Shonan Engineering P.Ltd., Pune V. ACIT,Cir.6,Pune, Pune

ITA 585/PUN/2012

• Counselvise Citation: 58524514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: VIPIN GUJRATHI
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER, AND SHRI R.S.PADVEKAR, JUDICIAL MEMBER. ITA.NO.585/PN/2012 (ASSTT. YEAR : 2007-08) M/S.SHONAN ENGINEERING P. LTD., 4, SAI COMPLEX, F.C.ROAD, PUNE 411004. .. APPELLANT PAN: AAICS6507K VS. ACIT, CIRCLE-6, PUNE. .. RESPONDENT ASSESSEE BY : SHRI VIPIN GUJRATHI DEPARTMENT BY : SHRI S.K.SINGH DATE OF HEARING : 25.04.2013 DATE OF PRONOUNCEMENT : 30.04.2013 ORDER PER R.S.PADVEKAR, JM : IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMP UGNED ORDER OF THE LD. CIT-III, PUNE, PASSED U/S.263 OF THE INC OME TAX ACT, 1961, DATED 20.01.2012 FOR THE A.Y. 2007-08. THE A SSESSEE HAS TAKEN THE MULTIPLE GROUNDS CHALLENGING THE LEGALITY AND PROPRIETY OF THE ORDER PASSED BY THE LD. CIT BY ASSUMPTION OF JU RISDICTION U/S.263 AS WELL AS ON MERIT IN RESPECT OF THE BAD D EBTS WHICH IS THE SUBJECT MATTER OF THE REVISIONARY JURISDICTION EXER CISED BY THE LD. CIT U/S.263 OF THE ACT. BRIEFLY STATED THE FACTS A RE AS UNDER. THE ASSESSEE COMPANY IS CARRYING ON THE BUSINESS OF UND ERTAKING TURNKEY PROJECTS FOR SUPPLY AND LAYING OF PIPELINES FOR WATER SUPPLY FOR VARIOUS MUNICIPAL CORPORATIONS, SEMI-GOVERNMENT AND GOVERNMENT AUTHORITIES AND EVEN NON-GOVERNMENT ORGA NISATIONS. THE ASSESSEE IS ALSO ENGAGED IN THE MANUFACTURING A ND TRADING OF MS PIPES AND FITTINGS LIKE BENDS, REDUCERS, FLANGES AND EXPANSION 2 JOINTS ETC. ASSESSEE ALSO UNDERTAKES CONTRACTS WIT H MATERIAL AS WELL AS ON LABOUR CHARGES BASIS FOR GOVERNMENT AND NON-G OVERNMENT ORGANISATIONS. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y. 2007-08 WHICH WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S.143(3) OF THE ACT. SUBSEQUENTLY, THE LD. CIT BY EXERCISING HIS JURISDICTION U/S.263, SET ASIDE THE ASSESSMENT ORDER ON THE REASON THAT THE ASSESSING OFFICER HAS WRONGL Y ALLOWED CLAIM OF BAD DEBTS TO THE EXTENT OF RS.7,52,458/- AS THE AMOUNT IN QUESTION WERE DEPOSITED WITH CONTRACTEES AS EARNEST MONEY. IN THE OPINION OF THE LD. CIT, THE CLAIM OF THE ASSESSEE P RIMA FACIE CANNOT BE TREATED AS BAD DEBT WITHIN THE MEANING OF SECT ION 36(1)(VII) R.W.S. SUB-SECTION (2) OF SECTION 36 OF THE ACT. N OW THE ASSESSEE IS IN APPEAL BEFORE US. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORD. ON THE PERUSAL OF THE IMPUGNED ORDER, IT IS SEEN THAT THE ASSESSEE HAD MADE THE EARNEST MONEY D EPOSIT AS UNDER: NAME AMOUNT NVDC INDORE RS.5,00,000 GOVT. OF GOA 1 RS.2,00,000 MJP: BEED RS. 20,000 ROOM DEPOSIT RS. 10,000 OTHER DEPOSITS WITH VIDC BHANDARA RS. 5,235 MISC. BEED LINING WORKS RS. 12,223 KARNATAKA SALES TAX RS. 5,000 RS.7,52,458 3. THERE IS NO DISPUTE ABOUT THE FACT THAT THE SAID AMOUNT IS IN THE NATURE OF EITHER DEPOSIT OR THE EARNEST MONEY. AT THE SAME TIME, IT IS ALSO NOT DISPUTED THAT THE ASSESSEE IS A CONTRACTOR WHO IS ENGAGED IN THE BUSINESS OF LAYING DOWN WATER SUPPLY SCHEMES ON TURNKEY BASIS. THERE IS ALSO NO DISPUTE THAT THE A MOUNTS IN QUESTION WERE DEPOSITED WITH THE CONTRACTEES AS EAR NEST MONEY. IN OUR OPINION, EVEN IF THE ASSESSEES SAID CLAIM DOES NOT PARTAKE THE CHARACTER OF THE BAD DEBTS BUT THE FACT REMAINS THA T THE SAID 3 AMOUNTS ARE INCURRED DURING THE COURSE OF ASSESSEE S BUSINESS AND OTHERWISE ALSO IT IS ALLOWABLE BUSINESS LOSS U/S.37 (1) OF THE ACT. IN OUR OPINION, PRIMA FACIE THE EXERCISE OF THE JURISD ICTION BY THE LD. CIT IS ERRONEOUS AS HE HIMSELF COULD HAVE DECIDED T HE ISSUE ON MERIT, I.E, IN RESPECT OF THE LIABILITY OF CLAIM OF BAD DEBTS/BUSINESS LOSS. WE FIND NO MERIT FOR SETTING ASIDE THE ORDER ON THIS ISSUE, AS THE ORDER CANNOT BE SAID TO BE ERRONEOUS. WE, THER EFORE, CANCEL THE ORDER PASSED BY THE LD. CIT U/S.263 OF THE ACT. 4. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF APRIL, 2013. SD/- SD/- ( G.S.PANNU ) ( R.S.PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 30 TH APRIL, 2013 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ACIT, CIRCLE-6, PUNE. 3. THE CIT-III, PUNE. 4. THE DR B BENCH, PUNE. 5. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.