M/s. Desti Chemi Metal Works, Bilimora V. The Dy.CIT.,Navsari Circle, Navsari

ITA 2034/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6825 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 18-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 25-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAVAL
• Keywords: Bad and doubtful debts; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.2034/AHD/2009 A. Y.: 2006-07 M/S. DISTI CHEMI METAL WORKS, SADANAND MILLS COMPOUND, GANDEVI ROAD, BILIMORA 396321 VS THE D. C. I. T., NAVSARI CIRCLE, RANGPUJA, SWAPNALOK COMPLEX, NEAR KALIAWADI BRIDGE, GRID ROAD, NAVSARI PA NO. AABFD 7980 P (APPELLANT) (RESPONDENT) APPELLANT BY WRITTEN SUBMISSIONS RESPONDENT BY SHRI ROBIN RAVAL, SR. DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A), V ALSAD DATED 26 TH MARCH,2009 FOR ASSESSMENT YEAR 2006-07. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE. WRITTEN SUBMISSION IS FORWARDED WHICH IS TAKEN INTO CONSIDERATION. 3. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FIN DINGS OF THE AUTHORITIES BELOW. 4. ON ISSUE NO.1, THE ASSESSEE CHALLENGED THE DISAL LOWANCE OF BAD DEBTS OF RS.9,36,173/- . THE ASSESSEE HAS WRITT EN OFF THE DEBTS DUE FROM TWO PARTIES NAMELY M/S. HIRA CHEMICAL INDU STRIES ITA NO.2034/AHD/2009 M/S. DISTI CHEMI METAL WORKS VS DCIT, NAVSARI CIRCL E, NAVSARI 2 NANDARBAR, MAHARASTRA RS.5,29,550/- AND M/S. RAJ LA XMI PETRO PVT. LTD., LATUR RS.3,96,623/- (RS.9,36,173/-). THE AO DISALLOWED THE ASSESSEES CLAIM AS HE WAS NOT SATISFIED WITH THE G ENUINENESS OF THE CLAIM. THE AO OBSERVED THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE SAID DEBTS HAVE BECOME BAD IN THE YEAR UNDER RE FERENCE. THE AO ALSO NOTED THAT THE ASSESSEE HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE THAT SUCH DEBTS ARE IRRECOVERABLE. THE AO HAS ALSO NOTED THAT THE ASSESSEE COULD NOT FURNISH THE PROOF OF IT S EFFORTS FOR RECOVERY OF THE ABOVE DUES. IN THE ABSENCE OF EVIDENCE, THE ADDITION WAS MADE. THE LEARNED CIT(A) ALSO CONFIRMED THE ADDITIO N. 5. THE ASSESSEE IN THE WRITTEN SUBMISSION STATED TH AT THE ISSUE IS NOW COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. 35 DTR 154. IT WAS ALSO STATE D THAT IN THE ASSESSMENT YEAR 2005-06, THE TRIBUNAL ALLOWED SIMIL AR CLAIM OF THE ASSESSEE IN ITA NO.4132/AHD/2008 DATED 11-06-2010. COPY OF THE ORDER IS FILED. THE LEARNED DR DID NOT DISPUTE THE ABOVE PROPOSITION OF LAW. 6. ON CONSIDERATION OF THE ABOVE FACTS WE ARE OF TH E VIEW THE ISSUE IS NOW COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. (SUPRA) IN WHICH IT WAS H ELD AS UNDER: THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH 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. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE ITA NO.2034/AHD/2009 M/S. DISTI CHEMI METAL WORKS VS DCIT, NAVSARI CIRCL E, NAVSARI 3 DEBT HAS, IN FACT, BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS WRITTEN OFF THE ABOVE BAD DEBTS AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSES SEE FOR THE PREVIOUS YEAR AS PER SECTION 36 (1) (VII) OF THE IT ACT. SIMILAR CLAIM OF THE ASSESSEE HAS BEEN ALLOWED BY THE TRIBUNAL IN TH E PRECEDING ASSESSMENT YEAR 2005-06. IN VIEW OF THE ABOVE, WE S ET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDI TION. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 7. ON ISSUE NO.2, THE ASSESSEE CHALLENGED THE DISAL LOWANCE OF RS.23,527/- BEING 20% OF THE OFFICE EXPENSES, POSTA GE AND COURIER ETC. THE AO DISALLOWED 20% OF THE ABOVE EXPENDITURE BECAUSE THE ASSESSEE COULD NOT PRODUCE THE VOUCHERS AND FORMAL EVIDENCE ON THESE SMALL EXPENSES. THE ASSESSEE STATED IN THE WR ITTEN SUBMISSION THAT IN THE PRECEDING ASSESSMENT YEAR 2005-06, THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE TO 5% ON THE SAME ISSUE WHICH IS CONFIRMED BY THE TRIBUNAL VIDE ORDER DATED 11-06-20 11(SUPRA). IT IS, ITA NO.2034/AHD/2009 M/S. DISTI CHEMI METAL WORKS VS DCIT, NAVSARI CIRCL E, NAVSARI 4 THEREFORE, PLEADED THAT ADDITION IS EXCESSIVE. ON C ONSIDERATION OF THE ABOVE FACTS, WE FIND THAT IN THE PRECEDING ASSESSME NT YEAR THE LEARNED CIT(A) RESTRICTED THE ADDITION ON THIS ISSU E AT 5% OF THE TOTAL EXPENDITURE AND THE TRIBUNAL DISMISSED THE GROUND O F APPEAL OF THE ASSESSEE. THEREFORE, IN THE ASSESSMENT YEAR UNDER A PPEAL, THE ADDITION APPEARS TO BE EXCESSIVE. WE ACCORDINGLY, M ODIFY THE ORDERS OF THE AUTHORITIES BELOW AND RESTRICT THE DISALLOWA NCE TO 5% AS IS CONSIDERED IN THE PRECEDING ASSESSMENT YEAR 2005-06 . THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. ON ISSUE NO.3, THE ASSESSEE CHALLENGED THE DISAL LOWANCE OF RS.20,828/- ON ACCOUNT OF WAGES. THE AO DISALLOWED 2% OUT OF THE WAGES ETC. BECAUSE THE ASSESSEE COULD NOT PRODUCE V OUCHERS AND FORMAL EVIDENCES AND FURTHER IN THE ABSENCE OF SUPP ORTING EVIDENCES THE EXPENDITURE COULD NOT BE SUBJECTED TO VERIFICAT ION. THE LEARNED CIT(A) CONFIRMED THE ADDITION. CONSIDERING THE ABOV E FACTS AND SMALLNESS OF THE EXPENDITURE, WE DO NOT FIND ANY ME RIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. THE AUTHORITIES BELOW AL LOWED 2% OUT OF THE TOTAL EXPENDITURE BECAUSE SUPPORTING EVIDENCES WERE NOT FURNISHED AND PRODUCED FOR VERIFICATION. NO EVIDENC E OR MATERIAL IS FILED BEFORE US AND NOTHING IS STATED IN THE WRITTE N STATEMENT. THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 9. ON THE LAST ISSUE, THE ASSESSEE CHALLENGED CHARG ING OF INTEREST WHICH IS MANDATORY AND CONSEQUENTIAL IN NATURE AND IS ACCORDINGLY REJECTED. ITA NO.2034/AHD/2009 M/S. DISTI CHEMI METAL WORKS VS DCIT, NAVSARI CIRCL E, NAVSARI 5 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-04-2011 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 21-04-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD