ACIT, CENTRAL CIRCLE-2(1), KOLKATA, Kolkata V. M/s Amrit Agrovet Pvt Ltd., Kolkata

ITA 1486/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1248 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 14-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTAADDL CIT LD
• Assessee Lawyers: D S DAML E FCA LD
• Keywords: Bad and doubtful debts
• Section: 263

Judgement Text

1 ITA NO.1486/KOL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUD ICIAL MEMBER I.T.A NO. 1486/ KOL/2016 A.Y: 2010-11 A.C.I.T, C.C-2(1), KOLKATA VS. AMRIT AGROVET (P) LTD PAN AAFCA 5101N [APPELLANT] [RESPONDENT] FOR THE APPELLANT : SMT. S. DASGUPTA,ADDL.CIT, LD.DR) FOR THE RESPONDENT : SHRI D.S. DAMLE, FCA, LD.A R DATE OF HEARING : 03-01-2018 DATE OF PRONOUNCEMENT : 23-03-2018 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), 9, KOLKATA D T. 22-03-2016 FOR THE A.Y 2010-11. 2. AT THE TIME OF HEARING BEFORE US THE LD. DR SUBM ITS THAT THE CIT-A WAS WRONG IN DELETING THE IMPUGNED ADDITION A S THE ISSUE RELATING TO DOUBTFUL DEBT SHOWN IN THE BALANCE SHEE T AGAINST SUNDRY DEBTORS DESPITE THE FACT THAT THIS WAS NEVER CONSID ERED BY THE AO AND IN SUPPORT OF THIS, REFERRED TO PARA 2.1 OF THE A.O S ORDER AND PAGE-2 OF THE CIT-AS ORDER. HE FURTHER ARGUED THAT THE CI T-A DECIDED THE ALLOWABILITY OF PROVISIONS OF DOUBTFUL DEBT AS BUSI NESS EXPENDITURE AND THE ISSUE OF NETTING OFF OF PROVISION FOR DOUBTFUL DEBT WAS NEVER DISCUSSED IN GROUND NOS. 1 TO 3 IN PAGES 2 TO 6 OF HIS ORDER. THEREFORE, THE QUESTION OF DELETION OF IMPUGNED ADD ITION DOES NOT ARISE AT ALL AND IN VIEW OF THIS, THIS ISSUE OF REV ENUES APPEAL IS LIABLE TO BE ALLOWED. IN SUPPORT OF THE CONTENTION, HE REL IED ON THE ORDER OF THE AO. 2 ITA NO.1486/KOL/2016 3. ON THE OTHER HAND, THE LD.AR SUBMITS THAT THE IS SUE IN HAND IS COVERED BY THE ORDER DT. 31-10-2017 IN ASSESSEES O WN CASE OF THE CO-ORDINATE BENCH, ITAT, C BENCH, KOLKATA IN ITA NO S. 753- 754/KOL/2017 FOR THE A.Y 2013-14 AND IN SUPPORT OF THE CONTENTION REFERRED TO PARA 26.2 OF THE SAID ORDER, WHEREIN TH E CIT U/S. 263 OF THE ACT QUASHED THE ORDER OF AO AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE TRIBUNAL VIDE ITS S AID ORDER DT. 31-10- 2017 ALSO HELD THAT THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF VIJAYA BANK ARE SQUARELY APPLI CABLE TO THE FACTS OF THE CASE IN HAND. IN SUPPORT OF THE CONTENTION, HE RELIED ON THE ORDER OF THE CIT-A IN ALLOWING THE SAME. 4. HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD INCLUDING THE CASE LAWS AS RELIED ON BY THE ASSESSE E BEFORE US. WE FIND THAT THE ASSESSEE MADE THE PROVISIONS FOR DOUB TFUL DEBT UNDER THE HEAD ADMINISTRATIVE AND OTHER EXPENSES TO ITS P & L ACCOUNT. THE ASSESSEE NETTED OFF THE SAID PROVISION FOR DOUB TFUL DEBT AGAINST SUNDRY DEBTORS AND CLAIMED DEDUCTION BEFORE THE AO. IN SUPPORT OF THIS, THE ASSESSEE RELIED ON THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF VIJAYA BANK REPORTED IN 323 IT R 166 (SC). BUT THE AO DENIED TO ALLOW SAID DEDUCTION BY STATING TH AT THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF SUPRA ARE APPLICABLE ONLY TO BANKS AND NOT OTHERWISE. WE FURTHER FIND TH AT THE CO-ORDINATE BENCH OF THIS TRIBUNAL VIDE ITS ORDER FOUND SATISFI ED THAT THE PROVISIONS OF DOUBTFUL DEBTS HAVE BEEN DULY ADJUSTE D AGAINST SUNDRY DEBT AND PROVISIONS FOR DOUBTFUL DEBT CANNOT BE TRE ATED AS UNCERTAIN LIABILITY BY TAKING SUPPORT FROM THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF SUPRA. THE OPERATIVE PORTION OF TRIBUNAL ORDER DT. 31-10-2017 IN THE CASE OF SUPRA IS REPRODUCED HEREIN BELOW FOR BETTER UNDERSTANDING:- 26.2 NOW COMING TO THE ISSUE WHETHER THE IMPUGNED PROVISION FOR DOUBTFUL DEBTS REPRESENT THE UNASCERTAINED LIABILITIES. AFTER PERU SAL OF BALANCE-SHEET OF ASSESSEE WE FIND THAT THERE REMAINS NO AMBIGUITY THAT THE AMOUNT OF PROVISION OF DOUBTFUL DEBTS WAS ADJUSTED AGAINST THE SUNDRY DEBTORS AS SHOWN IN THE BALANCE-SHEET OF THE ASSESSEE AS DETAILED UNDER:- 3 ITA NO.1486/KOL/2016 'SUNDRY DEBTORS (UNSECURED CONSIDERED LOAN) OVER SIX MONTHS 15, 932.687 11,268,990 UNDER SIX MONTHS 40, 527,856 40,361,839 56,650,543 51,576,829 CONSOLIDATED DEBITED 10,8 47,866 10,817,855 LESS: PROVISION FOR DOUBTFUL DEBTS 8,912 ,583 5,941,583 1, 935,283 58,395,826 4,506,583 56,483,112 ON PERUSAL OF ABOVE BALANCE-SHEET, WE HOLD THAT THE PROVISION OF DOUBTFUL DEBT HAS BEEN DULY ADJUSTED AGAINST THE SUNDRY DEBTORS. THEREFORE , THE AMOUNT SHOWN UNDER THE HEAD PROVISION FOR DOUBTFUL DEBT AMOUNTING TO 29.71 LAK H CANNOT BE TREATED AS UNASCERTAINED LIABILITY. IN HOLDING SO, WE FIND SUPPORT AND GUIDA NCE FROM THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF VIJAYA BANK VS. CIT 323 ITR 166 (SC) WHEREIN THE RELEVANT QUESTION RAISED BY HON'BLE APEX COURT AND THE FINDI NG THEIR LORDSHIP STAND AS UNDER:- 'AFTER INSERTION OF EXPLANATION TO S. 36(1)(VII) , ASSESSEE IS REQUIRED NOT ONLY TO DEBIT THE P&L A/C BUT SIMULTANEOUSLY ALSO REDUCE LOANS AND AD VANCES OR THE DEBTORS FROM THE ASSETS SIDE OF THE BALANCE SHEET TO THE EXTENT OF T HE CORRESPONDING AMOUNT SO THAT AT THE END OF THE YEAR THE AMOUNT OF LOANS AND ADVANCES/DE BTORS IS SHOWN AS NET OF PROVISION FOR IMPUGNED BAD DEBT; ASSESSEE-BANK HAVING, BESIDE S DEBITING THE P&L A/C AND CREATING A PROVISION FOR BAD AND DOUBTFUL DEBTS, SIMULTANEOU SLY OBLITERATED THE SAID PROVISION FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMO UNT FROM LOANS AND ADVANCES/DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET, IT WAS ENTITLED TO BENEFIT OF DEDUCTION UNDER S. 36(1)(VII) ; IT WAS NOT NECESSARY TO CLOSE THE INDIVIDUAL ACCO UNT OF EACH DEBTOR IN THE BOOKS.' BESIDES WE ALSO FIND SUPPORT AND GUIDANCE FROM THE ORDER OF THIS CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DEEPAK INDUSTRIES LTD VS. ITO IN ITA NO.2207/KOL/2010 DATED 10.06.2011. THE RELEVANT EXTRACT OF THE ORDER IS RE PRODUCED BELOW:- '6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. IT IS WELL SETTLED THAT BEFORE ASSUMPTION OF JURISDICTION U/S. 263 BY LD. CIT, TWO CONDITIONS HAVE TO BE SIMULTANEOUSLY F ULFILLED. FIRSTLY, ASSESSMENT ORDER SHOULD BE ERRONEOUS AND SECONDLY, THE ORDER SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF EITHER OF THE INGREDIENT MISSING, THE P ROCEEDINGS U/S. 263 OF THE ACT CANNOT STAND. IN THE PRESENT CASE, THE MAIN ASPECT TO BE E XAMINED IS WHETHER THE SUNDRY DEBTORS HAD BEEN WRITTEN OF OR NOT. THE DETAILS OF SUNDRY DEBTORS IS AS UNDER:- 'SUNDRYDEBTORS OUTSTANDING FOR A PERIOD EXCEEDING S IX MONTHS CONSIDERED GOOD 1,88,96,530/- 2,31,44,97-/- CONSIDERED DOUBTFUL 1,76,63,989/- 1,24,55,468/ - LESS: PROVISION 1,76,63,989/- 1,24,55,468/- OUTSTANDING FOR A PERIOD OF LESS THAN SIX MONTHS 19,09,51, 709/- 13,84,56,260/- 16,16,01,230/- 20,98,48,239/- THUS, TO THE EXTENT, THE DEBTS WERE CONSIDERED DOUB TFUL, THE SAME WERE WRITTEN OFF BY ACTUALLY WRITING OFF IN PROFIT AND LOSS ACCOUNT AND ALSO IN THE BOOKS OF ACCOUNT BY CREDITING THE SUNDRY DEBTORS ON THE ASSET SIDE OF B ALANCE SHEET. THIS METHODOLOGY WAS IN CONFORMITY WITH THE DECISION OF HON'BLE SUPREME COU RT IN THE CASE OF VIJAYA BANK'S CASE (SUPRA) AND, THEREFORE, COULD NOT BE DISPUTED. 6.1 THE OTHER ASPECTS POINTED OUT BY LD. CIT REGARD ING CIRCUMSTANCES UNDER WHICH THE ASSESSEE WROTE OFF THE AMOUNT COULD NOT BE GONE INT O BECAUSE AFTER 01.04.89, THE ONLY REQUIREMENT IS OF WRITING OFF THE AMOUNT. ONCE ACTU AL WRITE OFF THE AMOUNT. ONCE ACTUAL WRITE OFF OF THE AMOUNT IS THEE, THEN THE DEDUCTION ON BAD DEBT IS TO BE ALLOWED. SINCE FROM THE RECORDS, IT IS EVIDENT THAT ASSESSEE HAD A CTUALLY WRITTEN OFF THIS AMOUNT, WHICH WAS ALLOWED BY ASSESSING OFFICER, IT COULD NOT BE S AID THAT THE ASSESSMENT ORDER WAS ERRONEOUS. HENCE, LD. CIT WAS NOT JUSTIFIED IN ASSU MING JURISDICTION U/S. 263 OF THE ACT. WE, ACCORDINGLY, CANCEL THE ORDER OF LD. CIT.' 27. THE PRINCIPLES LAID DOWN BY HON'BLE SUPREME COU RT IN THE CASE OF VIJAYA BANK (SUPRA) ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. THEREFORE, WE HOLD THAT THE IMPUGNED ORDER PASSED BY LD. CIT(A) U/S 263 HOL DING THE ORDER OF AO AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE IS NOT SUSTAINABLE IN THE EYES OF LAW. HENCE, THIS GROUND OF ASSESSEE'S APPEAL IS ALLOWED. 4 ITA NO.1486/KOL/2016 5. IN VIEW OF ABOVE, WE ARE OF THE VIEW THAT THE CI T-A WAS JUSTIFIED IN ENTERTAINING AND DECIDING THE ISSUE R EGARDING ALLOWABILITY OF PROVISIONS FOR DOUBTFUL DEBTS AS BUSINESS EXPEND ITURE AND DEDUCTION ON BAD DEBT THEREIN IS LIABLE TO BE ALLOW ED. THE TRIBUNAL HAS DISCUSSED THE ISSUE THOROUGHLY ANALYZING THE FA CTS OF THE CASE FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SUPRA. THE CASE LAWS AS RELIED ON BY THE ASSESSEE BEFORE US IS COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVEN UE. THEREFORE, THE AO WAS NOT JUSTIFIED IN NOT ALLOWING THE CLAIM OF T HE ASSESSEE. THE GROUNDS IN 1 AND 2 RAISED BY THE REVENUE IN THE APP EAL ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-03- 2018 SD/- SD/- J. SUDHAKAR REDDY S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 - 03-2018 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/DEPARTMENT: THE ACIT, CC-2(1), 3 RD FLOOR, AAYKAR BHAWAN, POORVA E.M BYE PASS, 110 SHANTI PALL Y, KOLKATA-107. 2 RESPONDENT /ASSESSEE: M/S. AMRIT AGROVET PVT. LTD 158 LENIN SARANI, KOLKATA-13. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR.PS/H.O.O ITAT KOLKATA