M/s. Xebec Communications Pvt. Ltd., Pune V. Joint Commissioner of Income-tax,

ITA 152/PUN/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9174 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-03-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 05-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE
• Keywords: Business income; Additional evidence; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO. 1 52 /P U N/201 5 / ASSESSMENT YEAR : 20 1 0 - 1 1 M/S. XEBEC COMMUNICATIONS PVT. LTD., 20, SANTOSH HEIGHTS, 39/4, J N MARG, PUNE - 411037 . / APPELLANT PAN: AAACX0223B VS. THE JT. COMMISSIONER OF INCOME TAX, RANGE 7, PUNE . / RESPONDENT / APPELLANT BY : SHRI SUHAS P. BORA / RESPONDENT BY : SHRI ANIL KUMAR CHAWARE / DATE OF HEARING : 2 1 . 0 3 . 201 8 / DATE OF PRONOUNCEME NT: 23 . 0 3 .201 8 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - III , PUNE , DATED 11 . 11 .201 4 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1 961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED ASSESSING OFFICER AND CIT(A) - III HAVE ERRED IN: DISALLOWING THE RECEIVABLE AMOUNT FOREGONE BY THE ASSESSEE FROM M/S. COUNTRY CLUB RS.59,81,991/ - ON A RESETTLEMENT OF RECEIVABLE WITH THEM TO HELP FACILITATE FASTER RECOVERY OF OLD STICKY DEBT, BY TREATING IT AS NOT ALLOWABLE AS DEDUCTION UNDER SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961. ITA NO. 1 52 /P U N/20 1 5 XEBEC COMMUNICATIONS PVT. LTD. 2 IT IS PRAYED THAT TH E DISALLOWANCE AS ABOVE BEING BAD IN LAW THE SAME BE SET ASIDE. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE CLAIM OF BAD DEBTS AMOUNTING TO 59,81,991/ - . 4. BRIEFLY, IN THE FACTS OF THE CASE, THE CASE OF ASSESSEE WAS PICKED UP FOR SCRU TINY AND THE ASSESSING OFFICER NOTED THAT THERE WAS DISCREPANCY IN THE RECEIPTS SHOWN BY THE ASSESSEE, WHEN COMPARED TO THE GROSS RECEIPTS AS PER FORM NO.26AS. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY RECONC ILIATION. CONSEQUENTLY, THE ASSESSING OFFICER MADE AN ADDITION OF 2,52,03,926/ - . 5. BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SUBMISSIONS AND ALSO FILED RECONCILIATION OF DIFFERENCES BETWEEN THE INCOME AS PER FORM NO.26AS AND INCOME DECLARED IN THE BOOKS OF ACCOUNT. THE CIT(A) ASKED THE ASSESSING OFFICER TO CONSI DER THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AND TO FURNISH REMAND REPORT. IN RESPECT OF ONE WRITE OFF OF SUM OF 58,81,032/ - IN SETTLEMENT WITH COUNTRY CLUB, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE INSTEAD OF SHOWING THE SAME IN REC ONCILIATION SHOULD HAVE WRITTEN OFF THE AMOUNT IN THE BOOKS OF ACCOUNT IN ORDER TO MEET THE REQUIREMENT OF SECTION 36(1)(VII) OF THE ACT. IN RESPECT OF OTHER DIFFERENCES, EXPLANATION OF ASSESSEE WAS ACCEPTED. HOWEVER, EXPLANATION IN RESPECT OF AMOUNTS WR ITTEN OFF BEING BAD DEBTS , BUT STRAIGHT TO THE RECEIPTS ACCOUNT WAS NOT ACCEPTED. 6. THE ASSESSEE IS IN APPEAL AGAINST THE SAME. 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DREW OUR ATTENTION TO THE COPY OF ACCOUNTS OF THE SAID CONCERN COUN TRY CLUB IN THE BOOKS OF ACCOUNT OF ASSESSEE PLACED AT PAGES 8 TO 12 OF THE PAPER BOOK AND POINTED ITA NO. 1 52 /P U N/20 1 5 XEBEC COMMUNICATIONS PVT. LTD. 3 OUT THAT FOUR BILLS WERE REVERSED TOTALING 59,81,991/ - . ON THE OTHER HAND, THE SAID AMOUNT WAS REDUCED FROM THE GROSS RECEIPTS OF THE YEAR UNDER CONSIDERA TION. HE STRESSED THAT THE ASSESSEE HAD WRITTEN OFF THE AMOUNT FROM INDIVIDUAL ACCOUNT OF THE PARTY AND AS SUCH, HAD SATISFIED THE CONDITIONS LAID DOWN IN SECTION 36(1)(VII) OF THE ACT. IN THIS REGARD, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON 'BLE SUPREME COURT IN T.R.F. LTD. VS. CIT (2010) 323 ITR 397 (SC). 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WH ICH ARISES IN THE PRESENT APPEAL IS AGAINST THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. THE REQUIREMENT OF SAID SECTION IS THAT ANY AMOUNT WHICH HAS BEEN SHOWN AS INCOME BY THE ASSESSEE IN PRECEDING YEAR OR IN THE YEAR UNDER CONSIDERATION, BUT WHICH HAS BEEN WRITTEN OFF AS BAD DEBT BY THE ASSESSEE, THEN THE SAME IS TO BE ALLOWED AS DEDUCTION OUT OF BUSINESS INCOME OF ASSESSEE UNDER SECTION 36(1)(VII) OF THE ACT. THE ASSESSEE HAD NOT DEBITED ANY AMOUNT TO THE BAD DEBTS ACCOUNT, ON THE OTHER HAND, THE SAID RECEIPTS WHICH WERE DUE FROM CUSTOMERS WERE REDUCED FROM THE GROSS RECEIPTS OF THE YEAR UNDER CONSIDERATION. HOWEVER, NECESSARY ENTRIES WERE MADE TO THE PARTIES ACCOUNT AND THE AMOUNT WAS SQUARED OFF FROM THE SAID ACCOUNT. THE ASSESSEE HA S PLACED ON RECORD THE COPY OF ACCOUNT OF THE SAID PARTY COUNTRY CLUB IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND WE HAVE PERUSED THE SAME. THE AMOUNTS WHICH WERE DUE FROM THE SAID PARTIES HAVE BEEN SQUARED OFF FROM THE PARTIES ACCOUNT AND ON THE OTHER HAND, THE SAME ARE DEBITED TO THE RECEIPTS. THOUGH THE ENTRIES HAVE BEEN PASSED IN DIFFERENT MANNER AND NO AMOUNT HAS BEEN DEBITED TO THE BAD DEBTS ACCOUNT BUT THE INTENTION OF THE ITA NO. 1 52 /P U N/20 1 5 XEBEC COMMUNICATIONS PVT. LTD. 4 ASSESSEE CAN BE CLEAR FROM THE AFORESAID ENTRIES AS RECOGNIZE D THAT THE AMOUNTS WHICH WERE DUE AGAINST BUSINESS RECEIPTS IS KNOWN TO BE RECEIPTS AND HENCE, DEBITED TO THE RECEIPTS ACCOUNT AND SIMULTANEOUSLY TO THE PARTIES ACCOUNT. IN THIS REGARD, WHERE THE AMOUNT HAS BEEN SQUARED OFF AND FINDING SUPPORT FROM THE RA TIO LAID DOWN BY THE HON'BLE SUPREME COURT IN T.R.F. LTD. VS. CIT (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM THE AFORESAID DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. ACCORDINGLY, WE HOLD SO AND DIRECT THE ASSESSING OFFICER TO DELETE THE A DDITION OF 59,81,991/ - . THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS, ALLOWED. 10 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 23 RD DAY OF MARCH , 201 8 . SD/ - SD/ - ( D.KARUNAKARA RAO ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 23 RD MARCH , 201 8 . GCVSR / COPY OF THE ORDER IS FOR WARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A) - III , PUNE ; 4. THE C I T - IV , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE