M/s. Bahubali Print Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 565/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6914 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 19-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSI
• Keywords: Principle of natural justice; Bad and doubtful debts; Difference of opinion; Change of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 04/04/2011 DRAFTED ON: 04/ 04/2011 ITA NO.565/AHD/2010 ASSESSMENT YEAR : 2004-05 M/S.BABUBALI PRINTS (P) LTD. A/3001-02, KOHINOOR TEXTILE MARKET RING ROAD, SURAT VS. THE DCIT CIRCLE-1 SURAT PAN/GIR NO. : AABCB6232 H ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : MS.URVASHI SHODHAN, A.R. RESPONDENT BY: SHRI G.S. SOURYAWANSI, D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-I SURAT DATED 28/01/2010 PASSED FOR ASSESSMENT YEAR 2004-05. 2. GROUND NO.1 READS AS UNDER:- 1. THE LEARNED CIT (A) HAS GROSSLY ERRED IN LAW AN D ON THE FACTS IN CONFIRMING THE ACTIONS OF AO IN FRAMING ASSESSMENT U/S.143(3) R.W.S. 147 OF THE ACT, WITHOUT APPRECIATING THE FACT THAT ALL THE RELEVANT MATERIAL WAS DISCLOSED IN THE ORIGINAL RETURN OF IN COME AND MERE CHANGE OF OPINION DOES NOT EMPOWER THE ASSESSING OF FICER TO REOPEN CONCLUDED ASSESSMENT SIMPLY ON THE BASIS OF SUBSEQU ENT JUDGEMENT OF THE HON'BLE HIGH COURT. THE ORDER OF LD. CIT(A) BE ING UNJUST, UNFAIR AND AGAINST PRINCIPLES OF NATURAL JUSTICE DESERVES TO BE QUASHED. ITA NO .565/AHD/2010 M/S.BABUBALI PRINTS (P) LTD. VS. DCIT ASST.YEAR - 2004-05 - 2 - 2.1. AN ASSESSMENT WAS MADE U/S.143(3) OF THE I.T.A CT DATED 16/10/2006 ACCORDING TO WHICH THE RETURN OF INCOME WHICH WAS FILED ON 26/10/2004 DISCLOSING AN INCOME OF RS.21,57,260/- W AS ASSESSED AS SUCH. THE ASSESSING OFFICER HAS MENTIONED THAT THE ASSESS EE-COMPANY IS ENGAGED IN THE BUSINESS OF TRADING OF TEXTILE AND D ISCLOSED THE PROFIT AT THE RATE OF 12.01%. LATER ON, THE SAID ASSESSMENT WA S RE-OPENED U/S.147 OF THE I.T.ACT BY ISSUING NOTICE U/S.148 DATED 27/02/2 009. THE IMPUGNED ASSESSMENT ORDER WAS PASSED U/S.143(3) R.W.S.147 OF THE I.T.ACT DATED 29/10/2009. THE REASON FOR REOPENING AS EMERGED FR OM THE SAID ASSESSMENT ORDER WAS THAT THE ASSESSEE HAD CLAIMED BAD DEBTS. IT WAS NOTED BY THE ASSESSING OFFICER THAT THE WRITE OFF OF BAD DEBT WAS NOT SUPPORTED BY ANY PROOF OR EVIDENCE TO DEMONSTRATE T HAT THE POSSIBLE EFFORTS WERE TAKEN BY THE ASSESSEE TO RECOVER THE O UTSTANDING DEBT. THE ASSESSING OFFICER HAS ALSO COMMENTED THAT SIMPLY W RITING OFF OF THE DEBT IN THE BOOKS OF ACCOUNT DOES NOT MAKE THE DEB T IRRECOVERABLE. HE HAS TAKEN THE SAID ACTION BY FOLLOWING A DECISION O F HON'BLE GUJARAT HIGH COURT PRONOUNCED IN THE CASE OF DHALL ENTERPRISES & ENGINEERS PVT.LTD. VS. CIT REPORTED AT [2007] 162 TAXMAN 114 (GUJ.). FOLLOWING THE SAID DECISION, BAD DEBT OF RS.3,47,885/- WAS DISALLOWED. 3. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS CON TESTED THAT THE REOPENING WAS BAD IN LAW BECAUSE THE MATERIAL FACTS WERE ALREADY ON RECORD AND THE ASSESSEE HAS CLAIMED THE BAD DEBT BY PROPERLY WRITING OFF IN THE BOOKS OF ACCOUNT. HOWEVER, THE LEARNED CIT(APPEALS) WAS NOT CONVINCED AND HELD THAT THE REOPENING WAS CORRE CT BECAUSE THE ASSESSING OFFICER HAD TO FOLLOW THE DECISION OF THE JURISDICTIONAL HIGH COURT. THE SAID FINDING IS NOW FURTHER CHALLENGED. ITA NO .565/AHD/2010 M/S.BABUBALI PRINTS (P) LTD. VS. DCIT ASST.YEAR - 2004-05 - 3 - 4. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES AS WELL AS ON CAREFUL PERUSAL OF ALL THE RELEVANT ORDERS PASSED BY THE RE VENUE DEPARTMENT, WE ARE NOT INCLINED TO INTERFERE WITH THE DECISION OF RE-OPENING OF THE ASSESSMENT. AS IS EVIDENT FROM THE ASSESSMENT ORDE R EARLIER PASSED, STATED TO BE ASSESSMENT ORDER IN FIRST ROUND, EVIDE NTLY THERE WAS NO ENQUIRY OR APPLICATION OF MIND ON THE ISSUE OF CLAI M OF BAD DEBT. LATER ON, DUE TO THE PRONOUNCEMENT OF A DECISION OF JURIS DICTIONAL HIGH COURT, IT WAS THOUGHT PROPER TO RE-OPEN THE ASSESSMENT TO ENQUIRE ABOUT THE CLAIM OF BAD DEBT IN THE LIGHT OF THE SAID PRECEDEN T. SINCE THE ASSESSING OFFICER HAD RE-OPENED THE ASSESSMENT SIMPLY TO FOLL OW A DECISION OF THE HON'BLE HIGH COURT AND THAT WAS THE ORDER WHICH WA S AVAILABLE AT THAT POINT OF TIME, THEREFORE, WE FIND NO FALLACY IN THE SAID ACTION OF THE ASSESSING OFFICER. WITH THESE REASONS, WE HEREBY D ISMISS THIS GROUND OF APPEAL. 5. GROUND NO.2 READS AS UNDER: 2. THE LEARNED CIT (A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF THE AO IN DISALLOWING CLAIM O F BAD DEBTS OF RS.3,47,885/- THAT HAS BEEN WRITTEN OF IN THE BOOKS OF ACCOUNTS AS PER THE PROVISIONS OF LAW. BOTH THE LOWER AUTHORITIES HAVE ERRED IN NOT CORRECTLY INTERPRETING THE PROVISIONS OF SECTION 36 (1)(VII) OF THE ACT AND ERRONEOUSLY APPLIED THE RATIO OF THE JUDGMENT OF TH E HON'BLE HIGH COURT WITHOUT FULLY APPRECIATING THE FACTS OF THE CASE. 6. AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES, ONCE IT WAS AN ADMITTED FACTUAL POSITION THAT THE ASSESSEE HAS WR ITTEN OFF THE BAD DEBT IN THE BOOKS OF ACCOUNT, THEREFORE, THE ISSUE NOW S TOOD COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F TRF LTD. VS. CIT REPORTED AT [2010] 323 ITR 397 (SC), WHEREIN IT WA S HELD AS UNDER:- ITA NO .565/AHD/2010 M/S.BABUBALI PRINTS (P) LTD. VS. DCIT ASST.YEAR - 2004-05 - 4 - THIS POSITION IN LAW IS WELL-SETTLED. AFTER APRI L 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 ASSESSING OFFICER HAS NOT EXAMINE D WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEB ITED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE A CCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSI NG OFFICER HAS NOT EXAMINED WHETHER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, T HE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSI DERATION OF THE ABOVEMENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. 7. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON'BLE APEX COURT, WHEREIN THE SAID DECISION OF THE HON'BLE GUJ ARAT HIGH COURT HAS ALSO BEEN CONSIDERED, WE HEREBY REVERSE THE FINDING S OF THE AUTHORITIES BELOW AND DIRECT TO ALLOW THE CLAIM AS DECIDED BY T HE HON'BLE SUPREME COURT. THIS GROUND IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 8 TH APRIL, 2011. SD/- SD/- ( D.C. AGRAWAL ) ( MUKUL K R. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 08/ 04 /2011 T.C. NAIR, SR. PS ITA NO .565/AHD/2010 M/S.BABUBALI PRINTS (P) LTD. VS. DCIT ASST.YEAR - 2004-05 - 5 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..04/04/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 04/04/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 8.4.2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8.4.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER