M/s. Deepak Industries Ltd., Kolkata V. ITO, Ward - 6(1), Kolkata, Kolkata

ITA 2207/KOL/2010

• Counselvise Citation: 220723514 RSA 2010
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UJJAL KUMAR
• Assessee Lawyers: R SALARPURIA
• Keywords: Audit objection; Bad and doubtful debts; Assessment record

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [ . . . . . . . . , ,, , , ,, , . . . . . .. . ! ! ! ! , ' ' ' ' ] [BEFORE HONBLE SHRI B. R. MITTAL, JM & HONBLE SHRI SHRI S.V. MEHROTRA, AM] #$ #$ #$ #$ / I.T.A NO. 2207/KOL/2010 %& '() %& '() %& '() %& '()/ // / ASSESSMENT YEAR : 2006-07 M/S. DEEPK INDUSTRIES LIMITED -VS.- INCOME TAX OFFICER/WARD-6(1) KOLKATA. [PAN : AAACD 8676 J] KOLKATA. (,- /APPELLANT ) (/0,-/ RESPONDENT ) ,- / FOR THE APPELLANT : 1 /SHRI R. SALARPURIA /0,- / FOR THE RESPONDENT : 1 / SHRI UJJAL KUMAR 2 /O R D E R [ . . . . . .. . ! ! ! ! , ] PER S.V. MEHROTRA, JM THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2006-07 AGAINST ORDER OF CIT, KOLKATA-II DATED 24.11.2010 U/S. 263 OF THE INCOME TAX ACT. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APP EAL :- (1) FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES THE LD. CIT, KOLKATA-II, KOL. WAS WHOLLY UNJUSTIFIED IN PASSING THE ORDER U/ S. 263 CANCELLING THE ASSESSMENT MADE AND DIRECTING THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT DE NOVO. SUCH ACTION OF THE CIT. KOL.-II WAS WHOLLY BAD, ILLEGAL, UNJUSTIFIED AND UNCALLED FOR. (2) FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCE S THE ORDER PASSED BY THE LD. CIT. KOL.-II U/S. 263 WAS BAD, ILLEGAL, UNJUSTI FIED AND LIABLE TO BE QUASHED/CANCELLED. (3) FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCE S THE LD. CIT. KOL.-II WAS WHOLLY UNJUSTIFIED IN SETTING ASIDE THE ASSESSMENT U/S. 263 AND SUCH ACTION OF THE CIT-II WAS WHOLLY BAD, ILLEGAL AND UN JUSTIFIED. 3. BRIEF FACTS OF THE CASE ARE THAT LD. CIT EXAMIN ED THE ASSESSMENT RECORDS OF THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2006-07 AND NOTED THA T AN AMOUNT OF RS.50,00,000/- WAS DEBITED [ ITA NO. 2207/KOL/2010] 2 TOWARDS PROVISION FOR DOUBTFUL DEBTS/DEPOSITS IN TH E PROFIT AND LOSS ACCOUNT [VIDE SCHEDULE 15 UNDER THE HEAD ADMINISTRATIVE, SELLING ETC. EXPENSE S OF NEW ALLENBERRY WORKS, KOLKATA UNIT]. FURTHER, RS.2,25,491/- HAD ALSO BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT IN THE SAME FINANCIAL YEAR UNDER THE SAME HEAD [VIDE SCHEDULE 17, BEING O THER EXPENSES OF NEW ALLENBERRY WORKS, FARIDABAD UNIT]. SHE OBSERVED THAT SINCE PROVISION FOR DOUBTFUL DEBTS/DEPOSITS WAS NOT AN ALLOWABLE ITEM UNDER THE INCOME TAX ACT, THE AGGREG ATE OF ABOVE TWO PROVISIONS AMOUNTING TO RS.52,25,491/- SHOULD HAVE BEEN ADDED BACK WHILE CO MPUTING THE TOTAL INCOME. SINCE THIS WAS NOT DONE, THERE WAS UNDER STATEMENT OF INCOME OF ID ENTICAL AMOUNT OF RS.52,25,491/-. SHE ACCORDINGLY, ISSUED NOTICE U/S. 263 OF THE INCOME T AX ACT. THE ASSESSEE EXPLAINED THAT THOUGH THE AMOUNT OF RS.52,25,491/- HAD BEEN SHOWN AS PRO VISION FOR DOUBTFUL DEBTS/DEPOSITS IN THE PROFIT AND LOSS ACCOUNT, IN FACT, IT WAS NOT A PROV ISION AT ALL, BUT THE AMOUNT HAD BEEN WRITTEN OFF IN THE PROFIT AND LOSS ACCOUNT AND CLAIMED AS BAD D EBTS. IT WAS FURTHER CLARIFIED THAT SALES MADE DURING THE EARLIER YEARS HAD BEEN TAKEN INTO PROFIT AND LOSS ACCOUNT OF THE RESPECTIVE ASSESSMENT YEARS AND WHICH AFTER BECOMING UNREALIZABLE HAD BEE N WRITTEN OFF IN THE PROFIT AND LOSS ACCOUNT AS WELL AS IN THE BOOKS OF ACCOUNT BY REDUCING THE SUNDRY DEBTORS ON THE ASSET ASIDE OF THE BALANCE SHEET BY AN EQUIVALENT AMOUNT AND NO PART O F SUCH AMOUNT OF RS.52,25,491/- HAD BEEN TRANSFERRED TO LIABILITY OF BALANCE SHEET UNDER THE HEAD CURRENT LIABILITY AND PROVISIONS. THE ASSESSEE HAD RELIED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF VIJAYA BANK VS. CIT [2010] 323 ITR 166(SC) FOR THE METHODOLOGY ADOPTED BY HIM. THUS, IT WAS POINTED OUT THAT THE IMPUGNED AMOUNT HAD BEEN ACTUALLY WRITTEN OFF IN TH E PROFIT AND LOSS ACCOUNT AND THEREFORE, IT WAS AN ALLOWABLE DEDUCTION IN VIEW OF THE AMENDMENT OF INCOME TAX ACT FROM 01.04.1989. THEREFORE, THE PROVISIONS OF SECTION 263 ARE NOT AT TRACTED. HOWEVER, LD. CIT POINTED OUT THAT THE DETAILS FURNISHED BY THE ASSESSEE IN ANNEXURE A O F THE LETTER DATED 06.10.2010 DOES NOT GIVE TRUE PICTURE AS TO WHEN AND UNDER WHAT CIRCUMSTANCE S THE ASSESSEE-COMPANY TOOK THE DECISION OF WRITING OFF THE CAPTIONED AMOUNT IN ITS ACCOUNT. TH EREFORE, BOOKS OF ACCOUNT OF THE RELEVANT FINANCIAL YEAR NEED TO BE LOOKED INTO. THEREFORE, H E SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO REFRAME THE SAME DE NOVO AFTER DUE VERIFICATION OF THE ASSESSEES BOOKS OF ACCOUNT. 4. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE REFERRED TO PAGE-1 OF THE PAPER BOOK WHEREIN THE NOTICE ISSUED U/S. 263 OF THE ACT IS CO NTAINED AND POINTED OUT THAT IN THE NOTICE LD. CIT HAD ONLY STATED THAT SUM OF RS.52,25,491/- HAD WRONGLY BEEN ALLOWED. HE REFERRED TO PAGE 2 [ ITA NO. 2207/KOL/2010] 3 TO 19 OF THE PAPER BOOK, WHEREIN THE DETAILED REPLY FILED BEFORE THE LD. CIT IS CONTAINED. HE FURTHER REFERRED TO PAGE 26 OF THE PAPER BOOK, WHER EIN THE NOTICE ISSUED U/S. 154 IS CONTAINED AND POINTED OUT THAT THIS NOTICE HAD BEEN ISSUED BECAUS E OF AUDIT OBJECTION AS IS EVIDENT FROM PAGE 29 OF THE PAPER BOOK. HE SUBMITTED THAT ASSESSEE HAD F ILED ITS REPLY IN RESPONSE TO NOTICE U/S. 154 CONTAINED AT PAGE-30 OF THE PAPER BOOK. AFTER CONSI DERING THE SAME, NO ORDER WAS PASSED U/S. 154 OF THE ACT. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE FURTHER REFERRED TO PAGE 20 OF THE PAPER BOOK AND POINTED OUT THAT THE PROVISION HAS B EEN MADE WITH REFERENCE TO SPECIFIC PARTIES WHICH WERE AS UNDER :- SL. NO. NAME OF THE PARTY YEAR OF SALE AMOUNT 1. M/S. A.B. HYDROMECH PTE LTD. 2002-03 2004-05 3,00,000.00 2. M/S. HYDROMECH ENGG. PTE LTD. 1966-67, 1997-98 & 1998-99 47,00,000.00 3. M/S. S.K. AGENCIES, BANGALORE 2000-01 1,25,471.10 4. M/S. AJIT AUTO AGENCIES 2003-04 2003-04 1,00,019 .45 TOTAL : 52,25,490.55 LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE, WI TH REFERENCE TO FACTS NOTED ABOVE, SUBMITTED THAT SINCE SECTION 154 PROCEEDINGS WERE INITIATED A ND AFTER CONSIDERING ASSESSEES SUBMISSIONS, NO ORDER WAS PASSED, IT IS EVIDENT THAT THERE WERE TWO VIEWS POSSIBLE AND OUT OF WHICH ONE POSSIBLE VIEW WAS TAKEN BY THE ASSESSING OFFICER AN D THEREFORE, IT CANNOT BE SAID THAT THE ASSESSMENT ORDER WAS ERRONEOUS AS WELL AS PREJUDICI AL TO THE INTEREST OF THE REVENUE. IN SUPPORT OF HIS CONTENTION, ASSESSEE HAS RELIED ON THE DECISION OF I.T.A.T., KOLKATA IN THE CASE OF M/S. J. L. MORISON (INDIA) LTD. VS. ACIT, CENTRAL CIRCLE-VII IN ITA NO. 786/KOL/2010, ORDER DATED 13.04.2011. 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT LD. CIT HAS ONLY SET ASIDE THE ASSESSMENT ORDER AND HAS NOT GIVEN ANY ADVERSE FIND ING. THEREFORE, HIS ORDER SHOULD BE SUSTAINED. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. IT IS WELL SETTLED THAT BEFORE ASSUMPTION OF JURISDICTION U/S. 263 BY LD. CIT, TWO CONDITIONS HAVE TO BE SIMULTANEOUSLY FULFILLED. FIR STLY, ASSESSMENT ORDER SHOULD BE ERRONEOUS AND SECONDLY, THE ORDER SHOULD BE PREJUDICIAL TO THE IN TEREST OF THE REVENUE. IF EITHER OF THE INGREDIENT IS MISSING, THE PROCEEDINGS U/S. 263 OF THE ACT CAN NOT STAND. IN THE PRESENT CASE, THE MAIN ASPECT [ ITA NO. 2207/KOL/2010] 4 TO BE EXAMINED IS WHETHER THE SUNDRY DEBTORS HAD BE EN WRITTEN OFF OR NOT. THE DETAILS OF SUNDRY DEBTORS IS AS UNDER :- SUNDRY DEBTORS OUTSTANDING FOR A PERIOD EXCEEDING SIX MONTHS CONSIDERED GOOD 1,88,96,530/- 2,31,44,970/- CONSIDERED DOUBTFUL 1,76,63,989/- 1,24,55,468 /- LESS : PROVISION 1,76,63,989/- 1,24,55,468/- 0 0 OUTSTANDING FOR A PERIOD OF LESS THAN SIX MONTHS : 19,09,51,709/- 13,84,56,260/- 20,98,48.239/- 16,16,01,230/- THUS, TO THE EXTENT, THE DEBTS WERE CONSIDERED DOUB TFUL, THE SAME WERE WRITTEN OFF BY ACTUALLY WRITING OFF IN PROFIT AND LOSS ACCOUNT AND ALSO IN THE BOOKS OF ACCOUNT BY CREDITING THE SUNDRY DEBTORS ON THE ASSET SIDE OF BALANCE SHEET. THIS ME THODOLOGY WAS IN CONFORMITY WITH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF VIJAYA BAN KS CASE (SUPRA) AND, THEREFORE, COULD NOT BE DISPUTED. 6.1 THE OTHER ASPECTS POINTED OUT BY LD. CIT REGARD ING CIRCUMSTANCES UNDER WHICH THE ASSESSEE WROTE OFF THE AMOUNT COULD NOT BE GONE INT O BECAUSE AFTER 01.04.89, THE ONLY REQUIREMENT IS OF WRITING OFF THE AMOUNT. ONCE ACTU AL WRITE OFF OF THE AMOUNT IS THERE, THEN THE DEDUCTION ON BAD DEBT IS TO BE ALLOWED. SINCE FROM THE RECORDS, IT IS EVIDENT THAT ASSESSEE HAD ACTUALLY WRITTEN OFF THIS AMOUNT, WHICH WAS ALLOWED BY ASSESSING OFFICER, IT COULD NOT BE SAID THAT THE ASSESSMENT ORDER WAS ERRONEOUS. HENCE, LD. CIT WAS NOT JUSTIFIED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT. WE, ACCORDINGLY, CANCEL THE ORDER OF LD. CIT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 2 2 2 2 '3 '3 '3 '3 4 44 4 3% 3% 3% 3% 5 5 5 5 6 6 6 6 ORDER PRONOUNCED IN THE COURT ON 10. 06. 20 11. SD/- SD/- [ . . , ] [ . . ! , ' ] [ B. R. MITTAL ] [ S.V. MEHROTRA ] JUDICIAL MEMBER ACCOUNTANT MEMBER 7' / DATED : 10TH JUNE, 2011. [ ITA NO. 2207/KOL/2010] 5 2 8 /9 :9(; - COPY OF THE ORDER FORWARDED TO: 1. ' /APPLICANT- M/S. DEEPAK INDUSTRIES LTD., C/O. SAL ARPURIA JAJODIA & CO., 7, C.R. AVENUE, K OLKATA-700 072. 2 /0,- / RESPONDENT : INCOME TAX OFFICER/WARD-6(1), P-7, CHOWRINGHEE SQUARE, KOLKATA-700 001. 3. 2% / CIT 4. 2% ( )/ CIT(A) 5. '5 /% / DR, KOLKATA BENCHES, KOLKATA [ 09 / / TRUE COPY] 2%3 / BY ORDER < / #= /DEPUTY/ASSTT. REGISTRAR . [KKC '>? %@= A' /SR.PS]