Sundeep Haridas, Cuttack V. ACIT,Circle-1(1), Cuttack, Cuttack

ITA 552/CTK/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6333 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D K SHETH M SHETH
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

1 I.T.A.NO. 552 /CTC/ /2013 ASSESSMENT YEAR: 2008 - 09 , CUTTACK IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK ( )BEFORE . . , , HONBLE SHRI P.K.BANSAL, ACCOUNTANT MEMBER. /AND . . , HONBLE SHRI D.T.GARASIA, JUDICIAL MEMBER ! ! ! ! / I.T.A.NO.552 /CTK/ /2013 ' # / ASSESSMENT YEAR: 2008-09 SUNDEEP HARIDAS, CUTTACK PA NO.AADPH 5404 N - - - VERSUS- ACIT, CIRCLE - 1(1), CUTTACK ( %& /APPELLANT ) ( '(%& /RESPONDENT) %& * / FOR THE APPELLANT: /SHRI D.K.SHETH/M.SHETH '(%& * /FOR THE RESPONDENT: /SHRI S.C.MOHANTY +, - / DATE OF HEARING: 29. 4.2014 ./# - / DATE OF PRONOUNCEMENT: 1 . 5 .2014 0 / ORDER PER BENCH THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 10.9.2013 OF LD CIT(A)-CUTTACK FOR THE ASSESSMENT YEAR 2008-09, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE I.T.ACT, 1961. 2. FIRST GROUND RELATES TO DISALLOWANCE OF EMPLOYEE S CONTRIBUTION TOWARDS ESI WAS NOT PRESSED, HENCE DISMISSED AS NOT PRESSED. 2 I.T.A.NO. 552 /CTC/ /2013 ASSESSMENT YEAR: 2008 - 09 3. THE ONLY OTHER GROUND WHICH REQUIRES OUR ADJUDIC ATION RELATES TO DISALLOWANCE OF BAD DEBTS OF RS.1,98,525/-. 4. FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESS EE IS A DEALER IN AGRO-MACHINERY, AGRO- SPARES & AGRO-CHEMICALS UNDER THE NAME AND STYLE OF M/S. SUNDERDAS D HANSRAJ. DURING SCRUTINY ASSESSMENT THE ASSESSING OFFICER NOTICED T HAT AS AGAINST AN AMOUNT OF RS.6,67,787/-UNDER THE HEAD OF BAD DEBTS WRITTEN OF F SHOWN IN THE P & L A/C, AN AMOUNT OF RS.1,98,525/-WAS IN RESPECT OF LARSEN & TOUBRO LTD. , BHUBANESWAR WHICH IS A REGULAR TRADE CREDITOR OF THE ASSESSEE. ON VERIFICATION OF THE LE DGER COPY OF THE SAID PARTY THE AO FOUND THAT THE ASSESSEE HAS RUNNING BUSINESS TRANSACTIONS WITH THE SAID PARTY DURING THE FINANCIAL YEAR 2007-08. THE ASSESSEE COULD NOT FURNISH ANY RE ASON AS TO WHY RECEIVABLE AMOUNTING RS.1,98,525/- FROM M/S.LARSEN & TOUBRO LTD. SHOULD BE CONSIDERED AS BAD DEBTS AND SHOULD BE WRITTEN OFF WHILE THE ASSESSEE IS HAVING TRANSAC TIONS WITH THE PARTY IN THE SAME YEAR. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER OBS ERVED THAT THE SAID AMOUNT WHICH IS OUTSTANDING SINCE 2-3 YEARS DOES NOT EXPLAIN THE FA CT THAT THE SAME SHOULD BE TREATED AS BAD DEBT. THE AO THEREFORE DISALLOWED THE AMOUNT OF BAD DEBT CLAIMED AMOUNTING TO RS.1,98,525/-. IN THE FIRST APPEAL, LD CIT(A) AGRE ED WITH THE DECISION OF THE AO REJECTING THE CLAIM OF BAD DEBTS ON THE GROUND THAT ASSESSEE DID NOT SUBMIT ANY REASON WHY THE SAME IS NOT RECOVERABLE AND ALSO DID NOT PRODUCE ANY DECISI ON OF THE PARTY TO THIS EFFECT. HENCE, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE CONTENTION OF THE ASSESSEE IS THAT THE AMOUNT HAS BEEN OUTSTANDING SINCE 2 TO 3 YEARS AND WAS CARRIED FORWARD AND TAKEN AS OPENING BALANCE IN THE BOOKS OF ACCOUNT EVERY YEAR. SINCE THE PARTY DID NOT PAY THE AMOUNT TO THE ASSESSEE, THE AMOUNT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT AS BAD DEBTS. 3 I.T.A.NO. 552 /CTC/ /2013 ASSESSMENT YEAR: 2008 - 09 WE FIND THAT THE ISSUE AS TO WHETHER IT IS NECESSAR Y FOR THE ASSESSEE TO DEMONSTRATE THAT THE DEBTS HAVE ACTUALLY BECOME BAD OR ORDER TO MAKE A VALID CLAIM UNDER SECTION 36(1)(VII) IS NO LONGER RES INT EGRA. THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD VS CIT (323 ITR 397), HAS NOW SETTLED THE ISSUE IN FAVOUR OF THE ASSESSEE, INTER ALIA, OBSERVING AS FO LLOWS: THIS POSITION IN LAW IS WELL SETTLED. AFTER APRIL 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOW EVER, IN THE PRESENT CASE, THE AO HAS NOT EXAMINED WHETHER THE D EBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CU STOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER S. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DE BTORS. AS STATED ABOVE, THE AO HAS NOT EXAMINED WHETHER, IN FACT, TH E BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSES SEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE AO. HENCE, THE MATT ER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVEMENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. 6. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF TRF LTD (SUPRA), WE DIRECT THE AO TO DELETE THE AMOUNT OF R S.1,98,525/- CLAIMED BY THE ASSESSEE AS BAD DEBT. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 1 .5. 2014 ) S D / - S D / - ( . . ) , (P.K.BANSAL), ACCOUNTANT MEMBER ( . . ), (D.T.GARASIA(JUDICIAL MEMBER ( - )DATE. 1. 5 .2014 4 I.T.A.NO. 552 /CTC/ /2013 ASSESSMENT YEAR: 2008 - 09 0 '- 2#-3 - COPY OF THE ORDER FORWARDED TO: 1 . %& / THE APPELLANT : SUNDEEP HARIDAS, PROP. SUNDARDAS D HUNSRAJ, COLLEGE SQUARE, CUTTACK 2 '(%& / THE RESPONDENT: ACIT, CIRCLE-1(1), CUTTACK 3 . 0 /THE CIT, CUTTACK 4 . 0 ( )/THE CIT(A),CUTTACK 5 . 4 '- /DR, CUTTACK BENCH 6 . GUARD FILE . (- '- /TRUE COPY, 0+ / BY ORDER, ASST.REGISTRAR, ITAT, CUTTA CK (B.K.PARIDA) SENIOR.PRIVATE SECRETARY.