M/s. Manidhari Fashions Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(3), Surat

ITA 1161/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0146 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-08-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHANSHU S JHA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 06/08/2010 DRAFTED ON: 06/0 8/2010 ITA NO.1161/AHD/2010 ASSESSMENT YEAR : 2007-08 M/S.MANIDHARI FASHIONS PVT.LTD. B-17, BOMBAY MARKET UMARWADA SURAT VS. THE INCOME TAX OFFICER WARD-1(3) SURAT PAN/GIR NO. : AABCM 6305 J (APPELLANT) .. (RESPONDENT) APPELLANT BY : -NONE- RESPONDENT BY: SHRI SUDHANSHU S.JHA, D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-I, SURAT DATED 10/03/2010 PASSED FOR ASSESSMENT YEAR 2007-08. T HE ONLY ISSUE RAISED IN THIS APPEAL IS ABOUT THE DISALLOWANCE OF CLAIM OF BAD DEBTS. 2. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER U/S.143(3) OF THE I.T. ACT, 1961 DATED 11/11/ 2009 WERE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF FIN ANCE AND TRADING OF SYNTHETIC SAREES. A SUM OF RS.7,22,325/- WAS DEBI TED UNDER THE HEAD BAD DEBTS IN THE PROFIT & LOSS ACCOUNT IN RESPECT OF FOLLOW ING FOUR PARTIES:- ITA NO. 1161/AHD/2010 M/S.MANIDHARI FASHIONS P.LTD. VS. ITO ASST.YEAR - 2007-08 - 2 - SL.NO(S) NAME OF THE PARTY AMOUNT (IN RS.) (I) P.R.ENTERPRISES 76,075 (II) P.R.FABRICS PVT.LTD. 3,69,861 (III) SUNDERDAS KASHMIRILAL 2,15,900 (IV) ESS GEE ENTERPRISES 60,489 TOTAL 7,22,325 3. THE FIRST APPELLATE AUTHORITY HAS FOLLOWED THE D ECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRIS ES & ENGINEERS PVT. LTD. VS. CIT REPORTED AS (2007)295 ITR 481(GUJ.) AND HELD THAT SINCE THE ASSESSEE HAS NOT PROVED WHETHER THE TAX HAVE B ECOME BAD, THEREFORE, DISALLOWANCE WAS RIGHTLY MADE BY THE ASSESSING OFFI CER. 4. THOUGH ON THE DATE OF HEARING, NO ONE WAS PRESEN T FROM THE SIDE OF THE APPELLANT, BUT CONSIDERING THE NATURE OF THE DI SPUTE, WE HAVE THOUGHT IT PROPER TO PROCEED EX-PARTE QUA THE ASSESSEE AND DECIDED THIS APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATI VE. 5. THIS ISSUE OF CLAIM OF BAD DEBTS NOW STOOD COVERED BY A LATEST DECISION OF HON'BLE SUPREME COURT IN THE CASE OF T.R. F. LTD. VS. CIT REPORTED AS (2010) 323 ITR 397 (SC). THE APEX COU RT HAS TAKEN INTO CONSIDERATION THE POSITION OF LAW, AFTER 01/04/1989 AND HELD AS UNDER:- THIS POSITION IN LAW IS WELL-SETTLED. AFTER APRI L 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOW EVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINE D WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEB ITED AND THE ITA NO. 1161/AHD/2010 M/S.MANIDHARI FASHIONS P.LTD. VS. ITO ASST.YEAR - 2007-08 - 3 - CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE A CCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSI NG OFFICER HAS NOT EXAMINED WHETHER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, T HE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSI DERATION OF THE ABOVEMENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. 6.1. WE ARE GOVERNED BY THE VIEW TAKEN BY THE HON'B LE SUPREME COURT AND, THEREFORE, THE VIEW TAKEN BY THE REVENUE AUTH ORITIES IS HEREBY REVERSED AND IT WAS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE. THEREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 19/ 08 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 19 / 08 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPA RTMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(A PPEALS)-I, SURAT 5. THE DR, AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD