2010 (7) TMI 834 - AT - Income Tax

Tribunal rules in favor of assessee-company, deletes disputed additions, dismisses protective assessment

The Tribunal upheld the validity of the assessment order under section 153A, disallowed the bad debts claimed by the assessee-company, deleted the ... Assessment completed u/s143(3) r/w section 153A is void ab initio - HELD THAT:- The persons to be searched as mentioned in the warrant were severally living in different places. The only thing is the physical state of the warrant, was a common paper. So the warrant characterised as a common warrant in the present case is entirely different from the case of joint warrant considered in the case of Smt. Vandana Verma [2009 (10) TMI 52 - ALLAHABAD HIGH COURT]. Therefore, we are not in a position to accept the legal contention against the validity of the assessment. We hold that the impugned assessment order is valid. Writing off a debt as bad - HELD THAT:- from the facts of the case, it is very clear that when the return of income was filed by the assessee, no debt was recoverable from the buyers of the property. We find a lot of force in the argument of the learned CIT regarding the non-committal of the assessee-company in pursuing the legal remedies available before it for the recovery of the amount. Therefore, in these circumstances, we do not find that the debt has become bad debt. It was only a case of delayed payment. In short, we find that the CIT (A) has rightly confirmed the disallowance of Rs. 3,66,71,850. The appeal filed by the assessee-company is, therefore, liable to be dismissed both on law and facts. cross-appeal filed by the Revenue - deleting on-money addition made by the AO - HELD THAT:- The issue has been elaborately discussed by the CIT (A) in his order and we agree with him and, therefore, we find that the CIT (A) is justified in deleting the on-money payment of Rs. 2.85 crores. Thus, The Revenue fails in its appeal. company on substantive basis - addition made on protective basis - HELD THAT:- we find that there is no basis for the CIT (A) to come to a conclusion that on-money payment was received by the assessee, Shri Jaikishan Virwani. Incidentally, we have to state that the order in the case of M/s. Embassy Classic P. Ltd., was passed by one CIT (A) and the order in the case of Shri Jaikishan Virwani was passed by another CIT (A). In short, we find that the addition has to be deleted and the appeal of the assessee be allowed. Issues Involved:1. Validity of the assessment order under section 153A.2. Disallowance of bad debts claimed by the assessee-company.3. Addition of alleged on-money payment of Rs. 2.85 crores.4. Protective assessment of Rs. 2.85 crores in the hands of Shri Jaikishan Virwani.Issue-Wise Detailed Analysis:1. Validity of the assessment order under section 153A:The assessee-company argued that the assessment order passed under section 153A is void ab initio, citing a judgment from the Allahabad High Court in CIT v. Smt. Vandana Verma. The court held that a joint warrant of authorization issued for multiple individuals living together should result in a joint assessment. However, the Tribunal found that the warrant in this case was a common warrant, not a joint one, as the individuals named were living at different addresses. Therefore, the Tribunal held that the assessment order was valid.2. Disallowance of bad debts claimed by the assessee-company:The assessee claimed a deduction for bad debts amounting to Rs. 3,66,71,850, stating that a cheque received for the sale of property bounced, and the amount was written off as bad debt. The Commissioner of Income-tax (Appeals) disallowed the claim, stating that the debt was written off without sufficient efforts to recover it. The Tribunal upheld this decision, noting that the amount was received by the assessee before filing the return, indicating that it was not actually a bad debt. The Tribunal also emphasized that the assessee did not pursue legal remedies to recover the amount, thus confirming the disallowance.3. Addition of alleged on-money payment of Rs. 2.85 crores:The Revenue added Rs. 2.85 crores to the assessee's income, alleging it was on-money received from the buyers of the property. The Commissioner of Income-tax (Appeals) deleted this addition, finding no corroborative evidence to support the claim of on-money payment. The Tribunal agreed, noting that the statements from Shri K. M. Viswanath were contradictory and unreliable. The Tribunal found that the entry in the seized material was not supported by any legitimate calculations or evidence, and the statements made by Shri K. M. Viswanath were inconsistent and self-defeating. Therefore, the Tribunal upheld the deletion of the Rs. 2.85 crores addition.4. Protective assessment of Rs. 2.85 crores in the hands of Shri Jaikishan Virwani:The addition of Rs. 2.85 crores was made on a protective basis in the hands of Shri Jaikishan Virwani, a director of the assessee-company. The Tribunal noted that since the addition was deleted in the hands of the company, it could not be sustained in the hands of Shri Jaikishan Virwani either. The Tribunal emphasized that there was no evidence to conclude that on-money was paid by Shri K. M. Viswanath to either the company or its director. Consequently, the protective assessment was deleted, and the appeal of Shri Jaikishan Virwani was allowed.Conclusion:In conclusion, the Tribunal dismissed the cross-appeals filed by the assessee-company and the Revenue, confirming the disallowance of bad debts and the deletion of the on-money addition. The appeal filed by Shri Jaikishan Virwani was allowed, deleting the protective assessment of Rs. 2.85 crores.The order pronounced on Thursday, the 22nd day of July, 2010.