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TMI Blog2017 (12) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... - Shri P.M. Jagtap,Accountant Member And Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant : Shri Saurabh Kumar, Addl.CIT, ld.DR For The Respondent : Shri Girish Sharma, Advocate, ld.AR ORDER Shri S.S.Viswanethra Ravi, JM: This appeal by the Revenue is against the order dt. 13-11-2014 of the CIT-A, IV, Kolkata for the A.Y 2010-11. 2. The only issue is to be decided as to whether the CIT-A justified in deleting the impugned addition made on account of bad debt written off in the facts and circumstances of the case. 3. The brief facts relating to the issue in hand are that the assessee is a non-banking finance company, in short NBFC hereinafter and dealing in giving loans, advances and investments. The assessee filed its return of income showing income at Rs. Nil. Notices u/s. 143(2) and 142(1) of the Act were issued. In response to which, the ld.AR of the assessee appeared from time to time and produced necessary documents and evidences, books of account, ledger, cash book, purchase and sale register and bank statements etc. The AO found that the assessee claimed expenditure under the head bad debt written off to an extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of a) whether any legal steps was taken to realize the debt and whether any money suit as filed in this case. b ) to give the names of all the companies or firms in which Shri Kalpesh Daftari was the major share holder , director or partner/ proprietor during the relevant period. In response to the above query the asses se company filed a written reply dated 17-12-2012 stating that a) we have no information available with respect to directorships in other companies as well as his association as partner/ proprietor with others b) that no legal steps or money suit was filed as the person was absconding and later behind bars on getting arrested. 3.4. Thereafter a Show Cause notice dated 31-12-2012 was issued to the assesse requiring him to explain the following A) on verification of the ledger filed by you, it is seen that amount of ₹ 9,67,00,0001- was paid to Vani Exports towards loan from 12- 03-2010 to 31-03-2010, in a short span of 19 days and out of which you received payment of ₹ 7,07,32,0951- from Shivangi Enterprises from the period of 25-03-2010 to 31-03-2010 (6 days). Please explain the nexus of Mr. Kalpesh Navin Chandra Daftari with the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esse had made payments on various dates from 12-03-2010 to 31-03- 2010 , total amounting to ₹ 9,67,00,000/- to Vani Exports as per the instruction of Shri Kalpesh Daftari . But the asses se company also received the payments from 25-03-2010 to 31-03-2010 total amounting to ₹ 7,07,32,095 1- from Shivangi Enterprises. The was also noted that in spite of receiving back amount of ₹ 7,07,32,0951- in the short span of 07 days and the payment of ₹ 4,90,00,0001- being received on 31-03-2010 itself, the assesse declared the remaining loan of ₹ 2,59,67,905/- on 01-04-2010 as the Bad Debt written off from its account. Further the assesse has also not taken any legal steps for recovery of the loan given but has in the same year written it off as bad debt. Hence the mere fact that Kalpesh Navin Chandra Daftari to whom the loan was given at the fag end of the financial year is behind bars does not prove that the loan has become irrecoverable and can be written off from the accounts of the same financial year in which it was given in spite of receiving the payment of ₹ 4,90,00,000/- on 31-03-2010 . During the course of the scrutiny proceeding the assesse was un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the A.R. of the appellant. On each of the queries raised by the A.D. through his show cause letter dated 31.12.2012, the A.R. of the appellant has given point-wise reply. During the assessment proceedings, documents like loan application papers of Mr. K.D. along with a photocopy of his PAN Card and Passport were also provided. M/s. Vani Exports had also given a certificate confirming the receipt of total payment of ₹ 9,67,00,000/-. The A.O. was also provided with instructions of Mr. K.D. to make payment to M/s. Vani Exports. Furthermore, all the legal papers like warrant of arrest of Mr. K.D. issued by the DRI, the bail petition of Mr. K.D. and affidavit from the DRI challenging the bail petition was also made available to the A.O. All these papers make it clear that Mr. K.D. was involved in large scale financial irregularities and forgery, the quantum of which as estimated by the DRI was more than ₹ 60 crores. Before his arrest, Mr. K.D. was also absconding. It was under these circumstances that the Board of Directors of the appellant company considered it prudent to pass a resolution on 30.08.2010 giving approval to the write off. The relevant extracts from the Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The question that arises is whether there is anything in the language or the Act which gives a time period for declaring a debt to be bad. To my mind there is nothing in the language of the Act to suggest that a debt can be called bad only after a lapse of certain time period. On the other hand, the A.R. of the appellant has cited several cases where it has been held that there is no time period for a debt to become bad. Some of these cases cited are:- 1) CIT Vs. Morgan Securities and Credit (P) Ltd. 162 Taxman 124 (Delhi) 2) ACIT Vs. Pullen Pump Industries (2012) 20 Taxman 389Guj) 3) Jindal Iron Steel Co. Ltd. Vs. DCIT (2013) 33 'Taxman 96 (Mumbai ITAT) 4.5 From the above discussion it is clear that neither the time period for a loan to be considered as bad debt nor the lack of legal steps to recover the money are of any relevance in the case of the appellant. It is not even necessary for the appellant to establish that the debt has become irrecoverable [TRF Ltd. Vs. CIT 190 Taxman 391 (SC)]. In my opinion, one very important issue is to consider and ascertain /whether the loan was given in the normal course of business of the appellant. This aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 Total No. of parties to whom loan given 27 38 36 Total No. of parties in Mumbai to whom given 12 22 18 % of No. of parties in Mumbai to whom given 44% 58% 50% From the above chart it can be observed that substantial amount of the loan of the appellant has been given to various parties at Mumbai. In fact, during the A.Y. 2010-11 which is under consideration, the appellant disbursed 60%of its total loans amounting to ₹ 34.50 crores to various parties at Mumbai. In the earlier year as well as in the subsequent year too, substantial amount of the loan has been given to various parties at Mumbai. Therefore, it can be concluded, that giving loans to various parties at Mumbai was in the normal course of the business of the appellant. One of the persons at Mumbai to whom loan has been provided by the appellant is Mr. Pankaj Vora. Mr. Pankaj Vora's group companies have been provided loans to the extent of ₹ 7.83 crores d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein various details and evidences in support of the claim of assessee on this issue. The ld.AR supported the order of CIT-A. 10. Heard rival submissions and perused the material available on record including the detailed paper book. The assessee is a NBFC, which is clear from page no. 63 of paper book. Before the CIT-A the assessee stated that its old customer, Mr. Pankaj Vora introduced Mr. K.D and the assessee advanced ₹ 10 crores to said Mr. K.D and to that effect a loan application of Mr. K.D is at page 82 of the paper book. It is observed that at page 81 of the paper book, Mr. K.D requested the assessee to issue cheques in favour of M/s. Vani Exports. It is also on record that out of said amount the assessee received an amount of ₹ 7,07,32,095/-as on 31-03-2010. The assessee filed a copy of petition filed by the concerned authorities before the Additional Chief Metropolitan Magistrate, which are available at pages 91-99 of the paper book, seeking remand of Mr. K.D to show that Mr. K.D is absconding and it is difficult to recovery the amount lent to him. The assessee placed reliance on CBDT Circular No. 12/2016 dt. 30-05-2016 and to that effect the assessee fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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