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IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI
, ,
BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM
./I.T.A. No. 8442/Mum/2010
( / Assessment Year: 2001-02)
A. A. Doshi Share & Stock Brokers Ltd. ITO-4(1)(1),
R-711, Rotunda Building, Bombay / Aaykar Bhavan,
Samachar Marg, Vs. Mumbai-400 020
Mumbai-400 023
. / . /PAN/GIR No. AAACA 4670 R
( /Appellant) : ( / Respondent)
/ Appellant by : Shri Bhupendra Shah
/Respondent by : Shri Asghar Zain
/ : 23.02.2015
Date of Hearing
/
: 18 .03.2015
Date of Pronouncement
/ O R D E R
Per Sanjay Arora, A. M.:
This is an Appeal by the Assessee directed against the Order by the Commissioner
of Income Tax (Appeals)-8, Mumbai (`CIT(A)' for short) dated 19.10.2010, not allowing
the Assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961
(`the Act' hereinafter) for the assessment year (A.Y.) 2001-02 vide order dated
26.08.2005.
2. The appeal concerns the disallowance of the assessee's claim qua a trade debt,
receivable by the assessee, a share broker, from a customer by the name M/s. Shah &
Shah Investment, in the sum of Rs. 10,08,078/-, on being written off as irrecoverable.
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ITA No. 8442/Mum/2010 (A.Y. 2001-02)
A. A. Doshi Share & Stock Brokers Ltd vs. ITO
3. At the very outset, it was submitted by the learned Authorized Representative
(AR), the assessee's counsel, that the law in the matter had since attained finality, i.e.,
with the decision by the apex court in the case of TRF Ltd. vs. CIT [2010] 323 ITR 397
(SC), as also by the hon'ble jurisdictional high court in CIT vs. Shreyas S. Morakhia
[2012] 342 ITR 285 (Bom), placing a copy of the latter decision on record. As such, the
debt having been actually written off by the assessee in its books of account, no dispute
qua the same survives, so that the matter must be considered as squarely covered by the
said case law. The ld. Departmental Representative (DR) would, without in any manner
rebutting the said contentions by the assessee, rely on the orders by the authorities below.
4. We have heard the parties, and perused the material on record.
A reading of the impugned order reveals that the ld. CIT(A), on analyzing the
decisions in the case of Dy.CIT vs. Shreyas S. Morakhia [2010] 5 ITR 1 (Mum) (SB)
(Trib), since affirmed by the hon'ble jurisdictional High Court vide its decision cited
supra, and CIT vs. DB (India) Securities Ltd. [2009] 318 ITR 26 (Del) [226 CTR 466],
relied upon by the assessee before him, found their ratio as of the assessee being entitled
to its' claim of loss on account of bad-debt, upon write off in the books of account,
determined at the amount not realizable, i.e., at net of the value of the securities or other
assets of the debtor held by him. The argument is unexceptionable. The law in the matter
is well settled, so that it is only the assessment of the assessee as a businessman, i.e., in
relation to the debt being irrecoverable and, further, as signified by the write off of the
relevant debt in his books of account for the relevant year, which is decisive of the claim,
both as regards the amount irrecoverable and the period in which it is so becomes or is
deemed to be so. The Revenue, where it disputes the same, has to show that it is not so,
so that the write off is, to whatever extent, not genuine (refer: DIT(IT) vs. Oman
International Bank Saog [2009] 313 ITR 128 (Bom)). No doubt qua the genuineness of
the claim or the write off per se, however, stands expressed by the Revenue in the instant
case. The Revenue's right of verification of the assessee's claim, however, cannot be
denied and, in fact, to the extent not verifiable or otherwise not explained in terms of or
on the basis of the underlying facts, is, to that extent, not a valid claim. In the present
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ITA No. 8442/Mum/2010 (A.Y. 2001-02)
A. A. Doshi Share & Stock Brokers Ltd vs. ITO
case, the Revenue's objection is apparently valid in-as-much as it is only the amount not
recoverable, i.e., net of securities or other assets of the debtor available with the assessee
as a creditor, and which it can realize and, therefore, realizable, that is irrecoverable, and
which could be claimed by the assessee. Whether the assessee, in his wisdom, actually
realizes the same or not, is not relevant. What is relevant is that the assessee in the course
of his business has right to the securities which can be realized and the amount
appropriated against the outstanding debt of the debtor under reference. Where not
realized, the securities/assets would have to be valued, and their realizable value adopted
for the purpose.
We may though clarify that we are here not considering or speaking of the claims
or rights that are disputed, and would, therefore, where so deemed fit and proper by the
assessee, enforced through or by recourse to a legal process, as a recovery suit. The two
aspects are different. Such rights of claims, if and to the extent realized, would stand to
be assessed and brought to tax u/s. 41(1) of the Act. The ld. CIT(A) has, however, fell in
error in confirming the full disallowance, rather than requiring the assessee to establish
the quantum which was under the circumstances realizable, so that the matter is
essentially one of valuation and not of disallowance per se.
The matter shall, accordingly, travel back to the file of the ld. CIT(A) to enable the
determination of the amount, if any, realizable, and thus the quantum of disallowance, if
any, warranted under the circumstances. The ld. CIT(A) shall adjudicate per a speaking
order after hearing both the parties before him. We decide accordingly.
5. In the result, the assessee's appeal is allowed for statistical purposes.
Order pronounced in the open court on March 18th March,, 2015
Sd/- Sd/-
(Amit Shukla) (Sanjay Arora)
/ Judicial Member / Accountant Member
Mumbai; Dated :18 .03.2015
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ITA No. 8442/Mum/2010 (A.Y. 2001-02)
A. A. Doshi Share & Stock Brokers Ltd vs. ITO
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent
3. () / The CIT(A)
4. / CIT - concerned
5. , , / DR, ITAT, Mumbai
6. / Guard File
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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