TMI Blog2016 (5) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we upheld the order of the ld CIT(A) for business loss to the tune of ₹ 1.45 crores and confirmed the addition of ₹ 2,87,930/- as advanced to Shri Mohiuddin and claimed as bad debt. - Decided partly in favour of assessee Disallowance under the head various expenses - CIT(A) restricted the addition @ 10% as against 15% done by AO - Held that:- It is difficult to get bill of each and every expenditure incurred by the assessee particularly taxi, rickshaw, tea etc, therefore, no reason to intervene in the order of the ld CIT(A). Accordingly, we uphold the order of the ld CIT(A) - ITA No. 518/JP/2013 - - - Dated:- 21-3-2016 - SHRI T.R.MEENA, AM SHRI LALIET KUMAR, JM For The Revenue : Shri O.P. Bhateja (Addl.CIT) For The Assessee : Shri S.L. Jain (Adv) ORDER PER: T.R. MEENA, A.M.: The appeal by revenue and cross objection by assessee arise from the order dated 04/3/2013 of Ld. CIT (A)-II, Jaipur. Effective grounds of appeal as well as C.O. are as under:- Grounds in Revenue Appeal. On the facts and in the circumstances of the case and in law the ld CIT(A) has erred in: (i) Deleting the addition of ₹ 1,45,00,000/- o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and textile articles. It filed its return on 27/09/2009 showing income of ₹ 96,14,540/-. The case was scrutinized U/s 143(3) of the Act. The ld Assessing Officer observed that during the year under consideration, the assessee had debited a sum of ₹ 1,47,87,930/- under the head bad debts. The ld Assessing Officer gave reasonable opportunity of being heard on this issue, which was availed by the assessee vide letter dated 13/12/2011, which has been reproduced by the Assessing Officer on pages 2 to 5 of the assessment order, which are reproduced as under:- 1. That the assessee is in the business of carpet manufacturing and export since last 60 years and enjoys a premier position and incredible business reputation in the field. The assessee is known for its unique design and technology innovations all over the world. Mr. S N Kapoor has realtions with carpet buyers all over the world and all the goods manufactured and procured by the assessee are exported. The main markets of the assessee are Europe and USA. 2. That M/s Saraswati Exports is also in the business of manufacturing and exporting the carpets. The core expertise of M/s. Saraswati Exports lies in carpe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is deriving business income from the same business assessee claimed the write off as business expenditure in it financial statement for the year 2008-09 corresponding to assessment year 2009-10. 11. That an advance was extended to Mr. Mohinuddin who was a designer at the designing department of the assesses and the same was duly deducted in installments from his remuneration. He suddenly left the job and all the efforts to recover the money went in vain. The amount outstanding to his account has been written off as bad debts. 12. We would like to submit that the amount written off is very much allowable as business loss under the provision of Income Tax Act., 1961. 13. Sir, we hereby like to refer and very latest judgement of Madras High Court in the matter of A. Ramamurthy Vs. DCIT, Special Range - 1, Madurai in which hon'ble court has granted a relief on the ground and remanded back to the tribunal. The relevant para is quoted as under : In the circumstances, we feel that proper course would be to set aside the order of the Tribunal in this regard and direct the Tribunal to consider the claim of the assessee in respect of sum of ₹ 4,75, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is found that the heroin seized formed part of the stock-in-trade of the assessee, it follows that the seizure and confiscation of such stock-in-trade has to be allowed as business loss. Loss of stock - in - trade has to be considered as a trading loss vide CIT Vs S.N.A.S.A Annamalai Chettiar AIR 1973 SC 1032. 19. Sir, in view of the above submission we would humbly submit that advance given to the Saraswati Exports was a trading advance in ordinary course of business and therefore loss should be allowed under the provision of the Act. 20 Without prejudice to the above submission we would further like to submit that the said advance which has been written off in the assessment year 2009-10 has been recovered in financial year 2010-11 corresponding to assessment year 2011-12 and the same has been incorporated as income in the books of the assessee. (Copy of the income tax return filed for the financial year 2010-11 corresponding assessment year 2011-12 is herewith enclosed) After considering the assessee s reply, the ld Assessing Officer considered Section 36 of the Act and held the amount given to M/s Saraswati Exports has not been disclosed by the assessee in ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for business purposes as the assessee also had shown advances in the balance sheet for A.Y. 2002-03, the receipts from the advances also has been shown in fork of commission in the income of the assessee. It is further held that cantankerous litigation was going on between the appellant and M/s Saraswati Exports, that the cheques given by M/s Saraswati Exports had been dishonoured and that the appellant had to approach both police and courts to seek remedy. Thereafter she relied on the decision of Hon'ble Supreme Court in the case of TRF Ltd. Vs CIT in appeal No. 5294 of 2003 order dated 09/2/2010 wherein it has been held that after 01/4/1989 it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. The advance to M/s Saraswati Exports is appearing in the list of loan and advances given in Schedule-F of the balance sheet of the appellant right from A.Y. 2002-03 till A.Y. 2008-09 and in this A.Y. it has been written off in accounts. She also considered the bifurcation of bad debt written off, which was found to be in the name of M/s Saraswati Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ati Exports. The post dated cheques were obtained by the assessee as a security of the advance. There was a formal agreement between the assessee and M/s Saraswati Exports. M/s Saraswati Exports has also in the carpet business, it has expertise in design and technology and knows how in the carpet line of business. The business between both the parties was going smoothly as the partners of the firm has shown commission income substantially from this business as mentioned by the ld CIT(A), which has not been controverted by the ld DR. The response to M/s Saraswati Exports was not according to business terms and conditions, thereafter the assessee firm deposited the cheque in the bank account, which dishonoured. Thereafter the assessee filed criminal suit U/s 138 of the N.I. Act for recovery of amount. It also filed a civil suit for recovery of ₹ 1.45 crores. Thereafter, he filed complaint before the Additional Director General of Police (Crime), Rajasthan, therefore, when the assessee s efforts went in vain he had written off this amount as bad debt U/s 36(1)(vii) of the Act. During the assessment proceedings, it also claimed that if this amount is not allowable U/s 36(1)(vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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