Toshita Fiscal Services (P) Ltd., Kolkata V. ITO, Ward - 12(3), Kolkata, Kolkata

ITA 2254/KOL/2010

• Counselvise Citation: 225423514 RSA 2010
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: A K GUPTA
• Keywords: Bad and doubtful debts; Assessment record
• Section: 142(1); 133(6); 263

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [ . . . . . . . . , ,, , , ,, , . . . . . .. . ! ! ! ! , ' ' ' ' ] [BEFORE HONBLE SHRI B. R. MITTAL, JM & HONBLE SHRI S.V. MEHROTRA, AM] #$ #$ #$ #$ / I.T.A NO. 2254/KOL/2010 %& '() %& '() %& '() %& '()/ // / ASSESSMENT YEAR : 2006-07 TOSHITA FISCAL SERVICES (P) LIMITED - VS.- INCOME TAX OFFICER/WARD-12(3) KOLKATA. [PAN : AAACT 9358 D] KOLKATA. [ +, +, +, +, /APPELLANT ] ]] ] [ ./+, ./+, ./+, ./+,/ // / RESPONDENT ] ]] ] +, +, +, +, / FOR THE APPELLANT : SHRI A. K. GUPTA ./+, ./+, ./+, ./+, / FOR THE RESPONDENT : SHRI NIRAJ KUMAR, CIT 0 /ORDER . . . . . .. . ! ! ! ! , ' ' ' ' PER S. V. MEHROTRA, A. M. THE ASSESSEE HAS PREFERRED THIS APPEAL FOR ASSESSM ENT YEAR 2006-07 AGAINST ORDER OF LD. CIT-VI, KOLKATA DATED 16..11.2010 PASSED UNDER SECT ION 263 OF THE ACT. 2. THE ONLY GROUND OF APPEAL READS AS UNDER :- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX -1V, KOLKATA, WAS NOT JU STIFIED IN HOLDING THAT THE ORIGINAL ASSESSMENT ORDER DATED 12/12/2008 ALLOWING BAD DEBTS OF RS.31,57,508 U/S.143(3) WAS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF THE REVENUE AND THEREBY SETTING ASIDE THE ASSESSMENT OR DER FOR REVIEW BY HOLDING THAT THE RULING BY HONBLE SUPREME COURT IN THE FOLLOWING CASES WERE NOT APPLICABLE TO THE CASE AS THE FACTS ARE DI FFERENT AND AS BECAUSE THE ISSUE IN THE CITED CASE RELATES TO WHETHER THAT BAD DEBT WAS A PROVISION OR NOT. VIJAYA BANK VS. CIT & ANR IN CIVIL APPEALS NO. 328 6-3287 OF 2010 DATED 15/04/2010. T.R.F. LTD VS. CIT, RANCI IN CIVIL APPEAL NO.5293 OF 2003 DATED 09/02/2010. 2. FOR THAT THE ORDER U/S.263 PASSES BY LD. COMMISSIONER OF INCOME TAX-XII, ITA NO. 2254/KOL/2010 2 KOLKATA IS BAD OF LAW AS WE LL AS FACTS. 3. FOR THE APPELLANT CRAVES LEAVE TO AD D FURTHER GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING THIS APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT AFTER EXAMINATI ON OF ASSESSMENT RECORD OF ASSESSEE, LD. CIT NOTICED THAT AN AMOUNT OF RS.31,57,508/- WAS DEBITE D AS BAD DEBT IN THE PROFIT & LOSS ACCOUNT AS UNDER :- I) M/S. HARSH UDYOG PVT. LTD. : RS.17,21,512/ - II) M/S. APARNA POLY PRODUCTS LTD. : RS.14 ,35,996/- HE NOTED THAT THOUGH THE OUTSTANDING LOANS WERE WRI TTEN OFF, THE INTEREST INCOME WAS RECEIVED FROM THE SAID TWO PARTIES ALONGWITH SOME PRINCIPAL AMOUN T. TDS CERTIFICATES WERE ALSO RECEIVED FOR TAX DEDUCTION FROM INTEREST INCOME. HE, THEREFORE, CONC LUDED THAT DEBTS WERE NOT IRRECOVERABLE AND, ACCORDINGLY, ACTION OF THE ASSESSING OFFICER ACCEPT ING THE WRITTEN OFF OF DEBTS APPEARED TO BE ERRONEOUS AND PRE-JUDICIAL TO THE INTEREST OF REVEN UE. HE, THEREFORE, ISSUED NOTICE UNDER SECTION 263 OF THE ACT ON 25.10.2010. AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE, LD. CIT OBSERVED THAT ALLOWANCE OF BAD DEBTS BY THE ASSESSING OFFICE R IN RESPECT OF AFOREMENTIONED TWO PARTIES WAS ERRONEOUS AND PRE-JUDICIAL TO THE INTEREST OF REVEN UE. LD. CIT HAS OBSERVED THAT IN CASE OF M/S. APARNA POLY PRODUCTS LTD., LOAN AMOUNT OF RS.1.00 L AC. WAS RECOVERED ON 20.06.2005 AS PER LEDGER ACCOUNT IN ASSESSEES BOOKS. AS REGARDS M/S. HARSH UDYOG PVT. LTD., LD. CIT OBSERVED THAT THE PARTY IN RESPONSE TO QUERY UNDER SECTION 133(6) OF THE ACT CONFIRMED THAT THERE WAS INTEREST PAYMENT BY THE SAID PARTY OF RS.1,54,936/- ON WHICH TDS OF RS.34,768/- WAS ALSO DEDUCTED ON 31.03.2006. THEREFORE, BOTH LOANS HAD NOT BECOME BA D FOR RECOVERY. LD. CIT HAS FURTHER OBSERVED THAT ASSESSEE HAD NOT TAKEN IN ITS BOOKS INTEREST O F RS.1,54,936/- RECEIVABLE FROM M/S. HARSH UDYOG PVT. LTD. HOWEVER, IN CASE OF M/S. APARNA POL Y PRODUCTS LTD. THOUGH IT HAD WRITTEN OFF THE LOAN, IT REFLECTED THE INTEREST AS INCOME. THUS, AC TION OF THE ASSESSEE CLEARLY REFLECTED DOUBLE STANDARD. 4. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE REFERRED TO PAGES 6 & 7 OF THE PAPER BOOK WHEREIN LEDGER COPY ARE CONTAINED TO POINT OUT THAT IN CASE OF M/S. HARSH UDYOG PVT. LTD., THE OPENING BALANCE OF RS.17,21,512/- WAS WRITTEN OFF A S BAD DEBTS AND NO INCOME WAS TAKEN INTO CONSIDERATION DURING FINANCIAL YEAR 2005-06. AS REG ARDS M/S. APARNA POLY PRODUCTS LTD. & ARVIND INTERNATIONAL LIMITED, HE POINTED OUT THAT ASSESSEE HAD TAKEN INTO CONSIDERATION THE INTEREST ITA NO. 2254/KOL/2010 3 RECEIVED FROM THE PARTIES AND THE BALANCE AMOUNT OF RS.14,35,996/- WAS TRANSFERRED TO BAD DEBTS. LD. COUNSEL REFERRED TO PAGE 4 OF THE PAPER BOOK WH EREIN THE REPLY FILED BY THE ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 142(1) IS CONTAINE D IN WHICH DETAILED REPLY WAS FURNISHED BEFORE THE ASSESSING OFFICER IN REGARD TO BAD DEBTS AND IT WAS, INTER ALIA, STATED AS UNDER :- 1.D. THAT THE BAD DEBTS SUPRA HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF THE ASSESSEE COMPANY DURING THE FINANC IAL YEAR 2005- 06 DURING WHICH THE DEDUCTION HAS BEEN CLAIMED AND IS ALLOWABLE U/S 36(1)(VII) OF THE I T ACT,1961 SUBJECT TO THE P ROVISIONS OF SECTION 36(2) AND SECTION 36(2)(I) READS AS UNDER : NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEB T OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING IN COME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT O F SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIO US YEAR, OR REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF THE ASSESSEE OF BANKING OR MONEY - LENDING WHICH IS CAR RIED ON BY THE ASSESSEE. 1.E. THAT SUBSEQUENTLY, IF ANY RECOVERY IS MADE O UT OF LOAN AMOUNT AND/OR INTEREST THEREON, THE SAME SHALL BE OFFERED FOR TAXATION, IN THE YEAR OF RECEIPT. WITH REFERENCE TO THIS LETTER DATED 10.12.2008, LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER EXAMINED IN DETAIL ALL THE ASPECTS AND, THEREAFTER, ALLOWED ASSESSEES CLAIM. ONLY THE DISCUSSION IN THIS REGARD IS NOT THERE IN THE ASSESSMENT ORDER. H OWEVER, IT IS NOT A CASE OF LACK OF ENQUIRY BUT AT BEST OF INADEQUATE ENQUIRY. HE FURTHER SUBMITTED TH AT IF TWO VIEWS ARE POSSIBLE AND ASSESSING OFFICER ADOPTS ONE POSSIBLE VIEW THEN ASSESSMENT OR DER CAN NOT BE SAID TO BE ERRONEOUS. HE RELIED ON THE FOLLOWING DECISIONS :- I) RAMPYARI DEVI SARAOGI VS. CIT [1968] 67 ITR 84 (SC) II) SMT. TARA DEVI AGGARWAL VS. CIT [1973] 88 ITR 323 ( SC) III) CIT VS. VIKAS POLYMERS [2010] 194 TAXMAN 57(DELHI) IV) CIT VS. ASHISH RAJPAL [2009] 180 TAXMAN 623 (DELHI) V) CIT VS. HONDA SIEL POWER PRODUCTS LTD. [2010] 194 T AXMAN 175 (DELHI) LD. COUNSEL FURTHER SUBMITTED THAT ON THE DATE LD. CIT PASSED THE ORDER, THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT [2 010] 323 ITR 397 (SC) WAS AVAILABLE WHEREIN IT HAS BEEN HELD THAT BAD DEBTS HAD TO BE WRITTEN O FF IN THE BOOKS OF ACCOUNT FOR CLAIMING DEDUCTION UNDER SECTION 36(1)(VII). LD. COUNSEL FURTHER SUBMI TTED THAT THERE IS NO BAR ON WRITING OFF THE DEBTS, SIMULTANEOUSLY, IN THE YEAR IN WHICH TRANSAC TIONS TAKE PLACE. ITA NO. 2254/KOL/2010 4 5. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT L D. CIT HAS ONLY OPINED FOR REASSESSMENT AS PER LAW. HE SUBMITTED THAT IN CASE OF M/S. APARN A POLY PRODUCTS LTD. INTEREST WAS RECEIVED ON 31.03.2006 ON LOAN FOR 3 QUARTERS THEN HOW COULD SI MULTANEOUSLY THE SAME DEBT COULD BE TREATED AS BAD DEBT. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER DID NOT EXAMINE THE ISSUES PROPERLY. HE FURTHER SUBMITTED THAT AN S TEREO TYPE ORDER IS TO BE CONSIDERED AS ERRONEOUS ORDER. HE RELIED ON THE FOLLOWING DECISIONS :- I) CIT VS. HONDA SIEL POWER PRODUCTS LTD. [2010] 1 94 TAXMAN 175 (DELHI) II) CIT VS. ASHISH RAJPAL [2009] 180 TAXMAN 623 (D ELHI) III) CIT VS. VIKAS POLYMERS [2010] 194 TAXMAN 57 (DELHI) IV) MALABAR INDUSTRIAL CO LTD. VS. CIT [2000] 243 ITR 8 3 (SC) V) CIT VS. MAX INDIA LTD. [2007] 295 ITR 282 (SC) VI) RUSSELL PROPERTIES PVT. LTD. VS. ACIT [1977] 109 IT R 229 (CAL.) VII) DCIT VS. OMAN INTERNATIONAL BANK SAOG [2006] 286 IT R (AT) 8 (MUM.) LD. DEPARTMENTAL REPRESENTATIVE FURTHER REFERRED TO THE DECISION OF I.T.A.T., BOMBAY BENCH IN THE CASE OF FLOATGLASS INDIA LTD. VS. JCIT [2008] 3 03 ITR (AT) 170 (MUM.) WHEREIN IT HAS BEEN HELD THAT WHEN THERE IS LACK OF ENQUIRY BY ASSESSIN G OFFICER, SECTION 263 CAN BE VALIDLY INVOKED. LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED T HAT MERE COLLECTION OF MATERIAL IS NOT SUFFICIENT BUT PROPER EVALUATION OF THE SAME IS IMP ORTANT. HE RELIED ON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. DE EPAK KUMAR GARG [2008] 299 ITR 435 (MP). 6. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT FOR LAST QUARTER ASSESSEE DID NOT RECEIVE INTEREST IN CASE OF M/S. APARNA POLY PR ODUCTS LTD. HE FURTHER POINTED OUT THAT ASSESSMENT WAS DONE OVER A YEAR. IT IS NOT A CASE O F LACK OF ENQUIRY AS IS EVIDENT FROM THE LETTER DATED 10.02.2008. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE APPEAL. AS FAR AS THE LEGAL PROPOSITION HAVE BE EN ADVANCED BY BOTH THE SIDES, THERE IS NO QUARREL WITH THE SAME. HOWEVER, SINCE NOW THIS ISSU E HAS BEEN SETTLED BY THE DECISION OF HONBLE SUPREME COURT, THEREFORE, THE ENTIRE PROCEEDINGS HA VE TO BE CONSIDERED IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT. IF THE ASSESSING OFFICER S ACTION WAS IN ACCORDANCE WITH LAW LAID DOWN BY HONBLE SUPREME COURT THEN NO INTERFERENCE COULD BE MADE TO THE ASSESSMENT ORDER BY ITA NO. 2254/KOL/2010 5 INVOKING JURISDICTION UNDER SECTION 263 OF THE ACT. WE FIND THAT THIS ISSUE IS CONCLUDED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF T. R.F. LTD. VS. CIT [2010] 323 ITR 397 (SC) WHEREIN IT HAS BEEN 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 WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. WE, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 0 0 0 0 '1 '1 '1 '1 2 1% 3 4 2 1% 3 4 2 1% 3 4 2 1% 3 4 5' 5' 5' 5' ORDER PRONOUNCED IN THE COURT ON 08. 09. 2011. SD/- SD/- [ . . . . . . . . , ,, , ] [ . . . . . .. . ! ! ! ! , ' ' ' ' ] [B. R. MITTAL ] [S.V. MEHROT RA] JUDICIAL MEMBER ACCOUN TANT MEMBER ( (( (5' 5' 5' 5') )) ) DATED : 08TH SEPTEMBER, 2011. 0 8 .9 :9(/ COPY OF THE ORDER FORWARDED TO: 1. +, /APPELLANT : TOSHITA FISCAL SERVICES (P) LIMITED, 2/7, SARAT BOSE ROAD, 5 TH FLOOR, KOLKATA-700 0020. 2 ./+, / RESPONDENT : INCOME TAX OFFICER/WARD-12(3), P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 . 3. 0% / CIT, 4. 0% ()/ CIT(A), KOLKATA. 5. '3 .%/ DR, KOLKATA BENCHES, KOLKATA [/9 ./ TRUE COPY] 0%1/ BY ORDER, #A /ASSTT REGISTRAR [KKC 'BC %DA E' /SR.PS]