Sabar Construction Co., Dist.Sabarkantha V. The Dy.CIT.,Sabarkanth Circle, Himatnagar

ITA 132/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6773 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S A BOHRA
• Assessee Lawyers: K C THAKKAR
• Keywords: Reasonable cause; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI A.K.GARODIA, ACCOUNTANT MEMBER ITA NO.132/AHD/2009 ASSESSMENT YEAR:2006-07 DATE OF HEARING:4.5.11 DRAFTED:6.5.11 SABAR CONSTRUCTION CO. NR. CIVIL CIRCLE, HIMATNAGAR, DIST. SABARKANTHA PAN NO.AARFS1104Q V/S. DCIT, SABARKANTHA, CIRCLE, HIMATNAGAR (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI K.C.THAKKAR, AR RESPONDENT BY:- SHRI S.A. BOHRA, DR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF COM MISSIONER OF INCOME-TAX(APPEALS)-X, AHMEDABAD IN APPEAL NO. CIT( A) X/DCIT/HMT/ 4/08-09 DATED 24-10-2008 FOR THE ASSESSMENT YEAR 20 06-07. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUND:- 1) THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.4,65,224/- BEING THE BAD DEBT WR ITTEN OFF IN THE CASE OF M/S. LANCO INFRATECH LTD. AND M/S. K.P.PATE L. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING ASSE SSMENT PROCEEDINGS THE ASSESSEE WAS ASKED BY ASSESSING OFFICER TO JUST IFY ITS CLAIM FOR BAD ITA 132/AHD/2009 A.Y. 2006-07 SABAR CONSTN. CO. V. DCIT SABARKANTHA, CIR HMT PAG E 2 DEBT AMOUNTING TO RS.4,90,224/- WRITTEN OFF SHOULD NOT BE DISALLOWED. THE ASSESSEE MADE THE REPLY AS UNDER:- DURING THE YEAR UNDER CONSIDERATION WE HAVE WRITTE N OFF BAD DEBTS OF RS.4,90,224/- THE SAID AMOUNT WERE NOT RECOVERAB LE. THE PARTY- WISE BREAK-UP OF SAID BAD DEBTS IS AS UNDER:- NAME AMOUNT LANCO INFRATECH LTD. 1,00,000 M/S. K.P.PATEL 3,65,224 ANIRUDH PATEL 25,000 FURTHER WE BEG TO SUBMIT THAT AFORESAID AMOUNT WERE OUTSTANDING SINCE 4-5 YEARS AND WE WERE CONSTANTLY REMANDING TH E SAID PARTIES BY WAY OF TELEPHONIC COMMUNICATIONS PERSONAL VISITS AND WRITING REMINDER LETTERS TO RECOVER THE SAID AMOUNTS. WE MA DE ALL REASONABLE EFFORTS TO RECOVER THE SAID AMOUNT KEEPI NG IN MIND OUR BUSINESS RELATIONSHIP AND FUTURE PROSPECTS. NOW INS PITE OF OUR EFFORTS WE LOST OUR HOPE TO RECOVER THE SAID AMOUNT FROM AFORESAID PARTIES. WE WERE QUITE CONVINCED THAT THESE DEBTS B ECOME BAD AND HENCE WE HAD WRITTEN OFF SAID IRRECOVERABLE DEB TS DURING THE YEAR UNDER CONSIDERATION. FURTHER, WE BEG TO STATE THAT IF ANY OF THE SAID WR ITTEN OFF AMOUNT ARE RECOVERED IN FUTURE WE SHALL SURELY TREAT IT AS OUR INCOME IN FUTURE AND OFFER FOR TAX IN THE YEAR IN WHICH IT IS RECOVERED. AFTER TAKING INTO CONSIDERATION THE REPLY OF ASSESS EE, ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS NOT FUR NISHED ANY DETAILS OF EFFORT MADE TO RECOVER THE SAID BAD DEBTS AND NO CO MMUNICATION WAS MADE IN THIS REGARD TO THE PARTIES WRITING OFF OF B AD DEBT THAT WAS WITHOUT REASONABLE CAUSE. 4. AGGRIEVED BY THIS ORDER ASSESSEE PREFERRED APPEA L BEFORE LD. CIT(A) WHO ALSO CONFIRMED THE ACTION OF ASSESSING O FFICER. FURTHER, AGGRIEVED THE ASSESSEE IS NOW APPEAL BEFORE US. ITA 132/AHD/2009 A.Y. 2006-07 SABAR CONSTN. CO. V. DCIT SABARKANTHA, CIR HMT PAG E 3 5. HEARD BOTH THE PARTIES AND PERUSED THE RECORD. S INCE THERE IS NO DISPUTE ABOUT THE FACT THAT ASSESSEE HAS WRITTEN OF F BAD DEBTS IN HIS BOOKS OF ACCOUNT, THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE IN VIEW OF DECISION OF HONBEL SUPREME COURT IN THE CASE OF T.R.F. LIMITED V. CIT (2010) 323 ITR 397 (SC), WHEREIN FOLLOWING WAS HELD:- AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO O BTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS SNOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECO VERABLE: IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. IN VIEW OF THE ABOVE THE ADDITION MADE BY ASSESSING OFFICER AND CONFIRMED BY LD. CIT(A) IS HEREBY DELETED. THIS GRO UND OF ASSESSEES APPEAL IS ALLOWED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 04/05/2011 SD/- SD/- (A.K.GARODIA) ( D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 04/05/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-X, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD