Shri Manukant C.Shah,HUF, Surat V. The Income tax Officer,OSD-II,Range-2, Surat

ITA 1422/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1990 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJA RAM SAH
• Assessee Lawyers: S N DIVETIA
• Keywords: Bad and doubtful debts; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER) ITA NO.1422/AHD/2010 [ASSTT. YEAR : 2005-2006] MANUKANT C. SHAH, HUF 38, SAHIL MAHADEV NAGAR SOCIETY SANGRAMUPURA SURAT. PAN : AACHM 8178 B VS. ITO, OSD-II, RANGE-2 SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.N.DIVETIA REVENUE BY : DR. RAJA RAM SAH O R D E R PER BENCH: THIS APPEAL IS AT THE BEHEST OF THE ASSESSEE, WHICH HAS EMANATED FROM THE ORDER OF THE CIT(A)-II, SURAT DAT ED 24.02.2009. THE ONLY GROUND IS IN RESPECT OF DISALLOWANCE OF BAD DEBTS O F RS.8,86,565/-. 2. THE BARE MINIMUM FACTS IN BRIEF NECESSARY TO DEC IDE THIS SETTLED ISSUE AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER DAT ED 26.12.2007 WERE THAT THE ASSESSEE-HUF HAS WRITTEN- OFF THE BAD DEBTS IN THE BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION. THE AO HAS MENTIONED THA T THE MAJORITY OF THE BAD DEBTS WERE ADVANCED DURING THE YEAR ITSELF, HENCE I T WAS NOT PROVED BY THE ASSESSEE THAT THESE DEBTS HAVE BECOME IRRECOVERABLE . AFTER DISCUSSING FEW CASE LAWS, THE AO HAS HELD THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO PROVE THAT DEBTS IN QUESTION HAVE BECOME BAD DEBT DURING THE YEAR UNDER CONSIDERATION AND THERE WAS NO HOPE OF RECOVERY, RA THER NO STEPS WERE TAKEN TO RECOVER THE DEBTS HENCE, HELD THAT THE DEBTS IN QUE STION WERE NOT ALLOWABLE AS BAD DEBTS. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHO HAS AFFIRMED THE ACTION OF THE AO. 3. HAVING HEARD THE SUBMISSION OF BOTH THE SIDES, E SPECIALLY THE ARGUMENTS OF THE LEARNED DR, WE ARE STILL OF THE VIEW THAT IN THE LIGHT OF THE LATEST ITA NO.1422/AHD/2010 -2- DECISIONS OF THE HONBLE APEX COURT IN THE CASE OF T.R.F. LTD., 323 ITR 397 (SC) THE MATTER IS DIRECTLY COVERED BY THE SAID VER DICT. TIME AND AGAIN THE REVENUE DEPARTMENT HAS PLEADED, AS IN THE PRESENT C ASE, THAT A DEBT ONCE BECOME BAD CAN ONLY BE ALLOWED TO WRITE OFF UNDER S ECTION 36(I)(VII) OF THE IT ACT. ON THE OTHER HAND, THE ASSESSEE USED TO TAKE SHELTER OF CBDT CIRCULAR NO.551 DATED 23-1-1990 WHEREIN IT IS CLARIFIED THAT IN ORDER TO ELIMINATE THE DISPUTE IN THE MATTER OF DETERMINING THE YEAR IN WH ICH THE BAD DEBTS CAN BE ALLOWED AND ALSO TO RATIONALIZE THE AMENDED PROVISI ONS IT IS PRESCRIBED THAT THE CLAIM OF BAD DEBT IS TO BE ALLOWED IN THE YEAR IN W HICH THE SAID BAD DEBT HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS O F THE ASSESSEE. SINCE THE IMPUGNED DISALLOWANCE HAS BEEN MADE MERELY ON LEGAL GROUND, WHICH NOW STOOD RESOLVED BY THE ORDER OF THE HONBLE APEX COU RT CITED SUPRA, THEREFORE, WE HEREBY REVERSE THE FINDINGS OF THE AUTHORITIES B ELOW AND FOLLOWING THE CASE LAW, DIRECT TO ALLOW THE CLAIM. THIS GROUND OF THE ASSESSEE IS ALLOWED. 4. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11 TH FEBRUARY, 2011. SD/- SD/- (G.D. AGARWAL) VICE-PRESIDENT (MUKUL KR. SHRAWAT) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 11-02-2011 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD