The ACIT, Circle-8, Ahmedabad V. Xsis Power Systems Pvt.Ltd., Ahmedabad

ITA 314/AHD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50933 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: DIVYAKANT K PARIKH A R
• Keywords: Bad and doubtful debts

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , .'.#$%, '& ' ' BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ./ I.T.A. NO.314/AHD/2010 ( ) * ) * ) * ) * / / / / ASSESSMENT YEAR : 2006-07) THE ACIT CIRCL3-8 AHMEDABAD ) ) ) ) / VS. XSIS POWER SYSTEMS PVT.LTD. 20, ELLISBRIDGE SHOPPING CENTRE OPP.TOWN HALL ASHRAM ROAD, AHMEDABAD + '& ./,- ./ PAN/GIR NO. : AAACX 0081 H ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ' / APPELLANT BY : SHRI B.L.YADAV, D.R. /0+. 2 1 ' / RESPONDENT BY : SHRI DIVYAKANT K.PARIKH, A.R. )3 2 & / / / / DATE OF HEARING : 09/11/2011 4$* 2 & / DATE OF PRONOUNCEMENT : 18.11.11 '5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XIV , AHMEDABAD DATED 20/11/2009 PASSED FOR A.Y.2006-07 AND THE ONL Y SUBSTANTIVE GROUND IS REPRODUCED BELOW:- 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE DISALLOWANCE OF BAD DEBTS OF RS.1397200/- OUT OF RS .175702/-. ITA NO.314/AHD/ 2010 ACIT VS. XSIS POWER SYSTEMS PVT.LTD. ASST.YEAR 2006-07 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 17 /12/2008 WERE THAT THE ASSESSEE-COMPANY IS IN THE BUSINESS OF MANUFACTURI NG OF UPS AND CVT, ETC. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD WRITTEN OFF AN AMOUNT OF RS.17,57,702/- AS BAD DEBT. THE A SSESSEE WAS ASKED TO SUBMIT THE DETAILS OF THE STEPS TAKEN FOR RECOVERY OF THOSE DEBTS. THE ASSESSEE WAS ALSO ASKED TO PROVE THAT THE DEBT HAD IN FACT BECOME IRRECOVERABLE IN THE YEAR UNDER CONSIDERATION. A COMPLIANCE HAS BEEN MADE AND IT WAS INFORMED THAT AN AMOUNT OF RS.13,97 ,200/- PERTAINED TO ONE PARTY; NAMELY M/S.MATADEX. IT WAS INFORMED TH AT THE SAID PARTY HAD DEFAULTED IN PAYMENT. ACCORDING TO ASSESSING OFFIC ER, THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE JUSTIFYING THAT THE DEBT HAD INDEED BECOME BAD IN THE YEAR UNDER CONSIDERATION. THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER. THE MATTER WAS CARRIED BEFORE T HE FIRST APPELLATE AUTHORITY. AFTER CONSIDERING THE SUBMISSION AND TH E AMENDED PROVISIONS OF THE I.T.ACT, THE LEARNED CIT(APPEALS) HAS ALLOWE D THE CLAIM AS FOLLOWS:- 2.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND T HE SUBMISSIONS OF THE APPELLANT. I AM INCLINED TO ACCEPT THE CON TENTIONS OF THE APPELLANT. THE APPELLANT SUBMITTED ALL THE DETAILS BY WHICH IT CAN BE EVIDENCED THE CLAIM OF BAD DEBT AS REQUIRED U/S. 36(1)(VII) AND 36(2) OF THE I.T.ACT. THE APPELLANT HAS INCURRED T HIS DEBT IN ITS REGULAR BUSINESS AND THE SALE MADE TO PARTY WAS DUL Y CONSIDERED IN COMPUTING TOTAL INCOME IN THE CORRESPONDING YEAR . THE LEDGER ACCOUNT OF M/S.MATADEX IN THE BOOKS OF APPELLANT CL EARLY SHOWS REGULAR BUSINESS AND, THEREFORE, THE GENUINENITY O F SUCH PARTY AND TRANSACTION IS BEYOND DOUBT. THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS, SUBMITTED A COPY OF LETTER F ROM M/S. MATADEX, 3 BHALACHANDRA APPT., VASNA, AHMEDABAD BEA RING ITA NO.314/AHD/ 2010 ACIT VS. XSIS POWER SYSTEMS PVT.LTD. ASST.YEAR 2006-07 - 3 - NO.XSIS/2005 DT: 15/4/05 STATING THEREIN THAT IT HA S RECEIVED SO MANY LETTERS FROM APPELLANT, BUT ON ACCOUNT OF FINA NCIAL CRISIS, IT WAS UNABLE TO PAY THE OUTSTANDING OF APPELLANT. AP PELLANT SUBMITTED COPIES OF LETTER DT: 31-12-03, 16-05-04, 30-11-04, 21-11- 05 & 25-11-05 SHOWING CORRESPONDENCE WITH M/S.MATAD EX FOR OUTSTANDING PAYMENT. IT IS, THEREFORE, THE APPELLA NT DULY DISCHARGED ITS ONUS OF SHOWING EFFORTS MADE BY IT T O RECOVER DUES BEFORE WRITING OFF THE BALANCE OUTSTANDING AMOUNT A S BAD DEBT. WITH THE PRESENT LEGAL POSITION AS HELD BY THE HON BLE ITAT SPECIAL BENCH, MUMBAI IN THE CASE OF DCIT VS. OMAN INTERNATIONAL BANK SAOG (2006) 286 ITR (AT) 8 (MUMB AI), ONLY WRITING OFF OF BAD DEBT IS SUFFICIENT AND APPELLANT NEED NOT TO PROVE BEYOND DOUBT ABOUT ITS EFFORT OR DEBT HAS BECOME BA D. HONBLE SUPREME COURT DISMISSED THE DEPARTMENTS SPECIAL LE AVE IN THE CASE OF CIT VS. RAJENDRA Y.SHAH SLP(C) NO.8364 OF 2 009 VIDE JUDGEMENT DT: 10-07-08 AND CONFIRMED THE FINDING OF HON'BLE TRIBUNAL AS HELD IN THE CASE OF OMAN INTERNATIONAL BANK (SUPRA). IT IS, THEREFORE, THE DISALLOWANCE SO MADE BY A.O. IS NOT TENABLE IN THE EYES OF LAW. THE SAME IS DIRECTED TO BE DELETE D. THE APPELLANT WILL GET A RELIEF OF RS.13,97,200/-. 3. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT SINCE THE ASSESSEE HAD WRITTEN OFF THE OUTSTAN DING DEBT BALANCE DURING THE YEAR UNDER CONSIDERATION IN THE BOOKS OF ACCOUNT, THEREFORE, THE ISSUE NOW STOOD DIRECTLY COVERED BY A LATEST DE CISION OF HON'BLE APEX COURT PRONOUNCED IN THE CASE OF T.R. F. LTD. VS. CIT REPORTED AS (2010) 323 ITR 397 (SC), WHEREIN THE HON'BLE APEX COURT HAS TAKEN INTO CONSIDERATION THE POSITION OF LAW, AFTER 01/04/1989 AND HELD AS UNDER:- THIS POSITION IN LAW IS WELL-SETTLED. AFTER APRI L 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOW EVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHE R THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSES SEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUS TOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER . IN THE CASE OF ITA NO.314/AHD/ 2010 ACIT VS. XSIS POWER SYSTEMS PVT.LTD. ASST.YEAR 2006-07 - 4 - COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DE BTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETH ER, 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 O FFICER. HENCE, THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVEMENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. 3.1. ONCE THE HON'BLE APEX COURT HAS HELD THAT IT I S ENOUGH IF THE BAD DEBT IS WRITTEN-OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE, THEN IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAD BECOME IRRECOVERABLE. THEREFORE, RESPECTFULLY FOLL OWING THE ABOVE DECISION, THIS GROUND OF THE REVENUE IS HEREBY DISM ISSED. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED . SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 18 / 11 /2011 6..), .)../ T.C. NAIR, SR. PS '5 2 /7 8'7* '5 2 /7 8'7* '5 2 /7 8'7* '5 2 /7 8'7*/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-XIV, AHMEDABAD 5. 7<# /) , , / LEARNED DEPARTMENTAL REPRESENTATIVE, ITAT, AHMEDABAD 6. # =3 / GUARD FILE. '5) '5) '5) '5) / BY ORDER, 07 / //TRUE COPY// > >> >/ // / , , , , ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD