ITO, New Delhi V. M/s. Ganga Contracts & Projects Ltd., Noida

ITA 2783/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6406 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-10-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Keywords: Bad and doubtful debts
• Section: 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A. NO . 2783 /DEL/20 1 4 A.Y. : 20 0 5 - 06 INCOME TAX OFFICER, WARD 12(1), ROOM NO. 417, CR BLDG., NEW DELHI 110 002 VS M/S GANGA CONTRACTS & PROJECTS LTD., 203, DOHIL CHAMBERS, 46, NEHRU PLACE, NEW DELHI AND G-17, BASEMENT, SECTOR-39, NOIDA, UP (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) DEPARTMENT BY : SH. AMRIT LAL, SR. DR ASSESSEE BY : NONE ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU : JM H.S. SIDHU : JM H.S. SIDHU : JM H.S. SIDHU : JM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE IMPUGNED ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-V, NEW DELHI FOR THE ASSESSMENT YEAR 2005-06. 2. THE GROUNDS RAISED IN THE REVENUES READ AS UND ER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 45,84,283/- MADE BY THE AO ON ACCOUNT OF BAD DEBTS, BY COMPLETELY IGNORING THE FACT THAT THE ASSESSEE FAILED TO ESTABLISH THAT SUC H DEBTS HAVE BEEN OFFERED FOR TAXATION IN EARLIER YEARS. 2 2. THE APPELLANT CRAVES TO ADD, ALTER, AMEND, MO DIFY, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE H AS FILED THE RETURN OF INCOME OF RS. 3,79,926/- ON 31.10.2015 AND THE SAME WAS PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY. NOTICE U/S. 143(2) OF THE I.T. ACT WAS IS SUED AND QUESTIONNAIRE DATED 7.2.2007 ALONGWITH STATUTORY NOTICE U/S. 142( 1) OF THE I.T. ACT WAS ISSUED TO THE ASSESSEE, BUT AO OBSERVED THAT DUE T O ASSESSEES CASUAL APPROACH, NON-COOPERATIVE THROUGHOUT THE ASSESSMENT PROCEEDINGS AND ALSO THE ASSESSMENT WAS GETTING BARRED BY TIME ON 3 1.12.2007, AO COMPLETED THE ASSESSMENT EXPARTE U/S. 144 OF THE I .T. ACT, 1961 ON 28.7.2007 ON THE BASIS OF MATERIAL AVAILABLE ON REC ORD AND MADE VARIOUS ADDITIONS AND ASSESSED THE INCOME AT RS. 2,06,01,46 0/-. 4. AGGRIEVED WITH THE AFORESAID ORDER OF THE AO, TH E ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHO VIDE IMPUGNED ORDE R DATED 13.2.2014 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGAINST THE ORDER OF THE LEARNED CIT(A) THE REVE NUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 3 7. IN THIS CASE, NOTICE OF HEARING TO THE ASSESSEE WAS SENT BY THE REGISTERED AD POST AT THE ADDRESS GIVEN BY THE IN FORM NO. 36 VIDE PARA NO. 11 FILED BY THE DEPARTMENT, WHICH WAS RETURNED BACK WITH THE REMARK S NO SUCH PERSON. NO OTHER ADDRESS IS AVAILABLE WITH THE TRIBUNAL. KEEPI NG IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE ISSUE INV OLVED IN THE PRESENT APPEAL, WE ARE OF THE VIEW THAT NO USEFUL PURPOSE WOULD BE SERVED TO ISSUE NOTICE AGAIN AND AGAIN TO THE ASSESSEE, THEREFORE, WE ARE DECID ING THE PRESENT APPEAL EXPARTE QUA ASSESSEE, AFTER HEARING THE LD. DR AND PERUSING THE RECORDS. 8. WE HAVE HEARD THE LD. DR AND PERUSED THE RECORDS . WE FIND THAT THE LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE IN DISPUTE AND GAVE HIS FINDING VIDE PARA NO. 5.1 AT PAGE NO. 6 TO 7 OF HIS IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, THE RELEVANT FINDING O F THE LD. CIT(A) IS REPRODUCED BELOW:- 5.1 I HAVE GONE THROUGH FINDINGS OF AO IN ASSESS MENT ORDER AND FROM THE SAME IT IS NOTED THAT THE ONLY G ROUND ON WHICH THE SAID AMOUNT OF RS. 45,84,283/- WHICH IS SUNDRY DEBTORS WRITTEN OFF HAS NOT BEEN ALLOWED AS A DEDU CTION BY THE AO IS THAT THE ASSESSEE FAILED TO FURNISH EVID ENCE THAT INCOME / RECEIPTS IN RESPECT OF THE DEBTORS HAVE AL READY BEEN TAXED IN EARLIER YEARS. IN THIS CONNECTION, IT IS SEEN FROM THE SUBMISSION AND THE PAPER BOOK FILED BY THE APPELLANT THAT THESE DEBTOR S RELATE TO PARTIES / CLIENTS ON WHOM BILLS HAVE BEEN RAISED B Y THE APPELLANT FOR WHOM CONSTRUCTION WORK WAS STARTED BY THE 4 APPELLANT BETWEEN 1995 TO 2001. THE DETAILS AND NAT URE OF WORK DONE FOR 14 OF SUCH PARTIES HAVE ALSO BEEN PRO VIDED (PAGE -22 OF THE PAPER BOOK) AS ALSO THE COPY OF LE DGER ALE OF ALL THESE PARTIES FROM 1.4.2002 TO 31.3.2005. THE R EASON WHY THESE AMOUNTS HAVE BEEN WRITTEN OFF AS BAD DEBTS IS THAT THEY HAVE BEEN TREATED AS IRRECOVERABLE IN THE OPINION O F THE APPELLANT THAT THESE CONTRACTEE PARTIES USUALLY MAK E DEDUCTION ON ACCOUNT OF VARIATION IN SIZES, QUALITY OF MATERIAL, DEVIATION IN SPECIFICATION, RATE DIFFERENCE ETC. TH E APPELLANT HAS ALSO FILED HIS AUDITOR'S REPORT DATED 8.9.2006. FROM SCHEDULE 11 THEREOF IT IS SEEN THAT THE STATED ACCO UNTING POLICY OF THE COMPANY, INCLUDES REVENUE RECOGNITION FROM CONTRACT RECEIPTS ON BASIS OF THE RUNNING BILLS RAI SED BY THE COMPANY DURING THE YEAR. IN VIEW OF ALL THESE FACTS TAKEN TOGETHER THERE IS A STRONG PRIMA FACIE CASE IN FAVO UR OF THE APPELLANT THAT THE RECEIPTS FROM THE DEBTORS (WHO A RE PARTIES FOR WHOM THE APPELLANT HAS CARRIED OUT CONSTRUCTION WORK) WHICH IS NOW BEING WRITTEN OFF, WOULD NECESSARILY H AVE BEEN SHOWN IN THE BOOKS OF ACCOUNTS AS INCOME BY WAY OF CONTRACT RECEIPTS AND HAVE THEREFORE BEEN OFFERED FOR TAX IN THE EARLIER YEARS. MOREOVER, THE AO HAS NOT DISPUTED THE CORREC TNESS OF THE ASSESSEE'S CONTENTION THAT IT COULD NOT RECOVER THE SAME OF RS.45,84,283/- FROM DEBTORS. 5 ONCE THE ASSESSEE IS UNABLE TO RECOVER THE AMOUNT F ROM HIS DEBTORS, SUCH NON-RECOVERABLE RECEIPTS COULD APPROP RIATELY BE LEGALLY WRITTEN OFF AS BAD DEBT BY ASSESSEE. THIS A SPECT HAS BEEN EXAMINED BY THE HON'BLE APEX COURT IN THE CASE OF T.R.F. LTD. VS CIT - [2010] 323 ITR 397 (SC) WHEREI N IT IS HELD THAT AFTER THE AMENDMENT OF SECTION 36(1 )(VII ) OF THE INCOME-TAX ACT, 1961 WITH EFFECT FROM 1ST APRIL, 19 89, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBT S, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT HAS IN FACT, BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE, IT IS UNDISPUTED THAT THE SUM OF RS.45,84,283/- HAS ALREADY BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. IN VIEW OF THE ABOVE DISCUSSION IN ITS TOTALITY THE GROUND NO.3 OF APPEAL IS ALLOWED AND THE AO IS DIRECTED TO DELE TE THE ADDITION MADE FOR RS.45,84,283/-. 8.1 AFTER PERUSING THE AFORESAID LD. CIT(A)S FINDI NG, WE FIND THAT LD. CIT(A) HAS REFERRED AND FOLLOWED THE DECISION OF TH E HONBLE APEX COURT IN THE CASE OF TRF LTD. VS. CIT (2010) 323 ITR 397 (SC) WHEREIN IT IS HELD THAT AFTER THE AMENDMENT OF SECTION 36(1)((VII) OF THE INCOME TAX AT, 1961 WITH EFFECT FROM 1 ST APRIL, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT HAS IN FACT, BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD 6 DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUN TS OF THE ASSESSEE. WE FURTHER FIND THAT LD. CIT(A) HAS RIGHTLY OBSERVED T HAT IT IS UNDISPUTED THAT THE SUM OF RS. 45,84,283/- HAS ALREADY BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT, HENCE, THE AO WAS RIGHTLY DIRECTED TO DEL ETE THE ADDITION OF RS. 45,84,283/-. IN VIEW OF THE ABOVE, WE ARE OF THE VI EW THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED AN Y INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME AND DISMISS THE GROUND RAISED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/12/2016. S SS SD DD D/ // /- -- - S SS SD DD D/ // /- -- - [ [[ [L.P. SAHU L.P. SAHU L.P. SAHU L.P. SAHU] ] ] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR DATE: 26-12-2016 COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES