PERFECT ENGINEERING ASSOCIATES P.LTD, MUMBAI V. ACIT (OSD) CIR 2(2), MUMBAI

ITA 3701/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59782 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P KANT
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Business expenditure; Bad and doubtful debts; Revised return

Judgement Text

ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 3701/MUM/2010 (ASSESSMENT YEAR: 2006-07) PERFECT ENGG. ASSOCIATES (P) LTD VS. ACIT (OSD) MEHER HOUSE, 15 CAWASJI PATEL CIRCLE-2(2) STREET, FORT, MUMBAI 400001 MUMBAI PAN AAACP 2016 Q APPELLANT RESPONDENT APPELLANT BY: DR.K.SHIVARAM & PARAS SAVLA RESPONDENT BY: SHRI O.P. KANT , SR. DR DATE OF HEARING: 29/12/2011 DATE OF PRONOUNCEMENT: 20/01/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEES APPEAL AGAINST THE ORDERS OF THE CIT (A)- V, MUMBAI DATED 18.3.2010. THE ASSESSEE IS AGGRIEVE D ON THE DISALLOWANCE OF VARIOUS AMOUNTS CLAIMED IN THE PROF IT & LOSS A/C UNDER THE HEAD BAD DEBT/ ADVANCES WRITTEN OFF. IN A DDITION THE ASSESSEE IS ALSO OBJECTING TO BRINGING TO TAX UNSEC URED LOANS OF ` 36,61,174/- CREDITED TO THE PROFIT & LOSS A/C CLAIM ING NON- TAXABLE. WE HAVE HEARD THE LEARNED COUNSEL DR.K.SHI VARAM AND THE LEARNED DEPARTMENTAL REPRESENTATIVE SHRI O.P. KANT. 2. GROUND NO.1 TO 8 ARE INTER-RELATED IN THE SENSE THAT THE ASSESSEE CLAIMED AMOUNT OF REMISSION OF ` 4,77,936/-, BAD DEBT OF ` 51,33,489/-, ADVANCES WRITTEN OFF ` 4,02,200/- AS A DEDUCTION AFTER ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 2 OF 10 WRITING OFF IN THE BOOKS OF ACCOUNT. ASSESSING OFF ICER DID NOT ALLOW ON THE REASON THAT THE ASSESSEE HAS NOT JUSTIFIED T HE AMOUNTS AS COVERED BY THE PROVISIONS OF SECTION 36(1)(VII) R.W .S. 36(2). THE CIT (A) EVEN AFTER CONSIDERING THE LEGAL PRINCIPLES IN FAVOUR OF THE ASSESSEE CONFIRMED THE ADDITIONS ON THE REASON THAT THE DETAILS WERE NOT FURNISHED IN SUPPORT OF THE CLAIMS. 3. BEFORE US THE PAPER BOOK CONTAINING PAGES 1 TO 1 84 HAS BEEN FILED ALONG WITH THE FACT SHEET AND THE RELEVANT CA SE LAW. LEARNED COUNSEL REFERRING TO THE PAPER BOOK, WHICH WAS FILE D BEFORE THE ASSESSING OFFICER AND THE CIT (A) ALSO, SUBMITTED T HAT RELEVANT INFORMATION, ACCOUNT COPIES AND OTHER DETAILS WERE FILED BEFORE THE REVENUE AUTHORITIES, BUT NOT CONSIDERED BY THEM. TH E LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER, REITERATED THE FINDINGS OF THE ASSESSING OFFICER AND THE CIT (A). 4. WE HAVE CONSIDERED THE ISSUE. THERE IS NO DISP UTE WITH REFERENCE TO THE FACT THAT THE ASSESSEE HAS WRITTEN OFF THE ABOVE AMOUNTS. THE ISSUE IS ONE OF THE FACTUAL EXAMINATIO N THAT THE CONDITIONS UNDER SECTION 36(2) HAVE BEEN SATISFIED IE. THE AMOUNTS HAVE BEEN TAKEN INTO CONSIDERATION IN EARLIER YEARS SO AS TO WRITE OFF THE AMOUNT AS BAD DEBT. IT WAS SUBMITTED THAT THE A SSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE ACTIVITY OF UNDERTAKING TURN-KEY CONTRACTS AND ITS MAIN CUSTOMERS ARE MAHAR ASHTRA JEEVAN PRADHIKARAN, HINGOLI, PARBHANI, WATER SUPPLY DEPART MENT, PUNE MUNICIPAL CORPORATION, TAMIL NADU WATER SUPPLY & DR AINAGE BOARD ETC. IT WAS ALSO SUBMITTED THAT THE ASSESSEE IS ALSO NOT IN THE FINANCIAL BUSINESS AND ALL THE AMOUNTS WRITTEN OFF ARE PART OF RECOVERABLE/ADVANCES WHICH AROSE IN THE COURSE OF A SSESSEES BUSINESS. THE DETAILS AND SUBMISSIONS ON THE AMOUNT S ARE AS UNDER: ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 3 OF 10 A) REMISSION A/C WRITE OFF OF ` 4,77,936/-. AS PER THE ASSESSMENT ORDER THE DETAILS OF THE ABOVE AMOUNTS ARE UNDER: S.NO PARTICULARS AMOUNT ( ` `` ` ) 1 OCTROI DEPOSIT 16,500 2 PERFECT ENGINEERING PRODUCTS (P) LTD 66,148 3 LONAVALA ENGINEERING CASTINGS (P) LTD 22,500 4 KARLA ENGINEERING (P) LTD 17,971 5 NANDED GAS SUPPLIER 3,500 6 M/S SHETH & SURA ENGG. LTD 59,204 7 BISAKHA STEEL PLANT 31,926 8 MAHARASHTRA JEEVAN PRADHIKARAN, PARBHANI 26,082 9 MAHARASHTRA JEEVAN PRADHIKARAN, KINWAT 80,970 10 MAHARASHTRA JEEVAN PRADHIKARAN, BILLOLI 1,23,914 11 MAHARASHTRA JEEVAN PRADHIKARAN, BEED (17,65) 12 HINDUSTAN SHIPYARD LTD VIZAG 43,872 TOTAL 4,77,936 THE ASSESSING OFFICER WAS OF THE OPINION THAT THES E AMOUNTS DID NOT PERTAIN TO REVENUE A/C AND WAS MORE THAN 5 YEAR S OLD AND HENCE NOT ALLOWABLE AS BUSINESS EXPENSES. IT WAS TH E SUBMISSIONS THAT THE AMOUNTS DEBITED ON ACCOUNT OF THE REMISSIO N INCLUDED THE AMOUNTS TO BE RECEIVED FROM VARIOUS CONCERNS WHICH WERE DUE FOR MORE THAN 10 YEARS AND FROM CUSTOMERS. THESE WERE S HOWN IN THE BALANCE SHEET OF EARLIER YEARS AND SINCE THE AMOUNT S WERE OUTSTANDING FOR NUMBER OF YEARS, THESE WERE WRITTEN OFF IN THE YEAR. NOW THE ASSESSEE FILED NUMBER OF DETAILS SUPPORTING THE CONTENTION THAT THESE AMOUNTS WERE RECEIVABLE WHICH INCLUDE CE RTAIN OCTROI PAYMENTS WHICH COULD NOT BE RECOVERED AND HAVE BEEN WRITTEN OFF. ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 4 OF 10 5.1 IT WAS THE SUBMISSION THAT MOST OF THE AMOUNTS WERE RECEIVABLE ON CONTRACTS UNDERTAKEN EARLIER BUT NOT RECOVERED OUT OF VARIOUS DUES IN THE LAST 10 YEARS AND ACCORDINGLY T HESE AMOUNTS WERE WRITTEN OFF. PRIMA FACIE THERE SEEMS TO BE JUS TIFICATION IN THE ASSESSEES CLAIM. HOWEVER, EVEN THOUGH THE ASSESSIN G OFFICER HAD GIVEN FINDING THAT THE ASSESSEE COULD NOT SUBSTANTI ATE ITS CLAIM BY PRODUCING NECESSARY DOCUMENTS, WE ARE OF THE OPINIO N THAT THE ISSUE WAS NOT CORRECTLY EXAMINED BY THE ASSESSING O FFICER. THE DETAILS FILED BY THE ASSESSEE DO INDICATE THAT THE AMOUNTS WERE ACCOUNTED FOR IN THE EARLIER YEARS IN THE COURSE OF BUSINESS. HOWEVER, IT IS ONE OF THE CONTENTION THAT THE AMOUN TS WERE RECEIVABLE FROM ASSESSEES SISTER CONCERNS AND ALSO FROM CUSTOMERS. SINCE THE ISSUE WAS NOT EXAMINED BY THE ASSESSING O FFICER, WE ARE OF THE OPINION THAT THE SAME CAN BE REMITTED TO TH E ASSESSING OFFICER FOR EXAMINATION ON FACTS. THE ASSESSING OFF ICER IS DIRECTED TO EXAMINE WHETHER THESE AMOUNTS ARE TAKEN INTO ACCOUN T IN THE EARLIER YEARS OR NOT AND ALLOW WRITE OFF. ASSESSIN G OFFICER IS ALSO DIRECTED TO EXAMINE WHETHER THE AMOUNTS RECEIVABLE FROM THE ASSOCIATE CONCERNS WHICH WERE CLAIMED WERE IN THE C OURSE OF BUSINESS OR OTHERWISE. WITH THESE DIRECTIONS ,THE I SSUE OF REMISSION OF THE ABOVE AMOUNT CONTESTED IN GROUND NO.1 TO 4 A RE RESTORED TO THE FILE OF THE ASSESSING OFFICER. B) BAD DEBTS ` 51,33,489/-. THE AMOUNTS WRITTEN OFF PERTAIN TO THE FOLLOWING: MAHARASHTRA JEEVEN PRADHIKARAN - ` 39,27,208 HINGOLI, PARBHANI MUNICIPAL CORPORATION OF GREATER - ` 12,06,281 MUMBAI IT WAS SUBMITTED THAT THESE ARE THE CONTRACT RECEIP TS DUE FROM ABOVE CONCERNS FOR MORE THAN 10 YEARS. IN THE CASE OF MAHARASHTRA JEEVAN PRADHIKARAN, THE CONTRACT STARTED IN FINANCI AL YEAR 1997-98 ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 5 OF 10 AND AS PER THE CONTRACT 85% OF THE PROCUREMENT PRIC E WAS TO BE PAID TO THE ASSESSEE ON PIPELINE, WALL ETC. AND 5% WAS TO BE RELEASED FOR LOWERING AND LAYING JOB AND 10% WAS TO BE RELEASED AFTER SATISFACTORY HYDRAULIC TESTING. THE JOB RECEI PTS STARTED IN FINANCIAL YEAR 1997-98 AND THE TOTAL CONTRACT OF ` 5.12 CRORES WERE RECEIVED IN FIRST YEAR ITSELF. OUT OF THE TOTAL CON TRACT RECEIPTS, THE AMOUNT RECEIVED WAS TO THE TUNE OF ` 13.23 CRORES. AS ON 31.3.1998, THE CLOSING BALANCE OUT OF THIS JOB WAS ` 1.33 CRORES. 15% OF THE CONTRACT RECEIPTS OF ` 72,69,600/- FOR AY 1998-99 WERE NOT RECEIVED. OUT OF THIS ` 39,27,208/- NOW WRITTEN OFF ARE NOTHING BUT NET CUMULATIVE EFFECT OF 15% OF THE CONTRACT RECEIPTS F OR WHICH BILLS WERE RAISED AND WERE PARTLY RECEIVED IN SUBSEQUENT YEARS . WITH REFERENCE TO THE MUNICIPAL CORPORATION OF GREATER MUMBAI ` 12,06,281/-, THESE AMOUNTS WERE OUT OF THE CONTRACT RECEIPTS CAR RIED OVER SINCE 1.4.1997. THE BILLS WERE RAISED IN 1986 TO 1993. SI NCE THE AMOUNTS WERE NOT RECEIVED BY THE PARTY, THESE AMOUNTS WERE WRITTEN OFF DURING THE YEAR. 5.2 WITH REFERENCE TO THE ABOVE TWO AMOUNTS, IT WAS THE SUBMISSION THAT THESE AMOUNTS WERE TAKEN INTO ACCOU NT IN THE EARLIER YEARS AND WAS SHOWN AS RECEIVABLES YEAR AF TER YEAR AND SINCE THERE IS NO WAY OF RECOVERY OF THE ABOVE AMOU NTS, THESE WERE WRITTEN OFF DURING THE YEAR AND THIS SATISFIES COND ITIONS AS DECIDED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DCIT VS. OMAN INTERNATIONAL BANK 313 ITR 128 (BOM) AND THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT I N THE CASE OF T.R.F. LIMITED VS. CIT (2010) 323 ITR 397 (SC). IT WAS FURTHER SUBMITTED THAT IT WAS NOT NECESSARY TO ESTABLISH TH AT THE DEBTS HAVE BECOME IRRECOVERABLE. ALTERNATE CLAIM WAS THAT THE AMOUNT CLAIMED CAN ALSO BE ALLOWED AS LOSS FOLLOWING THE PRINCIPLE S LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF C IT VS. WOCKHARDT INTERNATIONAL LTD 314 ITR 11 (BOM). IT WA S ALSO ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 6 OF 10 SUBMITTED THAT BOTH THE ASSESSING OFFICER AND THE C IT (A) MISTOOK THE ACCOUNT TO ANOTHER CONTRACT WITH THE SAME AUTHO RITY AND THEREFORE, THE AMOUNTS WERE NOT ALLOWED. 5.3 AFTER CONSIDERING THE ABOVE SUBMISSIONS, WE ARE OF THE VIEW THAT THIS MATTER REQUIRE FACTUAL EXAMINATION BY THE ASSESSING OFFICER. THERE SEEMS TO BE CONFUSION WITH REFERENCE TO THE CONTRACTS UNDERTAKEN 10 YEARS BACK AND CONTRACTS NOW BEING UN DERTAKEN FROM THE SAME AUTHORITY FOR DIFFERENT PROJECTS. AS THESE ISSUES WERE NOT EXAMINED BY THE ASSESSING OFFICER IN THE CORREC TIVE PERSPECTIVE, WE ARE OF THE VIEW THAT THE ISSUE CAN BE EXAMINED O N FACTUAL BASIS AND THE AMOUNTS CAN BE ALLOWED TO THE ASSESSEE AFTE R GIVING AN OPPORTUNITY TO THE ASSESSEE. ON PRINCIPLES OF LAW, HOWEVER, THERE IS NO SCOPE FOR ANY DISALLOWANCE AS THE AMOUNTS WERE W RITTEN OFF. HOWEVER, CONTENTION RAISED BY THE ASSESSEE WITH REF ERENCE TO THE SATISFYING THE CONDITIONS UNDER SECTION 36(2) ARE O NLY TO BE EXAMINED. FOR THIS PURPOSE THE MATTER IS RESTORED T O THE FILE OF THE ASSESSING OFFICER. GROUND NOS. 5 TO 7 ARE ACCORDING LY ALLOWED FOR STATISTICAL PURPOSES. C) THE NEXT ISSUE IS ADVANCE WRITE OFF OF ` 4,02,200/-. THIS AMOUNT WAS WRITTEN OFF AS ADVANCE FROM SISTER CONCERN PERF ECT ENGINEERING ASSOCIATES, AURANGABAD. IT WAS SUBMITTED THAT THE A DVANCES WAS SOUGHT FOR BUSINESS PURPOSES AND THE SAME MAY BE AL LOWED AS BUSINESS LOSS. IT WAS FAIRLY ADMITTED THAT THIS AMO UNT CANNOT BE CONSIDERED UNDER SECTION 36(1)(VII) AND HAS TO BE C ONSIDERED AS BUSINESS LOSS. THERE IS NO EXPLANATION ABOUT THE NA TURE OF ADVANCES GIVEN EXCEPT STATING THAT THIS AMOUNT IS SHOWN AS R ECEIVABLE FOR THE LAST 8 YEARS. SINCE PERFECT ENGINEERING ASSOCIATES IS A SISTER CONCERN, THE NEED FOR CLAIMING IT AS A LOSS HAS NOT BEEN PROPERLY EXPLAINED. EVEN THOUGH IT WAS STATED THAT THE LOSS WAS CRYSTALLIZED DURING THE YEAR AS IT WAS WRITTEN OFF DURING THE YE AR, THE ASSESSEE COULD NOT JUSTIFY HOW THE LOSS WAS ALLOWABLE FOR T HE PURPOSE OF ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 7 OF 10 BUSINESS. UNLESS LOSS AROSE IN THE COURSE OF BUSINE SS, THE SAME CANNOT BE ALLOWED UNDER SECTION 28. PRIMA FACIE IT IS CLEAR TO US THAT THE AMOUNT IS NOT ALLOWABLE AS LOSS. HOWEVER, SINCE NEXT ISSUE OF UNSECURED LOANS BROUGHT TO TAX IS ALSO OF SIMILAR NATURE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION ON FACTS AND IF THE ASSESSEE JUSTIFIES THAT THE ADV ANCE IS IN THE COURSE OF BUSINESS AND THE LOSS AROSE DURING THE YE AR, THE SAME CAN BE ALLOWED. THEREFORE, GROUND NUMBER 8 IS ALSO REST ORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION. 6. THE NEXT ISSUE IS UNSECURED LOANS CREDITED OF ` 36,61,174/-. DURING THE AY THE ASSESSEE HAS INCLUDED AN AMOUNT O F ` 36,61,174/- IN THE PROFIT & LOSS A/C AND OFFERED TH E SAME TO TAX. BEFORE THE ASSESSING OFFICER THERE IS NO CLAIM FOR EXCLUDING THIS AMOUNT. IN FACT THE ASSESSEES CLAIM OF LOSS WAS RE DUCED TO THAT EXTENT BY THE AMOUNT TAKEN INTO PROFIT & LOSS A/C A S INCOME. THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT THESE UNSECURED LOANS WERE NOT PAYABLE. THEREFORE, ASSESSEE HAS TAKEN THE M AS INCOME IN THE PROFIT & LOSS A/C. ASSESSING OFFICER HAS DISAL LOWED VARIOUS OTHER AMOUNTS DISCUSSED ABOVE IN THE ASSESSMENT AN D REDUCED THE LOSS FROM ` 1.52 CRORES TO ` 0.92CRORES. BEFORE THE CIT(A) THE ASSESSEE HAS RAISED THIS ISSUE FOR EXCLUDING THE AB OVE AMOUNT FROM THE COMPUTATION. THE CIT (A) DID NOT ALLOW THE CLAI M ON THE REASON THAT THERE IS NO BASIS FOR CLAIMING THAT THE SAID A MOUNTS TO BE EXCLUDED AND THERE IS NO MATERIAL PLACED ON RECORD TO SHOW THAT THE IMPUGNED SUM WAS CLAIMED DEDUCTIBLE EITHER IN THE O RIGINAL RETURN OR IN THE REVISED RETURN. 6.1 BEFORE US THE LEARNED COUNSEL SUBMITTED THAT TH IS ISSUE CAN BE RAISED AS A LEGAL GROUND AND THE ASSESSEE IS EN TITLED TO CLAIM THE AMOUNT AS NOT TAXABLE. RELIANCE WAS PLACED ON THE D ECISION OF THE COORDINATE BENCH DECISION IN THE CASE OF CHICAGO PN EUMATIC INDIA LTD VS. DCIT, 15 SOT 252 FOR THE PROPOSITION THAT T HE APEX COURT ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 8 OF 10 JUDGMENT IN THE CASE OF GOETZE INDIA LTD VS. CIT 28 4 ITR 323 DOES NOT BAR THE ASSESSEE RAISING ITS LEGAL CLAIM BEFORE THE APPELLATE AUTHORITIES. EVEN THOUGH THE LEARNED COUNSEL RELIED ON THE DECISION OF COORDINATE BENCH IN THE CASE OF FRANCO-INDIAN PH ARMACEUTICALS (P) LTD VS. INCOME TAX OFFICER 3 ITR (TRIB.) 754 MU MBAI THAT THE ISSUE CAN BE RAISED AS ADDITIONAL GROUND BEFORE THE ITAT, THE SAME IS NOT APPLICABLE AS ASSESSEE RAISED IT BEFORE CIT( A). IT WAS THE SUBMISSION THAT THE UNSECURED LOANS WRITTEN OFF WER E NEVER CLAIMED IN THE PROFIT & LOSS A/C AS TRADING LIABILITY AND A NY REDUCTION IN RESPECT OF LOANS NOT CLAIMED AS TRADING LIABILITIES CANNOT BE BROUGHT TO TAX UNDER SECTION 41(1) AND RELIED ON THE DECISI ON OF HON'BLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF MAHINDRA & MAHINDRA VS. CIT 261 ITR 501 (BOM.) AND LOGITRONICS (P) LTD VS. CIT 333 ITR 386. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVE R, OBJECTED TO AS THERE WAS NO DETAILS ON THE FILE AND THE CLAIM C ANNOT BE ALLOWED WITHOUT NECESSARY FACTS BEING ON RECORD. 6.2 WE HAVE CONSIDERED THE ISSUE. THE ISSUE WAS RA ISED BEFORE THE CIT (A), CONSIDERED BY THE CIT (A) AND WAS REJECTE D. THIS IS NOT AN ADDITIONAL GROUND BEFORE THE ITAT. THEREFORE, MANY OF THE PRINCIPLES/PROPOSITIONS LAID DOWN DO NOT APPLY AS T HIS ISSUE AROSE OUT OF THE ORDER OF THE CIT (A). THE CIT (A) REJECT ED THE GROUND ON THE REASON THAT THE ASSESSEE HAS NOT FILED THE REVI SED RETURN NOR THE RELEVANT FACTS ARE ON RECORD. THERE ARE JUDGMENTS T O TAX THE AMOUNTS AS REVENUE IN CASE THE ASSESSEE TREATED IT AS INCOME IN THE PROFIT & LOSS A/C BEING TRADING AMOUNT AS CONSIDER ED BY THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER O F INCOME-TAX. VS. T.V. SUNDARAM IYENGAR & SONS LTD. 222 ITR 344. THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MAH INDRA & MAHINDRA LTD VS. CIT 261 ITR 501 WAS ALSO CONSIDERE D AND DISTINGUISHED BY THE HON'BLE BOMBAY HIGH COURT IN T HE CASE OF SOLID CONTAINERS LTD VS. DEPUTY CIT (2009 308 ITR 4 17 (BOM.). ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 9 OF 10 THEREFORE, IT IS NECESSARY TO EXAMINE THE FACTS WHE THER THE AMOUNTS ARE TO BE TREATED AS INCOME OR NOT. PRIMA FACIE THE ASSESSEE ITSELF TREATED THE AMOUNTS AS INCOME WHICH ESTABLISHES THA T THE AMOUNTS ARE ON THE REVENUE ACCOUNT. AS SEEN FROM THE VARIOU S CLAIMS THE ASSESSEE HAS EXAMINED ALL THE RECEIVABLES AND PAYAB LES AND DEBITED AND CREDITED THE RESPECTIVE AMOUNTS DURING THE YEAR IN ORDER TO PRESENT A BETTER PICTURE OF THE RECEIVABLES AND PAY ABLES. IT SEEMS THE ASSESSEE TREATED THE AMOUNT AS INCOME OUT OF TH E AMOUNTS NOT PAYABLE AND CLAIMED THE BAD DEBT/LOSS OF THE AMOUNT S NOT RECEIVABLE. THE ASSESSING OFFICER EXAMINED DEBITS O NLY AND DISALLOWED THE AMOUNTS, WHICH WERE CONSIDERED IN TH E GROUNDS FROM 1 TO 8 ABOVE. SINCE ALL THE AMOUNTS ARE OF SIM ILAR NATURE, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO T HE FILE OF THE ASSESSING OFFICER TO EXAMINE THE NATURE OF AMOUNT T AKEN TO THE PROFIT & LOSS A/C AS CREDIT AND SEE WHETHER THE AMO UNTS ARE ARISING IN THE COURSE OF BUSINESS. IF IT ARISES IN THE COUR SE OF BUSINESS IN A TRADING TRANSACTION/CONTRACT WORK, THERE IS JUSTIFI CATION IN BRINGING IT TO TAX. IF IT IS ON CAPITAL A/C PARAMETERS WILL APPLY DIFFERENTLY. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO EXA MINE THE NATURE OF THE AMOUNTS TAKEN TO PROFIT & LOSS A/C AND GIVE A C LEAR FINDING AFTER ANALYZING THE RESPECTIVE CASE LAW AS STATED A BOVE. THIS ISSUE IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR PROPER EXAMINATION ON FACTS. 7. ASSESSING OFFICER IS FREE TO CALL FOR NECESSARY DETAILS AND GIVE CLEAR FINDING ON ALL THE ISSUE RESTORED TO HIM. SIN CE VARIOUS DETAILS WERE ALREADY PLACED ON RECORD BY THE ASSESSEE BEFOR E THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT ITSELF, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER SHOULD NOT RESORT TO REJECTING CL AIMS WITHOUT EXAMINING THE DETAILS. HE SHOULD ALSO GIVE PROPER O PPORTUNITY TO THE ASSESSEE TO EXPLAIN VARIOUS DETAILS AND CLAIMS. WIT H THESE OBSERVATIONS, THE ISSUES CONTESTED BY THE ASSESSEE ARE RESTORED TO ITA NO.3701 OF 2010 PERFECT ENGINEERING ASSOCIATES (P) LTD MUMBAI PAGE 10 OF 10 THE FILE OF THE ASSESSING OFFICER FOR DOING THE ASS ESSMENT DE NOVO. ACCORDINGLY, THE ORDERS OF THE ASSESSING OFFICER AN D THE CIT (A) ARE SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2012. SD/- SD/- (V. DURGA RAO) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 20 TH JANUARY, 2012. VNODAN/SPS COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI