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Income Tax Appellate Tribunal, MUMBAI ‘SMC’ BENCH, MUMBAI
Appearances: Hari Raheja for the appellant Milind Chavan for the respondent Date of concluding the hearing : February 09, 2022 Date of pronouncement the order : May 06, 2022
O R D E R Per Pramod Kumar, VP:
By way of this appeal, the assessee appellant has challenged correctness of the order dated 18th September 2019 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act 1961 for the assessment year 2014-15.
Grievances raised by the assessee, which we will take up together, are as follows:-
1. On the facts and in the circumstances of the case and in law the CIT(A) was not justified in confirming the addition of Rs. 68,68,850/- made by the AO by rejecting the claim of bad debt of the appellant relating to the investment in NSEL.
2. On the facts and in the circumstances of the case and in law the CIT(A) erred in disallowing the appellant's claim for Rs.68,68,850/- in respect of Bad Debts written off in Assessment Year: 2014-15 Page 2 of 4 its accounts for F.Y. 2013-14 and upholding the disallowance made by the Assessing Officer on the ground that the aforesaid claim was premature and not a bad debt at all and that it had been wrongly categorized by the appellant as a bad debt.
3. On the facts and in the circumstances of the case and law the the CIT(A) failed in appreciating that the appellant having fulfilled all relevant conditions for claim of Bad Debts U/s. 36(1)(vii) rws 36(2), the case was squarely covered by the ratio of the decision of the Hon'ble SC in the case of TRF Ltd. and the clean guidelines as laid down by the CBDT Circular No. /12/2016 dtd. 30-05-2016.
4. The CIT(A) has grossly erred in considering only a part of the submissions of the appellant in para 4.6 of his order thereby ignoring the entire submissions and evidence filed by the appellant wrongly holding that the amount of claim outstanding is Rs. 47,24,463.78 as against the claim of Rs. 68,68,650/- 5. On the facts and in the circumstances of the case and in law the CIT(A) grossly erred in stating in para 4.2 that the appellant could not provide any proof of payment for expenses ignoring all the evidence filed in the paperbook. The appellant submits that the same was filed before the A.O. and the CIT(A).
On the facts and in the circumstances of the case and in law the CIT(A) was not justified in coming to conclusion that the transactions made by the appellant are in the nature of speculation transactions and that no actual delivery was taken or given.
7. Without Prejudice to the above the appellant's claim should be allowed as a business loss.
When this appeal came up for hearing, learned Departmental Representative objected to certain documents filed by the assessee and contended that the Assessing Officer had no occasion to examine the same. Accordingly, vide interim order dated 3rd November 2011, I called for remand report on the material submitted by the assessee. While doing so, I had observed as follows:-
During the course of this hearing, learned Departmental Representative pointed out that the material which is being shown now was never before the authorities below, and, therefore, the comments of the Assessing Officer will appropriate on this material before the decision is taken, or that, in the alternative the matter may be sent to the Assessing Officer for fresh examination in the light of the facts of the case. Learned counsel for the assessee, however, submits that no fresh material is being filed now but, nevertheless, agrees that a remand report if so considered necessary be called in respect to the same. In view of the above position and bearing in mind entirety of the case, I am of the considered view that a remand report indeed may be called in this matter. Learned Departmental Representative is directed to send entire material to the Assessing Officer and take his comments, in whatever way he thinks fit, in respect of the same. The matter shall now come up on 3rd December 2021, as a part heard matter. In the meantime, learned Departmental
Assessment Year: 2014-15 Page 3 of 4 Representative may complete this exercise, and obtain the comments of the Assessing Officer concerned. The matter remains tagged to the bench. Part Heard.
In the remand report, the jurisdictional Assessing Officer has, even while justifying his action on merits at great length, observed, inter alia, as follows:-
(i) From the analysis of the above papers as mentioned in para 3 above, given to me by the ITO-ITAT SMC Bench, it is seen that all of these papers are already put before the erstwhile AO and the Ld. CIT(A)-53, Mumbai and there is no new additional evidence as such, to bring out new facts out of it. The erstwhile AO and the Ld. CIT(A)-53, Mumbai had already done his analysis and applied his mind while framing that the debt claimed by the assessee is not acceptable on merits.
It is in this light that we have proceeded with the matter.
6. Briefly stated, the relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has debited Rs. 68,68,850/- to the profit loss account as ‘bad debts written off’. When the matter was probed further, it was noted that the assessee’s claim is that he has been carrying on business of trading in commodities on delivery basis and what is written off represents amounts could not be recovered from debtors after the sale of commodities. The Assessing Officer, however, noted that the assessee was carrying out commodities trading on National Spot Exchange Ltd. (NSEL) through the brokers M/s. India Infoline Commodities Ltd and M/s Future Capital Commodities Ltd. It was noted that as EOW investigations in some cases revealed, all the NSEL transactions were not fully backed by the commodities. This vague observation apart, it was also noted that the assessee has not filed any cases against these parties, and that there is no evidence to prove that these amounts unrecoverable. It was also noted that the bad debt claim was premature and not backed by evidence. The claim was thus disallowed. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The CIT(A) was further of the view that the transactions were speculative in nature and as such bad debt claim in respect of the same cannot be adjusted against the business income. The assessee is not satisfied and is in further appeal before the Tribunal.
I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.
I find that firstly it is only elementary that while claiming the deduction in respect of bad debts, as held by Hon’ble Supreme Court in the case of TRF Ltd. vs CIT [(2010) 323 ITR 397
Assessment Year: 2014-15 Page 4 of 4 (SC)], it is not necessary that the amount in question is conclusively held to be unrecoverable. The write off per se, as long as it is bonafide, is sufficient to claim the bed debt as deduction. It is also not in dispute that the proceedings against NSEL were in progress in various courts. The bonafide of the claim of write off cannot even be seriously called into question.
I have also carefully perused detailed evidences, including evidence of delivery of commodities, copies of related ledger accounts and subsequent small recoveries which are duly accounted for etc. On a perusal of these details, it is clear that the transaction, in respect of which write off is claimed, were delivery based transactions and that the claim of write off is correct. The objections raised by the authorities in my considered view are devoid of legally sustainable merits and I reject the same.