Super Handlers Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-8(2), Ahmedabad

ITA 2771/AHD/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9531 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 14-10-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 20-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO. 2771/AHD/2007 A Y: 2004-05 SUPER HANDLERS PVT. LTD., V INCOME TAX OFFICER, OPP. DHAMYUG FLATS, WARD NO. 8(3), GULBAI TEKRA, AHMEDABAD AHMEDABAD PA NO. AAFCS 4499 D (APPELLANT) (RESPONDENT) ITA NO.2853/AHD/2007 A. Y. 2004-05 THE D C. I. T.(OSD), CIRCLE-8, SUPER HANDLERS PV T. LTD. 4 TH FLOOR, A WING, OPP. DHAMYUG FLATS, AJANTA COMMERCIAL CENTRE, GULBAI TEKRA, AHMEDABA D ASHRAM ROAD, AHMEDABAD PA NO. AAFCS 4499 D ASSESSEE BY: SHRI S. N. SOPARKAR AND SHRI JAIMIN GA NDHI, A.R. DEPARTMENT BY: SHRI S. K. MEENA, DR ORDER PER BHAVNESH SAINI: BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A) XIV, AHMEDABAD DATE D 17-4-2007 FOR ASSESSMENT YEAR 2004-05. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL ON RECORD. 3. IN THE APPEAL OF THE ASSESSEE THE AO DISALLOWED INTEREST EXPENSES OF RS.5,87,643/-. THE ASSESSEE HAS SHOWN INCOME FROM P ARTNERSHIP FIRM AMOUNTING TO RS.38,44,803/- WHICH HAS BEEN CLAIMED AS EXEMPT U/S 10(32) OF THE IT ACT. THE AO HAS HELD THAT THE ASSESSEE HA D DIVERTED ITS INTEREST BEARING FUNDS TOWARDS ITS CAPITAL IN THE FIRM. SINC E THE ESTIMATE OF PROFIT FROM THE PARTNERSHIP FIRM IS EXEMPT INCOME, THE EXP ENDITURE INCURRED ON EXEMPT INCOME WAS DISALLOWABLE U/S 14A OF THE IT AC T AND INTEREST WAS ITA NO.2771 AND 2853/AHD/2007 SUPER HANDLERS PVT. LTD. 2 DISALLOWED AS WAS SIMILARLY DISALLOWED IN THE ASSES SMENT YEAR 2003-04. THE LEARNED CIT(A) FOLLOWING HIS APPELLATE ORDER FOR PR ECEDING ASSESSMENT YEAR CONFIRMED THE ADDITION AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE AUTHORITIES BELOW CONFIRMED THE DISALLOWANCE BY FOLLOWING THE O RDERS OF THE PRECEDING ASSESSMENT YEAR 2003-04 IN WHICH THE TRIBUNAL IN TH E CASE OF THE SAME ASSESSEE IN ASSESSMENT YEAR 2003-04 IN ITA NO.2909/ AHD/2006 AND ITA NO179/AHD/2007VIDE ORDER DATED 19-02-2009 RESTORED THE MATTER TO THE FILE OF THE AO FOR RECONSIDERATION AFRESH IN ACCORDANCE WITH LAW INCLUDING RELEVANT PROVISIONS OF SECTION 14A OF THE IT ACT. C OPY OF THE ORDER IS FILED WHICH IS NOT DISPUTED BY THE LEARNED DR. IT IS APPR OPRIATE THAT THE MATTER MAY BE REMANDED TO THE FILE OF THE AO AS IS DIRECTE D IN THE PRECEDING ASSESSMENT YEAR. 5. ON CONSIDERATION OF THE SUBMISSIONS OF THE PARTI ES AND THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE MATTER REQUIRES R ECONSIDERATION BY THE AO. THE LEARNED CIT(A) FOLLOWED THE ORDER FOR PRECEDING ASSESSMENT YEAR 2003-04 FOR DISMISSING THE APPEAL OF THE ASSESSEE ON WHICH THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR RECONSIDERATI ON IN ACCORDANCE WITH LAW. IT WOULD, THEREFORE, BE APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE AO BECAUSE IT WOULD HAVE BEARING ON THE ISSUE AFTER DE CISION IN THE PRECEDING ASSESSMENT YEAR. WE ACCORDINGLY, SET ASIDE THE ORDE RS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THE SAME IN ACCORDANCE WITH LAW BY GIVING REASONABL E SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS IS DIRECTED BY TH E TRIBUNAL EARLIER. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ITA NO.2771 AND 2853/AHD/2007 SUPER HANDLERS PVT. LTD. 3 7. IN THE DEPARTMENTAL APPEAL THE REVENUE CHALLENGE D THE ORDER OF HE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF BAD DEBT OF RS.12,01,104/-. THE ASSESSEE HAS CLAIMED DEDUCTION OF BAD DEBT AMOU NTING TO RS.14,37,959/- OUT OF WHICH RS.12,01,704/- WAS TOWA RDS UKAI COAL HANDLING BONUS BILLS FOR ASSESSMENT YEAR 2002-03 WR ITTEN OFF. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING T HE ORDER FOR ASSESSMENT YEAR 2003-04. THE ASSESSEE SUBMITTED THAT THIS AMOU NT HAS NOT BEEN REALIZED, HENCE THE SAME HAS BEEN WRITTEN OFF AND A LL THE CONDITIONS ARE FULFILLED. IT WAS SUBMITTED THAT BAD DEBT IS ALLOWA BLE AND SIMILAR ADDITION HAS BEEN DELETED IN THE ASSESSMENT YEAR 2003-04 BY THE LEARNED CIT(A) VIDE ORDER DATED 11-10-2006. THE LEARNED CIT(A) CONSIDER ING THE FACTS OF THE CASE NOTED THAT THE ASSESSEE HAS NOT REALIZED THE AMOUNT AND IT WAS WRITTEN OFF IN ITS BOOKS OF ACCOUNT WHICH IS ALLOWABLE DEDUCTION W HICH IS ALSO ALLOWED IN THE PRECEDING ASSESSMENT YEAR. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THOUGH THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEAR 2003-04 R ESTORED THE MATER TO THE FILE OF THE AO FOR RECONSIDERATION AS PER LAW VIDE ORDER DATED 19-02-2009 (SUPRA), HOWEVER, HE ISSUE IS NOW SETTLED BY THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. VS CIT 3 23 ITR 397 AND THE DEPARTMENTAL APPEAL HAS NOT MERIT AND THE SAME MAY BE DISMISSED. THE LEARNED DR DID NOT DISPUTE THAT THE ISSUE IS NOW CO VERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF T R F. LTD. (SUPRA). 9. ON CONSIDERATION OF THE FACTS OF THE CASE AND S UBMISSIONS OF THE PARTIES, WE ARE OF THE VIEW THAT THE ISSUE IS NOW C OVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF T. R F. LTD. (SUPRA) IN WHICH IT WAS HELD AS UNDER: THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH T HAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESSI NG ITA NO.2771 AND 2853/AHD/2007 SUPER HANDLERS PVT. LTD. 4 OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN F ACT, BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD D EBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUS TOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF T HE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION I S DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED 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 OFFICER. HENCE, THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE- MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTE NT OF THE WRITE OFF. 10. SINCE THE CONDITIONS U/S 36(1) (VII) OF THE IT ACT ARE SATISFIED IN THIS CASE, AS IS NOTED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER, THEREFORE, THERE IS NO MERIT IN THIS GROUND OF APPE AL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. 11. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES AND THE DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 22-10-2010 SD/- SD/- (D. C. AGRAWAL) (BHAVNESH SAINI) ACCOUNTANT MEMBER J UDICIAL MEMBER DATE: 22-10-201- LAKSHMIKANT/ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. THE CIT CONCERNED 5. THE D.R. ITAT, AHMEDABAD, 6. GUARD FILE BY ORDER DR / AR, ITAT, AHMEDABAD