REMI SALES AND ENGINEERING LIMITED, MUMBAI V. ACIT, CIRCLE 13(3)(1), MUMBAI

ITA 3650/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8661 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 25-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G PANSARI
• Assessee Lawyers: SHANKARLAL JAIN
• Keywords: Business income; Bad and doubtful debts
• Section: 143(3); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR , HON'BLE ACCOUNTANT MEMBER IT A. NO. 3650 /MUM/201 8 (A.Y: 2014 - 15) M/S. REMI SALES AND ENGINEERING LIMITED PLOT NO. 11, CAMA INDUSTRIAL ESTATE WALBHAT ROAD, GOREGAON (E) MUMBAI - 400063 PA N: AAACR0421M V. ACIT CIRCLE - 13(3)(1 ) 2 ND FLOOR, AAYAKAR BHAVAN M.K. ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHANKARLAL JAIN DEPARTMENT BY : SHRI D.G. PANSARI DATE OF HEARING : 11 .06.2019 DATE OF PRONOUNCEMENT : 06 .09 .2019 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) 21, MUMBAI [HEREINAFTER IN SHORT LD. CIT(A)] DATED 15.03.2018 FOR THE A.Y. 2014 - 15. 2. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS IN RESPECT OF SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TOWARDS BAD DEBTS WRITTEN OFF. 2 ITA.NO.3650/MUM/2018 (A.Y: 2014 - 15) M/S. REMI SALES AND ENGINEERING LIMITED 3. BRIEFLY STATE D THE FACTS ARE THAT, ASSESSE E C OMPANY WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN ELECTRICAL MOTORS , LABORATORY INSTRUMENTS AND EQUIPMENTS ETC., FILED ITS RETURN OF INCOME ON 29.11.2014 DECLARED INCOME OF . 1,59,64,590/ - . THE ASSESSMENT WAS COMPLETED ON 29.12.2016 U/S. 143(3) OF THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT .3,82,95,500/ - . IN THE COURSE OF THE ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED THAT ASSESSEE C OMPANY HAS CLAIMED BAD DEBTS AMOUNTING TO .2,23,30,912/ - . T HE ASSESSING OFFICER REQUIRED THE ASSESSEE TO JUSTIFY THE CLAIM FOR BAD DEBTS AND EXPLAIN WHY IT SHOULD NOT BE DISALLOWED. ASSESSEE FURNISHED ITS REPLY VIDE LETTER DATED 15.11.2016 EXPLAINING THE REASONS FOR WRITTEN OFF. IT WAS EXPLAINED THAT BAD DEBTS WERE WRITTEN OFF AFTER NATIONAL SPOT EXCHAN GE LTD., [NSEL] FAILED TO MAKE PAYMENTS ON DUE DATES AND IT CAME OUT IN PUBLIC SAYING THAT ITS DEALINGS WITH VARIOUS BUYERS OF COMMODITIES AND WAREHOUSES, WHERE THE UNDERLYING COMMODITIES WERE BEING STORED WERE DUBIOUS AND THE COMMODITIES IN THE WAREHOUSES WERE VANISHED AND WERE MUCH BELOW THE DECLARED QUANTITIES. THEREFORE, IT WAS EXPLAINED THAT THE MANAGEMENT OF TH E ASSESSEE C OMPANY AFTER CONSIDERING ALL THE FACTS OF THE CASE CAME TO THE CONCLUSION THAT FULL OUTSTANDING OF NSEL COULD NOT BE RECOVERED AND ACCORDINGLY DECIDED TO WRITTEN OFF 25% OF THE OUTSTANDING AMOUNT AS BAD DEBT AS ON 30.09.2013. IT WAS ALSO EXPLAINED THAT AS THE ASSESSEE 3 ITA.NO.3650/MUM/2018 (A.Y: 2014 - 15) M/S. REMI SALES AND ENGINEERING LIMITED C OMPANY HAS SHOWN THE INCOME FROM TRADING AS REVENUE INCOME IN ITS PROFIT AND LOSS ACCOUNT AND PART OF THE OUTSTANDING AMOUNT HAS BEEN WRITTEN OFF AS BAD DEBTS IN ITS BOOKS OF ACCOUNTS , IT MEETS THE REQUIREMENT OF SECTION 36(2) OF THE ACT AND THEREFORE SHOULD BE ALLOWED AS DEDUCTIO N. HOWEVER , NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE BAD DEBTS WRITTEN OFF OBSERVING THAT THE CLAIM OF BAD DEBT DUE TO NON - DELIVERY OF STOCK IS PREMATURE AT THIS STAGE AS FINAL DEFICIENCY IN AMOUNT CANNOT BE ARRIVED AT NOW. HE ALSO OBSERVED THAT THE CASE IS UNDER INVESTIGATION AND SEIZED ASSETS ARE YET TO BE REALIZED AND HENCE THE AMOUNT CANNOT BE TREATED AS BAD. ON APPEAL THE LD.CIT( A) SUSTAINED THE DISALLOWANCE. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE IN ITS BOOKS OF ACCOUNTS HAS SHOWN THE TRANSACTIONS OF THE PURCHASES AND SALE OF THE COMMODITIES AS TRADING AND ACCORDINGLY REFLECTED THE SAME IN ITS PROFIT AND LOSS ACCOUNT AND PROFIT M ADE FROM THE SAID TRANSACTIONS WAS OFFERED AS BUSINESS INCOME. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT NSEL DEFAULTED IN PAYMENTS AGAINST DUE IN AUGUST 2013 ONWARDS AGAINST SALES MADE AND THE ASSESSEE C OMPANY WRITTEN OFF HIS BAD DEBTS 25% OF OUTSTANDING IN ITS BOOKS OF ACCOUNTS AS ON 30.09.2013 SINCE NSEL FAILED TO MAKE PAYMENTS ON DUE DATES. THEREFORE, LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT AS THE ASSESSEE 4 ITA.NO.3650/MUM/2018 (A.Y: 2014 - 15) M/S. REMI SALES AND ENGINEERING LIMITED COMPANY HAS SHOWN THE INCOME FROM TRADING AS REVENUE INCOME IN ITS PROFIT AND LOSS ACCOUNT AND PART OF THE OUTSTANDING AMOUNT HAS BEEN WRITTEN OFF AS BAD DEBTS IN ITS BOOKS OF ACCOUNTS IT MEETS THE REQUIREMENT OF SECTION 36(2) OF THE ACT AND THEREFORE SHOULD BE ALLOWED AS DEDUCTION. HE STRONGLY RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT I N THE CASE OF T.R.F LTD. V. CIT [323 ITR 397], WHEREIN IT HAS BEEN HELD THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT HAS BEEN HELD THAT IT IS ENOUGH IF THE BAD DEBTS ARE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 5. LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISION RELIED ON. IT IS NOT IN DISPUTE THAT THE A SSESSEE C OMPANY HAS SHOWN THE INCOME FROM TRADING AS REVENUE INCOME IN ITS PROFIT AND LOSS ACCOUNT AND PART OF THE OUTSTANDING AMOUNT HAS BEEN WRITTEN OFF AS BAD DEBTS IN ITS BOOKS OF ACCOUNTS. IN SUCH CIRCUMSTANCES, THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF T.R.F LTD V. CIT (SUPRA) SQUARELY APPLY TO THE FACTS OF THE CASE. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE AND IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS 5 ITA.NO.3650/MUM/2018 (A.Y: 2014 - 15) M/S. REMI SALES AND ENGINEERING LIMITED OF THE ASSESSEE. SINCE THERE IS NO DISPUTE OF WRITE OFF OF BAD DEBTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT WE HOLD THAT T HE L OWER AUTHORITIES ARE NOT JUSTIFIED IN NOT ALLOWING THE CLA I M FOR DEDUCTION OF BAD DEBTS. THUS, WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE TOWARDS BAD DEBTS AND RECOMPU TE THE INCOME OF THE ASSESSEE. 7. IN THE RESULT, APPE AL OF THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 06 TH SEPTEMBER, 201 9 SD/ - SD/ - ( RAJESH KUMAR) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 06 0 9 / 2019 GIRIDHAR , S R. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM