M/s K. Manibhai & Co., Kolkata V. ACIT, CIR-35, KOLKATA, Kolkata

ITA 1343/KOL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4294 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 02-11-2015
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts

Judgement Text

I.T.A. NO. 1343/KOL./2015 ASSESSMENT YEAR: 2012-2013 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1343/KOL/ 2015 ASSESSMENT YEAR: 2012-2013 M/S. K. MANIBHAI & CO.,............................ ........................APPELLANT 21, R.N. MUKHERJEE ROAD, KOLKATA-700 001 [PAN: AADFK 1138 L] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ...........RESPONDENT CIRCLE-35, KOLKATA, AAYAKAR BHAWAN, POORVA, 110, SHANTI PALLI, E.M. BY-PASS, KOLKATA-700 107 APPEARANCES BY: SHRI MANISH TIWARI, FCA, FOR THE ASSESSEE SHRI DINOBANDHU NASKAR, JCIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : AUGUST 05, 2016 DATE OF PRONOUNCING THE ORDER : OCTOBER 21, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA DA TED 24.08.2015. 2. THE ISSUE RAISED IN GROUND NO. 1 RELATES TO THE DISALLOWANCE OF RS.37,70,033/- MADE BY THE ASSESSING OFFICER AND CO NFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF BAD DEBTS WRITTEN OFF. 3. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORT OF TE A. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31.10.2012 DECLARING TOTAL INCOME OF RS.4,70,569/-. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS.37,70,003/- WAS D EBITED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WRITTEN OFF. DURING THE COU RSE OF ASSESSMENT I.T.A. NO. 1343/KOL./2015 ASSESSMENT YEAR: 2012-2013 PAGE 2 OF 4 PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N ON ACCOUNT OF BAD DEBTS WRITTEN OFF WAS EXAMINED BY THE ASSESSING OFF ICER. IN THIS REGARD, IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT ALL THE DEBTS WRITTEN OFF BY IT AS BAD WERE VERY OLD DEBTS AND THE SAME HAD BECOME IRRECOVERABLE. RELIANCE WAS ALSO PLACED BY T HE ASSESSEE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TRF LIMITED VS.- CIT [323 ITR 397] TO CONTEND THAT THE RELEVANT DEBT S HAVING BEEN WRITTEN OFF FROM THE BOOKS OF ACCOUNT FOR THE YEAR UNDER CO NSIDERATION, IT WAS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 36(1)(VII ). THIS STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCORDING TO HIM, THERE WAS NOTHING BROUGHT ON RECORD BY THE ASS ESSEE TO ESTABLISH THAT THE RELEVANT DEBTS HAD ACTUALLY BECOME BAD DUR ING THE YEAR UNDER CONSIDERATION. HE ALSO HELD THAT THERE WAS NOTHING BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THE EFFORTS TAKEN BY IT TO REC OVER THE RELEVANT DEBTS. ACCORDINGLY, THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N ON ACCOUNT OF BAD DEBTS WRITTEN OFF WAS DISALLOWED BY THE ASSESSING O FFICER. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MA DE BY THE ASSESSING OFFICER BY OBSERVING THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO SHOW THE EFFORTS TAKEN BY IT TO RECOVER THE RELEVAN T DEBTS OR TO ESTABLISH ON EVIDENCE THAT THE SAID DEBTS HAD BECOME ACTUALLY BAD. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, ALL THE DEBTS IN QUESTION WRITTEN OFF BY THE ASSESSEE AS BAD REPRESENTED ITS TRADE DEBTORS AND T HERE IS NO DISPUTE RAISED ABOUT THIS FACT EITHER BY THE ASSESSING OFFI CER OR BY THE LD. CIT(APPEALS). THERE IS ALSO NO DISPUTE THAT THE SAI D DEBTS HAVE BEEN WRITTEN OFF BY THE ASSESSEE FROM ITS BOOKS OF ACCOU NT AS IRRECOVERABLE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER AS WELL AS THE LD. CIT(APPEALS), HOWEVER, HAVE DISALLOWED THE CLAI M OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF MAINL Y ON THE GROUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH ON EVIDENCE TH AT THE SAID DEBTS HAD ACTUALLY BECOME BAD DURING THE YEAR UNDER CONSIDERA TION. THE RELEVANT I.T.A. NO. 1343/KOL./2015 ASSESSMENT YEAR: 2012-2013 PAGE 3 OF 4 PROVISIONS GOVERNING THE ISSUE RELATING TO THE DEDU CTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF AS CONTAINED IN SECTION 36(1) (VII) HAVE UNDERGONE THE CHANGE WITH EFFECT FROM 1 ST APRIL, 1989 AND AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED (SUPRA), I T IS NOT NECESSARY FOR THE ASSESSEE AFTER THE SAID AMENDMENT MADE WITH EFF ECT FROM 1 ST APRIL, 1989 TO ESTABLISH THAT THE RELEVANT DEBTS, IN FACT, HAVE BECOME IRRECOVERABLE. AS FURTHER HELD BY THE HONBLE SUPRE ME COURT, IT IS ENOUGH IF THE RELEVANT DEBTS OR PART THEREOF HAVE BEEN TAK EN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE RELEVAN T PREVIOUS YEAR OR OF AN EARLIER PREVIOUS YEAR AND THE SAME HAVE BEEN WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. AS B OTH THESE CONDITIONS HAVE UNDISPUTEDLY BEEN SATISFIED IN THE PRESENT CAS E, I AM OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION ON ACCO UNT OF BAD DEBTS WRITTEN OFF AND THE AUTHORITIES BELOW WERE NOT JUST IFIED IN DISALLOWING THE SAID CLAIM. I, THEREFORE, DELETE THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON TH IS ISSUE AND ALLOW GROUND NO. 1 OF THE ASSESSEES APPEAL. 5. THE ISSUE RAISED IN GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.37,271/- MADE BY THE ASSESSING OFFICER AND CONFI RMED BY THE LD. CIT(APPEALS) OUT OF BUSINESS PROMOTION EXPENSES. 6. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH IT S RETURN OF INCOME, A SUM OF RS.3,72,709/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF BUSINESS PROMOTION EXPENSES. ON VERIFICATION, IT WAS FOUND B Y THE ASSESSING OFFICER THAT SOME OF THE EXPENSES CLAIMED BY THE AS SESSEE ON ACCOUNT OF BUSINESS PROMOTION WERE SUPPORTED ONLY BY SELF-MADE VOUCHERS. HE, THEREFORE, MADE A DISALLOWANCE OF RS.37,271/- BEING 10% OF THE TOTAL BUSINESS PROMOTION EXPENSES CLAIMED BY THE ASSESSEE . ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE B Y THE ASSESSING OFFICER AFTER HAVING FOUND THAT SOME OF THE EXPENSE S CLAIMED BY THE ASSESSEE AS BUSINESS PROMOTION WERE NOT DULY SUPPOR TED BY THE RELEVANT DOCUMENTARY EVIDENCE. I.T.A. NO. 1343/KOL./2015 ASSESSMENT YEAR: 2012-2013 PAGE 4 OF 4 7. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY NOTED BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDER BY POINTING OUT TO SOME SPECIFIC INSTANCES, SOME OF THE EXPENSES CLAIMED BY THE ASSE SSEE AS BUSINESS PROMOTION WERE NOT DULY SUPPORTED BY THE RELEVANT D OCUMENTARY EVIDENCE. THE EXPENSES CLAIMED BY THE ASSESSEE UNDE R THE HEAD BUSINESS PROMOTION THUS WERE NOT FULLY VERIFIABLE AND KEEPI NG IN VIEW THIS POSITION AS WELL AS ALL THE FACTS OF THE CASE, I AM OF THE VIEW THAT THE DISALLOWANCE OF 10% MADE BY THE ASSESSING OFFICER A ND CONFIRMED BY THE LD. CIT(APPEALS) OUT OF BUSINESS PROMOTION EXPENSES IS FAIR AND REASONABLE. I, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND DISMISS GROUND NO. 2 OF THE ASSESSEES APPEAL. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 21, 2 016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 21 ST DAY OF OCTOBER, 2016 COPIES TO : (1) M/S. K. MANIBHAI & CO., 21, R.N. MUKHERJEE ROAD, KOLKATA-700 001 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-35, KOLKATA, AAYAKAR BHAWAN, POORVA, 110, SHANTI PALLI, E.M. BY-PASS, KOLKATA-700 107 (3) COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKA TA; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.