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2012 (11) TMI 1280

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..... Premium Brands Mktg. Pvt. Ltd. it was noticed that provision for doubtful debts had been made of ₹ 1,46,289/- the same has been debited in the P&L A/c. Vide this office letter dt. 13.1.97 the assessee was asked to furnish details regarding the same as well as the reasons for writing off the said debts. The assessee in its reply dt.12.3.97 has stated that they had written off debtors of ₹ 1,46,289/- because even after reminding several times to the parties on telephone for making payments, the parties are not responded and accordantly these debts have been considered as doubtful for recovery and hence written off in accounts while making provision of doubtful debts. The reply of the assessee was considered. However, the assessee company has not fulfilled the statutory condition laid down for admissibility of bad debt u/s 36(1)(vii) of the Act. The ITAT Delhi Bench-B in the case of Dy. CIT vs. India Thermit Corpn. Ltd. reported in 56 ITD 307 held that "after reading the provision before and after the amendment carefully, we find that as per law prior to amendment the assessee has to establish that any debt has become bad in the previous year itself. In the amende .....

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..... ported in 323 ITR 327 after ascertaining whether the amount was ever offered as income or not. The ground is allowed for statistical purpose. 6. Ground No.2 relates to addition of ₹ 14,14,06,326/- on account of difference between the estimated market value and disclosed sale of Arvind Mills Ltd. showed by the assessee. 7. The facts in respect of this addition as they emerge from the order of ld. CIT(A) are as under:- "4.2 The facts of the case are that the appellant had sold through broker M/s Chimanlal Lalbhai, Ahmedabad 2,21,037 debentures Part B of Arvind Mills Ltd. to M/s Pinnacle Exports Pvt. Ltd., Ahmedanagar and M/s Rajkumar Engineering Pvt. Ltd. Ahmednagar for a total declared sale price of ₹ 19,01,49,175/-. These were sold by bills dated 14-2-94. Out of the total 2,21,037 debentures sold by the appellant 1,46,037 debentures were sold @ ₹ 839.85 per debentures and the bills dated 14-12-1994 for the sale referred to contracts dated 24-11-1993 and 25-11-1993 and the remaining A.Y. 1994-95 75000 debentures were sold @ ₹ 900/- per debenture and the bill dated 14-2-94 for the sale referred to contract dated 26-11-93. Each of these debentures were to .....

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..... -11-93 and 25- 11-93. Neither the appellant company, nor its sister concern nor the broker and not even the purchasers of the debentures could produce before the Assessing Officer, the copies of the original contracts dated 24/25/26 November, 1993. They could produce only contract notes dated 14-2-94 which were marked "duplicate." It was claimed that the original contract notes were lost and on that account duplicate contract notes were prepared on which inadvertently the date of preparing the duplicates contract notes i.e. 14-2-94 was written in place of the dates of original contracts. The broker had also been unable to produce original contract note vouchers for the months of November and December 1993 & January 1994 which were claimed to have been lost. iv. The only original evidence produced by the broker was original 'Sauda Book' where the purported transactions were entered into in the month of November, 1993 but the same could not be relied upon because of the following reasons: a. The transactions under consideration are obviously not part of the Stock Exchange records as they are purportedly 'inhouse transactions' entered into between the app .....

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..... the Stock Exchange. But the Assessing Officer found that the transactions of 26-11-1993 on the floor of the Stock Exchange were entered from pages 372 to 379 and the appellant's transactions of 26-11-1993 in respect of 75000 debentures was entered on page 378 and not on page 379 as was to be expected. The Broker's explanation that this was a clerical error has not been accepted by the Assessing Officer who has held that this clearly proves that the said transaction was recorded as an after thought only to accommodate the ante-dating of the said transaction between the contracting parties. v) The delivery of the shares was made in the month of Feb, 1994 whereas the delivery of the securities generally takes place within 15 days of the contracts between the parties. The explanation of the broker that the difference between the date of contracts and the date of the bills was on account of the fact that the bills were prepared only when delivery was 'tendered by the selling party was not accepted by the Assessing Officer. It is because he found it strange that the purchaser had not pressed for the delivery of the debentures when such a huge amount was involved and the tran .....

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..... ecord and in which the transactions are duly recorded and broker had not been able to produce the carbon copies of the original contract notes dated November 1993 as they were lost and as per the Stock Exchange Regulation, the assessee was not bound to retain and produce the same. The Assessing Officer has not accepted this explanation on the ground that none of the A.Y. 1994-95 parties have bean able to produce copy of the original contract notes. (d) In regard to notional 'loss of interest* the appellant explained to the Assessing Officer, that the delays In delivery of securities and realisation of sale proceeds is normal and no prudent business man would charge interest for such delays, The Assessing Officer did not find this explanation satisfactory. (e) The appellant's contention that the across examination statements of Shri Hemant Rasiklal Shah and Shri Munir R Sheth partner of M/S chimanbhai Lalbhai confirmed the claim of the appellant that contracts were entered Into in November 1993, was not accepted by the Assessing Officer on the ground that their statements were self serving specially in view of absence of original contracts and no availability of sauda book f .....

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..... made on behalf of the appellant. My findings in regard to the three categories of claims made on behalf of the appellant are as under:- i) As regards the claim that the transactions were made in November 1993, I tend to agree with the appellant for interalia, the following reasons: a) Para 2 of the C.B.D.T.'s Circular No.704 dated 28.4.1995 fully covers the case of the appellant who has completed the transactions by actual delivery of scrips and the transfer deeds. b) There is nothing to show that there is any connection between the appellant and the purchasing companies and the transactions appear to be at an arms length. c) The broker and specially his employee Shri Dipen Shah who was no more in employment with the broker have confirmed the contemporaneousness of the entries in the sauda book which is a primary documents. Appellant is also correct in his claim that these are Department's witnesses and have confirmed the transactions' timings. A.Y. 1994-95 d) Statement of Hemantbhai Shah partner of the broker M/s Chimanlal Lalbhai recorded in October 1993 speaking about anything in April/June 1993 cannot be taken to apply to everything in future. Moreover even the stat .....

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..... assessment of capital gains and for the period for which there was specific provision in the form of section 52(2) to replace sale price by market value the Supreme Court held that it cannot be done unless it was proved that more price was actually received than what was declared. c) There is no provision in the Act for replacing the sale price of traded things by their market value on date of sale. d) The Decisions referred to by the appellant unequivocally show that it is the real income only which can be taxed. e) In my opinion decisions referred to by the Assessing Officer do not apply at all to the facts of the appellant's case. f) In my opinion the Assessing Officer has not been correct in holding that the Gujarat High Court decision in the case of Marghabhai Patel & Co. (108 ITR 54) did not apply to the appellant's case. In fact in view of the transactions in the appellant's case being at one arms length, appellant's case is stronger than in the case cited. g) The decision of the Calcutta High Court in the case of Smt. Nadini Nopany (148 CTR 522) cited by the appellant squarely applies to the appellant's case. 4.9 In view of the foregoing I hold that .....

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..... ed in our view by a judgment of the Supreme Court in the case of CIT v. Shivakami Co. Pvt. Ltd. [1986] 159 ITR 71 (SC). We also find support in our view from a Division Bench judgment of the Bombay High Court in the case of India Finance and Construction Co. Pvt. Ltd. v. B.N. Panda, Dy. CIT [1993] 200 ITR 710." A.Y. 1994-95 We further find that the order of ld. CIT(A) is in conformity with the decision of jurisdictional High Court in the case of Marghabhai Kishabhai Patel & Co. (supra) wherein Hon'ble Court referred to the case of Madras High Court in the case of Ramlinga Choodambikai Mils Ltd. vs. CIT (1955) 281 ITR 952 and that of Gujarat High Court in the case of CIT Vs. Keshavlal Chandulal (1996) 59 ITR 120 and held as under:- "In absence of evidence to show either that the sales were sham transaction or that the market price were in fact paid by the purchasers, the mere fact that goods were sold at a concessional rate to benefit to purchaser at the expenses of the company would not entitled to income-tax department to assess the difference between market price and price paid by the purchaser as profit of the company." 11. In view of the above and since n .....

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