DCIT - 8(1), MUMBAI V. M/s. GSL INDIA LTD., MUMBAI

ITA 4472/MUM/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1814 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2002-2003
• Appeal Filed On: 04-08-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SRIVASTAVA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI D.MANMOHAN[VICE PRESIDENT] & SHRI RAJENDRA SINGH, AM & I.T.A.NO.4472/MUM/2006 - A.Y 2002-03 DY. COMMISSIONER OF I.T. 8(1), MUMBAI VS. M/S. GSL INDIA LIMITED, PLOT NO.56, ROAD NO.17, MIDC, ANDHERI [EAST], MUMBAI 400 093. PAN NO.AAACG 2334 A (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI AJAY KUMAR SRIVASTAVA. O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 10-5-2006 OF THE CIT[A] FOR THE A.Y 2002-03. THE A SSESSEE IN THIS APPEAL HAS RAISED DISPUTE ON DIFFERENT GROUNDS WHIC H HAVE BEEN DEALT WITH IN THE PRECEDING PARAGRAPHS. 2. THE FIRST ISSUE IS REGARDING DISALLOWANCE OF CLA IM OF BAD DEBTS. OF RS.7,47,66,662/-. THE AO DURING THE ASSESSMENT P ROCEEDINGS HAD ASKED THE ASSESSEE TO FURNISH COMPLETE DETAILS OF B AD DEBTS WRITTEN OFF, THE YEAR IN WHICH THEY WERE EARLIER OFFERED TO TAX AND STEPS TAKEN TO RECOVER THE DEBTS. AS PER THE AO, THE ASSESSEE FURN ISHED NO EVIDENCE TO PROVE THAT THE DEBTS WRITTEN OFF WERE ON REVENUE ACCOUNT AND HAD BEEN TAKEN INTO ACCOUNT IN THE COMPUTATION OF INCOM E IN THE EARLIER YEAR. THE ASSESSEE ALSO FURNISHED NO EVIDENCE TO SH OW THAT THE DEBTS HAD ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT AN D THAT THE SAME HAD 2 BECOME IRRECOVERABLE. IN APPEAL, CIT[A] OBSERVED T HAT ALL THE AMOUNTS WRITTEN OFF WERE OUTSTANDING FOR MORE THAN THREE YE ARS AND, THEREFORE, THE ASSESSEE WAS PREVENTED FROM TAKING ANY RECOVERY ACTION AS THE RECOVERY WAS BARRED BY LIMITATION. THEREFORE, CIT[A ] FOUND THE DECISION OF THE ASSESSEE TO WRITE OFF THE DEBTS AS BONA FIDE AND ACCORDINGLY ALLOWED THE CLAIM AGGRIEVED BY WHICH TH E REVENUE IS IN APPEAL. 3. BEFORE US NO ONE APPEARED ON BEHALF OF THE ASSE SSEE, NOR ANY LETTER OF AUTHORITY WAS FILED THOUGH THE NOTICE OF HEARING HAD BEEN GIVEN WELL IN ADVANCE. WE, THEREFORE, PROCEED TO DE CIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DR WHO PLACED RELIANCE ON THE ORDER OF THE AO. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DI SPUTE IS REGARDING ALLOWABILITY OF CLAIM OF BAD DEBT. AS PER THE AMEND ED PROVISIONS EFFECTIVE FROM 1-4-1989, THE BURDEN IS NO LONGER ON THE ASSESSEE TO ESTABLISH THAT THE DEBT HAD ACTUALLY BECOME IRRECOV ERABLE. HOWEVER, THE ASSESSEE IS STILL REQUIRED TO PROVE THAT THE DE BT HAD BEEN TAKEN INTO ACCOUNT IN THE COMPUTATION OF INCOME FOR EARLIER YE AR AND THAT IT HAD BEEN ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT. IN THIS CASE, THE AO HAS GIVEN A CLEAR FINDING THAT THE ASSESSEE COULD N OT GIVE ANY EVIDENCE TO SHOW THAT THE DEBT HAD BEEN TAKEN INTO ACCOUNT I N THE COMPUTATION OF INCOME OF EARLIER YEAR AND THAT IT HAD BEEN ACTU ALLY WRITTEN OFF IN THE BOOKS. THE CIT[A] , HOWEVER, HAS NOT GIVEN ANY FIND ING ON THESE ASPECTS AND HAS ALLOWED THE CLAIM ONLY ON THE GROUN D THAT IN HIS 3 OPINION THAT DEBT HAD BECOME IRRECOVERABLE. THE ORD ER OF THE CIT[A] CANNOT BE SUSTAINED. THE SAME IS SET ASIDE AND THE ISSUE IS RESTORED BACK TO THE CIT[A] FOR PASSING FRESH ORDER AFTER N ECESSARY EXAMINATION IN THE LIGHT OF THE OBSERVATIONS MADE ABOVE AND AFT ER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. THE SECOND DISPUTE IS REGARDING DISALLOWANCE OF RS.16,52,814/- CLAIMED BY THE ASSESSEE AS BUSINESS LOSS. THE ASSES SEE HAD CLAIMED LOSS OF RS.16,52,814/- ON ACCOUNT OF SUNDRY BALANCE S WRITTEN OFF. THE ASSESSEE EXPLAINED THAT THE SUNDRY BALANCES WRITTEN OFF, INCLUDED ADVANCES TO STAFF AND OTHER TRADE ADVANCES, WHICH H AD BECOME IRRECOVERABLE. THE AO, HOWEVER, OBSERVED THAT THE A SSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SHOW THAT THE BALANCES WRIT TEN OFF WERE ON REVENUE ACCOUNT AND HAD BECOME IRRECOVERABLE. HE, T HEREFORE, DISALLOWED THE CLAIM. IN APPEAL, THE CIT[A] OBSERV ED THAT AS PER THE DETAILS GIVEN BY THE ASSESSEE, THE AMOUNTS WRITTEN OFF WERE IN RESPECT OF ADVANCES GIVEN FOR SUPPLIES OR AGAINST SALARIES AND THE INDIVIDUAL AMOUNTS WERE SMALL. THE CIT[A] ALSO HELD THAT SINC E THE AMOUNTS WERE ADVANCED DURING THE COURSE OF THE BUSINESS OF THE ASSESSEE COMPANY, LOSS DUE TO NON RECOVERY HAS TO BE TREATED AS BUSINESS LOSS. ACCORDINGLY, HE ALLOWED THE CLAIM, AGGRIEVED BY WHI CH THE REVENUE IS IN APPEAL. 5. WE HAVE HEARD THE LD. DR, PERUSED THE RECORDS AN D CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLO WABILITY OF LOSS ON ACCOUNT OF NON RECOVERY OF ADVANCES GIVEN TO SUPPLI ERS OR TO THE STAFF 4 AGAINST SALARIES. SUCH LOSS CAN BE CONSIDERED AS BU SINESS LOSS U/S.28, BUT FOR ALLOWING THE LOSS THE ASSESSEE HAS TO ESTAB LISH THAT THE AMOUNTS HAD ACTUALLY BECOME IRRECOVERABLE DURING TH E YEAR. SUCH LOSS CAN BE ALLOWED ONLY IN THE YEAR IN WHICH THE AMOUNT S BECOME IRRECOVERABLE. IN THIS CASE, CIT[A] HAS ALLOWED TH E CLAIM WITHOUT GIVING A CLEAR FINDING AS TO HOW THE AMOUNTS HAD BECOME IR RECOVERABLE DURING THE YEAR. THE ORDER OF THE CIT[A] , THEREFORE, CANN OT BE SUSTAINED AND THE SAME IS SET ASIDE AND THE MATTER IS RESTORED BA CK TO HIM FOR PASSING FRESH ORDER AFTER GIVING A CLEAR FINDING AS TO THE IRRECOVERABILITY OF THE AMOUNTS DURING THE YEAR AND AFTER ALLOWING O PPORTUNITY OF HEARING TO THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON TH IS 28 TH DAY OF APRIL, 2010. (D.MANMOHAN) (RAJENDRA SINGH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI: APRIL, 2010. P/-* 5