Cadila Pharmaceuticals Ltd., Ahmedabad V. The Addl.CIT, Range-1, Now Dy.CIT, Circle-1(1)(2), Ahmedabad

ITA 2429/AHD/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8474 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-03-2020
• Assessment Year: 2006-2007
• Appeal Filed On: 13-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Bad and doubtful debts; Set aside
• Section: 143(3); 13; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (CONDUCTED THROUGH VIRTUAL COURT) (BEFO R E SHRI WASEEM AHMED , ACCOUNTANT MEMBER & MS. MADHUMITA ROY , JUDICIAL M EMBER ) ITA . NO: 2429 / AHD/2015 ( ASSESSMENT YEAR: 2006 - 07 ) CADILA PHARMACEUTICALS LTD. 708, SARKHEJ D HOLKA RD., BHAT, AHMEDABAD - 382210 V/S ADDL. CIT, RANGE - 1 (NOW DCIT, CIRCLE1(1)(2), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AA ACC6251E APPELLANT BY : SHRI S.N. SOPARKAR , AR RESPONDENT BY : SHRI VIDHYUT TRIVEDI, SR. D.R. ( )/ ORDER DATE OF HEARING : 10 / 06 / 2020 DATE OF PRONOUNCEMENT : 10 / 07 / 2020 PER WASEEM AHMED , ACCOUNTANT M EMBER THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CO MMISSIONER OF INCOME TAX (APPEALS) - 1 , AHMEDABAD [LD. CIT(A) IN SHORT] , DATED 04 / 06 / 2015 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DATED 29 / 12 / 2009 RELEVANT TO ASSE SSMENT YEAR (A.Y) 2006 - 07 . ITA NO . 2429/AHD/2015 . A.Y. 2006 - 07 2 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE OF RS. 23,27,520/ - ON ACCOUNT OF PRIOR PERIOD EXPENSES. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICALS, BULK DRUGS AND VARIOUS HOSPITAL PRODUCTS. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED DEDUCTION OF RS. 23,27,520/ - IN THE C OMPUTATION OF INCOME ON ACCOUNT OF PRIOR PERIOD ITEMS. THE DETAILS OF SUCH PRIOR PERIOD ITEMS STAND AS UNDER: 30.04.2005 35,927 REP SALES PROMOTION EXPENSES OF PRIOR PERIOD 31.03.2006 20,41,593 INT ON DRS PRIOR TO 2005 TFR 2 PRIOR PERIOD 31.03.2006 2,5 0,000 COST RECOVERED OF CHPL APRIL 05 TOTAL 23,U/S.271(1)(C) OF THE ACT,520 3.1 THE ASSESSEE REGARDING THE PRIOR PERIOD SALES PROMOTION EXPENSES OF RS. 35,927/ - SUBMITTED THAT, IT REPRESENTS THE ADVANCE GIVEN TO THE SALES REPRESENTATIVE WHO LEFT THE OR GANI Z ATION WITHOUT SETTLING THE SAME. THEREFORE, THESE EXPENSES WERE CONSIDERED AS PERTAINING TO THE YEAR UNDER CONSIDERATION. 3.2 THE ASSESSEE REGARDING THE AMOUNT OF INTEREST ON THE DEBTORS SUBMITTED THAT IT WAS RECORDED AS INCOME ON 30TH APRIL 2005 WH ICH WAS REVERSED AS ON 31ST MARCH 2006. BUT UNDER THE COMPANIES ACT , THE IMMEDIATE FINANCIAL YEAR WAS OF 13 MONTHS I.E. UP TO 30 APRIL 2005. THEREFORE THE SAME WAS TREATED AS PRIOR PERIOD ITEMS THOUGH THE SAME IS FALLING WITHIN THE PREVIOUS YEAR AS DEFINED UNDER SECTION 3 OF THE I NCOME T AX ACT. THE ASSESSEE MADE THE SIMILAR SUBMISSIONS REGARDING THE REVERSAL OF THE RENT OF 2.50 LAKHS WHICH WAS CLAIMED AS DEDUCTION UNDER THE ADJUSTMENT OF PRIOR PERIOD ITEMS. 4. HOWEVER THE AO DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING AS UNDER: ITA NO . 2429/AHD/2015 . A.Y. 2006 - 07 3 I. THERE WAS NO EVIDENCE FILED BY THE ASSESSEE TO JUSTIFY THAT THESE EXPENSES WERE CRYSTALLISED IN THE YEAR UNDER CONSIDERATION. THUS THE EXPENSES INCURRED IN THE EARLIER YEAR DO NOT PERTAIN/RELATE TO THE YEAR UNDER CONSIDERATION AND THUS THE MATCHING PRINCIPLES OF THE INCOME AND EXPENSES DO NOT GET SATISFIED. II. THERE WAS NO BILLS, VOUCHERS FILED BY THE ASSESSEE IN SUPPORT OF PRIOR PERIOD EXPENSES. III. THE CONTENTION OF THE ASSESSEE THAT THESE EXPENSES ARE NOT PRIOR PERIOD EXPENSES CANNOT BE ACCEPTED IN VIEW OF THE OBSERVATIO N OF THE AUDITOR CLASSIFYING THE SAME AS PRIOR PERIOD EXPENSES. IV. FURTHER, THE CLAIM OF THE ASSESSEE FOR THE BAD DEBT HAS ALREADY BEEN DISALLOWED, THEREFORE ON THE SAME REASONING, THE AMOUNT OF INTEREST ON SUCH DEBTORS CANNOT BE ALLOWED AS DEDUCTION. 5 . AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO CONFIRMED THE ORDER OF THE AO IN THE 1 ST ROUND OF LITIGATION VIDE ORDER DATED 23 RD MARCH 2011 BEARING APPEAL NO. CIT(A) - VI/ADDL.CIT.R.1/330/09 - 10. AGAINST THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE PREFERRED AN APPEAL TO THE ITAT WHICH SET ASIDE THE ORDER OF THE LEARNED CIT (A) DATED 23 - 3 - 2011 FOR FRESH ADJUDICATION VIDE ITS ORDER DATED 11 TH JULY 2014 BEARING ITA NO. 1518/AHD/2011 WITH THE FOLLOWING DIRECTION: IN THE CASE IN HAND, IT I S NOT THE CASE WHERE ASSESSEE HAS BEEN FOLLOWING PRACTICE IN PAST. HOWEVER, CONSIDERING THE FACT THAT THE SUBMISSIONS OF THE ASSESSEE WITH REGARD TO THE REVERSAL OF ENTRY IS NOT DECIDED BY THE LD.CIT(A). MOREOVER, THE LD.CIT(A) HAS ALLOWED THE CLAIM OF BAD DEBT OF THE ASSESSEE. THEREFORE, THE ISSUE IS RESTORED BACK TO THE FILE OF LD.CIT(A) TO DECIDE IT AFRESH AFTER VERIFYING THE CLAIM OF THE ASSESSEE THAT THE BOOK ENTRY WAS REVERSED. THUS, THIS GROUND OF ASSESSEE S APPEAL IS ALLOWED BUT FOR STATISTICAL PUR POSES. IN VIEW OF THE ABOVE, THE ASSESSEE IN THE SET ASIDE PROCEEDINGS BEFORE THE LEARNED CIT (A) SUBMITTED AS UNDER: THE ASSESSEE REGARDING THE INTEREST REVERSAL ON LATE RECOVERY OF DEBTORS FORRS.20,41,593/ - CLAIMED THAT THE IMPUGNED AMOUNT HAS ALREAD Y BEEN OFFERED TO TAX IN THE EARLIER YEAR AND THEREFORE THE SAME HAS TO BE ALLOWED IN THE YEAR UNDER CONSIDERATION AS THE SAME IS NOT RECOVERABLE. THE ASSESSEE REGARDING THE COST OF RENTAL INCOME REVERSED WITHIN THE FINANCIAL YEAR AMOUNTING TO RS.2,50,000 / - CLAIMED THAT THE AMOUNT WAS OFFERED TO TAX BY MAKING ACCOUNTING ENTRY IN THE BOOKS OF ACCOUNTS IN THE MONTH OF APRIL 2005, THE YEAR UNDER CONSIDERATION UNDER THE INCOME TAX ACT WHICH WAS REVERSED IN THE MONTH OF MARCH 2006. THUS THE REVERSAL OF RENTAL I NCOME DOES NOT REPRESENT THE PRIOR PERIOD EXPENSES. HOWEVER THE AUDITOR IN HIS AUDIT REPORT HAS CLASSIFIED THE SAME AS PRIOR PERIOD EXPENSES UNDER THE COMPANIES ACT IN VIEW OF THE FACT THAT THE PREVIOUS YEAR (2004 - 05) WAS FOR A PERIOD OF 13 MONTHS BEGINNIN G FROM APRIL 20004 TILL APRIL 2005. BUT UNDER THE INCOME TAX ACT, THE MONTH OF APRIL 2005 IS PART AND PARCEL OF THE YEAR UNDER CONSIDERATION. THEREFORE THE BOOK ENTRY MADE IN THE MONTH OF APRIL 2005 FOR RECORDING THE RENTAL ITA NO . 2429/AHD/2015 . A.Y. 2006 - 07 4 INCOME CANNOT BE CONSIDERED AS A PRIOR PERIOD EXPENSES AS IT WAS WRITTEN OFF IN THE MONTH OF MARCH 2006. THE ASSESSEE REGARDING THE SALES PROMOTION EXPENSES WRITTEN OF BEING NON RECOVERABLE AMOUNTING TO 35,927.00 CLAIMED THAT IT REPRESENTS THE ADVANCE GIVEN TO THE SALES REPRESENTATIVE IN THE EARLIER YEAR WHO LEFT THE COMPANY WITHOUT SETTLING THE SAME. THEREFORE THESE EXPENSES HAVE BEEN CRYSTALLISED IN THE YEAR UNDER CONSIDERATION AND THUS IT WAS CLAIMED AS DEDUCTION. IN ADDITION TO THE ABOVE, THE ASSESSEE ALSO SUBMITTED THAT THE AO HAS NOT DOUBTED ON THE GENUINENESS OF THE EXPENSES AND MERELY DISALLOWED THE SAME CONSIDERING THEM AS PRIOR PERIOD EXPENSES. ACCORDINGLY THE ASSESSEE FURTHER CONTENDED THAT THERE IS NO CHANGE IN THE RATE OF INCOME TAX OF THE EARLIER AND CURRENT YEAR AND THERE FORE, IT IS ENTITLED FOR THE DEDUCTION OF SUCH PRIOR PERIOD EXPENSES IN THE YEAR UNDER CONSIDERATION. 6. HOWEVER, THE LEARNED CIT (A) REGARDING THE REVERSAL OF INTEREST ON DEBTORS DISAGREED WITH THE CLAIM OF THE ASSESSEE FOR THE REASONS AS DETAILED UNDER : REGARDING THE INTEREST REVERSAL ON THE DEBTORS AMOUNTING TO RS. 20,41,593/ - I. THE ASSESSEE HAS NOT FILED ANY EVIDENCE SUGGESTING THAT THE IMPUGNED AMOUNT OF INTEREST WAS OFFERED TO TAX IN THE EARLIER YEAR. II. SIMILARLY THERE WAS ALSO NO EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF HIS CONTENTION THAT THE AMOUNT OF INTEREST WAS NOT CLAIMED AS DEDUCTION ALONG WITH THE BAD DEBTS. 6.1 IN VIEW OF THE ABOVE THE LEARNED CIT (A) AND IN THE ABSENCE OF ANY EVIDENCE HELD THAT THE ASSESSEE IS CLAIMING THE DEDUCTI ON OF BAD DEBTS OF SUCH INTEREST REVERSAL WITHOUT WRITING OFF IN THE BOOKS OF ACCOUNTS. 6.2 REGARDING THE REVERSAL OF RENTAL INCOME AMOUNTING TO RS. 2.50 LAKHS AND SALES PROMOTION WRITTEN OFF AMOUNTING TO RS. 35,927/ - , THE LEARNED CIT (A) UPHELD THE ORDE R OF THE AO IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE. 7. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 181 AND SUBMITTED THAT THE IMPUGN ED EXPENSES HAVE BEEN TREATED AS PRIOR PERIOD EXPENSES UNDER THE COMPANIES ACT FOR THE SIMPLE REASON THAT IN THE IMMEDIATE PRECEDING YEAR WAS THE EXTENDED YEAR I.E. 13 MONTHS (UP TO 30 TH APRIL) WHEREAS THE YEAR UNDER CONSIDERATION WAS LESS THAN 12 MONTHS I .E. 11 MONTHS ONLY. THUS THE ENTRY REVERSED AS ITA NO . 2429/AHD/2015 . A.Y. 2006 - 07 5 ON 31 - 3 - 2006 WAS IN FACT IS NOT PRIOR PERIOD ADJUSTMENT UNDER THE INCOME TAX ACT AS THE SAME WAS MADE AS ON 30 - 4 - 2005 I.E. WITHIN THE SAME FINANCIAL YEAR. 8.1 THE LD. AR ALSO CONTENDED THAT EVEN THE SAME ARE TREATED AS THE PRIOR PERIOD EXPENSES , THEN ALSO THE SAME ARE ALLOWABLE FOR DEDUCTION IN VIEW OF THE JUDGMENT OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VERSUS ADANI ENTERPRISES LTD IN THE TAX APPEAL NO. 566 OF 2016 . 9. ON THE OTHER HAND THE LE ARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS OF THE CASE IN DISPUTE HAVE ALREADY BEEN ELABORATED IN THE PRECEDING PA RAGRAPH, THEREFORE WE ARE NOT INCLINED TO REFER THE SAME FOR THE SAKE OF BREVITY AND CONVENIENCE. THE ISSUE IN THE PRESENT CASE RELATES TO THE CLAIM OF THE ASSESSEE FOR THE PRIOR PERIOD EXPENSES UNDER 3 CATEGORIES AMOUNTING TO RS. 23,27,520/ - AS DISCUSSED ABOVE. 10.1 PRIOR PERIOD EXPENSES ARISE IN THE CURRENT PERIOD AS A RESULT OF ERRORS OR OMISSIONS IN THE PREPARATION OF THE FINANCIAL STATEMENTS OF ONE OR MORE PRIOR PERIODS. IN OTHER WORDS THESE ARE THE EXPENSES WHICH HAVE BEEN INCURRED IN THE EARLIER YE ARS BUT THE SAME WERE NOT CLAIMED AS DEDUCTION IN THOSE YEARS TO WHICH THEY PERTAINS. AS SUCH THESE ARE THE EXPENSES WHICH HAVE BEEN INCURRED IN THE EARLIER YEAR BUT CLAIMED AS DEDUCTION IN THE CURRENT YEAR. HOWEVER, IN THE PRESENT CASE ALL THE EXPENSES CL AIMED BY THE ASSESSEE UNDER THE HEAD PRIOR PERIOD EXPENSES DO NOT REPRESENT THE EXPENSES. AS SUCH THE 2 ITEMS NAMELY INTEREST INCOME OF RS. 20,41,593/ - AND RENTAL INCOME OF RS 2.5 LAKH REPRESENT THE INCOME WHICH WAS OFFERED TO TAX IN THE EARLIER YEARS AND WRITTEN OF F IN THE YEAR UNDER CONSIDERATION AS CLAIMED BY THE ASSESSEE WHICH IN OUR CONSIDERED VIEW REPRESENT THE BAD DEBTS. ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT ITA NO . 2429/AHD/2015 . A.Y. 2006 - 07 6 BE ALLOWED DEDUCTION FOR THESE ITEMS AS PRIOR PERIOD EXPENSES. BUT THE SAME CAN BE CLAIMED AS BAD DEBTS UNDER THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT. THE PROVISIONS OF 36(1)(VII) READS AS UNDER: OTHER DEDUCTIONS. 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 **************** ( VII) SUBJECT TO THE PROVISIONS OF SUB - SECTION (2), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR]: 10.2 ON PERUSAL OF THE ABOVE PROVISION, IT IS REVEALED THAT THE BAD DEBTS CAN BE ALLOWED AS DEDUCTION IF IT IS WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNTS SUBJECT TO THE PROVISION OF SUB - SECTION (2) OF SECTION 36 OF THE ACT. IT IS THE DUTY OF THE ASSESSEE TO JUSTIFY I T S CLAIM BASED ON THE COGENT MATERIALS THAT IT HAS WRITTEN OFF THE BAD DEBTS IN THE BOOKS OF ACCOUNTS. ON PERUSAL OF THE DOCUMENTS FILED BY THE ASSESSEE WHICH ARE PLACED ON PAGES 99 TO 134 OF THE PAPER BOOK, IT IS NO T DECIPHERABLE WHETHER THE IMPUGNED AMOUNT OF BAD DEBTS WERE OFFERED TO TAX IN THE EARLIER YEARS AND THE SAME WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS IN THE CURRENT YEAR AS ON 31 - 3 - 2006 AS CONTENDED BY THE ASSESSEE. 10.3 SIMILARLY, IT IS ALSO NOT CLEAR THAT THE ASSESSEE HAS NOT CLAIMED SUCH INTEREST AS BAD DEBT ALONG WITH THE BAD DEBTS OF THE DEBTORS AS APPREHENDED BY THE LEARNED CIT (A) IN HIS ORDER DATED 4 TH JUNE 2015. 10.4 IT IS ALSO IMPORTANT TO NOTE THAT ON PERUSAL OF THE FINANCIAL STATEMENTS PRE PARED UNDER THE COMPANIES ACT FOR 11 MONTHS, THE ASSESSEE HAS SHOWN PRIOR PERIOD ADJUSTMENTS AMOUNTING TO RS. 22,91,593/ - BUT IT HAS NOT FILED THE FINANCIAL STATEMENTS PREPARED UNDER THE INCOME TAX ACT. TO OUR MIND, THE FINANCIAL YEAR ADOPTED UNDER THE COM PANIES ACT, 1956 (I.E. MAY 2005 TO MARCH 2006) CANNOT BE EQUATED WITH THE PREVIOUS YEAR DEFINED UNDER SECTION 3 OF THE INCOME TAX ACT (APRIL TO MARCH). UNDER ITA NO . 2429/AHD/2015 . A.Y. 2006 - 07 7 THE COMPANIES ACT, 1956 A FINANCIAL YEAR CAN BE MORE/LESS THAN OF 12 MONTHS WHEREAS THE PREVIOUS Y EAR UNDER THE INCOME TAX ACT CANNOT EXCEED MORE THAN 12 MONTHS. IN OUR CONSIDERED VIEW WHERE THE ASSESSEE HAS ADOPTED A DIFFERENT PERIOD UNDER THE COMPANIES ACT THAN THE PREVIOUS YEAR DEFINED UNDER THE INCOME TAX ACT, IT IS TO FILE SEPARATE FINANCIAL STATE MENTS UNDER THE INCOME TAX ACT. BUT WE NOTE THAT THE ASSESSEE HAS NOT FILED SUCH FINANCIAL STATEMENTS PREPARED UNDER THE INCOME TAX ACT. THUS IN THE ABSENCE OF SUFFICIENT DOCUMENTARY EVIDENCE BY THE ASSESSEE EVEN IN THE SET - ASIDE PROCEEDINGS, WE ARE NOT IN CLINED TO DISTURB THE FINDING OF THE AUTHORITIES BELOW. 10.5 WE ALSO NOTE THAT THE ITAT IN ITS ORDER DATED 11 TH JULY 2014 HAS DIRECTED TO THE LEARNED CIT (A) TO DECIDE THE ISSUE AFRESH AFTER VERIFYING THE CLAIM OF THE ASSESSEE THAT THE BOOK ENTRY WAS REV ERSED. THUS, IN THE SET - ASIDE PROCEEDINGS THE SCOPE OF THE ISSUE AS DISCUSSED ABOVE WAS LIMITED TO THE EXTENT OF VERIFICATION WHETHER THE ASSESSEE HAS REVERSED ENTRY IN THE BOOKS OF ACCOUNTS OR NOT. INDEED THE ONUS LIES UPON THE ASSESSEE TO FILE SUFFICIENT AND NECESSARY DOCUMENTS TO JUSTIFY THAT THE ENTRY WAS REVERSED IN THE BOOKS OF ACCOUNTS. HOWEVER, WE NOTE THAT THE ASSESSEE HAS NOT FILED ANY LEDGER ACCOUNT OF THE PARTIES SHOWING THE REVERSAL OF THE ENTRIES IN THE BOOKS OF ACCOUNTS. 10.6 IT IS ALSO PER TINENT TO NOTE THAT THE CASE LAW REFERRED BY THE LEARNED AR FOR THE ASSESSEE OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VERSUS ADANI ENTERPRISES LTD IN THE TAX APPEAL NO. 566 OF 2016 RELATES TO THE PRIOR PERIOD EXPENSES. BUT THE ISSUE ON HAND REL ATES TO THE BAD DEBTS AS DISCUSSED ABOVE. ACCORDINGLY WE ARE NOT INCLINED TO PLACE OUR RELIANCE ON THE PRINCIPLES LAID DOWN BY THE HON BLE GUJARAT HIGH COURT IN THE CASE OF ADANI E NTERPRISES LTD. (SUPRA). 10.7 REGARDING THE REVERSAL OF THE RENTAL INCOME O F RS. 2,50,000/ - WE HAVE PERUSED THE ANNEXURE 3 ATTACHED WITH THE ORDER OF THE LEARNED CIT (A) DATED 4 TH OF JUNE 2015 AND NOTE THAT THE ASSESSEE HAS REVERSED THE ENTRY FOR THE IMPUGNED RENTAL INCOME IN THE YEAR UNDER CONSIDERATION. THUS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS JUSTIFIED ITS CLAIM BASED ON THE DOCUMENTARY EVIDENCE THAT IT HAS REVERSED THE ENTRY IN RESPECT OF ITA NO . 2429/AHD/2015 . A.Y. 2006 - 07 8 ACCOUNTS OF THE RENTAL INCOME WHICH WAS OFFERED TO TAX. ACCORDINGLY, WE FIND THAT THE CONDITIONS AS SPECIFIED UNDER SECTION 36(1)(VII) OF THE ACT HAVE BEEN DULY S ATISFIED . ACCORDINGLY, WE REVERSE THE FINDING OF THE LEARNED CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. 10.8 REGARDING THE ADVANCE OF RS. 35,927.00 GIVEN TO THE SALES REPRESENTATIVE, THOUGH IT IS NOT A PRIOR PERIOD EXPENSES/ADJUSTMENT, BUT REPRESENT THE LOSS WHICH HAS BEEN INCURRED IN THE COURSE OF THE BUSINESS. ONCE THE ASSESSEE HAS WRITTEN OF ANY LOSS IN THE BOOKS OF ACCOUNTS WHICH WAS INCURRED IN THE COURSE OF THE BUSINESS, WE ARE OF THE VIEW THAT SUCH LOS S IS ELIGIBLE FOR DEDUCTION. ACCORDINGLY, WE REVERSE THE FINDING OF THE LEARNED CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. THUS THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10 / 07 / 20 20 - SD - - SD - (MS. MAHDUMITA ROY ) ( WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT ME MBER (TRUE COPY) AHMEDAB AD: DATED 10 /07 /2020 MANISH