ITO, New Delhi V. M/s. Western India Shipyard Ltd., Goa

ITA 2615/DEL/2012

• Counselvise Citation: 261520114 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 23-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 30-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR; VIVEK WADEKAR
• Assessee Lawyers: VIJAY V KALE
• Keywords: Opportunity of being heard; Bad and doubtful debts; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI I.C. SUDHIR, JM ITA NO.2615 TO 2617/DEL/2012 ASSESSMENT YEARS : 2006-07 TO 2008-09 ITO, WARD 18(3), NEW DELHI. VS. WESTERN INDIA SHIPYARD LTD., PRAKHAKAR MORMUGAO HARBOUR, MORMUGAO, VASCO, GOA. PAN: AAACW0117B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY V. KALE, CA DEPARTMENT BY : SHRI VIVEK WADEKAR, CIT, DR & SHRI J.P. CHANDRAKAR, SR. DR DATE OF HEARING : 23.02.2015. DATE OF PRONOUNCEMENT : 25.02.2015. ORDER PER R.S. SYAL, AM: THESE THREE APPEALS BY THE REVENUE RELATE TO THE A SSESSMENT YEARS 2006-07, 2007-08 AND 2008-09. FOR THE SAKE OF CONV ENIENCE, WE HAVE CLUBBED THESE APPEALS FOR DISPOSAL. ITA NOS.2615 TO 2617/DEL/2012 2 ASSESSMENT YEAR 2006-07 . 2. THE ONLY ISSUE RAISED BY THE REVENUE IN ITS APPE AL IS AGAINST THE ALLOWING OF DEDUCTION OF RS.1,84,40,253/- ON ACCOUN T OF BAD DEBTS WRITTEN OFF. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, MADE OUT A CLAIM, VIDE LETTER DATED 23.12.2008 THAT DEDUCTION FOR BAD DEBTS WRITTEN OFF AMOUNTING TO RS.1,84,40,253/- BE ALLOWED. THE AO REJECTED SUCH CLAIM ON THE PREMISE THAT SUCH A NEW CLAIM COULD HAVE BEEN MADE ONLY BY MEANS OF THE REVISED RETURN WITHIN THE TIME PERMISSIBLE U/S 139(5). SINCE SUCH TIME HAD ELAPSED, THE AO REFUSED TO GRANT ANY SUCH DEDUCTION. THE LD. CIT(A) ACCEPTED THE ASSESSEES CLAIM AND GRANTED DE DUCTION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE DO NOT FIND ANY DIFFICULTY IN THE LD. FIRST APPELLATE AUTHORITY TAKING UP CLAIM OF THE AS SESSEE FOR CONSIDERATION IN RESPECT OF DEDUCTION MADE DURING THE COURSE OF A SSESSMENT PROCEEDINGS OTHERWISE THAN BY WAY OF REVISED RETURN . ALBEIT, THE AO ITA NOS.2615 TO 2617/DEL/2012 3 CANNOT CONSIDER SUCH A CLAIM, BUT THE SAME CAN BE C ONSIDERED OR DIRECTED TO BE CONSIDERED BY THE APPELLATE AUTHORITIES. 5. COMING TO THE MERITS, WE FIND FROM THE IMPUGNE D ORDER THAT THE LD. CIT(A) HAS NOT DISCUSSED ANYTHING ABOUT THE ELIGIBI LITY OF SUCH CLAIM FOR BAD DEBTS WRITTEN OFF. SECTION 36(1)(VII) PROVIDES THAT ANY AMOUNT OF BAD DEBTS OR PART THEREOF WRITTEN OFF AS RECOVERABL E IN THE BOOKS OF ACCOUNT OF THE PREVIOUS YEAR IS ALLOWABLE AS DEDUCT ION SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 36. THE H ONBLE SUPREME COURT IN TRF LTD. VS. CIT (2010) 323 ITR 397 (SC) HAS HELD THAT A SIMPLE WRITE OFF OF A BAD DEBT IS SUFFICIENT FOR CLAIMING DEDUCTION AND THERE IS NO REQUIREMENT TO ESTABLISH THAT THE DEBT BECAME BA D IN THE PREVIOUS YEAR. HOWEVER, IT IS PERTINENT TO MENTION THAT THE ADMISSIBILITY OF DEDUCTION U/S 36(1)(VII) IS COUPLED WITH THE FULFIL LMENT OF THE CONDITION AS GIVEN IN SECTION 36(2). THE LATER PROVISION PRO VIDES THAT NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE A SSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR P ART THEREOF IS WRITTEN ITA NOS.2615 TO 2617/DEL/2012 4 OFF OR OF AN EARLIER PREVIOUS YEAR, ETC. A CONJOIN T READING OF SECTION 36(1)(VII) AND SECTION 36(2) MAKES IT ABUNDANTLY CL EAR THAT ANY AMOUNT OF BAD DEBT WRITTEN OFF DURING THE YEAR CAN BE ALLO WED AS DEDUCTION PROVIDED SUCH DEBT OR PART THEREOF WAS TAKEN INTO A CCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE FOR THIS YEAR OR AN EARL IER YEAR. UNLESS SUCH DEBT IS TAKEN INTO CONSIDERATION IN THE COMPUTATION OF TOTAL INCOME, THERE CAN BE NO QUESTION OF ALLOWING DEDUCTION ON ITS BEC OMING IRRECOVERABLE OR ON A MERE WRITE OFF. AS NECESSARY FACTS OF THIS ISSUE ARE NOT AVAILABLE AND THE LD. CIT(A) HAS SIMPLY ACCEPTED THE ASSESSEE S CLAIM WITHOUT GOING INTO THE DEDUCTIBILITY OF THIS AMOUNT AS PER LAW IN TERMS OF ABOVE DISCUSSION, WE SET ASIDE THE IMPUGNED ORDER AND REM IT THE MATTER TO THE FILE OF AO FOR DECIDING THIS ISSUE AFRESH IN CONFOR MITY WITH OUR ABOVE OBSERVATIONS. NEEDLESS TO SAY, THE ASSESSEE WILL E XTEND FULL CO-OPERATION TO THE AO BY SUBMITTING THE DETAILS CALLED FOR AND WILL BE ENTITLED TO A REASONABLE OPPORTUNITY OF BEING HEARD IN SUCH FRESH PROCEEDINGS. 6. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ITA NOS.2615 TO 2617/DEL/2012 5 ASSESSMENT YEAR 2007-08 7. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.4,31,72,978/- ON ACCOUNT OF PROVISIO N FOR CONTRACTOR (RS.2,65,61,162/-) AND PROVISION FOR SUPPLIERS (RS. 1,66,11,816/-). THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE INCL UDED THE ABOVE TWO PROVISIONS IN ITS LIST OF SUNDRY CREDITORS. ON BEI NG CALLED UPON TO EXPLAIN AS TO HOW THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION T OWARDS SUCH PROVISIONS, THE ASSESSEE DID NOT TENDER ANY EXPLANA TION. THIS LED TO THE MAKING OF ADDITION OF RS.4.31 CRORE, WHICH THE LD. CIT(A) DELETED IN THE FIRST APPEAL. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, HERE AGAIN, WE FIND THAT THE LD . CIT(A) DELETED THE ADDITION WITHOUT GOING INTO THE MERITS OF ITS DEDUC TIBILITY IN THE FIRST INSTANCE. HE SIMPLY MENTIONED IN THE IMPUGNED ORDER THAT THE ASSESSEE HAD SHOWN THAT THE PROVISIONAL BALANCES WERE SPECIF ICALLY ADJUSTED AGAINST THE BILLS OF SUB-CONTRACTORS. IN CONTRAST TO THAT, WE OBSERVE FROM THE ASSESSMENT ORDER THAT THE ASSESSEE DID NOT FURN ISH ANY DETAILS AND ITA NOS.2615 TO 2617/DEL/2012 6 ANYTHING ABOUT THE OTHERWISE DEDUCTIBILITY OF SUCH PROVISIONS. FURTHER, THERE IS NO ELABORATE DISCUSSION ABOUT THESE VITAL ASPECTS IN THE IMPUGNED ORDER. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND REMIT THE MATTER TO THE FILE OF AO FOR A FRESH DETE RMINATION OF THE SAME AS PER LAW, AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ASSESSMENT YEAR 2008-09 10. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.10,69,25,323/- ON ACCOUNT OF BAD DEB TS WRITTEN OFF. 11. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE TH AT THE ASSESSEE CLAIMED DEDUCTION FOR RS.10.69 CRORE BY MENTIONING THAT `SU CH BAD DEBTS WERE EARLIER DISALLOWED AND NOW CLAIMED AS DEDUCTION ON WRITE OFF. THE AO SOUGHT CERTAIN DETAILS AS TO WHEN THE BAD DEBT WERE WRITTEN OFF; WHEN AND HOW THESE WERE DISALLOWED EARLIER; CIRCUMSTANCES UN DER WHICH THESE WERE CLAIMED AS ALLOWANCE THIS YEAR; AND THE EARLIE R YEAR(S) IN WHICH THESE WERE SHOWN AS INCOME ALONG WITH COPY OF RELEV ANT LEDGER ACCOUNTS ITA NOS.2615 TO 2617/DEL/2012 7 OF SUCH YEARS. NO SUCH DETAILS WERE MADE AVAILABL E. THIS RESULTED INTO THE MAKING OF ADDITION OF RS.10.69 CRORE. THE LD. CIT(A) ALLOWED THE DEDUCTION BY OBSERVING THAT A MERE WRITE OFF IN THE BOOKS OF ACCOUNT WAS SUFFICIENT. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, HERE AGAIN, WE OBSERVE THAT THE ASSESSEE FAILED TO FURNISH ANY DETAILS BEFORE THE AO AS WERE CALLED FO R, WHICH HAVE BEEN MENTIONED ABOVE. THE LD. CIT(A) MERELY ACCEPTED TH E ASSESSEES CONTENTION BY NOTICING THAT SUCH AMOUNT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT. HE FAILED TO CARRY OUT ANY INVESTIGATION ABOUT THE FULFILLMENT OF THE PRE-REQUISITE CONDITION AS PER SECTION 36(2) AS DISCUSSED ABOVE. UNDER SUCH CIRCUMSTANCES, WE CANNOT UPHOLD THE IMPU GNED ORDER ON THIS SCORE. AS SUCH, THE IMPUGNED ORDER ON THIS ISSUE I S OVERTURNED AND THE MATTER IS SENT BACK TO THE AO FOR DECIDING IT AFRES H AS PER LAW, AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AO IS DIRECTED TO VERIFY THE DEDUCTIBILITY OF THIS AMOUNT AS PER SECTION 36(1)(VII) ALONG WITH SECTION 36(2). IF THE AMOUNT IS FOUND TO BE ITA NOS.2615 TO 2617/DEL/2012 8 DEDUCTIBLE, THEN THE AO SHOULD VERIFY THAT THE AMOU NT HAS NOT BEEN ALLOWED AS DEDUCTION IN EARLIER YEARS, EITHER BY HI M OR DUE TO THE ORDERS PASSED BY THE APPELLATE AUTHORITIES. 13. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 25.02.201 5. SD/- SD/- [I.C. SUDHIR] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 25 TH FEBRUARY, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.