M/s. Niky Engineers, Pune V. Income-tax Officer,

ITA 144/PUN/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1916 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: ABHAY V AVCHAT
• Keywords: Bad and doubtful debts; Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 144/PN/2015 $& ' !(' / ASSESSMENT YEAR : 2008-09 M/S. NIKY ENGINEERS, 997/19, POORTI SATSANG CO-OP. HOUSING SOCIETY LTD., NAVI PETH, PUNE 411030 PAN : AAAFN9718Q ....... / APPELLANT )& / V/S. INCOME TAX OFFICER, WARD 1(3), PUNE / RESPONDENT ASSESSEE BY : SHRI ABHAY V. AVCHAT REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 12-04-2016 / DATE OF PRONOUNCEMENT : 29-04-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, PUNE DATED 31-07- 2014 FOR THE ASSESSMENT YEAR 2008-09. 2. THE APPEAL HAS BEEN FILED WITH THE DELAY OF 11 DAYS. T HE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY IN FILING OF APPEAL SUPPORTED BY AN AFFIDAVIT. AFTER PERUSING THE SAME WE ARE SATISFIED THAT THE DELAY IN FILING OF APPEAL WAS NOT DELIBERATE OR 2 ITA NO. 144/PN/2015, A.Y. 2008-09 INTENTIONAL. THE ASSESSEE HAS BEEN ABLE TO SUFFICIENT EXPLAIN THE REASON FOR BELATED FILING OF THE APPEAL. ACCORDINGLY, THE DELAY OF 11 DAYS IN FILING OF APPEAL IS CONDONED AND THE APPEAL OF THE ASSESSEE IS ADMITTED TO BE HEARD AND DISPOSED ON MERITS. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS D ISALLOWANCE OF BAD DEBTS ` 10,21,698/- CLAIMED BY THE ASSESSEE. 4. SHRI ABHAY V. AVCHAT APPEARING ON BEHALF OF THE ASSESS EE SUBMITTED THAT IN THE RETURN OF INCOME THE ASSESSEE HAD CLAIMED ` 11,47,931/- AS BAD DEBTS DURING THE PERIOD RELEVANT TO THE ASSESSM ENT YEAR 2008-09. THE ASSESSEE IS A PARTNERSHIP FIRM AND WA S CARRYING ON THE BUSINESS OF MANUFACTURING OF PLASTIC GOODS FOR INDUSTRIAL USE. THE ASSESSEE HAS DISCONTINUED ITS BUSINESS W.E.F. FINANCIAL YEAR 20 07-08. AT THE TIME OF CLOSURE OF FIRM IT WAS DECIDED TO SETTLE T HE ACCOUNTS WITH THE DEBTORS. THE ASSESSEE HAD OUTSTANDING BALANCES FR OM - (I) AURANGABAD ELECTRICALS LTD. ` 99,388/-, (II) ENDURANCE SYSTEMS PVT. LTD. ` 5,00,000/-, (III) PIAGGIO VEHICLES PVT. LTD. ` 3,00,000/- AND (IV) MINDA HUF LTD. ` 1,22,310/-. WHEN THE ASSESSEE TOOK UP THE MATTER WITH THE RESPECTIVE COMPANIES IT TRANSPIRED THAT ALL THE A FORESAID COMPANIES HAVE SETTLED THE ACCOUNTS OF THE ASSESSEE IN THEIR RESPECTIVE BOOKS OF ACCOUNT. THESE OUTSTANDING BALANCES WERE ON ACCOUNT OF CASH/VOLUME DISCOUNTS OFFERED TO THE PARTIES. IN CASE OF ONE OF THE DEBTORS, DEBIT NOTE RECEIVED WAS NOT ACCOUNTED. THE LD. AR SUBMITTED THAT SINCE, THE OUTSTANDING AMOUNTS WERE NOT RECEIVABLES THE ASSESSEE HAD NO OTHER OPTION BUT TO WRITE OFF THE SAME AS BAD D EBTS. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF T.R.F. LTD. VS. COMMISS IONER OF INCOME TAX REPORTED AS 323 ITR 397 (SC) AND THE JUDGM ENT OF HON'BLE 3 ITA NO. 144/PN/2015, A.Y. 2008-09 BOMBAY HIGH COURT IN THE CASE OF DIT VS. OMAN INTERNAT IONAL BANK REPORTED AS 184 TAXMAN 314 (BOM). 5. ON THE OTHER HAND SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF AUTHORITIES BELOW AND PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE. THE LD. D R SUBMITTED THAT THE ASSESSEE HAS FAILED TO SHOW FROM RECORDS THAT THESE WERE AMOUNTS RECEIVABLE FROM THE RESPECTIVE COMPANIES. SINCE THERE WER E NO DEBTORS, THERE IS NO QUESTION OF WRITING OFF OF BAD DEBTS. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ONLY ISSUE RAISED IN THE APPEAL BY THE ASSESSEE IS DISALLOW ANCE OF BAD DEBTS WRITTEN OFF AMOUNTING TO ` 10,21,698/-. THE CONTENTION OF THE ASSESSEE IS THAT IN THE BOOKS OF ACCOUNT CERTAIN AMOUNT S WERE SHOWN AS RECEIVABLE FROM THE COMPANIES TO WHOM THE ASSESSEE H AD SUPPLIED FINISHED PRODUCTS. THESE AMOUNTS REPRESENT DISCOUNTS GI VEN BY THE ASSESSEE FOR CASH PAYMENTS OR BULK PURCHASES ETC. HOW EVER, THE RESPECTIVE PARTIES HAD SETTLED THE ACCOUNT OF ASSESSEE, WHEREAS THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAS FAILED TO TAKE INTO CONSIDERATION THE DISCOUNTS OFFERED, DEBIT NOTE FROM ONE OF THE PARTIES AND TOOL AMORTIZATION COST ALLOWED TO OTHER. THEREFORE, THE AMOUN TS WERE STILL STANDING AS RECEIVABLES IN THE BOOKS OF ASSESSEE. THE AS SESSEE HAS ALLEGEDLY CLOSED ITS BUSINESS. THE ASSESSEE HAS NO OTHER OPTION BUT TO WRITE OFF THE RECEIVABLES AS BAD DEBTS IN ITS BOOKS OF ACCOUNT. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF T.R.F. LT D. VS. COMMISSIONER OF INCOME TAX (SUPRA) HAS HELD THAT AFTER THE AMENDMENT OF 01-04-1989 IT IS NOT NECESSARY FOR THE ASS ESSEE TO ESTABLISH THAT THE DEBTS, IN FACT HAS BECOME IRREVOCABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUN TS OF THE 4 ITA NO. 144/PN/2015, A.Y. 2008-09 ASSESSEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUN T IS DEBITED AND THE CUSTOMER'S ACCOUNT IS CREDITED, THUS, CLOSING THE ACC OUNT OF THE CUSTOMER. 7. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE LAW LAID DOWN BY THE HON'BLE APEX COURT, WE FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE AND THE APP EAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF APRIL, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 29 TH APRIL, 2016 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-1, PUNE 4. ' / THE CIT-1, PUNE 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE