Balkrishna Textile Pvt.Ltd., Ahmedabad V. The Addl.CIT.,Range-I, Ahmedabad

ITA 1724/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2124 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER) ITA NO.1724/AHD/2009 [ASSTT. YEAR : 2005-2006] DICTATED ON: 20-01-2011 BALKRISHNA TEXTILE PVT. LTD. BOMBAY HIGHWAY, NAROL AHMEDABAD. VS. ACIT, RANGE-1 AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.N.DIVETIA REVENUE BY : SHRI K. MADHUSUDAN O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (A)-VI, AHMEDABAD DATED 27.01.2009 ARISING OUT OF THE ORDER OF THE AS SESSING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. IN THIS APPEAL BY THE ASSESSEE SEVERAL GROUNDS A RE RAISED. HOWEVER, THEY ARE ALL AGAINST THE DISALLOWANCE OF RS.28,44,3 36/- CLAIMED BY THE ASSESSEE AS BAD DEBTS/DISCOUNT. 3. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE STATED THAT THE SUM OF RS.26,75,974/- IS B EING CLAIMED AS BAD DEBTS AND SUM OF RS.1,68,362/- IS BEING CLAIMED AS DISCOUNT/DEDUCTION BY THE PARTIES; THAT THE DEDUCTION FOR BAD DEBTS CLAIM ED IN THE ACCOUNT OF FOUR PARTIES ARE AS UNDER: I) AARTI TRADERS : RS.12,23,366/- II) GAUTAM CORPORATION : RS.3,47,339/- III) MEET ENTERPRISES : RS.4,04,077/- IV) RUPAL ENTERPRISES : RS.7,01,192/-. ITA NO.1724/AHD/2009 -2- THAT THE AO DISALLOWED THE CLAIM OF BAD DEBTS ON TH E GROUND THAT THE ASSESSEE WAS UNABLE TO ESTABLISH THAT THE AMOUNT HA S BECOME BAD DEBT DURING THE YEAR UNDER CONSIDERATION. HE HAS STATED THAT THE HONBLE APEX COURT HAS CONSIDERED IDENTICAL ISSUE IN THE CASE OF TRF LTD. VS. CIT, 323 ITR 397 WHEREIN THEIR LORDSHIPS HAVE HELD THAT IT I S NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT HAS IN FACT BEC OME IRRECOVERABLE. IF THE ASSESSEE WRITES OFF THE AMOUNT AS IRRECOVERABLE, HE IS ENTITLED TO DEDUCTION. WITH REGARD TO THE CLAIM OF DISCOUNT, I T IS STATED THAT IN RESPECT OF SMALL AMOUNTS, THE RECOVERY COULD NOT BE MADE FR OM THE FOLLOWING PARTIES: 1. CHITALIYA EXPORTS : RS.7,367/- 2. GENERAL EXPORTS ENTERPRISES : RS.42,280/- 3. HITESH ENTERPIRSE : RS.5,490/- 4. FLEG SHOP : RS.12,669/- 5. VIKRAM PRINTS : RS.5,160/- 6. K.M. TEXTILES : RS.47,334/- 7. K. VINODCHANDRA ` : RS.21,446/- 8. SHANTILAL PHOOTARMAL : RS.26,616/- TOTAL : RS.1,68,362/- THAT THESE AMOUNTS WERE DEDUCTED BY THE BUYER ON AC COUNT OF VARIOUS DISCOUNTS VIZ. CASH DISCOUNT/INFERIOR QUALITY OF GO ODS SUPPLIED. HE THEREFORE SUBMITTED THAT THE SUM OF RS.26,75,974/- BE ALLOWED AS BAD DEBTS AND THE SUM OF RS.1,68,362/- BE ALLOWED AS DI SCOUNT/DEDUCTION. 4. THE LEARNED DR, ON THE OTHER HAND, HEAVILY RELIE D UPON THE ORDERS OF THE AUTHORITIES. 5. WE HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH T HE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE ISSUE OF BAD DEBT ITA NO.1724/AHD/2009 -3- IS CONSIDERED BY THE HONBLE APEX COURT IN THE CASE OF TRF LTD. (SUPRA) WHEREIN THEIR LORDSHIPS HELD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO O BTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR T HE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECO VERABLE : IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. FROM THE ABOVE, IT IS EVIDENT THAT FOR CLAIMING DED UCTION IN RELATION TO BAD DEBT, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTAB LISH THAT THE DEBT HAD IN FACT BECOME IRRECOVERABLE. THE ASSESSEE IS ENTITLE D TO DEDUCTION IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACC OUNTS OF THE ASSESSEE. IN THE CASE UNDER APPEAL BEFORE US, THERE IS NO DISPUT E THAT THE DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSE E. THE AO DISALLOWED THE CLAIM SOLELY ON THE GROUND THAT THE ASSESSEE WA S NOT ABLE TO ESTABLISH THAT THE DEBT HAD IN FACT BECOME IRRECOVERABLE. ON THE ABOVE FACTS, THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF T RF LTD. (SUPRA) WOULD BE SQUARELY APPLICABLE. RESPECTFULLY FOLLOWI NG THE SAME, WE DIRECT THE AO TO ALLOW THE ASSESSEES CLAIM OF BAD DEBTS A MOUNTING TO RS.26,75,974/-. 6. WITH REGARD TO THE CLAIM FOR DEDUCTION/DISCOUNT, WE FIND THAT APART FROM MAKING A STATEMENT THAT THESE WERE DEDUCTIONS MADE BY THE PARTIES, ON ACCOUNT OF CASH DISCOUNT OR FOR INFERIOR QUALITY OF GOODS, NO EVIDENCE IN SUPPORT OF THE CLAIM HAS BEEN FURNISHED. IT IS NOT IN DISPUTE THAT FOR CLAIMING DEDUCTION OF ANY AMOUNT, AS BUSINESS EXPEN DITURE OR BUSINESS LOSS, THE ONUS IS UPON THE ASSESSEE TO ESTABLISH TH AT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS OR THE LOSS WA S INCURRED DURING THE COURSE OF BUSINESS. THE ASSESSEE HAS NOT FURNISHED ANY PARTICULARS WITH ITA NO.1724/AHD/2009 -4- REGARD TO THE CLAIM OF DISCOUNT. IN FACT ORIGINALL Y, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.1,68,362/- ALSO AS BAD DEBT WHEN THE AO POINTED OUT THAT IN RESPECT OF THESE PARTIES, THE ASSESSEE WAS HAVING REGULAR TRANSACTION EVEN DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE CHANGED ITS STAND BEFORE THE CIT(A) AND CLAIMED THE SAME AS DISCOUNT. BE THAT AS IT MAY, THE ASSESSEE WAS UNABLE TO ESTAB LISH ITS CLAIM OF ALLOWABILITY OF DISCOUNT/DEDUCTION. WE THEREFORE S USTAIN THE ADDITION TO THE EXTENT OF RS.1,68,362/-. 7. IN RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 28 TH JANUARY, 2011 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 28-01-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD