The ACIT(OSD)-I,Range-4, Ahmedabad V. Gujarat State Financial Corporation, Gandhinagar

ITA 335/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0163 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

I.T.A. NO. 335 /AHD/201 1 ASSESSMENT YEAR: 200 6 - 07 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: R.P. TOLANI, J.M. AND PRAMOD KUMAR , A . M . ] I.T.A. NO. 335 /AHD/201 1 ASSESSMENT YEAR: 20 0 6 - 07 ASSTT. COMMISSIONER OF INCOME TAX (OSD) - I RANGE - 4, AHMEDABAD. ...... . . APPELLANT VS. GUJARAT STATE FINANCIAL CORPORATION .. . . RESPONDENT BLOCK NO.10, SECTION 11, UDYOG BHAVAN, GANDHINAGAR. [PAN: AA BCG 2924 M ] APPEARANCES BY: S URENDRA KUMAR FOR THE APPELLANT P.F. JAIN FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 2 8 .07.2016 DATE OF PRONOUNC ING THE ORDER : 27 . 10.2016 O R D E R PER PRAMOD KUMAR , AM : 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 6 TH NOVEMBER, 2010, PASSED BY THE LEARNED CIT(A), IN THE M ATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER), FOR THE ASSESSMENT YEAR 200 6 - 07. 2. GRIEVANCES RAISED BY THE A PPELLANT ARE AS FOLLOWS : - 1 . THE LD. CIT(A) - XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE DISALLOWANCE OF BAD DEBTS WRITTEN OFF OF RS.36,11,57,536/ - , WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 1. 2 . IN DOING SO, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT A PPRECIATING THAT THE CONDITIONS L A ID DOWN IN SECTION 36(1)(VII) OF THE ACT WERE NOT SATISFIED IN RESPECT OF THE AFORESAID CLAIM MADE BY THE A SSESSEE. I.T.A. NO. 335 /AHD/201 1 ASSESSMENT YEAR: 200 6 - 07 PAGE 2 OF 5 2 . THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.88,38,76,657/ - M AD E BY THE AO ON ACCOUNT OF PR OVISION OF B A D DEBTS WRITTEN OFF, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 2.2 THE LD. CIT(A) HAS ERRED IN LAW A ND ON FACTS IN NOT APPRECIATING THAT THE PROVISION FOR DOUBTFUL ADVANCES IS NOT AN ALLO WABLE EXPENDITURE UNDER THE PROVISIONS OF THE ACT. 2.3 IN DOING SO, THE LD . CIT (A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING T HAT THE INDIVIDUAL AMOUNTS OF ADVANCES WERE NOT ACTUALLY WRITTEN OFF F ROM THE BOOKS OF THE ASSESSEE AND AS SUCH, THE SAI D PROVISION OF RS.88,38,79,657/ - FOR BAD DEBTS WAS NOT AN ALLOWABLE EXPENDITURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD . CIT ( A ) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS , THEREFORE , PRAYED THAT THE ORDER OF THE LD . CI T(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSEE BEFORE US IS A PUBLIC SECTOR UNDERTAKING ENGAGED IN THE BUSINESS OF LEASING A ND FINANCE BUSINESS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, INTER ALIA, NOTED THAT THE ASSESSEE HA S WRITTEN OFF BAD DEBTS, AMOUNTING TO RS.36,11,57,536/ - , BY MAKING JOURNAL ENTRIES ONLY. HE, FOR THIS REASON AS ALSO F OR WANT OF JUSTIFICATION, DISALLOWED THIS BAD D EBT CLAIM. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.88,38,79,657/ - AS PROVISION FOR BAD DEBTS. IN RESPONSE TO ASSESSING OFFICER S REQUISITION FOR DETAILS, IT WAS SUBM ITTED BY THE ASSESSEE THAT TH E C ORPORATION HAS ACQUIRED THE ASSETS OF THE LOANEES WHO COULD NOT CLEAR THE DUES, AND THE PROVISION REPRESENTS DIFFERENCE BETWEEN AMOUNT OUTSTANDING AND THE VALUE OF ASSETS A S REALISED. THE ASSESSING OFFICER NOTED THAT ONLY A JOURNAL VOUCHER IS PASSED AND NO FURTHER DETAILS. ON THESE F A CTS, THE ASSESSING OFFICER DISALLOWED THIS PROVISION FOR BAD DEBTS , FOR RS. 88,38,79,657/ - , A S WELL. AGGRIEVED, INTER AL IA , BY THESE DISALLOWANCES, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE THE LEARNED CIT(A). LEARNED CIT(A) DELETED THESE DISALLOWANCES, AND, WHILE DOING SO OBSERVED AS FOLLOWS : - I.T.A. NO. 335 /AHD/201 1 ASSESSMENT YEAR: 200 6 - 07 PAGE 3 OF 5 5.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS ALSO THE SUBMISSIONS OF THE AR CAREFULLY. IT IS SEEN THAT THE DEBTS HAVE ACTUALLY BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. THE RELIANCE OF THE AO IN THE CASE OF DHALL ENTERPRISES AND ENGINEERS PRIVATE LTD. REPORTED IN (2006) 207 CTR 729 IS NOT CORRECT IN VIEW OF THE RECENT DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF M/ S TR F LTD. VS. CIT REPORTED IN 323 ITR 397 (SC) WHEREIN THE HONOURABLE SUPREME COURT HAS HELD THAT IT DOES NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT WRITTEN OFF AS IRRECOVERAB LE IN THE ACCOUNT OF THE ASSESSEE. IN VIEW OF THE ABOVE, ADDITION OF RS.36,11,57,53 6/ - MADE BY THE AO IS NOT JUSTIFIED. THE SAME IS DELETED. 6.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE AR CAREFULLY. IT IS SEEN THAT THE APPE LLANT HAD CREATED A PROVISION OF BAD DEBT ACCOUNT AND O UT OF THIS ACCOUNT A SUM OF RS. 88,38,79,65 7/ - HAS BEEN WRITTEN OFF. THE AR HAS CITED THE EFFORTS UNDERTAKEN BY THE APPELLANT TO RECOVER THE DEBTS. THE AR HAS ALSO RELIED ON IN THE CASE OF VITHALDAS H. DHANJIBHAI BARDANWALA V/S CIT . THE RELIANCE OF THE AO IN THE CASE OF DHALL ENTERPRISES AND ENGINEERS PRIVATE L TD. REPORTED IN (2006) 207 CTR 729 IS NOT CORRECT IN VIEW OF THE RECENT DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF M/S TRF LIMITED VS. CIT R EPORTED IN 323 ITR 397 (SC) WHEREIN THE HONOURABLE SUPREME COURT HAS HELD THAT IT DOES NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF THE ASSESSEE. IN VIEW OF THE ABOVE, A DDITION OF RS. 88,38,79,657/ - MADE BY THE AO IS NOT JUSTIFIED. THE SAME IS DELETED. 4. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANT E D BY THE LEARNED CIT(A) AND IS IN APPEAL BEFORE US. 5. W E HAV E HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6 . WE FIND THAT SO FAR DEDUCTION OF ACTUAL BAD DEBTS WRITTEN OFF, OF RS.36,11,57,536/ - , ARE CONCERNED, IT IS NOT IN DISPUTE THAT AMOUNTS HAVE ACTUALLY BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS SQUARED UP THE INDIVIDUAL ACCOUNTS TO THE DEBIT OF BA D DEBTS. IN THIS VIEW OF THE MATTER, AND IN THE LIGHT OF HON BLE SUPREME COURT IN TH E CASE OF TRF LIMITED VS. CIT (323 ITR 397) WHICH HOLDS THAT A I.T.A. NO. 335 /AHD/201 1 ASSESSMENT YEAR: 200 6 - 07 PAGE 4 OF 5 MERE WRITE OFF OF THE BAD DEBTS IN THE BOOKS OF ACCOUNT, AS IRRECOVERABLE, IS SUFFICIENT TO CLAIM DEDUCTIONS AS BAD DEBTS. LEARNED CIT ( A ) WAS, THEREFORE, QUITE JUSTIFIED IN GRANTING RELIEF TO THE ASSESSEE ON THIS ISSUE. AS FAR PROVISION OF RS.88,38,79,657/ - IS CONCERNED, UNDOUBTEDLY THERE IS NOTHING ON RECORD TO SHOW, OR EVEN INDICATE, THAT THESE AMOUNTS HAVE ACTUALLY BEEN WRITTEN OFF BY SQU A RING UP INDIVIDUAL ACCOUNTS OF THE DEBTORS, BUT WHA T IS NOT IN DISPUTE THAT THE PROVISION IN QUESTION HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT, AND THE A MOUNT OF PROVISION IS REDUCED F ROM THE LOANS AND ADVANCES APPEARING IN THE BALANCE SHEET. WITH THESE FACTS HAVING BEEN VERIFIED BY US WITH RESPECT TO MATERIAL ON RECORD , WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY HON BLE JURISDICTIONAL HIGH COURT S JUDGEMENT IN THE CASE OF CIT VS . NAWANA G AR CO - OPERATIVE BANK LIMITED (TAX APPEAL NO . 549 OF 2014; JUDGEMENT DATED 30.06.2014) , W HICH HAS OBSERVED AS FOLLOWS : - 5. WE HAVE HEARD MR. PRANAV G. DESAI LEARNED ADVOCATE APPEARING ON BEHALF OF THE APPELLANT - REVENUE. WE HAVE ALSO PERUSED THE IMPUGNED JUDGMENT AND ORDER PASSED BY THE LEARNED TRIBUNAL. THE LEARNED TRIBUNAL, WHILE ALLOWI NG THE CLAIM OF THE ASSESSEE OF DEDUCTION OF RS.2,18,05,3927 - U/S. 36(1)(VII) OF THE ACT, AS BAD DEBTS, THE LEARNED TRIBUNAL HAS HEAVILY RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VIJAYA BANK V. CIT, REPORTED IN (2010) 323 ITR 166. WE HAVE ALSO CONSIDERED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF VIJAYA BANK VS. CIT (SUPRA). THE QUESTION WHICH IS PROPOSED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VIJAYA BANK V. C IT (SUPRA). IN THE CASE OF VIJAYA BANK V. CIT (SUPRA), THE HON'BLE SUPREME COURT HAS OBSERVED AND HELD THAT WHERE ASSESSEE BANK HAD WRITTEN OFF IMPUGNED BAD DEBT IN ITS BOOKS BY WAY OF A DEBIT TO PROFIT AND LOSS ACCOUNT, SIMULTANEOUSLY REDUCING CORRESPONDI NG AMOUNT FROM LOANS AND ADVANCES TO DEBTORS DEPICTED ON ASSETS SIDE IN BALANCE SHEET AT CLOSE OF YEAR, THE ASSESSEE - BANK WAS ENTITLED TO DEDUCTION UNDER SECTION 36(1)(VII) AND FOR THAT PURPOSE, IT WAS NOT NECESSARY FOR IT TO CLOSE INDIVIDUAL ACCOUNT OF EACH OF ITS DEBTORS IN ITS BOOKS. WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY THE LEARNED TRIBUNAL. WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED JUDGMENT AND ORDER PASSED BY THE LEARNED TRIBUNAL. I.T.A. NO. 335 /AHD/201 1 ASSESSMENT YEAR: 200 6 - 07 PAGE 5 OF 5 7. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO B EARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE L EARNED CIT ( A ) AND DECLINE TO INTERFERE IN THE MATTER. 8. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 27 TH DAY OF OCTOBER , 2016. SD/ - SD/ - R.P. TOLANI PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 27 TH DAY OF OCTOBER , 2016. COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMEN TAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD