DCIT 3(2), MUMBAI V. IDBI TRUSTEESHIP SERVICES LTD, MUMBAI

ITA 4544/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79187 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 17-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 04-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI MULCHANDANI
• Assessee Lawyers: SUMIT KUMAR
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 4544/MUM/2009 ASSESSMENT YEAR: 2005-06 DCIT 3(2) ROOM NO. 608, 6 TH FLOOR, AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020 VS. M/S. IDBI TRUSTEESHIP SERVICES LTD. 10 TH FLOOR, NARIMAN BHAVAN, NARIMAN POINT, MUMBAI- 400 021 PAN: AAACI 8912 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUMIT KUMAR REVENUE BY : SHRI RAVI MULCHANDANI DATE OF HEARING : 23.06.2014 DATE OF PRONOUNCEMENT : 23.06.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE LD.CIT(A)-3, MUMBAI DATED 05.05.2009 FOR THE ASSESS MENT YEAR 2005-06, WHICH HAS COME UP FOR HEARING AS A RECALLED MATTER IN PURSUAN CE OF THE ORDER OF THE TRIBUNAL DATED 30.05.2013 PASSED IN THE MISCELLANEOUS APPLIC ATION NO 318/MUM/2013. HENCE, THIS APPEAL REQUIRES FRESH ADJUDICATION. 2. IN THIS APPEAL, THE REVENUE HAS AGITATED THE ACT ION OF THE LD.CIT(A) IN ALLOWING THE CLAIM FOR BAD DEBT OF RS.8,20,344/- AN D HOLDING THAT THE AO IS NOT RIGHT IN TAXING THE ADDITIONAL INCOME OF RS.14,64,623/- O N ACCRUAL BASIS. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE WHO WAS ENGAGED IN THE TRUSTEESHIP BUSINESS, WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUN TING. HOWEVER, FROM ASSESSMENT YEAR 2004-05, ASSESSEE CHANGED THE METHOD OF ACCOUN TING AND INCOME IN RESPECT OF WHICH NO RECOVERY WAS MADE WITHIN A PERIOD OF 7 MON THS WAS BEING SHOWN AS BAD DEBTS AND ONLY RECURRING BAD DEBT IN SUBSEQUENT YEA RS WAS BEING SHOWN AS INCOME. IN ASSESSMENT YEAR 2004-05, AO HAD REJECTED THE MET HOD OF ACCOUNTING AND ITA NO. 4544/MUM/2009 M/S. IDBI TRUSTEESHIP SERVICES LTD. ASSESSMENT YEAR: 2005-06 2 DISALLOWED THE CLAIM OF BAD DEBT. IN THE ASSESSMENT YEAR 2005-06, WHICH IS UNDER CONSIDERATION IN THIS APPEAL, THE ASSESSEE FOLLOWIN G THE NEW METHOD CLAIMED BAD DEBTS AT RS.8,20,344/- AND ALSO DECLARED ADDITIONAL INCOME OF RS.14,64,623/- IN RESPECT OF BAD DEBTS CLAIMED IN THE EARLIER YEARS. THE AO FOLLOWING THE DECISION IN ASSESSMENT YEAR 2004-05 REJECTED THE CLAIM OF BAD D EBTS OF RS.8,20,344.- BASED ON THE NEW ACCOUNTING METHOD. HE, HOWEVER, TAXED THE A DDITIONAL INCOME OF RS.14,64,623/- ON ACCRUAL BASIS IN RESPECT OF DEBTS WHICH HAD BEEN WRITTEN OFF BY THE ASSESSEE IN THE EARLIER YEARS. ON APPEAL, THE L D.CIT(A) OBSERVED THAT IN ASSESSMENT YEAR 2004-05, HE HAD ALREADY ACCEPTED TH E NEW METHOD FOLLOWED BY THE ASSESSEE AS BONAFIDE CHANGE AND ACCORDINGLY HE DIRE CTED THE AO TO ALLOW CLAIM OF BAD DEBT AND AS A CONSEQUENCE TAX THE ADDITIONAL IN COME RECEIVED ON ACCOUNT OF BAD DEBTS CLAIMED BY THE ASSESSEE IN THE EARLIER YE AR. AGGRIEVED BY THE SAID DECISION, THE REVENUE IS IN APPEAL BEFORE THE TRIBU NAL. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE DISPUTE IS REGARDING CLAIM OF BAD DEBT AND TAXABILITY OF ADDITIONAL INCOME DECLARED BY THE ASSESSEE IN VIEW OF NEW ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE SINCE 2004-05. THE ASSESSE E, SINCE ASSESSMENT YEAR 2004- 05, WAS WRITING OFF THE DEBTS IN RESPECT OF INCOME IN WHICH THERE WAS NO RECOVERY FOR 7 MONTHS AND IN RESPECT OF BAD DEBTS CLAIM IF ANY I NCOME WAS RECEIVED IN THE SUBSEQUENT YEAR, THE SAME WAS OFFERED AS INCOME WHI CH WAS UPHELD BY THE LD.CIT(A) IN ASSESSMENT YEAR 2004-05. WE FIND THAT THE SAID DECISION OF THE LD.CIT(A) HAS FURTHER BEEN UPHELD BY THE TRIBUNAL, VIDE ITS ORDER DATED 07.04.2014 IN ITA NO 6682/MUM/2008 WHEREIN IT HAS BEEN HELD TH AT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS A BONAFIDE ONE. IN VIEW OF THAT MATTER, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGN ED DECISION OF THE LD.CIT(A) AND THUS THE SAME IS UPHELD. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JUNE, 2014. SD/- SD/- (N.K. BILLAIYA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA NO. 4544/MUM/2009 M/S. IDBI TRUSTEESHIP SERVICES LTD. ASSESSMENT YEAR: 2005-06 3 MUMBAI, DATED: 23.06.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR I BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.