Chaynika Bhiwaniwala , Kolkata V. ACIT, Circle - 30, Kolkata

ITA 2653/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6629 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 21-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SHITAL KHEMKA
• Keywords: Business income; Bad and doubtful debts; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT, KZ] I.T.A. NO. 2653/KOL/2018 ASSESSMENT YEAR: 2010-11 CHAYNIKA BHIWANIWALA......................................................................APPELLANT 52/1, HAZRA ROAD, KOLKATA 700 019. [PAN: AEEPB 2468 P] ACIT, CIRCLE - 30 KOLKATA..................................RESPONDENT 2, GARIAHAT ROAD, AAYAKAR BHAWAN, DAKSHIN, KOLKATA 700 068. APPEARANCES BY: SHITAL KHEMKA, FCA APPEARING ON BEHALF OF THE ASSESSEE. BAIJ NATH SINGH, JCIT, SR. DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : APRIL 25, 2019 DATE OF PRONOUNCING THE ORDER : MAY 01, 2019 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 9, KOLKATA DATED 08.10.2018 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF RS. 11,15,984/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ASSESSEES CLAIM FOR BAD DEBTS WRITTEN OFF. 2. THE ASSESSEE IN THE PRESENT IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF RENDERING COMPUTER RENTAL SERVICES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HER ON 30.09.2010 DECLARING A TOTAL INCOME OF RS. 19,01,955/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS. 11,15,984/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WRITTEN OFF . IN SUPPORT OF ITS CLAIM FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF, THE FOLLOWING EXPLANATION WAS OFFERED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO: 2 I.T.A. NO. 2653/KOL/2018 ASSESSMENT YEAR: 2010-11 CHAYNIKA BHIWANIWALA OUR BIGGEST CUSTOMER, IS HAVING HUNDREDS OF PROJECTS ON PAN INDIA BASIS, IN WHICH WE WORK ACCORDING TO THE PROJECT PERIODS AND LOCATIONS. DURING THESE PROJECTS AT TIMES THERE ARE LOT OF ATTRITION/TRANSFER AND THE MANAGERS KEEP CHANGING, TIME TO TIME. DURING THIS CHANGE OVER THERE ARE THESE STRAY INCIDENTS, DURING WHICH WE ARE NOT ABLE TO REALIZE THESE AMOUNTS, AS BECAUSE IT IS VERY HARD TO IDENTIFY BY THE NEW MANAGERS ABOUT THE OLD WORK DONE. BUT CONSIDERING THE OVERALL VOLUME OF THE BUSINESS WE GET FROM THE SAID CUSTOMER WE ARE UNABLE TO TAKE STRONG ACTION 3. THE ABOVE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO. ACCORDING TO HIM, THE EXPLANATION OFFERED BY THE ASSESSEE WAS SILENT AS TO HOW THE DEBTS WRITTEN OFF AS BAD HAD BECOME UNREALISED. HE ALSO OBSERVED THAT IT WAS NOT ASCERTAINABLE AS TO WHETHER THE AMOUNT OF SUCH BAD DEBTS WAS OFFERED TO TAX BY THE ASSESSEE IN THE EARLIER YEARS. HE, THEREFORE, DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS AND MADE AN ADDITION OF RS. 11,15,984/- TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 20.03.2013. 4. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND THE FOLLOWING SUBMISSION WAS MADE BY THE ASSESSEE IN SUPPORT OF ITS CLAIM FOR DEDUCTION ON ACCOUNT OF DEBTS: OUR BIGGEST CUSTOMER IS HAVING HUNDREDS OF PROJECTS ON PAN INDIA BASIS IN WHICH WE WORK ACCORDING TO THE PROJECT PERIODS AND LOCATIONS. DURING THESE PROJECTS AT TIMES THERE ARE LOT OF ATTRITIONS/TRANSFER AND THE MANAGER KEEP CHANGING TIME TO TIME. DURING THIS CHANGE OVER THERE ARE THESE STRAY INCIDENTS DURING WHICH WE ARE NOT ABLE TO REALIZE THESE AMOUNTS AS BECAUSE IT IS VERY HARD TO IDENTIFY BY THE NEW MANAGE R ABOUT THE OLD WORK DONE. BUT CONSIDERING THE OVERALL VOLUME OF THE BUSINESS WE GET FROM THE SAID CUSTOMER WE ARE UNABLE TO TAKE STRONG ACTION. SINCE YOUR ASSESSEE IS DEALING WITH MNCS IN BIG VOLUMES. TO ATTAIN ORDERS ON ALL INDIA BASIS IT IS NOT ADVISABLE AS PER BUSINESS NORMS TO CHASE FOR THE OLD DUES EVERY TIME FROM MANAGERS. SINCE MANAGERS ON PROJECT BASIS KEEP ON 3 I.T.A. NO. 2653/KOL/2018 ASSESSMENT YEAR: 2010-11 CHAYNIKA BHIWANIWALA CHANGING IT IS NOT ADVISABLE TO KEEP ON ASKING THE BALANCE AMOUNT. AS THE MAJOR AMOUNTS ARE ALWAYS REALIZED FROM THE CUSTOMER. THE BALANCE AMOUNTS LEFT ARE KEPT ON PILING. ON YEAR TO YEAR BASIS ALL THE AMOUNTS BILLED ARE ACCORDINGLY ACCOUNTED FOR AND PUT TO TAXATION AND BALANCE RECEIVABLE ARE ALWAYS SHOWN AS DEBTOR ON ASSET SIDE OF THE BALANCE SHEET. COPIES OF THE FOLLOWING LEDGERS ARE ENCLOSED FOR YOUR CONSIDERATION: 1. BAD DEBTS LEDGER 2. COPIES OF INDIVIDUAL COMPANIES LEDGER WE REQUEST YOUR HONOUR THAT WHERE DEBTS WERE CONNECTED WITH BUSINESS INCOME EARNED BY ASSESSEE, DEDUCTION UNDER SECTION 36(1)(VII) WAS ALLOWABLE IN RESPECT OF BAD DEBTS WRITTEN OFF. 5. THE ABOVE SUBMISSION MADE BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE LD. CIT(A) AND HE PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF BAD DEBTS WRITTEN OFF MAINLY FOR THE REASON THAT THE ASSESSEE HAD FAILED TO FURNISH ANY DETAILS SHOWING THAT THE AMOUNT OF BAD DEBTS WAS OFFERED TO TAX IN THE EARLIER YEARS. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE ASSESSEE IS ENTITLED FOR DEDUCTION ON ACCOUNT OF BAD DEBTS IF SUCH BAD DEBTS ARE WRITTEN OFF IN THE BOOKS OF ACCOUNT OF THE RELEVANT YEAR AS IRRECOVERABLE AND THE AMOUNT OF SUCH BAD DEBTS WAS OFFERED TO TAX AS INCOME IN THE EARLIER YEARS OR IN THE YEAR UNDER CONSIDERATION. IN THE PRESENT CASE, THE RELEVANT DEBTS CLAIMED AS BAD WERE WRITTEN OFF BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AS IRRECOVERABLE AND THERE IS NO DISPUTE ABOUT THE SAME. THE ONLY DISPUTE THAT IS RAISED BY THE AUTHORITIES BELOW IS THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE AMOUNT OF SUCH BAD DEBTS WRITTEN OFF WAS OFFERED TO TAX EITHER IN THE EARLIER YEARS OR IN THE YEAR UNDER CONSIDERATION. IN THIS 4 I.T.A. NO. 2653/KOL/2018 ASSESSMENT YEAR: 2010-11 CHAYNIKA BHIWANIWALA REGARD, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED A PAPER BOOK GIVING ALL THE RELEVANT DETAILS ALONG WITH THE COPIES OF SUPPORTING BILLS TO SHOW THAT THE ENTIRE AMOUNT OF BAD DEBTS WRITTEN OFF WAS OFFERED TO TAX IN THE EARLIER YEARS. IN THIS REGARD, THE LEARNED DR HAS CONTENDED THAT SINCE THESE DETAILS AND DOCUMENTS WERE NOT FURNISHED BY THE ASSESSEE EITHER BEFORE THE AO OR BEFORE THE LD. CIT(A), THE MATTER MAY BE SENT BACK TO THE AO FOR VERIFICATION OF THE SAME. I FIND MERIT IN THIS CONTENTION OF THE LEARNED DR. THE IMPUGNED ORDER OF THE LD. CIT(A) ON THE ISSUE UNDER CONSIDERATION IS ACCORDINGLY SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE CLAIM OF THE ASSESSEE FROM THE RELEVANT DETAILS AND DOCUMENTS THAT THE AMOUNT OF BAD DEBTS WRITTEN OFF WAS OFFERED TO TAX IN THE EARLIER YEARS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MAY, 2019. SD/- (P.M. JAGTAP) VICE PRESIDENT DATED: 01/05/2019 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. CHAYNIKA BHIWANIWALA, 52/1, HAZRA ROAD, KOLKATA 700 019. 2. ACIT, CIRCLE 30, KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA