION MONEY TO RS.3 50 00 000/- AS ON 10-08-2007 AND AS APPEARING IN SEIZED PAPER 86. THE DETAILS OF PAYMENT MADE BY APPELLANT IN RESPECT OF RS.170 60 0 07/- AND RS.1 79 39 993/- TOWARDS SHARE APPLICATION MONEY OF PCL IS AS UNDER :- SHARE APPLICATION MONEY CHQ.NO. AMOUNT BANK 26-JUL-07 PCL-UCO BANK 830632 3291000 SBI IFB KOLK ATA 26-JUL-07 PCL-STATE BANK 830636 2452000 SBI IFB KO LKATA OF HYDERABAD 26-JUL-07 PCL-UCO BANK 830635 5376000 SBI IFB KOLK ATA 30-JUL-07 PCL 176875 2081815 SBI IFB ASANSOL 30-JUL-07 PCL 176878 247192 SBI IFB ASANSOL 31-JUL-07 PCL-UCO BANK 830655 3612000 SBI IFB KOL KATA TOTAL 17060007 10-AUG-07 PCL-UTI 830710 17939993 SBI IFB KOLKATA 35000000 THE PAYMENTS OF RS.1 70 60 007/- AND RS.1 79 39 993 /- HAVE BEEN MADE FORM BANK ACCOUNT OF APPELLANT AND ARE DULY REFLECTED AS PART OF TOTAL INVESTMENT OF RS.11 4455 CRORE IN THE SHARES OF PCL IN SCHEDULE-8 OF THE BAL ANCE SHEET OF APPELLANT. THEREFORE THE PRESUMPTION OF ASSESSING OFFICER THAT THESE AMO UNTS TOTALING RS.3 50 00 000/- REFLECT THE LOAN ADVANCED BY APPELLANT TO PCL IN CA SH IS WRONG AND ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.3 50 00 00 0/- MADE IN THE ASSESSMENT ORDER TO THE TOTAL INCOME OF APPELLANT ON SUCH INCORRECT ASS UMPTION. 3.4. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEF ORE US. 4. AT THE TIME OF HEARING THE LD. DR APPEARING ON B EHALF OF THE REVENUE BY POINTING OUT THE OBSERVATIONS MADE IN THE ASSESSMEN T ORDER WHICH WERE ALREADY INCORPORATED IN THE PRECEDING PARAGRAPHS CONTENDED THAT THE ACTION OF LD. AO IS JUSTIFIED AND LD. CIT(A) IS NOT CORRECT IN DELETING THE SAME BY MERELY PLACING RELIANCE ON SUBMISSIONS OF THE LD. COUNSEL FOR ASSESSEE. THE REFORE HE REQUESTED TO REVERSE THE ORDERS OF LD. CIT(A) AND RESTORE THAT OF AO. 4.1. REGARDING DELETION OF ADDITION OF RS.3.5 CRORE S THE LD. DR FOR THE REVENUE HIGHLIGHTED THE OBSERVATIONS MADE BY AO AND POINTED OUT THAT LD. CIT(A) HAS 8 CONSIDERED THE SUBMISSIONS OF ASSESSEE AS THE INVES TMENT MADE IN M/S.PURBANCHAL CEMENT LTD. WHEREAS THIS IS A LOAN TO M/S. PURBANCH AL CEMENT LTD FROM M/S. MAITHAN ALLOYS LTD. AS POINTED OUT BY AO IN THE ASSESSMENT ORDER. THEREFORE ON THIS ISSUE HE SUBMITTED THAT LD. CIT(A) HAS NOT PROPERLY APPRECIA TED THE FACTS. THEREFORE HE REQUESTED TO SET ASIDE THE ORDER OF LD. CIT(A) AND UPHOLD THE ACTION OF AO. 5. ON THE OTHER HAND THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE SUPPORTED THE ORDERS OF LD. CIT(A) AND FURTHER POINTED OUT TH AT AS REGARDING DELETION OF PROVISION DOUBTFUL ADVANCE LD.CIT(A) HAS PROPERLY ANALYSED TH E FACTS FROM DIFFERENT POINTS OF VIEW AND FINALLY CONCLUDED THAT NO ADDITION IS REQU IRED. THEREFORE HE REQUESTED TO UPHELD THE ORDER OF LD. CIT(A). 5.1. AS REGARDING UNEXPLAINED INVESTMENT OF RS.3.50 CRORES THE LD. COUNSEL FOR ASSESSEE HAS CATEGORICALLY POINTED OUT THAT AO HIMS ELF HAS ACCEPTED THAT ASSESSEE HAS FILED COPY OF THE PAYMENTS MADE TO M/S. PURBANCHAL CEMENT LTD. IN THE ASSESSMENT ORDER ITSELF AND LD. CIT(A) BASED ON THE SAID COPY OF THE BANK STATEMENTS DELETED THE SAME. THEREFORE HE CONTENDED THAT LD. CIT(A) IS FAI R AND CORRECT AND REQUESTED TO UPHELD THE SAME. 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD AFTER COMPARING BOTH THE OBSER VATIONS OF AO AND LD. CIT(A) WE ARE OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION ON ACCOUNT OF PROVISION FOR DOUBTFUL ADVANCE AFTER ANALYZING THE FACTS OF T HE CASE AND BY APPLYING RATIOS LAID BY THE HONBLE APEX COURT IN THE CASE OF T.R.F.LIMI TED VS CIT AS REPORTED IN 323 ITR 397 AND M/S. VIJAYA BANK VS CIT 323 ITR 166 (SC ). THEREFORE WE FIND NO INFIRMITY IN THE ORDERS OF LD. CIT(A) TO BE INTERFE RED WITH. THIS ISSUE OF THE REVENUE IS DISMISSED. 6.1. AS REGARDING THE UNEXPLAINED INVESTMENT OF RS. 3.5 CRORES ALSO WE FIND NO INFIRMITY IN THE ORDERS OF LD. CIT(A). KEEPING IN V IEW OF THE FACT THAT ASSESSEE HAS EXPLAINED EVEN BEFORE AO BY FILING AN EXPLANATION D ATED 21.12.2009 THAT REG. PAGE NO.86 OF MAL-3:- PLEASE NOTE THAT THIS SHEET IS A R OUGH WORKING OF AMOUNTS PAID/TO BE PAID FOR ACQUISITION OF PURBANCHAL CEMENT LTD. SHAR ES. PROPOSED WORD USED ALSO IN SHEET NO.86 OF MAL-3 AND ACCORDING TO THE PROPOSED PLAN . RS.11 44 54 625/- IS 9 INVESTED ALSO BY WAY OF ACQUISITION OF SHARES OF PU RBANCHAL CEMENTS LIMITED WHICH IS DULY ACCOUNT FOR IN THE REGULAR BOOKS OF ACCOUNT. S CHEDULE-8 OF BALANCE SHEET FOR A.Y.2007-08 REFLECTS THE FIGURE. A COPY OF PAYMENT OF THE SAME IS ENCLOSED HEREWITH FOR YOUR READY REFERENCE WHICH IS APPEARING AT PA GE 4 OF THE ASSESSMENT ORDER. HOWEVER AS RIGHTLY POINTED OUT BY LD. CIT(A) AO AL TOGETHER IGNORED THIS EXPLANATION AND PRESUMED THAT AN AMOUNT OF RS.3.5 CRORES IS A L OAN ADVANCED BY ASSESSEE TO M/S. PURBANCHAL CEMENT LIMITED. THE LD. CIT(A) BASED ON THE BANK STATEMENTS FILED BEFORE AO HAS COME TO THE CONCLUSION THAT THE PAYMENTS OF RS.1 70 60 007/- AND RS.1 79 39 993/- HAVE BEEN MADE FORM BANK ACCOUNT O F APPELLANT AND ARE DULY REFLECTED AS PART OF TOTAL INVESTMENT OF RS.11 4455 CRORE IN THE SHARES OF PCL IN SCHEDULE-8 OF THE BALANCE SHEET OF APPELLANT. THERE FORE THE PRESUMPTION OF ASSESSING OFFICER THAT THESE AMOUNTS TOTALING RS.3 50 00 000/ - REFLECT THE LOAN ADVANCED BY APPELLANT TO PCL IN CASH IS WRONG AND ASSESSING OFF ICER IS DIRECTED TO DELETE THE ADDITION OF RS.3 50 00 000/- MADE IN THE ASSESSMENT ORDER TO THE TOTAL INCOME OF APPELLANT ON SUCH INCORRECT ASSUMPTION. 6.2. IN VIEW OF THE ABOVE THE SECOND ISSUE RAISED B Y THE REVENUE IS ALSO DISMISSED. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE COURT ON 06.09.2011. SD/- SD/- . .. . . .. . B.R.MITTAL JUDICIAL MEMBER . .. .!' !'!' !'. .. . #$ #$ #$ #$ C.D.RAO ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 06.09.2011. R.G.(.P.S.) 10 #4 2 0& 5#&*6- COPY OF THE ORDER FORWARDED TO: 1. M/S.MAITHAN ALLOYS LTD. 9 A.J.C.BOSE ROAD KOLKAT A-700020. 2 THE D.C.I.T. CENTRAL CIRCLE-VI KOLKATA 3. THE CIT 4. THE CIT(A)-CENTRAL-II KOLKATA 5. DR KOLKATA BENCHES KOLKATA 1& 0/ TRUE COPY #4(;/ BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES