EISENMANN SURFACE FINISHING SYSTEMS INDIA P.LTD, THANE V. ASST CIT CIR 1, THANE

CO 60/MUM/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1320 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 25-08-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 06-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K VED; N A PATADE CO NO MUM ARISI
• Keywords: Reopening of assessment; Bad and doubtful debts
• Section: 143(3); 148

Judgement Text

M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ITA NO. 5947 /MUM/20 1 3 EISENMANN SURFACE FINISHING SYSTEMS INDIA P LTD. [FORMERLY KNOWN AS M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ) CO NO. 60/MUM/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H , MUMBAI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI GOPAL KEDIA , ACCOUNTANT MEMBER ITA NO. : 5947 /MUM/20 1 3 ( ASSESSMENT YEAR: 200 3 - 04 ) ASST . COMMISS IONER OF INCOME TAX C IRCLE - 1 , ASHAR I.T. PARK, 6 TH FLOOR, B WING, ROOM NO. 22, ROAD NO. 16Z, WAGLE INDUSTRIAL ESTATE, THANE (WEST), MUMBAI - 400 604 VS M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD , TECHNOSOFT KNOWLEDGE GATEWAY, 1 ST FLOOR, PLOT NO. B - 14, ROAD NO. 1, WAGLE INDL. ESTATE, NR. MULUND CHECK NAKA, MIDC, THANE(W), MUMBAI 400 604 .: PAN: AAAC H 14 5 9 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JEEVAN LAL LAVIDIYA RESPONDENT BY : S/ SHRI K K VED & SHRI N A PATADE CO NO. : 60/MUM/2015 ARISING OUT OF ITA NO . 5947/MUM/2013 , AY 2003 - 04 EISENMANN SURFACE FINISHING SYSTEMS INDIA P LTD. [FORMERLY KNOWN AS M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ] , MIDC, THANE(W), MUMBAI 400 604 VS ASST . COMMISSIONER OF INCOME TAX CIRCLE - 1, MUMBAI 400 604 (APPELLAN T) (RESPONDENT) APPELLANT BY : S/SHRI K K VED & SHRI N A PATADE RESPONDENT BY : SHRI JEEVAN LAL LAVIDIYA /DATE OF HEARING : 25 - 08 - 201 5 / DATE OF PRONOUNCEMENT : 28 - 08 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 18.07.2013 , PASSED BY CIT (A) - II , TH A NE , FOR THE QUANTUM OF AS SESSMENT PASSED U/S 143(3) R.W.S. 147 FOR THE ASSESSMENT YEAR 20 03 - 04. M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ITA NO. 5947 /MUM/20 1 3 EISENMANN SURFACE FINISHING SYSTEMS INDIA P LTD. [FORMERLY KNOWN AS M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ) CO NO. 60/MUM/2015 2 2. IN THE DEPARTMENTS APPEAL, THE SOLE GROUND RAISED READS AS UNDER : - 1. WHETHER ON THE FACTS OF THE CASE AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO ALLOW THE CLAIM OF BAD DEBTS AMOUNTING TO RS. 24,34,375/ - WITHOUT APPRECIATING THAT THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SURGICAL CO. LTD. VS ASSTT. CIT (2006) 153 TAXMAN 491 (MADRAS) IS SQUARELY APPLICABLE ON T HE FACTS OF THIS CASE. 2. BRIEF FACTS ARE THAT, T HE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DESIGN, SUPPLY AND INSTALLATION OF PAINT FINISHING SYSTEMS AND CONVEYORS, AND PROVIDING INTEGRATED FACILITIES MANAGEMENT SERVICES. IN THIS CASE, ORIGINAL A SSESSMENT WAS PASSED U/S 143(3) ON 28.02.2006 AT A TOTAL LOSS OF ( - ) RS. 37,42,610/ - AS AGAINST THE RETURNED LOSS AT ( - ) RS. 37,42,610/ - . THEREAFTER, THE ASSESSEES CASE WAS REOPENED U/S 147 VIDE NOTICE DATED 11.06.2009 U/S 148 ON THE GROUND THAT THE ASSE SSEE HAS CLAIMED DEDUCTION OF RS. 33,15,282/ - TOWARDS REVERSAL OF PROVISION FOR DOUBTFUL DEBTS, HOWEVER, IN THE PROFIT AND LOSS ACCOUNT, THE PROVISION FOR DOUBTFUL DEBT CREDITED WAS ONLY RS. 8,80,907/ - . THUS, IT WAS OBSERVED THAT EXCESS DEDUCTION HAS BEEN CLAIMED TO THE TUNE OF RS. 24,34,375/ - , WHICH HAS ESCAPED ASSESSMENT. IN RESPONSE, THE ASSESSEE HAD SUBMITTED THAT THERE IS NO EXCESS CLAIM MADE FOR REVERSAL OF CLAIM FOR DOUBTFUL DEBTS AND EXPLAINED BEFORE THE ASSESSING OFFICER THE NATURE OF ENTRIES IN TH E ACCOUNTS AND HOW THE BAD DEBTS HAS BEEN WRITTEN OFF. THE ENTIRE SUBMISSION OF THE ASSESSEE HAS BEEN DISCUSSED AT PAGE 2 AND 3 OF THE ASSESSMENT ORDER. IT WAS THUS SUBMITTED BY THE ASSESSEE THAT AN AMOUNT OF RS. 24 ,34,375/ - WHICH WAS WRITTEN OFF AS BAD DE BTS, IS ALLOWABLE AS M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ITA NO. 5947 /MUM/20 1 3 EISENMANN SURFACE FINISHING SYSTEMS INDIA P LTD. [FORMERLY KNOWN AS M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ) CO NO. 60/MUM/2015 3 DEDUCTION. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM AFTER OBSERVING AND HOLDING AS UNDER: THE SUBMISSIONS OF THE ASSESSEE CANNOT BE ACCEPTED AS THEY ARE DEVOID OF ANY MERITS. ON PERUSAL OF THE SAME, IT IS SEEN THAT THE OPE NING BALANCE FOR SUNDRY DEBTORS AS ON 01.04.2002 WAS RS. 34,38,000/ - . THE ASSESSEE INTER ALIA REDUCED AN AMOUNT OF RS. 33,15,282/ - WHICH CONSTITUTES RS. 8,80,907/ - RECOVERED AND OFFERED FOR TAXATION WHEREAS THE AMOUNT OF RS. 24,34,375/ - CONSTITUTES BAD DEB TS. THIS CLEARLY SPELLS OUT THAT THE ASSESSEE IS CLAIMED DEDUCTION AT RS. 24,34,375/ - ON ACCOUNT OF BAD DEBTS. AN AMOUNT OF RS. 24,34,375/ - IS THUS DISALLOWED FOR BAD DEBTS WRITTEN OFF AND ADDED BACK TO THE TOTAL INCOME FOR AY 2003 - 04. PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE SEPARATELY INITIATED. 4. THE LD. CIT(A) ALLOWED THE ASSESSEES CLAIM OF BAD DEBTS AFTER CONSIDERING THE ENTIRE FACTS AND MATERIAL ON RECORD IN THE FOLLOWING MANNER: IN RESPECT OF THE C LAIM OF BAD DEBTS AT RS. 24,34,375/ - , IT IS NOTICED THAT THE APPELLANT HAS DEBITED THE SAME IN PROVISION FOR DOUBTFUL DEBTS ACCOUNT AND CREDITED THE RESPECTIVE ACCOUNTS OF THE DEBTORS. IN THIS WAY, THE SUNDRY DEBTORS HAVE BEEN ACTUALLY WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION. SINCE THE APPELLANT HAS BEEN DEBITING PROFIT AND LOSS ACCOUNT ON THE BASIS OF PROVISION FOR DOUBTFUL DEBTS, NO FURTHER DEBIT IN THE PROFIT AND LOSS ACCOUNT IS REQUIRED IN THE YEAR UNDER CONSIDERATION ON ACTUALLY WRITTEN OFF DEBTS BASIS. THIS ISSUE HAS BEEN NOW SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. VS CIT [2010] 230 CTR 14 HOLDING THAT AFTER 01/04/1989 CLAIM OF BAD DEBTS IS ALLOWABLE AS DEDUCTION IF M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ITA NO. 5947 /MUM/20 1 3 EISENMANN SURFACE FINISHING SYSTEMS INDIA P LTD. [FORMERLY KNOWN AS M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ) CO NO. 60/MUM/2015 4 BAD DEBTS ARE ACTUALLY WRITTEN OFF AS IRRECOVERABLE IN T HE ACCOUNTS OF ASSESSEE. IT HAS BEEN FURTHER HELD THAT, IT IS NOT NECESSARY FOR ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE IN THE YEAR UNDER CONSIDERATION. UNDER THESE CIRCUMSTANCES AND LEGAL POSITION, I AM OF THE CONSIDERED VIE W THAT THE CLAIM OF BAD DEBTS TO THE EXTENT OF RS. 24,34,375/ - IS ALLOWABLE IN THE YEAR UNDER CONSIDERATION. HOWEVER, WITH ABUNDANT PRECAUTION, THE A.O. IS DIRECTED TO VERIFY AS TO WHETHER PROVISION FOR DOUBTFUL DEBTS HAS BEEN ADDED BACK IN THE TOTAL INC OME OR NOT. IF THE CLAIM OF BAD DEBTS HAS BEEN MADE BY THE APPELLANT ON THE BASIS OF PROVISIONS FOR DOUBTFUL DEBTS AND ALLOWED BY THE AO IN EARLIER YEARS, THEN FURTHER DEDUCTION ON THIS ACCOUNT ON ACTUAL WRITTEN OFF BASIS WILL NOT BE ALLOWED. THE AO IS D IRECTED TO ALLOW THE RELIEF ACCORDINGLY. WITH THESE DIRECTIONS GROUND NO. 2, STANDS PARTLY ALLOWED. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAD DIRECTED THE ASSESSING OFFICER TO VERIFY , WHETHER THE PROVISIONS FOR DOUBTFUL DEBTS HAD BEEN ADDED BACK IN THE TOTAL INCOME OR NOT. IN THE ORDER GIVING EFFECT, THE ASSESSING OFFICER HAS DULY VERIFIED THE SAME AND HAS ALLOWED THE BAD DEBTS. 6. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 7. AF TER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AND THE MATERIAL ON RECORD, WE FIND THAT ASSESSEES CLAIM OF BAD DEBTS OF RS. 24,34,375/ - WAS DEBITED UNDER THE HEAD PROVISION FOR DOUBTFUL DEBTS AND CREDITED TO THE RESPECTIVE ACCOUNTS OF THE DEBTORS. IN THIS MANNER, SUNDRY DEBTORS HAVE BEEN ACTUALLY WRITTEN OF F DURING THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) HA D DIRECTED THE ASSESSING OFFICER TO VERIFY AS TO WHETHER PROVISION FOR DOUBTFUL DEBTS HAD BEEN ADDED BACK IN THE TOTAL M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ITA NO. 5947 /MUM/20 1 3 EISENMANN SURFACE FINISHING SYSTEMS INDIA P LTD. [FORMERLY KNOWN AS M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ) CO NO. 60/MUM/2015 5 INCOME OR NOT. THE ASSESSING OFFICER IN PURSUANCE OF SUCH A DIRECTION HAS ALLOWED SUCH BAD DEBTS WRITTEN OFF AFTER VERI FICATION AND ALLOWED THE CLAIM. SUCH AN ALLOWABILITY OF BAD DEBTS IS CONFIRMITY WITH THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TR F LTD. VS CIT, REPORTED IN [2010] 230 CTR 14. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE DOES NOT STAND AND IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. 9. IN CROSS OBJECTION NO. 60/MUM/2015, THE ASSESSEE HAS CHALLENGED T HE VALIDITY OF REOPENING OF ASSESSMENT U/S 147. 10. SINCE WE HAVE ALREADY DISMISSED THE REVENUES APPEAL ON MERITS, THEREFORE, THE ISSUE OF VALIDITY OF REOPENING U/S 147 HAS BECOME PURELY ACADEMIC AND ACCORDINGLY , THE GROUND RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS AND SAME IS DISMISSED AS SUCH. 11. IN THE RESULT, BOTH THE REVENUE S APPEAL AND ASSESSEE S CROSS OBJECTION STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST , 2015. SD/ - SD/ - ( GOPAL KEDIA ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 28 TH AUGUST , 2015 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - II , THANE . 4) THE CIT I , THANE . 5) , , / THE D.R. H BENCH, MUMBAI. 6) \ COPY TO GUARD FILE. M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ITA NO. 5947 /MUM/20 1 3 EISENMANN SURFACE FINISHING SYSTEMS INDIA P LTD. [FORMERLY KNOWN AS M/S HADEN INTERNATIONAL GROUP INDIA PVT LTD ) CO NO. 60/MUM/2015 6 / BY ORDE R / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS