SPB Projects and Consultancy Ltd., CHENNAI V. ACIT, CHENNAI

ITA 508/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90276 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR BHUSARI
• Assessee Lawyers: N R SURESH
• Keywords: Depreciation; Question of law; Tangible material; Bad and doubtful debts; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO. 508/MDS/2014 ( / ASSESSMENT YEAR: 2009-10) M/S. SPB PROJECTS AND CONSULTANCY LTD., 13, ESVIN HOUSE, OLD MAHABALIPURAM ROAD, PERUNGUDI, CHENNAI-600 096. VS COMMISSIONER OF INCOME TAX, CHENNAI-VI, CHENNAI. PAN: AAACS4921K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.R.SURESH, C.A /RESPONDENT BY : DR. BHUSARI, CIT DR /DATE OF HEARING : 5 TH MARCH, 2015 /DATE OF PRONOUNCEMENT : 15 TH APRIL, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX, CHENNAI-VI DATED 18.02.2014 FOR THE ASSESSMENT YEAR 2009-10 PASSED UNDER SECTION 263 OF THE ACT. THE ASSESSEE IN ITS APPEAL CHALLENGES THE ORDER OF THE COMMISSIONER OF INCOME TAX PASSED UNDER SECTION 263 OF THE ACT IN HOLDING THAT THAT ASSESS EE HAS MADE ONLY PROVISION FOR DOUBTFUL DEBT AND HAS NOT M ADE A WRITE OFF AND IN ASSUMING JURISDICTION TO HOLD THA T ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2 ITA NO.508/MDS/2014 2. BRIEF FACTS ARE THAT ASSESSEE FILED ITS RETURN O F INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 21.09.2009 DECLA RING INCOME OF ` 4,12,58,280/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 26.12.2011 ASSESSING INCOME OF THE ASSESSEE AT ` 4,16,44,133/-. LATER, SHOW CAUSE NOTICE WAS ISSUED BY THE COMMISSIONER OF INCOME TAX UNDER SEC TION 263 PROPOSING TO REVISE THE ASSESSMENT ORDER DATED 26.12.2011 STATING THAT ASSESSING OFFICER HAS ACC EPTED THE ASSESSEE COMPANYS VERSION AND ALLOWED BAD DEBTS CL AIMED BY IT. THE ASSESSING OFFICER HAS NOT LOOKED INTO T HE FACTS THAT ASSESSEE HAS RECEIVED CLAIM LETTER FROM M/S. B ILT POWER LTD. ONLY DURING AUGUST, 2009 AND THE ASSESSEE COMP ANYS ACCOUNTS WERE CLOSED BY 31.03.2009 AND THE ASSESSEE COMPANY HAS NOT ACTUALLY WRITTEN OFF THE AMOUNT IN STEAD ONLY A PROVISION FOR WRITING OFF THE AMOUNT WAS MADE. TH EREFORE, ASSESSING OFFICERS ORDER PRIMA-FACIE APPEARS TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER OF INCOME TAX, THE ASSESSEE FILED A DE TAILED REPLY STATING THAT IN THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER CALLED FOR DETAILS IN RESPECT OF THE 3 ITA NO.508/MDS/2014 AMOUNTS WRITTEN OFF AS IRRECOVERABLE AND ASSESSEE FILED LEDGER COPY AND ALSO DETAILED NOTE ON IRRECOVERABLE AND SUBMITTED THAT AFTER EXAMINING THE CLAIM OF THE ASS ESSEE IN RESPECT OF IRRECOVERABLES, ASSESSING OFFICER COMPLE TED THE ASSESSMENT AND THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ASSESSEE FURTHER SUBMITTE D THAT ASSESSEE COMPANY IS A CONSULTANCY SERVICE COMPANY ENGAGED IN THE BUSINESS OF PROVIDING PROJECT MANAGE MENT AND CONSULTANCY SERVICES IN PULP AND PAPER, POWER AND SUGAR INDUSTRIES ETC. FOR THE YEAR ENDED 31 ST MARCH 2009 I.E., ASSESSMENT YEAR 2009-10 THE ASSESSEE COMPANY OFFERED GROSS CONSULTANCY INCOME OF ` 18,24,14,496/- WHICH INCLUDED INCOME FROM BILT GROUP ` 5,11 ,96,237/-. IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAS WRITTEN OF F ` 62,00,468/- TOWARDS IRRECOVERABLE AND CLAIMS WHICH INCLUDED COMPENSATION OF ` 50 LAKHS DUE TO BILT POWER LTD. BILT POWER LTD BY THEIR LETTER DATED 10 TH JULY 2009 CLAIMED THAT WHILE POURING THE CONCRETE ON THE TOP OF THE R OOF, STRUCTURE COLLAPSED ALONG WITH SUPPORTING STEEL STR UCTURES THEREBY RESULTING IN HUGE FINANCIAL LOSS TO BILT P OWER LIMITED AND DETERMINED ` 50 LAKHS AS COMPENSATION FOR 4 ITA NO.508/MDS/2014 NON- PERFORMANCE OF THE CONTRACT AND DAMAGES SUFFER ED BY THEM. THIS PROCEEDINGS CLAIMED BY THE BILT AND THE COMPENSATION GOT DETERMINED ON 10 TH JULY 2009. THE ACCOUNTS OF THE ASSESSEE COMPANY WERE FINALIZED AND ADOPTED BY THE BOARD ON 18-08-2009. THE ASSESSEE, THEREFORE ACCOUNTED FOR THE CLAIM UNDER THE HEAD IRRECOVERABLES / BAD DEBTS IN THE PROFIT AND LOSS A CCOUNT AND ALSO REDUCED IT FROM THE AMOUNT RECEIVABLE FROM TH E PARTY. THE ASSESSEE HAD RIGHTLY CLAIMED THE SAME AS BAD DE BT UNDER SECTION 36(2) OF THE INCOME TAX ACT AS THE IN COME HAS BEEN INCLUDED IN THE FINANCIAL YEAR ENDED 31-03-200 8 AND 2009 AND THE AMOUNT THOUGH BECAME IRREVOCABLE AFTER MARCH 2009 WAS AN EVIDENCE AVAILABLE TO THE ASSESSEE THAT THE AMOUNT IS NOT RECOVERABLE. THE ASSESSEE HAD WRITTEN OFF THE AMOUNT IN COMPLIANCE WITH ACCOUNTING STANDARD AS-9 REVENUE RECOGNITION AS THE AMOUNT WAS NOT REALIZAB LE. THE WRITE OFF WAS ALSO MADE IN COMMERCIAL PRUDENCE AND IN ACCORDANCE WITH THE SECTION 36(2) OF THE INCOME TAX ACT. THE ASSESSEE DID NOT MAKE A PROVISION BUT WROTE OFF THE AMOUNT BY DEBITING TO THE PROFIT AND LOSS ACCOUNT A ND CREDITING THE DEBTORS ACCOUNT. IT IS THEREFORE INCO RRECT TO COME TO CONCLUSION THAT ASSESSEE HAS MADE ONLY A PROVISI ON. THE 5 ITA NO.508/MDS/2014 ASSESSEE RELIED ON THE FOLLOWING DECISIONS OF THE SUPREME COURT IN SUPPORT OF ITS CLAIM:- I) CIT VS. MODI TELECOMMUNICATIONS LTD.( 325 ITR 29 1) II) TRF LTD. VS. CIT ( 323 ITR 397) III) LAWLYS ENTERPRISES P.LTD. VS. CIT (314 ITR 297 ) IV) CIT VS. STAR CHEMICALS (292 ITR 339) V) CIT VS. GIRISH BHAGWAT PRASAD (256 ITR 772) 4. THE ASSESSEE FURTHER CONTENDED THAT NARRATION GI VEN IN THE JOURNAL ENTRY IS BEING COMPENSATION CLAIM AMO UNT BY THE BILT POWER LTD. FOR NON-PERFORMANCE OF THE CONTRACT AND DAMAGES SUFFERED BY THEM NOW PROVIDED. THE NARRATIO N PROVIDED IS GIVEN IN THE ENTRY AND IS NOT A PROVISI ON. THIS HAS BEEN WRITTEN OFF TO THE PROFIT AND LOSS ACCOUNT UND ER IRRECOVERABLE AND CLAIMS AND FURTHER THE PARTY ACCO UNT HAS ALSO BEEN CREDITED FOR THIS AMOUNT AND THE ASSESSEE ALSO PRODUCED LEDGER COPY. THEREFORE, THE ASSESSEE SUBM ITTED THAT THE AMOUNT OF IRRECOVERABLE AND CLAIMS IS A WR ITE OFF IN THE BOOKS AS WELL AS IN THE PROFIT AND LOSS ACCOUNT AND THE CREDIT TO THE PARTY BILT POWER LTD. AND THE ASSESS EE HAS COMPLIED WITH THE PROVISIONS OF SECTION 36(2) OF TH E ACT. 6 ITA NO.508/MDS/2014 5. HOWEVER, THE COMMISSIONER OF INCOME TAX NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E PASSED ORDER UNDER SECTION 263 OF THE ACT HOLDING THAT ASS ESSEES CLAIM OF ` 50 LAKHS AS BAD DEBTS IN RELATION TO M/S. BILT POWER LTD. CANNOT BE ALLOWED FOR THE ASSESSMENT Y EAR 2009-10 AND DIRECTED THE ASSESSING OFFICER TO EXAMI NE THE DEBT AND ALLOW THE SAME IN THE SUBSEQUENT ASSESSMEN T YEARS, IF THE ASSESSEE SATISFIES THE CONDITIONS STI PULATED IN THE ACT, AGAINST WHICH THE ASSESSEE IS IN APPEAL BE FORE US. 6. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE COU RSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER CALLED FOR DETAILS OF IRRECOVERABLE CLAIMS AND THE ASSESSEE F URNISHED DETAILS FOR IRRECOVERABLE CLAIMS ALONG WITH LEDGER EXTRACT ON 7.12.2011. FURTHER A DETAILED NOTE WAS SUBMITTED ON 19.12.2011 ALONG WITH COPY OF THE LEDGER ACCOUNT O F THE CUSTOMER AND A LETTER FROM CUSTOMER LEVYING PENALT Y OR REPORT FROM IIT., DELHI STATING THAT DRAWINGS SUPP LIED BY THE ASSESSEE WERE DEFECTIVE AND WERE KNOWN ONLY WHEN TH E ROOF COLLAPSE HAPPENED AND IIT CONCLUDED THAT PATTERN OF FAILURE IS DUE TO DESIGN DEFECTS. COUNSEL FOR THE ASSESSEE SUB MITS THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS SUB MITTED 7 ITA NO.508/MDS/2014 THAT AMOUNTS WRITTEN OFF HAVE BEEN OFFERED EITHER INCOME IN THE PREVIOUS YEAR OR EARLIER YEARS AND THE AMOUNTS HAVING BEEN WRITTEN IN THE BOOKS OF ACCOUNTS OF THE ASSES SEE BY DEBITING TO THE PROFIT AND LOSS ACCOUNT AND CREDITI NG TO PARTIES ACCOUNT SHALL BE ALLOWABLE AS BAD DEBTS UNDER SECT ION 36(2) OF THE ACT. COUNSEL FOR THE ASSESSEE SUBMITS THAT A FTER CONSIDERING ALL THESE SUBMISSIONS, THE ASSESSING OF FICER COMPLETED THE ASSESSMENT ON 26.12.2011 ALLOWING THE CLAIM OF THE ASSESSEE. THUS, THE ORDER PASSED BY THE ASSE SSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE ASSESSING OFFICER HAS TAKEN ONE OF THE VIEWS POSSIBLE AND THEREFORE, THE ASSESSMENT ORDER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 7. COUNSEL FOR THE ASSESSEE PLACING RELIANCE ON THE DECISIONS OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. ANAND FOOD PRODUCTS [39 TAXMANN.COM 187 (AP)] AND THE HONBLE GUJARAT HIGH COURT IN THE CAS E OF CIT VS. AMIT CORPORATION [21 TAXMANN.COM 64 (GUJ)] SUB MITS THAT IF THE ASSESSING OFFICER WHILE FRAMING ORIGINA L ASSESSMENT HAD ACCESS OF ALL THE RECORDS AND AFTER PERUSING SUCH RECORDS FRAMED THE ASSESSMENT, SUCH ASSESSMEN T 8 ITA NO.508/MDS/2014 CANNOT BE REVISED UNDER SECTION 263 OF THE ACT. COU NSEL FOR THE ASSESSEE PLACING RELIANCE ON THE DECISION OF HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR SHARMA (335 ITR 83) SUBMITS THAT IF THERE IS AN ENQUIRY EV EN IF IT IS INADEQUATE, COMMISSIONER IS NOT JUSTIFIED IN INVOKI NG PROVISIONS OF SECTION 263 OF THE ACT MERELY BECAUSE HE HAD A DIFFERENT OPINION ON THE MATTER. 8. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT COMMISSIONER OF INCOME TAX HELD THAT THE CLAIM FOR BAD DEBTS ARE NOT ALLOWABLE IN THIS ASSESSMENT YEAR FOR THE REASON THAT ASSESSEE HAS NOT ACTUALLY WRITTEN OFF T HE AMOUNT INSTEAD HAS MADE ONLY A PROVISION FOR WRITING OFF T HE AMOUNT. COUNSEL SUBMITS THAT COMMISSIONER OF INCOME TAX CAM E TO SUCH A CONCLUSION ON THE BASIS THAT BILT POWER LTD . HAS SENT CLAIM LETTER ONLY DURING AUGUST, 2009 AND THE ASSESSEE COMPANYS ACCOUNTS WERE CLOSED BY 31.03.2009. IN TH IS REGARD, COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ENGINEERING DRAWINGS RELATING TO THE CIVIL CONSTRUC TION WERE DELIVERED PRIOR TO THE MARCH 2009, INVOICES WERE RA ISED ON THE CUSTOMER AND ACCOUNTED AS INCOME. THE FACT THA T THE DRAWINGS WERE DEFECTIVE WAS KNOWN ONLY WHEN THE ROO F 9 ITA NO.508/MDS/2014 COLLAPSE HAPPENED AND THE REPORT OF LIT, DELHI HAS CONCLUDED THAT THE PATTERN OF THE FAILURE IS DUE TO DESIGN DE FECTS WHICH MEANS THE DRAWINGS WERE DEFECTIVE EVEN WHEN THEY WE RE DELIVERED TO THE CUSTOMER AND INCOME WAS RECOGNIZED . THE FACT THAT IT IS DEFECTIVE WAS KNOWN ONLY WHEN THE I NCIDENT OCCURRED. THIS IS SIMILAR TO A SALES RETURN WHERE G OODS ARE DESPATCHED IN THE LAST WEEK OF MARCH OF THE FINANCI AL YEAR, WHICH GET RETURNED ON QUALITY COMPLAINTS. IN SUCH C ASE EVEN THOUGH THE QUALITY COMPLAINTS ARE MADE KNOWN AFTER THE END OF THE FINANCIAL YEAR, CREDIT NOTE IS GIVEN AS OF 3 1 ST MARCH. THEREFORE THE CONCLUSION OF THE CIT THAT CLAIM WAS RECEIVED ONLY IN AUGUST 2009 AND ACCOUNTS OF THE COMPANY WER E CLOSED BY 31-03-2009 IS NOT CORRECT. THE ACCOUNTS W ERE OPEN WHEN THE DRAWINGS WERE DECLARED DEFECTIVE AND CLAIM WAS DETERMINED. THE FACT REMAINS THAT THE INCOME RECOGNIZED IN RESPECT OF DEFECTIVE DRAWINGS ARE NOT RECEIVABLES. THE COMPANY HAS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS, LEDGER COPIES OF THE IRRECO VERABLE WRITTEN OFF AND THE CUSTOMER ACCOUNT EVIDENCING THE CREDIT. THUS THERE IS A FACTUAL ERROR IN THE CONCLUSION DRA WN BY THE CIT THAT THE AMOUNT HAS NOT BEEN WRITTEN OFF AND ON LY A PROVISION HAS BEEN MADE. THE REASONS ON WHICH THE CIT HAS 10 ITA NO.508/MDS/2014 ASSUMED JURISDICTION ARE INCORRECT AND THEREFORE PR OCEEDINGS UNDER SECTION 263 ARE VITIATED. THE CIT HAS DIRECTE D THAT THE CLAIM FOR BAD DEBTS ARE NOT ALLOWABLE. THE ASSESSIN G OFFICER HAS VERIFIED THAT INCOME RELATING TO BAD DEBTS HAVE BEEN ACCOUNTED IN THE PREVIOUS YEARS AND THE CIT HAS NOT CONTROVERTED THIS FACT. THE CIT HAS ASSUMED THAT TH E BAD DEBT WILL HAVE TO BE WRITTEN OFF 'IN THE PREVIOUS Y EAR', WHILE SECTION 36(1)(VII) REQUIRES THAT BAD DEBT SHOULD B E WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSE 'FOR THE PREVIOUS YE AR'. THERE IS NO CONDITION THAT THE WRITE OFF SHOULD BE DONE I N THE PREVIOUS YEAR I.E., 'BEFORE THE END OF THE FINANCIA L YEAR', THUS THE ASSUMPTION OF COMMISSIONER OF INCOME TAX IS AL SO INCORRECT. 9. COUNSEL FOR THE ASSESSEE PLACING RELIANCE ON THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF U.P. RAJKIYA NIRMAN NIGAM LTD. VS. ACIT (36 TAXMAN N. COM 96) SUBMITS THAT THE HONBLE HIGH COURT HELD TH AT WRITE OFF OF BAD DEBT CAN BE MADE AFTER CLOSURE OF THE Y EAR BUT BEFORE THE AUDITED ACCOUNTS WERE ADOPTED. COUNSEL FOR THE ASSESSEE SUBMITS THAT SIMILAR VIEW HAS BEEN TAKEN B Y THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF ALLIAN CE FIN 11 ITA NO.508/MDS/2014 STOCK LTD. VS. ACIT (40 TAXMANN.COM 176). 10. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT POST 01- 04-1989, WRITE OFF OF BAD DEBT IS DETERMINED BY COM MERCIAL CONSIDERATIONS AND THERE IS NO NEED TO ESTABLISH TH AT THE DEBT HAS BECOME BAD. IN ACCORDANCE WITH SECTIONS 36(1)(V II) AND 36(2) THE INCOME RELATING TO THE BAD DEBT SHOULD HA VE BEEN INCLUDED AS INCOME IN ONE OR MORE PREVIOUS YEARS AN D FURTHER, WRITTEN OFF AS IRRECOVERABLE IN THE ACCOU NTS OF THE ASSESSE WITH A CORRESPONDING CREDIT TO THE CUSTOMER ACCOUNT. THIS PRINCIPLE HAS BEEN ENDORSED BY THE HON'BLE SUP REME COURT IN TRF LIMITED VS. CIT (2010) 323 ITR 397 (SC ). APPLYING THESE PROVISIONS OF LAW, THE COMPANY HAS M ET THE REQUIREMENT OF SECTIONS 36(1 )(VII) AND 36(2) OF TH E ACT. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSING OFF ICER HAS MADE A DETAILED ENQUIRY ON THE BAD DEBTS CLAIM AND ALL THE RELEVANT PAPERS RELATING TO THE CLAIM HAVE BEEN FIL ED BEFORE THE ASSESSING OFFICER. THEREFORE, COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSING OFFICER HAS ALLOWED THE CLAI M FOR BAD DEBTS BASED ON THE DETAILS, EVIDENCE GATHERED DURI NG THE ASSESSMENT PROCEEDINGS AND THE SUBMISSIONS MADE AN D ALSO TAKING INTO ACCOUNT THE CORRECT POSITION OF LA W. IN THE 12 ITA NO.508/MDS/2014 CIRCUMSTANCES, THE ASSESSMENT ORDER CANNOT BE HELD AS ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE RE VENUE JUST BECAUSE THE COMMISSIONER OF INCOME TAX HAS A DIFFE RENT VIEW OR OPINION ON THE MATTER. THEREFORE, HE PRAYS FOR SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOM E TAX UNDER SECTION 263 OF THE ACT. 11. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TAX IN HOLDING THAT ASSESSEES CLAIM OF ` 50 LAKHS AS BAD DEBT IN RESPECT OF BILT POWER LTD. FOR THE ASSESSMENT YEAR 2009-10 AS NOT ALLOWABLE. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TAX. 12. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND THE MATERIALS PLACED ON RECORD. THE ASSESSEE CL AIMED ` 62,00,468/- AS IRRECOVERABLE AND DEBITED TO PROFI T AND LOSS ACCOUNT DURING THE ASSESSMENT YEAR 2009-10. IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF T HE ACT, THE ASSESSING OFFICER CALLED FOR VARIOUS DETAILS ON IRRECOVERABLE / CLAIMS. THE ASSESSEE FILED VARIOUS DETAILS INCLUDING LEDGER ACCOUNT COPIES, CLAIM LETTER FROM THE PARTY, THE REPORT GIVEN BY IIT., DELHI SHOWING THAT DESIGN S AND 13 ITA NO.508/MDS/2014 DRAWINGS SUPPLIED BY THE ASSESSEE ARE DEFECTIVE AND THAT WAS THE CAUSE FOR COLLAPSE OF ROOF AND THEREFORE CL AIM MADE BY THE PARTY TOWARDS NON-PERFORMANCE OF CONTRACT AN D DAMAGES . APART FROM THESE, ASSESSEE FILED DETAILED NOTES ON IRRECOVERABLES AS UNDER:- THE ASSESSEE HAS CHARGED TO P&L ACCOUNT ` 62,00,468 BEING IRRECOVERABLES AND CLAIMS FROM CUSTOMERS AND EMPLOYEE ADVANCES. THE DETAILS FOR IRREVOCABLE CLAI MS TOGETHER WITH THE LEDGER COPIES OF THE RESPECTIVE P ARTIES ARE ENCLOSED. FOR THE SAKE OF EASY UNDERSTANDING, WE HA VE REFERRED TO PAGE NUMBER OF ANNEXURE (LEDGER EXTRACT ) AGAINST THE AMOUNT WRITTEN OFF. ALL THE IRREVOCABLE S HAVE BEEN DEBITED TO PROFIT & LOSS ACCOUNT AND CREDITED TO RE SPECTIVE PARTY'S ACCOUNT. ALL THE AMOUNTS WRITTEN OFF HAVE BEEN EITHER OFFERE D AS INCOME IN THE PREVIOUS YEAR ENDED MARCH 2009 AND EA RLIER YEARS. IN RESPECT OF BIL T POWER LTD., THE COMPANY HAS W RITTEN OFF RS 50 LAKHS BEING THE CLAIM FOR NON-PERFORMANCE OF THE CONTRACT AND DAMAGES SUFFERED BY THE CLIENT. THE IN COME RELATABLE TO THE CONTRACT HAS BEEN INCLUDED IN THE INCOME FOR THE PREVIOUS YEAR IN MARCH 2008 AND 2009. THE COMPA NY WAS INTIMATED COLLAPSE OF THE BUILDING ROOF FRAME F OR THEIR POWER PLANT WHICH WAS DESIGNED BY THE ASSESSEE COM PANY IN THE MONTH OF AUG '09 BEFORE THE ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH '09 GOT FINALIZED. BIL T POWER LTD. ALSO SUBSTANTIATED THE CLAIM FOR DAMAGES BY A REPORT FRO M INDIAN INSTITUTE OF TECHNOLOGY, DELHI AND ALSO ADJUSTED RS 50 LAKHS TOWARDS NON-PERFORMANCE OF THE CONTRACT AND DAMAGES SUFFERED BY THEM. WHILE THE AMOUNT OF CLAIM WAS INT IMATED TO THE ASSESSEE COMPANY DURING ALL THE MEETINGS, THE S AME WAS ADJUSTED BY THEM IN THEIR ACCOUNTS AND FOLLOWED UP BY LETTER DATED 24TH AUG.2009. UNDER SECTION 36(2) OF THE I.T ACT, CLAIM FOR DEDUC TION OF BAD DEBT IS ALLOWABLE PROVIDED THE DEBT HAS BEEN IN CLUDED AS INCOME OF THE ASSESSEE IN ANY PREVIOUS YEAR AND IS ACTUALLY WRITTEN OFF IN THE BOOKS. IN ALL THE CASES OF CLAIMS MADE BY THE ASSESSEE, TH E INCOME HAS BEEN ACCOUNTED IN THE YEAR ENDED MARCH ' 09 OR 14 ITA NO.508/MDS/2014 IN EARLIER YEARS AND THE AMOUNT HAVING BEEN WRITTEN OFF IN THE BOOKS OF THE ASSESSEE BY DEBITING TO PROFIT AND LOS S AND CREDITING TO PARTY'S ACCOUNT SHALL BE ALLOWABLE AS BAD DEBT U/S 36(2) OF THE I.T ACT. ACCORDINGLY, STANDARD AS.9 - REVENUE RECOGNITION AL SO MANDATES AN ENTERPRISE TO RECOGNIZE THE INCOME AND PROVIDE FOR THE SAME IF THE ULTIMATE REALISABILITY OF THE I NCOME IS DOUBTFUL. APPLYING THE PRINCIPLES, THE ASSESSEE RECOGNIZED TH E COMPANY RELATING TO BIL T POWER IN FULL AND THEN WR ITTEN OFF TO PROFIT & LOSS ACCOUNT THE CLAIM OF RS 50 LAKHS. THUS, IT MAY BE SEEN THE AMOUNT CLAIMED AS IRRECOVERABLE ARE ALLOWABLE IN ACCORDANCE WITH THE PROVISIONS OF THE I.T. ACT. WE ALSO INVITE YOUR ATTENTION TO THE FOLLOWING DECI SIONS OF THE HIGH COURT AND SUPREME COURT. 1) CIT VS MODI TELECOMMUNICATIONS LTD 325 ITR 291 2) TR.F. LTD. VS. C.I.T 323 ITR 397 (SC) 3) LAWLYS ENTERPRISES P LTD. VS CIT 314 ITR 297 4) CIT VS STAR CHEMICAL (BOMBAY) 292 ITR 339 6) CIT VS GIRISH BHAGWAT PRASAD 256 ITR 772 THE CASE IS SQUARELY COVERED BY THE SUPREME COURT D ECISION IN T.R.F. LTD V. COMMISSIONER OF LNCOME TAX (2010) 32 3 ITR 397 [SC]. CONSIDERING ALL THESE CLAIMS, SUBMISSIONS, AND EV IDENCES PRODUCED BY THE ASSESSEE IN THE COURSE OF ASSESSMEN T PROCEEDINGS, ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 26.12.2011 BY THE ASSESSING OFFICER A CCEPTING THE CLAIM FOR BAD DEBTS / IRRECOVERABLE CLAIMS. 13. THE COMMISSIONER OF INCOME TAX ISSUED NOTICE U NDER SECTION 263 OF THE ACT PROPOSING TO REVISE THE ASSE SSMENT 15 ITA NO.508/MDS/2014 STATING THAT ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT ON 26.12.2011 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ALSO THE ASSESSING OFFI CER HAS NOT LOOKED INTO THE FACTS THAT ASSESSEE HAS RECEIVED CLAIM LETTER FROM M/S. BILT POWER LTD. ONLY DURING AUGUST, 2009 AND THE ASSESSEE COMPANYS ACCOUNTS WERE CLOSED BY 31.03.20 09. SECTION 263 WAS INVOKED FOR ONE MORE REASON THAT TH E ASSESSEE HAS NOT ACTUALLY WRITTEN OFF THE AMOUNT IN STEAD HAS MADE ONLY A PROVISION FOR WRITING OFF THE AMOUNT. T HE ASSESSEE HAS FILED DETAILED REPLY BEFORE THE COMMIS SIONER STATING THAT BAD DEBTS WERE ACTUALLY WRITTEN OFF I N THE BOOKS OF ACCOUNTS BY DEBITING THE PROFIT AND LOSS ACCOUNT A ND ALSO BY CREDITING THE PARTYS ACCOUNT AND IT IS NOT MERE P ROVISION. THE ASSESSEE ALSO SUBMITTED THAT PASSING ENTRIES AFTER 31 ST MARCH BUT BEFORE FINALIZING THE ACCOUNTS BY THE BOARD IS ACTUAL WRITE OFF AND IS NOT PROHIBITED BY LAW. THE ASSESSEE ALS O PLACES RELIANCE ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. U.P. RAJKIYA NIRMAN NIGAM LTD. (SUPRA) AND SUBMITTED THAT WHERE BOOKS OF ACCOUNTS ARE NOT CLOSED AND NOT SIGNED BY BOARD OF DIRECTORS AND NOT ADOP TED BY SHAREHOLDERS AS PER COMPANIES ACT, IT IS LEGALLY P ERMISSIBLE TO MAKE ADJUSTMENTS BEFORE THEY ARE FINALLY ADOPTED . 16 ITA NO.508/MDS/2014 THEREFORE BAD DEBTS COULD BE WRITTEN OFF EVEN AFTER CLOSURE OF ACCOUNTING YEAR. HOWEVER, THE COMMISSIONER OF INCO ME TAX PASSED ORDER UNDER SECTION 263 OF THE ACT HOLDING T HAT BAD DEBTS IN RESPECT OF BILT POWER LTD. IS NOT ALLOWAB LE DURING THE ASSESSMENT YEAR 2009-10 AND DIRECTED TO CONSID ER THE SAME IN THE SUBSEQUENT ASSESSMENT YEAR, SUBJECT TO FULFILLMENT OF CONDITIONS LAID DOWN IN THE PROVISIO NS OF THE ACT. THE COMMISSIONER OF INCOME TAX WAS OF THE OPINION THAT IN THIS CASE ASSESSING OFFICER HAS NOT LOOKED INTO FAC TS AND IT IS LACK OF ENQUIRY. 14. IN THE CASE OF CIT VS. AMIT CORPORATION (SUPRA) THE HONBLE GUJARAT HIGH COURT HELD AS UNDER:- 5. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTED NO ERROR. WHEN DURING THE COURSE OF FRAMING OF THE ASSESSMENT, THE ASSESSING OFFICER HAD ACCESS TO ALL THE RECORDS OF THE ASSESSEE, AFTER PURSUING SUCH RECORD THE ASSESSING OFFICER FRAMED THE ASSESSMENT, SUCH ASSESSMENT COULD NOT HAVE BEEN REOPENED IN EXERCISE OF REVISION POWER UNDER SECTION 263 OF THE ACT FOR MAKING FURTHER INQUIRIES. IN THE FACTS OF THE CASE, IN OU R OPINION, TRIBUNAL RIGHTLY INTERFERED WITH SUCH ORDER. NO QUESTION OF LAW ARISES. TAX APPEAL IS THEREFORE DISMISSED. 15. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. (332 ITR 167) HELD AS UNDER:- 17 ITA NO.508/MDS/2014 THE SUBMISSION OF THE COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER THE ASSESSING OFFICER DID NOT CONSIDER THE ASPECT SPECIFICALLY WH ETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESSMENT ORDER, WHICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE AO HAD NOT APPLIED HIS MIND ON THE ISSUE. THE AO IN THE ASSESSING ORDER IS NOT REQUIRED TO GIVE DETA ILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. THE COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE. DISTINCTION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDERS UNDER S. 263, MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF 'LACK OF INQU IRY' THAT SUCH A COURSE OF ACTION WOULD BE OPEN. THE AO HAD CALLED FOR EXPLANATION ON THIS VERY ITEM FRO M THE ASSESSEE AND THE ASSESSEE HAD FURNISHED HIS EXPLANATION VIDE LETTER DT. 26TH SEPT., 2002. THIS FACT IS EVEN TAKEN NOTE OF BY THE CIT HIMSELF IN PARA 3 OF HIS ORDER. THIS CLEARLY SHOWS THAT THE AO HAD UNDERTAKEN THE EXERCISE OF EXAMINING AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REPLACEMENT OF DYES ARID TOOLS IS TO BE . TR EATED AS REVENUE EXPENDITURE OR NOT. IT APPEARS THAT SINC E THE AO WAS SATISFIED-WITH THE AFORESAID EXPLANATION, HE ACCEPTED THE SAME. THE CIT IN HIS IMPUGNED ORDER EVEN ACCEPTS THIS. THUS, EVEN THE CIT CONCEDED THE. POSITION THAT THE AO MADE THE INQUIRIES, ELICITED REPLIES AND THEREAFTER- PASSED THE ASSESSMENT ORDER. THE GRIEVANCE OF THE CIT WAS THAT THE AO SHOULD HAVE MADE FURTHER INQUIRIES RATHER THAN ACCEPTING THE EXPLANATION. THEREFORE, IT CANNOT BE SAID THAT IT IS A CASE OF ' LACK OF INQUIRY'.-CIT VS. GABRIAL INDIA LTD. (1993) 114 CTR (BOM) 81 (1993) 203 ITR 108 (BOM) RELIED ON. 16. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CI T VS. DEVELOPMENT BANK LTD. (323 ITR 206) HELD AS UNDER: - 18 ITA NO.508/MDS/2014 A READING ,OF THE ORDER PASSED BY THE CIT WOULD SHOW THAT THE PRINCIPAL OBJECTION WHICH THE REVISIO NAL AUTHORITY EXPRESSED AGAINST THE ORDER OF THE AO WAS AN ALLEGED FAILURE OF THE AO TO EXAMINE; FIRSTLY WH ETHER THE CAPITAL GAIN OF RS. 1.26 CRORES HAS BEEN EARNED BY THE ASSESSEE ON TRANSACTIONS RELATING TO INVESTMENT S 'HELD TO MATURITY', AND SECONDLY WHETHER THE DEPRECIATION OF RS. 622.39 LAKHS WAS CLAIMED ON INVESTMENTS WHICH WERE HELD AS STOCK-IN-TRADE. NOW FROM THE , MATERIAL ON RECORD BEFORE THE COURT IT I S EVIDENT THAT THE ASSESSEE, IN RESPONSE TO A SPECIFI C QUERY ' OF THE AO DT. 20TH SEPT., 2004 SUPPLIED DE TAILS OF THE LONG-TERM INVESTMENTS HELD FOR A PERIOD IN EXCESS OF ONE YEAR WHICH THE ASSESSEE TREATED AS INVESTMENTS HELD TO MATURITY. THE PROFIT ON THESE INVESTMENTS WAS COMPUTED AT RS. 1.26 CRORES. IN SO FAR AS THE ASPECT OF DEPRECIATION OF RS. 622.39 LAKHS ON INVESTMENTS HELD AS STOCK-IN-TRADE WAS CONCERNED, THE ASSESSEE HAD SIMILARLY SUPPLIED TO THE A'O DETAILS OF THE CURRENT INVESTMENTS IN RESPO NSE TO THE QUERY OF THE AO. IN ADDITION, IT WOULD ALSO HAVE TO BE NOTED THAT, IN PURSUANCE OF, THE ORDER PASSED BY THE CIT UNDER S. 263, AN ASSESSMENT ORDER CAME TO B E PASSED ON 28TH DEC., 2007. DURING THE COURSE OF THE ASSESSMENT ORDER, THE AO NOTED THAT THE ASSESSEE HAS EXPLAINED DEPRECIATION CLAIMED AGAINST THE INVESTMENTS HELD AND CLASSIFIED AS STOCK-IN-TRADE. THE EXPLANATION OF THE ASSESSEE IN THIS CONNECTION WAS ACCEPTED AND THE AO CAME TO THE CONCLUSION THAT DEPRECIATION OF RS. 622.39 LAKHS HAS BEEN. CLAIMED TOWARDS INVESTMENTS HELD AND CLASSIFIED AS STOCK-IN - TRADE. IN THE ABSENCE OF ANY TANGIBLE MATERIAL TO T HE CONTRARY, THE CIT COULD NOT HAVE TREATED THIS FINDI NG TO BE ERRONEOUS-OR 'TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE OBSERVATION OF THE CIT THAT THE AO HAD ARRIVED AT HIS. FINDING WITHOUT CONDUCTING AN ENQUI RY WAS ERRONEOUS, SINCE AN ENQUIRY WAS SPECIFICALLY HE LD WITH REFERENCE TO WHICH A DISCLOSURE OF DETAILS WAS CALLED FOR BY THE AO AND MADE BY THE ASSESSEE. IN THESE CIRCUMSTANCES, THE TRIBUNAL WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT RECOURSE TO THE POWERS UNDER S. 263 WAS NOT WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. .: IN CONCLUSION, THE HONBLE HIGH COURT HELD THAT SIN CE AN ENQUIRY WAS SPECIFICALLY HELD WITH REFERENCE TO WHI CH A DISCLOSURE OF DETAILS WAS CALLED FOR BY THE ASSESSI NG OFFICER 19 ITA NO.508/MDS/2014 AND MADE BY THE ASSESSEE, THE OBSERVATION OF THE COMMISSIONER OF INCOME TAX THAT ASSESSING OFFICER HAD ARRIVED AT HIS FINDING WITHOUT CONDUCTING ENQUIRY W AS ERRONEOUS AND THEREFORE COMMISSIONER OF INCOME TAX WRONGLY EXERCISED POWERS UNDER SECTION 263 OF THE A CT. 17. IN THIS CASE ALSO, THE DETAILS CALLED FOR BY TH E ASSESSING OFFICER WERE FURNISHED BY THE ASSESSEE AND SUCH DET AILS WERE ACCEPTED BY THE ASSESSING OFFICER AND IN SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT THERE IS A LA CK OF ENQUIRY. THERE WAS AN ENQUIRY, THOUGH IT IS INADEQU ATE AND IN SUCH CIRCUMSTANCES, IN VIEW OF THE ABOVE DECISIONS, THE COMMISSIONER OF INCOME TAX LACKS JURISDICTION UNDER SECTION 263 OF THE ACT TO REVISE THE ASSESSMENT ORDER. 18. IN THE CASE OF CIT VS. U.P.RAJKIYA NIRMAN NIGAM LTD. (SUPRA), THE HONBLE ALLAHABAD HIGH COURT HELD AS U NDER:- 6. ON PERUSAL OF THE PROVISIONS HERE-IN-ABOVE, IT REVEALS THAT THE ONLY REQUIREMENT FOR ALLOWING THE BAD DEBT UNDER SECTION 36 (1 ) (VII) OFTHE INCOME-TAX ACT, IS THAT ANY BAD DEBT OR PART THEREOF IS WRITTEN OFF AS IRRECOVERABLE AND SECOND L Y, THEY SHOULD BE WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR . IN THE INSTANT APPEAL, NEITHER THE DEPARTMENT NOR T HE ASSESSEE DISPUTES THAT THE DEBT HAD BECOME BAD AND IT WAS WRITTEN OFF. 7. THE PRESCRIPTION AS PROVIDED IS TO WRITE OFF BA D DEBT BY THE ASSESSEE IN THE ACCOUNTS 'FOR THE PREVI OUS 20 ITA NO.508/MDS/2014 YEAR', BUT IT DOES NOT SAY TO WRITE OFF BAD DEBT 'I N THE PREVIOUS YEAR'. THUS, THERE IS A VAST DIFFERENCE IF THE WORD 'IN' WOULD HAVE BEEN THERE IN PLACE OF 'FOR' . FURTHER, THE WORDS 'ACCOUNTS OF THE ASSESSEE' ARE QUALIFIED WITH FURTHER WORDS 'FOR THE PREVIOUS YEAR'. THUS, I T ONLY MEANS THAT THE ACCOUNTS IN WHICH THE ACT OF WRITING OFF IS TO BE DONE BY THE ASSESSEE SHOULD BE FOR THE PREVIOUS YEAR . THEREFORE, THE LAW REQUIRES TO WRITE OFF THE BAD DEBT IN THE ACCOUNTS OFTHE ASSESSEE IN THE RELE VANT ACCOUNTING YEAR. THERE IS NEITHER ANY CONDITION NOR ANY PROVISION THAT THE WRITING OFF SHOULD BE DONE I N THE PREVIOUS YEAR, I.E. BEFORE END OF THE FINANCIAL YEA R . 8. IN THE PRESENT CASE, DEBTS RELATING TO THE PERIO D 1987-88 AND 1998-99 CLAIMED IN THE ACCOUNTS WHICH WERE PREPARED UPTO 31-3-2004 AND AS THE ACCOUNTS OF THE ASSESSEE ARE OPEN AND SUBJECT TO CORRECTIONS BY THE AUDITORS, AS PER THE COMPANIES ACT, THEN SUCH W RITING OFF CAN BE DONE IN THOSE ACCOUNT BOOKS. NO NEW LEGAL PROPOSITION HAS BEEN BROUGHT TO OUR NOTICE FO R TREATING THE DEBT AS BAD OR IRRECOVERABLE SHOULD BE TAKEN IN THE PREVIOUS YEAR ITSELF. IN OTHER WORDS, WHERE ACCOUNT BOOKS ARE NOT CLOSED AND NOT SIGNED BY THE BOARD OF DIRECTORS AND NOT ADOPTED BY THE SHAREHOLD ERS AS PER THE COMPANIES ACT, IT IS LEGALLY PERMISSIBLE TO MAKE ADJUSTMENTS BE F ORE THEY ARE FINALLY ADOPTED. 9. FURTHER, IT IS ADMITTED THAT THE ORIGINAL RETURN , ON THE BASIS OF UNAUDITED ACCOUNTS, WAS FILED ON 1-11-2004. AFTER AUDIT HAD TAKEN PLACE AND REPORT O F THE AUDITORS WAS ACCEPTED, REVISED RETURN WAS FILED ON 18-8-2005 AND IT IS ONLY IN THE REVISED RETURN, THE DEBTS TO THE TUNE OF RS.2 CRORES AND ODD HAD BEEN DECLARED AS BAD . THE GROUND TAKEN BY THE ASSESSING AUTHORITY AND APPELLATE AUTHORITY FOR NOT ACCEPTING THE SAID BAD DEBTS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, I.E . 2004-05 IS CONTRARY TO THE PROVISIONS OF SECTION 36 (1) (VII) OFTHE INCOME-TAX ACT, AND FURTHER IN VIEW OF THE INTERPRETATION AS STATED HERE-IN-ABOVE. THEREFORE, THE TRIBUNAL HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE HONBLE HIGH COURT HELD THAT WHERE BOOKS ARE NO T CLOSED AND NOT SIGNED BY THE BOARD OF DIRECTORS AND NOT A DOPTED BY THE SHAREHOLDERS AS PER THE COMPANIES ACT, IT IS L EGALLY PERMISSIBLE TO MAKE ADJUSTMENTS BEFORE THEY ARE FIN ALLY 21 ITA NO.508/MDS/2014 ADOPTED. HENCE, IN THE CASE OF THE ASSESSEE WHEN T HE BOOKS ARE CLOSED AND ADOPTED BY THE BOARD OF DIRECTORS AN D SHAREHOLDERS ON 18.08.2009 BY WHICH TIME THE ENTRIE S WERE PASSED WRITING OFF THE IRRECOVERABLE CLAIMS TO THE PROFIT AND LOSS ACCOUNT AND PARTY ACCOUNTS. THUS, EVEN ON MERI TS, THE CLAIMS HAVE TO BE ALLOWED IN VIEW OF THE ABOVE HON BLE ALLAHABAD HIGH COURT DECISION. 19. THUS, RESPECTFULLY FOLLOWING THE SAID DECISIONS , WE SET ASIDE THE IMPUGNED ORDER OF THE COMMISSIONER OF INC OME TAX AND ALLOW THE APPEAL OF THE ASSESSEE. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF APRIL, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 15 TH APRIL, 2015 SOMU 12 32 / COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .