The ACIT(OSD)-I, Range-4, Ahmedabad V. Fairdeal Suppliers Pvt.Ltd., Ahmedabad

ITA 327/AHD/2011

• Counselvise Citation: 32720514 RSA 2011
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-05-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 07-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEK OZA
• Assessee Lawyers: PF JAIN
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, J.M. & SHRI T.R. ME ENA, A.M.) I.T. A. NO. 327/AHD/2011 (ASSESSMENT YEAR: 2004-05) THE ACIT(OSD)-I, RANGE-4, AHMEDABAD V/S FAIRDEAL SUPPLIERS PRIVATE LTD. 4 TH FLOOR, SHALIN BUILDING, NR. BRIDGE CORNER, ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACF 2878C APPELLANT BY : SHRI VIVEK OZA, SR. D.R. RESPONDENT BY : SHRI P.F. JAIN ( )/ ORDER DATE OF HEARING : 19-05-2014 DATE OF PRONOUNCEMENT : 23-05-2014 PER SHRI T.R. MEENA, A.M. 1 THE REVENUES APPEAL IS EMANATING FROM THE ORDER OF LD. CIT(A)-XX, AHMEDABAD DATED 08.11.2010 FOR A.Y. 2004-05. 2 THE SOLE GROUND OF APPEAL IS AGAINST THE DELETING T HE ADDITION OF RS. 13,15,969/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF BAD DEBTS. THE A.O. OBSERVED THAT THE ASSESSEE HAD CLAIMED BAD DEB TS OF RS. 13,15,969/- IN PROFIT AND LOSS ACCOUNT. HE ASKED TO FILE DETAIL S OF PARTIES DURING THE ASSESSMENT PROCEEDING, THE ASSESSEE FILED THE DETAI LS PARTLY AND ALSO GAVE THE JUSTIFICATION FOR CLAIMING BAD DEBT. THAT THE A SSESSEE HAD WRITTEN OFF ITA NO 327/ AHD/2011 . A.Y. 2004- 05 2 THESE BAD DEBTS AS IRRECOVERABLE AND THERE NO NEED TO PROVE DEBT HAD BEEN BECAME BAD ON THE APPELLANT. THE A.O. FOUND THAT IN CASE OF SHASUM CHEMICAL & DURGS LTD. THAT THIS AMOUNT PERTAIN TO P ENALTY FOR DELAYED DISPATCH OF GOOD BY THE APPELLANT AND THIS AMOUNT W AS DEDUCTED BY THE PARTY FOR BREACH OF CONTRACT BY THE ASSESSEE. THE R EMAINING DETAILS WERE NOT FURNISHED BEFORE THE A.O. IN ABSENCE OF DETAILS AS WELL AS NOT PROVING RECOVERY EFFORTS AND DEBT BECAME BAD, HE MADE AN AD DITION OF RS. 13,15,969/-. 3 BEING AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRI ED THE MATTER BEFORE CIT(A) WHO HAD ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 4.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS ALS O THE SUBMISSIONS OF THE A.R CAREFULLY. IT IS SEEN THAT THE DEBTS HAVE ACTUALLY BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. IN VIEW OF THE RECENT DE CISION OF THE HONORABLE SUPREME COURT IN THE CASE OF TRF LTD. V. CIT REPORT ED IN 323 ITR 397 (SC) WHEREIN THE HONORABLE SUPREME COURT HAS HELD THAT I T DOES NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS B ECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF THE ASSESSEE. IN VIEW OF THE ABOVE, THE ADDITION OF RS. 13,15,969 /- MADE BY THE A.O IS NOT JUSTIFIED. THE SAME IS DELETED. 4 NOW REVENUE IS BEFORE US LD. D.R. RELIED UPON THE O RDER OF THE A.O AND ARGUED THAT ASSESSEE DID NOT FURNISH THE DETAILS OF THE DEBT BEFORE THE A.O AT TIME OF ASSESSMENT PROCEEDINGS. THEREFORE HE HAD NOT FULFILLED THE CONDITION LAID DOWN UNDER SECTION 36(2) OF THE I.T. ACT AND GENUINENESS OF THIS DEBT HAD NOT PROVED BEFORE HIM. ITA NO 327/ AHD/2011 . A.Y. 2004- 05 3 5 AT THE OUTSET, LD. A.R. FOR THE ASSESSEE SUPPORTED THE ORDER OF CIT(A) AND ARGUED THAT ASSESSEE HAD WRITTEN OFF DEBT AS IR RECOVERABLE IN THE BOOKS OF ACCOUNT AS PER HONBLE SUPREME COURT DECIS ION IN CASE OF TRF LTD. VS. CIT 300 23 ITR 397 (SC). THE ONLY CONDITIO N FOR CLAIMING OF BAD DEBT IS WRITTEN OFF THESE DEBTS IN THE BOOKS OF ACCOUNT AS IRRECOVERABLE. THERE IS NO OBLIGATION ON THE PART O F THE ASSESSEE OR PROVE THE DEBT BECAME BAD AFTER AMENDMENT MADE WITH EFFEC T FROM 01.04.1989 AS HELD BY THE HONBLE SUPREME COURT IN ABOVE CITED CASE. THEREFORE HE REQUESTED TO CONFIRM THE ORDER OF CIT(A). 6 WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD. THE DETAILS OF DEBT WAS NOT FURNISHED BEFORE THE A. O AND HE COULD NOT VERIFY WHETHER THESE DEBTS PERTAIN TO BUSINESS AND DISCLOSE AS AN INCOME IN THE PAST AS PER SECTION 36(2) OF THE I.T. ACT. W E ALSO FIND THAT ASSESSEE HAD NOT PROVED THE GENUINENESS OF THE DEBTS BEFORE THE A.O. THE ASSESSEE HAS ALSO NOT PROVIDED THE INFORMATION WHET HER AFTER WRITTEN OFF IN PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAD PASSED CORRESPONDING CREDIT ENTRY IN THE ACCOUNTS OF THE DEBTORS. THEREFORE THE A.O HAS BEEN DEPRIVED OF THE APPLICABILITY OF THE PROVISIONS OF SECTION 3 6(2), TO BE READ ALONG WITH SECTION 36(1)(VII). 7 THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KOHLI BROTHERS COLOUR LAP PVT. LTD. 186 TAXMANN.COM 62 WHEREIN ASS ESSEE HAD FAILED TO FURNISH THE INFORMATION REGARDING PERSONS WITH REFE RENCE TO WHOM BAD DEBT WRITTEN OFF WAS CLAIMED. WHICH WAS DISALLOWED BY THE A.O CONFIRMED BY THE CIT(A) AND DELETED BY THE ITAT. HE LD THAT IT IS NOT OBLIGATORY ON THE PART OF THE ASSESSEE TO PROVE THA T THE BAD DEBT WRITTEN ITA NO 327/ AHD/2011 . A.Y. 2004- 05 4 OFF BY THE ASSESSEE IS INDEED A BAD DEBT FOR PURPOS E OF ALLOWANCE UNDER SECTION 36(1) (VII). THE HONBLE HIGH COURT HELD T HAT THIS DEDUCTION IS TO BE ALLOWED. THERE IS NO OBLIGATION ON THE PART OF T HE ASSESSEE TO PROVE THE DEBT BECAME BAD SUBJECT TO PROVISIONS OF SECTIO N 36(2) OF THE ACT. UNDER THE SCHEME AS PROVIDED FOR UNDER INCOME TAX A CT, THE ENTRIES WHICH HAVE BEEN MADE AS TO WHETHER SAME ARE GENUINE ENTRY AND NOT IMAGINARY AND PRINCIPLE ENTRY, QUA THE SAME ASSESSI NG OFFICER IS FULLY EMPOWERED TO MAKE ENQUIRY. ASSESSEE CANNOT BE QUEST IONED TO DEMONSTRATE DEBT BECAME BAD UNDER THE AMENDED PROVI SION. THEREFORE WE RESTORE BACK THIS ISSUE TO THE A.O TO RE-EXAMINE THE FACTS OF THE CASE AFRESH. THE ASSESSEE IS DIRECTED TO SUBMIT DETAILS OF PARTIES AS OBSERVE ABOVE BY THIS BENCH. 8 ACCORDINGLY, THE REVENUES APPEAL IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 23 - 05 - 2014. SD/- SD/- (MUKUL KR. SHRAWAT) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD