Dy.CIT, Circle-2(2), Hyderabad V. M/s ECI Engineering and Construction Company Limited, Hyderabad

ITA 1111/HYD/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7656 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 02-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: I RAMA RAO
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA. NO. 1111/HYD/2014 ASSESSMENT YEAR 2009-2010 DCIT, CIRCLE 2(2) HYDERABAD. VS. M/S. ECI ENGINEERING AND CONSTRUCTION COMPANY LTD., HYDERABAD 500 089. PAN AAACE4411G (APPELLANT) (RESPONDENT) FOR REVENUE : MR. RAJAT MITRA FOR ASSESSEE : MR. I. RAMA RAO DATE OF HEARING : 09.10.2014 DATE OF PRONOUNCEMENT : 07.11.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS IS REVENUE APPEAL AGAINST THE ORDER OF LD. CIT(A)-III, HYDERABAD DATED 3 RD MARCH, 2014 ON THE ISSUE OF ALLOWING THE BAD DEBTS CLAIMED/ADVANCES WRITTEN OFF OF RS.30,29,932. 2. BRIEFLY STATED, ASSESSEE IS A COMPANY ENGAGED I N THE BUSINESS OF CONSTRUCTION ACTIVITY. IT FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 DECLARING TOTAL INCOME OF RS.32,18,76,958. ASSESSING OFFICER COMPLETED THE AS SESSMENT UNDER SECTION 143(3) DISALLOWING INTER ALIA, ADVANC ES WRITTEN OFF OF RS. 30,29,932 AND BAD DEBTS WRITTEN OFF OF R S. 8,02,143. A.O. DISALLOWED ON THE REASON THAT EVIDENCE WAS NOT PROVIDED TO SHOW WHY THE ADVANCES/ BAD DEBTS HAD BEEN WRITTE N OFF. ASSESSEE SUBMITTED THE DETAILS BEFORE A.O. WHICH IN TURN, WERE 2 ITA.NO.1111/HYD/2014 M/S. ECI ENGINEERING & CONSTRUCTION CO. LTD., FURNISHED BEFORE LD. CIT(A) ALSO. LD. CIT(A) CONSID ERED THE FACTS AND THE LAW ON THE ISSUE AND GAVE RELIEF HOLD ING AS UNDER: 5.3. I HAVE SEEN CAREFULLY THE FACTS AND EVIDENCE. FIRST OF ALL, IT IS NOT THE CASE OF THE A.O. THAT THE ADVANC ES PAID TO OVER 200 PEOPLE ARE BOGUS. THE APPELLANT IS A CIVIL CONTRACT AND IS RUNNING HIS BUSINESS IN MANY LOCATIONS ALL O VER THE COUNTRY. IT IS A FACT OF BUSINESS THAT CERTAIN ADVA NCES HAVE TO BE PAID TO VARIOUS PERSONS. A LOOK AT THE ADVANC ES SHOWS THAT SOME OF THEM ARE VERY PETTY AND ARE PAID TO LABOURERS, DRIVERS ETCETERA. THESE HAVE ALSO BEEN C ARRIED FORWARD IN THE BOOKS OF ACCOUNT FOR MANY YEARS. THE APPELLANT CANNOT BE EXPECTED TO BRING DOCUMENTARY EVIDENCE FROM THESE PERSONS AFTER SO MANY YEARS REG ARDING THEIR NON-RETURN. MOREOVER, THERE IS NO EVIDENCE WI TH THE A.O. TO PROVE THAT THE ADVANCES IN QUESTION ARE BOG US, ESPECIALLY SINCE THEY HAVE BEEN GIVEN THROUGH THE B OOKS WHICH AND IN MANY CASES THROUGH CASH IN HAND IS DUL Y REFLECTED IN THE BOOKS OF ACCOUNT. 5.4. WITH RESPECT TO THE BAD DEBT, THE APPELLANT HA S PROVIDED ALL POSSIBLE DETAILS OF THE RUNNING ACCOUN T IS AND HAS ALSO PROVIDED EVIDENCE TO SHOW THAT THE DEBT HA D BECOME NON-RECOVERABLE AS THE ENTITY IN QUESTION HA D GONE INSOLVENT. 5.5. . 5.6 FROM THE ABOVE DECISION IT IS CLEAR THAT THE APPELLANT DOES NOT HAVE TO ESTABLISH BEYOND DOUBT T HAT THE DEBT HAD INDEED BECOME BAD. THE JUDGEMENT OF THE BUSINESSMAN THAT IN ITS COURSE OF BUSINESS THE DEBT IS IRRECOVERABLE WOULD SUFFICE. IN THE PRESENT CASE T HE ASSESSING OFFICER HAS NOT DOUBTED THE FACT THAT THE DEBTS HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. HE HAS ALSO NOT DOUBTED THE GENUINENESS OF THE ENTRIES. THEREF ORE, THERE IS NO REASON TO HOLD THAT THE BAD DEBTS WRITT EN OFF ARE NOT ALLOWABLE. I AM FORTIFIED IN MY VIEW BY THE DE CISION OF THE HONOURABLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS. SIRPUR PAPER MILLS LTD. 334 ITR 656. FURTHER, IN THE CASE OF CIT_II VS. INVENTA CHEMICALS, ITA 186 OF 20 13, THE HON'BLE AP HIGH COURT HAS ALSO SUPPORTED THE ABOVE VIEW. 3 ITA.NO.1111/HYD/2014 M/S. ECI ENGINEERING & CONSTRUCTION CO. LTD., 3. LD. CIT(A) ALSO EXTRACTED THE OPERATIVE PART OF JUDGMENT IN THE CASE OF TRF LIMITED VS. CIT 323 ITR 397 OF THE HONBLE SUPREME COURT HOLDING THAT ASSESSEE DOES NO T HAVE TO ESTABLISH BEYOND DOUBT THAT THE DEBT HAD INDEED BEC OME BAD. HE ALSO FOLLOWED THE DECISION OF HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF CIT VS. SIRPUR PAPER MILLS LTD ., 334 ITR 656 AND CIT-II VS. INVENTA CHEMICALS ITA.NO.186 OF 2013. REVENUE HAS PREFERRED APPEAL ONLY ON THE ADVANCES W RITTEN OFF STATING THAT ADVANCES ARE NOT PETTY WHEREAS, THAT W AS MAJOR AMOUNT RANGING UPTO RS. 6 LAKHS IN THE CASE OF SIN GLE PARTY. 4. WE HAVE HEARD THE LEARNED D.R. AND LD. COUNSEL. 5. IT IS NOT A CASE WHERE ASSESSEE HAS NOT FURNISH ED THE DETAILS BEFORE A.O. HOWEVER, A.O. DISALLOWED ON THE REASON THAT ASSESSEE HAS NOT JUSTIFIED WHY THE AMOUNTS ARE WRITTEN OFF. LD. CIT(A) EXAMINED THE DETAILS AND FOUND THAT MOST OF THEM ARE ADVANCES IN THE COURSE OF BUSINESS PAID OV ER TO MORE THAN 200 PEOPLE AND SINCE THE AMOUNTS ARE WRITTEN O FF IN THE BOOKS OF ACCOUNTS THEY ARE ELIGIBLE FOR DEDUCTION. BOTH ON FACTS AS WELL AS ON LAW, ORDER OF CIT(A) IS TO BE UPHELD. THERE IS NO MERIT IN REVENUE GROUNDS. ACCORDINGLY, THE SAME ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.11.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 07 TH NOVEMBER, 2015. VBP/- 4 ITA.NO.1111/HYD/2014 M/S. ECI ENGINEERING & CONSTRUCTION CO. LTD., COPY TO 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2( 2), HYDERABAD. 2. M/S. ECI ENGINEERING AND CONSTRUCTION COMPANY LT D., PLOT NO.A-12 & A-13, PANCHAVATI TOWN SHIP, MANIKOND A, RAJENDRANAGAR MANDAL, HYDERABAD 500 089. 3. COMMISSIONER OF INCOME TAX (APPEALS)-III, HYDERA BAD. 4. COMMISSIONER OF INCOME TAX-II, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD