The ACIT, Circle-6, Surat V. M/s. President Automobiles, Surat

ITA 2978/AHD/2009

• Counselvise Citation: 297820514 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI G. D. AGARWAL, VP AND SHRI BHAVNESH SA INI, JM) ITA NO.2978/AHD/2009 A. Y.: 2006-07 THE A. C. I. T., CIRCLE-6 ROOM NO.623, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S. PRESIDENT AUTOMOBILES, NEAR P.W.D. STORE, AT & POST KUMBHARIA, SURAT BARDOLI MAIN ROAD, SURAT PA NO. AAFFP 8159 C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ROOPCHAND, SR. DR RESPONDENT BY NONE DATE OF HEARING: 05-09-2011 DATE OF PRONOUNCEMENT: 09-09-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-IV , SURAT DATED 27 TH JULY, 2009 FOR THE ASSESSMENT YEAR 2006-07, CHALLE NGING THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF RS. 14,79,640/- ON ACCOUNT OF BAD DEBT. 2. THE LEARNED CIT(A) NOTED THAT THIS ISSUE RELATES TO DISALLOWANCE OF BAD DEBTS OF RS.17,65,461/-. THE AO IN THE ASSES SMENT ORDER MENTIONED HAT IN THE ABSENCE OF ANY CROSS CONFIRMAT ION, PAN, ADDRESS AND DETAILS OF RECOVERY MEASURES ETC., HE W AS OF THE OPINION THAT THE DEBTS HAVE NOT BECOME BAD ON CONSEQUENTLY EXPENSES ITA NO. 2978/AHD/2009 THE ACIT, CIRCLE-6, SURAT VS M/S. PRESIDENT AUTOMOB ILES 2 WRONGLY CLAIMED BY THE ASSESSEE AS BAD DEBT. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT DEBTS HAVE BECOME BA D IN THE YEAR IN QUESTION AND HENCE WAS WRITTEN OFF IN THE YEAR AS B AD. COPIES OF LEDGER ACCOUNTS OF ALL BAD DEBTS WERE SUBMITTED BEF ORE THE AO AT THE ASSESSMENT STAGE. THE LEARNED CIT(A) CONSIDERING TH E FACTS AND MATERIAL ON RECORD NOTED THAT THE ASSESSEE HAS RIGH TLY CLAIMED THE BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNTS. THE AO MADE ADDITION OF RS.14,79,640/- TO THE INCOME OF THE ASSESSEE BY DEDUCTING THE AMOUNT OF RS.2,85,821/- SHOWN AS RECOVERABLE IN THE SUBSEQUENT YEAR FROM THE TOTAL BAD DEBTS OF RS.17,65,461/-. TH E EFFECTIVE ADDITION OF RS.14,79,640/- WAS ACCORDINGLY DELETED. 3. THE LEARNED DR SUBMITTED THAT THE ISSUE IS NOW C OVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F T. R. F. LTD., 323 ITR 397 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 ESTAB LISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. I T IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINE D WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS 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 BEE N UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE ITA NO. 2978/AHD/2009 THE ACIT, CIRCLE-6, SURAT VS M/S. PRESIDENT AUTOMOB ILES 3 NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE O FF. 4. CONSIDERING THE FACTS OF THE CASE IN THE LIG HT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. L TD. (SUPRA), WE ARE OF THE VIEW THE ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE. ADMITTEDLY, THE ASSESSEE HAS WRITTEN OFF THE BAD DEBTS AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR T HE PREVIOUS YEAR, THEREFORE, THE ASSESSEE SATISFIED THE REQUIREMENTS OF SECTION 36(1) (VII) OF THE IT ACT. ACCORDINGLY, WE DO NOT FIND AN Y MERIT IN THE DEPARTMENTAL APPEAL. SAME IS ACCORDINGLY DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD