Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SH.R. K. PANDA & MS. SUCHITRA KAMBLE
PER R.K. PANDA, AM:
This appeal filed by the assessee is directed against the order dated 25.03.2015 of the CIT (A)-16, New Delhi relating to A. Y. 2010-11.
The only effective ground raised by the assessee reads as under :-
“That the Ld. CIT (A) has grossly erred in confirming the disallowance of Rs.24,60,310/- on account of “Trade Advance Irrecoverable : Written off in Profit & Loss Account” by holding it as a trade debt written off not allowable as expense, which disallowance is bad in law and fact of the case.”
Facts of the case, in brief, are that the assessee is an individual and is engaged in insurance business and also a wholesale stockiest of Cigarettes. He filed his return of income on 08.02.2013 declaring total income of Rs.84,87,083/-. A search and seizure operation u/s. 132 of the IT Act, 1961 was conducted in case of Sanya Group of cases. The assessee was also covered under the said search. In response to notice u/s. 153 A the assessee filed the return of income on 08.02.2013 declaring income of Rs.84,87,083/-. In the said return the assessee had included Rs.70,00,000/- as his additional income.
During the course of assessment proceedings the Assessing Officer noted that the assessee has claimed credit advances written off in respect of Reha Distribution Co. amounting to Rs.24,60,310/-. The Assessing Officer asked the assessee to explain the nature of these credit claims and file details of the same. The assessee was further required to explain whether these receipts were routed through the P & L a/c within the meaning of section 36(2) of the IT Act. However, the assessee failed to comply with the requirement. Therefore, in absence of proper details and explanation the Assessing Officer made addition of Rs.24,60,310/- to the income of the assessee.
Before CIT (A) the assessee made elaborate submissions. However, the Ld. CIT (A) was not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer by observing as under :- “Ground No.l relating to the write off of trade advance amounting to Rs.24,60,210/- was meticulously examined in the light of the details available on record. It was incumbent on the part of the appellant to bring on record the evidence before the AO establishing that the above sum was not a trade debt but a trade advance as argued consistently by it. It is pertinent to add that arguments or submissions without the backing of evidence have no evidentiary value. In the instant case the appellant failed to demonstrate as to how the above sum was in the nature of trade advance and not trade debt. As per facts on record the appellant was having business transaction with the above said party for years together and all these years running accounts had been maintained in relation to this party. There was either debit or credit balance at the end of all such previous years i.e. 2006-07 till 2009-10. Terming the balance as trade advance at the close of assessment year 2010-11 was only an afterthought to claim some benefit through illegal means. Moreover, it was also not a case where the appellant was maintaining two separate accounts in respect of the same party in its books of account i.e. trading account and trade advance account. Since the appellant miserably failed to establish with the help of the ledger account and the explanations for the entries in such account that the said amount represented trade advances the claim of the appellant is held to be without any force of law and evidence. As far as the argument of the appellant that the relief be allowed u/s 37 is concerned, the said section does not cover expenses in the nature of “write off’. Section 36 is the appropriate section under which appellant had no explanation. Hence the claim of write off was also invalid in law. In the foregoing facts the grounds of appeal 1 (i), (ii) & (iii) are dismissed. The addition of Rs.24,60,210/- is sustained. Ground No.2 is being of general nature hence dismissed.”
Aggrieved with such order of the CIT (A), the assessee is in appeal before the Tribunal.
We have considered the rival arguments made by both the sides and perused the material available on record. We find the Assessing Officer made addition of Rs.24,60,310/- claimed by the assessee on account of advances written off in respect of Reha Distribution Company on the ground that assessee could not explain the nature of the credit and file the details of the same. We find the Ld. CIT (A) upheld the action of the Assessing Officer on the ground that assessee failed to demonstrate as to how the above sum was in nature of trade advance and not trade debt.
Since the assessee failed to establish with the help of the ledger account and the explanations for the entries in the said account that the above amount represent trade advance, the Ld. CIT (A) did not entertain the claim of the assessee. It is the submission of the Ld. Counsel for the assessee that full details were given, therefore, the Ld. CIT(A) was not justified in sustaining the addition made by the Assessing Officer. According to him advances given for the purposes business are allowable expenses u/s. 28 r/w 37 of the Act since the nature of the business is that for the purchase of goods advances has to be given to the suppliers.
Considering the totality facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate his case regarding the allowability of the claim. Needless to say the Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The ground raised by the assessee is accordingly allowed for statistical purposes.