The Dy. CIT., Circle-5, Ahmedabad V. M/s Precision Technofeb & Engineering Ltd, Ahmedabad

ITA 1501/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7763 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA
• Keywords: Bad and doubtful debts; TDS
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI T.K. SHARMA, JUDICIAL MEMBER AND D.C.AGRAWAL, ACCOUNTANT MEMBER ) ITA.NO. 1501/AHD/2009 [ASSTT.YEAR : 2006-2007] DCIT, CIR.5 AHMEDABAD. VS. M/S.PRECISION TECHNOFEB & ENGINEERING LTD. 7C, SURYARATH COMPLEX ELLISBRIDGE, PANCHVATI AHMEDABAD 380 006. REVENUE BY : SHRI P.M.SHUKLA ASSESSEE BY : NONE O R D E R PER D.C.AGRAWAL, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-XI, AHMEDA BAD DATED 9-3-2009 . THE ASSESSEE IN THIS APPEAL HAS RAISED FOLLOWING GROUND S: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.18,70,653/- UNDER SECTION 40(A)(IA) OF THE ACT. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.6,16,665/- ON ACCOUNT OF DISALLOWANC E OF BAD DEBTS. 2. THERE ARE TWO ISSUES INVOLVED IN THIS APPEAL. T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF ERECTION, SUPPLY, COMMISSIONING AND INSTALLATION OF GATES. REGARDING THE FIRST ISSUE, FACTS ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS DED UCTED TAXES ON CERTAIN PAYMENTS BUT HAS NOT CREDITED THE SAME TO THE GOVER NMENT ACCOUNT WITHIN THE TIME PERIOD PRESCRIBED UNDER SUB-SECTION 1 OF SECTI ON 200 OF THE INCOME-TAX ACT. THE TOTAL PAYMENTS ON WHICH TDS WERE DEDUCTED BUT NOT PAID TO THE GOVERNMENT WORKED OUT BY THE AO AT RS.26,42,984/- . THE DETAILS OF WHICH ARE DESCRIBED BY HIM AT PAGE NOS.2, 3 AND 5 OF THE ORDER. IT WAS EXPLAINED TO THE AO THAT THE DEDUCTION OF TAX WAS DONE IN THE MO NTH OF JULY, 2006 AND PAYMENT OF SUCH TAX HAS BEEN DONE TO THE GOVERNMENT ACCOUNT BEFORE THE DUE ITA.NO. 1501/AHD/2009 -2- DATE OF FILING OF THE RETURN OF INCOME. IN RESPECT OF SOME OTHER ITEMS, IT WAS EXPLAINED TO THE AO THAT DATE OF DEDUCTION HAS BEEN RECORDED AS THE BILL DATE, BUT THE BILLS WERE FINALIZED MUCH LATER, AS THE SAM E WERE TO BE GOT APPROVED BY THE STAFF AT THE SITE AND WERE SUBSEQUENTLY FORWARD ED FOR PAYMENT. ACCOUNTANT HAD COMMITTED A MISTAKE BY TAKING THE DATE OF BILL AS DATE OF DEDUCTION. THE AO HOWEVER DID NOT AGREE WITH THE EXPLANATION AND M ADE THE ADDITION OF RS.26,42,984/-. LEARNED CIT(A) NOTED THAT OUT OF R S.26,42,984/- THE ASSESSEE HAS ACTUALLY MADE TDS OF RS.18,70,653/- IN THE MONT H OF MARCH AND PAID THE SAME BEFORE FILING OF THE RETURN OF INCOME. LEARNE D CIT(A) THEREFORE ALLOWED THE CLAIM TO THE EXTENT OF RS.18,70,653/- AND CONFI RMED THE BALANCE ADDITION OF RS.7,72,331/-. 3. BEFORE US LEARNED DR SUBMITTED THAT THE PAYMENT TO THE GOVERNMENT ACCOUNT SHOULD HAVE BEEN MADE WITHIN SEVEN DAYS OR AS PRESCRIBED UNDER SECTION 200. THE LEARNED DR SUPPORTED THE ORDER OF CIT(A). 4. NONE APPEARED ON BEHALF OF THE ASSESSEE. AFTER HEARING LEARNED DR AND ON PERUSAL OF MATERIAL ON RECORD, WE RESTORE THE MA TTER TO THE FILE OF LEARNED CIT(A) TO CONSIDER THE EFFECT OF RULE 30 AND PROVIS O TO SECTION 40(A) AS INTRODUCED W.E.F. 1-4-2005 AND DECIDE THE ISSUE AFR ESH AS TO WHETHER THERE WAS ANY DELAY IN NOT MAKING THE PAYMENT OF TDS DEDUCTED TO THE GOVERNMENT ACCOUNT. ACCORDINGLY, THIS ISSUE IS RESTORED TO TH E FILE OF LEARNED CIT(A). 5. NEXT ISSUE IS ABOUT BAD DEBTS. THE AO NOTED THA T THE ASSESSEE HAS CLAIMED BAD DEBTS OF RS.6.65 LAKHS. IT WAS EXPLAIN ED THAT THE ASSESSEE COMPANY RECEIVED ORDER OF 5-12-2003 FROM ALSOM PORT UGAL FOR SUPPLY OF 14 & 15 UNIT OF TR ELEMENT OF OWVEN FALLS EXTENSION PROJ ECT, UGANDA. ACCORDINGLY, THE COMPANY HAD SUPPLIED GOODS TO THEM IN TWO LOTS, DURING THE PREVIOUS YEAR. AFTER RECEIPT OF GOODS, AUTHORITIES IN UGANDA OBSERVED SOME DEFECTS IN UNIT CORROSION PAINTING ON THE GOODS, AS A RESULT THESE GOODS WERE NOT APPROVED. ACCORDINGLY UGANDAN PARTY HAD DEDUCTED A N AMOUNT OF EURO 10899 ITA.NO. 1501/AHD/2009 -3- OUT OF THE MONEY PAYABLE TO THE ASSESSEE. AFTER M AKING CERTAIN EFFORTS TO RECOVER THE BALANCE AMOUNT, DURING THE YEAR THE AMO UNT EQUIVALENT TO INDIAN RUPEES WAS WRITTEN OFF IN THE BOOKS AND CLAIMED AS DEDUCTION. THE AO DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSE E HAD CLAIMED BAD DEBT EVEN BEFORE COMPLETION OF ONE YEAR. IT DID NOT SHOW ANY EFFORT TO RECOVER THE SUM EXCEPT AGREEMENT, ACCORDING TO WHICH, THE ASSESSEE AGREED TO RELINQUISH THE SUM. THE LEARNED CIT(A) ALLOWED THE CLAIM ON THE G ROUND THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH THE DEBTORS ACCO RDING TO WHICH THE DEBTOR WOULD RELEASE BANK GUARANTEE, IF ASSESSEE FORGO ITS CLAIM OF BALANCE AMOUNT. THUS, ACCORDING TO HIM, CONDITIONS LAID DOWN UNDER SECTION 36(2) ARE FULFILLED AND THE AMOUNT HAS BEEN WRITTEN OFF IN THE BOOKS. 6. WE HAVE HEARD LEARNED DR WHO RELIED ON THE ORDER OF AUTHORITIES BELOW. IN OUR CONSIDERED VIEW, THE CLAIM HAS BEEN CORRECTL Y WRITTEN OFF. THE ASSESSEE HAS PROVIDED ADEQUATE MATERIAL ON RECORD TO SHOW TH AT THERE IS NO POSSIBILITY OF ANY RECOVERY. THE ASSESSEE WAS ALLOWED TO RECEIVE ITS SALE PROCEEDS FROM THE BANK ONLY WHEN IT FOREGONE THE CLAIM OF THE BALANCE AMOUNT BEING THE SUM DEDUCTED BY THE CUSTOMER. THERE WAS AN AGREEMENT TO THIS EFFECT ALSO WHICH THE ASSESSEE HAD TO HONOUR. THUS, THERE IS NO CASE FOR MAKING ANY FURTHER EFFORTS FOR RECOVERY OF THE AMOUNT. ACCORDINGLY, THE CLAIM WAS JUSTIFIED. IT WAS WRITTEN OFF IN THE BOOKS AS THERE WAS NO HOPE OF AN Y RECOVERY. WE CONFIRM THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND DISMI SS THE GROUND RAISED BY THE REVENUE. 7. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWE D BUT FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 24 TH JULY, 2009. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (D.C. AGRAWAL) ACCOUNTANT MEMBER ITA.NO. 1501/AHD/2009 -4- PLACE : AHMEDABAD DATE : 24-07-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD