ELECTROMECH FIREFIGHTERS P. LTD, MUMBAI V. ITO 9(1)(3), MUMBAI

ITA 5190/MUM/2010

• Counselvise Citation: 519019914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2005-2006
• Appeal Filed On: 24-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: MUKESH MAHESHWARI
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.5190/MUM/2010 (ASSESSMENT YEARS: 2005-06) M/S. ELECTROMECH FIREFIGHTERS PVT. LTD., A-101, SHIVAM PLOT NO.13, LINK ROAD, SHASTRI NAGAR, GOREGAON (W), MUMBAI -400 104 ....... APPELLANT VS INCOME TAX OFFICER 9(1)(3), ROOM NO.224, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ..... RESPONDENT PAN: AAACE 9213 A APPELLANT BY: SHRI MUKESH MAHESHWARI RESPONDENT BY: SHRI V.V. SHASTRI DATE OF HEARING: DATE OF PRONOUNCEMENT: 23.08.2011 30.09.2011 O R D E R PER R.S. PADVEKAR, JM: IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A)-19, MUMBAI DATED 19.3.2010 FOR T HE A.Y. 2005-06. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW CIT (APPEALS) ERRED IN NOT ALLOWING PURC HASE FROM M/S. INTIME COMMERCIAL PVT. LTD. OF ` 72,997/- WHICH WAS WRONGLY CREDITED AS PURCHASES FROM M/S. INTIME FIRE APPLIANCES. THERE IS NO INTENTION OR CONSCIOUS AND DELIBERATE ATTEMPT TO CONCEAL ANY FACT OR INFLATE A NY ITA 5190/MUM/2010 M/S. ELECTROMECH FIREFIGHTERS PVT. LTD. 2 EXPENSE. HENCE OFFICERS CLAIM OF UNEXPLAINED EXPE NDITURE IS INVALID. 2. THE CIT (APPEALS) ERRED IN NOT ALLOWING THE BAD DEBTS WRITTEN OFF AGGREGATING TO ` 19,959/- DURING THE YEAR ON THE GROUNDS THAT THE AMO9UNT HAS NOT BEEN WRITTEN OFF F ROM THE ACCOUNTS AS IRRECOVERABLE. THE ASSESSEE SUBMITS TH AT THE AMOUNTS FROM VARIOUS DEBTORS WERE NOT RECOVERABLE. THESE WERE SMALL AMOUNTS FROM EIGHT PARTIES AND INSPITE O F REPEATED EFFORTS THE AMOUNTS WERE NOT PAID BY THE D EBTORS AND THEREFORE THEY HAVE BEEN WRITTEN FROM THE BOOKS OF ACCOUNTS. 2. BRIEFLY STATED THE FACTS ARE AS UNDER. THE ASSE SSEE-COMPANY IS ENGAGED IN THE BUSINESS OF DESIGNING, SUPPLY AND IN STALLING THE FIRE HYDRANT, SPRINKLER AND FIRE ALARM SYSTEMS AND ALSO ENGAGED AS CONTRACTORS, CONSULTANTS AND ENGINEERS FOR FIRE FIGHTING. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING THE INCOME AT ` 8,40,348/- FOR THE A.Y. 2005-06. THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S.143(3). 3. SO FAR AS GROUND NO.1 IS CONCERNED, THE A.O. ISS UED THE NOTICE U/S.133(6) OF THE ACT TO VERIFY THE DETAILS OF THE PURCHASES GIVEN BY THE ASSESSEE. ONE OF THE PARTY, NAMELY M/S. INTIME FIR E APPLIANCES INFORMED THE A.O. THAT THEY HAVE MADE SALES TO THE EXTENT OF ` 12,91,518/- TO THE ASSESSEE. AS PER THE BOOKS OF A CCOUNTS OF THE ASSESSEE THE PURCHASES FROM THE SAID PARTY WERE SHO WN AT ` 13,64,515/-. IN SUM AND SUBSTANCE, THERE WAS DISCR EPANCY IN RESPECT OF THE PURCHASES MADE FROM M/S. INTIME FIRE APPLIAN CES AS RECORDED IN ASSESSEES BOOKS OF A/CS. THE A.O. MADE THE ADD ITION OF ` 72,997/- U/S.69C. THE ASSESSEE CHALLENGED THE ADDI TION BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. ITA 5190/MUM/2010 M/S. ELECTROMECH FIREFIGHTERS PVT. LTD. 3 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD S. THE LD. COUNSEL SUBMITS THAT THE ASSESSEE WAS ALSO PURCHASI NG THE MATERIAL FROM M/S. INTIME COMMERCIAL PVT. LTD. AND THERE WAS WRONG ENTRY IN THE BOOKS OF ACCOUNT IN RESPECT OF THE TWO PURCHASE S FROM M/S. INTIME FIRE APPLIANCES AND DUE TO WRONG ACCOUNTING ENTRY I N THE BOOKS OF ACCOUNT, THE VARIATION/DIFFERENCE WAS SHOWN IN THE PARTIES ACCOUNT. 5. WE FIND FORCE IN THE ARGUMENTS OF THE LD. COUNSE L. WE FIND THAT THE NAMES OF THE PARTIES WERE IDENTICAL I.E. INTIME FIRE APPLIANCES AND M/S. INTIME COMMERCIAL PVT. LTD. IF THERE IS A MIS TAKE WHILE MAKING THE POSTING/ENTRIES IN THE BOOKS OF ACCOUNT, THEN N O ADDITION IS REQUIRED TO BE MADE. WE, ACCORDINGLY, FOR THE LIMIT ED PURPOSE OF VERIFYING WHETHER THE TWO PURCHASES MADE BY INTIME COMMERCIAL PVT. LTD. ARE INCLUDED IN THE PURCHASE OF M/S. INTIME FI RE APPLIANCES, RESTORE THE ISSUE TO THE FILE OF THE A.O. WITH THE DIRECTION THAT IF DUE TO WRONG ACCOUNTING ENTRY, THE ASSESSEE HAS INCLUDED T HE SAID PURCHASES IN THE ACCOUNT OF M/S. INTIME FIRE APPLIANCES, THEN ADDITION SHOULD BE DELETED. THE A.O. SHOULD DO THIS LIMITED VERIFICATI ON AND ACCORDINGLY DECIDE THE ISSUE. ACCORDINGLY, GROUND NO.1 IS ALLO WED FOR THE STATISTICAL PURPOSES. 6. SO FAR AS GROUND NO.2 IS CONCERNED, IT IS IN RES PECT OF THE BAD DEBTS WRITTEN OFF. 7. AS NOTED BY THE A.O., THE ASSESSEE HAD CLAIMED B AD DEBTS OF ` 6,72,359/- UNDER THE HEAD ADMINISTRATIVE EXPENSES . THE A.O. ASKED THE ASSESSEE TO FILE THE DETAILS. AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE, IT WAS NOTICED BY THE A.O. THAT SOME OF T HE BAD DEBTS ARE PERTAINING TO THE PREVIOUS YEAR RELEVANT TO THE A.Y . 2005-06. THE A.O. HAS GIVEN THE DETAILS OF TRANSACTIONS IN THE ASSESS MENT ORDER. AS PER THE DETAILS GIVEN BY THE A.O,. IT IS SEEN THAT THE TRANSACTIONS ARE ON 31.3.2005 AND SHOWN AS WRITTEN ON THE SAME DATE. T HE A.O. MADE ITA 5190/MUM/2010 M/S. ELECTROMECH FIREFIGHTERS PVT. LTD. 4 THE DISALLOWANCE TO THE EXTENT OF ` 2,02,982/- OUT OF THE TOTAL CLAIM OF ` 6,72,359/-. THE ASSESSEE CHALLENGED THE DISALLOWA NCE BEFORE THE LD. CIT (A) AND THE LD. CIT (A) SUSTAINED THE DISALLOWA NCE TO THE EXTENT OF ` 19,959/- WHICH WAS PERTAINING TO THE CURRENT YEAR. THE LD. CIT (A) HAS OBSERVED THAT TO THE EXTENT OF ` 19,959/-, THE AMOUNTS HAVE NOT BEEN WRITTEN OFF FROM THE ACCOUNT AS IRRECOVERABLE. 8 THE LD. COUNSEL ARGUES THAT IN VIEW OF THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF TRS LTD. -323 ITR 397(S.C.), ONCE THE AMOUNT IS WRITTEN OFF IN BOOKS OF A/C THEN NO FURTHER ENQUIRY CAN BE MADE BY THE A.O./THE LD. CIT (A). WE FIND T HAT THE LD. CIT (A) HAS CATEGORICALLY OBSERVED THAT THE ASSESSE HAS NOT WRITTEN OFF THE SAID AMOUNT IN THE BOOKS OF ACCOUNT AND THE LD. COUNSEL SAYS THE AMOUNTS ARE ACTUALLY WRITTEN OFF IN THE BOOKS OF AC COUNT. WE, THEREFORE, CONSIDERED IT FIT TO RESOLVE THIS CONTRO VERSY BY RESTORING THIS MATTER TO THE FILE OF THE A.O. FOR VERIFICATION WHE THER THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE SAID AMOUNT IN BOOKS OF AC COUNT AND DECIDE ISSUE IN LIGHT OF THE PRINCIPLES LAID DOWN BY THE H ONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA). THE A.O. IS DIRECTED TO VERIFY THE SAME AND DECIDE THE ISSUE ACCORDINGLY IN THE LIGHT OF OUR ABOVE OBSERVATIONS. 09. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR THE STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0TH SEPTEMBER 2011. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATED : 30TH SEPTEMBER 2011 ITA 5190/MUM/2010 M/S. ELECTROMECH FIREFIGHTERS PVT. LTD. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CENTRAL3, MUMBAI. 4) THE CIT- CENTRAL -4, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 5190/MUM/2010 M/S. ELECTROMECH FIREFIGHTERS PVT. LTD. 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 30.08.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 02.09.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER