WEST COAST INDUSTRIES, MUMBAI V. JCIT RG (2), MUMBAI

ITA 2908/MUM/2010

• Counselvise Citation: 290819914 RSA 2010
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2004-2005
• Appeal Filed On: 13-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MAYAK
• Assessee Lawyers: N S PORWAL
• Keywords: Bad and doubtful debts; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER I T A NO: 2908/MUM/2010 (ASSESSMENT YEAR: 2004-05) M/S WEST COAST INDUSTRIES, MUMBAI APPELLANT (PAN: AAAFW0192P) VS JOINT COMMISSIONER OF INCOME TAX RESPONDENT RANGE 18(2), MUMBAI APPELLANT BY: MR N S PORWAL RESPONDENT BY: MR A K MAYAK O R D E R R V EASWAR, PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AND IT RELATES T O THE ASSESSMENT YEAR 2004-05. THE ASSESSEE IS A PARTNER SHIP FIRM ENGAGED IN THE MANUFACTURE AND EXPORT OF GARMENTS. 2. THE FIRST GROUND IS DIRECTED AGAINST THE INITIAT ION OF REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE I NCOME TAX ACT, 1961, BY ISSUE OF NOTICE UNDER SECTION 148 ON 25.04.2006. THE GROUND TAKEN BEFORE US IS THAT THE ASSESSEE FILED I TS RETURN ON 01.11.2004, WHICH WAS PROCESSED UNDER SECTION 143(1 ) ON 13.03.2006 AND NO NOTICE UNDER SECTION 143(2) WAS I SSUED ON OR BEFORE 30.11.2005 AND, THEREFORE, THE ASSESSING OFF ICER CANNOT STRAIGHTAWAY PROCEED TO ISSUE NOTICE UNDER SECTION 147 WITHOUT FIRST ITA NO: 2908/MUM/2010 2 ISSUING NOTICE UNDER SECTION 143(2) TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3). THIS CONTENTION IS WITHOUT F ORCE. AN ASSESSMENT COMPLETED UNDER SECTION 143(1) CAN BE RE OPENED BY ISSUE OF NOTICE UNDER SECTION 147 AND IT IS NOT INC UMBENT UPON THE ASSESSING OFFICER TO FIRST ISSUE NOTICE UNDER SECTI ON 143(2) TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3) AND TH EREAFTER TO PROCEED TO REOPEN THE ASSESSMENT UNDER SECTION 147. THE FOLLOWING AUTHORITIES SUPPORT THIS LEGAL POSITION: - (1) MAHANAGAR TELEPHONE NIGAM LTD. VS. CHAIRMAN, CBDT & ANR (2000) 246 ITR 173 (DEL) (2) CIT VS. ABAD FISHERIES (2002) 258 ITR 641 (KER) (3) RANCHI CLUB LTD. VS. CIT (1995) 214 ITR 643 (PAT) (4) JORAWAR SINGH BAID VS. ACIT (1992) 198 ITR 47 (CAL) (5) PRADEEP KUMAR HAR SARAN LAL VS. AO (1998) 229 ITR 46 (ALL) IN THE LIGHT OF THE AFORESAID AUTHORITIES IT CANNOT BE HELD THAT THE REASSESSMENT WAS WITHOUT JURISDICTION MERELY BECAUS E THE RETURN HAD BEEN PROCESSED UNDER SECTION 143(1) EARLIER AND THE ASSESSING OFFICER DID NOT TAKE ANY STEPS TO ISSUE NOTICE UNDE R SECTION 143(2) AND TO FIRST COMPLETE AN ASSESSMENT UNDER SECTION 1 43(3) OF THE ACT. ACCORDINGLY THE CHALLENGE TO JURISDICTION TO REOPEN THE ASSESSMENT FAILS AND THE GROUND IS DISMISSED. 3. THE SECOND GROUND, WHICH IS ON MERITS, IS DIRECT ED AGAINST THE DISALLOWANCE OF ` 1,36,67,085/-, BEING PROVISION FOR BAD DEBTS ACTUALLY WRITTEN OFF. SINCE THE GROUND MADE A REFE RENCE TO PROVISION FOR BAD DEBTS AND ALSO REFERRED TO ACTUAL WRITE OFF , THERE WAS A DOUBT ITA NO: 2908/MUM/2010 3 AS TO WHETHER THE ASSESSEE MERELY MADE A PROVISION OR WHETHER THE DEBTS WERE ACTUALLY WRITTEN OFF. IN THE ASSESSMENT ORDER WE FIND REFERENCE TO THE ASSESSEE HAVING PRODUCED COPIES OF THE LEDGER ACCOUNTS. APPARENTLY THE LEDGER ACCOUNTS DISCLOSED THAT THE DEBTS WERE ACTUALLY WRITTEN OFF AND IT IS NOT A CASE OF M ERE PROVISION. IT IS ALSO SEEN THAT IN THE PROFIT AND LOSS ACCOUNT THE A SSESSEE HAD ERRONEOUSLY DESCRIBED THE CLAIM AS A PROVISION FOR DOUBTFUL DEBTS AND WHEN THIS WAS POINTED OUT BY THE ASSESSING OFFI CER AND VERIFIED IT WAS APPARENTLY FOUND THAT THE DEBTS THEMSELVES W ERE ACTUALLY WRITTEN OFF. THE ASSESSING OFFICER HAS NOT TAKEN A NY OBJECTION ON THE FOOTING THAT THE DEBTS WERE NOT WRITTEN OFF. H OWEVER, AS REGARDS THE OTHER QUESTION AS TO WHETHER THE DEBTS WERE TAK EN INTO ACCOUNT IN COMPUTING THE ASSESSEES INCOME FOR THE RELEVANT PREVIOUS YEAR OR ANY OF THE EARLIER PREVIOUS YEARS AS REQUIRED BY SECTION 36(2)(I), THERE IS NOTHING ON RECORD TO SHOW WHETHER THIS CON DITION HAS BEEN SATISFIED. THE LEARNED REPRESENTATIVE FOR THE ASSE SSEE HAS REFERRED TO THE CONTENTS OF THE PAPER BOOK TO SHOW THAT THIS CONDITION WAS ALSO SATISFIED IN THE ASSESSEES CASE. WE THEREFOR E SET ASIDE THE ORDERS OF THE DEPARTMENTAL AUTHORITIES ON THIS POIN T AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHA LL EXAMINE THE DETAILS AND EVIDENCE ADDUCED BY THE ASSESSEE AND TA KE A FRESH DECISION REGARDING THE CONDITION THAT THE DEBTS SHO ULD HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING THE ASSESSEES INCO ME FOR THE RELEVANT PREVIOUS YEAR OR ANY OF THE EARLIER PREVIO US YEARS. THE ASSESSING OFFICER SHALL TAKE A FRESH DECISION IN AC CORDANCE WITH LAW ITA NO: 2908/MUM/2010 4 AS TO WHETHER THE DEBTS ARE ALLOWABLE OR NOT. HE S HALL GIVE ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD . 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH APRIL 2011. SD/- SD/- (RAJENDRA SINGH) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI, DATED 15 TH APRIL 2011 SALDANHA COPY TO: 1. M/S WEST COAST INDUSTRIES 331, KEWAL INDUSTRIAL ESTATE SENAPATI BAPAT MARG, LOWER PAREL MUMBAI 400 013 2. JCIT, RANGE 18(2), MUMBAI 3. CIT-18, MUMBAI 4. CIT(A)-29, MUMBAI 5. DR G BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI