The DCIT, 1(1), Indore V. M/s D & H Secheron Electrodes Pvt. Ltd., Indore

ITA 172/IND/2011

• Counselvise Citation: 17222714 RSA 2011
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 02-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: SHRI; S N AGRAWAL
• Keywords: Bad and doubtful debts
• Section: 43B; 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 172/IND/2011 A.Y. 2003-04 DY. COMMISSIONER OF INCOME TAX 1(1) INDORE ... APPELLANT VS M/S D&H SECHERON ELECTRODES P. LTD. INDORE PAN AAACD6111E ... RESPONDENT APPELLANT BY : SHRI KESHAV SAXENA RESPONDENT BY : SHRI S.N. AGRAWAL AND SHRI PANKAJ MOGRA DATE OF HEARING : 13.2.2012 DATE OF PRONOUNCEMENT : 13.2.2012 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 18.5.2011 PASSED BY THE LD. FIRST APPELLATE AUTHORI TY, INDORE. 2 THE FIRST AND SECOND GROUNDS RAISED ARE THAT THE LD . FIRST APPELLATE AUTHORITY ERRED IN LAW AND ON FACT IN DIR ECTING THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION OF RS.32,95,032/- AND RS.4,81,768/-, BEING EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND EMPLOYEES CONTR IBUTION TO ESI FUND, RESPECTIVELY ON THE GROUND THAT THE PAYME NTS OF THE IMPUGNED SUMS WERE MADE BEFORE THE DUE DATE OF FILI NG OF RETURN OF INCOME, AS PER THE PROVISIONS OF SECTION 43B OF THE ACT. 2. DURING HEARING, THE LEARNED CIT DR DEFENDED THE ADDITION BY PLACING RELIANCE UPON THE DECISION FROM HON'BLE BOMBAY HIGH COURT IN THE CASE OF PAMWI TISSUES LIMITED (20 08) 215 CTR (BOM) 158 : 313 ITR 137. ON THE OTHER HAND, T HE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION F ROM HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. AIMIL LIMIT ED AND OTHERS; (2010) 188 TAXMAN 265 : (2010) 321 ITR 508 (DEL). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AN D PERUSED THE MATERIAL AVAILABLE ON FILE. BRIEF FACTS OF THE CASE ARE THAT 3 BEFORE THE LEARNED ASSESSING OFFICER THE ASSESSEE C HALLENGED THE ADDITION OF RS.37,76,800/- MADE ON ACCOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND BY SUBMITTING T HE BREAKUP OF SUCH CONTRIBUTION TOWARDS PF & ESIC. AS PER THE ASSESSING OFFICER, THE CONTRIBUTIONS WERE PAID BEYOND THE DAT ES PROVIDED U/S 43B READ WITH EXPLANATION, CONSEQUENTLY, HE MAD E DISALLOWANCE U/S 36(1)(VA) OF THE ACT. ON APPEAL, L EARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION WHICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. 3.1 IF THE PROVISIONS OF SECTION 43B READ WITH SECT ION 36(1)(VA) OF THE ACT ARE KEPT IN JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL, THE ONLY REQUIREMENT OF THE ACT IS THAT THE DEDUCTION CANNOT BE DISALLOWED UNDER SECTION 43B OF THE ACT, IF THE ACTUAL PAYMENT IS MADE BEFORE THE DUE DATE OF FILING THE R ETURN. IF THE EMPLOYEES CONTRIBUTION IS NOT DEPOSITED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IF DEPOSITED LATE, THE EMPLOYER IS TO PAY INTEREST ON THE DELAYED PAYMENT FOR WHICH SPECIFIC PROVISIONS ARE MADE IN THE PF ACT AS WELL AS THE ESIC ACT. THESE ACTS PERMIT THE EMPLOYER TO MAKE THE DE POSIT WITH 4 SOME DELAYS SUBJECT TO CONSEQUENCES LIKE INTEREST A ND PENALTIES. HOWEVER, AS MENTIONED EARLIER, THE DED UCTION THEREOF CANNOT BE DISALLOWED U/S 43B OF THE ACT IF THE PAYMENT IS ACTUALLY MADE BEFORE THE DUE DATE OF FILING THE RETURN AND THUS THE ASSESSEE BECOMES ENTITLED TO DEDUCTION UND ER THE PROVISIONS OF SECTIONS 36(1)(VA) READ WITH SECTION 43B OF THE ACT. SECTION 43B(B), HOWEVER, STIPULATES THAT SUCH DEDUCTION WOULD BE PERMISSIBLE ONLY ON ACTUAL PAYMENT. THE H ON'BLE APEX COURT IN THE CASE OF VINAY CEMENT LIMITED (213 CTR (SC) 268) HAS CLEARLY HELD THAT CONTRIBUTION MADE T O PROVIDENT FUND BEFORE FILING OF THE RETURN COULD NOT BE DISAL LOWED UNDER SECTION 43B AS IT STOOD PRIOR TO THE AMENDMENT WITH EFFECT FROM IST APRIL, 2004. CLAUSE (VA) TO SECTION 36(1) OF THE ACT WAS INSERTED BY THE FINANCE ACT WITH EFFECT FROM IST AP RIL, 1998. THE EXPLANATION TO SUB-CLAUSE HAS CLARIFIED THE MEANING OF DUE DATE WHICH MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDIT AN EMPLOYEES CONTRIBUTION TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND UNDER ANY A CT, RULE, ORDER OR NOTIFICATION ISSUED THEREUNDER OR UNDER AN Y STANDING 5 ORDER, AWARD, CONTRACT OF SERVICE OR OTHERWISE. THE ASSESSEE FINDS SUPPORT FROM THE DECISION FROM HON'BLE KARNAT AKA HIGH COURT IN CIT VS. SABARI ENTERPRISES; 213 CTR (KARN. ) 269, THE RATIO LAID DOWN IN ALLIED MOTORS PRIVATE LIMITED V. CIT; 139 CTR (SC) 364 AND GENERAL FINANCE COMPANY VS. CIT; 257 I TR 338 (SC), THEREFORE, IF THE ASSESSEE FILES THE PROOF OF PAYMENT OF STATUTORY LIABILITY TOWARDS PF AND OTHER FUNDS REFE RRED TO IN CLAUSE (B) OF SECTION 43 IS PERMISSIBLE IF THE PAYM ENT IS MADE BEFORE DUE DATE OF SUBMISSION OF RETURN UNDER SECTI ON 139(1) OF THE ACT, EVEN IF THE CONTRIBUTIONS ARE PAID BEYOND THE DUE DATES UNDER THE RESPECTIVE STATUTORY ENACTMENTS. IN VIEW OF THESE FACTS, WE FIND NO INFIRMITY IN THE STAND OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS). IT IS AFFIRMED. 4. THE LAST GROUND RAISED BY THE REVENUE PERTAINS T O DIRECTION TO THE ASSESSING OFFICER WITH REGARD TO C LAIM OF PROVISIONS OF DOUBTFUL DEBTS OF RS.1,46,07,788/- BY PLACING RELIANCE UPON THE DECISION FROM HON'BLE APEX COURT IN THE CASE OF VIJAY BANK VS. CIT (323 ITR 166) WITHOUT AP PRECIATING THE FACT THAT THE RATIO LAID DOWN IN THAT CASE IS A PPLICABLE IN 6 CASE OF BANKS AND NOT IN OTHER CASES, IN VIEW OF TH E PROVISIONS OF SECTION 36(1)(VII) READ WITH SECTION 36(2) OF TH E ACT AND IN VIEW OF THE DECISION IN SOUTHERN TECHNOLOGIES LIMIT ED (320 ITR 557) (SC). 4.1 THE LEARNED CIT DR ADVANCED THE ARGUMENT WHICH IS IDENTICAL TO THE GROUND RAISED BY FURTHER SUBMITTIN G THAT IT WAS A PROVISION ONLY AND NOT THE ACTUAL DEBTS. ON THE OT HER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUG NED ORDER. 4.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON FILE. THE LEARNED ASSESS ING OFFICER DISALLOWED THE CLAIM ON THE PLEA THAT THE ASSESSEE MADE MERE DEBIT ENTRY IN THE PROFIT AND LOSS ACCOUNT WHICH IS NOT SUFFICIENT. THE CLAIM OF THE ASSESSEE IS THAT THE AMOUNT OF PRO VISION WAS ADJUSTED IN THE FIGURES OF DEBTORS WHICH WAS REDUCE D IN ITS ACCOUNTS. THE SUM AND SUBSTANCE OF THE ARGUMENTS O F THE LEARNED CIT DR IS THAT THE ENTRY MADE BY THE ASSESS EE WAS MERELY A PROVISION WHICH COULD NOT BE EQUATED WITH ACTUAL WRITE 7 OFF OF BAD DEBTS IN TERMS OF SECTION 36(1)(VII) OF THE ACT AND THE CASE OF THE ASSESSEE CANNOT BE EQUATED WITH THE CAS E OF BANK AND ESPECIALLY M/S. VIJAY BANK VS. CIT (SUPRA). WE HAVE PERUSED THE DECISION FROM HON'BLE APEX COURT PRONOU NCED IN THE CASE VIJAY BANK WHEREIN IT WAS HELD THAT IT IS NOT IMPERATIVE TO CLOSE THE INDIVIDUAL ACCOUNT OF EACH DEBTOR TO C LAIM DEDUCTION U/S 36(1)(VII) OF THE ACT. THE FINDING AN D CONCLUSION DRAWN IN THE IMPUGNED ORDER IS THAT SINCE THE TAX P AYER (THE ASSESSEE) HAS WRITTEN OFF THE BAD DEBT IN ITS BOOKS BY WAY OF DEBIT TO THE PROFIT AND LOSS ACCOUNT SIMULTANEOUSLY REDUCING THE CORRESPONDING ACCOUNT FROM DEBTORS ACCOUNT DEPICTE D IN THE BALANCE-SHEET, AT THE END OF THE YEAR, THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. IN VIEW OF THESE FACTS, WE ARE REPRODUCING HEREUNDER THE RELEV ANT PROVISIONS OF THE ACT :- 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CL AUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 ( VII ) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), THE AMOUNT OF 91 [ANY 92 BAD DEBT OR PART THEREOF 92 WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR T HE PREVIOUS YEAR]: 8 93 [ PROVIDED THAT IN THE CASE OF 94 [AN ASSESSEE] TO WHICH CLAUSE ( VIIA ) APPLIES, THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DEBT OR PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANC E IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE U NDER THAT CLAUSE.] 95 [ EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, ANY BAD DEBT OR PART THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISION FOR BA D AND DOUBTFUL DEBTS MADE IN THE ACCOUNTS OF THE ASSESSEE ;] IF THE PROVISIONS OF THE ACT AND ESPECIALLY THE EXP LANATION INSERTED BY THE FINANCE ACT, 2001 WITH RETROSPECTIV E EFFECT FROM 1.4.1989 IS ANALYSED, WE ARE IN AGREEMENT WITH THE ARGUMENT OF THE LEARNED CIT DR ONLY TO THE EXTENT THAT ANY PROV ISION FOR BAD AND DOUBTFUL DEBT MADE IN THE ACCOUNTS BY THE ASSES SEE THEN WRITTEN WRITE OFF IS NOT ALLOWABLE. HOWEVER, WE F IND FROM THE PROFIT AND LOSS ACCOUNT (PAGE 21 OF THE PAPER BOOK) FOR THE YEAR ENDED 31 ST MARCH, 2003, THE ASSESSEE MADE THE PROVISION FOR DOUBTFUL DEBTS TO THE TUNE OF RS.1,46,07,788/- BUT ACTUALLY CONSIDERED THE DOUBTFUL DEBTS TO THE TUNE OF RS.1,9 5,02,650/- (PAGE 26 OF THE PAPER BOOK). THE ASSESSING OFFICER ON INNER PAGES 4 AND 5 OF THE ASSESSMENT ORDER HAS DISCUSSED THE ISSUE BY ADDING THE AMOUNT OF RS.1,40,07,788/- TO T HE TOTAL INCOME OF THE ASSESSEE BY OBSERVING THAT THE ASSESS EE IN HIS REPLY HAS NOWHERE MENTIONED THAT THE AMOUNT WHICH W AS 9 WRITTEN OFF AS RECOVERABLE IN THE ACCOUNTS OF THE A SSESSEE FOR THE PREVIOUS YEAR, UNTIL AND UNLESS IT IS WRITTEN O FF AS A RECOVERABLE IN HIS BOOKS OF ACCOUNT, THEREFORE, IT IS NOT ALLOWABLE. WE FIND THAT RATHER THE COPY OF THE AUD ITED BALANCE- SHEET WAS FILED BEFORE THE ASSESSING OFFICER (PAGES 8 TO 37 OF THE PAPER BOOK) AS MENTIONED EARLIER FROM PAGES 21 AND 26 IT IS CLEAR THAT THE ASSESSEE HAS CHARGED AN AMOUNT OF RS.1,46,07,788/- TO THE PROFIT AND LOSS ACCOUNT AND CORRESPONDINGLY, THE SAID AMOUNT WAS REDUCED FROM T HE FIGURES OF DEBTORS. WE ARE OF THE VIEW, ONCE THE AMOUNT DE BITED TO THE PROFIT AND LOSS ACCOUNT IS CARRIED TO THE BALANCE-S HEET AND THE CORRESPONDING AMOUNT IS REDUCED FROM THE DEBTORS A CCOUNTS, DEPICTED ON THE ASSET SIDE OF THE BALANCE-SHEET, CO NSTITUTE ACTUAL WRITE OFF OF THE BAD DEBTS ESPECIALLY AT THE END OF THE YEAR THE DEBTORS ACCOUNTS ARE REFLECTED AS NET AMO UNTS, CONSEQUENTLY, IT IS ACTUAL WRITE OFF FOR THE PURPOS E OF SECTION 36(1)(VII) OF THE ACT. SECTION 36(1)(VII) AND SECT ION 36(VIIA) OF THE ACT DEALT WITH PROVISION FOR BAD AND DOUBTFUL D EBTS AND MORE SPECIFICALLY CLAUSE (VIIA) DEALS IN RESPECT OF ANY PROVISION 10 FOR BAD AND DOUBTFUL DEBTS MADE BY A SCHEDULED BANK OR A NON- SCHEDULED BANK AND THE PERCENTAGE AS CONTAINED IN T HE ACT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BR ANCHES OF SUCH BANK WHEREAS CLAUSE (VII) DEALS WITH OTHER ASS ESSEES. THE HON'BLE APEX COURT WHILE DEALING WITH THE CASE OF VIJAY BANK; 323 ITR 166 (RELEVANT PAGE 172) WENT A STEP F URTHER BY HOLDING AS UNDER :- COMING TO THE SECOND QUESTION, WE MAY REITERATED THAT IT IS NOT IN DISPUTE THAT SECTION 36(1)(VII) OF THE 1961 ACT APPLIES BOTH THE BANKING AND NON-BANKING BUSINESS. THE MANNER IN WHICH THE WRITE OFF IS TO BE CARRIED OUT HAS BEEN EXPLAINED H EREINABOVE. IT IS IMPORTANT TO NOTE THAT THE ASSESSEE BANK HAS NOT ON LY BEEN DEBITING THE PROFIT AND LOSS ACCOUNT TO THE EXTENT OF IMPUGNED BAD DEBTS, IT IS SIMULTANEOUSLY, REDUCING THE AMOUNT OF LOANS AND ADVANCES OR THE DEBTORS AT THE YEAR END, AS STATED HEREINABOVE, IN OTHER WORDS, THE AMOUNT OF LOANS AND ADVANCES, O R THE DEBTORS AT THE YEAR END IN THE BALANCE-SHEET IS SHOWN AS NE T OF THE PROVISIONS FOR THE IMPUGNED DEBTS. HOWEVER, WHAT IS BEING INSISTED UPON BY THE ASSESSING OFFICER IS THAT MERE REDUCTION OF THE AMOUNT OF LOANS AND ADVANCES OR THE DEBTORS AT THE YEAR END WOULD NOT SUFFICE AND, IN THE INTEREST OF TRANSPARE NCY, IT WOULD BE DESIRABLE FOR THE ASSESSEE BANK TO CLOSE EACH AND E VERY INDIVIDUAL ACCOUNT OF LOANS AND ADVANCES OR DEBTORS AS A PRE- CONDITION FOR CLAIMING DEDUCTION U/S 36(1)(VII) OF THE ACT...............................THE ORDER OF THE ASSESSING OFFICER IS BASED ON APPREHENSION THAT, IF THE ASSESSEE FAILS TO CLOS E EACH AND EVERY INDIVIDUAL ACCOUNT OF ITS DEBTORS, IT MAY RES ULT IN THE ASSESSEES CLAIMING DEDUCTION TWICE OVER. IN THIS CASE, WE ARE CONCERNED WITH THE INTERPRETATION OF SECTION 36(1)( VII) OF THE ACT, WE CANNOT DECIDE THE MATTER ON THE BASIS OF APPREHENSIONS/DESIRABILITY..... ... IN VIEW OF THE ABOVE, WE ARE USEFULLY REPRODUCING H EREUNDER THE OBSERVATION MADE BY THE DIVISION BENCH OF THE HON'B LE APEX 11 COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LIMITED; (2010) 320 ITR 577 (PARAGRAPH 25 PAGE 604) :- PRIOR TO APRIL 1, 1989, THE LAW, AS IT THEN STOOD, TOOK THE VIEW THAT EVEN IN CASES IN WHICH THE ASSESSEE (S) MAKES ONLY A PROVISION IN ITS ACCOUNTS FOR BAD DEBTS AND INTEREST THEREON AND EVEN THOUGH THE AMOUNT IS NOT ACTUALLY WRITTEN OFF BY DEBITING THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AND CREDITING THE AMOUNT TO THE ACCOUNT OF THE DEBTOR, THE ASSESSEE WAS STILL ENTITLED TO DEDU CTION U/S 36(1)(VII). (SEE CIT V. JWALA PRASAD TIWARI (1953) 24 ITR 537 ( BOM) AND VITHALDAS H. DHANJIBHAI BARDANWALA V. CIT (1981) 13 0 ITR 95 (GUJ). SUCH STATE OF LAW PREVAILED UP TO AND INCLUDING THE ASSESSMENT YEAR 1988-89. HOWEVER, BY INSERTION (WITH EFFECT FROM A PRIL 1, 1989) OF A NEW EXPLANATION IN SECTION 36(1)(VII), IT HAS BEEN CLARIFIED THAT ANY BAD DEBT WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUN T OF THE ASSESSEE WILL NOT INCLUDE ANY PROVISION FOR BAD AND DOUBTFUL DEBT MADE IN THE ACCOUNT OF THE ASSESSEE. THE SAID AMENDMENT INDICA TES THAT BEFORE APRIL 1, 1989, A DISTINCT DICHOTOMY IS BROUGHT IN B Y WAY OF THE SAID EXPLANATION TO SECTION 36(1)(VII). CONSEQUENTLY, AF TER APRIL 1, 1989, A MERE PROVISION FOR BAD DEBT WOULD NOT BE ENTITLED T O DEDUCTION UNDER SECTION 36(1)(VII). TO UNDERSTAND THE ABOVE DICHOTO MY, ONE MUST UNDERSTAND HOW TO WRITE OFF. IF AN ASSESSEE DEBI TS ANM AMOUNT OF DOUBTFUL DEBT TO THE PROFIT AND LOSS ACCOUNT AND CR EDITS THE ASSET ACCOUNT LIKE SUNDRY DEBTORS ACCOUNT, IT WOULD CONS TITUTE A WRITE OFF OF AN ACTUAL DEBT. HOWEVER, IF AN ASSESSEE DEBITS P ROVISION FOR DOUBTFUL DEBT TO THE PROFIT AND LOSS ACCOUNT AND M AKES A CORRESPONDING CREDIT TO THE CURRENT LIABILITIES AN D PROVISIONS ON THE LIABILITIES SIDE OF THE BALANCE-SHEET THEN IT WOULD CONSTITUTE A PROVISION FOR DOUBTFUL DEBT. IN THE LATTER CASE, T HE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION AFTER APRIL 1, 1989. 4.3 IF THE PROVISIONS ARE ANALYSED, IT CAN BE CONC LUDED THAT PRIOR TO 1.4.1989, THE LAW AS IT THEN STOOD, E VEN IN THE CASES WHERE THE ASSESSEE MAKES A PROVISION IN ITS A CCOUNTS, MADE PROVISION FOR BAD DEBTS AND INTEREST THEREON A ND EVEN THOUGH THE AMOUNT IS ACTUALLY NOT WRITTEN OFF BY DE BITING THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AND CREDITI NG THE 12 AMOUNT TO THE ACCOUNT OF THE DEBTOR, ASSESSEE WAS S TILL ENTITLED TO DEDUCTION U/S 36(1)(VII) OF THE ACT (SEE CIT V. JWALA PRASAD TIWARI; 24 ITR 537 AND VITTHALDAS H. DHANJIBHAI BAR DANAWALA; 130 ITR 95 (GUJ). SUCH STATE OF LAW PREVAILED UPTO AND INCLUDING ASSESSMENT YEAR 1988-89. HOWEVER, BY INSE RTION TO EXPLANATION BY THE FINANCE ACT, 2001 W.R.E.F. FROM 1.4.1989, IT HAS BEEN CLARIFIED THAT AFTER 1.4.1989, IT IS NOT N ECESSARY FOR THE ASSESSEE TO ESTABLISH THAT, DEBT, IN FACT, HAS BECO ME IRRECOVERABLE, IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IT IS SUBSTANTIAL COMPLIANCE OF SAME, ON THE STRENGTH OF THE AMENDMEN T, IT CANNOT BE SAID THAT AN INQUIRY IS NOT PERMISSIBLE T O SEE AND SATISFY THAT THERE ARE SOME SEMBLANCE OF GENUINENES S IN SUCH ENTRY AND SAME IS NOT TOTALLY FAKE ENTRY, MEANING T HEREBY AFTER 1.4.1989, THE ASSESSEE HAS ONLY TO WRITE IT OFF A S IRRECOVERABLE IN ITS ACCOUNTS. FOR THIS PROPOSITION, WE ARE SUPP ORTED BY THE RATIO LAID DOWN IN TRF LIMITED VS. CIT; 323 ITR 397 (SC), CIT V. KOHLI BROTHERS COLOUR LAB PRIVATE LIMITED 186 TA XMAN 62 (ALL), CIT VS. AUTO METERS LIMITED; 292 ITR 345 (DE L) AND CIT V. 13 COATES OF INDIA LIMITED; 232 ITR 324 (CAL.). HOWEV ER, IF AN ASSESSEE DEBITS PROVISIONS FOR DOUBTFUL DEBTS TO THE PROFIT AND LOSS ACCOUNT AND MAKES A CORRESPONDING CREDIT TO TH E CURRENT LIABILITIES AND PROVISIONS ON THE LIABILITY SIDE O F THE BALANCE- SHEET THEN IT WOULD CONSTITUTE A PROVISION FOR DOUB TFUL DEBT, THEREFORE, IN THE LATTER CASE, THE ASSESSEE WOULD N OT BE ENTITLED TO DEDUCTION AFTER 1.4.1989. THE HON'BLE APEX COUR T, IN VIEW OF THESE FACTS, IN THE CASE OF VIJAY BANK (SUPRA) CONS CIOUSLY REPRODUCED PARA 26 OF THE DECISION FROM SOUTHERN TECHNOLOGIES LIMITED (SUPRA). AFTER 1.4.1989 HONEST Y OF ASSESSEES JUDGMENT IS RELEVANT. IN ORDER TO TAKE ADVANTAGE OF THIS PROVISION, THE ASSESSEE IS REQUIRED TO ESTABLI SH THAT A DEBT DUE HAS BECOME A WORTHLESS DEBT. IT IS NOT NECESSAR Y FOR THE ASSESSEE TO SHOW THAT HE HAS FAILED TO RECOVER THE DEBT DESPITE TAKING LEGAL ACTION. THE ASSESSEE IS ALSO NOT EXPEC TED TO SAY THAT HE HAD BECOME PESSIMISTIC ABOUT THE PROSPECT O F THE RECOVERY OF THE DEBT IN QUESTION. AT THE SAME TIME, THE DEPARTMENT CANNOT INSIST ON DEMONSTRATIVE AND INFAL LIBLE PROOF THAT THE DEBT HAS BECOME DEBT. THE ONLY REQUIREMENT IS 14 AMENDMENT IN THE CIRCUMSTANCES, WE FIND THAT THE ASSESSEE IS ENTITLED TO BENEFIT OF DEDUCTION UNDER SECTION 36(1 )(VII) OF THE ACT AS THERE WAS AN ACTUAL WRITE OFF BY THE ASSES SEE, THEREFORE, WE AFFIRM THE STAND OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE O F LEARNED REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 13.2.2012. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13.2.2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-