Referred Sections:
section 37 of the Income Tax Act, 1961
section 36 (1) (vii) of the Income Tax Act,
Referred Cases / Judgments:
Minda (HUF) vs JCIT [2006] 101 ITD 191 (Del.).
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: `A': NEW DELHI)
BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER &
SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER
ITA No:- 1434/Del/2016
(Assessment Year: 2011-12)
Sh.Praveen Gupta, ACIT,
D-101, First Floor, Tower No.D, Vs Circle-2,
Caitriona Residential Apartment Meerut.
Complex, Ambience Island,
Gurgaon-122001.
PAN-ACJPG4777H
APPELLANT RESPONDENT
Appellant by Shri Sunil Kumar, CA
Respondent by Shri D.S.Rawat, Sr.DR
ORDER
PER ANADEE NATH MISSHRA, AM
[A]. This appeal has been filed by the assessee against the
impugned order dated 16.02.2016 passed by Learned
Commissioner of Income Tax(Appeals), Meerut [in short "Ld.CIT(A)"]
pertaining to 2011-12 assessment year. The assessee has raised
following grounds of appeal:-
1. "That each ground of appeal is with out prejudice to each
other.
2. That the Ld. CIT was not correct and justified in sustaining
the addition of Rs. 50.00,000/- u/s 36 (1) (viii) read with section 37
of the Income Tax Act, 1961 on the basis of facts and circumstances
of the case.
ITA No:- 1434/Del/2016
(Assessment Year: 2011-12)
3. That the Ld. CIT was not correct and justified in sustaining
the addition of Rs. 12,22,400/- on account of earth filing expenses
on the basis of facts and circumstances of the case.
4. That the appellant reserved the right to add amends, alter
and/or delete any of the grounds of appeal.
5. That on the basis of facts of the case and in view of the
circumstances it is prayed that either the additions sustained by the
Ld. CIT may please be deleted or the matter may please be restore
back to the file of Commissioner of Income Tax (Appeals) in the
interest of natural justice."
[B]. Assessment order dated 27.03.2014 was passed by the AO
u/s 143(3) of the Income Tax Act, 1961 [in short "Act"] wherein the
total income was assessed at Rs.3,20,49,170/- as per following
computation:-
"Income as shown in return : Rs.13,02,090
Add: (i) Disallowance out of bad debt : Rs.50,00,000
(ii) Disallowance of advanced received u/s 68 : Rs.1,34,00,000
(iii) Disallowance of earth filling : Rs.12,72,400
(iv) Addition to unsecured loan : Rs.1,06,41,000
(v) Disallowance out of vehicle running expenses : Rs.45,469
(vi) Disallowance out of depreciation on car expenses : Rs.66,246
(vii) Disallowance of proportionate interest : Rs.3,21,967
Total income : Rs.3,20,49,172
Rounded off : Rs.3,20,49,170
[C]. The assessee filed appeal before the Ld.CIT(A). Vide aforesaid
impugned order dated 16.02.2016 of Ld.CIT(A), the assessee was
allowed substantial relief. However, Ld.CIT(A) sustained the
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ITA No:- 1434/Del/2016
(Assessment Year: 2011-12)
aforesaid addition of Rs.50,00,000/- being disallowance out of bad
debt written off. Further, ld.CIT(A) sustained the disallowance of
Rs.12,22,400/- out of disallowance of Rs.12,72,400/- by the AO on
account of disallowance of earth filing expenses. The present
appeal before us has been filed by the assessee against the
aforesaid disallowances sustained by Ld.CIT(A). In the course of
the appeal in the appellate proceedings in Income Tax Appellate
Tribunal (in short "ITAT"), the following particulars were filed from
the assessee's side:-
1. Balance Sheet 31.03.2011
2. Copy of account Arshad Ahmad
3. Copy of Bad Debts account
4. Judgement 190 Taxmann 391 (SC)
5. Judgement 190 Taxmann 257 (SC)
6. Judgement 101 ITD 191 (Delhi)
7. Paper cutting dated 04.03.2015
8. Remand Report dated 05.10.2015
9. Purchase Deed
10. Sale Deed
[C.1]. At the time of hearing before us, Ld.AR of the assessee relied
on the aforesaid particulars filed from assessee's side in ITAT.
Ld.AR for the assessee drew our particular attention to paper
cutting dated 04.03.2015 in support of aforesaid second ground of
appeal and contended that the aforesaid loss of Rs.50,00,000/- is
allowable u/s 36(1)(viii) of the Act as bad debt written off; and also
alternatively u/s 37 of the Act as business loss. Ld.AR for the
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(Assessment Year: 2011-12)
assessee placed strong reliance on the case of Minda (HUF) vs JCIT
[2006] 101 ITD 191 (Del.).
[C.2]. In support of all the grounds of appeal, Ld.AR for the
assessee also placed strong reliance on the submissions made
before Ld. CIT(A) in respect of the aforesaid disallowance of
Rs.50,00,000/- and Rs.12,22,400/-. The relevant discussion is at
the following portion of the aforesaid impugned order dated
16.02.2016 of Ld.CIT(A) reproduced hereunder:-
"GROUND NO. 1 Addition of Rs. 50,00,000.00
"That as already submitted above that the assessee was
engaged in the business of trading of immovable properties
and this amount was given for the purchase of land of Khasra
no. 155 at Begum Pur (Malvinas' Nagar, Delhi) to Mr. Arshad
Ahamad is not denied by the assessing officer arid therefore it
is-established beyond doubt That the amount was advanced
only for business purposes and therefore the provisions of
section 36 (1) (vii) of the Income Tax Act, is clearly applicable.
That the condition precedent to section 36 (1) (vii) is that
the assessee has actually written off the amount as Bad Debts
in his books of accounts or not and since the assessee has
actually written off the amount in his books of accounts during
the year under consideration as bad debt, the amount is
allowable u/s 36 (1) (vii) of The I Tax Act, 1961.
That here it is also submitted that Mr. Arshad Ahamad
is a cheater and to further prove that the advance was for
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purchase of land, we are enclosing herewith copy of News
paper dated 04.03.2015.
Now it is a settled law that if the assessee has written
off the amount in his books of accounts as bad debt, he is not
require to prove further as held by Hon'ble Supreme Court in
the case of TRF Ltd. v/s CI reported in 190 Taxmann 391(SC)
and in the case of Vijaya Bank Ltd v/s CIT reported in 190
Taxmann 257 (SC).
In view of the brief on the issue as narrated above the
addition is baseless, beyond the fact of the issue and therefore
not tenable in the eyes of law and therefore your honour is
very earnestly requested to please delete the addition.
Supporting documents
1. Copy of Audited B/S&P & L A/c of M/s Aviraj
Enterprises Page 1-3
2 Copy of account of Arshad Ahmad Page 4
3. Copy of Bad debts a/c Page 5
4. Copy of 190 Taxman 391 (SC) Page 6-7
5. Copy of 190 Taxman 257 (SC) Page 8-12
6. Copy of News Paper cutting Page 12A
..........................
.........................
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GROUND NO. 3 Addition of Rs. 12,72,400.00 That the
assessee has purchased plot no 485/2 situated at Vill. Noor
Nagar. Meerut on 15.03.2004 and sold on 31.01.2011.
That the facts are that when the assessee has
purchased the plot it was not developed but when the plot was
sold during the year it was developed and duly surrounded
with boundary walls, which is evident from the purchase and
sale deeds.
Supporting documents
1. Purchase deed dated 15.03.2004 Page 26-42
2. Sale deed dated 31.01.2011 Page 43-60"
[C.3]. Ld.CIT(A) also obtained Remand Report of the AO in respect
of the aforesaid submissions made by the assessee before Ld.CIT(A).
The assessee made further submissions before Ld.CIT(A) on
Remand Report of the AO. The relevant discussion is at the
following portion of aforesaid impugned order dated 16.02.2016 of
Ld.CIT(A) reproduced hereunder:-
"NOW GROUND WISE SUBMISSIONS ON REMAND REPORT
ARE AS UNDER:-
"Ground No-1. Addition of Rs.50 lakhs
In this regard the assessing officer has objected that the
assessee has not taken any efforts for its recovery.
In this regard we have to submit, firstly that section 36(1 )(vii)
do not require to demonstrate that the assessee has taken any
efforts to recover the amount written off as bad debts. As per
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the decisions of Hon'ble Supreme Court reported in 190
taxman 391 (SC) and in the case reported in 190 taxman
257(SC) the only requirement is that the assessee has actually
written off the amount as bad debts in his books of accounts,
which the assessee has done and to prove it at page-4 of our
written submissions we have filed the copy of accounts of Shri
Arshad Ahmed and at page-5 copy of bad debts accounts,
which proves that the assessee has actually written off the
amount as bad debts in his books of accounts and at page 12A
which is a newspaper clipping is vital proof that Shri Arshad
Ahmed has cheated not only to the assessee but to other
peoples of Meerut.
Hence, on the basis of page no-4, 5 and 12A and the
decisions cited supra the amount of Rs.50 lakhs actually
written off by the assessee as bad debts is an allowable
expenditure and may please be allowed.
..................................................
B. Ground No-3. Addition of Rs.12,72,400
In the remand report the only objection of the assessing
officer is that the vouchers are not available/produced, he
nowhere doubted the expenditure
In this regard it is submitted that this expenditure
relates to earth filling and leveling of the land for which no
external vouchers are possible to obtain.
That the total expenditure was incurred on various dates
and duly entered in the books of accounts. The assessing
officer has not rejected my books of accounts and hence no
addition could be made for the entries found entered in regular
books of accounts of assessee and in particular when the
assessing officer neither in his assessment order nor in his
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remand report doubted the expenditure and the books of
accounts have been accepted."
[C.4]. Ld.CIT(A) considered the submissions of the assessee and
under:-
decided the issues as under:
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[C.5]. Ld.DR placed reliance on the aforesaid impugned order dated
16.02.2016 of Ld.CIT(A).
[D]. sides, patiently. We have perused the
We have heard both sides
record, carefully.
materials available on record We have considered
judicial precedents mentioned in the records or brought to our
, the assessee has
notice at the time of hearing before us. Although,
d five grounds of appeal, essentially there are disputes in respect
filed
disallowances/additions.
of two disallowance . The first dispute is regarding
Rs.50,00,000/- on account of
disallowance of assessee's claim of Rs.50
bad debt written off. During appellate proceedings, it was
contended from the assessee's side that this amount is also
alternatively allowable u/s 37 of the Act. On careful perusal of the
records, we find that there is nothing to prove that the aforesaid
,00,000/- was paid by the assessee for business
amount of Rs.50,00,000/
purposes. There is also nothing on record to prove that this
,00,000/- was paid by the assessee for purchase of
amount of Rs.50,00,00
land. From perusal of records, we find no evidence regarding land
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(Assessment Year: 2011-12)
purchased by the assessee-either proposed to be purchased or
actually purchased. Although Ld.AR of the assessee vehemently
contended that the amount was paid by the assessee to Mr. Arshad
Ahmad through banking channels; Ld.AR could not point out any
material on the record to prove that this amount was paid for
business purposes or for the purpose of purchase of land. We
heard Ld. AR of the assessee with concern when he submitted at
the time of hearing before us that the aforesaid Mr. Arshad Ahmad
(to whom the assessee claims to have made payment of aforesaid
Rs.50,00,000/-) is a politically influential person and also not a law
abiding person (for which purpose Ld.AR of the assessee referred to
news paper cutting dated 04.03.2015 from Meerut Edition of Hindi
daily newspaper "Hindustan"). However, we decline to make any
comment on whether the aforesaid Mr. Arshad Ahmad is politically
influential or not; and whether he is law abiding person or not;
because these aspects are irrelevant for the purposes of this appeal
in ITAT. What is relevant is that the assessee has failed to prove
that the aforesaid amount of Rs.50,00,000/- was paid by the
assessee to Mr. Arshad Ahmad for business purposes or for
purchase of land. We also find nothing on record to show that any
legal remedies were attempted by the assessee for recovery of the
aforesaid amount of Rs.50,00,000/- from Mr. Arshad Ahmad. In
view of the foregoing assessee's claim for business loss or for
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ITA No:- 1434/Del/2016
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deduction u/s 37 of the Act is not sustainable. There is, further, no
material on record to show that aforesaid amount of Rs.50,00,000/-
or any part thereof has been taken into account in computing
income of the assessee of the previous year in which the amount of
such debt or part thereof is written off or of an earlier previous year;
and thus, mandatory condition u/s 36(2)(i) of the Act is not fulfilled
for claim of bad debt. At the time of hearing before us, Ld.AR for
the assessee also expressed inability to bring any further material
on record in support of the assessee's claim for the aforesaid
amount of Rs.50,00,000/-. In the forgoing facts and circumstances,
the assessee's claim for deduction of the aforesaid amount of
Rs.50,00,000/- deserves to be rejected whether this claim is made
as bad debt written off u/s 36 of the Act or alternatively u/s 37 of
the Act. In any case, in Ground No. 2 of appeal, the assessee refers
to section 36(1)(viii) of the Act which is not applicable to the facts
and circumstances in the case of the assessee. [Section 36(1)(viii)
of the Act, is instead applicable for claims in respect of any separate
reserve created and maintained by a specified entity.] In view of the
foregoing, we are of the view that the assessee's claim for the
aforesaid amount of Rs.50,00,000/- is unsustainable in law.
[E]. As far as the aforesaid disallowance of Rs.12,22,400/- on
account of earth filling expenses is concerned, we find from the
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(Assessment Year: 2011-12)
records that the AO had disallowed the assessee's entire claim of
earth filling expenses amounting to Rs.12,72,400/- stating that
inspite of repeated opportunity, no document or evidence was filed
by the assessee before the AO during assessment proceedings.
However, Ld.CIT(A) deleted an amount of Rs.50,000/- out of this
disallowance and sustained remaining addition amounting to
Rs,12,24,400/-. This relief of Rs.50,000/- was allowed by Ld.CIT(A)
on the basis of Stamp Valuation Authority who had valued the cost
of boundary wall for Rs.50,000/-. The assessee had filed no
evidences before Ld.CIT(A) to explain how the assessee claimed an
amount of Rs.12,72,400/- when the valuation of the boundary wall
by the Stamp Valuation Authority was only for Rs.50,00,000/-.
Even in the appellate proceedings in ITAT, the assessee has not
adduced any evidences to support the claim of having actually
incurred the aforesaid expenditure amounting to Rs.12,72,400/-
towards cost of earth filling/boundary wall. The assessee has failed
to bring any material for our consideration to justify any further
relief in addition to relief of Rs.50,000/- already allowed by
Ld.CIT(A) on the basis of the valuation of boundary wall by Stamp
Valuation Authority. In the absence of any supporting evidences in
support of assessee's claim of the aforesaid amount of
Rs.12,22,400/- [disallowance of which has been sustained by
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ITA No:- 1434/Del/2016
(Assessment Year: 2011-12)
Ld.CIT(A)], we are of the view that this claim of the assessee for
aforesaid Rs.12,24,400/- is unsustainable in law.
[F]. As all the relevant evidences submitted by the assessee have
already been appraised by the lower authorities [CIT(A) & AO] and
moreover, as no further material has been placed before us from
assessee's side in support of the assessee's claim for deduction of
aforesaid amount of Rs.50,00,000/- & Rs.12,22,400/-, no useful
purpose will be served by restoring the disputed issues back to the
file of Ld. CIT(A). The prayer made in Ground No.5 of this appeal,
therefore, deserves to be rejected.
[G]. In view of the foregoing, all the grounds of appeal are
dismissed. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 03/09/2019.
Sd/- Sd/-
(H.S.SIDHU) (ANADEE NATH MISSHRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 03/09/2019
* Amit Kumar *
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ITA No:- 1434/Del/2016
(Assessment Year: 2011-12)
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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