The ACIT,B.K.Circle, Palanpur V. M/s. Shrijee Industries Ltd., Palanpur

ITA 2845/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2022 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 11-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAVANSHI SRDR
• Keywords: Bad and doubtful debts
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.2845-2846/AHD/2010 ASSESSMENT YEAR:2005-06 DATE OF HEARING:18.2.11 DRAFTED:21.2.11 ACIT, B.K. CIRCLE, PALANPUR V/S. M/S. SHRIJEE INDUSTRIES LTD. AVAL TA. PALANAPUR PAN NO.AAS9309Q (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI G.S. SOURYAVANSHI, SR-DR RESPONDENT BY:- NONE O R D E R PER BENCH:- TWO APPEALS BY REVENUE ARE ARISING OUT OF ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-XV, AHMEDABAD IN APPEAL NOS CIT (A) XV/ ACIT/B.K.CIR/ PLN/28 & 60/08-09 OF EVEN DATE I.E. 13-08-2010. THE ASSESSMENT WAS FRAMED BY THE ACIT, B.K.CIRCLE, PALANPUR U/S.144 R.W.S. 14 7 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED19-02-2008 FOR ASSESSMENT YEAR 2005-06. FIRST WE WILL TAKE APPEAL OF REVENUE IN ITA NO.2845 /AHD/2010. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE MADE BY ASSESSING OFFI CER ON ACCOUNT OF BAD DEBTS WRITTEN OFF. FOR THIS, REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUND NO.1 :- ITA 2845-46/AHD/2010 A.Y. 2005-06 ACIT B.K. CIR, PLN V. M/S. SHRIJEE INDS. LTD. PAGE 2 1) THE LD. COMMISSIONER OF INCOME-TAX(A)-XV, AHMED ABAD HAS ERRED IN LAW AND DON FACTS IN DELETING THE DISALLOWANCE O F RS.22,98,815/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BAD DEB TS. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ON VERIFICATION OF ACCOUNTS ASSESSING OFFICER NOTICED THAT THE ASSESSE E CLAIMED DEDUCTION OF RS.22,98,815/- BEING BAD DEBT WRITTEN OFF DURING TH E YEAR UNDER CONSIDERATION WITHOUT SUPPORTING ANY AUTHENTIC EVIDENCE VIZ. WHET HER THE DEBT WAS IN RESPECT OF BUSINESS OR OTHERWISE AND ACTUALLY BECAM E IRRECOVERABLE. SINCE THE CLAIM FOR BAD DEBT HAS WRONGLY BEEN ALLOWED WHILE P ROCESSING THE RETURN U/S.143(1) OF THE ACT RESULTED INTO UNDER ASSESSMEN T TO THE TUNE OF RS.22,98,815/-. THEREFORE, ASSESSING OFFICER FOUND REASON THAT THE CLAIM OF BAD DEBT HAS ESCAPED ASSESSMENT TO THE ABOVE EXTENT AND HE ISSUED NOTICE U/S 148 ON 22-10-2007 AND WHICH WAS DULY SERVED UPO N ASSESSEE ON 31-10- 2007. ACCORDINGLY, ASSESSING OFFICER DISALLOWED THE BAD DEBTS AS THE ASSESSEE HAS NOT COOPERATED WITH HIM. THE CIT(A) DE LETED THE DISALLOWANCE OF BAD DEBT BY GIVING FOLLOWING FINDINGS IN PARA-6 & 7 OF HIS APPELLATE ORDER:- 6. AFTER GOING THROUGH RIVAL SUBMISSION IT IS SEEN THAT THE BAD DEBTS HAD BEEN WRITTEN OFF IN THE PRINTED PROFIT & LOSS ACCOU NT FORMING PART OF THE PRINTED ANNUAL REPORT OF THE COMPANY. FURTHER THE D ETAILS INN RESPECT OF BAD DEBTS WRITTEN OFF WERE ALSO PROVIDED BY THE APP ELLANT COMPANY AND THE TABLE OF THE SAME IS ENCLOSED HEREWITH AS ANNEX URE-A OF THIS ORDER, WHICH WAS MADE AVAILABLE TO THE AO ALSO BY T HIS OFFICE FOR COMMENTS BUT THE SAME COULD NOT BE RECEIVED. THE AO INFORMED THAT THE APPELLANT DID NOT TURN UP ON THE SCHEDULED DATE OF HEARING BEFORE HIM. THE TABLE SHOWS THAT DEBTS ARE WITH RESPECT TO OLD SALES IN RESPECT OF WHICH RECOVERY COULD NOT BE EFFECTED. THE COMPAN Y HAS BEEN BEARING LOSSES AND IS A SICK COMPANY AS PER DIRECTO RS REPORT FORMING PART OF THE PRINTED ANNUAL REPORT OF THE COMPANY FO R THE CURRENT YEAR WHEREIN IT HAS BEEN STATED AS UNDER:- THE COMPANY CONTINUES TO REMAIN A SICK INDUSTRIAL COMPANY UNDER THE PROVISIONS OF SICK INDUSTRIAL COMPANIES ( SPECIAL PROVISIONS) ACT, 1985 AS THE NET WORTH OF THE COMPA NY HAS BEEN FURTHER ERODED DUE TO LOSSES INCURRED DURING THE YE AR. 7. IN VIEW OF THE AFORESAID MENTIONED DISCUSSION TH E AO IS DIRECTED TO DELETE THE DISALLOWANCE OF BAD DEBTS OF RS.22,98,81 5 WHICH HAVE BEEN WRITTEN OFF IN THE ACCOUNTS OF THE SICK COMPANY. ITA 2845-46/AHD/2010 A.Y. 2005-06 ACIT B.K. CIR, PLN V. M/S. SHRIJEE INDS. LTD. PAGE 3 AGGRIEVED, REVENUE CAME IN APPEAL BEFORE THE TRIBUN AL. 4. WE HAVE HEARD THE LD-SR-DR AND FIND THAT THAT TH IS IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE D ECISION OF T.R.F. LIMITED V. COMMISSIONER OF INCOME TAX [2010] 323 ITR 397 (SC) WHEREIN IT IS HELD THAT TH E DISALLOWANCE OF BAD DEBTS ON THE GROUND THAT THE AS SESSEE HAS NOT PRODUCED SUFFICIENT EVIDENCE TO SHOW THAT REASONABLE STEPS W ERE TAKEN TO RECOVER THE DEBT. HOWEVER, THERE IS NO DISPUTE THAT THE ABOVE AMOUNT WAS DULY WRITTEN OF IN THE ASSESSEES BOOKS OF ACCOUNT. ON THE ABOVE FACTS TH E DECISION OF HONBLE APEX COURT IN THE CASE OF T.R.F. LIMITED (SUPRA) WOULD BE SQUARELY APPLICABLE WHEREIN, THEIR LORDSHIPS HELD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE IN COME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DED UCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTA BLISH THAT 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. IN THE PRESENT CASE, IT IS A FACT THAT THE ASSESSEE HAS WRITTEN OFF BAD DEBTS IN ITS BOOKS OF ACCOUNT AND ACCORDINGLY THE ISSUE IS COVER ED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, WE CONFIRM THE OR DER OF CIT(A) DELETING THE DISALLOWANCE OF BAD DEBTS AND THIS ISSUE OF REVENUE APPEAL IS DISMISSED. NOW COMING REVENUES APPEAL IN ITA NO.2846/AHD/2010 . 5. AS THE QUANTUM APPEAL OF REVENUE IS DECIDED IN F AVOUR OF ASSESSEE AND AGAINST THE REVENUE AS ABOVE, THE LEVY OF PENAL TY U/S. 271(1) OF THE ACT HAS RIGHTLY BEEN DELETED BY CIT(A) AND WE CONFIRM T HE SAME. 6. IN THE RESULT, BOTH APPEALS OF REVENUE ARE DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 22/02/2011 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 22/02/2011 ITA 2845-46/AHD/2010 A.Y. 2005-06 ACIT B.K. CIR, PLN V. M/S. SHRIJEE INDS. LTD. PAGE 4 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD