ISHAN EQUIPMENTS PRIVATE LIMITED,VADODARA V. DEPUTY COMMISSIONER OF INCOME TAX , CIRCLE 1(1)(1), VADODARA, CHAKLI CIRCLE , VADODARA

ITA 235/AHD/2024

AI Insights

The case involves Ishan Equipments Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, concerning the Assessment Year 2018-19. The primary issues in the appeal were the disallowance of penalty expenditure and the disallowance of bad debts written off. The Assessing Officer had initially disallowed these amounts, which the Tribunal found to be unjustified upon review. The Tribunal's decision was based on the examination of the income tax return, the assessment order, and the legal provisions under the Income Tax Act, 1961, particularly focusing on the correct application of Sections 36(1)(vii) and 37.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472267 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-09-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 09-02-2024
• Other Referred Cases: TRF Ltd. vs. CIT (323 ITR 397)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: S.N. DIVETIA; SAMIR VORA; ARS
• Keywords: Bad and doubtful debts; TDS
• Section: 143(3); 37; 43B

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “डी“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ D ” BENCH, AHMEDABAD \u0016ी टी.आर. से\u001a\u001bल क ुमार, \u0011ाियक सद\u001d एवं \u0016ी मकरंद वसंत महादेवकर, लेखा सद\u001d क े सम#। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.235/Ahd/2024 िनधा \u000fरण वष\u000f /Assessment Year : 2018-19 Ishan Equipments Pvt.Ltd. Survey No.144-15, NH No.8 Sankharda Nr. Police Chowki Vadodara – 391 350 (Gujarat) बनाम/ v/s. The Dy.CIT Circle-1(1)(1) Vadodara \u0013थायी लेखा सं./PAN: AAACI 4131 R (अपीलाथ&/ Appellant) ('( यथ&/ Respondent) Assessee by : Shri S.N. Divetia & Shri Samir Vora, ARs Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 26/09/2024 घोषणा की तारीख /Date of Pronouncement: 10/10/2024 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal filed by the assessee is directed against the order dated 12.12.2023, passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (NFAC) [hereinafter referred to as “CIT(A)”], for the Assessment Year (A.Y.) 2018-19. The appeal arises from the assessment order framed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] by the Assessing Officer [hereinafter referred to as “AO”]. ITA No.235/Ahd/2024 Ishan Equipments Pvt.Ltd. vs. The DCIT Asst. Year : 2018-19 2 Facts of the Case: 2. The assessee is engaged in the business of engineering and fabrication. The assessee filed its return of income for A.Y. 2018-19 on 25.10.2018, declaring a total income of Rs.1,51,43,170/-. The case was selected for complete scrutiny under the E-Assessment Scheme, 2019, with identified issues, such as, Verification of genuineness of expenses, and Verification of duty drawback received. 2.1. The assessment order was passed by the Assessing Officer (AO) on 19.04.2021, making some additions, including: • Disallowance of penalty expenditure amounting to Rs.4,81,985/- under section 37. • Disallowance of bad debts of Rs.24,50,304/- under section 36(1)(vii). 3. Aggrieved by the additions, the assessee preferred an appeal before the CIT(A), who partially allowed the appeal. Dissatisfied with the remaining additions, the assessee has filed this appeal before us with following grounds: 1. Disallowance of Penalty Expenditure of Rs.4,81,985/- The Assessing Officer erred in disallowing penalty u/s 37 of Rs.4,81,985/-. This penalty of Rs.4,81,985/- was already disallowed and added in the total Income at the time of submitting original return of Income filed on 25.10.2018. Hence it is requested to delete the addition made by the A.O. as it amounts to double addition. 2. Disallowance of Bad Debts W/Off Rs.24,50,304 /- ITA No.235/Ahd/2024 Ishan Equipments Pvt.Ltd. vs. The DCIT Asst. Year : 2018-19 3 The Assessee has written off Rs.24,50,304/- a bad debts in the A.Y. 2018-19. This amount has been written off as bad debts and irrecoverable in the accounts of the assessee company. The amount of the debt was taken into account while computing the income during the earlier years. As all the terms and conditions and provisions of Section 36 of the Income Tax Act, 1961 are complied, it is allowable expenditure as bad debts. Hence it is requested to delete the addition of Rs.24,50,304/- being bad debts written off, made by the A.O. 4. During the course of hearing before us, the Authorised Representative (AR) of the assessee stated that the penalty expenditure was already disallowed in the computation of income filed with the return. The disallowance was made under Section 43B instead of Section 37 due to a clerical error. 4.1. The AR provided a detailed break-up of the disallowed amounts in the ITR and confirmed that the penalty expenditure of Rs.4,81,985/- was part of the total disallowance of Rs.21,62,259/-. The AR also stated that following are the amounts included in the list totalling to Rs.4,81,985/-. Amount (Rs.) ------------------ 1. Penalty Expense 3,77,385/- 2. Penalty on TDS (F.Y. 2016-17) 1,04,600/- 4.2. The AR requested the deletion of the double disallowance made by the AO on account of this clerical error. ITA No.235/Ahd/2024 Ishan Equipments Pvt.Ltd. vs. The DCIT Asst. Year : 2018-19 4 4.3. Regarding Bad Debts Disallowance of Rs.24,50,304/-, the AR submitted that the bad debts of Rs.24,50,304/-, comprising amounts due from BGR Energy System Pvt. Ltd. (Rs.3,51,265/-) and SIMON India Ltd. (Rs.20,99,039/-), were written off in the books of accounts during F.Y. 2017-18 after settlement agreements were reached with both parties. The AR further stated that these amounts were offered to income by way of sale in the earlier years. The AR cited the Hon’ble Supreme Court’s judgement in TRF Ltd. vs. CIT (323 ITR 397), wherein it was held that it is sufficient if the bad debts are written off in the books, and there is no need to establish that the debt is irrecoverable. The AR argued that all the conditions under Section 36(1)(vii) of the Act were satisfied, and therefore the disallowance was unjustified. 5. The Departmental Representative (DR) relied on the orders of lower authorities. 6. We have carefully considered the submissions made by both the assessee and the Department, along with the orders of the lower authorities. We also perused the material available on records. Upon reviewing the computation of income and the ITR filed by the assessee, it is evident that the total disallowance of Rs.21,62,259/- included the said penalty expenditure. The error occurred due to a clerical mistake in selecting the section under which the disallowance was made. In light of this, we hold that the AO’s disallowance under Section 37 leads to a duplication, which is unsustainable. The addition of Rs.4,81,985/- is hereby deleted. ITA No.235/Ahd/2024 Ishan Equipments Pvt.Ltd. vs. The DCIT Asst. Year : 2018-19 5 6.1. The assessee wrote off bad debts of Rs.24,50,304/-, which included Rs.3,51,265/- due from BGR Energy System Pvt. Ltd. and Rs.20,99,039/- from SIMON India Ltd.. The AO disallowed the claim, citing the absence of supporting documentation during the assessment proceedings. The assessee provided sufficient evidence in the form of ledger accounts and minutes of settlement meetings with the debtors, proving that the amounts were genuinely written off after settlement agreements. The Supreme Court’s ruling in TRF Ltd. vs. CIT clarifies that after 01.04.1989, there is no requirement to prove that the debt has become irrecoverable. It is enough that the debt has been written off in the books. Based on the submissions and the evidence provided, it is clear that the conditions under Section 36(1)(vii) of the Act were met, and the disallowance by the AO was unjustified. The disallowance of Rs.24,50,304/- is, therefore, deleted. 6.2. In view of the above findings, we allow the assessee’s appeal on both grounds. The disallowances made by the AO under sections 37 and 36(1)(vii) of the Act are deleted. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Open Court on 10th October, 2024 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 10/10/2024 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS ITA No.235/Ahd/2024 Ishan Equipments Pvt.Ltd. vs. The DCIT Asst. Year : 2018-19 6 आदेश की \"ितिलिप अ#ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant 2. \"%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT 4. आयकर आयु& ) अपील ( / The CIT(A)-(NFAC),Delhi 5. िवभागीय \"ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स%ािपत \"ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 8.10.2024 2. Date on which the typed draft is placed before the Dictating Member. : 8.10.2024 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 10.10.2024 7. Date on which the file goes to the Bench Clerk. : 10.10.2024 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "