Kay Beetex Spin Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 1186/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73070 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 16-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: M K PATEL
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.1186/AHD/2010 A.Y. 2004-05 KAYBEE TEX SPIN PVT. LTD., 2 ND FLOOR, VISHWAKARMA CHAMBERS, MAJURAGATE, SURAT. PAN: AABCK 0017H VS DCIT, CIRCLE-1, SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.C. MATHEWS, SR.D.R., ASSESSEE(S) BY : SHRI M.K. PATEL, A.R. / DATE OF HEARING : 26/02/2014 / DATE OF PRONOUNCEMENT: 26/02/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT(A)-I, SURAT, DATED 22.02.2010 AND THE G ROUND RAISED ARE REPRODUCED BELOW: 1. THE LEARNED CIT (APPEALS) - I, SURAT HAS GRIEVO USLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN RE-OPENING THE ASSESSMENT U/S.147 OF THE INCOME-TAX ACT-1961 MERELY ON THE GROUND OF ISS UANCE OF SHOW CAUSE NOTICE BY THE CENTRAL EXCISE AUTHORITY AND ON THE B ASIS OF STATEMENT RECORDED BY ONE OF THE DIRECTOR OF THE APPELLANT COMPANY, TH E MATTER OF WHICH IS STILL BEING SUB-JUSTICE UNDER CENTRAL EXCISE ACT. 2. THAT THE LEARNED CIT(A)-I, SURAT HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.9,28,000/- AS UNACCOU NTED INCOME. 3. THAT THE LEARNED CIT(A)-I, SURAT HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF CLAIM OF BAD DEBTS O F RS.58,31,435/- WHICH IS OTHERWISE ALLOWABLE AS PER THE JUDGMENTS OF HONBLE SUPREME COURT OF INDIA ITA NO.1186/AHD/2010 KAYBEE TEX SPIN PVT. LTD. VS. DCIT, CIRCLE-1, SURAT . FOR A.Y. 2004-05 - 2 - IN CASE OF TRF LTD. VS. COMMISSIONER OF INCOME TAX [(DTD. 09.02.2010 (2010) 230 CTR (SC) 14.] 2. LEARNED AR HAS INFORMED NOT TO PRESS GROUND NOS. 1 AND 2, THEREFORE, THESE GROUNDS ARE HEREBY DISMISSED BEING NOT PRESSED. NOW, WE ARE LEFT WITH GROUND NO.3 WHICH IS IN RESPECT OF THE CLAIM OF BAD DEBTS. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 147 OF IT ACT, DATED 29.12 .2009 WERE THAT THE ASSESSEE COMPANY HAS CLAIMED BAD DEBT OF RS.58,31,4 35/- IN THE P & L A/C. IN COMPLIANCE TO THE SHOW CAUSE NOTICE, THE AS SESSEE HAD FURNISHED THE DETAILS OF THE BAD DEBT ACCOUNT ALONG WITH LED GERCOPIES OF THE PARTIES. IT WAS INFORMED THAT EXCEPT THE ACCOUNT OF M/S SUNSHINE FISHERIES AMOUNTING TO RS.13,05,507/-, ALL OTHER RE CEIVABLES WERE OLD AMOUNT AND THE RECOVERY FROM THOSE ACCOUNTS WERE NO T POSSIBLE DUE TO THE FINANCIAL DIFFICULTIES OF THOSE PARTIES. THE AS SESSEE HAS, THEREFORE, DECIDED TO WRITE OFF THOSE ACCOUNTS IN THE BOOKS OF ACCOUNT AS BAD DEBT. IN RESPECT OF M/S. SUNSHINE FISHERIES, THE AMOUNT W AS CARRIED OVER FROM LAST FINANCIAL YEAR AND THERE WERE CERTAIN RECOVERI ES MADE UP TILL 18 TH JUNE, 2003. HOWEVER, THEREAFTER ON ACCOUNT OF FINAN CIAL DIFFICULTY OF THE SAID PARTY THE BALANCE AMOUNT WAS TREATED AS UNRECO VERABLE AND CLAIMED AS BAD DEBT. HOWEVER, THE AO WAS NOT CONVINCED AND BY FOLLOWING THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISES & ENGINEERS PVT. LTD. VS. CIT [2007] 162 TAXMAN 114 (GUJ) DISALLOWED THE CLAIM. THE IMPUGNED ADDITION WAS CHALLENGED BEF ORE LEARNED CIT(A). 4. BEFORE LEARNED CIT(A), THE YEAR-WISE DETAILS OF THE PENDING LIABILITY WAS FURNISHED AS UNDER: ITA NO.1186/AHD/2010 KAYBEE TEX SPIN PVT. LTD. VS. DCIT, CIRCLE-1, SURAT . FOR A.Y. 2004-05 - 3 - NAME OF THE PARTY AMOUNT (RS.) YEAR SUNSHINE OVERSEAS 13,05,507/- 2003-04 ANGANA EXPORTS 7,17,267/- 2002-03 EAGLE FIBRES PVT. LTD. 8,48,816/- 2002-03 POOJA TEX SPIN PVT. LTD. 1,01,974/- 2001-02 SHIVAM EXPORTS 11,91,952/- 2002-03 SIDDHARTH SYNTHETICS 1,80,000/- 2002-03 TEJAL INTERNATIONAL 1,16,358/- 2002-03 MICRO POLYSTER PVT. LTD. 5,64,750/- 2001-02 RAJIV MATHUR 2,41,500/- 2001-02 SIDDHESHWAR OVERSEAS 63,311/- 2000-01 KIRIT TRADERS 2,50,000/- 99-2000 R.K. FABRICS 2,50,000/- 99-2000 58,31,435 4.1 ALTHOUGH, IT WAS ARGUED THAT THE RECOVERY OF TH E OUTSTANDING AMOUNT WAS NOT POSSIBLE BUT REJECTING THOSE ARGUMEN TS IT WAS HELD BY LEARNED CIT(A) THAT NO EFFORT WAS MADE BY THE ASSES SEE TO RECOVER THOSE OUTSTANDING DEBTS, THEREFORE, FOLLOWING THE DECISIO N AS CITED BY THE AO AFFIRMED THE ADDITION. 5. WITH THIS BACKGROUND, WE HAVE HEARD BOTH THE SID ES. FROM THE SIDE OF THE ASSESSEE, LEARNED AR, MR. M.K. PATEL HAS PLA CED RELIANCE ON TRF LTD. 323 ITR 397 (SUPRA) AND KAMALA COTTON CO., 226 ITR 605 (GUJ.). ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE, LE ARNED DR HAS FILED A DECISION OF OMAN INTERNATIONAL BANK, 313 ITR 128 (B OM.), KOHLI BROTHER COLOUR LAB, 329 ITR 80 (ALD.). 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED OPINION THAT ONCE THE ADMITTED FACTUAL P OSITION IS THAT THE ITA NO.1186/AHD/2010 KAYBEE TEX SPIN PVT. LTD. VS. DCIT, CIRCLE-1, SURAT . FOR A.Y. 2004-05 - 4 - ASSESSEE HAS WRITTEN OFF THE DEBT AS A BAD DEBT IN THE BOOKS OF ACCOUNT AND THOSE WERE IRRECOVERABLE, THEREFORE, THE ISSUE IS COVERED BY THE DECISION OF TRF LTD. (SUPRA). THIS DECISION OF THE HONBLE SUPREME COURT IS BINDING UPON US; HENCE REQUIRED TO BE RESP ECTFULLY FOLLOWED. REST OF THE DECISIONS AS CITED BY LEARNED DR ARE PR ONOUNCED EITHER BY BOMBAY HIGH COURT OR ALLAHABAD HIGH COURT, HOWEVER, THOSE DECISIONS HAVE BEEN PASSED IN THE YEAR 2009, AS AGAINST THAT, THE DECISION OF THE HONBLE SUPREME COURT HAS BEEN PASSED IN THE YEAR 2 010, NATURALLY THE DECISION OF THE HONBLE SUPREME COURT WAS NOT AVAIL ABLE ON THAT POINT OF TIME WHEN THOSE HIGH COURTS HAVE PRONOUNCED THE JUD GMENT. IN VIEW OF THIS, WE HEREBY REVERSE THE FINDINGS OF THE REVENUE AUTHORITIES AND DIRECT TO ALLOW THE CLAIM. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 26/02/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD