M/s. J.K. Securities Pvt.Ltd., Anand v. The ACIT.,Cent.Circle-1,, Baroda

ITSSA 131/AHD/2009 | 2004-2005
Pronouncement Date: 14-07-2011 | Result: Allowed

Appeal Details

RSA Number 13120516 RSA 2009
Bench Ahmedabad
Appeal Number ITSSA 131/AHD/2009
Duration Of Justice 1 year(s) 8 month(s) 30 day(s)
Appellant M/s. J.K. Securities Pvt.Ltd., Anand
Respondent The ACIT.,Cent.Circle-1,, Baroda
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 14-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 14-07-2011
Date Of Final Hearing 29-09-2011
Next Hearing Date 29-09-2011
Assessment Year 2004-2005
Appeal Filed On 15-10-2009
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D. K. TYAGI JM AND A. M. ALANKAMONY AM M/S J. K. SECURITIES (P) LTD. OPP. PEOPLES BANK PARK SARDARGUNJ ROAD ANAND. VS. ASSTT. CIT CENTRAL CIR- 1 BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI J.P. SHAH & SHRI ASEEM THAKKAR ARS RESPONDENT BY:- SHRI S. K. GUPTA CIT DR O R D E R PER A.M. ALANKAMONY ACCOUNTANT MEMBER . THESE ARE TWO APPEALS ARE FILED BY THE ASSESSEE DI RECTED AGAINST THE ORDER OF LD.CIT(A)-IV AHMEDABAD FOR THE ASSESSMENT YEAR 2004-05 AND 2005-06 DATED 18/03/2009 PASSED U/S. 250 OF THE AC T. R.W.S 143(3) & 153A OF THE ACT. THE GROUNDS RAISED FOR BOTH THE ASSESSMENT YEAR AR E WITH RESPECT TO DISALLOWANCE OF BAD DEBTS OF RS.42 000/- AND 11 68 930/- FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY. SINCE THE ISSUES IT(SS)A NO.131& 132/AHD/2009 ASST. YEARS 2004-05 & 2005-06 IT(SS)A NOS.131 & 132/AHD/2009 ASST. YEARS 2004-05 & 2005-06 2 INVOLVED IN BOTH THE YEARS ARE IDENTICAL THEY ARE T AKEN UP TOGETHER FOR ADJUDICATION IN THIS COMMON ORDER. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF STOCK BROKERS AND DEPOSITORY PARTIC IPANT OF NSC. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESS MENT YEAR 2004-05 AND 2005-06 DECLARING AN INCOME OF RS.1 02 77 760/- AN D RS.82 25 510/- ON 31.10.2004 AND 27.10.2005 RESPECTIVELY. A SEARCH U/ S 132 OF THE ACT WAS CARRIED OUT IN THE J.K. SECURITIES GROUP ON 19.01.2 006. ACCORDINGLY NOTICE U/S 153A WAS ISSUED ON 13.6.2006 IN RESPONSE TO WHICH THE ASSESSEE FILED ITS RETURN ON 28.7.2006 DECLARING AN INCOME OF RS.1 02 35 755/- AND RS.73 26 579/- FOR THE AY 2004 -05 & 2005-06 RESPECTIVELY. SUBSEQUENTLY NOTICE U/S 143(2) WAS IS SUED ON 4/10/2007 FOLLOWED BY QUESTIONNAIRE AND NOTICE U/S 142(1). ON THE BASIS OF RETURNS FILED MATERIAL SEIZED AND THE REPLY OF ASSESSEE TH E ASSESSMENT WAS FINALIZED U/S 143(3) R.W.S. 153A OF THE ACT. IN COU RSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO GIVE REASONS FOR WRITING OFF CERTAIN AMOUNT AS BAD DEBTS WHICH RANGED BETWEEN RS.100 TO RS.5000/- FOR BOTH THE AYS. WITH DETAILS. HOWEVER THE ASSESSEE COMPAN Y DID NOT FURNISH THE DETAILS OF THE DEBTS WRITTEN OFF AND ALSO FAILED TO OFFER JUSTIFICATION FOR SUCH ACTION. THE REVENUE AUTHORITIES OPINED THAT IN NORMAL CIRCUMSTANCES THERE SHOULD NOT BE ANY CLAIM OF BAD DEBTS IN RESPE CT OF DEPOSITORY IT(SS)A NOS.131 & 132/AHD/2009 ASST. YEARS 2004-05 & 2005-06 3 ACCOUNTS SINCE THE CLIENTS CANNOT CLOSE THEIR RESP ECTIVE ACCOUNTS WITHOUT MEETING THEIR OUTSTANDING DUES. SINCE NO SATISFACTO RY EXPLANATION OR THE DETAILS FOR THE BAD DEBTS WERE FURNISHED BY THE ASS ESSEE COMPANY THE ADDITION OF RS.42 000/- AND RS. 11 68 930/-WAS MA DE TO THE INCOME OF THE ASSESSEE FOR THE AY 2004-05 & 2005-06. THE ADDI TION MADE BY THE AO WAS FURTHER CONFIRMED BY LD. CIT(A) IN BOTH THE ASSESSMENT YEARS WITH THE FOLLOWING OBSERVATIONS:- 2.1 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF LD. COUNSEL AS WELL AS GONE THROUGH THE RECORDS. ON PERUSAL OF THE ASSESSM ENT ORDER IT HAS BEEN NOTICED THAT THE AO HAD MADE DISALLOWANCE OF RS.42 000/- ON ACCOUNT OF BAD DEBTS IN THE ABSENCE OF DETAILS AND JUSTIFICATI ON SINCE APPELLANT HAD EXPRESSED ITS INABILITY TO GIVE DETAILS AND JUSTIFI CATION FOR BAD DEBTS. IF THE APPELLANT HAD NOT DETAILS THEN IT MAY NOT BE POSSI BLE TO WRITE OFF FROM THE BOOKS OF ACCOUNTS WHICH IS PRE-CONDITION FOR CLAIMI NG THE BAD DEBT. IT WAS STATED BEFORE AO DURING ASSESSMENT PROCEEDINGS THAT THE APPELLANT HAD NO TIME TO FILE DETAILS BECAUSE AMOUNTS WERE NU MEROUS AND VERY SMALL. FURTHER IN THE NORMAL CIRCUMSTANCES IN RESP ECT OF DEPOSITORY ACCOUNTS THERE SHOULD NOT BE ANY CLAIM OF BAD DEBT AS CLIENTS CANNOT CLOSE ACCOUNT WITHOUT MEETING THE OUTSTANDING AGAIN ST THEIR NAMES. THE CASES RELIED UPON BY LD. COUNSEL ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE FACTS OF THE PRESENT CASE ARE D IFFERENT FROM THE FACTS OF THE CASES RELIED UPON BY LD. COUNSEL. HOWEVER IT W AS HELD BY HON. ITAT MUMBAI BENCH IN CASE OF INDIA INFOLINE SECURITIES ( P) LTD. VS. ACIT (ITA NO.2584/M/2006 DATED 30.07.2008) (114 ITD 1) THAT T HE CONDITION OF SECTION 36(2) OF INCOME-TAX ACT DOES NOT GET FULFIL LED IN THE CASE THE ASSESSEES BUSINESS IS ONLY STOCK BROKING HENCE W RITE OFF UNDER SECTION 36(1)(VII) OF THE AMOUNTS CANNOT BE CONSIDERED AS A N ALLOWABLE BAD DEBT TO A STOCK BROKER. THE ABOVE IS ALSO SUPPORTED BY T HE DECISION OF THE HON. ITAT IN ACIT VS. B. N. KHANDELWAL 101 TTJ (MUM) 717 . KEEPING IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE THERE IS NO INFIRMITY IN MAKING THE DISALLOWANCES ON ACCOUNT OF BAD DEBT. HE NCE NO INTERFERENCE IS CALLED FOR IN THIS CASE. THE ONLY SINGLE GROUND OF APPEAL IS DISMISSED. IT(SS)A NOS.131 & 132/AHD/2009 ASST. YEARS 2004-05 & 2005-06 4 4. LD. AR STATED THAT THE AMOUNTS WRITTEN OFF BY TH E ASSESSEE WERE GENUINE RANGING FROM RS.100/- TO RS.5000/- AND SINC E THE SAME CANNOT BE RECOVERED FROM THE CLIENTS THE ASSESSEE HAVE NO OT HER OPTION OTHER THAN TO WRITE IT OFF FROM ITS BOOKS OF ACCOUNTS. ACCORDINGL Y THE ASSESSEE HAS WRITTEN OFF THESE ITEMS AS BAD DEBTS IN ITS BOOKS O F ACCOUNT. HE ALSO REMINDED US OF THE DECISION RENDERED IN THE CASE OF T. R. F. LTD. VS CIT 323 ITR 397 (SC). 5. THE LD. DR SUPPORTED THE ORDERS OF AO AND THE LD . CIT(A). THE LD. DR FURTHER STATED THAT IT WAS NOT CLEAR FROM THE AS SESSMENT ORDER OR FROM THE ASSESSMENT PROCEEDINGS WHETHER THESE BAD DEBTS CLAIMED WERE OFFERED AS REVENUE DURING THE EARLIER ASSESSMENT YEARS BY T HE ASSESSEE. THE LD. DR PRAYED THAT IF THE BENCH DESIRES TO ACCEPT THE S UBMISSIONS OF THE ASSESSEE THE MATTER MAY BE REMITTED BACK TO THE FI LE OF THE LD. A.O. TO EXAMINE WHETHER THE BAD DEBTS CLAIMED WERE OFFERED AS REVENUE DURING THE EARLIER ASSESSMENT YEARS. 6. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IT IS A CLEAR CASE OF WRITING OFF OF BAD DE BTS ON THE PRUDENCE OF THE ASSESSEE. FROM THE FACTS OF THE CASE IT IS ALSO APP ARENT THAT THE ASSESSEE HAS WRITTEN OFF THE BAD DEBTS IN ITS BOOKS OF ACCOU NT AS SPECIFIED IN THE ACT. THE CASE LAW CITED BY THE LD. AR IS REPRODUCED HEREIN BELOW FOR REFERENCE. T. R. F. LTD. VS CIT 323 ITR 397 (SC). IT(SS)A NOS.131 & 132/AHD/2009 ASST. YEARS 2004-05 & 2005-06 5 THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FAC T HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOV ERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER IN THE PRESENT CASE THE ASSESSI NG OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS IN FACT BEEN WRITTE N OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS THE BAD DEBT ACCOUN T IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED THUS CLOSING THE A CCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES THE PROVISION IS DEDUCTED FR OM SUNDRY DEBTORS. AS STATED ABOVE THE ASSESSING OFFICER HAS NOT EXAMINE D WHETHER IN FACT THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCO UNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING O FFICER. HENCE THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CO NSIDERATION OF THE ABOVE- MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTE NT OF THE WRITE OFF. FOLLOWING THE DECISION OF THE HONBLE APEX COURT WH ICH SQUARELY COVERS THE ASSESSEES CASE BEFORE US WE HAVE NO HESITATIO N TO HOLD THAT THE ASSESSEE COMPANYS CLAIM OF BAD DEBT HAS TO BE ALLO WED IF THE SAME ARE OFFERED AS REVENUE RECEIPT DURING THE EARLIER YEARS . TO CLEAR THE DOUBT EXPRESSED BY THE LD. DR WE REMIT THIS MATTER TO THE FILE OF LD. A.O. TO MAKE SUCH AN ENQUIRY AND IF THEY ARE FOUND TO BE OF FERED AS REVENUE RECEIPT DURING THE PREVIOUS YEAR DEDUCTION SHALL B E GRANTED UNDER THE HEAD BAD DEBTS FOR THE RELEVANT AYS CLAIMED BY THE ASSESSEE. 6. IN THE RESULT BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER WAS PRONOUNCED IN OPEN COURT ON 14/7/2011. SD/- SD/- (D.K.TYAGI) (A. M. ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD DATED : 14/7/2011 MAHATA/- IT(SS)A NOS.131 & 132/AHD/2009 ASST. YEARS 2004-05 & 2005-06 6 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 14/7/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 15/7/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..