M/S. CLASSIC SHARES & STOCK BROKING SERVICES LTD, MUMBAI V. THE DCIT CEN CIR-40, MUMBAI

ITA 4820/MUM/2007

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2062 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 22-12-2014
• Assessment Year: 1998-1999
• Appeal Filed On: 05-07-2007
• Court: TRIBUNAL
• Department Lawyers: DR P DENIEL
• Assessee Lawyers: NELLKANTH KHANDELWAL
• Keywords: Reopening of assessment; Business income; Retrospective amendment; Bad and doubtful debts; Difference of opinion; Provision of bad debts; Change of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ITA NO. 4820 / MUM/20 07 ( ASSESSMENT YEAR : 199 8 - 9 9 ) M/S. CLASSIC SHARES & STOCK BROKING SERVICES LTD., RADHA BHAVAN, 1 ST FLOOR, 121, NAGINDAS MA STER ROAD, MUMBAI - 400023 VS. DCIT CC - 40, MUMBAI PAN/GIR NO. AABCS4255R APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI NELLKANTH KHANDELWAL REVENUE BY SHRI DR.P.DENIEL DATE OF HEARING 04 /0 8 /2016 DATE OF PRONOUNCEME NT 09 / 11 /2016 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 1998 - 99, IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.147 OF THE IT ACT. 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR REOPENING OF ASSESSMENT WHICH HAVE ALREADY BEEN COMPLETED UNDER SCRUTINY ASSESSMENT PROCEEDINGS U/S.143(3). IN MERIT, ASSESSEE IS AGGRIEVED FOR ADDITION OF RS.55,91,765/ - ON ACCOUNT OF BAD DEBTS WRITTEN OFF U/S.36(1)(VII) OF THE IT ACT. 3. R IVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. ITA NO. 4820 - 2007 CLASSIC SHARES AND STOCK BROKING SERVICES LTD., 2 4. FACTS IN BRIEF ARE THAT ASSESSEE FILED RETURN OF INCOME DECLARING LOSS OF RS .2.51 CRORES ON 31 . 08 .199 9 . THEREAFTER ASSESSMENT WAS COMPLETED U/S.143(3) DETERMINING INCOME AT NET LOSS OF RS.1.8 3 CRORES. DURING THE COURSE OF ASSESSMENT AO HAS DEALT WITH IN DETAIL THE ASSESSEES CLAIM FOR PROVISION OF BAD DEBTS OF RS.55,91,765/ - AFTER HAVING THE FOLLOWING OBSERVATION: - P ROVI SI ON FOR B AD DEBTS : RS.5 5, 91,7 6 5/ - . THE ASSESSEE HAS CLAIMED THA T NOMENCLATURE I S PROVISION , BUT IT IS WRITE OFF OF BAD DEBTS. ASSESSEE HAS CLAIMED THAT THERE IS NO PARTICUL A R FO RM/M ETHOD OF WRITE OFF OF BAD DEBTS IS PRESCRIBED AND AS PER ACOOUNTING AN D DISTIONERY, WRITE OFF MEANS 'TO TRANSFER THE BALANCE OF UN ACCOUNT, PREVIOUSLY REC ORDED AS AN ASSET TO AN EXPENSE ACCOUNT OR TO P&L ACCOUNT. IN SUPPORT OF ITS CL AIM, THE AS SESSEE HAS ALSO CITED FOLLOWING CASE LAWS : 1. VITHALDAS H. DHANJIBHA I. B ANDANWALA - VS - CLT, (1981) 130 ITR 95 (GU J). 2. CIT - VS - J WALA PRA SAD TEWARI, 24 ITR 537 (BOM). 3. SARANGPU R COTTON MFG . CO , LRD. - VS - CIT, 143 ITR 166, 173 (GUJ) 4. CIT VS - U NION CARBIDE (1) LTD., 7P., TAXRNAN, 605, 610. 5. C IT - VS - .. UNITED BANK O F INDIA, 115 C TR 35,38 (CAL). AFTER CONS IDERING SUBMISSIONS OF THE ASSESSEE, THE CLA IM OF THE ASSESSEE IS ALLOWED. 5. THEREAFTER, THE ASSESSMENT WAS REOPENED U/S.147 ON 28/03/2003 ON THE PLEA THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.55,91,765/ - AS PROVISION FOR BAD DEBTS IN THE P & L A/C. AS PER EXPLANATION BELOW THE PROVISO TO CL AUSE VII OF SUB SECTION (1) OF SECTION 36 OF THE I.T.ACT WITH ITA NO. 4820 - 2007 CLASSIC SHARES AND STOCK BROKING SERVICES LTD., 3 RETROSPECTIVE EFFECT FROM 01.04.1989, NO PROVISION FOR BAD AND DOUBTFUL DEBTS IS DEDUCTIBLE FROM THE ASSESSEES BUSINESS INCOME. 6. IN THE ASSESSMENT SO FRAMED U/S.143(3) R.W.S.147, AO OBSERVED THAT IN VIEW OF THE FACT THAT THE SECTION 36(1) (VII) EXPLANATION, NO PROVISION SHOULD BE ALLOWED FOR THE WRITE - OFF OF BAD DEBTS SO THE DEDUCTION ALLOWED BY THE ASSESSING OFFICER IS ERRONEOUS. 7. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF THE AO BOTH ON THE GROUND OF REOPENING AS WELL AS MERIT OF THE ADDITION SO MADE. 8. IT WAS CONTENDED BY LEARNED AR THAT IN THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO HAS DEALT IN GREAT DETAIL, THE ASSESSEES CLAIM FOR BAD DEBTS OF RS.55.91 LAKHS. HE FURTHER SUB MITTED THAT IT WAS NOT THE PROVISION BUT ACTUAL WRITE OFF OF THE DEBT AND THE ASSESSEE HAS REDUCED THE INDIVIDUAL AMOUNT OF BAD DEBTS FROM THE AMOUNT OF RESPECTIVE DEBTORS. 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. 10. FROM THE RECORD, W E FOUND THAT IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE AO HAS DEALT IN GREAT DETAIL , ASSESSEES CLAIM OF BAD DEBTS AND AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING DECISION OF BOMBAY, GU JARAT AND CALCUTTA HIGH COURT REACHED TO THE CONCLUSION THAT ASSESSEES CLAIM IS ADMISSIBLE. THUS, FR AMING ASSESSMENT UNDER SCRUTINY AFTER CONSIDERING ALL THE MATERIAL FACTS, IT AMOUNTS TO CHANGE OF OPINION FOR WHICH REOPENING IS NOT ADMISSIBLE. NO NEW FAC TS HAVE BEEN BROUGHT ON RECORD BY AO SO AS TO HOLD THAT IT WAS NOT AN ADMISSIBLE CLAIM. EVEN ON MERITS, WE FOUND THAT FOR EACH AMOUNT OF BAD ITA NO. 4820 - 2007 CLASSIC SHARES AND STOCK BROKING SERVICES LTD., 4 DEBTS, ASSESSEE HAS REDUCED THE DEBTORS AMOUNT. THUS, IT WAS THE CLAIM OF ACTUAL BAD DEBTS AND NOT MERELY PROVISION FOR BAD DEBTS. HOWEVER, AO IS AT A LIBERTY TO BRING TO TAX NET IF THERE IS ANY RECOVERY OF DEBTS IN SUBSEQUENT YEAR . ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09/11 /2016 S D/ - ( PAWAN SINGH ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 09/11 /201 6 KARUNA SR. PS COPY OF T HE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//