ACIT, Ludhiana V. Sh. Mohit Saharan, Ludhiana

ITA 1000/CHANDI/2010

• Counselvise Citation: 100021514 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 09-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1000/CHD/2010 ASSESSMENT YEAR: 2005-06 THE ACIT, VS SHRI MOHIT SAHARAN PROP., CIRCLE-II, M/S D.V.SAHARAN & SONS, LUDHIANA LUDHIANA PAN NO. AMTPS2929D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT BY : NONE DATE OF HEARING : 29.03.2012 DATE OF PRONOUNCEMENT : 17.04.2012 ORDER PER MEHAR SINGH, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-I, LUDHIANA DATED 27.4.2010 RELATING TO ASSE SSMENT YEAR 2005- 06 PASSED U/S 143(3) OF THE INCOME-TAX ACT,1961 (I N SHORT 'THE ACT'). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 7,74,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS CLAIMED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2004-05 WHEREAS THE AMOUNT HAD BEEN WRITTEN OFF BY THE BANKERS ON 26.6.2006 AND THE CLAIM / EXPENDITURE UNDER THE HEAD BAD DEBT ALIAS 2 BUSINESS LOSS IS NOT ALLOWABLE DURING THE FINANCIAL YEAR 2004-05 RELEVANT TO ASSESSMENT YEAR 2005-06. 2. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED.. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEALS BEFORE IT IS FINALLY DISPOSED OFF . 3. GROUND NOS. 2 & 3 OF THE APPEALS BEING GENERAL I N NATURE, NEEDS NO ADJUDICATION, HENCE, DISMISSED. 4. GROUND NO.1 OF THE APPEAL RELATES TO DELETION TH E ADDITION OF RS. 7,74,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BAD DEBTS. 5. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD DEBITED RS. 7,74,000/- AS BAD DEBTS INSTEAD OF BUSINESS L OSS IN THE PROFIT AND LOSS ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE NATURE OF THIS ENTRY. IN THIS RESPECT, THE ASSESSEE SUBMITTED A COPY OF T HE LEDGER ACCOUNT OF BAD DEBTS ALIAS BUSINESS LOSS ALONGWITH THE BANK CE RTIFICATE AND COPIES OF ACCOUNT OF M/S LANKA FELTS (P) LTD AND M/S BABIL COMPANY LCC, OMAN. FROM THE COPY OF THE ACCOUNT, THE ASSESSING OFFICER OBSERVED THAT THE BAD DEBS OF RS. 3,88,000/- WAS CLAIMED IN RESPECT OF EXPORT SALE MADE AS PER BILL NO. 860 DATED 28.9.2004 AND T HE OTHER AMOUNT CLAIMED AS BAD DEBT WAS IN RESPECT OF M/S BABIL COM PANY, OMAN FOR A SUM OF RS. 3,86,000/- IN RESPECT OF BILL NO 844 DAT ED 27.4.2004. THE ASSESSING OFFICER HELD THAT THE IMPUGNED AMOUNTS FR OM THESE TWO PARTIES HAD NOT BECOME BAD AND THE ASSESSEE HAD FAI LED TO ESTABLISH THE 3 SAID FACTUM. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE WITH REGARD TO HIS CONTENT ION THAT THE PAYMENT OF BILL NO. 860 FOR RS. 3,88,000/- IN THE CASE OF M /S LANKA FELTS (P) LTD, COLOMBO AND IN RESPECT OF BILL NO. 844 FOR RS . 3,86,000/- IN THE CASE OF M/S BABIL COMPANY WERE DISPUTED AS IS EVID ENT FROM THE ENTRIES REPRODUCED FROM THE LEDGER AS DISCUSSED IN PARA-4.2. THE ASSESSEE HAD RECEIVED PAYMENT AMOUNTING TO RS. 51,8 3,447/- AGAINST PURCHASES OF RS. 58,30,556/- WHICH ALSO INCLUDED TH E OPENING BALANCE OF RS. 30,000/-. AS IS APPARENT FROM THE COPY OF T HIS ACCOUNT THERE WAS STILL DEBIT BALANCE OF RS. 2,59,108/- IN THIS ACCOU NT. EVEN THE ASSESSEE HAD SUPPLIED THE GOODS AGAINST BILL NO. 887 DATED 2 8. 12.2004 FOR RS. 2,48,000/- SUBSEQUENT TO THIS BILL. SO FAR AS THE ACCOUNT OF M/S BABIL COMPANY LCC, OMAN IS CONCERNED THERE WAS EXPORT AS PER BILL NO. 844 DATED 25.07.04 FOR A SUM OF RS. 3,86,000/- ONLY AND THE ASSESSEE HAS CLAIMED THIS AMOUNT AS BAD DEBTS ON 31.03.2005. T HE CLAIM OF THE ASSESSEE TO WRITE OFF THE AMOUNT OF RS. 3,88,000/- AND RS. 3,86,000/- AT THE END OF FINANCIAL YEAR IN THE BOOKS OF ACCOUNT AS IRRECOVERABLE WAS WITHOUT ANY BASIS AND THE SAME DE SERVES TO BE DISALLOWED. FURTHER, THE COPIES OF BANK CERTIFICAT ES DATED 26.06.2006 ALSO SHOWED THAT EXPORT BILL NO. 860 DATED 28.09.04 & BILL NO. 844 DATED 25.07.04 HAD BEEN WRITTEN OFF IN THE RECORDS OF THE BANK, ON 26.06.2006 WHICH ALSO PROVES THAT THE AMOUNTS OF RS. 3,88,000/- AND RS 3, 86,000/- AS CLAIMED BY THE ASSESSEE HAD NOT B ECOME BAD DEBTS DURING THE F.Y. 2004-05 RELEVANT TO THE A .Y. 2005-06. HENCE, THESE AMOUNTS CAN'T BE ALLOWED AS BAD DEBTS DURING FINANCIAL YEAR 2004-05. THEREFORE, AN ADDITION OF RS. 7,74,0 00/- (RS. 3,88,000/- 4 + RS. 3,86,000/-) WAS MADE TO THE INCOME OF THE ASS ESSEE. AS THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF IN COME TO CLAIM THE WRONG DEDUCTION ON ACCOUNT OF BAD DEBT. 6. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMIT TED THAT THE ASSESSEE IS A MANUFACTURER AND EXPORTER OF WOOLEN K NITTED BARRETS, WOOLLEN BLAZERS, METAL BADGETS, BUTTON, WOODEN STIC KS, SCOUT, LANYARDS ETC. TO BE USE BY THE BRITISH ARMY AND IS EXPORTING ALL HIS END PRODUCTS OUTSIDE INDIA. HOWEVER, THE CIT(A) ALLOWE D THE GROUND OF THE ASSESSEE BY DELETING THE ADDITION VIDE PARA 4.1 OF THE ORDER OBSERVING AS UNDER:- 4.1 I HAVE ANALYZED THE MATTER AND I FIND THAT THE PAYMENTS ON ACCOUNT OF EXPORTS MADE TO THOSE TWO CO NCERNS COULD NOT BE RECEIVED AS THE MATERIAL HAD BECOME NO T ACCEPTABLE TO THE IMPORTERS BEING WET. THEREFORE, T O MIND SAME IS ALLOWABLE AS A BUSINESS LOSS, NOTWITHSTANDI NG THE FACT THAT THE APPELLANT CLAIMED THE SAME AS BAD DEB TS. I ALSO TEND TO AGREE WITH THE LD. AR, THAT WRITING OFF OF THE AMOUNTS BY THE BANK IS OF NO CONSEQUENCE ONCE THE MATERIAL EXPORTED BECOMES UNACCEPTABLE TO THE BUYER AND IT IS AT THIS STAGE THAT THE LOSS OCCURS TO THE SELLER . THEREFORE, I ALLOW THE GROUND OF APPEAL . 7. BEFORE THE TRIBUNAL, LD. DR PLACED RELIANCE ON THE ORDER PASSED BY THE ASSESSING OFFICER. NO ONE APPEARED O N BEHALF OF THE ASSESSEE. 5 8. WE HAVE HEARD THE LD. DR AND HAVE ALSO PERUSE D THE MATERIALS AVAILABLE ON RECORD. HAVING REGARD TO THE CURRENT AMENDED PROVISIONS OF SECTION 36(1)(VII) AND SECTION 36(2) OF THE ACT, THERE IS NO REQUIREMENT OF ESTABLISHING THE FACTUM OF BAD DEBT AND IT IS SUFFICIENT IF BAD DEBTS ARE WRITTEN OFF AS IRRECOVERABLE BY TH E ASSESSEE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF CIT(A) AND THE SAME IS UPHELD. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF APRIL, 2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH APRIL, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR