Satish Kumar v. Commissioner Of Income Tax

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- -Income tax Appeal No. 343 of 2004Date of decision: 25.8.2010 Satish Kumar --- Appellant Versus Commissioner of Income Tax Panchkula --- Respondent --- ’CORAM:HON BLE MR JUSTICE ADARSH KUMAR GOEL. ’HON BLE MR JUSTICE AJAY KUMAR MITTAL. --- Present:Mr D K Goyal. . . , Advocate for the appellant. Mr Yogesh Putney Sr Standing Counsel. , . -for the Revenue respondent. --- AJAY KUMAR MITTAL J, . , . This appeal under Section - 260 A of the Income tax Act, 1961 (for short “the Act’” has been filed by the assessee against the order) dated 10.9.2004, passedbytheIncomeTaxAppellate Tribunal,Chandigarh Bench “B” Chandigarh, (in short “the Tribunal” in ITA No) .395/CHANDI/2000, for the assessment year 1990-91. This appeal was admitted on 7.2.2005, for determination of: the following substantial question of law “ Whether under the facts and circumstances of the case the Tribunal was justified in law by not allowing the deduction of Rs. 3,50,000/- under Section 28 as business loss or underSection 36 as bad debt against the said amount added asincomeunderSection 69 whichamountwas neither received back nor goods against that amount were receivedby the appellant ”. . The facts necessary for disposal of the appeal are that Satish Kumar assessee had been earning Rs, .15,000/- to Rs. 24,000/- per year from the business of arranging trucks for carrying of coal tothe destination of the purchasing parties and also labour for loading and unloading of the coal besides supervising that process. It came to the notice of the Department that the assessee had remitted threedemand drafts made from the State Bank of India to one KrishanKumar Sharma An enquiry was made from the assessee who initially. denied that he knew Krishan Kumar Sharma, but later on when hisstatement was recorded on 14.2.1996, he admitted that there wasremittance of Rs. 3,50,000/- to Krishan Kumar Sharma of Barka Khana(Bihar and also stated that the money belonged to said Krishan Kumar) .The assessing officer, thus, completed the original assessment atRs.3,80,500/- and made an addition for unexplained investment of Rs,.3,50,000/- for the purchase of drafts from the bank. Being aggrieved-thereby the assessee filed appeal before the Commissioner of Incometax Appeals () {in short “CIT A ”( ) }. The CIT A by order dated( ) 21.2.1997(Annexure A -2) set aside the addition made and remitted the matterback to the assessing officer to examine de novo after affording properand adequate opportunity to the assessee. . The assessing officer, in compliance to the directions ofthe CIT A( ), again recorded the statement of the assessee on 22.1.1999 and treated the sum of Rs. 3,50,000/- to be the income of theassessee vide fresh assessment order dated, 18.2.1999 (Annexure A -3). The assessee preferred appeal before the CIT A( ) andraised submissions with full might, but the CIT A( ) agreed with theconclusion arrived at by the assessing officer and dismissed the appealof the assessee vide order dated 16.2.2000. The appellant still did not stay back and carried the matter in further appeal before the Tribunal The submissions raised on behalf. of the assessee before the Tribunal also did not yield any result infavour of the assessee and consequently the appeal was dismissed on31.7.2003. The assessee thereafter moved a miscellaneous applicationbefore the Tribunal under Section, 254(2) of the Act pleading that theTribunal had ignored from consideration ground No. 4( ) b taken by himand did not adjudicate upon the same. The said ground reads thus: “4( ) b That alternatively even if it is income of the appellant, on the date of maturity of the draft the assessee should, have been allowed a deduction as a business loss u s / 28, / 28, 5 or bad debt u s / 36 or a loss of current assets or a loss of capitalduringthecourseofbusiness as on 31.3.1990relevant to the year under appeal ”.. relevant to the year under appeal ”.. The assessee thereafter moved a miscellaneous applicationbefore the Tribunal under Section, 254(2) of the Act pleading that theTribunal had ignored from consideration ground No. 4( ) b taken by himand did not adjudicate upon the same. The said ground reads thus: “4( ) b That alternatively even if it is income of the appellant, on the date of maturity of the draft the assessee should, have been allowed a deduction as a business loss u s / 28, / 28, 5 or bad debt u s / 36 or a loss of current assets or a loss of capitalduringthecourseofbusiness as on 31.3.1990relevant to the year under appeal ”.. relevant to the year under appeal ”.. -The Tribunal on re consideration of the submissions made on behalf of the assessee in the miscellaneous application rejected the said legal ground of appeal by order dated 10.9.2004, Annexure A -1. -We have heard learned counsel for the assessee appellant -. , The point for consideration in this case is whether the , assessee was entitled to claim deduction on account of business lossunder Section 28 or as bad debts under Section 36 in respect of Rs.3,50,000/- which was added to his income under Section 69 of the Act owing to reason of having got prepared three bank drafts bearing Nos.847682, 847684 and 847684 dated 9.3.1990, 13.3.1990 and 19.3.1990respectively. It is not in dispute that the demand drafts were preparedon 9.3.1990, 13.3.1990 and 19.3.1990 whereas the assessee had claimed these drafts to be bad debt in the year ending 31.3.1990. The appellant had not been able to produce any evidence to substantiate that the same had become bad debt on the said date within a span of 22 days. Equally the assessee had failed to refer to any material on record to, show that he had incurred business loss on account of these demanddrafts which were added to his income under Section 69 of the Act.The relevant findings recorded by the Tribunal in para 11 of its order areas under: : “We have heard both the parties and carefully considered the material available on record One of the claims of the. . assessee was that the amount given by way of draft was bad debt . This contention was without any evidence The. assessee could not produce any correspondence with ShriKrishanKumarSharmainwhosenamedrafts werepurchased on 9.3.90, 13,3,90 and 19.3.90 for Rs One lac Rs. , ,.One lac and Rs. 1.50 lac respectively. The assessee also could not produce any evidence that the amount utilized in the purchase of those drafts was of any person other than the assessee . It is noticed that for purchasing the drafts, the Bank voucher was prepared by the assessee in his 7 handwriting and also the drafts were received by him and nothing had been brought on record with evidence that theinvestment in purchasing the drafts was made by anyperson other than the assessee so the investment made, , by the assessee was considered his income from hisundisclosed sources and was added by the AssessingOfficer to the income of the assessee in view of theprovisions of Section 69 of I T Act . . , 1961 which deals withunexplained investment Since the assessee had not given. any explanation about the source of the investment and theexplanation offered by him was not satisfactory in theopinion of the Assessing Officer, therefore, addition wasmade u s / 69 of I T Act . . , 1961. As we have already notedhere in above that the assessee could not establish that, the amount in question became bad debt so the claim wasnotsustainablebecauseitwasunbelievablethat theamount given as advance at the fag end of financial year on9.3.90, 13.3.90 and 19.3.90 would become bad within a span 8 of less than 22 days on Moreover the assessee, 31.3.1990. hadnotproducedanyevidencethattheamount inquestion, , in fact became bad debt. . As regards to thequestion, , in fact became bad debt. . As regards to the 8 of less than 22 days on Moreover the assessee, 31.3.1990. hadnotproducedanyevidencethattheamount inquestion, , in fact became bad debt. . As regards to thequestion, , in fact became bad debt. . As regards to the question, , in fact became bad debt. . As regards to thecontention of the ld. Counsel for the assessee that thisamount should be considered as business loss or thecapital loss it is noticed that the assessee nowhere stated, that the amount in question was used for the business purpose rather it was stated that the assessee was nothaving any business link with Shri Krishan Kumar Sharma in whose name the impugned drafts were purchased . The assessingofficermadetheadditiononaccount ofundisclosedinvestmentinthedraftsandsince theassessee could not establish that the drafts in questionwere invested in the business so this claim of the Ld.Counsel for the assessee is also not acceptable that it was businesslossoracapitallossparticularlywhen the assessee himself had stated that he was not having thebusiness link with Shri Krishan Kumar Sharma. Therefore . ThereforeTherefore, 9 the amount in question was given for the purpose other than business purposes and since the assessee miserablyfailed to prove the source of the investment in the drafts amounting to Rs. 3.50 lacs the Assessing Officer rightlymade the addition and ld CIT A was justified in confirming. ( ) the action of the Assessing Officer In view of the aforesaid. . discussion and considering the entire facts of the presentcase we do not see any merit in this ground of assessee’s, appeal . In that view of the matter we dismiss this appeal, , . and accordingly the appeal of the assessee fails ”. -Learned counsel for the assessee could not pin point any - perversity or illegality in the aforesaid finding of fact recorded by theTribunal which may warrant interference by this Court. . In view of the above we hold that the assessee was not, , entitled to deduction either on account of bad debt or on account of business loss to the tune of income of Rs. 3,50,000/- added underSection 69 of the Act. The question of law as reproduced above is, . 3,50,000/- added under 10 thus answered against the assessee and in favour of the Revenue, . The appeal is consequently dismissed . (AJAY KUMAR MITTAL)JUDGE (ADARSH KUMAR GOEL)August 25, 2010JUDGE*rkmalik*