The ACIT, Circle-8, Ahmedabad V. Vadilal Industries, Ahmedabad

ITA 3283/AHD/2004

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94380 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-08-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 10-11-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Retrospective amendment; Bad and doubtful debts
• Section: 143(3); 147; 148

Judgement Text

, B, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH , !' # $% & , ' ' ! ( BEFORE S/SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AN D KUL BHARAT, JUDICIAL MEMBER) ITA NO.3283/AHD/2004 WITH CO NO.354/AHD/2004 [ASSTT.YEAR : 1998-1999] ACIT, CIR.8 AHMEDABAD. /VS. VADILAL INDUSTRIES VADILAL HOUSE SHRIMALI SOCIETY NAVRANGPURA, AHMEDABAD. ( *+ / APPELLANT) ( ,-*+ / RESPONDENT) REVENUE BY : SHRI NARENDRA SINGH, SR.DR ASSESSEE BY : SHRI S.N. SOPARKAR DATE OF HEARING : 27 TH AUGUST, 2015 DATE OF PRONOUNCEMENT : 10 TH SEPTEMBER, 2015 O R D E R PER KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD DATED 12.8.2004. THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.3283/AHD/2004 (REVENUES APPEAL) 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,18,90,284/- ON ACCOUNT OF DISALLOWED CLAIM OF BAD DEBTS U/S.36(1)(VII) OF THE I.T.ACT, 1961,. ITA NO.3283/AHD/2014 WITH CO -2- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CITA) OUGHT TO HAVE UPHELD THE ORDER OF THE AO 3. THIS IS THE SECOND ROUND OF LITIGATION. IN EARL IER ROUND OF LITIGATIONS, THE APPEAL PREFERRED BY THE REVENUE WAS DISMISSED BY TH E TRIBUNAL ON THE GROUND THAT THE REOPENING UNDER SECTION 147 OF THE ACT AS NOT VALID. THE REVENUE PREFERRED APPEAL BEFORE THE JURISDICTIONAL HIGH COU RT IN TAX APPEAL NO.1825 OF 2009. IN THAT THE HONBLE HIGH COURT WAS PLEASED T O RESTORE AND REMANDED THE MATTER TO THE TRIBUNAL WITH THE FOLLOWING DIRECTION S: 7. THE MATTER IS SENT BACK TO THE TRIBUNAL, WHICH SHALL DECIDE ALL THE QUESTIONS INCLUDING THE ISSUE RAISED BY THE RESPOND ENT-ASSESSEE QUESTIONING VALIDITY OF THE REOPENING ALSO. THE TR IBUNAL AFTER ONCE DECIDING THE QUESTION OF VALIDITY OF THE REOPENING OF THE ASSESSMENT, SHALL ALSO DECIDE THE ISSUES WITH REGARD TO THE ADDITION ON MERIT, ON AFFORDING DUE OPPORTUNITIES TO BOTH THE SIDES THEREFORE, AS PER THE DIRECTIONS OF THE HONBLE HI GH COURT CONTAINED IN THE ABOVE PARA, TWO ISSUES ARE REQUIRED TO BE DECID ED. FIRSTLY, WHETHER REOPENING OF THE ASSESSMENT WAS VALIDITY OR NOT, AN D SECONDLY, WHETHER THE CIT(A) WAS CORRECT IN DELETING THE IMPUGNED DISALLO WANCE. 4. BRIEFLY STATED FACTS ARE THAT IN THE CASE OF THE ASSESSEE, ASSESSMENT UNDER SECTION 143(3) R.W. SECTION 147 OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED BY THE AO VIDE ORDER DATED 31.3.2004, WHILE FRAMING THE ASSESSMENT, THE AO MADE DISALLOWA NCE OF WRITING OFF OF DOUBTFUL DEBTS OF RS.1,18,90,284/-. AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A), AFTER CONSID ERING THE SUBMISSION MADE BY THE PARTIES, DELETED THE DISALLOWANCE. THE REVE NUE IS NOW IN APPEAL BEFORE US. ITA NO.3283/AHD/2014 WITH CO -3- 5. ON THE FIRST ISSUE, AT THE OUTSET, THE LD.SENIOR COUNSEL, SHRI S.N. SOPARKAR, FOR THE ASSESSEE SUBMITTED THAT THE AO WAS NOT JUST IFIED IN REOPENING OF THE ASSESSMENT. HE REITERATED THE SUBMISSIONS MADE BE FORE THE LD.CIT(A) AND BEFORE THIS TRIBUNAL IN THE FIRST ROUND OF LITIGATI ON. THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE ORIGIN AL RETURN OF INCOME WAS FILED ON 30.11.1998 VIDE ACKNOWLEDGEMENT NO.000058 WITH T HE OFFICE OF THE ACIT, CENT.CIR.1(4), AHMEDABAD. IN THE SAID RETURN, T HE ASSESSEE HAS CLAIMED BAD DEBTS OF RS.1,18,90,284/-. IN THE PROFIT & LOSS AC COUNT, THE SAME WAS WRITTEN OFF BY WAY OF PROVISION. AS PER THE DECISION OF THE H ONBLE GUJARAT HIGH COURT IN THE CASE OF VITHALDAS H. DHANJIBHAI BARDANWALA, 130 ITR 95, THE AMOUNT DEBITED TO P&L ACCOUNT BY CORRESPONDING CREDIT TO B AD DEBTS RESERVE ACCOUNT IS ALLOWABLE AS A DEDUCTION UNDER SECTION 36(1)(VII) O F THE ACT. THE SAID CLAIM WAS ALLOWED UNDER SECTION 36(1)(VII) OF THE ACT ACC ORDING TO THE PROVISIONS EXISTING AT THE TIME OF ASSESSMENT UNDER SECTION 14 3(3) OF THE INCOME TAX ACT. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE THEN AO VIDE PARA 29 OF THE LETTER NO.JCIT/SR.9/VADILAL IND./99-2000 DAT ED 17.12.1999 HAS CALLED FOR THE DETAILS OF PROVISION FOR DOUBTFUL DEBTS. IN RE SPONSE THERETO, THE ASSESSEE SUBMITTED DETAILS. AFTER VERIFICATION OF THE SAID DETAILS, THE AO CHOOSE NOT TO MAKE ANY ADDITION IN THIS REGARD. THEREAFTER, THE REVENUE REOPENED ASSESSMENT BY ISSUANCE OF NOTICE UNDER SECTION 148 DATED 28.10 .2002. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED RETURN. THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT AT THE TIME OF RETURN OF INCOME IN RESPONSE TO NOTICE U/S.148, THE EXPLANATION TO SECTION 36(1)(VII) VIDE FINANCE ACT, 2001 WAS IN SERTED W.E.F. 1.4.1989. SINCE IN THE ACCOUNTS THE ASSESSEE HAD N OT WRITTEN OFF THE INDIVIDUAL ACCOUNTS OF THE DEBTORS, ACCORDING TO THE INSERTION OF THE ABOVE EXPLANATION , THE CLAIM OF RS.1,18,90,284/- BECAME DISALLOWABLE. THE REFORE, IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S.148 THE ASSE SSEE HAS ADDED RS.1,18,90,284/- TO THE TOTAL INCOME OF THE ASSESSE E. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN THE ORIGINAL ASS ESSMENT, THE AO HAD ACCEPTED ITA NO.3283/AHD/2014 WITH CO -4- THE CLAIM OF THE ASSESSEE, AND SUBSEQUENTLY, REOPEN ING WAS SOLELY ON THE BASIS OF AMENDMENT TO THE LAW. HE SUBMITTED THAT AS PER THE REASONS RECORDED, THE REOPENING WAS ON THE BASIS THAT THE ASSESSEE HAD DE BITED RS.1,18,90,284/- TOWARDS PROVISION FOR DOUBTFUL/ADVANCES IN THE PROF IT & LOSS ACCOUNT, AND THAT IT HAS BEEN JUDICIALLY HELD THAT ANY EXPENDITURE IN TH E NATURE OF PROVISIONS IS NOT ALLOWABLE, AND THAT FURTHER EXPENDITURE IN THE NATU RE OF BAD DEBTS/ADVANCES IS ALLOWABLE ONLY WHEN THE DEBT WAS ACTUALLY BEEN WRIT TEN OFF IN THE ACCOUNTS OF THE RELEVANT PARTIES, AND THE FAILURE TO DISALLOW T HE SAME HAS RESULTED IN UNDER ASSESSMENT OF INCOME TO THE TUNE OF RS.1,18,90,000/ -. 8. THE LD.SR.DR SUPPORTED THE ORDERS OF BOTH THE AU THORITIES ON THE ISSUE ORE REOPENING. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT IN THE ORIGINAL ASSESSMENT THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE AO. HOWE VER, THE ASSESSMENT WAS REOPENED ON THE GROUND THAT THE ASSESSEE HAD DEBITE D RS.1,18,90,284/- TOWARDS PROVISION FOR DOUBTFUL DEBTS/ADVANCES IN THE PROFIT & LOSS ACCOUNT, AND SUCH EXPENDITURE IN THE NATURE OF PROVISION IS NOT ALLOW ED, IN VIEW OF THE JUDICIAL DECISIONS. THE EXPENDITURE IN THE NATURE BAD DEBTS /ADVANCES WOULD BE ALLOWABLE WHEN THE DEBT HAS ACTUALLY WRITTEN OFF IN THE ACCOUNTS OF THE RELEVANT PARTIES. THEREFORE, SO FAR REOPENING IS CONCERNED, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), AS THE SAME WAS MADE ON ACCOUNT OF AMENDMENT IN LAW. ACCORDINGLY, THE ISSUE OF REOPEN ING IS DECIDED AGAINST THE ASSESSEE. 10. COMING TO THE ISSUE OF DISALLOWANCE OF CLAIM OF THE ASSESSEE, LD. SR. DR VEHEMENTLY ARGUED THAT THE LD.CIT(A) HAS NOT JUSTIF IED IN DELETING THE ADDITION. HE FURTHER SUPPORTED THE ORDER OF THE AO. ON THE C ONTRARY, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS WRITTE N OFF THE DEBTS FROM ACCOUNT OF THE ASSESSEE. HE SUBMITTED THAT THE ISSUE IS SQU ARELY COVERED BY THE ITA NO.3283/AHD/2014 WITH CO -5- JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT, 323 ITR 397 (SC). 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD.COUNSEL FOR THE ASSESSEE HAS SUBMIT TED THAT IN THE ASSESSMENT YEAR 2000-01, THE APPEAL FILED AGAINST THE ORDER OF THE AO HAS BEEN ALLOWED BY THE LD.CIT(A). WE FIND THAT THE LD.CIT(A) HAS GIVE N A FINDING OF THE FACT IN PARA-4 OF HIS ORDER, WHICH READS AS UNDER: 4. I HAVE GONE THROUGH THE ORDER OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. AFTER CONSIDERING THE FACTS OF THE CASE , I AM INCLINED TO THE ACCEPT THE CONTENTIONS RAISED ON BEHALF OF THE APPE LLANT. THE ONLY REASON FOR DISALLOWING THE CLAIM WAS THAT IT HAS WRITTEN O FF DEBTORS INDIVIDUAL ACCOUNTS IN THE BOOKS OF ACCOUNTS AFTER THE FILING OF RETURN OF INCOME. HOWEVER, THE ACT OF WRITING OFF DEBTORS INDIVIDUAL ACCOUNTS AGAINST THE PROVISION FOR BAD DEBTS WAS NECESSITATED BY THE AME NDMENT IN THE FINANCE ACT WITH RETROSPECTIVE EFFECT FROM 1.4.1989 . IT IS ALSO SEEN THAT THE APPELLANT HAS DULY COMPLIED WITH ALL THE REQUIR EMENTS AS PER THE COMPANIES ACT. FURTHER, THE ACTION OF SUCH REOPENI NG OF ACCOUNTS DOES NOT HAVE ANY EFFECT OF THE PROFIT/LOSS FOR THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE C ASE AND ALSO FOLLOWING THE DECISION GIVEN IN APPELLANTS OWN CASE FOR A.Y. 2000-01, I HOLD THAT AFTER THE AMENDMENT OF CLAUSE (VII) OF SECTION 36(1 ), IF THE APPELLANT HAS REOPENED TO WRITE OFF THE ACCOUNTS OF RESPECTIVE DE BTORS IN ITS BOOKS OF ACCOUNTS BY DULY COMPLYING ALL TECHNICAL REQUIREMEN TS AS PER THE CIRCULAR OF DEPTT. OF COMPANY AFFAIRS, IT WILL SUFF ICE FOR CLAIMING IT AS BAD DEBT. THE AO, THEREFORE, DIRECTED TO ALLOW THE CLAIM OF BAD DEBT AMOUNTING TO RS.1,18,90,284/- US/.36(1)(VIII) OF TH E ACT. THIS FINDING OF THE FACT HAS NOT BEEN CONTROVERTED BY THE LD.DR, SINCE THE ASSESSEE HAS WRITTEN OFF THE DEBTS FROM THE ACCOUNT S OF THE RELEVANT PARTIES. THEREFORE, WE DO NOT SEE ANY REASONS TO INTERFERE W ITH THE ORDER OF THE CIT(A), ON THIS ISSUE, AND THE SAME IS HEREBY CONFIRMED. THUS, THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. CO NO.354/AHD/2004 (ASSESSEES CO) 12. IN THIS CO, THE ONLY ISSUE IS THAT ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF THE ASSESSMENT UNDER SECTION 148 OF TH E ACT. SINCE WE HAVE ITA NO.3283/AHD/2014 WITH CO -6- ALREADY DEALT WITH THIS ISSUE WHILE DECIDING OF THE APPEAL OF THE REVENUE, WHEREBY WE CONFIRMED THE ORDER OF THE LD.CIT(A) IN HOLDING THE REOPENING OF THE ASSESSMENT UNDER SECTION 148 OF THE ACT TO BE V ALID, THIS CO OF THE ASSESSEE DOES NOT SURVIVE AND HENCE, THE SAME IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT 10 TH SEPTEMBER, 2015. SD/- SD/- ( / ANIL CHATURVEDI) !' # /ACCOUNTANT MEMBER ( & /KUL BHARAT) ' ' /JUDICIAL MEMBER