M/s Steel Strips Wheels Limited, Chandigarh V. DCIT, CC-II, Chandigarh

ITA 1000/CHANDI/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7105 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 10-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GE E TINDERMANN
• Keywords: Bad and doubtful debts
• Section: 28; 37(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH .., ! '# #$ %, & '( BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, J M ITA NO. 1000/CHD/2019 ASSESSMENT YEAR : 2016-17 M/S STEEL STRIPS WHEELS LTD. SCO 49-50, SECTOR 26 CHANDIGARH THE DCIT CENTRAL CIRCLE-II CHANDIGARH PAN NO: AACCS3003L APPELLANT RESPONDENT !' ASSESSEE BY : SHRI ASHWANI KUMAR, CA #!' REVENUE BY : SMT. GEETINDER MANN, JCIT $ %! & DATE OF HEARING : 22/01/2020 '()*! & DATE OF PRONOUNCEMENT : 29/01/2020 ')/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 31/05/2019 OF LD. CIT(A)-3, GURGAON. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WEL L AS FACTS IN CONFIRMING THE DISALLOWANCE OF THE DEDUCTION OF BAD DEBTS WRITTEN OFF BEING IN THE NATURE OF IRRECOVERABLE ADVANCE AS BUSINESS LOSS U/S 37(1) RE AD WITH SECTION 28 OF THE ACT. THE ADDITION MADE ON THIS ACCOUNT AMOUNTING TO RS. 541233/- MAY PLEASE BE DELETED. 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WEL L AS ON FACTS IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS. 3,88,392/- ON ACCO UNT OF PRIOR PERIOD EXPENSES, WHEREAS, THE SAME IS ALLOWABLE AS PER LAW . THEREFORE, ADDITION OF RS. 3,88,392/- MAY PLEASE BE DELETED. 3. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER AND AMEND A NY OF THE ABOVE GROUNDS OF APPEAL BEFORE THE SAME IS HEARD OR DISPO SED OFF. 2 3. VIDE GROUND NO. 1 THE GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 5,41,233/- MADE BY THE A.O. ON ACCOUNT OF BAD D EBTS WRITTEN OFF. 4. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSEE E-FILED ITS RETURN OF INCOME ON 17/10/2016 DECLARING AN INCOME OF RS. 32,84,17,625/- WHICH WAS SUBSEQUENTLY REVISED OF RS. 33,25,99,414/- ON 22/07 /2017. LATER ON THE CASE WAS SELECTED FOR SCRUTINY. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE HAD BALANCES WRITTEN BACK (NET) UNDER THE HEAD OTHER EXPENSES, ADMINISTRATIVE AND SELLING EXPENSES AMOUNTING TO RS . 5,41,233/-. THE A.O. ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THE AFORESAI D EXPENSES WHICH WERE FURNISHED ON 29/11/2018 STATING THEREIN THAT THE BA LANCE WRITTEN OFF INCLUDED AMOUNT ON ACCOUNT OF VERY OLD IRRECOVERABLE BALANCE S LYING IN STORES AND SPARES SUPPLIERS AND OTHER SHORT / EXCESS AND ROUNDING OFF DIFFERENCES, WRITTEN OFF. THE A.O. HOWEVER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND MADE THE IMPUGNED ADDITION. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. IT WAS FURTHER SUBMITTED THAT THE OBSERVATION OF THE A.O. WAS NOT TRUE AS THE ASS ESSEE HAD MERELY PRODUCED THE STATEMENT OF ACCOUNT OF BALANCES WRITTEN OFF CO NTAINING THE DATES ON WHICH THE BALANCES WERE WRITTEN OFF WHICH HAD BEEN MISUND ERSTOOD TO THE DATE OF TRANSACTION BY THE LD. A.O., THEREFORE, THE BAD DEB TS WRITTEN OFF BEING IN THE NATURE OF IRRECOVERABLE ADVANCE CLAIMED AS BUSINESS LOSS UNDER SECTION 37(1) R.W.S 28 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS ACT) MAY BE ALLOWED TO THE ASSESSEE. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS. MYSORE SUGAR CO. LTD. REPORTED AT [1962] 46 ITR 649 (SC) HARSHAD J CHOKSI VS. CIT IN ITA NO. 43/1997 DT. 14/ 08/2012 (BOM) 3 KHYATI REALTORS PVT. LTD. VS. ACIT IN ITA NO. 129/M UM/2014 DT. 04/03/2016 (MUM TRIB) T.R. F LTD. VS. CIT IN CA NO. 5293 / 2003 (SC) 6.1 HOWEVER THE LD. CIT(A) DID NOT FIND MERITS IN T HE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ADDITION MADE BY THE A.O. BY OBSERVING AS UNDER: THE A.O. HAS MADE THIS DISALLOWANCE ON THE GROUND THAT THE AMOUNTS WRITTEN OFF BY THE APPELLANT PERTAIN TO THE YEAR UNDER CONSIDER ATION AND NO VALID EXPLANATION FOR WRITING OFF THE AMOUNT OF RS. 5,41, 233/- HAS BEEN GIVEN BY THE APPELLANT. DURING THE APPELLATE PROCEEDINGS ALSO, THE APPELLAN T HAS NOT FURNISHED ANY EXPLANATION TO COUNTER THE SPECIFIC FINDINGS OF THE A.O. IN VIEW OF THE SAME, I AGREE WITH THE CONTENTIONS OF THE A.O. AND HENCE THI S ADDITION IS CONFIRMED. NOW THE ASSESSEE IS IN APPEAL. 7. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE BA D DEBTS WRITTEN OFF WERE PERTAINING TO THE EARLIER YEARS WHICH WERE IRRECOVE RABLE, THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION MADE B Y THE A.O. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT REPORTED AT [2010] 323 ITR 397. 8. IN HIS RIVAL SUBMISSIONS THE LD. DR STRONGLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT IS NOT IN DISPUTE THAT THE DEBTS WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION. 9.1 ON A SIMILAR ISSUE THE HON'BLE APEX COURT IN TH E CASE OF T.R.F. LTD. VS. CIT (SUPRA) HELD AS UNDER: 4 AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961 WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DED UCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE; IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. WE THEREFORE BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE AFORESAID REFERRED TO CASE DELETE THE IMPUGNED ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A). 10. VIDE GROUND NO. 2 THE GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF ADDITION OF RS. 3,88,392/- MADE BY THE A.O. ON ACCOUNT OF PRIOR PERIOD EXPENSES. 11. AS REGARDS TO THIS ISSUE THE LD. COUNSEL FOR TH E ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED VIDE ORDER DT. 27 /05/2019 IN ASSESSEES OWN CASE IN ITA NO. 756/CHD/2018 FOR THE A.Y. 2011-12 WHEREI N THE DEPARTMENTAL APPEAL ON THE SAME ISSUE WAS DISMISSED, COPY OF THE SAID O RDER WAS FURNISHED WHICH IS PLACED ON RECORD. 12. LD. DR IN HIS RIVAL SUBMISSIONS SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 13. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES AND THE MATERIAL AVAILABLE ON THE RECORD, IT IS NOTICED THAT AN IDEN TICAL ISSUE HAVING SIMILAR FACTS WAS AGITATED BY THE DEPARTMENT FOR THE A.Y. 2011-12 IN ITA NO. 756/CHD/2018, WHICH HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AN D AGAINST THE DEPARTMENT, THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 15 AN D 16 OF THE AFORESAID REFERRED TO ORDER DT. 27/05/2019 IN ASSESSEES OWN CASE WHICH READ AS UNDER: 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE FACTUAL SUBMISSIONS MADE BY THE ASSESSEE THAT THE PRIOR PERIOD EXPENSES WERE BOOKED ON ACCOUNT OF LATE RECEIPT OF BILLS OF UNITS OF THE ASSESSEE LOCATED AT FARAWAY PLACES AND THAT EVEN PRIOR PERIOD INCOMES WERE ALSO SO BOOKED BY THE ASSESSEE, HAS NOT BEEN CONTROVERTED BY THE REVENUE. THE ASSESSEE HAS CONTENDED THAT IT WAS CONSISTENTLY BOOKING SUCH PRIOR PERIOD EXPENSES AND INC OME FROM YEAR TO YEAR, AND THIS HAS ALSO NOT BEEN CONTROVERTED BY THE REVE NUE. 5 16. IN VIEW OF THE AFORESAID FACTS, WE DO NOT FIND ANY R EASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A), DELETING THE DISALLOWANCE M ADE OF PRIOR PERIOD EXPENSES, SINCE WE FIND THAT THE SAID EXPENSES HAD BEE N BOOKED AS PER THE ESTABLISHED AND CONSISTENT POLICY FOLLOWED BY THE AS SESSEE .FURTHER CONSIDERING THE FACT THAT EVEN PRIOR PERIOD INCOMES HAVE BEEN BOOKED, NO PURPOSE WOULD BE SERVED, WE FIND, BY DISALLOWING O NLY PRIOR PERIOD EXPENSES SINCE IN THAT CASE, EVEN PRIOR PERIOD INCOME WOULD HAVE TO BE REDUCED FROM THE TAXABLE PROFITS OF THE ASSESSEE. IN VIEW OF THE ABOVE, GROUND OF APPEAL NO.VI RAISED BY THE REVENUE IS DISMISSED. SO BY RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) IS DELETED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. (ORDER PRONOUNCED IN THE OPEN COURT ON 29/01/2020 ) SD/- SD/- #$ % .., (SANJAY GARG ) ( N.K. SAI NI) & '(/ JUDICIAL MEMBER ! / VICE PRESIDENT AG DATE: 29/01/2020 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE