Rajan Mathai Kavida, Baroda v. The ACIT.,Circle-2(2),, Baroda

ITA 514/AHD/2008 | 2004-2005
Pronouncement Date: 31-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 51420514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 514/AHD/2008
Duration Of Justice 2 year(s) 3 month(s) 18 day(s)
Appellant Rajan Mathai Kavida, Baroda
Respondent The ACIT.,Circle-2(2),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-05-2010
Date Of Final Hearing 13-05-2010
Next Hearing Date 13-05-2010
Assessment Year 2004-2005
Appeal Filed On 12-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI T K SHARMA JM & SHRI A N PAHUJA AM] ITA NO.514/AHD/2008 (ASSESSMENT YEAR:-2004-05) SHRI RAJAN MATHAI KAVIDA 906/2 & 3 GIDC ESTATE MAKARPURA BARODA [PAN:ADGPK4965K] V/S ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-2(2) BARODA [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI D K PARIKH AR REVENUE BY:- SMT. NEETA SHAH DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 03- 12-2007 OF THE LD. CIT(APPEALS)-II BARODA RAISES THE FOLLOWING GROUNDS :- 1 THE ORDER PASSED BY THE HONBLE COMMISSIONER OF I NCOME TAX (APPEALS) IS BAD IN LAW CONTRARY TO LEGAL PRONOUNCEMENTS AND SAME BE QUASHED. THE ADDITIONS / DISALLOWANCES CONFIRMED BY HIM ARE UNWARRANTED AND SAME BE DELETED NOW. 2 THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.2 76 000/- BEING LIQU IDATED DAMAGES. YOUR APPELLANT SUBMITS THAT LIQUIDATED DAMAGES ARE ALLOW ABLE REVENUE EXPENDITURE AND DISALLOWANCE MADE IS UNJUST AND UNC ALLED FOR AND SAME BE DELETED NOW. 3 THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ADDITION OF RS.2 94 830/- BEING BAD DEBT S WRITTEN OFF DURING THE YEAR. YOUR APPELLANT SUBMITS THAT CLAIM BEING IN AC CORDANCE WITH PROVISIONS OF SECTION 36(2) BE ALLOWED NOW AND DISA LLOWANCE MADE BE DELETED. 4 THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING PARTLY DISALLOWANCE OF RS.85 629/- BEING 1/10 TH OF VEHICLE TELEPHONE AND TRAVELING EXPENSES FOR SO CALLED PERS ONAL USE. YOUR APPELLANT SUBMITS THAT VEHICLES / TELEPHONES ARE MA INLY USED FOR BUSINESS PURPOSES. THE EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS BE ALLOWED AS CLAIMED AND ADHOC DISALLOWANCE MADE BE DELETED N OW. ITA NO.514/AHD/2008 FOR AY 2004-05 SHRI RAJAN MATHAI KAVIDA 2 5 THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LEVYING INTEREST U/S 234B/C/D OF THE ACT. THE LEVY OF INTER EST BE HELD INCORRECT AND SAME BE DELETED NOW. YOUR APPELLANT CRAVES LEAVE TO ALTER/AMEND/WITHDRAW /MODIFY/ ANY OF THE ABOVE GROUNDS BEFORE HEARING. 2 GROUND NO.1 IN THE APPEAL BEING GENERAL IN NATUR E DOES NOT REQUIRE ANY SEPARATE ADJUDICATION AND IS THEREFORE DISMISSED. 3. ADVERTING NOW TO GROUND NO. 2 IN THE APPEA L FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING IN COME OF RS.16 68 980/- FILED ON 29.10.2004 BY THE ASSESSEE MANUFACTURING FRP BASED EQUIPMENTS AFTER BEING PROCESSED ON 23. 12.2004 U/S 143(1) OF THE INCOME-TAX ACT 1961 [HEREINAFTER REF ERRED TO AS THE ACT] WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 14.9.2005. DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER [AO IN SHORT] NOTICED THAT TH E ASSESSEE DEBITED AN EXPENDITURE OF RS.2 76 000/- ON ACCOUNT OF LIQUIDATED DAMAGES. VIDE QUESTIONNAIRE DATED 22-08-2006 THE A SSESSEE WAS ASKED TO FURNISH THE DETAILS OF THIS EXPENDITURE AL ONG WITH DOCUMENTARY EVIDENCE. SINCE THE ASSESSEE DID NOT SU BMIT ANY DETAILS/EVIDENCE VIDE LETTER DATED 01-12-2006 THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE CLAIM OF RS.2 76 000/- ON ACCOUNT OF LIQUIDATED DAMAGES BE NOT DISALLOWED. IN RESPONSE VIDE LETTER DATED 12-02-2006 THE ASSESSEE SUBMITTED TH AT M/S ION EXCHANGE (INDIA) LIMITED PLACED AN ORDER OF THE VALUE OF RS.26 40 000/- WITH THE ASSESSEE. SINCE THE ORDER GOT DELAYED THE SA ID COMPANY WHILE MAKING THE PAYMENT DEDUCTED AN AMOUNT OF RS.2 76 000/- AS LIQ UIDATED DAMAGES FOR LATE DELIVERY . HOWEVER THE AO DID NOT ACCEPT THE CONTENTIONS ON T HE GROUND THAT NO DOCUMENTARY EVIDENCE IN RESPECT OF DEDUCTION OF LIQ UIDATED DAMAGES BY M/S. ION EXCHANGE HAD BEEN SUBMITTED BY THE ASSESSEE EVEN I N RESPONSE TO SHOWCAUSE NOTICE VIDE ORDER SHEET ENTRY DATED 06.12.2006. ACC ORDINGLY THE AO DISALLOWED THE CLAIM. ITA NO.514/AHD/2008 FOR AY 2004-05 SHRI RAJAN MATHAI KAVIDA 3 4 ON APPEAL THE ASSESSE REITERATED THEIR ARGUMENTS BEFORE THE AO AND RELIED ON THE DECISIONS IN THE CASE OF DR. G. G. JOSHI 209 ITR 324 (GUJ) CIT VS PANIPAT WOLLEN & GENERAL MILLS CO. LTD. 103 ITR 66 (SC) CEPT VS S R V G PRESS CO. 42 ITR 219 ( SC) AND CALCUTTA LANDING & SHIPPING CO. LTD. VS CIT 65 ITR 1 (CAL). AFTER CONSIDERING THESE SUBMISSIONS THE LEARNED CIT(A) U PHELD THE DISALLOWANCE HOLDING AS UNDER:- 4.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUN SEL AND FACTS OF THE CASE. THE APPELLANT CLAIMED LIQUIDATED DAMAGES WITH OUT ANY EVIDENCE. EVEN DEBIT NOTE FOR SUCH CLAIM WAS NOT ISSUED OR SU BMITTED. EVEN AT THIS STAGE NO EVIDENCE WAS SUBMITTED. THE CASE LAWS SUB MITTED BY THE APPELLANT ONLY ALLOWS THE LIQUIDATED DAMAGE AS REVE NUE EXPENDITURE. HOWEVER NONE OF THE CASE LAWS DEALS WITH ALLOWANCE OF SUCH CLAIM EVEN IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE. WHAT IS SUBMITTED BY THE APPELLANT IS THAT THE COMPANY DEDUCTED RS.2 76 000/ - WHILE MAKING THE FINAL PAYMENT. HOWEVER DEDUCTION IS ON ACCOUNT OF LIQUIDATED DAMAGE OR ANY OTHER REASON THE SAME HAS NOT BEEN CLARIFIED O R EVIDENCED BY ANY PROOF. IN ABSENCE OF ANY EVIDENCE OF LIQUIDATED DAM AGES SUFFERED BY THE I DO NOT FIND ANY REASON TO INTERFERE WITH THE ACTION OF THE ASSESSING OFFICER. THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ISSUE IS THEREFORE CONFIRMED . 5 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). . THE LEARNED AR ON BEH ALF OF THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS BEFORE THE AUTHORITIES BELOW RELIED ON THE DECISIONS IN THE CASE OF G L RE XROTH INDUSTRIES LTD. VS. DCIT (1997) 59 TTJ AHD (757) LEADER ENGG. WORKS VS. IAC (1982) 11 TAXMAN 21 (ASR) (MAG) ITO VS. RADIANT CA BLES (P) LTD. (1986) 19 ITD 79 (HYD) ITO VS. VAMET INDUSTRIES (19 91) 38 ITD 504 (HYD) ORISSA CEMENT LTD. VS. ITO (1990) 36 TTJ (DEL HI) 236 KAVERI ENGG. INDUSTRIES LTD. VS. DCIT (1992) 43 ITD 527 (M AD) MOTI ELECTRIC INDUSTRIES LTD. VS. ITO (1989) 34 TTJ (DELHI) 60. W HILE REFERRING TO THEIR WRITTEN SUBMISSIONS AND A COPY OF THE LEDGER ACCOUNT OF ION EXCHANGE (INDIA) LTD. [PAGE 14 OF THE PB] COPY OF JOB ORDER[PG.17 TO 19 OF THE PB] A COPY THE FAX LETTER OF THE CLIENT ION EXCHA NGE (INDIA) LTD. DATED 3-2-2003 [PG.20 OF THE PB] AND REQUEST FOR WAIVER OF LIQUIDA TED DAMAGES[ PG. 22 & 23 OF ITA NO.514/AHD/2008 FOR AY 2004-05 SHRI RAJAN MATHAI KAVIDA 4 THE PB} THE LD. AR SUBMITTED THAT THE AMOUNT OF R S.2 76 000/- HAS BEEN CLAIMED AS LIQUIDATED DAMAGES. ON THE OTHER HAND THE LD. D R VEHEMENTLY ARGUED THAT NOT AN IOTA OF EVIDENCE WAS SUBMITTED BEFORE THE AO AN D THE LD. CIT(A) THAT THE AMOUNT OF RS.2 76 000/- WAS ON ACCOUNT OF PENALTYOR BY WAY OF LIQUIDATED DAMAGES. THEREFORE CLAIM OF THE ASSESSEE IS NOT AD MISSIBLE. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS. AS IS APPARENT THE AO DISALLOWED THE CLAIM FOR DED UCTION OF AN AMOUNT OF RS.2 76 000/- SINCE DESPITE OPPORTUNITY A LLOWED THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE THAT THE SAID AMOUNT WAS DE DUCTED BY M/S. ION EXCHANGE BY WAY OF PENALTY OR LIQUIDATED DAMAGES. E VEN BEFORE THE LD. CIT(A) NEITHER ANY DEBIT NOTE FOR SUCH CLAIM NOR ANY OTHER EVIDENCE WAS SUBMITTED. ACCORDINGLY THE LD. CIT(A) UPHELD THE DISALLOWANCE WITH THE OBSERVATIONS THAT THE DECISIONS RELIED ON BY THE ASSESSEE WERE NOT OF ANY HELP IN THE ABSENCE OF ANY EVIDENCE THAT THE AMOUNT WAS DEDUCTED BY WAY OF LIQUIDATED DAMGES. EVEN BEFORE US SITUATION IS NO BETTER. THOUGH THE LD. A R REFERRED US TO VARIOUS PAGES IN THE PAPER BOOK AND THE WRITTEN SUBMISSIONS AND RELI ED UPON A NUMBER OF DECISIONS NOT AN IOTA OF EVIDENCE HAS BEEN PLACED BEFORE US SUGGESTING THAT THE AFORESAID AMOUNT WAS DEDUCTED BY M/S ION EXCHANGE (INDIA) LTD BY WAY PF PENALTY OR LIQUIDATED DAMAGES FOR DELAY IN EXECUTIO N OF THE ORDER. IN THE ABSENCE OF ANY MATERIAL FOR TAKING A DIFFERENT VIEW IN THE MATTER WE ARE NOT INCLINED TO INTERFERE . EVEN RELIANCE ON THE VARIOUS DECISIONS IS TOTALLY MISPLACED UNLESS IT WAS FIRST ESTABLISHED THAT THE AMOUNT WAS DEDUCTED BY WAY OF LIQUIDATED DAMAGES. THEREFORE GROUND NO.2 IN THE APPEAL IS DI SMISSED. 7 NEXT GROUND NO.3 RELATES TO DISALLOWANCE OF RS.2 94 830/- BEING CLAIM FOR BAD DEBTS. THE AO NOTICED THAT THE ASSESSEE DEBITED AN EXPENDITURE OF RS.2 94 830/- TOWARDS BAD DEBTS. VIDE QUESTIONNAIRE DATED 22-08-2006 THE ASSESSEE WAS ASK ED TO SUBMIT THE DETAILS OF EFFORTS MADE TO REALIZE THE DEBTS AL ONG WITH THE DOCUMENTARY EVIDENCE. SINCE THE ASSESSEE DID NOT C OMPLY THE AO VIDE ORDER SHEET ENTRY DTD. 04.09.2006 AND 11.09.20 06 AGAIN ASKED ITA NO.514/AHD/2008 FOR AY 2004-05 SHRI RAJAN MATHAI KAVIDA 5 TO SUBMIT THE DOCUMENTARY EVIDENCE IN RESPECT OF TH E EFFORTS MADE TO REALIZE THE DEBTS. IN RESPONSE THE AUTHORIZED REPR ESENTATIVE OF THE ASSESSEE FILED A FEW COPIES OF UNSIGNED LETTERS. VI DE LETTER DTD.03.10.2006 THE AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE FILED A FEW LETTERS SIGNED BY THE ASSESSEE. HOWEVER THE AO REJECTED THESE ON THE GROUND THAT THESE CAN NOT BE CONSIDERE D AS DOCUMENTARY EVIDENCE IN RESPECT OF THE EFFORTS MADE TO REALIZE THE DEBTS. IN TERMS OF ANOTHER LETTER DATED 01.12.2006 THE ASSESSEE WAS SHOWCAUSED AS TO WHY THE ASSESSEE'S CLAIM FOR DEDUC TION OF BAD DEBTS OF RS.2 94 830/- BE NOT DISALLOWED. IN RESPON SE VIDE LETTER DATED 06-12-2006 THE AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE SUBMITTED AS UNDER- 'OUT OF TOTAL BAD DEBTS OF RS.294850/- TWO MAJOR BA D DEBTS I.E. RS.203110/- OF RELIANCE INDUSTRIES AND RS.7300 0/-FOR IPCL. RELIANCE: THE ABOVE INVOICE WAS RAISED FOR THE WORK CARRIED OUT AT SITE TO ACCOMMODATE THE MAIN PIPING AND EREC TION AS PER THE INSTRUCTIONS OF SITE ENGINEERS OF RIL INVOICE W AS MADE AFTER JOINT MEASUREMENT OF WORK HOWEVER THERE WAS LONG GAP BETWEEN THE JOB COMPLETED AND INVOICE RAISED DUE TO QTY. CONFIRMATION FROM RIL WE WERE CONSTANTLY FOLLOWING UP WITH RIL FOR PAYMENT DURING PERSONAL VISITS AND THRU TEL EPHONE. LATER ON WE CAME TO KNOW THAT THE BILL HAS NOT BEEN CERTIFIED BY RESPECTIVE ENGINEERS AND NOT RECD. AT FINANCE DE PARTMENT OF RELIANCE MEANWHILE THE CONCERNED ENGINEER RESIGNED FROM THE COMPANY. IPCL: THIS INVOICE WAS AGAINST SUPPLY OF FRP HCL ST ORAGE TANK TO IPCL WHILE MAKING THE PAYMENT AGAINST THIS INVOICE THEY HAVE DEDUCTED RS.73000/- AS LATE EXECUTION OF THE ORDER. WE HAVE NOS. OF TIMES INFORMED THEM THAT DELAY WAS ON THEIR PART BECAUSE ON NON-SUPPLYING THE REQUIRED SPACE MEASUREMENT FOR THE TANK TO BE ERECTED. BUT IPCL HA S NOT- ADHERED TO OUR REQUEST. IN BOTH THE CASE WE HAVE BEEN DOING BUSINESS WITH THESE 'TWO COMPANIES FOR NOS. OF YEARS AND ARE HAVING CORDIAL RELATIONS. MOREOVER TO CONTINUE SUCH RELATIONS WE CANNOT TAKE LEGAL ITA NO.514/AHD/2008 FOR AY 2004-05 SHRI RAJAN MATHAI KAVIDA 6 ACTIONS AGAINST THESE COMPANIES FOR RECOVERY OF MON EY AND HENCE WE HAVE NO OTHER ALTERNATIVE BUT TO WRITE OFF THE AMOUNT. WE HAVE BOOKED THE SALES IN EARLIER YEARS AND FOR WHATEVER REASONS IF THE MONEYS ARE NOT FORTHCOMING THEN THE ONLY PRUDENT WAY IS TO WRITE OFF THE AMOUNT. AS REGARDS CORRESPONDENCE SUBMITTED TO YOUR HONOUR THE SAME W ERE PRINTOUT OF COMPUTER COPIES AS ONLY SOFT COPIES OF CORRESPONDENCE ARE MAINTAINED AT OUR CLIENT'S END.' 7.1 HOWEVER THE AO DID NOT ACCEPT THE AFORESAID CONTENTIONS OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE DID NO T SUBMIT ANY GENUINE DOCUMENTARY EVIDENCE IN RESPECT OF HIS EFFORTS MADE TO REALIZE THE DEBTS. THE CONTENTION OF THE ASSESSEE THAT HE WAS COMPELLED TO WRITE OFF THESE DEBTS WITHOUT TAKING ANY ACTION FOR KEEPING THE CORDIAL RELATION WITH THESE COMPANIES IS NOT A CONVINCING REASON. SINCE THE ASSESSEE DID NO T FULFILL THE CONDITIONS SPECIFIED U/S. 36(2) OF THE ACT. THE AO DISALLOWED THE CLAIM . 8 ON APPEAL THE LEARNED CIT(A) UPHELD THE DISALLOW ANCE IN THE FOLLOWING TERMS : 5.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNS EL AND FACTS OF THE CASE. THE BAD DEBTS CAN BE ON ACCOUNT OF TWO REASON S - I) THE DEBTOR BECOME FINANCIALLY UNSOUND OR NOT IN A POSITION TO MAKE THE PAYMENT AND II) THE CLAIM ITSELF IS IN DISPUTE AND OTHER SIDE D O NOT RECOGNIZE THE LIABILITY. IN THE CASE OF APPELLANT BOTH RIL AND IPCL ARE FIN ANCIALLY SOUND AND THEREFORE THE BAD DEBT CANNOT BE CLAIMED ON ACCOUNT OF DEBTORS FINANCIAL DIFFICULTIES. THE OTHER REASON COULD BE THAT THE DE BTOR REFUSES TO ACKNOWLEDGE THE DEBT IN VIEW OF THE DISPUTED CLAIMS . IN THE CASES OF RIL THE REASONS GIVEN ARE NOT DISPUTE FOR THE PAYMENT. THE REASON GIVEN IS JUST A TIME GAP IN RAISING OF INVOICE AND COMPLETION OF WORK. IF APPELLANT HAD RAISED BILLS FOR EXECUTION OF WORK THE SAME HAS TO BE EITHER ACKNOWLEDGED OR TO BE REFUSED BY THE RIL HOWEVER APPELLANT DID NOT SUBMIT ANY EVIDENCE IN THIS REGARD. SIMILARLY IN THE CASE OF IPCL THE DEDUCTION OF RS.73 000/- IS NOT EVIDENCED BY ANY COMMUNICATION F ROM IPCL. ALL THE COMMUNICATION SUBMITTED BY THE APPELLANT ARE THE LE TTERS WRITTEN BY THE APPELLANT AND AS SUCH THE REASON FOR NON-RECOVERY G IVEN BY THE APPELLANT IS NOT EVIDENCED. IN THE ABSENCE OF ANY EVIDENCE TO SUGGEST THESE DEBTS AS BAD THE ADDITION MADE BY THE ASSESSING OFFICER APPEARS TO BE JUSTIFIED. THE CASE LAWS RELIED BY THE APPELLANT DO NOT HELP S INCE WHAT APPELLANT CAN WRITE OFF IS BAD DEBTS AND NOT A NORMAL DEBT. RELIA NCE AND IPCL CANNOT BE CONSIDERED STICKY DEBTS. THESE COULD BE ONLY DISPUT ED DEBTS FOR WHICH THE ITA NO.514/AHD/2008 FOR AY 2004-05 SHRI RAJAN MATHAI KAVIDA 7 ONUS IS ON THE APPELLANT TO SUBMIT NECESSARY EVIDEN CE. IN THE ABSENCE OF ANY EVIDENCE TO INDICATE THAT THESE DEBTS ARE BAD CLAIM OF THE APPELLANT IS NOT AS PER THE PROVISIONS OF SECTION 36(1)(VII) AND 36(2) OF I. T. ACT. THE ADDITION MADE BY THE ASSESSING OFFICER IS THEREFORE CONFIRMED. 9. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED AR ON BEHAL F OF THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS BEFORE THE CIT (A)RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F TRF LTD. 230 CTR 14 (SC) AND CONTENDED THAT THE ISSUE IS COVERED BY THE SAID DECISION. WHILE REFERRING TO THEIR WRITTEN SUBMISSI ONS AND PAGE NO.2 8 9 24 AND 25 OF THE PAPER BOOK THE LD. AR CONTENDED THAT SINCE THESE AMOUNTS HAVE BEEN WRITTEN OFF THESE ARE ADMISSIBLE IN TERM S OF THE AFORESAID DECISION IN THE CASE OF TRF LTD.(SUPRA).THE LEARNED DR ON THE OTHER HAND DID NOT DISPUTE THESE SUBMISSIONS ON BEHALF OF THE ASSESSEE . 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE FACTS OF THE CASE AS ALSO THE DECISION RELIED UPON. HONBLE SUPREME CO URT IN THEIR DECISION DATED 9.2.2010 IN THE CASE OF TRF LTD. VS. CIT IN CIVIL APPEAL NO.5293 OF 2003 REPORTED IN 230 CTR 14 (SC) HELD THAT THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT H AS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER IN THE PRESENT CASE THE ASSESSI NG OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS IN FACT BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS THE BAD DEBT ACCOUNT IS DEBITED AN D THE CUSTOMER'S ACCOUNT IS CREDITED THUS CLOSING THE ACCOUNT OF THE CUSTOMER . IN THE CASE OF COMPANIES THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATE D ABOVE THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER IN FACT THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE THE MATTER IS REMITTE D TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. 11. IN THE LIGHT OF AFORESAID DECISION OF THE HONBLE APEX COURT IN TRF LTD.(SUPRA) WE HAVE NO OPTION BUT TO REVERSE THE FINDINGS OF THE LD. CIT(A) AND ITA NO.514/AHD/2008 FOR AY 2004-05 SHRI RAJAN MATHAI KAVIDA 8 DELETE THE DISALLOWANCE MADE BY THE AO. THEREFORE GROUND NO. 2 IN THE APPEAL IS ALLOWED. 12 GROUND NO.4 RELATES TO CONFIRMATION OF DISALLOWA NCE OF RS.85 629/- BEING 1/10 TH OF VEHICLE TELEPHONE AND TRAVELLING EXPENSES. THE AO NOTICED THAT THE ASSESSEE CLAIM ED AN AMOUNT OF RS.1 57 827/- TOWARDS TELEPHONE EXPENSES RS.3 74 9 28/- TOWARDS TRAVELING EXPENSES RS.1 62 311/- TOWARDS VEHICLE EXPENSES AND RS.1 61 223/- TOWARDS VEHICLE DEPRECIATION. SINCE T HE POSSIBILITY OF PERSONAL USER ELEMENT IN THESE EXPENSES WAS NOT RUL ED OUT VIDE LETTER DTD.01.12.2006 THE ASSESSEE WAS ASKED TO SH OWCAUSE AS TO WHY THE APPROPRIATE DISALLOWANCE BE NOT MADE OUT OF VEHICLE TRAVELLING AND TELEPHONE EXPENSES FOR PERSONAL USE . IN RESPONSE VIDE LETTER DTD.06.12.2006 THE AUTHORIZED REPRESEN TATIVE OF THE ASSESSEE SUBMITTED THAT OUT OF TOTAL VEHICLE EXPE NSES OF RS.1 62 311/- EXPENDITURE OF RS.57.079/- WAS INCUR RED FOR THE PROPRIETOR'S CAR AND THE REMAINING VEHICLES WERE USED BY OTHER STAFF MEMBERS ONLY. MOREOVER PROPRIETOR'S CAR EXPE NDITURE IS SOLELY FOR BUSINESS PURPOSE ONLY. SIMILARLY OUT OF TELEPHONE EXPENSES OF RS.1 57 287/- ONLY RS.42 133/- PERTAIN ED TO MOBILE OF PROPRIETOR MAINLY USED FOR BUSINESS PURPOSE . BESID ES TRAVELLING EXPENSES WERE INCURRED SOLELY FOR BUSINESS TRIPS ON LY AND NO PERSONAL TRAVELLING EXPENSES WERE DEBITED. HOWEVER THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE ON THE GRO UND THAT PERSONAL USER ELEMENT IN THE ABOVE EXPENSES CANNOT BE RULED OUT AND ACCORDINGLY DISALLOWED A SUM EQUIVALENT TO 1/5 TH OF THE TOTAL EXPENSES OF RS.8 56 289/- RESULTING IN ADDITION OF RS.1 71 258/- . 13 ON APPEAL THE LEARNED CIT(A) RESTRICTED THE DIS ALLOWANCE TO 10% HOLDING AS UNDER:- ITA NO.514/AHD/2008 FOR AY 2004-05 SHRI RAJAN MATHAI KAVIDA 9 6.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNS EL AND FACTS OF THE CASE. AO DISALLOWED 10% OF TELEPHONE CONVEYANCE AN D OFFICE EXPENSES IN AY 2002-03. THE DISALLOWANCE WAS MADE @ 20% THIS YEAR WHICH APPEARS TO BE ON HIGHER SIDE. CONSIDERING THAT THE PERSONAL USE OF VEHICLE TELEPHONE WAS NOT DENIED AND IN TRAVELING EXPENSES ALSO THERE COULD BE PERSONAL ELEMENT INVOLVED I RESTRICT THE DISALLOWA NCE AT 10%. 14 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMISSIONS ON THIS GROUN D. 15. AFTER GOING THROUGH THE FACTS OF THE CASE. WE F IND THAT THE ASSESSEE HAS NOT REFERRED US TO ANY MATERIAL WARRAN TING INTERFERENCE WITH THE FINDINGS OF THE LD. CIT(A). SINCE PERSONAL USE OF CAR AND TELEPHONE BY THE ASSESSEE AND HIS FAMILY MEMBERS OR STAFF HAS NOT BEEN DENIED NOR IT WAS CLAIMED THAT THE ASSESSEE OR HIS FAMILY HAD ANY I NDEPENDENT VEHICLES OR TELEPHONES FOR PERSONAL USE IN OUR OPINION DISALL OWANCE OF 1/10 TH OF THE EXPENSES ON TELEPHONE TRAVELLING AS ALSO RUNNING A ND MAINTENANCE OF CARS INCLUDING DEPRECIATION IN THE LIGHT OF PROVISIO NS OF SEC. 38(2) OF THE ACT IS REASONABLE . WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND UPHOLD THE SAME. THEREFORE GROUND NO 4 IS REJECTED. 16 GROUND NO. 5 IN THE APPEAL RELATES TO LEVY OF INTEREST U/S 234B 234C & 234D OF THE ACT. THE LD. AR ON BEHALF OF THE ASSE SSEE DID NOT MAKE ANY SUBMISSIONS ON THIS GROUND. THE LEVY OF INTEREST U /S 234B & 234C OF THE ACT BEING MANDATORY [COMMISSIONER OF INCOME TAX. VS ANJ UM M. H. GHASWALA AND OTHERS 252 ITR 1(SC) AFFIRMED BY HON'BLE APEX COUR T IN THE CASE OF CIT V. HINDUSTAN BULK CARRIERS [2003] 259 ITR 449 (SC) AND IN THE CASE OF CIT V. SANT RAM MANGAT RAM JEWELLERS [2003] 264 ITR 564 (SC) ] THESE GROUNDS ARE DISMISSED. HOWEVER THE AO MAY ALLOW CONSEQUENTIAL RELIEF IF ANY WHILE GIVING EFFECT TO THIS ORDER. AS REGARDS THE ISSUE OF CHARG ING OF INTEREST U/S 234D OF THE ACT WE FIND THAT THIS ISSUE IS SQUARE LY COVERED BY THE DECISION OF THE ITAT SPECIAL BENCH IN THE CASE OF ITO V EKTA PROMOTERS (P) LTD. (2008) 113 ITD 719 (DELHI) (SB) IN WHICH THE ITA NO.514/AHD/2008 FOR AY 2004-05 SHRI RAJAN MATHAI KAVIDA 10 SPECIAL BENCH OF THIS TRIBUNAL HAS CLEARLY HELD THA T SECTION 234D WHICH HAS BEEN BROUGHT ON THE STATUTE FROM 01-06-20 03 CANNOT BE APPLIED TO THE ASSESSMENT YEAR 2003-04 AND EARLIER YEARS BUT IT WILL HAVE APPLICATION ONLY WITH EFFECT FROM ASSESSMENT Y EAR 2004-05. IN THE LIGHT OF VIEW TAKEN THE AFORESAID DECISION OF T HE SPECIAL BENCH OF ITAT AND NO CONTRARY DECISION HAVING BEEN BROUGHT T O OUR NOTICE WE HAVE NO ALTERNATIVE BUT TO REJECT THE GROUND NO.5 IN THE APPEAL. 17. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERM S OF THE RESIDUARY GROUND ACCORDINGLY THIS GROUND IS DISMI SSED. 18 IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 31 -05- 2010 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 31-05-2010 COPY OF THE ORDER FORWARDED TO : 1. SHRI RAJAN MATHAI KAVIDA 906/2 & 3 GIDC ESTATE MAKARPURA BARODA 2. THE ACIT CIRCLE-2(2) BARODA 3. CIT CONCERNED 4. CIT(A)-II BARODA 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD