The DCIT,(OSD)Circle-8, Ahmedabad V. Shree Prakash Textile Guj. Pvt. Ltd., Ahmedabad

ITA 2045/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2180 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-01-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 26-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANAND P SHAH
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND T.K. SHARMA, JUDICIAL MEMBER) ITA NO.2045/AHD/2009 [ASSTT. YEAR : 2003-2004] DCIT (OSD), CIR.8 AHMEDABAD. VS. SHRI PRAKASH TEXTILES (GUJARAT) B-6, SHRI KRISHNA CENTRE MITHAKHALI SIX ROAD, NAVRANGPURA, AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANAND P. SHAH REVENUE BY : SHRI K. MADHUSUDAN O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX -XIV, AHMEDABAD DATED 22.04.2009 ARISING OUT OF THE ORDER OF THE ASSESSIN G OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ONLY GROUND RAISED IN THIS APPEAL OF THE REV ENUE READS AS UNDER: THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN ALLOWIN G BAD DEBT OF RS.7,81,910/- OF THE ACT. 3. FACTS OF THE CASE ARE THAT IN THE ORIGINAL ASSES SMENT PROCEEDINGS, THE ASSESSEE CLAIMED BAD DEBTS AMOUNTING TO RS.7,81,910 /-, WHICH WAS DISALLOWED BY THE ITO VIDE ASSESSMENT ORDER PASSED UNDER SECTI ON 143(3) DATED 7.3.2006; THAT ON APPEAL THE ITAT VIDE ITS ORDER DATED 22.12. 2006 IN ITA NO.1911/AHD/2006 SET ASIDE THE MATTER BACK TO THE F ILE OF THE AO FOR RE- EXAMINATION. THE SUM OF RS.7,81,910/- WAS CONSISTI NG OF TWO ITEMS. THE FIRST BEING A SUM OF RS.3,00,000/- WHICH THE ASSESSEE CLA IMED TO HAVE GIVEN FOR PURCHASE OF RAW-MATERIAL TO PRIYA TRADE CHEMICALS. THE ITAT DIRECTED TO EXAMINE THIS CONTENTION OF THE ASSESSEE AND HAS FUR THER DIRECTED IF THE AMOUNT WAS PAID FOR PURCHASE OF RAW MATERIAL, THE SAME SHO ULD BE ALLOWED AS BUSINESS LOSS. THE SECOND SUM OF RS.4,81,910/- WAS THE COMM ISSION ACCRUED TO THE ASSESSEE AND OFFERED AS INCOME IN THE EARLIER YEAR BUT WAS NOT ACTUALLY RECEIVED. ITA NO.2045/AHD/2009 -2- IN THE SET ASIDE ASSESSMENT, THE AO AGAIN REPEATED THE ADDITION OF RS.7,81,910/- . WITH REGARD TO THE SUM OF RS.3,00,000/- BEING TH E AMOUNT PAID TO PRIYA TRADE CHEMICALS, HE WAS OF THE VIEW THAT THE ASSESSEE WAS UNABLE TO FURNISH COPIES OF THE BILLS, BANK STATEMENT AND CORRESPONDENCES FILE SO AS TO ESTABLISH ITS CLAIM THAT THE AMOUNT WAS GIVEN AS ADVANCE FOR PURCHASE O F RAW MATERIAL. WITH REGARD TO THE SOME OF RS.4,81,910/-, THE AO WAS OF THE VIEW THAT THE ASSESSEE WAS UNABLE TO ESTABLISH THAT THE AMOUNT HAS ACTUALL Y BECOME BAD. ON APPEAL, THE CIT(A) DELETED THE ADDITION WITH THE FOLLOWING FINDING: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS AS ADVANCED BY THE A.R. OF THE APPELLANT. A PERUSAL OF ORDER OF HON'BLE TRIBUNAL REVEALS THAT THE A.O. HAS BEEN DIRECTED TO CONSIDER THE ALLOWABILITY OF CLAIM U/S.29, IF HE IS SATISFIED TH AT IT REPRESENTED ADVANCES MADE BY THE APPELLANT FOR PURCHASE OF RAW MATERIAL, BUT THE A.O. DID NOT CONSIDER THE CLAIM AS PER THE DIRE CTION OF THE HON'BLE TRIBUNAL. FROM THE DETAILS FURNISHED BY THE A.R, IT IS CLEARLY SEEN THAT THE ADVANCES MAD,: TO THESE PARTIES WERE MEANT FOR PURCHASE OF RAW MATERIALS, I.E. COLOUR, CHEMICALS E TC. IT IS ALSO SEEN FROM THE COPY OF STORES REGISTER FILED BY THE A.R. THAT GOODS HAVE BEEN PURCHASED FROM PRIYA TRADE CHEM ON 7-4-1992 AN D ALSO ON 2003-1993 THE APPELLANT GAVE ADVANCE OF RS.3.00.000 /- TO PRIYA TRADE CHEM ON 14-09-1994 BUT THE SAID PARTY DID NOT SEND GOODS. THE A.Q. HAS ALSO FILED A SUMMARISED ACCOUNT COPY O F THE PARTY PRIYA TRADE CHEM FOR THE PERIOD 1.4.1993 TO 17/09.1 993 WHEREFROM IT IS SEEN THAT THE APPELLANT HAD PURCHASE TRANSACT IONS OF RS.11,00,152/- AND THE ACCOUNT WAS SQUARED OFF. THU S FROM THESE DETAILS IT IS CLEAR THAT THE ADVANCE GIVEN TO PRIYA TRADE CHEM WAS TRADE ADVANCE . AS REGARDS THE AMOUNT DUE FROM PRAS AD AGENCY THE APPELLANT HAS GIVEN COPY OF LETTER WRITTEN BY THE S AID PARTY ON 31.03.1995 SAYING THAT THEY HAVE CREDITED THE ACCOU NT OF THE APPELLANT WITH COMMISSION OF RS.4,81,910/- BEING CO MMISSION FOR PROCURING ORDER OF PTHALIC ANHYDRIDE AND MCB. AS T HE AMOUNT OF COMMISSION HAS BEEN OFFERED BY THE APPELLANT AS INC OME IN EARLIER YEAR AND THE COMMISSION WAS NOT RECEIVED BY THE APP ELLANT, THE APPELLANT HAS WRITTEN OFF THE SAID AMOUNT IN THIS Y EAR. CONSIDERING THE ABOVE FACTS, I AM, OF THE OPINION THAT THE WRIT E OFF OF THESE AMOUNTS IS ALLOWABLE, ACCORDINGLY, I DIRECT THE AO TO DELETE THE ADDITION MADE ON THIS COUNT. ITA NO.2045/AHD/2009 -3- 4. AGGRIEVED WITH THE ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL BEFORE US. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SI DES AND THE FACTS OF THE CASE, WE ENTIRELY AGREE WITH THE ORDER OF THE CIT(A). SO FAR AS THE AMOUNT ADVANCED TO PRIYA TRADE CHEMICALS IS CONCERNED, THE CIT(A) H AS RECORDED THE FINDING THAT THE ASSESSEE WAS PURCHASING THE COLOUR AND CHE MICALS REGULARLY FROM THE PRIYA TRADE CHEMICALS. THEREFORE, OBVIOUSLY FURTHE R AMOUNT GIVEN TO IT WAS FOR THE SUPPLY OF COLOUR AND CHEMICALS, WHICH IS TH E RAW MATERIAL BEING UTILISED IN THE ASSESSEE BUSINESS. SO FAR AS THE NON-RECEIP T OF COMMISSION IS CONCERNED, THE ISSUE IS NOW SQUARELY IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF T.R.F. LTD. VS. C IT, 323 ITR 397, 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 OBTAIN A DED UCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH T HAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE; IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE FIND NO JUSTIFICATION TO I NTERFERE WITH THE ORDER OF THE CIT(A), THE SAME IS SUSTAINED, THE REVENUES APPEAL IS DISMISSED. 5. IN RESULT, THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 4 TH FEBRUARY, 2011. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 04-02-2011 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD