ACIT, CHENNAI V. Klemmen Engineering Corporation, CHENNAI

ITA 1676/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0749 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 28-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: S SRIDHAR
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENNAI BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NOS. 1676/MDS/2012 ASSESSMENT YEAR : 2007-08 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-XIII, CHENNAI. V. M/S. KLEMMEN ENGINEERING CORPORATION BV-12, MOGAPPAIR INDUSTRIAL ESTATE (EAST), CHENNAI-600 050. (PAN : AAAFK4208Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. DASGUPTA, SR.DR RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 19.0 2.2013 DATE OF PRONOUNCEMENT : 26.02.201 3 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-XII, CHENNAI DATED 16-02-2012 FOR THE ASSESSMENT YEAR 2007-08. 2. THERE IS A DELAY OF 95 DAYS IN FILING THE APPEAL BY THE REVENUE. SHRI V. JEEVALA NAIK, ASSISTANT COMMISSIONER OF INC OME-TAX, CIRCLE-XIII, CHENNAI HAS FILED AN AFFIDAVIT WHEREIN HE HAS STATE D THAT DUE TO SPECIAL AUDIT WORK AND ANNUAL TRANSFER OF STAFF THERE WAS A DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL AND THAT THE SAME MAY BE CONDONED. THE ITA NO. 1676/MDS/2012 : 2 : LEARNED COUNSEL FOR THE ASSESSEE HAS NOT RAISED ANY SERIOUS OBJECTION. WE FIND THAT THE DELAY IS NEITHER WANTON NOR INTENT IONAL. WE, THEREFORE, CONDONE THE DELAY IN FILING THE APPEAL BY THE REVEN UE. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE HAD FILED A RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 DECLARING TOTAL INCOME OF ` 97,52,385/-. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT U/S 143(3) OF THE INCOME TAX ACT, 1961 DISALLOWED THE CLAIM TOWARDS B AD DEBT WRITTEN OFF TO THE EXTENT OF ` 10,65,431/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED AS UNDER : 2. THE ASSESSEE IS REQUIRED TO ESTABLISH THAT A DE BT DUE TO HIM NOW BECOME WORTHLESS DEBT. REALISATION OF THE DEBT IS NOT POSSIBLE. THE ASSESSEE CANNOT SAY THAT HE HAS BECO ME PESSIMISTIC ABOUT THE PROSPECT OF RECOVERY OF THE D EBT. THE FACTS AND CIRCUMSTANCES ON WHICH THE JUDGEMENT IS B ASED SHOULD SHOW THAT THE DEBT WAS NOT REALIZABLE FOR SO ME FAULT ON THE PART OF THE DEBTOR BUT NOT BECAUSE OF POSSIBLE DIFFICULTIES OR HURDLE OF THE ASSESSEE. THE FACT OF UTILIZING OF D EBT SHOULD SHOW THE IRRECOVERABILITY OF THE DEBT FROM THE ANGLE OF DEBTOR AND NOT ON THE BASIS OF THE ABILITY OF THE ASSESSEE TO RECO VER THE DEBT. THE DEBTORS FINANCIAL POSITION IS STRONG. THERE IS HOPE FOR RECOVERY. THE IMPUGNED DEBTORS ARE PSUS/LISTED COM PANIES AND ASSESSEE CONTINUES TO DO BUSINESS AND THEY ARE WRITTEN OFF AS BAD DEBTS. IT IS DIFFICULT TO BELIEVE THAT THE DEBTORS ARE NOT IN A POSITION TO DISCHARGE THEIR ACKNOWLEDGED DEBTS. NO PROOF WAS GIVEN SHOWING THAT ALL THESE DEBTORS ARE FINANCIALL Y WEAK OR NOT ABLE TO PAY OR REFUSED TO PAY. HENCE, BAD DEBTS OF ` 10,65,431/- ARE DISALLOWED. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A PPEALS) AND IT WAS SUBMITTED THAT THE ASSESSEE HAD WRITTEN OFF THE SE DEBTS AS NOT ITA NO. 1676/MDS/2012 : 3 : RECOVERABLE AND THE CLAIM OF THE ASSESSEE WAS ALLOW ABLE. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE DECISIO N OF THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. V. CIT (323 I TR 397) (SC). THE CIT(APPEALS) BY FOLLOWING THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF TRF LTD. V. CIT (SUPRA) ALLOWED THE AP PEAL FILED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, THE REVENUE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. AT THE TIME OF HEARING THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF TRF LTD. V. CIT (SUPRA) AND SUPPORTED THE ORDER PASSED BY THE CIT(A PPEALS). 5. ON THE OTHER HAND, THE LEARNED DR FAIRLY CONCEDE D THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE SUPREME C OURT, CITED SUPRA. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE O NLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE CLAIM MADE BY THE ASSESS EE UNDER THE HEAD BAD DEBTS IS ALLOWABLE OR NOT. THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER OBSERVED THAT THE DEBTS ARE PSUS/LIMITED COMP ANIES. THEREFORE THE ASSESSEE CANNOT COME TO THE CONCLUSION THAT THE DEBTS ARE NOT RECOVERABLE. IT IS A FACT THAT THE ASSESSEE HAS WR ITTEN OFF IN THE BOOKS OF ACCOUNT THE DEBT OF ` 10,65,431/- AS IRRECOVERABLE. THE HON'BLE SUPREME COURT IN THE CASE OF V. TRF LTD V. CIT (SUP RA) HAS OBSERVED AS UNDER : 4. THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1. 4.1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH T HAT THE ITA NO. 1676/MDS/2012 : 4 : DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENO UGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 7. IN THE PRESENT CASE THE ASSESSEE HAD WRITTEN OFF THE AMOUNTS IN THE BOOKS OF ACCOUNTS AS BAD DEBTS AND CLAIMED DEDU CTION U/S 36(1)(VII) OF THE ACT. THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT, CITED SUPRA, WE FIND NO INFIRMITY IN THE ORD ER PASSED BY THE CIT(APPEALS). ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(APPEALS) AND DISMISS THE APPEAL FILED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON TUESDAY, THE 26 TH OF FEBRUARY, 2013, AT CHENNAI. SD/- SD/- (DR. O. K. NARAYANAN) (V.DURGA RAO) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 26 TH FEBRUARY, 2013. H. COPY TO: ASSESSEE/AO/CIT(A)/CIT/D.R./GUARD FILE