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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-24, Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
filed by the assessee read as under:
1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in sustaining the disallowance of deduction for bad debts of Rs.23,26,873/- G N Resound India Pvt. Ltd. 36(2) of the Income Tax Act, 1961 (“the Act”) ignoring the submission of the appellant.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in sustaining additions as unexplained cash credit a sum of Rs.2,00,000/- u/s 68 of the Act ignoring the submission of the appellant.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing that credit should not be granted to the appellant in respect of tax deducted at source of Rs.1,85,700/- ignoring the provisions of law and submissions of the appellant.
3. We begin with the 1st ground of appeal. The Assessing Officer (AO) made a disallowance of bad debts of Rs.23,26,873/- u/s 36(2) as he found that the appellant had failed to furnish the nature of transactions and the assessment years in which the said transactions had been taken into account. The details of concerned bad debts are as under :
Sr. No. Name of the party Amount of debt written off (Rs.) 1. M/s Delhi-A B OptiqueEye 9,72,341/- & Ear 2. A.P. Bhimavaram K.S. Rao 2,76,680/- 3. BeltoneShreeram H C 4,10,209/- 4. Calcutta Abha Audit Aids 5,46,069/- 5. Gujarat-Ahmd-Power Tek 90,656/- Aggrieved by the order of the AO, the appellant filed an appeal before the Ld. CIT(A). We find that during the course of appellate G N Resound India Pvt. Ltd. CIT(A) additional evidence along with application under Rule 46A. Then the Ld. CIT(A) called for a remand report from the AO in respect of the said additional evidence. The Ld. CIT(A)received a copy of the remand report from the AO on 18.01.2016 and sent a copy of it to the appellant for filing submission, if any. The appellant filed a rejoinder before the Ld. CIT(A) on 25.02.2016. The Ld. CIT(A), having gone through the remand report submitted by the AO and the rejoinder filed by the appellant, observed that except getting a reply from M/s A.B. Optique, no other information was either received by the AO or submitted by the appellant in the remand proceedings. At least from two such parties viz. BeltoneShreeram H C and M/s Gujarat-Ahmd-Power Tek, notices issued u/s 133(6) were returned back by the postal authorities with the remarks ‘left’. Even the appellant submitted before the AO during the course of remand proceedings that they were unable to provide the current details of BeltoneShreeram H C and M/s Gujarat-Ahmd-Power Tek. Also A.B. Optique replied to the AO but failed to provide a copy of the ledger account for the relevant period. Therefore, the AO could not verify the authenticity of the transactions. In view of the above facts, the Ld. CIT(A) dismissed the said ground of appeal filed by the appellant.
4. Before us, the Ld. counsel of the appellant files a copy of the ledger account of Beltone (I) Pvt. Ltd. and CBDT Circular No. 12/2016 dated 30.05.2016 wherein it is stated:
G N Resound India Pvt. Ltd. “3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon’ble Supreme Court in the case of TRF Ltd. In CA Nos. 5292 to 5294 of 2003 vide judgment dated 09.02.2010, has stated that the position of law is well settled. “After 01.04.1989, for allowing deduction for the amount of any bad debt or part thereof u/s 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if bad debt is written off as irrecoverable in the books of accounts of assessee.
In view of the above, claim for any debt or part thereof in any previous year, shall be admissible u/s 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfils the conditions stipulated in sub section (2) of sub-section 36(2) of the Act.”
Per contra, the Ld. DR relies on the order passed by the Ld. CIT(A) and submits that even after the amendment made in section 36(2), in case of non-genuine transactions, the same can be verified by the AO. As in the present case, the appellant failed to prove the genuineness of transaction, the Ld. CIT(A) has rightly dismissed the said appeal filed by the appellant.
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below.
G N Resound India Pvt. Ltd. Indisputably, the notices sent by the AO to BeltoneShreeram HC and M/s Gujarat-Ahmd-Power Tek were sent back by the postal authorities with the remarks ‘left’. Even in the remand proceedings, the appellant submitted before the AO that they were unable to provide details of the above two concerns. Also A.B. Optique failed to send a copy of the ledger account of the relevant period to the AO. Against the above background of facts, the AO was not in a position to verify the genuineness of transactions. We find that the appellant has failed to establish before the AO as well as the Ld. CIT(A) that the debt was incidental to its business and the debt was taken into account in computing the total income of the previous year in which it was written off or an earlier year. These are the basic ingredients for claim of bad debts. In the instant case, the appellant has not fulfilled the conditions laid down at para 4 of the said CBDT Circular. Therefore, the claim of automatic deduction of bad debt does not arise. Having gone through the assessment order, the remand report, the order of the Ld. CIT(A) and the submissions of the Ld. counsel, we find that the appellant has not discharged the onus cast on him in the instant case. Where an assessee sets up a claim for a particular deduction in the computation of his income, but is unable to establish necessary facts in this regard, the department would be justified in disallowing the claim as held in CIT v. Calcutta Agency Ltd. (1951) 19 ITR 191 (SC), Nund & Samont Co. (P.) Ltd. v. CIT (1970) 78 ITR 268 (SC), Seshasayee Bros Ltd. v. CIT (1961) 42 ITR 568 (Mad.).
G N Resound India Pvt. Ltd. The burden of prove is limited to primary or initial onus. Once such primary onus is discharged, such burden shifts to the revenue as held in Mather & Platt (India) Ltd. v. CIT (1987) 168 ITR 493 (Cal), Ritz Hotels (Mysore) Ltd. v. CIT (1992) 196 ITR 614 (Kar). In the instant case, the appellant has failed to discharge the primary onus. In view of the above, we uphold the order of the Ld. CIT(A) confirming the disallowance of Rs.23,26,873/- made by the AO and dismiss the 1st ground of appeal
7. The 2nd ground raised in this appeal is against the order of the Ld. CIT(A) confirming the addition of Rs.2,00,000/- made by the AO as unexplained cash credit u/s 68. The AO made the addition as he found that there were several cash deposits as per CIB information in the appellant’s bank account. The amounts were Rs.60,000/- (31.08.2009), Rs.80,000/- (30.04.2009)and Rs.60,000/-(17.06.2009). All these amounts were deposited in ICICI Bank, Chandigarh. In response to a show-cause notice issued by the AO, the appellant replied that these deposits were made by the sales persons against sales made in Chandigarh. However, the AO was not convinced with the explanation, as the address, PAN of the sales persons, bill amount could not be submitted by the assessee. Therefore, the AO made an addition of Rs.2,00,000/-.
8. In appeal before the Ld. CIT(A), the appellant filed certain additional evidence with regard to the above addition of Rs.2,00,000/- G N Resound India Pvt. Ltd. AO. The Ld. CIT(A) forwarded a copy of such evidence to the AO to make inquiry and send a remand report. The AO, after verification, sent a remand report incorporating the fact that the appellant vide its letter dated 16.02.2015 provided the address of the parties but failed to provide PAN of a party Veenu Bhargawa (Dealer), c/o Big Ben Optical Company, Chandigarh. Further, copies of sale invoices were provided which pertain to the FY 2007-08 and FY 2008- 09 relevant to the AY 2008-09 and AY 2009-10 respectively. The AO also observed that no reply was received from Mr. Veenu Bhargawa and Mr. B.K. Narang, in response to the notice issued u/s 133(6). On the above facts, the Ld. CIT(A) came to a finding that the onus required u/s 68 is completely on the assessee as far as the identity and creditworthiness of the creditor is concerned as also the genuineness of the said transaction. As the appellant failed to discharge the onus even during the remand proceedings, the Ld. CIT(A) upheld the addition of Rs.2,00,000/- made by the AO u/s 68.
9. Before us, the Ld. counsel of the appellant submits that the concerned cash has been deposited by sales persons directly from Chandigarh towards sale proceeds. Further the amount of cash deposited by the sales persons has been credited to the dealer’s ledger account in the books of accounts of the appellant. In view of the above, it is submitted by him that the addition of Rs.2,00,000/- made by the AO be deleted.
10. On the other hand, the Ld. DR relies on the order passed by the Ld. CIT(A). He submits that the appellant failed to file before the AO the