Income Tax Appellate Tribunal - Mumbai
Vesta Building Products P.Ltd, Mumbai vs Assessee on 10 August, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL "F", BENCH MUMBAI
BEFORE SHRI JASON P. BOAZ, AM AND SHRI SANDEEP GOSAIN, JM
IT A No.5592/Mum/2011
(Assessment Year: 2007-08)
M/s Vesta Building Products P. Vs. C.I.T.(A)-21, Mumbai.
Ltd.
3rd Floor, Nandavan Kala Nagar,
Bandra (East),
Mumbai-400 051.
PAN: AABCV 8118L
Appellant .. Respondent
Appellant by Shri M Subramanian
Respondent by Shri Anil Kumar Das
Date of hearing 27-04-2016
Date of pronouncement 10-08-2016
ORDER
PER SANDEEP GOSAIN, JUDICIAL MEMBER:
The present appeal has been filed by the Assessee against the order of the learned CIT (A)-21, Mumbai dated 03-09-2010 passed in appeal No.CIT (A)-21/IT/543/2009-10 for assessment year 2007-08, on the following grounds:-
"1. On the facts and in the circumstances of the case the learned A.O. erred in disallowing Bad debts of Rs.4,00,872/- and further the CIT(A) erred in confirming the said disallowance of Rs.4,00,872/-."
2. "The learned AO further erred on the facts and circumstances of the case in making additions of Rs.94,72,889/- as unexplained cash credit u/s 68 and the CIT(A) further erred in confirming the said addition on appeal."
3. "The learned A.O. erred in disallowing Rs.1,05,852/- out of salary paid being in excess over last year."
4. The learned AO further erred on the facts and in the circumstances of case in making disallowance u/s40(a)(ia) of the Act."
2ITA No.5592/Mum/2011 (A.Y.2007-08)
M/s. Vesta Building Products Pvt. Ltd. vs. C.I.T.
5. "The appellant craves leave to add and or amend the above grounds of appeal at the time of hearing."
2. The brief facts of the case are that the return of income was filed by the assessee on 15.11.2007 declaring total income at Rs. Nil. Thereafter notice u/s 143(3) of the Income Tax Act, 1961 was issued on 22.09.2008 and was duly served on the assessee. After providing opportunity to the assessee and after receiving the reply filed by the assessee, the AO passed the order of assessment on 10.12.2009 u/s 143(3) of the I.T. Act,1961 thereby making disallowance on account of bad debts of Rs. 4,00,872/- and also made addition of Rs.94,72,889/- as unexplained cash credits u/s 68 of the I.T. Act,1961. Aggrieved by the order of the AO, the assessee preferred appeal before the learned CIT (A) and the learned CIT (A) after considering the case and hearing both the parties has partly allowed the appeal.
Aggrieved by the order of the learned CIT (A), the assessee preferred an appeal before us on the grounds mentioned hereinabove.
3. At the very outset ld. AR representing the assessee requested for condonation of delay in filing the appeal and in this respect our attention was drawn to application dated 14.08.2012. The contents of the said application supported by documents at page no.1 to 13 are perused by us and after hearing the parties and considering the facts contained in the application and taking into account the principles laid down by Hon'ble Supreme court in the case of Land Acquisition Collector vs. Mst Katiji AIR 1987 S.C. 1353. We Condon the delay and admit the appeal for decision 3 ITA No.5592/Mum/2011 (A.Y.2007-08) M/s. Vesta Building Products Pvt. Ltd. vs. C.I.T. on merits. At the outset of arguments the ld. AR submitted that he do not want to press ground no.3 &4 of the appeal therefore considering the facts that the assesee do not want to press the ground no.3 &4 therefore taking into consideration the submissions made by ld. AR, the ground no.3&4 of the appeal are dismissed as not pressed.
Ground No.1
4. This ground relates to making of disallowance of bad debts of Rs.4,00,872/-. In this respect ld. AR submitted before us that the assessee has written off the amount of bad debts of Rs.4,00,872/- in the normal course of business and it was allowable u/s 36 of the Income Tax Act, 1961. Ld. AR further submitted that the amount due was income from hire charges for use of JCB Machinery and the same was being shown as income in arrears. ld. AR relied upon the judgements of Hon'ble ITAT in the case of Ajith Kumar Kamdar vs. CIT (2005) SOT 183 (Mum) wherein it was said that it was not for the assessee to establish that the debt has become bad in the previous year. And lastly it was submitted that since the assessee had written off the debts as irrecoverable in the accounts for the previous year that itself is sufficient for claiming as bad debt.
On the contrary, ld. DR appearing on behalf of revenue supported the orders passed by revenue authorities.
5. We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders 4 ITA No.5592/Mum/2011 (A.Y.2007-08) M/s. Vesta Building Products Pvt. Ltd. vs. C.I.T. passed by the revenue authorities. Before deciding the merits of the case it is necessary to analyse the orders passed by CIT(A) and the operative para of CIT(A) is reproduced herein below for sake of reference:
"3.3 I have carefully considered the facts of the case. Any claim of bad debt is allowable u/s 36(1)(VII)if the condition laid down u/s 36(2) are satisfied. In view of decision of the courts on this issue, the appellant was not required to establish that the debt had actually become bad. The only condition now required to be fulfilled is that the amount claimed as bad debt should have been considered in the income of appellant of the year under consideration or in any earlier year. During assessment proceedings the appellant was not able to explain as to in which year the said amount claimed as bad debt was considered in the income of appellant. During appellate proceedings also the appellant was asked to furnish such details. However the appellant could not furnish such details. In the facts and circumstances, as the condition laid down u/s 36(2) has not been fulfilled. Therefore, the appellant's claim of bad debt was not allowable. The AO was justified in disallowing appellant's claim."
After carefully anlaysing the afore mentioned order and after hearing the arguments of both the parties we are of the considered view that the only condition which required to be fulfilled by the assessee for claiming relief u/s 36(1)(VII) is to demonstrate that the amount claimed as bad debt should have been considered in the income of assessee of the year under consideration or in any earlier year. Ld. CIT(A) has pointed out that during assessment proceedings the assessee was not able to explain as to in which year the said amount claimed as bad debt was considered as the income of assessee. The said fact was however verified by CIT(A) by asking the assessee to furnish said details but the assessee could not furnish any such details even before CIT(A). Therefore, considering this 5 ITA No.5592/Mum/2011 (A.Y.2007-08) M/s. Vesta Building Products Pvt. Ltd. vs. C.I.T. factual position ld. CIT(A) has rightly come to the conclusion that the condition laid down u/s 36(2) of the I.T. Act has not been fulfilled. Therefore, the assessee claim of bad debts was rightly disallowed by CIT(A).Even before us no new circumstance have been brought on record in order to controvert or rebut the findings recorded by the learned CIT (A). Moreover, there is no reason for us to deviate from the findings recorded by the learned CIT (A). Therefore, we are of the considered view that the findings recoded by the learned CIT (A) are judicious and are well reasoned. Accordingly, we uphold the same. Resultantly, this ground raised by the Assessee stands dismissed.
Ground No.2
6. The said ground relates to making addition of Rs.94,72,889/- as unexplained cash credit u/s 68 of the I.T. Act. Ld. AR pointed out our attention towards para number 5.2 of CIT(A) order wherein a detail chart has been mentioned and it was further submitted by ld. AR that the assessee had received Rs.18,25,000/- from Mr. Rahul Sankhe and Rs.76,47,889/- from Mr. Shirish Sankhe as loans during the year (Total- 94,72,889/-). It was further argued that Mr. Shirish Sanke had given loan of Rs.56 lakhs from his bank account. The said amount was repaid to the bank of Rs.20,74,889/- being loan taken by the assessee company. It was further submitted by ld. AR that an amount of Rs.4,25,000/- and Rs.20,74,889/- were being shown as loans received from Mr. Rahul Sankhe and Shirish Sankhe respectively. It was pointed out by ld. AR that the amount of Rs.14,00,000/- received from Mr. Rahul Sankhe and 6 ITA No.5592/Mum/2011 (A.Y.2007-08) M/s. Vesta Building Products Pvt. Ltd. vs. C.I.T. Rs.56,00,000/- received from Mr. Shirish Sankhe were reflected in the ledger account or Mrs. Rashmi Sankhe due to clerical error. The asessee had filed bank accounts of Mr. Rahul Sankhe and Mr. Shirish Sankhe. The ld. AR further submitted that the amount of Rs.70,00,000/- (out of loan of Rs.94,72,889/- received from its shareholders) were erroneously shown as Loan from Mrs. Rashmi Sankhe (Director of the company) due to clerical error. The ld. AR argued that this accounting error did not have any effect on the total income of the company. The ld. AR lastly requests that the said addition was unreasonable and hence may kindly be deleted.
On the other hand learned Departmental Representative appearing on behalf of revenue relied upon the order passed by learned CIT(A).
7. We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. We are of the considered view that the ld. CIT(A) has dealt with the said issue in para no.5.3 of its order and while dealing with the said issue. Ld. CIT(A) has categorically mentioned that even inspite of availing ample opportunities to file the confirmations as well as the reconsideration of the differences, the assessee did not furnish either confirmations or the reconciliation of the differences. It was categorically noticed by the CIT(A) that since the fresh amounts were appearing in the books of accounts of the assessee , therefore the onus was specifically on the assessee to furnish the confirmations as well as the reconciliation of the differences. Although during the appeal 7 ITA No.5592/Mum/2011 (A.Y.2007-08) M/s. Vesta Building Products Pvt. Ltd. vs. C.I.T. proceedings before CIT(A), the assessee had tried to explain the difference by stating that due to clerical error, the amounts were posted in some different ledger account. However, the assessee's explanation of explaining the difference appeared to be an afterthought by CIT(A), As in this respect no such explanation was furnished before AO even after availing several opportunities.
We have also noticed that copy of letter dated 19/11/2009 relied upon by the assessee was also not filed during appellate proceedings and even before us no application for leading additional evidences has been moved. Therefore, the assessee's claim had remained unsubstantiated that it had filed ledger accounts of the parties before the AO in support of its claim of reconciliation. From the facts and circumstances of the present case and after going through the impugned orders passed by CIT(A), we are of the considered view that since the assessee had failed to furnish explanation and reconciliation in respect of fresh credits appearing in its books of accounts and the assessee has also failed to discharge the onus of proving creditworthiness of the parties by not filing the confirmations of the parties. Therefore, ld. CIT(A) has rightly dismissed this ground of appeal.
6. No new material has been brought on record by the learned AR before us to controvert the findings recorded by the learned CIT (A). Therefore, we find no reason to interfere with the same. Accordingly, we uphold the order of the learned CIT (A) and dismiss the grounds of appeal of the assessee.
8ITA No.5592/Mum/2011 (A.Y.2007-08)
M/s. Vesta Building Products Pvt. Ltd. vs. C.I.T. Ground No.5 of the Assessee's appeal is general in nature and hence, requires no specific adjudication.
7. In the result, the appeal of the Assessee is dismissed.
Order pronounced in the open court on 10/08/2016.
Sd/- Sd/-
(JASON P. BOAZ) (SANDEEP GOSAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 10/08/2016
Ashwini/PS
Ashwini/PS
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
//True Copy//
BY ORDER,
Assistant Registrar
ITAT, MUMBAI