M/s Super Smeletrs Ltd., Kolkata V. DCIT,CC-2(4), , Kolkata

ITA 386/KOL/2020

AI Insights

The case involves M/s. Super Smeletrs Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals)-20, Kolkata, confirming the addition of a provision for doubtful debts of Rs. 45,51,125/- to the assessee's income for the Assessment Year 2009-10. The primary contention was whether the provision for doubtful debts, which was initially added back in the original return but omitted in the return filed in response to a notice under section 153A of the Income-tax Act, 1961, should be disallowed. The Tribunal examined the adjustments made by the assessee in the computation of income and found that the provision for doubtful debts was effectively offset against the provision for sundry creditors, and the net amount was offered as income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132574 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-02-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 25-06-2020
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Keywords: Bad and doubtful debts
• Section: 153A; 250

Judgement Text

| आयकर अपीलीय अिधकरण ᭠यायपीठ, कोलकाता | IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI SANJAY GARG, HON’BLE JUDICIAL MEMBER & DR. MANISH BORAD, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 386/Kol/2020 Assessment Year: 2009-10 M/s. Super Smeletrs Ltd. Premlata Building 39, Shakespeare Sarani 3 rd Floor Kolkata - 700017 [PAN : AAFCS1116F] Vs Deputy Commissioner of Income Tax, CC-2(4), Kolkata अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : Shri A.K. Tulsiyan, FCA Revenue by : Smt. Ranu Biswas, Addl. CIT, Sr. D/R सुनवाई कᳱ तारीख/Date of Hearing : 23/02/2023 घोषणा कᳱ तारीख /Date of Pronouncement: 17/05/2023 आदेश/O R D E R PER DR. MANISH BORAD, ACCOUNTANT MEMBER : This is the appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-20, Kolkata (hereinafter referred to as the ld. CIT(A)”], passed u/s 250 of the Income-tax Act, 1961 (hereinafter the ‘Act’), dated 07/02/2020 for the Assessment Year 2009-10. 2. The sole grievance of the assessee raised in Ground Nos. 1 & 2 is that, ld. CIT(A) erred in confirming the action of ld. Assessing Officer making addition of provision of doubtful debt of Rs.45,51,125/- on the ground that the same is not allowable to the assessee. 3. Facts in brief relevant to this issue are that the assessee is a limited company engaged in manufacturing and trading of iron and steel. Original return of income for Assessment Year 2009-10 was filed on 27/09/2019 declaring total income of Rs.71,89,860/-. Thereafter subsequent to the I.T.A. No. 386/Kol/2020 Assessment Year: 2009-10 M/s. Super Smeletrs Ltd. 2 search, in reply to the notice u/s 153A of the Act, return was filed on 19/10/2011 disclosing loss of Rs.10,06,16,382/-. As far as the issue under consideration is concerned, ld. Assessing Officer observed that provisions for doubtful debts for Rs. 45,51,125/- was added back by the assessee in the computation of income filed with the original return of income, however, in the return filed in response to notice u/s 153A of the Act, same was omitted by the assessee resulting in escapement of income of Rs.45,51,125/-. Before the Assessing Officer assessee filed detailed written submission. It was submitted that assessee had not reduced the same from the income in the computation means that it has offered net income. However, ld. Assessing Officer was not satisfied with these submissions and he reduced the loss claimed by the assessee by Rs.45,51,125/-. Assessee failed to get any relief. 4. Dissatisfied with the findings, assessee preferred appeal before the ld. CIT(A) who confirmed the order of the ld. Assessing Officer by observing as follows:- “Assessee had filed return on 27.09.2009 declaring total income of Rs.71,89,860/-. Subsequently a search & seizure action was conducted in assessee's case and consequently notice u/s.153A was issued. In response to the same, assessee filed return on 19th October, 2011 disclosing loss of Rs.10,06,16,382/-. Order u/s. 143(3) read with 153A was passed on 30th December, 2011. Subsequently, it was observed that while filing original return, assessee had added back provision for doubtful debts of Rs.45,51,125/- in the computation of income. However, it was not added back in the computation of income while filing return in response to notice u/s.153A. Consequently, AO was of the opinion that income to the extent of has escaped assessment. Therefore, proceedings u/s.147 were initiated and notice u/s.148 dated 23.11.2012 was issued. Order u/s.143(3)/147/153A was passed on 27.03.2014, by adding of amount of Rs.45,51,125/-. In the assessment proceedings, as well as in appellate proceedings assessee has submitted that it had made provision for 'Sundry Debtors' at Rs.61,04,290/- and had also made provision for 'Doubtful Debt' of Rs.45,51,125/-. Assessee had also made provision for sales tax at Rs.3,78,333/-. According to assessee provision of sundry debtors was net off against provision for doubtful debt and provision for sales tax and the resultant amount of Rs.11,74,832/- has been adjusted with misc. income. Assessee has submitted that had the adjustment done separately in the computation of income, it I.T.A. No. 386/Kol/2020 Assessment Year: 2009-10 M/s. Super Smeletrs Ltd. 3 would have got further deduction of Rs.11,74,832/- Hence, assessee submits that disallowance made by the AO should not be sustained. I have carefully considered the facts of the case and the submission of the appellant. Notice u/s.153A is issued to give an opportunity to the assessee to file its return declaring income which includes the undisclosed income detected at the time of search. The scope of section 153A does not permit the assessee to re-contest / re- claim any deduction etc. which it has suo moto not claimed / foregone while filing the original return of income. If assessee believes that it had not claimed certain deduction or it had wrongly considered any income or expenses due to some misunderstanding, then it should have taken recourse to the provisions of sec. 119(2)(b) of the Income-tax Act which reads as under : "The Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any income-tax authority, not being a Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law." Assessee should have filed petition u/s.119(2)(b) for any defects in the original return filed by it. As the assessee has not adopted the correct procedure, its action cannot be justified. Under the circumstances, the disallowance made by the AO to the extent of Rs.45,51,125/- is confirmed.” 5. Aggrieved, the assessee is now in appeal before the Tribunal. 6. Ld. Counsel for the assessee vehemently argued referring to the written submissions mainly contending that its legally settled that provision for doubtful debts is not allowed and similarly provision for sundry creditors is not taxable and since the assessee in spite of adding doubtful debts and deductions of sundry creditors, has set off the same with each other. The excess income has been offered to tax in the return filed u/s 153A of the Act. 7. On the other hand, the ld. D/R supported the order of the lower authorities. 8. We have heard the rival contentions and perused the material placed before us. I.T.A. No. 386/Kol/2020 Assessment Year: 2009-10 M/s. Super Smeletrs Ltd. 4 The only issue before us whether the ld. CIT(A) erred in confirming the disallowance of provision for doubtful debts of Rs.45,51,125/-. It is an admitted fact that in the original return of income where the assessee has shown a positive income of Rs.71,89,860/-, the same was arrived at after adding back provisions doubtful debts of Rs.45,51,125/-. However, in the return filed u/s 153A of the Act, there was no specific suo moto disallowance by the assessee which came to the attention of the ld. Assessing Officer who has thereafter made the said disallowance. Before us, ld. Counsel for assessee submitted that during the year there was provision for doubtful debts of Rs.45,51,125/- and provision for sundry creditors (notional income) at Rs.61,04,290/-. There was also provisions for sales tax at Rs.3,78,333/-. The assessee reduced the provision for doubtful debts and provision for sales tax from the provision of sundry creditors and the resultant figure was Rs.11,74,832/-. Further the net provision of Rs.11,74,832/- has been reduced from the total miscellaneous expenses of Rs.10,06,16,382/-. Thus, only net miscellaneous expenses of Rs.88,64,490/- has been claimed in the Profit & Loss A/c. Thus, we find that the assessee instead of separately addition and deducting provisions for doubtful debts and sundry creditors has net off the same and has made net adjustments in computation of income u/s 153A of the Act. 9. Thus, under the given facts and circumstances of the case, we are of the considered view that assessee has already adjusted provision for doubtful debts by netting it off against the provision for sundry creditors and the net effect of the excess non-taxable notional income has been offered to tax by reducing it from the miscellaneous expenses. Since the alleged sum of provision for doubtful debts has already been offered as income by the assesse in the above stated manner, we fail to find any justification in the I.T.A. No. 386/Kol/2020 Assessment Year: 2009-10 M/s. Super Smeletrs Ltd. 5 action of the ld. Assessing Officer making the alleged disallowance. Thus, the finding of the ld. CIT(A) is reversed and Ground Nos. 1 & 2 raised by the assessee are allowed. 10. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 17 th May, 2023 at Kolkata. Sd/- Sd/- (SANJAY GARG) (DR. MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated 17/05/2023 *SC SrPs आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय ᮧितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाडᭅ फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Kolkata