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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL
The present appeal has been filed by the assessee challenging the impugned order dated 03/01/2013 passed under section 250 of the Income Tax Act, 1961 (‘the Act’) by the learned Commissioner of Income Tax (Appeals)–2, Mumbai [‘learned CIT(A)’], for the assessment year 2008-09.
The present appeal has been listed for hearing before us pursuant to the order dated 31/12/2019, passed by the coordinate bench of the Tribunal in DCIT vs M/s Killick Nixon Ltd., M.A. no. 335/Mum./2019 (in Mum./2013, for the assessment year 2008-09), whereby, the earlier order
Killick Nixon Limited ITA no.1786/Mum./2013 dated 19/11/2018, passed under section 254(1) of the Act was recalled and the appeal was directed to be re-fixed for hearing.
When the appeal was called for hearing neither anyone appeared on behalf of the assessee nor was any application seeking adjournment filed. From the perusal of the record, we find that since the appeal has been re-fixed for hearing, no one has appeared on behalf of the assessee, apart from some intermittent representation on a few dates of hearing on behalf of the assessee. The learned Departmental Representative („learned DR‟) placed on record the copy of the acknowledgement of service of notice on the assessee. Therefore, in view of the above, we proceed to dispose off the present appeal ex–parte, qua the assessee after hearing the learned DR and based on the material available on record.
In this appeal, the assessee has raised the following grounds:
“1. The Learned CIT(A) has erred in confirming the disallowance of business loss or bad debts of Rs 2 Crore with respect to amount written off of G.K.A.K. Rathi HUF.
2. The Learned CIT(A) has failed to consider that appellant has been referred to BIFR as a Sick Unit and due to auction of property by Special Court, details were not readily available or misplaced.
3. The Leaned CIT(A) has erred in confirming interest u/s 234A, 234B & 234C of the Income Tax Act.
4. The Appellant craves leave to add/or amend and/or notify and/or alter and/or delete the aforesaid ground of appeal.”
We find that vide application dated 23/05/2018, the assessee also sought admission of the following additional grounds of appeal:
Killick Nixon Limited ITA no.1786/Mum./2013
“1) The Learned CIT(A) has erred in holding that ground of reasonable opportunity is in general in nature and not considered that notice under 143(2) was issued on 28-07-2010 i.e. before filing of the return of income. Thus, the assessment framed without issue of notice u/s 143(2), after filing of return is ab-initio void. 2) The Learned CIT(A) ought to have consider object clause as per III (t) of the Memorandum of Association, as per which the appellant has been allowed to lend money, either with or without security. 3) The Appellant craves leave to add to and/or amend and/or modify and/or alter and/or delete the aforesaid additional ground of appeal. 4) The aforesaid additional ground of appeal is without prejudice to the original grounds of appeal.”
6. We find that the coordinate bench of the Tribunal vide order dated 19/11/2018, allowed the appeal filed by the assessee in respect of the jurisdictional ground raised
vide additional ground No.
1. However, pursuant to the miscellaneous application filed by the Revenue under section 254(2) of the Act, the aforesaid order was recalled and the present appeal was re-fixed for hearing afresh. From the perusal of the order dated 31/12/2019, passed by the coordinate bench of the Tribunal in M.A. no. 335/Mum./2019 (in ITA no.1786/Mum./2018, for the assessment year 2008-09) and the Miscellaneous Application along with annexures filed by the Revenue, we find that pursuant to notice dated 07/07/2009, issued under section 142 of the Act, the assessee manually filed its return of income on 26/07/2010. Thereafter, the Assessing Officer (‘AO‟) issued a notice dated 28/07/2010 under section 143(2) of the Act and initiated scrutiny assessment proceedings in the case of the assessee. In view of the aforesaid facts, we find no merits in the addition ground No. 1 challenging the assessment framed on the basis of non-issuance of notice under section 143(2) of the Act after the filing of the return of income. As a result, additional ground No.1 raised by the assessee is dismissed. Page | 3
Killick Nixon Limited ITA no.1786/Mum./2013
Insofar as the grounds raised by the assessee on merits, the brief facts of the case are: The assessee is a company and is engaged in clearing and forwarding business. Pursuant to notice issued under section 142 of the Act, the assessee manually filed its return of income on 26/07/2010, declaring a total loss of Rs.36,38,338. The return of income filed by the assessee was selected for scrutiny and statutory notices under sections 143(2) and 142(1) along with questionnaire were issued and duly served on the assessee. During the assessment proceedings, on perusal of details, it was noticed that the assessee has claimed bad debts and advances written off of Rs.2,08,63,086. Accordingly, the details of such bad debts/advances written off were sought from the assessee. From the details submitted by the assessee, it was noticed that the bad debts/advances written off during the year include an advance of Rs.2 crore made to G.K.A.K. Rathi (HUF). The AO vide order dated 23/12/2010, passed under section 143(3) of the Act held that the advances given to G.K.A.K. Rathi (HUF), which is claimed as a bad debt by the assessee were not included in the income as per section 36(2) of the Act. In absence of any details to prove that such debts were included in the income, the AO disallowed the advances of Rs.2 crore written off in the profit and loss account and added the same to the total income of the assessee.
The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee on the basis that the assessee has not proved if any amount due from G.K.A.K. Rathi (HUF) was offered as income in the earlier years and the assessee has also failed to establish the business necessity for advancing the Killick Nixon Limited ITA no.1786/Mum./2013 loan to G.K.A.K. Rathi (HUF). The relevant findings of the learned CIT(A), in the impugned order, are as under:
“4.4. I have gone through the issue. During the appellate proceedings, the appellant company was asked to give the purpose for which advance was given to GKAK Rathi, HUF. The appellant company has simply stated that the advances were given for business development but has not furnished any details about the business development. It was also seen that the total outstandings from GKAK Rathi, HUF is Rs.6,41,81,942/- and the appellant company choose to claim bad debts amounting to Rs.2,00,00,000/- from this debt. The appellant could not furnish any convincing reply why the appellant company choose to claim only Rs.2,00,00,000/- as a loss and how this amount of loss was determined etc. The appellant company was asked to produce the account copy of GKAK Rathi, HUF in the books of accounts of the appellant from the date of granting the advances upto 31.03.2007. The appellant could not furnish the details. The claim of the appellant cannot be allowed as bad debt since the appellant could not prove that any amount from this Rs.6,41,81,942/- was offered as income in earlier years. The claim of the appellant cannot be allowed as a business loss since the appellant could not establish any business necessities for advancing the loan to GKAK Rathi, HUF. Further, the appellant could not establish how only Rs.2 crores is not recoverable from GKAK Rathi, HUF. The appellant also could not prove this amount of Rs.2,00,00,000/- could not be recovered and become bad only during the accounting year relevant to this assessment year. In view of these facts, the appellant's claim that it should be allowed as a business loss is not accepted. Considering the facts narrated above, I am of the view that to reduce the tax liability, without any basis, the appellant has made a claim of Rs.2,00,00,000/- as bad debt. I hold that the appellant‟s claim cannot be allowed as business loss or bad debts. AO's order is upheld.”
During the hearing, the learned DR vehemently relied upon the order passed by the lower authorities and submitted that there is no proof available on record that the amounts claimed as bad debt was included in the income of the year or earlier years.
Killick Nixon Limited ITA no.1786/Mum./2013
We have considered the submissions of the learned DR and perused the material available on record. Before the lower authorities, the assessee claimed that a loan of Rs.6,41,81,942 was given to G.K.A.K. Rathi (HUF) group for business development. Due to the non-recovery of any amount from G.K.A.K. Rathi (HUF) group, as per the assessee, it chooses to claim bad debts amounting to Rs.2 crore from this debt. From the perusal of written submissions filed before the learned CIT(A), a copy of which forms part of the paper book, we find that as per the assessee in the assessment year 2000-01, guarantee commission of Rs.6 crores from G.K.A.K. Rathi (HUF) group was held to be taxable in the hands of the assessee. Since the amount from G.K.A.K. Rathi (HUF) group was not recoverable, the assessee decided to write off Rs.2 crore as bad debt in the year under consideration. However, we find that in none of the submissions, the assessee has provided any details on whether the said amount was taken into account in computing the income of the previous year in which the amount of such debt is written off or of an earlier previous year. Since the requirement of section 36(2) of the Act is not fulfilled in the present case, therefore, we find no infirmity in the impugned order upholding the disallowance of Rs.2 crore claimed as a bad debt by the assessee. As a result, grounds No. 1 and 2 and additional ground No. 2 raised by the assessee are dismissed.
Ground no.3, raised in assessee’s appeal, is pertaining to the levy of interest under sections 234A, 234B, and 234C of the Act, which is consequential in nature in the present case. Therefore, ground no.3 is allowed for statistical purposes. Page | 6
Killick Nixon Limited ITA no.1786/Mum./2013
In the result, the appeal by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 30/01/2023