TMI Blog2010 (7) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... the legal remedies available before it for the recovery of the amount. Therefore, in these circumstances, we do not find that the debt has become bad debt. It was only a case of delayed payment. In short, we find that the CIT (A) has rightly confirmed the disallowance of Rs. 3,66,71,850. The appeal filed by the assessee-company is, therefore, liable to be dismissed both on law and facts. cross-appeal filed by the Revenue - deleting on-money addition made by the AO - HELD THAT:- The issue has been elaborately discussed by the CIT (A) in his order and we agree with him and, therefore, we find that the CIT (A) is justified in deleting the on-money payment of Rs. 2.85 crores. Thus, The Revenue fails in its appeal. company on substantive basis - addition made on protective basis - HELD THAT:- we find that there is no basis for the CIT (A) to come to a conclusion that on-money payment was received by the assessee, Shri Jaikishan Virwani. Incidentally, we have to state that the order in the case of M/s. Embassy Classic P. Ltd., was passed by one CIT (A) and the order in the case of Shri Jaikishan Virwani was passed by another CIT (A). In short, we find that the addition has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the assessee-company, certain legal proceedings were also initiated against the defaulters. As on the date of the finalisation of the balance-sheet, the realisation of the balance money was doubtful and the assessee took a decision to write off the amounts as bad debts. Accordingly, the assessee-company wrote-off a sum of Rs. 3,66,71,850 as bad debts on account of Shri K. M. Viswanath and Smt. K. M. Parvathamma. The Assessing Officer has also made out a case that the assessee-company has received on-money of Rs. 2.85 crores from Shri K. M. Viswanath and Smt. K. M. Parvathamma. The said amount also has been added to the income of the assessee. Thus, the total income of Rs. 6,54,17,727 was determined by the Assessing Officer. In the first appeal, the Commissioner of Income-tax (Appeals) upheld the addition of Rs. 3,66,71,850 relating to the claim of bad debts. The Commissioner of Income-tax (Appeals) found that the debt was incurred in the previous year relevant to the assessment year under appeal and the debt was written off in the very same year without there being any efforts by the assessee to realise the amount receivable from Shri K. M. Viswanath and Smt. K. M. Parvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yers at Andhra Pradesh had denied making of any cash payments to Shri K. M. Viswanath and his mother. On the basis of all these materials, the Department itself did not believe the story of Shri K. M. Viswanath that they had received an amount of Rs. 23 crores for the sale of the mines at Bellary. In fact, he was again examined on June 25, 2005. In the absence of any evidence, he finally offered a sum of Rs. 10.8 crores as taxable income in the hands of his mother who was the owner of the mines. The said amount was offered for taxation as capital gains. The balance amount of Rs. 12.2 crores were offered as income in the hands of Shri K. M. Viswanath, for the assessment year 2005-06. In the light of the above contradicting statements the Commissioner of Income-tax (Appeals) came to a conclusion that the deliberations made by Shri K. M. Viswanath could not be relied upon as in his own affair he had no reasonable explanation to offer. The Commissioner of Income-tax (Appeals) also examined the replies given by Shri K. M. Viswanath in the course of cross-examination conducted by the assessee in the course of assessment. Earlier he had stated that he had gone to the residence of Shri J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case as well, common warrant of authorisation has been issued for more than one person and, therefore, the assessment made in the individual name of the assessee-company is void. He has also canvassed a decision of the Tribunal on the subject which was delivered in favour of the assessee relying on the above judgment of the hon'ble Allahabad High Court. We considered the issue. The Allahabad High Court in the case of Smt. Vandana Verma was in fact examining the case where a joint warrant of authorisation was issued. Both the persons mentioned in the warrant were living in the same premises. It was in such circumstances, the hon'ble court held that warrant was issued and search was carried out as a single unit and, therefore, the consequential assessment should also have been made in a single unit in the status of association of persons or body of individuals. On the other hand, in the present case, the warrant of authorisation is a common warrant and not a joint warrant. The common warrant issued in the present case has specified in detail the names and addresses of all the persons to be searched. They are all not living at the same premises. Absolutely there is no commu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the assessee, the assessee was taking advantage of the situation and making an immature claim of deduction in respect of the bad debts. The learned Commissioner of Income-tax further argued that the assessee had received the said amount immediately after the close of the balance-sheet date in the succeeding previous year itself which shows that the amount never became bad. He, therefore, submitted that the decision of the Supreme Court cited by the learned chartered accountant is not applicable to the present case in hand. We considered the matter in detail. The law on the subject of deduction of bad debts as amended as of now provides for a statutory form of evidence to justify such a claim of deduction. The statutory form of evidence prescribed in the amended law is that where the assessee does write off a debt as bad and irrecoverable in its books of account, it would sufficiently comply with the requirements of evidence and such written off amounts should be allowed as deduction in the hands of the assessee. The rejoinder of the amended law is that on recovery of the debts in future, the same shall be brought to tax under section 41 of the Income-tax Act. Even though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) has discussed the nature of the seized materials in detail and discounted the probative value of the entry regarding the payment of Rs. 2.85 crores. The Commissioner of Income-tax (Appeals) has rightly doubted that a case of on-money payment reflected in the seized material should have been supported by necessary calculations concerning the value of the property, mode of payment and the particulars regarding on-money, if any. As pointed out by the Commissioner of Income-tax (Appeals), this singular entry of cash payment of Rs. 2.85 crores is not supported by any corroborative evidence. On the other hand the payment has been shown as "payment of advance" which is quite legitimate in a property transaction. This entry in the seized material is supplemented by the Revenue by the statements given by Shri K. M. Viswanath. But Shri K. M. Viswanath has taken different stand at different points of time. Initially he had stated before the authorities that he, along with his mother had received Rs. 23 crores on sale of mines at Bellary to buyers from Andhra Pradesh. Later enquiries and investigations made by the Department brought to light that the mines were sold for a consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances, the Commissioner of Income-tax (Appeals) is justified in characterising Shri K. M. Viswanath a witness with no credibility and that his statement cannot be accepted as gospel truth for making additions in the hands of the assessee-company. The issue has been elaborately discussed by the Commissioner of Income-tax (Appeals) in his order and we agree with him and, therefore, we have restated only the essential aspects of the discussion. We find that the Commissioner of Income-tax (Appeals) is justified in deleting the on-money payment of Rs. 2.85 crores. The Revenue fails in its appeal. Next we will consider the appeal in I. T. A. No. 976/Bang/2009, filed by Shri Jaikishen Virwani. As already stated, the assessee is a director of M/s. Embassy Classic P. Ltd. In the appeal filed by the said company we have already considered the issue of on-money payment of Rs. 2.85 crores. The addition was made in the hands of the said company on substantive basis and the same addition has been made in the hands of the assessee on protective basis. The said addition made on protective basis has been confirmed by the Commissioner of Income-tax (Appeals). That is the reason for filing sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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