The DCITKheda Circle, Nadiad V. Shri Kantibhai S.Parmar, Kheda

ITA 2320/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50704 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 30-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT JHAVERI
• Assessee Lawyers: A L THAKKAR A R
• Keywords: Bad and doubtful debts

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., !'# $ $ $ $ %% % &, ' ( # BEFORE SHRI G.D.AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER $./ I.T.A. NO.2320/AHD/2009 ( * * * * / / / / ASSESSMENT YEAR : 2005-06) THE DY.CIT KHEDA CIRCLE NADIAD / VS. SHRI KANTIBHAI S.PARMAR C/O.TRAMBAKESHWAR QUARRY WORKS STATE HIGH WAY PO SEVALIA, TAL.THASRA '+ (, $./- $./ PAN/GIR NO. : ALBPP 3620 V ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ( / APPELLANT BY : DR.JAYANT JHAVERI, SR. D.R. /0+. 2 1 ( / RESPONDENT BY : SHRI A.L. THAKKAR, A.R. % 3 2 &, / / / / DATE OF HEARING : 04/10/2011 45* 2 &, / DATE OF PRONOUNCEMENT : 04/10/2011 (6 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF THE CIT(A)-IV, BARODA DATED 11/05/2009 AND THE GROUND IS REPRODUCED BELOW:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE ADDITION OF BAD DEBTS FROM RS.14,98,061/- TO RS.1,65,328/- T HOUGH THE ASSESSEE FAILED TO PROVE THAT HE HAD MADE ANY EFFORTS FOR TH E RECOVERY AND ALSO IGNORING THE UNDERLYING PRINCIPLES LAID DOWN IN DHA LL ENTERPRISES & ENGINEERS PVT.LTD. VS. CIT 295 ITR 481 (GUJ.). ITA NO. 2320/AHD/2009 DY.CIT VS. SHRI KANTIBHAI S.PARMAR ASST.YEAR 2005-06 - 2 - 2. WHILE PASSING AN ORDER U/S.143(3) OF THE IT ACT 1961, DATED 28/12/2007, IT WAS OBSERVED BY THE AO THAT THE ASSE SSEE HAS CLAIMED A BAD DEBT OF RS.14,98,061/- IN THE NAME OF ONE SHRI KANTIBHAI S.PARMAR, PROPRIETOR OF NEELAM TRADING CO. IT WAS NOTED THA T DEBTS WERE WRITTEN OFF IN THE BOOKS OF ACCOUNT. AS PER AO, THE ISSUE WAS THAT THE SAID BAD DEBT WAS CLAIMED AT THAT TIME WHEN AN ADDITIONAL IN COME WAS UNEARTHED ON SURVEY OPERATION AND TO SET OFF THE ADDITIONAL I NCOME CLAIM OF BAD DEBT WAS MADE. HOWEVER, IT HAS ALSO BEEN NOTED BY THE AO THAT NOT A SINGLE PAPER WAS SUBMITTED TO DEMONSTRATE THAT ANY ATTEMPT OF RECOVERY WAS MADE. IT WAS CONCLUDED BY THE AO THAT ASSESS EE WAS UNDER OBLIGATION TO ESTABLISH THAT THE DEBTS HAVE BECOME BAD DEBT. ACCORDING TO HIM, CONSIDERING THE DUBIOUS AND SOPHISTICATED M ETHOD BEING EMPLOYED WITH THE SOLE PURPOSE TO AVOID TAX THE CLA IM OF BAD DEBT WAS DISALLOWED. THE MATTER WAS CARRIED BEFORE THE FIRS T APPELLATE AUTHORITY. 3. THE LD.CIT(A) HAS DISCUSSED FEW PROVISIONS OF TH E ACT AND THEREAFTER ARRIVED AT THE CONCLUSION THAT MOST OF T HE DEBTS WERE OUTSTANDING FOR SEVERAL YEARS WITHOUT ANY RECOVERY AND THERE WAS NO FURTHER SCOPE OF ANY RECOVERY THEREFORE APPELLANT W AS JUSTIFIED IN WRITING OFF OF SUCH DEBTS. 4. WITH THIS BRIEF BACKGROUND, WE HAVE HEARD BOTH T HE SIDES. FROM THE SIDE OF THE REVENUE, DR.JAYANT JHAVERI SR.DR AN D FROM THE SIDE OF THE RESPONDENT-ASSESSEE SHRI A.L. THAKKAR HAVE APPEARE D AND RESPECTIVELY SUPPORTED THE ORDERS OF THE AO AND CIT(A). WE FIND THAT NOW THIS ISSUE HAS DULY BEEN CONSIDERED BY THE HONBLE SUPREME COU RT IN THE CASE OF ITA NO. 2320/AHD/2009 DY.CIT VS. SHRI KANTIBHAI S.PARMAR ASST.YEAR 2005-06 - 3 - T.R. F. LTD. VS. CIT REPORTED AS (2010) 323 ITR 39 7 (SC), WHEREIN THE HON'BLE APEX COURT HAS TAKEN INTO CONSIDERATION TH E POSITION OF LAW, AFTER 01/04/1989 AND HELD AS UNDER:- THIS POSITION IN LAW IS WELL-SETTLED. AFTER APRI L 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FAC T, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRE COVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE AS SESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WRITTE N OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACC OUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE A CCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FR OM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINE D WHETHER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING O FFICER. HENCE, THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CO NSIDERATION OF THE ABOVEMENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. 4.1. ONCE THE HON'BLE APEX COURT HAS HELD THAT IT I S ENOUGH IF THE BAD DEBT IS WRITTEN-OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE, THEN IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAD BECOME IRRECOVERABLE. THEREFORE, THIS GROUND OF TH E REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 04/ 10 /2011. SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 04/ 10 /2011 7.. , . ../ T.C. NAIR, SR. PS ITA NO. 2320/AHD/2009 DY.CIT VS. SHRI KANTIBHAI S.PARMAR ASST.YEAR 2005-06 - 4 - (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*&/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. $$ & %9 / CONCERNED CIT 4. %9() / THE CIT(A)-IV, BARODA 5. 8<= /& , , / DR, ITAT, AHMEDABAD 6. = >3 / GUARD FILE. (6 % (6 % (6 % (6 % / BY ORDER, 08& /& //TRUE COPY// ! !! !/ // / $ $ $ $ ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION.. 04/10/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 04/10/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S04/10/2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 04/10/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER