TaxTMI 
TaxTMI 
2011 (1) TMI 1182
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....on only on presumption and surmises." 2. The first issue in this appeal raised vide ground No. 1 relates to the addition of Rs. 39 lacs claimed as bad debts. 3. The facts of the case, in brief, are that the assessee filed the return of income on 29th March, 2007 declaring an income of Rs. 1,12,44,524. The case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee had claimed bad debts of Rs. 39 lacs. AO pointed out that the assessee did not offer any cogent evidence as to why the capital investment of Rs. 34,00,000 in the form of fixed deposits with the City Co-operative Bank Ltd. and Badla deposit of Rs. 5 lacs with M/s Century Consultants Ltd., Lucknow be allowed as bad debts. According to the AO, a deduction for bad debts or part thereof under s. 36(2)(i) of the IT Act, cannot be allowed unless such debt or part thereof has been taken into account in computing the 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, or represents money lent in the ordinary course of business of banking or moneylending which is carried on by the assessee. Acc....
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....money with City Co-operative Bank and Century Consultant Ltd. amounting to Rs. 39,00,000 (Rs. 34,00,000 + Rs. 5,00,000). That both these entities eloped with the money of all their creditors (depositors). That after waiting for considerably long period the appellant during the year had written off the above amount in the books of account and claimed it as bad debt as per the provision of s. 36(2)(i) of the IT Act, 1961. That the various Hon'ble Courts have held that while arriving at a conclusion the intention of the assessee should always be kept in mind. That to further strengthen the claim of the appellant in respect of bad debt, I humbly bring into Your Honour's notice that there are two important ingredients while claiming bad debt, firstly it should be a debt in the ordinary course of business and it must have become bad. (i) That as far as reply to first ingredient is concerned the 'debt' could be defined as a liability to pay in present or in future unascertainable money. On a deposit being made; the depositee incurs a liability although the time for payment could come only when a demand is made.-Ramanathan Chettiar v. Ramanathan Chettiar AIR 1968 SC 1047, 1049. (i....
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....that the assessee had failed to prove that making fixed deposit with the bank was part of moneylending business. Therefore, the AO was justified in rejecting the claim and in making the addition of Rs. 39 lacs. 6. Now, the assessee is in appeal. 7. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee deposited the amount with the parties to earn the interest income and the deposit was made in the regular course of business. It was further stated that earning of interest from different modes is the regular feature of the assessee's business. Our attention was drawn towards p. 4 of the assessee's compilation and it was submitted that the assessee was earning interest income from different deposits in the banks, post office and also from private parties. It was contended that since the bank with which the deposit was made eloped, so, it was not possible to recover the amount from the bank as such, the amount was written off as bad debts. It was further submitted that when the amount was deposited with the bank to earn income, relationship which constituted between the banker and the assessee was one....
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....rt in the case of Shanti Prasad Jain (supra) has held as under : "The law is well-settled that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not trustee and beneficiary. The banker is entitled to use the monies without being called upon to account for such user, his only liability being to return the amount in accordance with the terms agreed between him and the customer, and it makes no difference in the jural relationship whether the deposits were made by the customer himself, or by some other persons, provided the customer accepts them. There might be special arrangement under which a banker might be constituted as a trustee, but apart from such an arrangement, his position qua banker is that or a debtor and not trustee." 10. In the present case also, the assessee made the deposit of Rs. 34 lacs with the banking company, namely, City Co-operative Bank, so there was relationship of debtor and creditor and as the amount deposited by the assessee with the bank could not be recovered so, there was loss to the assessee, which was claimed as bad debts. The assessee had written off the a....
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....hat the assessee, an individual, was not required to deduct tax at source on brokerage and commission paid during the year under consideration. The learned CIT(A) pointed out that the assessee had advanced loan of Rs. 1,35,57,050, which was stock-in-trade of the assessee and therefore, the same was to be considered as assessee's turnover under the provisions of s. 44AB of the IT Act during the financial year immediately preceding the financial year in which commission or brokerage was paid. Therefore, the assessee was liable to deduct tax at source under s. 194H of the IT Act, which was not deducted. He accordingly confirmed the action of the AO. 15. Now, the assessee is in appeal. 16. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that in the preceding year, the assessee had 'income from other sources' and had no business income on loan amount given, as such, the question of deduction of TDS during the relevant year did not arise. Our attention was drawn towards p. 4 of the assessee's compilation and it was submitted that the total income of the assessee from moneylending business was Rs. 10,85,550, therefo....
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....xceed the monetary limit specified in s. 44AB of the IT Act, because the net income of the assessee from lending business in the shape of interest income was Rs. 10,85,440 after claiming the expenses of Rs. 4,56,708. In other words, gross receipts from moneylending business were Rs. 15,42,148 as is evident from p. 4 of the assessee's compilation. We, therefore, considering the totality of the facts of the present case, are of the view that the assessee was not liable to deduct tax at source from the commission and brokerage. Furthermore, this brokerage had been paid on account of sale of the properties, the income of which had been shown under the head "Short-term capital gain" as is evident from p. 5 of the assessee's compilation. The selling of properties was not the business of the assessee, as such, the amount involved in the transaction relating to the selling of properties was not the part of turnover of the assessee. We, therefore, considering the totality of the facts as discussed hereinabove, are of the view that the learned CIT(A) was not justified in confirming the addition made by the AO. Accordingly, the said addition is directed to be deleted. 19. The next issue vide....
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....e reason that the assessee was not the owner of the flat in question. The learned CIT(A) confirmed the action of the AO by stating that business activity was not carried out from the said premises. On the other hand, the claim of the assessee was that business activities were carried out and the assessee was the owner of the said building. Since there is contradiction in the stand taken by the AO and the claim of the assessee because the AO is saying that no proof of ownership was furnished before him and the claim of the assessee is that the assessee was the owner, we, therefore, deem it appropriate to set aside the issue relating to depreciation on building to the file of the AO for fresh adjudication in accordance with law, after providing due and reasonable opportunity of being heard to the assessee. As regards to the depreciation on other items is concerned, it is noticed that the assessee had not challenged the same before the learned CIT(A). We, therefore, do not see any merit in this contention of the learned counsel for the assessee that depreciation was allowable in respect of other items also. 24. As regards to the another issue involved in this ground of appeal relatin....
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....e of old property of husband of assessee Rs. 1,50,000 The assessee could not furnish the reasons why the two bank accounts were not shown in the balance sheet in earlier years and also could not explain that the balances lying in those accounts include the receipts which have been taken into consideration for assessment purposes in earlier previous years. Besides, in support of assessee's claim that she got Rs. 1,50,000 from the sale of old furniture of her husband, she filed one photocopy of handwritten receipt issued by one Shri Bhupinder Singh s/o S. Ajmer Singh, resident of 9/11, Model Colony, Jagadhari where the said person has shown that he had paid Rs. 1,50,000 through account payee cheque to the assessee towards purchase of old school furniture from her. On perusal of the said receipt the following doubts are raised over its genuineness : A. The said receipt did not mention the date when it was issued which is very important to prove the date of transaction. B. Though the said receipt issued mentioned that payment was made by account payee cheque but it did not specify the cheque number, name of the bank and branch on which it was drawn and even the date of said cheque....
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....this amount as unexplained receipt by making the following observations which are uncalled for and unjustified and may be deleted : 'Though the said receipt issued mentioned that the payment was made by account payee cheque but it did not specify the cheque number, name of the bank and branch on which it was drawn and even the date of said cheque which itself creates doubt about its genuineness'." 33. The learned CIT(A), after considering the submissions of the assessee, observed that the bank balances pertaining to earlier years were shown as opening balances for the year under consideration, therefore, no addition could be made during the year under consideration. He directed the AO to delete the addition of Rs. 3,92,882. As regards to the addition of Rs. 1,50,000 on account of sale of old property of the husband of the assessee, the learned CIT(A) observed that the AO made this addition on the ground that the assessee could not show the date of transaction, cheque number, name of bank and thus, the assessee could not prove the genuineness of the transaction. He accordingly sustained the addition of Rs. 1,50,000. 34. Now, the assessee is in appeal. 35. The learned counsel for....
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....ssee had shown investment of Rs. 3,41,72,285.16 in the business of moneylending as on 31st March, 2006 as detailed below : Loan to Drosia Constructions (P) Ltd. Rs. 2,47,07,070 Loan to A.K. Singh, Varanasi Rs. 30,00,000 Loan to Ashok Sur Rs. 59,41,635.16 Loan to Samir Anand Rs. 4,94,768 Loan to Salil Anand Rs. 18,100 Loan to Sadana Electric Rs. 10,802 40. The AO pointed out that the assessee in the P&L a/c had shown the interest income as per following details : A.K. Singh, Varanasi Rs. 7,30,043 Drosia Constructions (P) Ltd. Rs. 7,50,000 Mullicks Emporium Rs. 62,105 40.1 According to the AO, the assessee had charged the interest approximately @ 15 per cent per annum. The AO worked out the interest by applying the rate of 15 per cent at Rs. 31,22,486 as against Rs. 7,50,000 charged from Drosia Constructions (P) Ltd. and the addition was worked out at Rs. 23,72,486 in the case of the said company. Similarly, interest was worked out at Rs. 7,84,497 in the case of Shri Ashok Sur and, thus, the addition totalling to Rs. 31,56,983 (Rs. 23,72,486 + Rs. 7,84,497) was made. 41. The assessee carried ....
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....ition on the ground of less charging of interest or not charging of interest. He accordingly confirmed the addition made by the AO. 43. Now, the assessee is in appeal. 44. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the loans were given out of surplus funds of the assessee. It was further stated that Mr. Ashok Sur is the only son-in-law of the assessee and had taken short-term loan and Shri Samir Anand and Shri Salil Anand are the sons of the assessee, as such, no interest was charged from them. It was further stated that the assessee had shown the interest income which was paid by Drosia Constructions (P) Ltd., who also deducted TDS while making payment to the assessee and disclosed the same to the Department. It was further stated that the AO as well as the learned CIT(A) failed to consider that friendly loans were given to son-in-law and the sons out of surplus money. 45. In his rival submissions, the learned Departmental Representative strongly supported the orders of the authorities below. 46. We have considered the submissions of both the parties and gone through the material available on rec....