M/s. Bhagyesh Soneji, Ahmedabad V. The Dy.CIT., Circle-10, Ahmedabad

ITA 362/AHD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51053 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 05-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MATHIVANAN
• Assessee Lawyers: D R THAKKAR
• Keywords: Bad and doubtful debts

Judgement Text

ITA NO.362/AHD/2010 ASSESSMENT YEAR 2005-06. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C. GUPTA & B. P. JAIN,A.M.) I.T.A. NO. 362 /AHD/2010 (ASSESSMENT YEAR : 200 5-2006) BHAGYESH HIRUBHAI SONEJI PROP. M/S. ELEGANT INDIA 205, KIRTIMAN, OPP. KADVA PATIDAR HOSTEL, OFF. C.G. ROAD, NAVRANGURA, AHMEDABAD . (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE-10, NARAYAN CHAMBERS. ASHRAM ROAD, AHMEDABAD. (RESPONDENT ) PAN: AFPBS 2299M APPELLANT BY : SHRI D. R. THAKKAR. RESPONDENT BY : SHRI M. MATHIVANAN, SR. D .R. ( )/ ORDER DATE OF HEARING : 15-12-2011 DATE OF PRONOUNCEMENT : 16-12-2011. PER: SHRI B. P. JAIN, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES FROM THE ORDER OF THE LD. CIT (A)- XVI, AHMEDABAD DATED 30-120-2009 FOR ASSESSMENT YEA R 2005-06. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1.01. THAT LD. CI.T.(A) AHMEDABAD ERRED IN DISALL OWING BAD DEBTS OF RS.36,03,153/-. 1.02 THAT VARIOUS REASONS ADVANCED BY LD. CIT AR E CONTRARY TO THE FACTS AND EVIDENCES ON RECORD. ITA NO.362/AHD/2010 ASSESSMENT YEAR 2005-06. 2 1.03 THE APPELLANT THEREFORE, SUBMIT THAT THE DIS ALLOWANCE MADE BY LD. CIT (A) ON ACCOUNT OF BAD DEBTS OF RS.36,03,153/-IS TO BE DELETED. 1.04. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTE R OR TO AMEND ANY OF THE GROUNDS OF APPEAL BEFORE FINAL HEARING OF THE APPEA L. 3. THE BRIEF FACTS IN THE GROUNDS OF THE ASSESSEE A RE THAT THE ORIGINAL ASSESSMENT ORDER WAS PASSED ON 28-11-2007 U/S. 143( 3). SUBSEQUENTLY IT WAS REOPENED ON THE GROUND THAT THE APPELLANT HAS CLAIM ED BAD DEBTS OF RS.36,03,153/. FROM THE RECORDS IT WAS NOT PROVED THAT THE DEBTS H AVE BECOME BAD. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BAD DEBTS OF RS. 36 ,03,153/- ON THE GROUND THAT THE ASSESSEE FAILED TO PROVE THAT DEBT HAS BECOME BAD. ACCORDINGLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISE 207 CTR 729 (GUJ) HE DISALLOWED THE CLAIM OF BAD DEBT. 4. THE LD. CIT (A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE DISALLOWANCE BY THE ASSESSING OFFICER HAD BEEN MADE ONLY FOR THE REASON THE ASSESSEE COULD NOT PRODUCE THE COPIES OF THE CORRES PONDENCE BETWEEN THE TWO PARTIES TO SHOW THAT THE DEBT HAS BECOME BAD DURING THE YEAR. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ASSESSEE COULD NOT R ECOVER THESE DEBTS WHICH WERE OUTSTANDING SINCE FINANCIAL YEAR 1999-2000 AND TO B UY PEACE OF MIND AND TO AVOID LITIGATION THE ASSESSEE DID NOT FILE ANY SUIT AGAIN ST THE PARTIES TO RECOVER THE SAME AND THEREFORE, THE SAID AMOUNT WAS WRITTEN OFF IN T HE BOOKS OF ACCOUNT. THE LD. DR HEAVILY RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISE REPORTED IN 207 CTR 729. ITA NO.362/AHD/2010 ASSESSMENT YEAR 2005-06. 3 6. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE VI EW THAT WITH EFFECT FROM 1-4- 1989 THERE IS AN AMENDMENT IN SECTION 36(1)(VII) W HICH PROVIDES FOR DEDUCTIONS WHEN THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHI CH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR T HE PREVIOUS YEAR. THIS AMENDMENT HAS BEEN MADE BY DIRECT TAX LAWS (AMENDMENT) ACT, 1 987 W.E.F. 1-4- 1989.THEREFORE, IF THE ASSESSEE WRITES OFF THE BAD DEBTS IN ITS BOOKS OF ACCOUNT THE SAID CLAIM WILL BE ENOUGH TO SUPPORT THE DEDUCTION U/S. 36(1)(VII). OUR VIEW IS SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT REPORTED IN (2010) 323 ITR 397 WHERE IT HAS BEE N HELD THAT W.E.F. 1-4-1989 AFTER THE AMENDMENT IN SECTION 36(1)(VII), IT IS EN OUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. I T IS NOT NECESSARY TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. THEREF ORE, FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD., (SUP RA) THE ISSUE HAS ATTAINED THE FINALITY AND THEREFORE FOLLOWING THE SAME WE DIRECT THE AO TO ALLOW THE CLAIM OF BAD DEBT AMOUNTING TO RS.36,03,153/- U/S. 36(1)(VII ) OF THE ACT. ACCORDINGLY, THE ORDER OF THE LD. CIT (A) IS REVERSED. THUS THE GRO UNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.362/AHD/2010 IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 12 - 2011. SD/- SD/- (G. C. GUPTA) (B. P. JAIN) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA NO.362/AHD/2010 ASSESSMENT YEAR 2005-06. 4 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XVI, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 15 - 12 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 15 /12 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 15 -12 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 16 - 12 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 16 - 12 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 6 -12 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..