ACIT 4(3), MUMBAI V. KANTILAL MANGALDAS SECURITIES P. LTD, MUMBAI

ITA 1055/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3452 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-12-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 16-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARIGOVIND SINGH
• Assessee Lawyers: SAMEER G DALAL
• Keywords: Bad and doubtful debts; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI RAJENDRA SINGH,(AM) ITA NO.1055/MUM/2009 ASSESSMENT YEAR : 2001-02 ASSTT. COMMISSIONER OF INCOME TAX -4(3) 6 TH FLOOR, ROOM NO.649 AAYAKAR BHAVAN MUMBAI-20. ..( APPELLANT ) VS. M/S. KANTILAL MANGALDAS SECURITIES PRIVATE LIMITED 100/104, D.G. CHAMBER, NANIK MOTWANI MARG, FORT MUMBAI-23. ..( RESPONDENT ) P.A. NO. (AAACJ 1986 G) APPELLANT BY : SHR I HARI GOVIND SINGH RESPONDENT BY : SHRI SAMEER G. DALAL O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 5.12.2008 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2001-02. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS AS A SHARE BROKER FILED RETURN DECLARING TOTAL INCOME OF RS.47,35,200/-. A REGULAR ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961(THE ACT) WAS MADE DETERMINING THE TOTAL INCOME AT RS.57,29,170/- VIDE ORDER DATED 14.3.2003. SUBSEQ UENTLY THE LD. CIT VIDE HIS ORDER PASSED U/S.263 DATED 28.3.2005 HAS H ELD THAT THE ASSESSMENT ORDER DATED 14.3.2003 WAS ERRONEOUS INASMUCH AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE ISSU E OF ALLOWANCE OF ITA NO.1055/M/09 A.Y:01-02 2 BAD DEBTS RS.87,86,254/- AND HENCE HE SET ASIDE THE ASSESSME NT ORDER AND DIRECTED THE ASSESSING OFFICER TO ENQUIRE INTO AND VERIFY THE CLAIM OF BAD DEBTS AND TO ASCERTAIN AS TO WHETHER THE B AD DEBTS HAVE ACTUALLY BECOME BAD DURING THE YEAR OR OTHERWISE AFTER PROVIDING APPROPRIATE OPPORTUNITY TO THE ASSESSEE AND TO MAKE ASSESSM ENT AS PER LAW. PURSUANT TO THE ORDER OF THE LD. CIT THE A SSESSING OFFICER PROVIDED OPPORTUNITY TO THE ASSESSEE. IN THE ABSENCE OF ANY COMPLIANCE, THE ASSESSING OFFICER WHILE OBSERVING THAT THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS AS LAID DOWN U/S.36(2) R.W.S. 36(1)(VII), DISALLOWED THE BAD DEBTS RS.87,86,254/- AND ADDED TO T HE INCOME OF THE ASSESSEE AND THEREBY COMPLETED THE ASSESSMENT AT AN INCO ME OF RS.1,45,15,420/- VIDE ORDER DATED 16.11.2005 PASSED U/ S.144 R.W.S. 263 OF THE ACT. 3. ON APPEAL, THE LD. CIT(A) AFTER CONSIDERING THE A SSESSEE'S SUBMISSION REMANDED THE MATTER TO THE ASSESSING OFFICER. I N COMPLIANCE, THE ASSESSING OFFICER SUBMITTED HIS REPORT STATI NG INTERALIA THAT ....THE SUBMISSION MADE BY THE ASSESSEE COMPANY IS VERY SELF EXPLANATORY. ....I FIND JUSTIFICATION IN TH E BAD DEBTS CLAIMED .... . THE LD. CIT(A) WHILE OBSERVING THAT THE ASSESSING OF FICER IS CONVINCED WITH THE EXPLANATION OF THE APPELLANT AND H AS FOUND OUT THE JUSTIFICATION IN THE CLAIM OF BAD DEBTS AND BAD DEBTS S HOWN BY THE APPELLANT HAS BEEN DULY WRITTEN OFF FROM THE BOOKS OF ACCOUNTS, HENCE, AS PER PROVISION OF LAW U/S.36(1)(VII) IT IS ALLOWABLE AND ACCORDINGLY HE DELETED THE ADDITION OF RS.87,86,254/- MADE BY THE A SSESSING OFFICER . 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE DE LETION OF ADDITION OF BAD DEBTS RS.87,86,254/- ITA NO.1055/M/09 A.Y:01-02 3 5. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE OR DER OF THE ASSESSING OFFICER . 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WH ILE RELYING ON THE REMAND REPORT OF THE ASSESSING OFFICER AND THE OR DER OF THE LD. CIT(A) FURTHER SUBMITS THAT THE ISSUE STANDS COVERED IN F AVOUR OF THE ASSESSEE BY THE RECENT DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN SHREYAS S. MORAKHIA. HE THEREFORE, SUBMITS THAT THE OR DER PASSED BY THE LD. CIT(A) BE UPHELD. 7. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL P ARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THA T THERE IS NO DISPUTE THAT THE ASSESSING OFFICER IN THE REMAND REPORT HAS STATED THAT I FIND JUSTIFICATION IN THE BAD DEBTS CLAIMED. THE LD. CIT(A) AFTER RELYING ON THE SAME FURTHER HELD THAT THE BAD DEBTS SH OWN BY THE APPELLANT HAS BEEN DULY WRITTEN OFF IN THE BOOKS OF ACCOUNT, AS PER PROVISION OF LAW U/S.36(1)(VII) AND HENCE HE DELETED THE SAME. 8. IN TRF LTD. VS. CIT (2010) 323 ITR 397(SC) IT HA S BEEN OBSERVED AS UNDER (HEAD NOTES): AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME TAX ACT, 1961 WITH EFFECT FROM APRIL 1, 1989, IN OR DER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE : IT IS ENOUGH IF TH E BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT S OF THE ASSESSEE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE REVENUE AND KEEPING IN VIEW THAT IT IS NOT THE CASE OF THE REVENUE THAT THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER IS NO T ACCORDING TO LAW WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON'BLE APEX ITA NO.1055/M/09 A.Y:01-02 4 COURT HOLD THAT THE ASSESSEE HAS COMPLIED WITH THE PROVISI ONS OF SEC.36(1)(VII) OF THE ACT AND ACCORDINGLY WE ARE INCLIN ED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE ADDIT ION MADE BY THE ASSESSING OFFICER . THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE, REJECTED. 9. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23.12.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.