M/s. Shree Ram Resins Pvt.Ltd., Surat V. The ACIT.,Circle-4, Surat

ITA 1158/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5604 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S CHAUDHARY
• Keywords: Bad and doubtful debts; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.1158/AHD/2010 A.Y.: 2006-07 M/S. SHREE RAM RESINS PVT. LTD., 4091, HARIOM MARKET, RING ROAD, SURAT VS THE A. C. I. T., CIRCLE-4, SURAT PA NO AADCS 3477 M (APPELLANT) (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SHRI D. S. CHAUDHARY, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-IV, SURAT D ATED 30-12-2009 FOR ASSESSMENT YEAR 2006-07 ON THE FOLLOWING GROUND: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN SUSTAINING THE ORDER OF THE LOWER AUTHORITY, DIS ALLOWING CLAIM OF BAD DEBTS, PARTICULARLY WHEN ALL THE REQUI RED CONDITIONS WERE FULFILLED AND APPELLANT WAS ENTITLE D FOR THE CLAIM. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE. A/D CARD DULY SERVED UPON THE ASSESSEE IS AVAILABLE ON RECOR D. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FINDINGS OF THE AUTHORIT IES BELOW. 3. BRIEFLY, THE FACTS ON GROUND NO.1 OF THE APPEAL ARE THAT THE AO FOUND THAT THE ASSESSEE COMPANY HAD CLAIMED BAD DEB TS OF RS.8,95,543/- IN THE NAME OF SADHNA TEXTILE INDUSTR IES SHOWN IN ITS PROFIT & LOSS ACCOUNT. THE ASSESSEE WAS REQUESTED T O FURNISH COMPLETE DETAILS OF THE BAD DEBT ALONG WITH DETAILS OF LENGT H OF TIME THE DEBT WAS OUTSTANDING, RECOVERY MEASURES TAKEN, DETAILS OF NE GOTIATION OR ARBITRATION IF ANY, DETAILS OF PRESENT WHEREABOUTS OF THE DEBTOR WITH ITA NO.1158/AHD/2007 M/S. SHREE RAM RESINS PVT. LTD. VS ACIT, CIR-4, SUR AT 2 NECESSARY EVIDENCE IN SUPPORT THEREOF. IT WAS SUBMI TTED THAT GOODS WERE SOLD TO SADHNA TEXTILE INDUSTRIES AND DESPITE BEST EFFORTS RECOVERY COULD NOT BE MADE. THE DIRECTOR OF THE ASSESSEE COMPANY V ISITED SEVERAL TIMES FACTORY PREMISES OF THE DEBTOR BUT BUSINESS ACTIVIT Y OF THE DEBTOR WAS FOUND DISCONTINUED. THE ASSESSEE FOLLOWING NO ATTEM PT OF RECOVERY TREATED IT AS BAD DEBT. THE AO DID NOT ACCEPT THE C ONTENTION OF THE ASSESSEE AND REJECTED THE CONTENTION OF THE ASSESSE E AND ADDED THE SAME AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. THE ASS ESSEE PLEADED BEFORE THE LEARNED CIT(A) THAT CLAIM OF THE ASSESSEE IS AL LOWABLE AS PER AMENDED PROVISIONS OF SECTION 36(1) (VII) BECAUSE WHEN THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE IN THE PREVIOUS YEAR THE DEDUCTION IS ALLOWABLE. THE LEARNED CIT(A) HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE BECAUSE THE ASSESSEE HAS FAILED TO PROVE THROUGH SO ME EVIDENCE THAT THE AMOUNT IN QUESTION WAS BAD. 4. THE LEARNED DR CONCEDED THAT THE ISSUE IS NOW CO VERED BY JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F T. R. F. LTD. VS CIT 323 ITR 397. 5. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF T HE VIEW THAT THE ORDERS OF THE AUTHORITIES BELOW CANNOT BE SUSTAINED IN LAW. THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. (SUPRA) HELD AS UNDER: THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOU GH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACC OUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN ACCOUNTS OF THE A SSESSEE. WHEN BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBIT ED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSI NG THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE ITA NO.1158/AHD/2007 M/S. SHREE RAM RESINS PVT. LTD. VS ACIT, CIR-4, SUR AT 3 PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATE D ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETH ER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OF F IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEE N UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MAT TER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AN D THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. 6. HOWEVER, THE ASSESSEE DID NOT APPEAR AT THE TIME OF HEARING AND HAS NOT CLARIFIED WHETHER IN FACT BAD DEBT WAS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR PREVIOUS YEAR. WE, THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE ISSUE TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THIS ISSUE AS PER AM ENDED PROVISIONS OF SECTION 36(1) (VII) OF THE IT ACT AND IN VIEW OF TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. (SUPRA). 7. AS A RESULT, APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 23-07-2010 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 23-07-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD