The ITO, Ward-4(2), Ahmedabad V. Karnavati Engineering Ltd, Ahmedabad

ITA 1080/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76896 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 12-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Bad and doubtful debts

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BENCH, AHMEDABAD , ! ' #$ #$ #$ #$ %, ' BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER $./ I.T.A. NO.1080/AHD/2011 ( ( )( ( )( ( )( ( )( / / / / ASSESSMENT YEAR : 2007-08) THE ITO WARD-4(2) AHMEDABAD / VS. KARNAVATI ENGINEERING LTD. IRM HOUSE OFF. C.G.ROAD NAVRANGPURA,AHMEDABAD '* ! $./+, $./ PAN/GIR NO. : AAACK 6047 Q ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 / APPELLANT BY : SHRI P.L. KUREEL, SR.DR ./*- 1 0 / RESPONDENT BY : SHRI S.N.SOPARKAR WITH SHRI PARIN SHAH, ARS 2 1 ! / / / / DATE OF HEARING : 24/06/2014 34) 1 ! / DATE OF PRONOUNCEMENT : 30/06/2014 5 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VIII, AHMEDA BAD (CIT(A) IN SHORT) DATED 25/01/2011 PERTAINING TO ASSESSMEN T YEAR (AY) 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LD.CIT(A)-VIII, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.10,77,651/- MADE BY THE A.O. ON ACCOUNT OF CLAIM OF BAD DEBTS, WITHOUT PROPERLY APP RECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECOR D BY THE ASSESSING OFFICER. ITA NO.1080/AHD /2011 ITO VS. KARNAVATI ENGINEERING LTD. ASST.YEAR 2007-08 - 2 - 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.2,50,719/- OUT OF DISALLOWANCE O F RS.4,80,020/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PRIOR P ERIOD EXPENSES, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE DECISION OF THE ASS ESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDERS OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 31/12/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.10,77,651 /- AND DISALLOWANCE OF PRIOR PERIOD EXPENSES AMOUNTING TO RS.4,80,020/- . AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, PARTLY ALLOWED THE APP EAL OF THE ASSESSEE. AGAINST THE ORDER OF THE LD.CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE US. 3. FIRST GROUND IS AGAINST DELETION OF DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.10,77,651/-. THE LD.SR.DR VEHEMENT LY ARGUED THAT THE ORDER OF THE LD.CIT(A) IS NOT JUSTIFIED AND HE SUPP ORTED THE ORDER OF THE AO. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS MADE RELIANCE ON THE JUDGEMENT OF JURISDICTIONA L HIGH COURT RENDERED IN THE CASE OF DHALL ENTERPRISES. HE SUBM ITTED THAT THIS JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT HAS BEEN DISAPPROVED BY THE HONBLE APEX COURT. HE SUBMITTED THAT THE HON BLE APEX COURT ITA NO.1080/AHD /2011 ITO VS. KARNAVATI ENGINEERING LTD. ASST.YEAR 2007-08 - 3 - RENDERED IN THE CASE OF TRF LTD. VS. CIT REPORTED A T (2010)323 ITR 397 (SC). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGEMENTS RELIED UPON BY THE LD.COU NSEL FOR THE ASSESSEE. THE AO DISALLOWED THE BAD DEBTS ON THE BASIS THAT S UCH DEBT HAS BECOME BAD AND IRRECOVERABLE. THE LD.COUNSEL FOR THE ASSE SSEE DREW OUR ATTENTION TOWARDS THE FINDINGS OF THE LD.CIT(A) WHO HAS GIVEN A FINDING THAT THE CHARTERED ACCOUNTANT HAS GIVEN A CERTIFICATE MENTIO NING THAT ALL THE BAD DEBTS WRITTEN OFF ARE RELATING TO TRADE OF THE COMP ANY AND INCOME REFERRING TO THOSE HAS BEEN OFFERED FOR TAX IN EARL IER YEARS AND IMPUGNED DEBTS HAVE BEEN WRITTEN OFF IN THE YEAR UNDER CONSI DERATION. WE FIND THAT THE LD.CIT(A) HAS RELIED ON THE JUDGEMENT OF THE HO NBLE APEX COURT IN THE CASE OF TRF LTD.(SUPRA) THAT AFTER THE AMENDMEN T OF SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBT S, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, H AS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRE COVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUNT WAS OFFERED FOR TAXATION IN THE EARLIER YEAR S. HE SUBMITTED THAT VERIFICATION AT THIS STAGE WOULD BE ONLY AN ACADEMI C EXERCISE AS THE ASSESSEE IS SUBJECTED TO THE PROVISIONS OF MAT. WE FIND FORCE IN THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE. THE LD.CIT(A) HAS GIVEN A FINDING ON FACT THAT THE AO HAS MADE DISALLOWANCE I N RESPECT OF BAD DEBTS MERELY ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE ITA NO.1080/AHD /2011 ITO VS. KARNAVATI ENGINEERING LTD. ASST.YEAR 2007-08 - 4 - DEBT HAS BECOME BAD. RESPECTFULLY FOLLOWING THE RA TIO LAID DOWN BY THE HONBLE SUPREME COURT RENDERED IN THE CASE OF TRF L TD. VS. CIT(SUPRA), WE DO NOT FIND ANY MERIT IN THIS GROUND OF REVENUE S APPEAL, HENCE THE SAME IS REJECTED. 5. SECOND GROUND IS AGAINST DELETION OF DISALLOWANC E TO THE EXTENT OF RS.2,50,719/-. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A). HE SUBMITTED THAT OUT OF RS.4,80,019/-, RS.1,60,585 /- RELATE TO PURCHASES OF COMPONENTS, THE SAME ENTERING THE STOCKS DURING THE YEAR UPON THE PURCHASES MADE. SIMILARLY, AN AMOUNT OF RS.90,134 /- WHICH WAS IN DISPUTE AND WAS ULTIMATELY SETTLED DURING THE YEAR. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS GIVEN A FINDING ON F ACT IN PARA-4.3 OF HIS ORDER AS UNDER:- 4.3. I HAVE CAREFULLY CONSIDERED THE FINDINGS OF T HE A.O. AS WELL AS THE SUBMISSION OF THE APPELLANT IN THIS REGARD. THE APPELLANT SUBMITTED THAT OUT OF THE SAID RS.4.8 LACS, RS.1,6 90,585/- RELATE TO PURCHASES OF COMPONENTS, THE SAME ENTERING THE STOC KS DURING THE YEAR UPON THE PURCHASES MADE, CANNOT BE CONSIDERED AS DISALLOWABLE PRIOR PERIOD EXPENSES AND THERE IS ANO THER IDENTICAL AMOUNT RS.90,134/- OF COURRIER DHL WORLDWIDE, WHICH AMOUNT HAD BEEN IN DISPUTE WAS ULTIMATELY SETTLED TOWARDS THE END OF THE YEAR AND CONSIDERED AS EXPENDITURE UPON SETTLEMENT AND PAYMENT (FEB.07) HENCE CAN BE CONSIDERED AS OCCURRING ONLY DURING THE YEAR. THE SUBMISSIONS OF THE APPELLANT ARE JUSTIFI ED TO THAT EXTENT AND ACCORDINGLY THE ADDITION OF RS.2,50,719/- IS DE LETED AND ITA NO.1080/AHD /2011 ITO VS. KARNAVATI ENGINEERING LTD. ASST.YEAR 2007-08 - 5 - BALANCE RS.2,29,301/- IS CONFIRMED. THIS GROUND IS PARTLY ALLOWED. 6.1. THIS FINDING ON FACT PASSED BY THE LD.CIT(A) I S NOT CONTROVERTED BY THE REVENUE BY PLACING OF ANY CONTRARY MATERIAL ON RECORD, HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A ), SAME IS HEREBY UPHELD. THUS, THIS GROUND OF REVENUES APPEAL IS A LSO REJECTED. 7. REMAINING GROUNDS ARE GENERAL IN NATURE NEED NO INDEPENDENT ADJUDICATION. 8. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( ) ( %) ! ' ' ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/ 06 /2014 8.., .../ T.C. NAIR, SR. PS 5 1 .9 : 9) 5 1 .9 : 9) 5 1 .9 : 9) 5 1 .9 : 9)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. $$ ; / CONCERNED CIT 4. ;() / THE CIT(A)-VIII, AHMEDABAD 5. 9%< . , , / DR, ITAT, AHMEDABAD 6. <=( >2 / GUARD FILE. 5 5 5 5 / BY ORDER, /9 . //TRUE COPY// ? ?? ?/ // / $+ $+ $+ $+ ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD