DCIT, Sangrur V. M/s Guru Nanak Agri. Engg. Works, Barnala

ITA 585/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8538 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: ADITYA KUMAR; SSH ASHWANI KUMAR
• Keywords: Source of fund; Bad and doubtful debts
• Section: 194C; 69

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 585/CHD/2014 ASSESSMENT YEAR : 2010-11 THE DCIT, VS. M/S GURU NANAK AGRI ENGG. WORKS, CIRCLE, SANGRUR HANDIAYA DISTT. BARNALA PAN NO. AAEFG2921Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH RESPONDENT BY : S/SH. ASHWANI KUMAR & ADITYA KUMAR DATE OF HEARING : 14.01.2016 DATE OF PRONOUNCEMENT : 28.01.2016 . ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A) PATIALA DATED 28.03.2014 RELATING TO ASSESSMENT YEA R 2010-11. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE. LD. CIT(A) HAS ERRED IN DELEING THE ADDITION OF RS.45,84,880/- MADE BY THE AO ON ACCOUNT OF BAD DEBTS DEBITED IN THE PROFI T & LOSS ACCOUNT, IGNORING THE FACT THAT THE DEBTOR IS ALIVE , TRACEABLE AND THE MATTER REGARDING INSOLVENCY OF THE DEBTOR I S STILL PENDING WITH THE COURT. 2 3. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE CLAIMED RS. 45,84,880/- ON ACCOUNT OF BAD DEBTS IN THE PROFIT A ND LOSS ACCOUNT. THE CONTENTION OF THE ASSESSEE BEFORE THE ASSESSING OFF ICER WAS THAT DESPITE ITS BEST EFFORTS, THE OUTSTANDING AMOUNT COULD NOT BE RECOVE RED. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE SUBMITED BEFORE HIM THAT HE HAS FILED CIVIL SUIT IN THE COURT FOR RECOVERY OF RS. 45,84,880/-. THE ASSE SSING OFFICER NOTICED FROM THE COPY OF PETITION THAT PARTIAL PAYMENT OF RS. 19 ,68,000/- WAS RECOVERED FROM THE ORIGINAL AMOUNT OF RS. 65,52,880/- AND THE BALA NCE OF RS. 45,84,880/- WAS CLAIMED AS BAD DEBT. THE ASSESSING OFFICER DISALLOW ED THE CLAIM OF THE ASSESSEE ONLY ON THE GROUND THAT BAD DEBT IS NOT ALLOWABLE U NLESS THE RECOVERY OF DEBT IS IMPOSSIBLE. HE THEREFORE, MADE THE ADDITION OF RS. 45,84,880/-. 4. ON APPEAL, THE CIT(A) DELETED THE ADDITION, OBSE RVING AS UNDER:- 4.5 I HAVE CONSIDERED THE SUBMISSIONS MADE, IN THIS CASE, THE APPELLANT HAS SUBMITTED THAT THE BAD DEBT IS WR ITTEN OFF FROM THE BOOKS OF ACCOUNTS. IN THIS CASE, THE AMOUN T REPRESENTS OUTSTANDING PAYMENT AS ON 31.03.2009 ON ACCOUNT OF SALE OF COMBINES TO M/S SUDHIR ENTERPRIS ES AND THAT THE SAME IS WRITTEN OFF IN THE BOOKS BECAUSE O F THE REASON DISCUSSED EARLIER. THESE FACTS ARE NOT REBUT TED BY THE A.O. AND IT IS ALSO NOT THE CASE OF THE A.O. TH AT PROVISION OF SECTION. 36(2) IS NOT SATISFIED. THE A .O. HAS DISALLOWED THE CLAIM ONLY ON THE GROUND THAT BAD DE BT IS NOT ALLOWABLE UNLESS THE RECOVERY OF DEBT IS IMPOSS IBLE. AS PER THE PROVISION OF SECTION 36(I)(VII) BAD DEBT IS ALLOWABLE AS A DEDUCTION ON WRITING OFF THE SAME FROM THE BOO KS OF ACCOUNT. THEREFORE, RELYING ON THE DECISIONS CITED ABOVE AND LOOKING INTO THE FACTS OF THE CASE, THE BAD DEB T CLAIMED BY- THE APPELLANT IS HEREBY ALLOWED AND THE ADDITIO N MADE BY THE A.O. IS DELETED. 3 5. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION IN THE CASE OF TRF LTD V CIT (2010) 32 3 ITR 397 (SC) WHEREIN THE HON'BLE SUPREME COURT HAS LAID DOWN THE RATIO THAT AFTER THE AMENDMENT OF SECTION 36(I)(VII) OF THE INCOME-TAX ACT, 1961 W.E. F. APRIL 1 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION OF BAD DEBT, IT IS N OT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECO VERABLE. IT IS ENOUGH IF THE BAD DEBT WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS O F THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE HAS WRITTEN OFF RS. 45,84,880/- FROM ITS BOOKS OF ACCOUNT AS BAD DEBT AND HAD SHOWN THEM AS IRRECOVERABLE AND, H ENCE, IT WILL SUFFICIENT FOR CLAIMING IT AS BAD DEBT. IN VIEW OF THE ABOVE, WE U PHOLD THE ORDER OF CIT(A) AND REJECT GROUND NO.1 OF THE APPEAL. 6. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. C1T(A) HAS FURTHER ERRED IN DELETING THE ADDITION OF RS.64 ,51,415/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF FREIGH T EXPENSES, WITHOUT APPRECIATING THAT THE ASSESSEE HA D FAILED TO MAKE COMPLIANCE WITH THE PROVISIONS OF SECTION 1 94 C(6) AND 194C(7) BY NOT SUBMITTING PANS OF VARIOUS PARTIES/TRANSPORTERS TO THE CONCERNED AUTHORITIES. 7. THE ASSESSING OFFICER NOTED THAT IN THE PROFIT A ND LOSS ACCOUNT FOR THE YEAR NEEDED 31.3.2010, THE ASSESSEE HAD DEBITED EXPENSES OF RS. 1,31,22,666/- UNDER THE HEAD FREIGHT. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH COMPLETE DETAILS OF PARTIES / PERSONS TO WHOM FREIG HT CHARGES WERE PAID AND ALSO TO FURNISH DETAILS OF TDS MADE ON THIS ACCOUNT. IN COMPLIANCE OF THE SAME, THE ASSESSEE SUBMITTED DETAILS OF TRANSPORT AND FREIGHT PAID ALONG WITH COPY OF TDS RETURN. FROM THE SAID DETAILS, THE ASSESSING OFFICE R NOTICED THAT THE ASSESSEE HAS 4 DEDUCTED TDS ON PAYMENT OF FREIGHT CHARGES OF RS. 6 6,71,251/- OUT OF RS. 1,31,22,666/-. AS REGARDS BALANCE AMOUNT OF FREIGHT PAYMENT AND TRANSPORT CHARGES, THE ASSESSEE SUBMITTED THAT IT HAD DEDUCTE D TDS ON FREIGHT WHICH WAS PAID PRIOR TO 30.9.3009. AFTER 1.10.2009, THE ASSES SEE COLLECTED PAN NO. FROM PERSONS TO WHOM THE ASSESSEE PAID FREIGHT. THE ASSE SSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND HELD THAT THE A SSESSEE FAILED TO MAKE COMPLIANCE TO THE PROVISIONS OF SECTIONS 194C (6) A ND 194C(7) OF THE INCOME- TAX ACT, 1961. ACCORDINGLY, THE CLAIM OF THE ASSESS EE IN RESPECT OF FREIGHT CHARGES OF RS. 64,51,415/- WAS DISALLOWED BY THE AS SESSING OFFICER. 8. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE, OBSERVING AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS MADE. IT IS AN ADMITTED FACT THAT THE APPELLANT HAS NOT DEDUCTED TDS ON THE PAYMENTS MADE AFTER 1.10.2009 IN VIEW OF THE AMENDED PROVISI ONS OF THE ACT. OUT OF SUCH PAYMENT OF RS. 64,51,415/-, RS . 51,13,875/- PERTAINS TO M/S S.P. ROAD LINES FOR WHI CH THE PAN HAS BEEN SUBMITTED. BALANCE PAYMENTS ARE LESS THAN RS. 20,000/- AND, THEREFORE, DEDUCTION OF TAX IS NOT RE QUIRED. THIS FACT IS VERIFIED BY ASSESSING OFFICER ALSO FRO M ASSESSMENT ORDER AS PER ORDER SHEET NOTING DATED 24.12.2013. THE ASSESSING OFFICER HAS ALSO NOT REBUTTED THE SUBMISS ION OF THE APPELLANT AND HAS ONLY CLAIMED THAT PROVISIONS OF S ECTION 194(7) ARE NOT COMPLIED WITH. IN THIS CONNECTION, T HE APPELLANT HAS RELIED ON THE ORDER OF THE CIT V VALI BHAI KHAN MANKAD 261 CTR 538 (GUJ). I HAVE GONE THROUGH THE DECISION IN THE CASE OF CIT VS. VALIBHAI KHAN BHAI MANKAD AND IT IS SQUARELY APPLICABLE IN THE CIRCUMSTANCES OF THE PRESENT CASE. IN THIS CASE, THE APPELLANT HAS COMP LIED WITH THE PROVISIONS OF SECTION 194C(6). HOWEVER, REQUIS ITE DETAILS IN THE PRESCRIBED FORM AS PER PROVISIONS OF SECITON 194C (7) COULD NOT BE FILED AS NO SUCH FORM WAS PRESCRIBED T ILL DATE AS INTIMATED TO THE ASSESSING OFFICER DURING THE ASSES SMENT 5 PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS. SAME IS NOT CONTRADICTED BY THE ASSESSING OFFICER. THEREFORE, L OOKING INTO THE ENTIRETY OF THE FACTS AND SUBMISSIONS MADE, THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT IS DE LETED. 9. AFTER HEARING THE RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THAT THE CIT(A) HAS CORRECTLY PLACED RELIANCE ON THE DECISION OF TH E HON'BLE GUJARAT HIGH COURT IN CIT VS. VALIBHAI KHANBHAI MANKAD (2013) 92 DTR 2 67 (GUJARAT), WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER:- 9) IN OUR VIEW, THEREFORE, ONCE THE CONDITIONS OF FURTHER PROVISO OF SECTION 194C(3) ARE SATISFIED, THE LIABI LITY OF THE PAYEE TO DEDUCT TAX AT SOURCE WOULD CEASE. THE REQUIREMEN T OF SUCH PAYEE TO FURNISH DETAILS TO THE INCOME TAX AUTHORIT Y IN THE PRESCRIBED FORM WITHIN PRESCRIBED TIME WOULD ARISE LATER AND ANY INFRACTION IN SUCH A REQUIREMENT WOULD NOT MAKE THE REQUIREMENT OF DEDUCTION AT SOURCE APPLICABLE UNDER SUB-SECTION (2) OF SECTION 194C OF THE ACT. IN OUR VIEW, THEREFORE, THE TRIBUN AL WAS PERFECTLY JUSTIFIED IN TAKING THE VIEW IN THE IMPUG NED JUDGMENT. IT MAY BE THAT FAILURE TO COMPLY SUCH REQUIREMENT BY T HE PAYEE MAY RESULT INTO SOME OTHER ADVERSE CONSEQUENCES IF SO P ROVIDED UNDER THE ACT. HOWEVER, FULFILLMENT OF SUCH REQUIREMENT C ANNOT BE LINKED TO THE DECLARATION OF TAX AT SOURCE. ANY SUC H FAILURE THEREFORE CANNOT BE VISUALIZED BY ADVERSE CONSEQUEN CES PROVIDED UNDER SECTION 40(A)(IA) OF THE ACT. THERE IS NO DISPUTE THAT THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTION 194C(6) OF THE ACT. IT IS APPARENT FROM THE RECORD THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED PAN NUMBER OF M/S S.P. ROAD LINES TO WHOM PAYMENT OF RS. 1,17,85,126/- WAS MADE OUT OF TOTAL FREIGHT OF RS. 1,31,22,666/- . THE ASSESSEE HAD PAID RS. 6671251/ - PRIOR TO 30.9.2009 AND RS. 5113875/- AFTER 1.10.2009 TO M/S S.P. ROAD LINES. T HE BALANCE FREIGHT OF RS. 1337540/- WAS PAID DURING THE YEAR UNDER CONSIDERAT ION TO THE VARIOUS 6 TRANSPORTERS WHICH WAS BELOW RS. 20,000/- EACH. IT IS APPARENT FROM THE RECORDS THAT ON 1.10.2009, THE ASSESSEE COLLECTED PAN NOS. FROM THE PERSONS TO WHOM IT HAD PAID FREIGHT. THE ASSESSEE CONTENDED THAT REQUE ST IN THE PRESCRIBED FORM AS PER PROVISIONS OF SECTION 194C(7) COULD NOT BE FILE D AS NO SUCH FORM WAS PRESCRIBED TILL DATE AS INTIMATED TO ASSESSING OFFI CER DURING THE ASSESSMENT PROCEEDINGS. IN OUR OPINION, THE CIT(A) WAS FULLY J USTIFIED IN DELETING THE ADDITION AND, HENCE, WE REJECT GROUND NO.2 OF THE A PPEAL. 10. GROUND NO.3 OF THE APPEAL READS AS UNDER:- 3. IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. C1T(A) HAS FURTHER ERRED IN DELETING THE ADDITION OF RS.14 ,800/- MADE BY THE AO UNDER SECTION 69 OF THE INCOME TAX ACT. 1 961 ON ACCOUNT OF WRONG DEBIT ENTRY, WITHOUT APPRECIATING THAT THE ASSESSEE HAD MADE THIS CASH PAYMENT FROM ITS UNDISC LOSED SOURCES OF INCOME. 11. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE H AS MADE CASH PAYMENT OF RS. 14,821/- TO SHRI KULJIT HARVESTER IN THE BOOKS OF ACCOUNT ON 6.6.2009 WHEREAS THE SAID PARTY HAD SHOWN RECEIPT ON 5.6..20 09. ON QUERY, THE ASSESSEE SUBMITTED THAT THE ACCOUNTANT ATTENDS IT OFFICE UPT O 6 PM EVERY DAY. SHRI KULJIT HARVESTER COLLECTED PAYMENT OF RS. 14,800/- FROM TH E ASSESSEE AFTER 6 PM ON 5.6.2009. THE ASSESSEE TOLD ITS ACCOUNTANT ON THE N EXT MORNING TO DEBIT RS. 14,800/- IN THE ACCOUNT OF KULJIT HARVESTER, LUDHIA NA. THE ASSESSEE FURTHER EXPLAINED THAT THE ACCOUNTANT BY MISTAKE DEBITED RS . 14,800/- IN THE ACCOUNT OF KULJIT HARVESTER ON 6.6.2009 INSTEAD OF 5.6.2009. T HE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE EXPLANATION OF THE ASSESSEE AND MA DE THE ADDITION OF RS. 14,800/- U/S 69 OF THE ACT. 7 12. ON APPEAL, THE CIT(A) DELETED THE ADDITION OBSE RVING THAT THE EXPLANATION OFFERED BY THE ASSESSEE APPEARED TO BE REASONABLE. 13. AFTER HEARING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE. IT IS CLEAR FROM THE RECORDS THAT THE PAYMENT TO KULJIT HARVESTER WAS MADE AFTER 6PM ON 5.6.2009. T HERE IS NOTHING ON RECORD TO CONTROVERT THE ABOVE CONTENTION OF THE ASSESSEE. AC CORDINGLY, WE UPHOLD THE ORDER OF CIT(A) AND REJECT GROUND NO.3 OF THE APPEA L. 14. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.01.2016 SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED 28 TH JANUARY, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR