ACIT 2(1), MUMBAI V. FANCY CORPORATION LTD, MUMBAI

ITA 5798/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1375 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 30-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABANI KANTA NAYAR
• Assessee Lawyers: H N MOTIWALA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESDIENT AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 5798/M/2009 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX, APPELLANT (OSD) 2(1), ROOM NO. 543, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 012 VS. M/S FANCY CORPORATION LTD., RESPONDENT 16, MUMBAI SAMACHAR MARG, FORT, MUMBAI 400 001. (PAN AAACF0866C) APPELLANT BY : SHRI ABANI KANTA NAYAR RESPONDENT BY : MR. H.N. MOTIWALA ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- II, MUMBAI, PASSED ON 27.08. 2009 FO R THE ASSESSMENT YEAR 2006-07 WHEREIN THE REVENUE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F UNCONFIRMED SUNDRY CREDITORS OF RS. 36,77,782/- WIT HOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT PRO DUCED ANY EVIDENCE BEFORE THE AO, THAT THE SAID LIABILITIES W ERE STILL SUBSISTING TO THE CONCERNED PARTIES IN THE RELEVANT PREVIOUS YEAR. 2. THE LEARNED CIT(A) ERRED IN DELETING THE DISALLO WANCE OF BAD DEBTS OF RS. 28,33,041/- WITHOUT APPRECIATING THE F ACT THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE BEFORE THE A O TO SHOW THAT THE ALLEGED DEBTS HAD BEEN TAKEN INTO ACC OUNT IN COMPUTING THE INCOME OF THE ASSESSEE IN ANY ASSESSM ENT YEAR AS PER SECTION 36(2)(I) AND THAT THE SAME HAD BECOM E BAD AND IRRECOVERABLE DURING THE RELEVANT PREVIOUS YEAR. ITA NO. 5798/M/09 M/S FANCY CORPORATION LTD. 2 2. AS REGARDS GROUND NO.1, THE AO TREATED SUNDRY CR EDITORS OUTSTANDING FOR MORE THAN 3 YEARS AS INCOME OF THE ASSESSEE U/S 41(1) OF THE ACT. THE CIT(A) FOLLOWED THE ORDER OF ITAT IN THE CASE OF DSA ENGINEERS VS. ITO, [2009] 30 SOT 31(MUM.) AND H ELD THAT THE ASSESSEE HAS NOT WRITTEN OFF THE BALANCES IN THE BO OKS OF ACCOUNT. MERELY BECAUSE THE SUNDRY CREDITORS HAVE NOT BEEN P AID FOR MORE THAN THREE YEARS, THE LIABILITY IS NOT TAXABLE IN T HE HANDS OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 41(1) OF T HE ACT. THE CIT(A) FURTHER HELD THAT THE ASSESSEE HAS NOT OBTAI NED ANY BENEFIT IN RESPECT OF SUCH LIABILITIES BY WAY OF REMISSION OR CESSATION, THEREFORE, SECTION 41(1) IS NOT APPLICABLE TO THIS CASE. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE CIT(A) HAS FOL LOWED THE ORDER OF ITAT CITED SUPRA AND IN THE LIGHT OF THAT WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). THEREFORE, THE OR DER OF CIT(A) IS HEREBY UPHELD ON THIS ISSUE. 4. AS REGARDS 2 ND GROUND IN RESPECT BAD DEBTS, THE AO DISALLOWED BAD DEBTS CLAIM OF THE ASSESSEE ON THE G ROUND THAT THE ASSESSEE DID NOT GIVEN ANY SATISFACTORY EXPLANATION THAT DEBTS BECAME BAD. FURTHER, THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE THAT THE DEBTS WERE OFFERED FOR TAX IN EAR LIER YEAR. THE CIT(A) DELETED THE SAID ADDITION FOLLOWING THE JUDG MENT OF CIT V. STAR CHEMICALS (BOMBAY P. LT.D, 313 ITR 126 (BOM.). THE CIT(A) FURTHER HELD THAT HE HAS EXAMINED THE COPIES OF THE PARTIES, WHICH SHOW THAT IN EARLIER YEAR THIS TRANSACTION WAS OFFE RED TO TAX. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE ASSESSEE HAS S ATISFIED ALL THE CONDITIONS OF 36(1)(VII) AND 36(2) OF THE ACT AND T HERE IS NO CONTRARY MATERIAL ON RECORD TO ESTABLISH THAT THE CLAIM OF B AD DEBTS IS NOT GENUINE. WE, THEREFORE, UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. ITA NO. 5798/M/09 M/S FANCY CORPORATION LTD. 3 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JUNE, 2010. SD/- SD/- (D. MANMOHAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 30 TH JUNE, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, FBENCH, I.T. A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 23.6.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 24.6.10 SR.P.S/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.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER