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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘A’
Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD – BENCH ‘A’
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 2596/Ahd/2017 �नधा�रण वष�/Assessment Year: 2014-15 Shri Priyakant Ramanlal ACIT, Cir.5(2) Parikh (Ind.) Vs Ahmedabad. 5th Floor, H.K. House Ashram Road Ahmedabad 380 009. PAN : ABRPP 6335 P अपीलाथ�/ (Appellant) �� यथ�/ (Respondent) Assessee by : Shri S.N. Divatia, AR Revenue by : Shri S.K. Dev, Sr.DR
सुनवाई क� तार�ख/Date of Hearing : 01/05/2019 घोषणा क� तार�ख /Date of Pronouncement : 06/05/2019 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-5, Ahmedabad dated 20.10.2017 passed for the Asstt.Year 2014-15.
Assessee has taken six grounds of appeal, out of which ground nos.1, 5 and 6 are general grounds of appeal, which do not call for recording of any specific finding.
In ground no.2 and 3, the assessee has pleaded that the ld.CIT(A) has erred in confirming the disallowance of claim of bad debt amounting to Rs.1,82,625/-. Alternatively, the ld.CIT(A) ought to have
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allowed it as a business loss if the bad debt is not admissible to the assessee.
Brief facts of the case have lucidly been pleaded by the assessee in his submissions before the ld.First Appellate Authority. The relevant part reads as under: Your appellant had approached M/s. K.P. & Company, the concerned person is Shri Jagatbhai Shah who were engaged in the business of shares, stock and finance as sub broker for purchase shares of Reliance Industries as well as shares of State Bank of India in the year 1998 for the purpose of my trading business of shares. I had instructed the above broker to purchase shares of Reliance Industries Ltd. At the rate of Rs. 140.50 p. on 28-8-1998. According to the settled norms and practice, the settlement is to take place every week and accordingly, as the price of the shares of Reliance Industries Ltd. had gone down and I had paid the difference badla amount to Rs. 33475/-. Thereafter, again the price had gone down to Rs. 121.75p. per share of Reliance Industries Ltd. And I had decided to take delivery of the above 1500 shares of Reliance Industries Ltd. And M/s. K.P. & Company had raised bill No. AC/9826/00014 in Sept. 1998 of Rs. 182625/-and requested me to make full payment of Rs. 182625/-for purchase of 1500 shares on behalf of me. Zerox copy of which is already submitted along with previous submission dated 9/12/2016. I had made full payment of Rs. 182625/- by chq. No. 242527 dated 22-9-1998 drawn on Textile Traders Co.Op.Bank which has also been encashed by M/s. K.P. & Company. The said broker K.P. & Co. after receiving the payment had not effected Delivery of 1500 shares of Reliance Industries Ltd and the said broker had confirmed and acknowledged in writing to me on 1-3- 1999 that the delivery of the said shares are pending. M/s. K.P. &Company had failed and neglected to effect delivery of 1500 shares of Reliance Industries Ltd. I had issued debit note of Rs. 40750/-being interest on the amount paid by me for purchase of the shares of Reliance Industries Ltd. M/s. K.P. & Company had continuously not only failed and neglected but have intentionally held delivery of 1500 shares of Reliance Industries. Therefore, I had approached Advocate Shri Harin P. Raval who had issued notice dated 25-4-2000 for initiating Civil Proceedings for non delivery of shares and/or recovery/refund of the amount paid to them alongwith interest accrued thereon and claimed further damages as per the law. The complaint was also filed before the Police Station Officer, Navrangpura, Ahmedabad and the Hon.
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Magistrate, Court No. 13, Ahmedabad had directed to investigate the Navrangpura Police Station Officer to the complaint u/s. 156(3) of the C.P.C.Act. Zerox copy of Advocate notice and Court's Order is already furnished to you alongwith submission dated 9-12-2016.
Till the end of the accounting year 1-4-13 to 31-3-14, neither the delivery of 1500 shares of Reliance Industries were made to me by M/s. K.P. & Company nor payment of Rs.182625/-You will find that since the trade advance was made during the course of its assessee, any loss on account of recoverability would automatically fall under the
category of trade debt / receivable and hence is allowable as business loss. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of ClT vs Mysore Sugar Co. Ltd reported in (1962) 46 ITR 649 (SC) .
As far as claim of bad debt is concerned, the same has been disallowed to the assessee on the ground that conditions enumerated in section 36(2) of the Act were not fulfilled by the assessee, and therefore, it is not admissible. Finding recorded by the ld.CIT(A) in this connection is worth to note. It reads as under: “Decision:
3.3. The AO has noticed that the assessee had claimed bad debts during the year. The AO has considered the submissions furnished by the assessee. However, he has not accepted the same. The AO has held that the amount which is being claimed as bad debt by the assessee does not fulfill the condition specified in Section 36(2) of the Act. Accordingly the AO has disallowed an amount of Rs. 1,82,625/-.
3.4. During the course of appellate proceedings the appellant has contended that the appellant is doing business of money lending and also doing business of share trading and speculation business of shares and commodity since last many years. It is further contended that the appellant had purchased certain shares through M/s.K.P. & Co. and made full payment of Rs.1,52,625/- ,however, the said broker after receiving the payment had not effected delivery of shares. It is further contended that as the broker had failed to make payments the assessee had approached advocate and issued notices to the broker for initiating civil
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proceedings for non-delivery of shares. In these circumstances it is further contended by the appellant that amount of Rs. 1,82,625/- is claimed as bad debt. In this regard the appellant has relied upon certain decisions as cited above.
3.5. The facts of the case and the submissions are considered. The provisions of section 36(2) of the Act are reproduced asunder:-
"In making any deduction for a bad debt or part thereof, the following provisions shall apply.
(i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money lending which is carried on by the assessee. "
From the plain reading of this section it is very much clear that the claim of bad debt by the assessee doesn't come under the purview of the provisions of Section 36(2)of the Act. In the case of Netco Pharma Ltd. the Hon'ble ITAT, Hyderabad Bench'A' in appeal No.377/Hyd/2009 and 487and 686/Hyd/2007 dtd. 31.10.2012 clearly held that trade debts or trade advances are not allowable as bad' debt. Considering the above, the disallowance of bad debt made by the AO is justified and the disallowance made by the AO is confirmed. Thus the ground of appeal is dismissed.
Ground No.2 relates to initiation of penalty proceedings u/s.271(l)(c) of the Act. No appeal lies against the initiation of penalty under section 271(l)(c). Hence, this ground is dismissed.”
The ld.counsel for the assessee was unable to find out any illegality on this finding of the ld.CIT(A), but proceed to emphasis on alternative contention. He took us through a legal notice served through Advocate, Shri Harin P. Raval to M/s.K.P. & Company and Shri Jagatbhai Shah. Copy of this legal notice has been placed on page no.41 of the paper book. Thereafter, he pointed out that the assessee filed a
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police complaint which was not entertained hence, he filed a complaint before Metropolitan Magistrate having jurisdiction over the area of the assessee. The ld.Magistrate vide order dated 16.10.2001 passed under section 156(3) of the Cr.PC directed the police to carry out an investigation. Copy of this order is available at page no.49 and 50 of the paper book. On the strength of these documents, he submitted that the assessee was unable to recover payments made by him for purchases of shares. Shares were not handed over to the assessee, hence, it be allowed as business loss. The ld.counsel for the assessee also took us through written submissions filed before the AO and submitted that these shares were sought to be purchased in the business of trading in shares. For this purpose, he specifically took us through page no.3 of the assessment order.
On the other hand, the ld.DR relied on the orders of the Revenue authorities.
We have duly considered rival submissions and gone through the record carefully. We find that shares were sought to be purchased in the year 1998. The order of ld.Magistrate for carrying out an investigation under section 156(3) of the Cr.PC is dated 16.10.2001. The assessee has sought loss in the Att.Year 2014-15. There is no material on record demonstrating how this loss has been crystallized in this assessment year 2014-15. The documents which have been placed on record are of the year 2000. The legal notice was issued on 25th April, 2000. The order of the Magistrate is 16.10.2001. Apart from these two thirteen years’ old documents no other evidence has been placed on record demonstrating whether the loss has been crytlised in this year i.e. Asstt.Year 2014-15.
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Therefore, we do not find any merit in both the contentions of the ld.counsel for the assessee. Ld.CIT(A) has rightly confirmed the disallowance.
So far as ground no.4 in respect of addition of Rs.23,525/- made by the AO with the aid of section 41 is concerned, we find from the assessment order that the ld.AO has made this addition on the ground of acceptance of the same by the assessee. As the fact emerges from the record, this issue has not been agitated by the assessee before the ld.First Appellate Authority. Therefore, there is no merit in the contention of the assessee that the issue in question has been raised before the lower authorities. We find no force in ground no.4 of appeal. It is rejected.
In the result, appeal of the assessee is rejected. Pronounced in the Open Court on 6th May, 2019.
Sd/- Sd/- (PRADIP KUMAR KEDIA) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated, 06/05/2019