The ITO, Ward-5(1), Ahmedabad V. M/s. Neptune Textile Mills Ltd., Ahmedabad

ITA 2252/AHD/2010

• Counselvise Citation: 225220514 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 05-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTAN T MEMBER I.T.A. NO.2252/AHD/2010 A. Y. 2006-07 ITO, WARD-5 (1), AHMEDABAD APPELLANT VS. NEPUTNE TEXTILE MILL LTD. PAN-AAACN5339G RESPONDENT DEPARTMENT BY : SHRI S.P. TALATI, SR. D.R. ASSESSEE BY : NONE DATE OF HEARING : 21.05.2012 DATE OF PRONOUNCEMENT : 25.05.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THIS IS REVENUES APPEAL AGAINST THE ORDER OF LD. C IT(A)-XI, AHMEDABAD DATED 19.04.2010, PASSED IN APPEAL NO.CIT (A)-XI/791/2008-09. 2. THE REVENUE IS AGGRIEVED BY THE ACTION OF LD. C IT(A) IN DELETING THE ADDITION OF RS.38,99,864/-, MADE BY A.O. ON ACC OUNT OF BAD DEBTS. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE A.O. OBSERVED THAT THE ASSESSEE CO MPANY HAS CLAIMED WITH BAD DEBT OF RS.42,16,864/-. THE ASSESSEE WAS ASKED BY THE A.O. TO JUSTIFY THE CLAIM FOR BAD DEBTS. THE ASSESSEES CONTENTION WAS THAT THE IMPUGNED ITA NO.2252/AHD/2010 , A.Y. 2006-07 2 DEBTS WERE FOUND TO BE IRRECOVERABLE AND ACCORDINGL Y, THEY WERE WRITTEN OFF BY CREDITING PARTIES ACCOUNT AND DEBITING BAD DEBTS WRITTEN OFF ACCOUNT. THIS EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTABLE TO T HE A.O. AND HE WAS OF THE VIEW THAT THE DEBTS WERE ONLY THREE YEARS OLD A ND THE ASSESSEE COMPANY DID NOT FURNISH ANY EVIDENCE TO SHOW THAT ANY EFFOR T WAS MADE TO RECOVER THESE DEBTS. IT WAS FURTHER OBSERVED BY THE A.O. T HAT THE BALANCES WERE BEING CARRIED FORWARD FOR THE LAST TWO ASSESSMENT Y EARS. THE PARTIES WERE NOT DECLARED INSOLVENT BY THE COURT NOR THEIR BUSIN ESS WAS CLOSED. THEREFORE, IT CANNOT BE SAID THAT THERE WAS NO CHAN CE OF RECOVERY AND THEREFORE, DEBTS WERE NOT ESTABLISHED TO HAVE BECOM E BAD. THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED AND ADDITION OF RS.42,16, 864/- WAS ADDED TO THE INCOME OF THE ASSESSEE. IN APPEAL THE ADDITION IN RESPECT OF AN AMOUNT OF RS.3,17,000/-, BEING THE EARNEST MONEY DEPOSITED WI TH VARIOUS GOVERNMENT DEPARTMENTS CLAIMED BY THE ASSESSEE AS BAD DEBTS W AS HELD TO BE DISALLOWABLE BY LD. CIT(A). THE BALANCE AMOUNT OF RS.38,99,864/- WAS HELD TO BE ALLOWABLE AS BAD DEBTS U/S 36(1)(VII) OF THE I.T. ACT FOLLOWING THE DECISION IN THE CASE OF T.R.F. LTD. VS. CIT (230 CTR 14) (S.C.) . AGGRIEVED BY THIS PART OF THE LD. CIT(A) ORDER NOW THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING LD. D.R. RELIED ON THE O RDER OF LD. A.O. WHILE NONE APPEARED ON BEHALF OF THE ASSESSEE DESPI TE NOTICES SENT TO HIM. 5. AFTER HEARING LD. D.R. AND PERUSING THE RECORD WE FIND THAT A SUM OF RS.38,99,864/- CLAIMED BY THE ASSESSEE AS BA D DEBTS HAS BEEN DISALLOWED BY THE A.O. ON THE GROUND THAT ASSESSEE FAILED TO PROVE BEFORE ITA NO.2252/AHD/2010 , A.Y. 2006-07 3 HIM THAT THERE IS NO CHANCE OF RECOVERY OF THIS AMO UNT AND THE DEBT HAS BECOME ACTUALLY BAD. THE LAW IS NOW WELL SETTLED I N VIEW OF THE DECISION IN THE CASE OF T.R.F. LTD. VS. CIT (230 CTR 14) (S.C.) TO THE EFFECT THAT ONCE THE DEBTS ARE WRITTEN OFF AS BAD IN THE BOOKS OF ACCOUNTS, THEY ARE TO BE ALLOWED AS BAD DEBTS U/S 36(1)(VII) OF THE I.T. ACT. THE ASSESSEE IS NOT REQUIRED TO PROVE THAT THE DEBTS HAVE IN FACT BECOM E BAD. THEREFORE, LD. CIT(A) HAS RIGHTLY DELETED THIS ADDITION MADE BY TH E A.O. BY DISALLOWING THE BAD DEBT CLAIMED BY THE ASSESSEE OF RS.38,99,864/- BY WRITING OFF THIS AMOUNT IN HIS BOOKS OF ACCOUNTS. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER WAS PRONOUNCED IN OPEN COURT ON 25.05.2012 SD/- SD/- (A. MOHAN ALANKAMONY) ( D.K. TYAGI) ACCOUNTANT MEMBER JU DICIAL MEMBER N.K. CHAUDHARY, SR. P.S. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. ! , ' , #$ / DR, ITAT, AHMEDABAD 6. %& '( / GUARD FILE. BY ORDER/ , ) / # * ' , #$ +