The DCITBharuch Circle, Bharuch V. M/s. Pragati Glass Pvt.Ltd., Bharuch

ITA 2029/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2336 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 10-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KAUR SRDR
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.2029/AHD/2010 ASSESSMENT YEAR :2003-04 DATE OF HEARING:7.1.11 DRAFTED:12..1.11 DCIT, BHARUCH CIRCLE, BHARUCH V/S . PRAGATI GLASS WORKS PVT. LTD. KOSAMBA (R.S) DIST.BHARUCH, PAN NO.AABCP7377H (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT. SUMIT KAUR, SR-DR RESPONDENT BY:- SHRI SURENDRA MODIANI, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VI, BARODA IN APPEAL NO.CAB/VI -378/08-09 DATED 22-03-2010. THE ASSESSMENT WAS FRAMED BY DCIT, BHARUCH CIRCLE, BHARUCH U/S143(3) R.W.S 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) VIDE HIS ORDER DATED 19-12-2008 FOR ASSESSMENT YEAR 2003-04. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF BAD DEBTS. FOR THIS, R EVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF BAD DE BTS OF RS.32,19,688/-. 1(II) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE DEBTS WHICH WERE WRITTEN OFF ARE IN RESPECT OF EXISTING PHARMACEUTICAL COMPANIES AND THE DEBTOR COMPANIES ARE STILL PURCHASING THE MATERIAL FROM TH E ASSESSEE COMPANY. FURTHER, AS HELD BY THE HON. GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD ELECTRICITY COMPANY VS. CIT. (262ITR 97), BEFORE AL LOWANCE OF BAD DEBTS, IT IS ITA NO.2029/AHD/2010 A.Y.2003-04 DCIT, BHARUCH CIRCLE V. PRAGATI GLASS WORKS PVT. LTD . PAGE 2 NECESSARY THAT ASSESSEE TAKES ALL LEGAL ACTIONS AGA INST THE DEBTOR COMPANIES. HOWEVER, THE ASSESSEE FAILED TO DO SO. HENCE, THE A O WAS RIGHT IN DISALLOWING THE ASSESSEES CLAIM OF BAD DEBTS OF RS.32,19,688/- . 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE, SHRI SURENDRA MODIANI STATED THAT THIS IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF T.R.F. LIMITED V. COMMISSIONER OF INCOME TAX [2010] 323 ITR 397 (SC) WHEREIN IT IS HELD THAT THE DISALLOWANCE OF BAD DEB TS ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED SUFFICIENT EVIDENCE TO SHOW THAT R EASONABLE STEPS WERE TAKEN TO RECOVER THE DEBT. HOWEVER, THERE IS NO DISPUTE THA T THE ABOVE AMOUNT WAS DULY WRITTEN OF IN THE ASSESSEES BOOKS OF ACCOUNT. ON THE ABOVE FACTS THE DECISION OF HONBLE APEX COURT IN THE CASE OF T.R.F. LIMITED (SUPRA) WOULD BE SQUARELY APPLICABLE WHEREIN, THEIR LORDSHIPS HELD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE IN COME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DED UCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTA BLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE : IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. ON THE OTHER HAND, LD. SR-DR RELIED ON THE ASSESSME NT ORDER. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS OF THE CASE. WE FIND THAT THERE IS CATEGORICAL FINDING BY CIT(A) AND THE BAD DEBTS ARE WRITTEN OFF FOR VARIOUS REASONS INCLUDING THE FOLLOWING:- CUSTOMER HAS DISCONTINUED BUSINESS. GOODS ARE REJECTED CUSTOMER IS FACING FINANCIAL PROBLEMS. PARTY IS NOT TRACEABLE. PARTY IS NOT RESPONDING TO RECOVERY ATTEMPTS. CUSTOMER HAS GRIEVANCE IN RESPECT OF QUALITY. THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE BY GIVING FOLLOWING FINDINGS IN PARA-4.3 OF HIS APPELLATE ORDER:- 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A .R. THE FACTS OF THE CASE AND THE JUDICIAL DECISIONS CITED. WHILE ASSESSEE HA S MADE OUT A GOOD CASE FOR ESTABLISHING THAT THE DEBTS BECAME BAD, EVEN OTHERW ISE, THE RECENT DECISION OF SUPREME COURT IN THE CASE OF TRF LIMITED IS CLEA R THAT FOR ALLOWANCE OF BAD DEBS, WRITING OFF THE DEBTS IN THE BOOKS OF ACCOUNT IS SUFFICIENT AND IT IS NO ITA NO.2029/AHD/2010 A.Y.2003-04 DCIT, BHARUCH CIRCLE V. PRAGATI GLASS WORKS PVT. LTD . PAGE 3 LONGER NECESSARY TO ESTABLISH THAT THE DEBT IS BAD. HENCE THE DISALLOWANCE ON THIS GROUND IS DELETED. WE FIND THAT CIT(A) HAS FOLLOWED THE DECISION OF HO NBLE APEX COURT IN THE CASE OF TRF LTD. (SUPRA) AND ASSESSEE HAS ACTUALLY BEEN WRITE OFF I N ITS BOOKS OF ACCOUNT AND THIS FACT HAS ALSO BEEN ADMITTED BY ASSESSING O FFICER. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND RESPECTFULLY F OLLOWING THE ABOVE DECISION OF THE HONBLE APEX COURT, CONFIRM THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) ON THIS POINT AND DISMISS THIS GROUND OF THE REVENU ES APPEAL. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13/012011 SD/- SD/- (D.C.AGRAWAL) (MAHAVI R SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 13/01/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-VI, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD