Kalpit Realty & Services Ltd., Ahmedabad V. The Income tax Officer,Ward-4(2), Ahmedabad

ITA 2277/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9737 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI S.S. GODA RA, J.M.) I.T. A. NO. 2277/AHD/2011 (ASSESSM ENT YEAR: 2006-07) KALPIT REALTY & SERVICES LIMITED, VADILAL HOUSE, 53, SHRIMALI SOCIETY, NAVRANGPURA, AHMEDABAD-380009 V/S THE I.T.O., WARD-4(2), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AACCK 4443N APPELLANT BY : MS. URVASHI SHODHAN, A.R. RESPONDENT BY : SHRI DINESH, SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 06-07-2015 DATE OF PRONOUNCEMENT : 10 -07-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-VIII, AHMEDABAD DATED 01-07-2011 FOR A.Y. 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF TRANSPORTATION, CONSTRUCTION AND DEVELOPMENT. ASSESSEE ELECTRONICAL LY FILED ITS RETURN OF INCOME FOR A.Y. 2006-07 ON 28.12.2006 DECLARING TOT AL LOSS OF RS. ITA NO 2277/ AHD/2011 . A.Y. 2006-0 7 2 12,30,846/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) AND THE TOTAL LOSS WAS DETERMINED AT RS. 8,11,919/-. AGGRIEVED BY THE ORDER OF A.O., ASSESS EE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 01.07.2011 G RANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF L D. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWIN G EFFECTIVE GROUND:- 1. THE LEARNED COMMISSIONER (APPEAL) ERRED IN CONFIRMI NG THE DISALLOWANCE OF RS. 3, 74,860/-BEING ADVANCES GIVEN TO TRANSPORTERS ON INV ALID GROUND THAT IT IS PROVISION AND NOT ACTUAL WRITTEN OFF IN BOOKS OF ACCOUNT THOU GH ADVANCES GIVEN DURING THE NORMAL COURSE OF BUSINESS. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE DETAILS FURNISHED BY THE ASSESSEE, A.O NOTICED THAT ASSESSE E HAS DEBITED A SUM OF RS. 3,74,860/- UNDER THE HEAD PROVISIONS FOR BAD D EBTS. ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM TO WHICH ASSESSEE SUBMIT TED THAT DURING THE COURSE OF TRANSPORT BUSINESS, ASSESSEE HAD GIVEN ADVANCES TO THE CONTRACTORS FOR THE EXPENSES WHICH WAS ALSO A NORMAL PRACTICE IN THE BU SINESS. ON COMPLETION OF THE TRIP AND ON FAILURE OF THE CONCERNED PARTIES TO SUBMIT BILLS AGAINST THE ADVANCES, THE AMOUNT REMAINED UNADJUSTED AND PROVIS ION WAS MADE FOR THESE AMOUNTS. THE SUBMISSION OF THE ASSESSEE WAS NOT FOU ND ACCEPTABLE TO THE A.O. FOR THE REASON THAT ACCORDING TO HIM UNLESS TH ERE IS AN ADMITTED DEBT, THE WRITE OFF CANNOT BE ALLOWED AS BAD DEBTS. HE FU RTHER NOTED THAT ASSESSEE HAD NOT TAKEN ANY STEPS TO RECOVER OR ADJUST THE AD VANCES GIVEN TO THE TRANSPORTERS. HE ACCORDINGLY DISALLOWED THE CLAIM O F RS. 3,74,860/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE LD. CIT(A) WHO UPHELD THE DISALLOWANCE BY HOLDING AS UN DER:- 3.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, FINDINGS OF THE A.O AS WELL AS SUBMISSION OF THE APPELLANT. DURING THE ASSESSMENT PROCEEDINGS, THE A.O OBSERVED THAT ITA NO 2277/ AHD/2011 . A.Y. 2006-0 7 3 THE ASSESSEE HAS DEBITED SUM OF RS. 374860/- UNDER THE HEAD 'PROVISIONS FOR BAD DEBTS'. THE A.O HAS DISALLOWED THE CLAIM OF THE ASSESSEE ME NTIONING THAT THE ASSESSEE HAS NOT TAKEN ANY STEP TO RECOVER OUTSTANDING DUES FROM THE PARTIES WITH WHOM THE AMOUNT IS OUTSTANDING. THE A.O ALSO CONTENDED THAT THE ADVANC ES WERE GIVEN TO THE TRANSPORTERS FOR ON THE WAY EXPENSES WHICH COULD NOT BE ADJUSTED AGA INST FINAL BILLS SUBMITTED BY THE CONTRACTOR. WITH THESE FINDINGS, THE A.O DISALLOWED THE CLAIM OF THE ASSESSEE OF RS. 374860/- ON ACCOUNT OF PROVISIONS FOR BAD ADVANCES. ON THE CONTRARY, THE LD. A.R ON BEHALF OF APPELLANT SUBMITTED THAT THE APPELLANT IS IN THE BUSINESS OF TRANSPORTATION. DURING THE COURSE OF BUSINESS OF TRANSPORTATION , T HE APPELLANT HAD TO GIVE THE ADVANCES TO THE CONTRACTORS AT THE BEGINNING OF THE TRIP FOR ON THE WAY EXPENSES. AS PER THE NORMAL PRACTICE OF PROFESSION OF TRANSPORTATION BUSINESS, EVERY TIME SUCH TYPE OF ADVANCES GIVEN TO THE DRIVERS. AFTER COMPLETION OF THE TRIP OR PER IODICALLY, THE CONCERN CONTRACTOR MADE THE BILLS AND ACCORDINGLY THE ADVANCES GIVEN ARE AD JUSTED AGAINST THE SUM PAYABLE TO THEM. IN SOME OF THE CASES, THE PARTY HAD LEFT THE WORK IN THE WAY AFTER PAYING ADVANCES. SUCH A RESULT, THE SAID ADVANCES REMAIN UNADJUSTED IN THE BOOKS OF ACCOUNTS. IN THE YEAR UNDER CONSIDERATION, THE MANAGEMENT OF THE APPELLANT COMPANY DECIDED TO PROVIDE FOR SUCH ADVANCES AS NOT RECOVER ABLE IN BOOKS OF ACCOUNTS AND ACCORDINGLY THE PROVISION HAS BEEN MADE AS ' PROVIS ION OF BAD ADVANCES.' IT IS AN ADMITTED FACT THAT THE APPELLANT HAS MADE A 'PROVISION FOR BAD ADVANCES' AND IT HAS NOT WRITTEN OFF THE ADVANCES IN THE BOOK S OF ACCOUNT. MEANING THEREBY THE ADVANCES HAVE REALLY NOT BECOME BAD DURING THE YEAR UNDER CONSIDERATION. IT IS SETTLED LEGAL POSITION THAT ANY ' PROVISION WITH REFERENCE TO DEBT OR ADVANCES IS NOT ALLOWABLE UNLESS IT IS WRITTEN OFF IN THE BO OKS OF ACCOUNT. THEREFORE THE ADDITION OF RS. 3,74,860/- IS CONFIR MED. 5. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. A.R REITERATED THE SUBMISSIONS MADE BEFORE A.O. AND LD. CIT(A) AND FURTHER SUBMITTED THAT THE AFORESAID SUM WAS WRITTEN OFF BY THE ITA NO 2277/ AHD/2011 . A.Y. 2006-0 7 4 ASSESSEE IN SUBSEQUENT YEARS BUT SINCE THE ASSESSEE HAD CLAIMED THE EXPENDITURE IN THE YEAR UNDER CONSIDERATION, IT HAS NOT CLAIMED THE EXPENDITURE IN SUBSEQUENT YEARS. IT WAS THEREFORE S UBMITTED THAT ASSESSEE BE ALLOWED DEDUCTION IN THE YEAR UNDER CONSIDERATION O R IN THE ALTERNATE SUITABLE DIRECTIONS BE GIVEN TO AO TO ALLOW IT AS DEDUCTION IN THE YEARS IN WHICH ASSESSEE HAS DEBITED THE SUM AS BAD DEBTS. THE LD. A.R. PLACED ON RECORD THE COPY OF THE COMPUTATION OF INCOME FOR A.Y. 2008 -09, GROUPING OF BAD AND DOUBTFUL DEBTS AND THE AUDITED ACCOUNTS IN HER SUPPORT. SHE FURTHER PLACED RELIANCE ON THE DECISION OF AHMEDABAD TRIBUN AL IN THE CASE OF PERFECT EQUIPMENTS VS. DCIT 85 ITD 50 (AHMEDABAD) FOR THE P ROPOSITION THAT THE HONBLE TRIBUNAL COULD GIVE DIRECTION IN RELATION T O ANY ASSESSMENT YEAR WHICH IS NOT BEFORE IT BUT IS NECESSARY FOR DISPOSA L OF APPEAL. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND LD. C IT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT DURING THE YEAR UNDER CONSI DERATION, THE ASSESSEE HAD DEBITED A SUM OF RS. 3,74,860/- UNDER THE HEAD PRO VISION FOR BAD DEBTS AND HAD CLAIMED IT AS DEDUCTION. IT IS ALSO AN UNDISPU TED FACT THAT THE AMOUNT WERE NOT WRITTEN OFF IN THE BOOKS OF ACCOUNTS IN TH E YEAR UNDER CONSIDERATION. ACCORDING TO SECTION 36(1)(VII), THE ASSESSEE CAN C LAIM DEDUCTION OF THE AMOUNT OF ANY BAD DEBT OR PART THEREOF ONLY OF THE PORTION WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSE E SUBJECT TO PROVISIONS OF SECTION 36(2) OF THE ACT. IN THE PRESENT CASE, SINC E THE ASSESSEE HAS NOT WRITTEN OFF THE AMOUNT IN THE BOOKS OF ACCOUNTS, WE ARE OF THE VIEW THAT THE AMOUNT WAS RIGHTLY DISALLOWED BY A.O AND THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). WITH RESPEC T TO ALLOWING THE DEDUCTION IN SUBSEQUENT YEARS, BEFORE US, LD. A.R. HAS SUBMITTED THAT THE ITA NO 2277/ AHD/2011 . A.Y. 2006-0 7 5 AMOUNT WHICH WERE CLAIMED AS PROVISION FOR BAD DEB TS WERE IN FACT HAVE BEEN WRITTEN OFF IN SUBSEQUENT YEARS AND IN SUBSEQU ENT YEAR, WHEN THE SAME HAVE BEEN WRITTEN OFF IN A.Y. 08-09, ASSESSEE HAS N OT CLAIMED THE DEDUCTION IN A.Y. 08-09 AND THEREFORE ASSESSEE SHOULD NOT BE DENIED THE CLAIM ALTOGETHER. THE AFORESAID SUBMISSION OF THE ASSESSE E NEEDS A FACTUAL VERIFICATION. WE THEREFORE RESTORE THE ISSUE BACK T O THE FILE OF A.O AND DIRECT HIM TO CONSIDER THE ALLOWABILITY OF DEDUCTION OF BA D DEBTS ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN ACCORDANCE WITH LA W. THE ASSESSEE IS ALSO DIRECTED TO FILE PROMPTLY ALL THE REQUIRED DETAILS CALLED FOR BY THE A.O. NEEDLESS TO STATE THAT A.O SHALL GRANT ADEQUATE OPP ORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT, THE GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 10 - 07 - 201 5. SD/- SD/- (S.S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD