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TMI Blog2022 (9) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... see 143 (3) 4 2341/M/2006 2000 - 2001 AO 143 (3) 5 2498/M/2006 2001 - 2002 Assessee 143 (3) 6 2499/M/2006 2002 - 2003 Assessee 143 (3) 7 487/M/2013 2003 - 2004 Assessee penalty u/s 271 (1) (C) 8 5462/M/2006 2003 - 2004 Assessee 143 (3) 9 7547/M/2012 2004 - 2005 Assessee 143 (3) read with Section 147 10 490/M/2008 2004 - 2005 Assessee 143 (3) 11 488/M/2013 2004 - 2005 Assessee penalty u/s 271 (1) (C) 12 1919/M/2009 2005 - 2006 Assessee 143 (3) 13 489/M/2013 2006 - 2007 Assessee penalty u/s 271 (1) (C) 14 6075/M/2009 2006 - 2007 Assessee 143 (3) 15 6146/M/2011 2007 - 2008 Assessee 143 (3) 16 6147/M/2011 2008 - 2009 Assessee 143 (3) We proceed to dispose them of assessment year wise as hereinafter. ITA number assessment year filed by particulars 2323/M/2016 1999 - 2000 AO 143 (3) 2496/M/2006 1999 - 2000 Assessee 143 (3) 03. For assessment year 1999 - 2000 , cross appeals are filed by assessee in ITA number 2496/M/2006 and The Assistant Commissioner Of Income Tax [ The ld AO] in ITA number 2323/M/2006 against the appellate order passed by The Commissioner Of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irming disallowance of short-term capital gain on sale of securities on ground that the genuineness of the transaction remains to be proved viii. on the facts and in law the CIT (A) erred in confirming disallowance of bad debts written off of Rs. 4,47,759/- on the ground that similar claim was disallowed in assessment year 96 - 97 ix. on the facts and in law, the CIT (A) failed to appreciate that in fact for assessment year 96 - 97, similar claim of appellant was partly allowed and thereby erred in disallowing claim of right of Rs 4447759/- x. on the facts and in law the CIT (A) erred in confirming disallowance out of interest in respect of advances given to CIFCO travel private limited relying only on the order of the CIT - A for assessment year 96 - 97 the CIT (A) erred in facts and in law in confirming disallowance out of depreciation on the ground that the depreciation was disallowed in the earlier year without independently examining allowability of depreciation for the year xi. on the facts and in law, the CIT (A) erred in confirming addition made rejecting bona fide change in method of accounting xii. on the facts and in law, the CIT (A) failed to appreciate that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accounting income being lease rental. The Prudential norms issued by the reserve bank of India are in relation to income recognition, which falls on altogether different ground. The reversal of entries made is obviously subsequent to the end of the accounting period after accounting the lease rental he further referred to the report of the board of directors of the assessee company wherein it is mentioned that assessee was not registered as nonbanking financial company as application for registration of the assessee was not considered favorably. Therefore, the AO was of the view that NBFC Prudential norms do not apply to the assessee. Hence, he held that there is no reason to reverse the income of Rs. 1,730,586 for the year under consideration. Accordingly, this addition was made. 08. The assessee challenged the same before the learned CIT - A as per ground number 1 and 2. The learned CIT - A of the view that identical issue in assessment year 98 - 99 the identical disallowance was confirmed as assessee was not registered as an NBFC. He further held that the guidelines of the RBI has nothing to know with the determination of income which is to be done in accordance with the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st shown, as receivable in the earlier year i.e. assessment year 98 - 99 did not receive in view of the sale of the securities and therefore the same is written off. The AO questioned the same and stated that the securities were sold on cum interest basis and the assessee has incurred loss in the transaction of sale of securities. The assessee was not forthcoming with any explanation. AO disallowed the same. On appeal before the learned CIT - A assessee could not produce any evidence with respect to the sale of securities and it was found that the securities were never delivered to the assessee and was subsequently sold to the same person. Therefore, the CIT - A noted that the securities were sold remains unsubstantiated is no documents or correspondence bank transactions could be produced in support of the sale price of the securities. Therefore, the addition was confirmed with respect to the claim of interest and short-term capital loss. 13. The learned authorised representative reiterated the same facts before us and the learned departmental representative supported the orders of the lower authorities. 14. We have carefully considered the rival contention and perused the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , doubt about the existence of genuine transaction and such write off are related to the business. 16. The assessee preferred appeal before the learned CIT - A following his own order for assessment year 96 - 97 and 97 - 98 confirmed the disallowance stating that it did not satisfy the criteria Under which the said claim is allowable u/s 36 (1) (vii) read with Section 36 (2) of the act. 17. We have heard the rival contentions on this issue and find that undoubtedly these was the amount which was financed by the assessee through its dealer for purchase of consumer goods to the various parties. Undisputed fact shows that assessee is engaged in the business of leasing and hire purchase, assessee has advanced money to these parties through its dealers. Assessee is engaged in the business of money lending, it is also proved that the above amount could not be recovered, therefore according to us it satisfies all the conditions of allowability of bad debt in case of finance business. Merely certain deficiencies in the documents cannot be used to deny the claim of bad debt. In view of this we direct the learned assessing officer to delete the disallowance of amount of bad debt claim of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the coordinate bench. We find that in paragraph number 24 the coordinate bench has reproduced the order for assessment year 9697 of the coordinate bench in ITA number 3992/M/2001. In that paragraph the order of the ITAT for assessment year 94-95 was referred. In that order the orders for assessment year 1992 - 1993 and 93 - 94 one referred to and the matters were restored back to the file of the AO to decide it in accordance with the decision of ITAT. However, for assessment year 1998 - 99, the coordinate bench directed the AO to allow the depreciation. We find that the direction of the coordinate bench, which followed the decision of the other assessment years where the issue was set aside to the file of the AO, is not in conformity with those orders of ITAT. Accordingly we set-aside this issue back to the file of the learned assessing officer with a direction to decide the issue afresh in the light of orders of the ITAT. This ground of appeal is allowed accordingly to that extent. 23. Ground number 8 and sub- set of those grounds deals with the rejection of change in the method of accounting. The fact shows that Assessee Company has changed its accounting system from accrual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the assessee and confirmed the disallowance. 27. Before us this ground was not pressed hence same is dismissed. 28. Accordingly, appeal of the assessee is partly allowed. 29. ITA number 2323/M/2006 filed by the assessing officer contends only issue where the learned CIT - A has erred in directing the AO bifurcated the lease rentals received from certain parties in principal and interest and to tax only the interest component as income of the assessee. We find that this issue is covered in favour of the assessee by the decision of the CIT - A in assessment year 1997 - 98 wherein the claim of the appellant was accepted based on remand report by the AO. This direction of the learned CIT - A is also in consonance with CIRCULAR: NO. 9 [R. DIS. NO. 27(4)-IT/43], DATED 23-3-1943. There is no change in the facts and circumstances of the case, on the merits we do not find any infirmity in the order of the learned CIT - A. As such, nothing was contended before us by the revenue. Accordingly, appeal of the learned AO is dismissed. 30. In the result for assessment year 99 - 2000 appeal filed by the assessee in ITA number 496/M/2006 is partly allowed and you'll filed by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 are allowed. 34. Ground number 4 is with respect to disallowance of depreciation of Rs. 261,210/- which is disallowed by the learned assessing officer following the order of the AO in 1997 - 1998 and 1998 - 1999 where the assets were either in not existence or whether they're been used for the purpose of the business was not known. Identical ground arose in the case of the assessee for assessment year 1998 - 1999 wherein the issue has been decided in favour of the assessee. However, we have dealt with this issue in the appeal of the assessee for assessment year 99 - 2000 wherein we have set-aside the whole issue back to the file of the learned assessing officer in accordance with the order of the coordinate bench in earlier years in assessee's own case. Therefore, according to that ground number 4 is restored back to the file of the learned assessing officer. 35. Ground number 5 is with respect to the rejection of method of accounting followed by the assessee. This is identical to ground arose in case of the assessee for assessment year 1998 - 99. By that order the learned assessing officer has made the addition of Rs. 9,230,816/-. We find that the method of accounting change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange in the method of accounting. 41. The ground number 1 is with respect to confirming the disallowance of interest in respect of advances given to sift court travel private limited. The fact shows that there is no such addition made by the learned assessing officer with respect to the advances given to CIFCO travel private limited. Therefore, ground number 1 of the appeal is not arising out of the order of the learned CIT - A hence dismissed. 42. Ground number 2, is with respect to disallowance of depreciation on the ground that in earlier year the assets were neither found to be in existence or no evidence with respect to the fact that the assets were given on lease for the purposes of the business of the assessee. We find that this issue is squarely covered in favour of the assessee by the decision of the coordinate bench in case of assessment year 98 - 99 wherein for that year the coordinate bench followed the decision in earlier years. We have also stated so in our order for assessment year 99 - 2000 in the appeal of the assessee and set-aside the issue back to the file of the learned assessing officer. Therefore for the similar reasons, we also setaside ground number 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1998 - 1999 wherein the coordinate bench directed AO to delete the disallowance. However when identical issue arose before us for assessment year 1999 - 2000 we found that in earlier years the coordinate bench has set aside the issue back to the file of the learned assessing officer to decide it up as in accordance of the orders of the ITAT. Therefore with similar direction we set-aside this ground of appeal to the file of the learned AO. 48. Ground number 3 is with respect to the change in method of accounting made by the assessee, which was rejected by the lower authorities. We find that identical issue arose in the case of the assessee for earlier years i.e. assessment year 98 - 99, wherein ITAT giving detailed reasons has upheld that the change in the method of accounting followed by the assessee is bona fide, in accordance with the law and proper. We have also followed the same in the case of the assessee for assessment year 1999 - 2000. Therefore, we reverse the findings of the lower authorities and upheld the change in the method of accounting made by the assessee as bona fide, proper and in accordance with the law. Accordingly, ground number 3 of the appeal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance outstanding in the account of this party is the interest receivable from this party which was folly offered to taxation in the earlier years. The assessee has already contested that the principal amount has already been received and the amount outstanding is only interest. We do not find any reason to uphold the disallowance as the interest income has already offered for taxation in the earlier years and this amount is outstanding only with respect to that interest. We find that this is not an advance given by the assessee but merely an outstanding interest receivable. On this sum there was no disallowance made by the learned assessing officer in earlier years also. Therefore, the ground number 1 of the appeal of the assessee is allowed and AO is directed to delete the disallowance of Rs. 215,821 on account of interest free advances given to Acadia investment private limited amounting to Rs. 1,027,720/-. 55. Ground number 2 is with respect to the disallowance of depreciation of Rs. 110,698/- on assets either which have not been found in existence or which were not found to be used by the assessee for the purpose of its business. Identical issue is decided by the coord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems, there are no evidences available and therefore the disallowance of the balance sum is confirmed. Accordingly, the assessee gets relief with respect to the sum of Rs. 1,503,135/- being outstanding hire charges receivable and a sum of Rs. 519,222/- being interest and brokerage income already offered for taxation in the earlier years. The ground number 4 of the appeal is partly allowed. 58. Accordingly, ITA number 5462/M/2006 filed by the assessee for assessment year 2003 - 04 is partly allowed. 59. ITA number 487/M/2013 is filed by the assessee for assessment year 2003 - 04 against the penalty confirmed by the learned CIT - A levied by the learned assessing officer u/s 271 (1) (c) of the act of Rs. 4,206,590/- by the order dated 22/11/2012. 60. We have already stated the facts of the case in deciding the quantum appeal of the assessee. The penalty has been levied on disallowance of interest of Rs. 215,821/-, depreciation disallowed of Rs. 110,698/-, addition made on account of change in the method of accounting of Rs. 7,864,880/- and bad debts written off Rs. 3,862,997/-. 61. Out of the above addition, as per our order in the quantum appeal in ITA number 5462/M/2016 all add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed by the appellate authorities, it cannot be said that the assessee has furnished inaccurate particulars of income. 65. Even otherwise, on the merits, the claim of the assessee is rejected. Merely because of the same, when the claim is not found to be unsustainable in law, the penalty deserves to be deleted. 66. Accordingly, we direct the learned assessing officer to delete the penalty for assessment year 2003 - 04. ITA number 407/M/2013 filed by the assessee against the confirmation of the penalty u/s 271 (1) (C) of the act is allowed. 7547/M/2012 2004 - 2005 Assessee 143 (3) read with Section 147 490/M/2008 2004 - 2005 Assessee 143 (3) 488/M/2013 2004 - 2005 Assessee penalty u/s 271 (1) (C) 67. ITA number 490/M /2006 is filed by assessee for assessment year 2004 - 05 against the order of the Commissioner of income tax (appeals) - Central - V, Mumbai dated 23/11/2007 wherein appeal filed against the order u/s 143 (3) on 19/12/2006 passed by the assessing officer was dismissed. 68. Assessee is aggrieved by raising the grounds against disallowance of interest of Rs. 215,821 in respect of advances given to Arcadia investment Ltd and on account of disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of Rs. 215,821/- deserves to be deleted, accordingly reversing the orders of the lower authorities, ground number 1 of the appeal is allowed. 74. Ground number 2 is with respect to the disallowance of depreciation of Rs. 83,023/- this disallowance is with respect to the assets, which could not be found in existence or could not be found to have been given on hire purchase/lease in the ordinary course of business of the assessee. This issue arose originally in assessment year 1996 - 97. The coordinate bench in assessee's own case has dealt with this issue in earlier years. We have also followed the same while deciding the appeal of the assessee for assessment year 1999 - 2000. In that year, considering all the judgments of the coordinate benches in earlier years in case of the assessee, we have set-aside the whole issue back to the file of the learned assessing officer with a direction to decide it in accordance with the decisions of the coordinate bench. Accordingly, ground number 2 of the appeal is allowed to that extent. 75. Ground number 3 is with respect to the rejection of the change in method of accounting and consequent addition of Rs. 6,261,332/-. We find that ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income tax act dated 28/12/2011 passed by the Deputy Commissioner of income tax (OSD -II), Central range - 7, Mumbai was dismissed. 82. Briefly the fact shows that assessee filed return of income for assessment year 2004 - 05 originally on 30/10/2000 for at a total loss of Rs. 7,566,870/-. This was assessed u/s 143 (3) on a total loss of Rs. 920,100/- on 19/12/2006. Subsequently on verification of the case record, the learned assessing officer found that the assessee followed the cash system of accounting from assessment year 98 - 99 however no addition has been made on account of accrual of interest on lease and hire purchase that. Therefore, notice u/s 148 of the act was issued on 28/3/2011. Consequently accrued interest on debtors of Rs. 14,165,982/- was added to the total income of the assessee as per order dated 28/12/2011 passed u/s 143 (3) read with Section 147 of the act. The assessee objected before the learned assessing officer the validity of the initiation of reassessment proceedings stating that it is a change of opinion. The AO rejected such objection in the assessment order itself and proceeded to make the addition of accrued interest. AO found that as per sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A and has challenged the same on account of confirmation of disallowance of interest of Rs. 215,821/- on amount of advances given related parties, disallowance of depreciation amounting to Rs. 62,267/- and rejection of the change in the method of accounting and making an addition of Rs. 7,815,641/- confirmed by the learned CIT - A. 89. Assessee filed its return of income on 20/10/2005 (wrongly mentioned by the learned assessing officer as 30/10/2004) at a loss of Rs. 7,053,823/-. The return of assessee was picked up for scrutiny and it was found that as in last year there is an advanced given to Arcadia investment Ltd of Rs. 1,027,720 on which the learned assessing officer computed interest at the rate of 21% and disallowed a sum of Rs. 215,821/- out of the interest expenditure. As some of the assets were not found in existence and it was not known whether same are used by the assessee in its leasing business or not with respect to 4 different parties. The interest has been consistently disallowed by the learned assessing officer for past several years since 1989 - 90, therefore the continuation of the same disallowance of depreciation of Rs. 62,267/- was made. AO further consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the direction of the reserve bank of India. Therefore respectfully following the decision of the coordinate bench for assessment year 1998 - 1999 we allow ground number 3 of the appeal and direct the learned assessing officer to delete the addition of Rs. 7,815,641/-. 95. Accordingly, appeal of the assessee for assessment year 2005 - 06 in ITA number 1919/M/2009 is allowed. 489/M/2013 2006 - 2007 Assessee penalty u/s 271 (1) (C) 6075/M/2009 2006 - 2007 Assessee 143 (3) 96. ITA number 6075/M/2009 is filed by the assessee for assessment year 2006 - 07 against the order passed by the Commissioner of income tax (appeals) - 40, Mumbai dated 18/9/2009 wherein the assessee is aggrieved with the additions confirmed by the learned CIT - A with respect to (1) disallowance of interest expenditure of Rs. 215,821/- on advanced given to Arcadia investments private limited, (2) disallowance of depreciation of Rs. 46,700 on account that the similar disallowance was made in the earlier year where the assets were not found in existence or no details were available with that there used for the business of the assessee, (3) addition of Rs. 7,737,131/- on account of change in accounting poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and thereby making an addition of Rs. 7,737,131. We find that identical issue arose in case of the assessee for assessment year 1998 - 2000 wherein the coordinate bench has held that the change in method of accounting made by the assessee is bona fide, proper, in accordance with the law and in accordance with the directions of the reserve bank of India. Accordingly, respectfully following the decision of the coordinate bench, we direct the learned assessing officer to delete the disallowance/addition of Rs. 7,737,131/- and allow ground number 3 of the appeal. 103. Ground number 4 of the appeal is with respect to the disallowance of Rs. 397,332/- on account of amount of written off. Fact shows that assessee has claimed the above sum as a bed that. Wherein certain parties to whom advances have been given are not traceable and the amount could not be recovered. Therefore, the learned assessing officer made the addition for the reason that assessee could not give any evidence to show what efforts have been made for recovery of the above sum. The learned CIT - A also confirmed the same. We find that identical issue arose in the appeal of the assessee for earlier years wherein we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchase income is not taxable for the reason that same is already taxed in earlier years, vi. Rejecting the claim of the assessee that the amount written back as waiver of principal amount state bank of India is not taxable on the ground that no such claim was made in the return of income. 109. The brief facts of the case show that assessee filed its return of income on 24 - 10 - 2007 declaring total income of Rs. Nil. The assessment u/s 143 (3) of the act was made on 14/12/2009 at Rs. 38,636,457 -. The assessment was challenged in appellate proceedings before the learned CIT - A passed an order on 8/6/2011. Assessee, aggrieved, is in appeal before us. 110. At the time of hearing, assessee raised an additional ground of appeal as per application dated 1/8/2022 stating that a sum of Rs. 12,719,687/- being the principal loan amount of state bank of India written back and credited to the profit and loss account is not taxable Under the provisions of the income tax act and consequently was required to be excluded while computing taxable income of the assessee. Assessee submitted that such ground was taken before the learned assessing officer as per letter dated 21/12/2009. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Therefore, for the similar reasons set-aside this ground of appeal back to the file of the learned assessing officer. 115. Ground number 3 is with respect to the addition of Rs. 7,737,171/- on account of rejection in the change in the method of accounting. This issue arose in the case of the assessee for assessment year 1998 - 1999, wherein the coordinate bench held that the change in the method of accounting adopted by the assessee is bona fide, proper, in accordance with the law and guidelines issued by the reserve bank of India. Therefore, respectfully following the decision of the coordinate bench, we allow ground number 3 of the appeal and direct the learned assessing officer to delete the addition of Rs. 7,737,171/-. 116. Ground number 4 is with respect to the amount written back by the assessee of Rs. 38,384,611 as bad debt during the course of assessment proceedings the assessee furnished all the details however as the claim of the assessee is rejected in earlier years, the disallowance was made. Same disallowance was confirmed by the learned CIT - A. We have carefully considered the identical disallowance in the appeals of the assessee for earlier years and allowed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was already passed on 14 December 2019. Therefore, naturally, there was nothing before the assessing officer at the time of passing of the order. Neither the claim was not made by filing revised return nor was not the claim available during the course of assessment proceedings even by letter. Therefore, this issue was agitated by assessee before the learned and CIT - A who dealt with the same as per paragraph number 9 of his assessment order. Learned CIT - A further noted that the letter is dated 21/12/2009, which was submitted on 22/12/2009 whereas the assessment order has already been passed on 14th/12/2009 therefore AO naturally could not have considered the submission of the assessee. Therefore, he rejected the claim of the assessee. 119. Learned authorised representative submitted that when the letter has been filed before the learned assessing officer issued a considered the same and he failed to consider therefore the order of the CIT - A not entertaining the claim of the assessee is not correct. 120. The learned departmental representative supported the orders of the lower authorities. 121. We have carefully considered the rival contention and perused the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2008 - 09 against the order passed by the learned CIT - A - 40, Mumbai dated 8/6/2011 wherein the appeal filed by the assessee against the order passed u/s 143 (3) of the act dated 1/12/2010 by the learned assessing officer is dismissed. Therefore assessee is aggrieved on 4 different points as Under:- i. disallowance of interest expenditure of Rs. 215,821/- based on findings in earlier assessment years ii. disallowance of depreciation of Rs. 26,270/- based on findings in earlier assessment years iii. addition of Rs. 7,737,171/- on account of rejection of the change in the method of accounting is non-earlier assessment years iv. Chargeability of interest u/s 234B of the act. 127. The fact shows that return of income was filed on 22/9/2008 declaring a total loss of Rs. 4,162,704/- which is assessed u/s 143 (3) of the act on 6/12/2010 determining total income of Rs. 7,979,222/- wherein the disallowance of Rs. 215,821/-, depreciation was disallowed of Rs. 26,270/- and addition was made due to the change in method of accounting of Rs. 7,737,131/- was made. 128. On appeal before the learned CIT - A all the above disallowances/addition was confirmed. 129. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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