The DCIT,(OSD)Circle-8, Ahmedabad V. Shree Prakash Textile Guj. Pvt. Ltd., Ahmedabad

ITA 2552/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57025 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P R SHAH
• Keywords: Bad and doubtful debts

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.L.GEHLOT, ACCOUNTANT MEMBER ./ I.T.A. NO.2552/AHD/2009 ( / / / / ASSESSMENT YEAR : 2006-07) DCIT (OSD) CIRCLE-8 AHMEDABAD / VS. SHRI PRAKASH TEXTILE (GUJARAT) PVT.LTD. LAXMI VIJAY HOSIERY MILL COMPOUND NARODA ROAD, AHMEDABAD ! ./'# ./ PAN/GIR NO. : AADCS 8691 M ( $ / // / APPELLANT ) .. ( %&$ / RESPONDENT ) $ ' / APPELLANT BY : SHRI SAMIR TEKRIWAL, SR. D.R. %&$ ( ' / RESPONDENT BY : SHRI P.R. SHAH, A.R. )* ( +,! / / / / DATE OF HEARING : 10/1/2012 -. ( +,! / DATE OF PRONOUNCEMENT : 13.1.12 / / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XIV, AHMEDAB AD DATED 6.7.2009. THE SUBSTANTIVE GROUND READS AS FOLLOWS :- [1] THE LD. CIT(A)-XIV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.969230/- MADE BY ASSESSING OFFICER IN RESPECT OF BAD DEBTS. THE ASS ESSEE HAD FAILED TO PRODUCE ANY EVIDENCE TO PROVE THE GENUINE NESS OF ITA NO.2552/AHD /2009 DCIT (OSD) VS. AHMEDABAD ASST.YEAR - 2006-07 - 2 - THE BAD DEBTS AND THE REASONS FOR WHICH THE SAME WE RE TREATED AS BAD. 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPOND ING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T.ACT DATED 26.12.2008 WERE THAT THE ASSESSEE- COMPANY IS IN THE BUSINESS OF MANUFACTURING, PROCES SING AND JOB-WORK OF COTTON YARN AND SYNTHETIC FABRICS. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD CLAIMED BAD DEBTS OF RS.9,69,230/- IN RESPECT OF THE FOLLOWING PARTIES :- SL. NAME OF THE PARTY AMOUNT 1. NILKAMAL EXPORTS INC.LTD. RS.7,35,008/- 2. GLOBAL MARKETING RS.1,16,040/- 3. EXPECTATION RS. 50,433/- 4. VALIANT GLASS WORK PVT.LTD. RS. 67,749/- TOTAL RS.9,69,230/- 2.2. THE ASSESSEE WAS ASKED TO PRODUCE THE EVIDE NCE TO SHOW THAT THE DEBTS HAD BECOME BAD DURING THE YEAR UNDER CONSIDER ATION. THE REPLY OF THE ASSESSEE WAS THAT AFTER THE AMENDMENT TO SECTIO N 36(1)(VII) W.E.F. 1/4/1989 IT IS NOT NECESSARY TO PROVE THAT THE DEBT HAD BECOME BAD. THE ASSESSEE HAD PLACED RELIANCE ON GLOBAL CAPITAL LIMI TED 305 ITR 332 (DEL.), AS AGAINST THAT, THE AO HAD PLACED RELIANCE ON DHALL ENTERPRISES & ENGINEERS PVT.LTD. VS. CIT 295 ITR 481 (GUJ.). FO LLOWING THE SAID DECISION, THE AO HAD HELD THAT THE WRITING OF THE B AD DEBT WAS PRE-MATURE SINCE THOSE DEBTS HAVE NOT BECOME BAD DURING THE RE LEVANT PREVIOUS YEAR. THE DISALLOWANCE WAS MADE AND THE SAME WAS CHALLENG ED. ITA NO.2552/AHD /2009 DCIT (OSD) VS. AHMEDABAD ASST.YEAR - 2006-07 - 3 - 3. THE LD.CIT(A) HAS CONSIDERED THE SUBMISSIONS AND THEREAFTER FOLLOWING DECISION OF THE TRIBUNAL HELD AS UNDER:- 2.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND T HE SUBMISSIONS AS ADVANCED BY THE A.R. OF THE APPELLANT. FROM THE DETAILS FILED BY THE A.R., IT IS FOUND THAT THE OUTSTANDING AMOUNTS IN THE CASE OF, (I) NILKAMAL EXPORTS INC. LTD., RS.7,35,008/-; (II) GLO BAL MARKETING RS.1,16,040/-; (III) GLOBAL MARKETING RS.50,433/- & (IV) RS.67,749/- TOTALLING TO RS.9,69,230/- WERE WRITTEN OFF BY THE APPELLANT ON THE ADVICE OF THE AGENTS, WHO HAD VISI TED THE SAID PARTIES FOR THE RECOVERY OF THE SAME, BUT SINCE THE DUES WERE ON ACCOUNT OF DAMAGED GOODS, THE CONCERNED PARTIES REF USED T MAKE THE PAYMENTS AND ACCORDINGLY THE APPELLANT HAD NO O THER ALTERNATIVE THAN TO WRITE OFF THE SAME IN P& L A/C. AND CLAIM THE SAME AS BAD DEBTS. FURTHER, THE APPELLANT HAD ALSO MADE SINCERE EFFORTS TO EFFECT THE RECOVERY BY MAKING TELEPHONE CALLS AND WHEN IT FELT THAT THERE WAS NO SCOPE OF RECOVERY, IT HAD WR ITTEN OFF AS BAD DEBTS IN THE FINANCIAL YEAR 2005-06. IT IS ALSO SE EN THAT HON'BLE ITAT ABAD BENCH C IN APPEAL NO.3740/3741/AHD/2003 FOR A.Y. 2000-01 & 2001-02 IN THE CASE OF ADDL.CIT (ASST.) V S. M/S.CAMPHOR & ALLIED PRODUCTS LTD., HAS ALLOWED THE BAD DEBTS EVEN AFTER CONSIDERING THE DECISION OF DHALL ENTERP RISES & ENGRS.. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES A ND FOLLOWING THE CASE LAWS AS RELIED UPON BY THE A. 4. FROM THE SIDE OF THE REVENUE, LD. SR.DR MR .SAMIR TEKRIWAL AND FROM THE SIDE OF RESPONDENT-ASSESSEE LD.AR MR. P.R. SHAH APPEARED AND RESPECTIVELY PLACED RELIANCE ON THE ORDERS OF THE AO AND THE CIT(A). LD.AR HAS ALSO CITED TRF LTD. 323 ITR 397 (SC). 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDE S, SINCE THE ADMITTED FACTUAL POSITION WAS THAT THE AMOUNTS WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS DURING THE YEAR UNDER CONSIDERATION AND TH OSE WERE RELATED TO ITA NO.2552/AHD /2009 DCIT (OSD) VS. AHMEDABAD ASST.YEAR - 2006-07 - 4 - THE BUSINESS ACTIVITY OF THE ASSESSEE, THEREFORE TH E CLAIM IS ALLOWANCE AS PER A LATEST DECISION OF THE HONBLE SUPREME COURT PRONOUNCED IN THE CASE OF TRF LTD. (SUPRA), WHEREIN THE HON'BLE AP EX COURT HAS TAKEN INTO CONSIDERATION THE 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 DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOW EVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHE R THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSES SEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUS TOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER . IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DE BTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETH ER, 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 CONSIDERATION OF THE ABOVEMENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. 5.1. 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 IS AL LOWED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- ( A.L. GEHLOT ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13/ 01 /2012 0,.., .../ T.C. NAIR, SR. PS ITA NO.2552/AHD /2009 DCIT (OSD) VS. AHMEDABAD ASST.YEAR - 2006-07 - 5 - / ( %+1 2 1+ / ( %+1 2 1+ / ( %+1 2 1+ / ( %+1 2 1+/ COPY OF THE ORDER FORWARDED TO : 1. $ / THE APPELLANT 2. %&$ / THE RESPONDENT. 3. + )3 / CONCERNED CIT 4. )3() / THE CIT(A)-XIV, AHMEDABAD 5. 167 %+ , , / DR, ITAT, AHMEDABAD 6. 78 9* / GUARD FILE. /) /) /) /) / BY ORDER, &1+ %+ //TRUE COPY// : :: :/ // / ' ' ' ' ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 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.S 13.1.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.1.12 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