Applitech Solutions Ltd., Ahmedabad V. The CIT-1,, Ahmedabad

ITA 1721/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0249 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-10-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 25-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: P M MEHTA
• Keywords: Bad and doubtful debts; Set aside
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING: 12/10/2009 DRAFTED ON: 13/10 /2009 ITA NO.1721/AHD/2009 ASSESSMENT YEAR : 2004-2005 APPLITECH SOLUTION LIMITED, 701, SHIKHAR NR. ADANI HYPER MARKET, NAVRANGPURA, AHMEDABAD. VS. CIT-1 3 RD FLOOR, INSURANCE BUILDING, ASHRAM ROAD, AHMEDABAD. PAN/GIR NO. : AABCA8332P (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI P.M.MEHTA RESPONDENT BY: SHRI SHELLEY JINDAL CIT D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD.CIT(APPEALS)- I, AHMEDABAD DATED 24.03.2009. 2. THE ISSUE INVOLVED IN ALL THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN THE MEMO OF APPEAL IS THAT IN THE FACTS AND CIRCUMS TANCES OF THE CASE THE CIT-I, AHMEDABAD ERRED IN INVOKING THE PROVISION OF SECTIO N 263 AND PASSING THE IMPUGNED REVISIONAL ORDER DATED 24.03.2009. 3. IN THE STATEMENT OF FACTS FILED ALONG WITH THE M EMO OF APPEAL, THE ASSESSEE HAS STATED TO QUOTE AS UNDER: SOF-CUM- SYNOPSIS THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN OFFICE EQUIPMENTS, INFORMATION TECHNOLOGY EQUIPMENTS, REPAIRS AND MAINTENANCE OF S UCH PRODUCTS AND OF PROVIDING SERVICES OF DESIGN AND DEVELOPMENT OF WEB INTERFACE MODULE, MAT ERIAL PROCUREMENT APPLICATIONS, SETTING OF WORLD-WIDE-WEB CONNECTIVITY, ETC. IT HAD FILED ITS RETURN OF INCOME DECLARING A LOSS OF RS.20.55 CRORES AND ASSESSMENT WAS COMPLETED U/S. 143(3) ON 26.12.2006 BY DETERMINING A LOSS OF RS.15.15 CRORES, WHEREIN VARIOUS ADJUSTMENTS AND AD DITIONS WERE MADE TOTALING TO RS.5.42 CRORES INCLUDING A DISALLOWANCE OF BAD DEBTS TOTALING RS.3 .09 CRORES. 2. THE IMPUGNED REVISIONAL ORDER U/S.263 IS O N THE POINT OF BAD DEBTS ONLY. THE ASSESSEE HAD SHOWN AND CLAIMED DEDUCTION FOR BAD DEBTS TOTALING RS.16.62 CRORES. THEY PERTAINED TO SIX PARTIES. THE ASSESSING OFFICER CALLED FOR RELEVANT INFORMATION ETC. IN RESPECT OF ALL THOSE SIX ITA NO.1721/AHD/2009 APPLITECH SOLUTION LIMITED ASST.YEAR -2004-05 - 2 - PARTIES. THE ASSESSMENT ORDER NOTICED THAT THE REQU ISITE INFORMATION WAS NOT FURNISHED IN RESPECT OF 3 PARTIES, WHICH INVOLVED CLAIM OF BAD DEBTS TOT ALING RS.3.09 CRORES AND ON THAT BASIS DISALLOWED THE ASSESSEE'S CLAIM TO THE AFORESAID EX TENT OF RS.3.09 CRORES. 3. THE LD. CIT, AHMEDABAD-1 HAS INITIATED ACT ION U/S.263 IN RESPECT OF ASSESSEE'S CLAIM OF BAD DEBTS FOR THE REMAINING THREE PARTIES, INVOLVING A TOTAL SUM OF RS.13.54 CRORES AND HAS ULTIMATELY PASSED THE IMPUGNED REVISIONAL ORDER U/S.263. THERE IN HE HAS PURPORTEDLY RELIED ALMOST WHOLLY ON THE HON. GUJARAT HIGH COURT DECISION IN DHALL ENTER PRISES AND ENGINEERING PVT. LTD. VS. CIT (207 CTR 729) AND (295 ITR 481). HE HAS OPINED THAT AS P ER THAT DECISION OF THE HON. GUJARAT HIGH COURT, THE ASSESSEE WAS REQUIRED TO PROVE THAT THE AFORESAID 3 DEBTS TOTALING RS.13.54 CRORES HAD BECOME BAD DURING THE PREVIOUS YEAR, RELEVANT TO TH IS ASSESSMENT, BUT THE ASSESSING OFFICER FAILED TO CALL UPON THE ASSESSEE TO PROVE IT IN RESPECT OF THE AFORESAID 3 DEBTS TOTALING RS.13.54 CRORES. 4 IT IS SUBMITTED THAT IN THE CASE OF DHALL E NTERPRISES AND ENGINEERING PVT. LTD. THAT TAX PAYER HAD CLAIMED BAD DEBTS IN RESPECT OF NINE PARTIES, O UT OF WHICH, CLAIM FOR SEVEN PARTIES WAS ALLOWED, BUT IN RESPECT OF THE REMAINING TWO PARTIE S THERE WAS EVIDENCE AVAILABLE ON RECORD, THAT THAT TAX PAYER WAS PURSUING THE RECOVERY PROCEEDING S AGAINST THOSE TWO PARTIES AND THOSE TWO PARTIES HAD NOT CLEARED THE DUES, BECAUSE OF EXISTE NCE OF CERTAIN DIFFERENCES IN REGARD TO THE TRANSACTIONS WITH THEM. 5. IT IS SUBMITTED THAT ON FACTUAL ASPECTS, T HIS ASSESSEE'S CASE IS NEARER TO THE CASES OF SEVEN PARTIES WHOSE CLAIMS WERE ACCEPTED IN THE AFORESAID REPORTED DECISION AND OF COURSE THERE IS NO SIMILARITY AT ALL BETWEEN FACTUAL MATRIX OF THOSE T WO DEBTORS WHICH WERE DISALLOWED IN THAT REPORTED DECISION. THE POINT IS THAT IN THE ASSESSE E'S CASE THE DEPARTMENT HAS NOT FOUND OR EVEN ALLEGED THAT THE DIFFERENCES WERE EXISTING BETWEEN THE ASSESSEE AND THE DEBTORS IN REGARD TO THE TRANSACTIONS, OR THE ASSESSEE WAS STILL MAKING EFFO RTS FOR EFFECTING RECOVERY FROM THOSE THREE DEBTORS, WHICH INVOLVED TOTAL SUM OF RS. 13.54 CROR ES. 6. IN THE IMPUGNED PROVISIONAL ORDER INFERENC ES ARE CONTAINED IN PARAS MARKED 5, 5.1, 5.2 AND 5.3 ON PAGES 5 AND 6 THEREOF. IN PARA MARKED 5, HE HAS NOTICED THAT THESE THREE PARTIES INVOLVING A SUM OF RS.13.54 CRORES ARE LISTED IN PARA 3 OF THE IMPUGNED REVISIONAL ORDER, AND IN RESPECT THEREOF THE ASSESSEE HAD FILED COPIES OF BILLS AND LEDGER ACCOUNTS ETC. HE FURTHER NOTED THAT ASSESSEE HAD CLAIMED THAT RIGOROUS EFFORTS WERE MAD E FOR RECOVERY. THEN THE CIT OPINES THAT THERE IS NO MENTION REGARDING THE DETAILS OF VARIOUS EFFO RTS MADE. THEN IN PARA MARKED 5.1 HE HAS OBSERVED, INTER ALIA, AS FOLLOWS - 'IT IS THUS CLEARLY ESTABLISHED FROM RECORDS THAT A PART FROM FILING COPIES OF ACCOUNTS AND COPIES OF BILLS OF THREE PARTIES NO OTHER DETAILS ( INCLUDING EFFORTS MADE FOR RECOVERY) WERE FILED. THE ASSESSING OFFICER, THEREFORE, FAI LED TO MAKE RELEVANT ENQUIRY AS TO HOW THE DEBTS IN RESPECT OF THESE THREE PARTIES HAD BEC OME BAD. NO ENQUIRIES WERE MADE BY THE ASSESSING OFFICER TO KNOW AS TO WHAT EFFORTS WE RE MADE BY THE ASSESSEE FOR RECOVERY OF DEBTS AND HOW DEBTS COULD BE SAID TO HAVE BECOME BAD DURING THE YEAR. NOT EVEN A SINGLE CORRESPONDENCE MADE BY THE ASSESSEE WITH ANY OF THE THREE PARTIES (TWO OF WHOM ARE HONG KONG BASED HAVING THE SAME ADDRE SS) WAS FURNISHED BY THE ASSESSEE. SINCE, THE ASSESSING OFFICER FAILED TO MAKE RELEVANT ENQUIRIES REGARDING THE DEBTS BECOMING BAD DURING THE YEAR, THE ORDER OF TH E ASSESSING OFFICER IS DEFINITELY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E............. (EMPHASIS SUPPLIED) 7. THUS, THE ONLY POINT MADE OUT IN THE IMPUG NED REVISIONAL ORDER IS THAT THE ASSESSING OFFICER FAILED TO FIND OUT WHAT EFFORTS WERE MADE B Y THE ASSESSEE FOR RECOVERY OF DEBTS AND HOW DEBTS COULD BE SAID TO HAVE BECOME BAD. WITH UTMOST RESPECT, IT IS SUBMITTED THAT THE LD. CIT WENT WRONG IN RELYING ON THE HON'BLE GUJARAT HIGH C OURT DECISION IN DHALL ENTERPRISES AND ENGINEERS PVT. LTD. [295 ITR 481] FOR HIS PROPOSITI ON THAT THE A.O. WAS EXPECTED TO EXAMINE WHAT EFFORTS WERE MADE BY THE ASSESSEE FOR EFFECTIN G RECOVERY OF THOSE THREE DEBTS TOTALING RS. 13.54 CRORES. ITA NO.1721/AHD/2009 APPLITECH SOLUTION LIMITED ASST.YEAR -2004-05 - 3 - 8. FURTHER IN PARA MARKED 5.1 ITSELF, THE LD. CIT HAS FURTHER OPINED AS FOLLOWS:- '5.1............THE A.O. DID CALL FOR DETAILS OF BA D DEBTS WRITTEN OFF BUT ACCEPTED THE CLAIM OF BAD DEBTS IN RESPECT OF THESE THREE PARTIES TOTA LING RS. 13.54 CRORES, WITHOUT GIVING ANY REASONS AS TO WHY HE WAS ACCEPTING THE SAME.. IT IS SUBMITTED THAT AFTER CALLING FOR THE DETAILS AND EXAMINING THEM, WHEN AN ASSESSING OFFICER FINDS THE ASSESSEE'S CASE VALID AND ACCEPTABLE, HE IS NOT SUPPOSED TO RECORD REASONS IN THE ASSESSMENT ORDER FOR ACCEPTING SUCH CLAIM. BE AS IT MAY, IT IS CERTAINLY NOT THE DEPARTMENT'S PRACTICE AND PERHAPS, FOR GOOD REASONS. 9. THEN, IN PARA MARKED 5.2, THE IMPUGNED REVISIONAL ORDER REPRODUCES A PART OF THE HON. GUJARAT HIGH COURT DECISION IN THE AFORESAID CASE O F DHALL ENTERPRISES AND ENGINEERING PVT. LTD IT IS SUBMITTED THAT EVEN IN THOSE QUOTES THERE IS VER Y SIGNIFICANT POINT, WHICH IS SPECIFICALLY STATED BY THE HON. GUJARAT HIGH COURT. IT IS CONTAINED IN THE FOLLOWING SENTENCE - 'BUT, WHEN CORRESPONDENCE WAS THERE TO THE EFFECT T HAT THE ASSESSEE WAS INSISTING FOR PAYMENT FOR RECOVERY OF THE DEBT, IT CANNOT BE SAID THAT THE DEBT HAS BECOME BAD IN THE RELEVANT ASSESSMENT YEAR.' IT IS SUBMITTED THAT FOR UNDERSTANDING THE REAL MEA NING OF THAT PART OF THE HON'BLE GUJARAT HIGH COURT DECISION IN DHALL ENTERPRISES AND ENGINEERS P VT. LTD. [295 ITR 481] WHICH IS REPRODUCED IN PARA MARKED 5.2 OF THE IMPUGNED REVISIONAL ORDER, T HE WHOLE OF THAT PART NEEDS TO BE READ TOGETHER. THE LD. CIT HAS TRIED TO TEAR, OUT OF CON TEXT, FIRST THREE SENTENCES THEREOF WHICH ARE AS FOLLOWS:- 'EVEN IF WE GO BY THE PLAIN READING OF CLAUSE (VII) , THE REQUIREMENT FOR ALLOWING DEDUCTION ON ACCOUNT OF BAD DEBTS IS THAT THE BAD D EBTS SHOULD BE WRITTEN OFF AS IRRECOVERABLE. MERELY DEBITING THE AMOUNT IS NOT SU FFICIENT. THE REQUIREMENT IS THAT THE ASSESSEE SHOULD ALSO PROVE THAT THE DEBT HAS BECOME BAD IN THAT PARTICULAR YEAR. ...' IT IS SUBMITTED THAT THOSE THREE SENTENCES HAVE TO BE READ AND UNDERSTOOD ALONG WITH AND IN THE CONTEXT OF THE LATER PART WHICH IS AS FOLLOWS:- '. . . .AS POINTED OUT RIGHTLY BY THE TRIBUNAL, THERE WAS CORRESPONDENCE REGARDING THE AMOUNT IN QUESTION THAT DUE TO SOME DIFFERENCES, TH E AMOUNT WAS NOT PAID IN THAT PARTICULAR YEAR. BUT WHEN CORRESPONDENCE WAS THERE TO THE EFFECT THAT THE ASSESSEE WAS INSISTING FOR PAYMENT OF RECOVERY OF THE DEBT, IT C ANNOT BE SAID THAT THE DEBT HAS BECOME BAD IN RELEVANT ASSESSMENT YEAR. WE, THEREFORE, SEE NO INFIRMITY IN THE ORDER OF TH E TRIBUNAL AND WE ANSWER THE FIRST QUESTION AGAINST T HE ASSESSEE.' [EMPHASIS SUPPLIES] IT IS SUBMITTED THAT WHEN BOTH THESE PARTS ARE READ TOGETHER, THE MEANING TO BE ASSIGNED IS THAT IF THERE IS EVIDENCE ON RECORD THAT DUE TO SOME DIFFER ENCES THE AMOUNT WAS NOT PAID IN THAT PARTICULAR YEAR AND THE ASSESSEE WAS INSISTING ON RECOVERY OF THE DEBT, IT CANNOT BE SAID THAT THE DEBT HAD BECOME BAD AND MERELY DEBITING THE AMOUNT IS NOT SU FFICIENT AND IT CANNOT BE HELD THAT THE BAD DEBT HAD BEEN WRITTEN OFF. 10. BE, AS IT MAY, THERE ARE HON'BLE GUJARAT HI GH COURT DECISIONS SUPPORTING THE ASSESSEE'S VIEW AND THEY ARE NOTED ALSO AT THE TOP OF PAGE-5 O F THE IMPUGNED REVISIONAL ORDER. THEY ARE AS FOLLOWS:- I) IN - GIRISH BHAGWATPRASAD [256 ITR 772] II) IN PATIDAR GINNING AND PRESSING COMPANY [ 157 CTR 177]. 11. WITHOUT PREJUDICE TO THE ASSESSEE'S MAIN CONTEN TION THAT EVEN THE GUJARAT HIGH COURT DECISION IN DHALL ENTERPRISES AND ENGINEERS PVT. LTD. [295 I TR 481] DOES NOT MANDATE THAT THE ASSESSING OFFICER SHOULD NECESSARILY MAKE ENQUIRIES AS TO WHA T EFFORTS WERE MADE BY THE ASSESSEE TO EFFECT RECOVERY OF RELEVANT DEBTS, IT IS SUBMITTED THAT TH ERE ARE CBDT INSTRUCTIONS [REFER CIRCULAR NO. 551 ITA NO.1721/AHD/2009 APPLITECH SOLUTION LIMITED ASST.YEAR -2004-05 - 4 - DT. 23-1-1990] AND REPORTED DECISIONS [INCLUDING TH OSE OF GUJARAT HIGH COURT] WHICH SUPPORT THE ASSESSEE'S CLAIM. THEY ARE NOTICED IN PARA MARKED 5 .2 OF THE IMPUGNED REVISIONAL ORDER BUT ASSESSEE'S RELIANCE THEREON HAS NOT BEEN DISPELLED IN THE IMPUGNED REVISIONAL ORDER. 12. WITHOUT PREJUDICE, IT IS SUBMITTED THAT EVEN IF IT IS REGARDED AS A POINT AKIN TO THAT OF A CLEAVAGE OF JUDICIAL OPINION, A VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE PREFERRED. 13. ACTUALLY, THE LD. CIT CITES TWO ITAT DECISI ONS IN PARA 6 OF THE IMPUGNED REVISIONAL ORDER PRESUMABLY FOR COUNTER BALANCING THE ASSESSEE'S REL IANCE ON THE CIRCULAR AND DECISIONS CITED BY THE ASSESSEE AND NOTICED IN PARA MARKED 4.2 OF THE IMPU GNED REVISIONAL ORDER. THEY ARE DATED 12-9- 2008 AND 7-11-2008. AS AGAINST THOSE TWO DECISIONS, WE NOW HAVE THE BENEFIT OF ITAT AHMEDABAD STILL LATER DECISION DATED 27-2-2009 IN A CONSOLIDATED ORDER FOR 35 APPEALS AND CROSS OBJECTIONS WHEREIN THE FIRST ORDER IS IN RESPECT OF ACIT VS. H. NYALCHAND FINANCIAL SERVICES IN APPEAL NO. 2631/A/2004 FOR ASSESSMENT YEAR 2001-02. THEREIN, THE ASSESSEE'S ACT OF WRITING OFF THE DEBTS IN THE BOOKS HAS BEEN REGARDED AS A GOOD EVIDENCE BY RELYING PRIMARILY ON THE BOMBAY HIGH COURT DECISION IN LORD DAIRY FARM LTD. VS. CIT (1955) 27 ITR 700 [BOM] BY ACCEPTING THE ASSESSEE'S PLEA THAT THAT DECISION WAS RENDERED BY THE BOMBAY HIGH COURT WHEN THE GUJARAT REGION FELL IN THE JURISDICTION OF THE BOMBAY HIGH COURT AND THAT DECISION IN LORD DAIRY FARM LTD. VS. CIT WAS REQUIRED TO BE FOLLOWED. 14. WITHOUT PREJUDICE, IT IS SUBMITTED THAT THE RE IS YET ANOTHER ASPECT OF THE MATTER. THE DECISIONS CITED BY LD. CIT ARE FOR TAKING A VIEW IN THE ORIGINAL ASSESSMENT PROCEEDINGS BUT IN THE CASE BEFORE US, WE HAVE TO EXAMINE ALSO THE APPLICA BILITY OF SECTION 263 FOR GIVING JURISDICTION TO THE CIT FOR REVISING AN ALREADY COMPLETED ASSESSMEN T. BY NOW QUITE A FEW BINDING DECISIONS ARE AVAILABLE WHICH SPELL OUT THE PARAMETERS AND LIMITA TIONS OF SECTION 263. THE POSITION IS THAT IF THE ASSESSING OFFICER HAS TAKEN ONE POSSIBLE VIEW SECTI ON 263 WILL NOT APPLY ONLY BECAUSE THE CIT HOLDS ANOTHER POSSIBLE VIEW. IN THE INTEREST OF BRE VITY, WE NEED REFER ONLY TO THE GUJARAT HIGH COURT DECISION IN COMMISSIONER OF INCOME-TAX VS. AR VIND JEWELLERS (2002) 177 CTR 546 (GUJ.) (259 ITR 502). THEREIN THE HON'BLE GUJARAT HIGH COU RT ANALYZED IN GREAT DETAIL AND IN GREAT DEPTH THE SUPREME COURT DECISION IN THE CASE OF MALABAR I NDUSTRIAL CO. LTD., VS. COMMISSIONER OF INCOME-TAX (2000) 243 ITR 83 (SC), AND THEN IN PARA 6 ON PAGE 549 OF THE REPORTS (177 CTR) RECORDED AS FOLLOWS: '6. FROM THE ABOVE OBSERVATIONS MADE BY THE SUPREME COURT, IT IS CLEAR THAT THE PROVISIONS OF S. 263 CANNOT BE INVOKED TO CORRECT E ACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED AND INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. THE SUPREME COURT HAS ALSO MADE IT CLEAR THAT THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER AND THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSI NG OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. IT WAS FURTHER EMPHATICALLY STATED THAT WHEN AN ITO ADOPTS ONE OF THE COURSES PERMISSI BLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY T HE ITO IS UNSUSTAINABLE IN LAW.' (EMPHASIS SUPPLIED) 15. THE HON. GUJARAT HIGH COURT HAS REITERATED THIS VIEW RATHER RECENTLY ALSO IN CIT VS. NIRMA CHEMICAL WORKS PVT. LTD. (2009) 309 ITR 67 (GUJ)) 16. THUS, THE POSITION THAT EMERGES IS AS FOLLOW S - ; (I) THE LD. CIT'S RELIANCE ON THE GUJARAT HIGH COURT DECISION IN DHALL ENTERPRISES AND ENGINEERS PVT. LTD. (295 ITR 481) IS NOT VALID AND AT ANY RATE, THERE ARE CIRCULARS AND DECISIONS (INCLUDING THOSE OF THE HON. GUJARAT HIGH COURT) WHICH SUPPORT THE ASSESSEE'S VIEW. ITA NO.1721/AHD/2009 APPLITECH SOLUTION LIMITED ASST.YEAR -2004-05 - 5 - (II) THUS, EVEN IF IT IS TREATED AS A CASE AKIN TO THAT OF CLEAVAGE OF JUDICIAL OPINION, A VIEW FAVOURABLE TO THE ASSESSEE NEEDS TO BE ADOPTED . (III) IN THIS CASE, THE JURISDICTIONAL ASPECT OF SE CTION 263 IS ALSO INVOLVED. THE ASSESSING OFFICER HAS TAKEN A VIEW WHICH IS NOT ONL Y REASONABLE, BUT ALSO REASONABLY CORRECT THE PROVISIONS OF SECTION 263 ARE NOT APPLI CABLE. HENCE, THE IMPUGNED REVISIONAL ORDER U/S. 263 DATED 24.3.2009 DESERVES TO BE CANCELLED. 17. WITHOUT PREJUDICE TO THE ASSESSEE'S MAIN SUB MISSION THAT THE IMPUGNED REVISIONAL ORDER IS BAD IN LAW AND DESERVES TO BE CANCELLED, IT IS SUBM ITTED THAT IN HIS FINAL DIRECTION, THE LD. CIT ERRED IN BINDING THE ASSESSING OFFICER TO THE HON'B LE GUJARAT HIGH COURT DECISION IN DHALL ENTERPRISES AND ENGINEERS PVT. LTD. (295 ITR 481) [ IN PLACE OF LEAVING HIM FREE TO DECIDE 'AS PER LAW'], MORE PARTICULARLY BECAUSE THE CIT HAD ALREAD Y EXPRESSED A VIEW ON THAT DECISION. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND ARGUED IN SUPPORT OF THE ORDER OF THE CIT AND SUBMITTED IT WI LL BE OBSERVED FROM THE ORDER OF THE LEARNED ASSESSING OFFICER THAT THERE IS NO D ISCUSSION ABOUT THE BAD DEBTS OF RS.13.54 CRORES IN RESPECT OF THREE PARTIES. THU S, IT IS CLEAR THAT NO VERIFICATION OR INQUIRY WAS CARRIED OUT BY THE LEARNED ASSESSING OFFICER BEFORE ALLOWING THE CLAIM FOR BAD DEBT OF RS.13.54 CRORES. RELYING ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISES AND ENGINEERS PVT. LTD.[295 ITR 481], IT WAS ARGUED THAT EVEN AFTER THE AMENDME NT MADE TO SECTION 36(1)(VII) FROM ASSESSMENT YEAR 1989-90, THE ASSESSEE IS REQUI RED TO PROVE THAT THE DEBT CLAIMED TO HAVE BEEN WRITTEN OF AS BAD HAS IN FACT BECOME IRRECOVERABLE. SINCE, NO SUCH VERIFICATION OR INQUIRY WAS CARRIED OUT THE REFORE, THE CIT WAS JUSTIFIED IN SETTING ASIDE THE ORDER OF THE LEARNED ASSESSING OF FICER AND REMANDING THE MATTER BACK TO HIS FILE FOR PROPER VERIFICATION BY INVOKING JURISDICTION UNDER SECTION 263 OF THE ACT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) PASSED ORDER UN DER SECTION 263 ON THE GROUND THAT THE LEARNED ASSESSING OFFICER ALLOWED C LAIM OF BAD DEBT OF RS.13.54 CRORES BY THE ASSESSEE WITHOUT VERIFICATION AND THE REFORE, THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER WAS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE. THE CIT IN VIEW OF THE ABOVE FINDING, SET ASIDE THE ORDER OF THE LEARNED ITA NO.1721/AHD/2009 APPLITECH SOLUTION LIMITED ASST.YEAR -2004-05 - 6 - ASSESSING OFFICER WITH THE DIRECTION TO REFRAME THE ASSESSMENT AFTER DUE VERIFICATION. 5. WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE C LAIMED BAD DEBT OF RS.16,62,47,546/-. DURING THE COURSE OF THE ASSESSM ENT HEARING, THE LEARNED ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH DET AILS OF BAD DEBTS OF RS.16,62,47,546/-. THE ASSESSEE FURNISHED DETAILS O F BAD DEBTS OF RS.13,53,71,405/- WHICH RELATED TO THREE PARTIES BY FURNISHING COPY OF LEDGER ACCOUNT OF THE SAID THREE PARTIES AND DID NOT PRODU CE DETAILS OF REMAINING BAD DEBT OF RS.3,08,76,140/-. THE LEARNED ASSESSING OFF ICER THEREFORE, DISALLOWED THE CLAIM OF RS. 3,08,76,140/- AND ALLOWED THE CLAI M OF BAD DEBT OF RS.13,53,71,405/-. WE THUS, FIND THAT THE CLAIM OF RS. 13,53,71,405/- AS BAD DEBT WAS ALLOWED BY THE LEARNED ASSESSING OFFICER AFTER APPLICATION OF HIS MIND. IT IS NOT A CASE WHERE THE LEARNED ASSESSING OFFICER WAS NOT ALIVE TO THE FACT OF THE CLAIM MADE BY THE ASSESSEE. WE FIND THAT NO MATERIA L WAS BROUGHT ON RECORD BY THE CIT TO SHOW THAT ANY AMOUNT WAS RECOVERED BY TH E ASSESSEE FROM THE ABOVE DEBTORS IN RESPECT OF WHICH BAD DEBT OF RS. 13,53,7 1,405/- WAS CLAIMED BY THE ASSESSEE OR ANY MATERIAL TO SHOW THAT THERE WAS FAI R CHANCE OF RECOVERY FROM THE SAID THREE PARTIES. IN ABSENCE OF ANY SUCH MATERIAL BROUGHT ON RECORD AND KEEPING IN VIEW THE FACT THAT THE CLAIM WAS PARTLY ACCEPTED BY THE LEARNED ASSESSING OFFICER OF THE BAD DEBTS AFTER APPLYING HIS MIND TO THE FACTS OF THE CASE IN OUR CONSIDERED VIEW, SUCH ORDER PASSED BY THE LEARNED A SSESSING OFFICER CANNOT BE HELD AS ERRONEOUS. IT IS NOT THE CASE OF THE REVENU E THAT THE CLAIM OF BAD DEBT OF RS. 13,53,71,405/- ACCEPTED BY THE LEARNED ASSESSIN G OFFICER AFTER EXAMINING THE DETAILS AS FURNISHED BY THE ASSESSEE COULD NOT HAVE BEEN ACCEPTED BY THE LEARNED ASSESSING OFFICER WITHIN THE FRAMEWORK OF T HE LAW. AS A POSSIBLE VIEW WAS TAKEN BY THE LEARNED ASSESSING OFFICER AFTER AP PLYING HIS MIND TO THE FACTS OF THE CASE, IN OUR CONSIDERED OPINION, THE ORDER O F THE LEARNED ASSESSING OFFICER CANNOT BE HELD AS ERRONEOUS OR PREJUDICIAL TO THE I NTEREST OF THE REVENUE SIMPLY FOR THE REASON THAT IN THE OPINION OF THE CIT MORE FURTHER INQUIRES SHOULD HAVE BEEN MADE BY THE LEARNED ASSESSING OFFICER BEFORE A CCEPTING THE CLAIM OF THE ASSESSEE. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED ITA NO.1721/AHD/2009 APPLITECH SOLUTION LIMITED ASST.YEAR -2004-05 - 7 - VIEW CIT WAS NOT JUSTIFIED IN PASSING THE IMPUGNED ORDER UNDER SECTION 263 OF THE ACT. WE THEREFORE, SET ASIDE THE ORDER OF THE C IT PASSED UNDER SECTION 263 OF THE ACT AND ALLOW THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 7. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 23/10/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 23/10/2009 PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD