The ACIT,Vapi Circle, Vapi V. Bharat Resins Ltd., Daman

ITA 2068/AHD/2012

• Counselvise Citation: 206820514 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-12-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 13-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV CIT D R
• Keywords: Opportunity of being heard; Bad and doubtful debts
• Section: 80IB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD , , , , BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND .., SHRI T.R. MEENA, ACCOUNTANT MEMBER !.. , ' # $ # $ # $ # $ ITA NO. 2068/AHD/2012 ASSESSMENT YEAR : 2004-05 ASSTT. COMMISSIONER OF INCOME-TAX, VAPI CIRCLE, VAPI V/S . M/S. BHARAT RESINS LTD. PLOT NO. 43-33, 35, SURVEY NO.168 DABHEL INDUSTRIAL CO. OP. SOCY. DABHEL, DAMAN. PAN NO. AA ACB9709J (APPELLANT) .. (RESPONDENT) C.O. NO. 216/AHD/2012 ASSESSMENT YEAR : 2004-05 M/S. BHARAT RESINS LTD. PLOT NO. 43-33, 35, SURVEY NO.168 DABHEL INDUSTRIAL CO. OP. SOCY. DABHEL, DAMAN. V/S . ASSTT. COMMISSIONER OF INCOME-TAX, VAPI CIRCLE, VAPI (APPELLANT) .. (RESPONDENT) % & ' / BY REVENUE SHRI O. P. VAISHNAV, CIT.D.R. & ' /BY ASSESSEE SHRI BANDISH SOPARKAR, A.R. ()* & +' /DATE OF HEARING 19.12.2013 ,-. & +' /DATE OF PRONOUNCEMENT 31.01.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS APPEAL AT THE BEHEST OF REVENUE AND C.O. AT TH E BEHEST OF ASSESSEE FILED, WHICH HAVE EMANATED FROM THE ORDERS OF CIT(A), VALSAD, DATED ITA NO. 2068/AHD/12 & C.O. NO. 216/AHD/2012, A.Y. 0 4-05 PAGE 2 30.06.2012 FOR A.Y. 04-05. BOTH WERE HEARD TOGETHE R AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONV ENIENCE. THE SOLE GROUND OF REVENUES APPEAL IS AGAINST ALLOWING THE BAD DEBTS OF RS.63,05,772/- BY THE LD. CIT(A). 2. THE A.O. OBSERVED THAT ASSESSEE HAD CLAIMED BAD DEBT AMOUNTING TO RS.71,35,790/- DURING THE YEAR UNDER CONSIDERATION. THE A.OS. CLAIM WAS THAT THIS BAD DEBT PERTAINED TO YEAR IN WHICH INCOM E WAS 100% EXEMPTED U/S. 80IB. THE BAD DEBT WAS CLAIMED ON 8 TH YEAR OF OPERATION FROM THE ELIGIBLE DEDUCTION U/S.80IB AND ASSESSEE GAINED NOT PAYING T AX OF 70% OF BAD DEBT CLAIMED DURING THE YEAR. THERE IS A TOTAL DEDUCTIO N OF SAME BAD DEBT AS NO TAX WAS PAID ON 100% EXEMPTION AS WELL AS LATER ON CLAIMED BAD DEBT ON THE SAME AMOUNT. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. THE ASSESSEE SUBMITTED THAT HONBLE SUPREME COURT IN CASE OF TRF LIMITED VS. CIT (2010) 323 ITR 397 HAS HELD THAT WHEN ANY BAD DEBT WRITTEN OFF IN THE BOOKS OF ACCOUNT AS IRRECOVERABLE, IT IS ALLOWABLE EXPENDITURE. THE ASSESSEE GAVE DETAILS OF BAD DEBTS CLAIMED TO THE A .O. AT THE TIME OF ASSESSMENT WHICH IS REPRODUCED AS UNDER: SR. NO. ASSESSMENT YEAR 80IB % CLAIMED AMOUNTS OF BAD DEBT PERTAINS TO 1 1997-1998 100% 2 1998 - 1999 100% 3 1999-2000 100% 1969191 4 2000-2001 100% 5 2001-2002 100% 4673563 6 2002 - 2003 30% 493038 7 2003-2004 30% 8 2004-2005 30% ITA NO. 2068/AHD/12 & C.O. NO. 216/AHD/2012, A.Y. 0 4-05 PAGE 3 TOTAL 7135790/- THE A.O. OBSERVED THAT RS.19,69191/- HAS BEEN SHOWN IN THE INCOME FOR A.Y. 1999-2000 AND CLAIMED 100% DEDUCTION. RS.46,73,563 /- WAS SIMILARLY CREDITED IN A.Y. 01-02 AND CLAIMED DEDUCTION 100% O N IT. THUS, IT IS CLEAR THAT NO TAX HAS BEEN PAID ON RS.66,42,754/-. FURTHER ON RS.4,93,038/-, THE ASSESSEE CREDITED RS.4,93,038/- IN A.Y. 02-03 AND C LAIMED DEDUCTION U/S. 80IB @ 30% ON IT. THE ASSESSEE DID NOT PAY ANY TAX ON 30% OF RS.4,93,038 AT RS.1,47,911/-, THE ASSESSEE HAD PAID TAX ONLY IN COME OF RS.3,45,126/- IN A.Y. 02-03. THUS, HE DISALLOWED RS.63,05,772/- AFT ER REDUCING EARLIER DISALLOWANCE MADE BY THE A.O. AT RS.3,66,456/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE ASSESS EES CLAIM BY OBSERVING AS UNDER: 7.3 DECISION :- I HAVE CONSIDERED THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTIONS RAISED BY THE AR OF THE APPELLANT IN THE WRITTEN SUBMISSION. THERE IS NO D ISPUTE ABOUT THE AMOUNT OF BAD DEBTS DURING THE YEAR. THE APPELLANT MADE C LAIM OF BAD DEBT IN THE YEAR UNDER CONSIDERATION. FOR SUCH CLAIM WHAT IS N ECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS B ECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOV ERABLE IN THE ACCOUNTS OF THE ASSESSEE AS HELD BY THE HONBLE SC IN THE CASE OF TRF LTD. V/S. CIT 230 CTR 14(SC). THE ALLOWABILITY OF BAD DEBT DOES NOT GOVERN BY THE SEC.80IB OF THE ACT. THUS, THE CONTENTION OF THE A R IS ACCEPTED AND THE AO IS DIRECTED TO ALLOW THE BAD DEBT. THUS, THIS G ROUND OF APPEAL IS ALLOWED. ITA NO. 2068/AHD/12 & C.O. NO. 216/AHD/2012, A.Y. 0 4-05 PAGE 4 4. NOW THE REVENUE IS BEFORE US. LD. CIT D.R. RELI ED UPON THE ORDER OF THE A.O. WHEREAS LD. COUNSEL FOR THE APPELLANT RELI ED IN CASE OF ACIT VS. ALFA LAMINATION, DAMAN IN ITA NO. 2234/AHD/2010 FOR A.Y. 2004-05, WHEREIN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HONBLE A BENCH, AHMADABAD. THE HONBLE ITAT HAD DISMISSED THE REVENUES APPEAL ON IDENTICAL FACTS OF THE CASE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE CR EDITED RS.19 LACS IN THE P&L ACCOUNT BUT CLAIMED 100% DEDUCTION U/S.80IB IN TWO YEARS. HOWEVER, IN 3 RD YEAR, THE ASSESSEE PAID TAX ONLY 70% OF INCOME ON A MOUNT CREDITED IN THE P&L ACCOUNT. THE ASSESSEE HAD CLAIMED THIS BAD DEBT IN A.Y. 04-05. IN 8 TH YEAR OF DEDUCTION U/S.80IB, 30% DEDUCTION U/S.80IB IS AVAIL ABLE AND PAID THE TAX ON 70% OF INCOME. THE CO-ORDINATE A BENCH HAS DECID ED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE . BEING PRECEDENCE, I HAVE TO FOLLOW THE ORDER OF CO- ORDINATE A BENCH AND DISMISS THE REVENUES APPEAL ON THIS GROUND. ASSESSEES C.O. NO. 216/AHD/2012 6. THE ASSESSEES C.O. IS AGAINST REOPENING OF THE CASE U/S.147 OF THE IT ACT. THE A.O. OBSERVED THAT THE ASSESSEE FILED RET URN OF TOTAL INCOME AT RS.48,56,717/- ON 25.10.2004. ASSESSMENT U/S.143(3 ) WAS COMPLETED ON 29.09.2006 AT RS.53,32,560/-. AT THE TIME OF SCRUT INY ASSESSMENT, LD. A.O. HAD DISALLOWED RS.3,66,456/- ON ACCOUNT OF BAD DEBT . SUBSEQUENTLY, PERUSAL OF THE CASE FILED, IT IS REVEALED THAT ASSESSEE HAD CLAIMED BAD DEBT AMOUNT TO ITA NO. 2068/AHD/12 & C.O. NO. 216/AHD/2012, A.Y. 0 4-05 PAGE 5 RS.71,35,790/- DURING THE YEAR UNDER CONSIDERATION. THIS CLAIM OF BAD DEBT IS NOT ALLOWABLE TO THE ASSESSEE FOR VARIOUS REASONS A S PER RECORD. THE A.O. RECORDED REASONS U/S. 147 OF THE IT ACT AND ISSUED NOTICE U/S. 148 ON 14.07.2010. LD. A.R. FOR THE ASSESSEE FILED WRITTE N SUBMISSION BEFORE THE A.O. VIDE LETTER DATED 30.08.2010 AND SUBMITTED THA T ORIGINAL RETURN FILED ON 25.10.2004 MAY BE TREATED AS RETURN IN RESPONSE TO THE NOTICE U/S. 148. IN GROUND NO.1 OF APPEAL BEFORE THE CIT(A), THE REOPEN ING WAS CHALLENGED. AFTER CONSIDERING THE ASSESSEES REPLY AND CASE LAW CITED BY THE ASSESSEE, THE LD. CIT(A) DISMISSED THE ASSESSEES GROUND OF APPEAL ON REOPENING WHICH IS REPRODUCED AS UNDER: 5.3 DECISION :- I HAVE CONSIDERED THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTION RAISED B Y THE AR OF THE APPELLANT IN THE WRITTEN SUBMISSION. I FIND FORCE IN THE CONTENTION OF THE AO BECAUSE EVEN OTHERWISE, THE POWERS OF THE AO UNDER SEC.147 ARE AMPLITUDE. IT HAS BEEN HELD IN CASE OF RAYMOND WOO LEN MILLS LTD. V/S ITO REPORTED IN 236 ITR 34 (SC) THAT IN DETERMINING AS TO WHETHER COMMENCEMENT OF RE-OPENING ASSESSMENT ARE VALID, IT HAS ONLY TO BE SEEN WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH DEPARTMENT COULD RE-OPEN THE CASE. IN THIS CASE AL THOUGH THE BAD DEBT WAS ALLOWED IN THE EARLIER ORDER BUT THE QUANTUM IN VOLVED CALLED FOR RE- EXAMINATION. IN VIEW OF THE AFORESAID FACTUAL AND LEGAL POSITION, THE APPELLANTS CONTENTION THAT AO HAS ERRED IN RE-OPEN ING THE ASSESSMENT HAS NO MERIT IN IT. THUS, THE APPELLANTS GROUND N O.1 IS DISSMISSED. 7. NOW THE ASSESSEE IS BEFORE US. THE LD. A.R. FOR THE ASSESSEE ARGUED THAT THIS IS REOPENING AFTER 4 YEARS FROM THE END O F THE ASSESSMENT YEAR. THE A.O. MADE QUERY ON THIS ISSUE OF BAD DEBT VIDE LETT ER DATED 3 RD SEPTEMBER, ITA NO. 2068/AHD/12 & C.O. NO. 216/AHD/2012, A.Y. 0 4-05 PAGE 6 2010, IN ITEM NO.3, WHICH HAD BEEN REPLIED BY THE A SSESSEE IN DETAIL IN ITEM NO.7. THEREFORE, A.O. HAS VERIFIED THIS BAD DEBT A ND ALLOWED THIS BAD DEBT IN ORIGINAL ASSESSMENT PASSED U/S.143(3) ON 29.09.2006 . IN APPEAL, THE ASSESSEE CHALLENGED THE DISALLOWANCE OF BAD DEBT BE FORE THE CIT(A) AT RS.3,66,456/- IN GROUND NO.3. THE LD. CIT(A) HAD D ISMISSED THE ASSESSEES CLAIM. IT PROVED THAT THIS ASPECT HAD BEEN EXAMINE D BY THE A.O. IN FIRST SCRUTINY ASSESSMENT. HE FURTHER RELIED IN CASE OF HONBLE GUJARAT HIGH COURT DECISION IN CASE OF KANAK FABRICS VS. ITO IN SPECIAL CIVIL APPLICATION NO.335 OF 2001, ORDER DATED 03.03.2011, WHEREIN IDENTICAL ISSUE HAD BEEN DECIDED BY THE HONBLE COURT IN FAVOUR OF THE ASSESSEE. THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL ON RECORD. T HUS, HE REQUESTED TO QUASH THE REOPENING MADE BY THE A.O. CONFIRMED BY THE CIT (A) U/S. 147 OF THE IT ACT. AT THE OUTSET, LD. CIT D.R. VEHEMENTLY RELIED UPON THE ORDER OF THE CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS DISCLOSED PARTICULARS OF BAD DEBTS IN FIRST SCRUTINY ASSESSMENT TO THE A.O. AS DISCUSSED ABOVE. THE LD. A.O. REOPENED THE CASE U/S. 147, ON SAME ISSUE, WHICH HAS BEEN CONSIDERED BY HIM. THE ASSESSEE HAD FURNISHED FULL DETAILS OF BAD DEBTS AT THE TIME OF ASSESSMENT. THERE IS NO FAILURE ON THE PART OF APPELLANT TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR IT FOR ASSESSMENT YEAR UNDER CONSIDER ATION. THE ASSUMPTION OF THE JURISDICTION U/S. 147 OF THE ACT HAS BEEN HELD INVALID BY THE VARIOUS COURTS ITA NO. 2068/AHD/12 & C.O. NO. 216/AHD/2012, A.Y. 0 4-05 PAGE 7 INCLUDING JURISDICTION OF THE HIGH COURT. THEREFOR E, WE REVERSE THE ORDER OF CIT(A). ON THIS GROUND, ASSESSEES C.O. IS ALLOWED . 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED AND ASSESSEES C.O. IS ALLOWED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 31.01.2014 SD/- SD/- ( D.K.TYAGI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / / / / & && & 0+1 0+1 0+1 0+1 21.+ 21.+ 21.+ 21.+ / COPY OF ORDER FORWARDED TO:- 1. % / REVENUE 2. / ASSESSEE 3. + (6 / CONCERNED CIT 4. (6- / CIT (A) 5. 1: 0+) , , / DR, ITAT, AHMEDABAD 6. < => / GUARD FILE. BY ORDER/ / , ?/ % , $