Satish Kumar vs Commissioner of Income Tax

Ajay Kumar Mittal, J.—This appeal u/s 260A of the Income tax Act, 1961 for short "the Act" has been filed by the Assessee against the order dated 10-9-2004, passed by the Income Tax Appellate Tribunal, Chandigarh Bench "B", Chandigarh in short "the Tribunal" in I. T. A. No. 395/Chandi/2000, for the assessment year 1990-91.

This appeal was admitted 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 u/s 28 as business loss or u/s 36 as bad debt against the said amount added as income u/s 69 which amount was neither received back nor goods against that amount were received by 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 to the 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 three demand drafts made from the State Bank of India to one Krishan Kumar Sharma. An enquiry was made from the Assessee who initially denied that he knew Krishan Kumar Sharma but later on when his statement was recorded on 14-2-1996, he admitted that there was Rs. 3,50,000 to Krishan Kumar Sharma of Barka Khana (Bihar) and also stated that the money belonged to the said Krishan Kumar. The assessing officer, thus completed the original assessment at Rs. 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 (Appeals) (in short "Commissioner (Appeals)"). The Commissioner (Appeals) by order dated 21-2-1997, (annexure A-2) set aside the addition made and remitted the matter back to the assessing officer to examine de novo after affording proper and adequate opportunity to the Assessee.

The assessing officer in compliance with the directions of the Commissioner of income tax (Appeals) again recorded the statement of the Assessee on 22-2-1999, and treated the sum of Rs. 3,50,000 to be the income of the Assessee, vide fresh assessment order dated annexure A.

The Assessee preferred appeal before the Commissioner (Appeals) and raised submissions with full might but the Commissioner (Appeals) agreed with the conclusion arrived at by the assessing officer and dismissed the appeal of 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 in favour of the Assessee and consequently the appeal was dismissed on 31-7-2003.

The Assessee thereafter moved a miscellaneous application before the Tribunal u/s 254(2) of the Act pleading that the Tribunal had ignored from consideration ground No. 4(b) taken by him and 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, or bad debt u/s 36, or a loss of current assets or a loss of capital during the course of business as on 31-3-1990 relevant to the year under appeal.

The Tribunal on reconsideration of the submissions made on behalf of the Assessee in the miscellaneous application rejected the said legal ground of appeal by order dated annexure A-l.

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 loss u/s 28 or as bad debts u/s 36 in respect of Rs. 3,50,000 which was added to his income u/s 69 of the Act owing to reason of having got prepared three bank drafts bearing Nos. 847682, 847683, 847684 dated 9-3-1990, 13-3-1990 and 19-3-1990 respectively.

It is not in dispute that the demand drafts were prepared on 9-3-1990, 13-3- 1990 and 19-3-1990, and 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 demand drafts which were added to his income u/s 69 of the Act. The relevant findings recorded by the Tribunal in paragraph 11 of its order are as 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 Shri Krishan Kumar Sharma in whose name drafts were purchased on 9-3-1990, 31-3-1990 and 19-3-1990 for Rs. 1 lakh, Rs. 1, lakh and Rs. 1.50 lakh 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 handwriting and also the drafts were received by him and nothing had been brought on record with evidence that the investment in purchasing the drafts was made by any person other than the Assessee so the investment made by the Assessee was considered his income from his undisclosed sources and was added by the assessing officer to the income of the Assessee in view of the provisions of Section 69 of the Income Tax Act, 1961, which deals with unexplained investment. Since the Assessee had not given any explanation about the source of the investment and the explanation offered by him was not satisfactory in the opinion of the assessing officer, therefore addition was made u/s 69 of the Income Tax Act, 1961. As we have already noted here in above that the Assessee could not establish that the amount in question became bad debt so the claim was not sustainable because it was unbelievable that the amount given as advance at the fag end of the financial year on,9-3-1990, 13-3-1990 and 19-3-1990 would become bad within a span of less than 22 days on 31-3-1990. Moreover, the Assessee had not produced any evidence that the amount in question in fact became bad debt. As regards the contention of the learned Counsel for the Assessee that this amount should be considered as business loss or capital 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 not having any business link with Shri Krishan Kumar Sharma in whose name the impugned drafts were purchased. The assessing officer made the addition on account of undisclosed investment in the drafts and since the Assessee could not establish that the drafts in question were invested in the business so this claim of the learned Counsel for the Assessee is also not acceptable that it was business loss or a capital loss particularly when the Assessee himself had stated that he was not having the business link with Shri Krishan Kumar Sharma Therefore, the amount in question was given for the purpose other than business purposes and since the Assessee miserably failed to prove the source of the investment in the drafts amounting to Rs. 3.50 lakhs the assessing officer rightly made the addition and the learned Commissioner (Appeals) was justified in confirming the action of the assessing officer. In view of the aforesaid discussion and considering the entire facts of the present case we do not see any merit in this ground of Assessees 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 the Tribunal 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 u/s 69 of the Act. The question of law as reproduced above is, thus, answered against the Assessee and in favour of the revenue. The appeal is consequently dismissed.