M/s. DCIT, New Delhi V. M/s. Sarla Fabric Pvt. Ltd., New Delhi

ITA 481/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0143 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 30-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J S MINHAS ACIT
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G, NEW DELHI) BEFORE SHRI D. MANMOHAN, HONBLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER I.T.A. NO.481 /DEL/2013 ASSESSMENT YEAR : 2009-10 DCIT, CIRCLE 7(1), VS. M/S. SARLA FABRIC PVT. LT D., NEW DELHI F-88, OKHLA INDUSTRIAL AREA, PHASE I, NEW DELHI-110 020 GIR / PAN:AAHCS3856Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J. S. MINHAS, ACIT RESPONDENT BY : NONE DATE OF HEARING : 30.06.2015 DATE OF PRONOUNCEMENT : 30.06.2015 ORDER PER D.MANMOHAN, VP: THIS APPEAL OF REVENUE IS DIRECTED AGAINST HT ORDE R PASSED BY LD. CIT(A) X, NEW DELHI AND IT PERTAINS TO ASSESSMENT Y EAR 2009-10. FOLLOWING GROUNDS WERE RAISED BEFORE US: 1. THE LD. CIT (A) HAS ERRED IN ALLOWING THE PARTI AL WRITE OFF OF DEBT WHICH IS BY WRITING OFF ONLY THE INTEREST PART WHEREAS THE PRINCIPAL AMOUNT HAS NOT BEEN WRITTEN OFF.' 2. 'THE LD. CIT (A) HAS ERRED IN ALLOWING PARTIAL W RITE OFF OF DEBT PERTAINING TO INTEREST ON LOAN DESPITE THE FACT THA T IT WAS NOT IN RESPECT OF BUSINESS CARRIES ON IN THE RELEVANT PREVIOUS YEA R.' 3. 'THE LD. CIT (A) HAS ERRED IN ALLOWING PARTIAL W RITE OFF OF DEBT PERTAINING TO INTEREST ON LOAN DESPITE THE FACT THA T IT IS NOT INCIDENTAL TO THE BUSINESS OR PROFESSION OF THE ASSESSEE.' ITA NO.281/DEL/2013 2 2. WHEN THE CASE WAS CALLED FOR HEARING, NONE APPEA RED FOR THE ASSESSEE. IT MAY BE NOTED THAT ONE MR. DEEPAK MALIK, AUTHORIZ ED REPRESENTATIVE FILED PAPER BOOK ON 23.02.2015, THOUGH HE IS NOT HAVING P OWER OF ATTORNEY OF THE ASSESSEE. IT IS THEREFORE, INFERRED THAT ASSESSEE IS NOT INTERESTED IN PURSUING ITS APPEAL EFFECTIVELY. WE, THEREFORE PROCEED TO D ISPOSE OF THE APPEAL EX- PARTE, QUA THE ASSESSEE. 3. FACTS NECESSARY FOR THE PURPOSE OF DISPOSAL OF T HE ISSUE IN DISPUTE ARE STATED IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED I N THE BUSINESS OF WEAVING, PROCESSING AND PRINTING OF FABRIC AND EXPO RTS. FOR THE PERIOD PRIOR TO THE ASSESSMENT YEAR UNDER CONSIDERATION, IT DECL ARED NIL INCOME WITH CURRENT YEARS LOSS OF RS.3,53,281/-. IN THE SCRUT INY ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE COMPANY RECEIVED INTEREST AMOUNT OF RS.3.86 CRORES AGAINST WHICH A SUM OF RS.57,29,241/ - HAS BEEN ADJUSTED AGAINST INTEREST RECEIVED ON ACCOUNT OF INTEREST R EVERSED UNRECOVERED FORM MOHAN INFRACON PVT. LTD. FOR F.Y. 2006-07. WHEN C ALLED UPON TO PROVIDE DETAILS IN THIS REGARD, THE ASSESSEE SUBMITTED THAT THERE WAS A DELAY IN GETTING APPROVAL FROM THE GOVERNMENT AUTHORITIES IN RESPECT OF CONSTRUCTION OF HOUSES AND HENCE, THERE WAS NO INCOME / REVENUE GEN ERATION FOR M/S. MOHAN INFRACON. UNDER THESE CIRCUMSTANCES, THE ASSESSEE HAD LOST THE HOPE OF RECOVERY OF INTEREST FROM M/S. MOHAN INFRACON PVT. LTD. AND HENCE REVERSED THE INTEREST ENTRY TO AVOID ENTERING INTO DISPUTE W ITH THE SAID PARTY. 4. THE A.O. OBTAINED ACCOUNT COPY OF M/S. MOHAN INF RACON PVT. LTD., BY ISSUING SUMMONS U/S 133(6) OF THE ACT, WHEREIN IT W AS FOUND THAT IN THE BOOKS OF M/S. MOHAN INFRACON PVT. LTD., INTEREST AM OUNT OF RS.57,29,241/- WAS BEING SHOWN AS PAYABLE TO THE ASSESSEE COMPANY AS ON 31.03.2009. THE ITA NO.281/DEL/2013 3 A.O. THEREFORE, DISALLOWED THE CLAIM OF WRITE OFF O F THE INTEREST TO THE TUNE OF RS.57,29,241/-. 5. AGGRIEVED, THE ASSESSEE CONTENDED BEFORE LD. CIT (A) THAT THE SUM OF RS.17 CRORES WAS ADVANCED TO M/S. MOHAN INFRACON PV T. LTD. DURING THE FINANCIAL YEAR 2006-07. ASSESSEE SHOWED INTEREST R ECEIVABLE FROM THE SAID PARTY ON ACCRUAL BASIS. NO AMOUNT OF INTEREST WAS PAID BY M/S. MOHAN INFRACON PVT. LTD. THE ASSESSEE PRESSURISED M/S. M OHAN INFRACON PVT. LTD., FOR RETURNING OF LOAN ADVANCED. IT RECEIVED CHEQUE FOR THE SAID AMOUNT BUT THE SAME COULD NOT BE ENCASHED WHICH REFLECTED THE FINANCIAL STATUS OF THE COMPANY, WHICH IS RUNNING IN HUGE LOSSES. IN OTHER WORDS, THE PLEA OF ASSESSEE IS THAT M/S. MOHAN INFRACON PVT. LTD. WAS NOT IN A POSITION TO PAY EVEN THE PRINCIPAL AMOUNT AND HENCE THE PAYMENT OF INTEREST DOES NOT ARISE. HE RELIED UPON CERTAIN REPORTED DECISIONS IN SUPPOR T OF ITS CONTENTION THAT IF A DEBT IS WRITTEN OFF IN THE BOOKS OF ACCOUNT, IT IS NOT OPEN TO THE A.O. TO REJECT THE CLAIM OF ASSESSEE ON THE GROUND THAT HE HAD FAI LED TO ESTABLISH THAT THE DEBT HAD BECOME BAD. 6. LD. CIT(A) OBSERVED THAT THE ASSESSEE COMPANY HA D ACTUALLY WRITTEN OFF THE INTEREST RECEIVABLE AS BAD DEBT IN ITS BOOK S OF ACCOUNT AND HE RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE C ASE OF TRF LTD VS CIT 232 ITR 397 TO HOLD THAT THE CLAIM OF ASSESSEE DESE RVES TO BE AUTOMATICALLY ALLOWED. HE ACCORDINGLY DISPOSED OF THE APPEAL. 7. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 8. AT THE TIME OF HEARING, THE BENCH CALLED UP THE LD. D.R. TO FURNISH EVIDENCE AS TO WHETHER INTEREST RECEIVABLE IN EARLI ER ASSESSMENT YEARS WAS OFFERED TO TAX IN EARLIER YEARS. IN THE LIGHT OF D ECISION OF HONBLE APEX COURT, IN THE CASE OF TRF LTD. (SUPRA), ANY AMOUNT WHICH WAS OFFERED TO TAX ITA NO.281/DEL/2013 4 IN EARLIER YEAR BUT WRITTEN OFF IN THE SUBSEQUENT Y EAR AS BAD DEBT, CAN BE CLAIMED AS DEDUCTION AND IT IS NOT NECESSARY FOR T HE ASSESSEE TO PROVE THAT THE DEBT HAD ACTUALLY BECOME BAD AND IS NOT RECOVER ABLE. THE LD. D.R. COULD NOT PLACE ANY MATERIAL TO CONTRADICT THE PLEA OF THE ASSESSEE THAT INTEREST WAS OFFERED TO TAX ON ACCRUAL BASIS IN THE EARLIER YEARS. 9. THE ASSESSEE IS ADMITTEDLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND HAS NOT RECEIVED THE LOAN AMOUNT ALSO TILL DATE . LD. D.R. WAS UNABLE TO PLACE ANY MATERIAL BEFORE US IN THIS REGARD. HOWEV ER, HE REQUESTED THE BENCH THAT THE MATER MAY BE SET ASIDE TO THE FILE OF A.O. FOR RECONSIDERATION OF THE MATTER IN ACCORDANCE WITH LAW. 10. IT MAY BE NOTED THAT IN THE PAPER BOOK FILED BY THE ASSESSEE, COPY OF ACCOUNTS OF M/S. MOHAN INFRACON PVT. LTD., IN THE B OOKS OF ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 TO 2009-10 WERE FURNISHED W HICH SHOWED THAT INTEREST WAS OFFERED TO TAX IN EARLIER ASSESSMENT Y EARS. BUT IN THE LIGHT OF THE FACT THAT EVEN THE PRINCIPAL AMOUNT COULD NOT B E RECOVERED, THE ASSESSEE COMPANY DID NOT PROVIDE FOR INTEREST IN THE SUBSEQU ENT YEARS. IF THIS STATEMENT OF ASSESSEE IS CORRECT, THEN THERE IS NO CASE MADE OUT BY THE A.O. FOR MAKING THE ADDITION. THESE FACTS WERE NOT BROU GHT ON RECORD EITHER IN THE ORDER PASSED BY A.O. OR LD. CIT(A). WE, THEREFORE, IN THE INTEREST OF SUBSTANTIAL JUSTICE, SET ASIDE THE MATTER TO THE FI LE OF A.O. WHO IS DIRECTED TO RECONSIDER THE MATTER AFRESH IN ACCORDANCE WITH LAW . NEEDLESS TO OBSERVE THAT IF THE INTEREST AMOUNT IS OFFERED TO TAX IN EA RLIER YEARS AND NOW WRITTEN OFF IN THE BOOKS OF ASSESSEE AS BAD DEBT, THE CLAIM OF ASSESSEE IS ALLOWABLE AS DEDUCTION AND IT IS NOT NECESSARY FOR THE ASSESSEE TO PROVE THAT THE DEBT HAD ACTUALLY BECOME BAD. IF NO ADDITION IS MADE IN THE SUBSEQUENT YEAR WITH REGARD TO THE INTEREST RECEIVABLE ON ACCRUAL BASIS, IT STRENGTHENS THE CASE OF ITA NO.281/DEL/2013 5 THE ASSESSEE FURTHER. WITH THESE OBSERVATIONS, WE RESTORE THE MATTER TO THE FILE OF A.O. FOR DE NOVO CONSIDERATION. 11. IN THE RESULT, APPEAL FILED BY REVENUE IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2015. SD./- SD./- (N. K. SAINI) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT DATE: 30 TH JUNE, 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 30/6 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 30/6 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 30/6/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 30/6 SR. PS/PS 7 FILE SENT TO BENCH CLERK 30/6 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER