Shri Mohan Jain, Indore V. Income Tax Officer- 1(2), Ujjain

ITA 605/Ind/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5182 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 14-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V J BORICHA
• Keywords: Recovery proceedings; Bad and doubtful debts
• Section: 80C; 143(3)

Judgement Text

[ITA NO.605/IND/2017 [SHRI MOHAN JAIN, INDORE] , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.605/IND/2017 ASSESSMENT YEAR: 2014-15 SHRI MOHAN JAIN C/O SHRI PAVAN VED 203, MORYA HERITAGE 56 SHOPS ROAD 10/5, NEW PALASIA INDORE (M.P.)452001 / VS. ITO-1(2) UJJAIN ( APPELLANT ) ( REVENUE ) P.A. NO. ABVPJ1338C APPELLANT BY SHRI PAVAN VED, A.R. RESPONDENT BY SHRI V.J. BORICHA, D.R. DATE OF HEARING: 24.01.2019 DATE OF PRONOUNCEMENT: 05.02.2019 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER O F THE CIT(A), UJJAIN DATED 16.6.2017 PERTAINING TO THE [ITA NO.605/IND/2017 [SHRI MOHAN JAIN, INDORE] 2 ASSESSMENT YEAR 2014-15. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF BAD DEBTS OF RS.1,63,43,622/-. 2. THE LD. CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION U/S 80C IN RESPECT OF PPF CONTRIBUTION. 3. THE ORDER OF LD. CIT(A) IS OBVIOUSLY INCORRECT AND PERVERSE HENCE COST OF THIS APPEAL BE ALLOWED EXERCISING YOUR DISCRETIO N U/S 254(2B). 4. THE APPELLANT RESERVES RIGHT TO ADD AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL AS ABOVE. PRAYER FOR INTERIM RELIEF: A. THE ORDER OF LD. CIT(A) APPEAL IS PRIMA FACIE PERVE RSE HENCE AN INTERIM ORDER BE PASSED GRANTING TOTAL STAY OF RECO VERY OF DEMAND. B. IN VIEW OF THE ABOVE REASON, THE APPEAL BE HEARD OU T OF TURN. 2. THE FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSM ENT AND THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WAS FRAMED VIDE ORDER DATED 16.12.2016. THE ASSESSING OFFICER (IN SHORT A.O.) WHILE FRAMING THE ASSESSMENT, DISALLOWED CLAIM OF BAD D EBT AMOUNTING TO RS.1,63,43,622/- AS CLAIMED ON THE BASIS THAT SUCH CLAIM IS PREMATURE. [ITA NO.605/IND/2017 [SHRI MOHAN JAIN, INDORE] 3 3. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS CONFIRMED THE DISALLOWANCE OF BAD DEBT. N OW ASSESSEE IS IN FURTHER APPEAL. 4. GROUND NO.1 IS AGAINST DISALLOWANCE OF BAD DEBT CLAIMED. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE H AD SOLD GOODS TO NSEL ON VARIOUS DATES. HE DREW OUR ATTENTION TO PAPER BOOK WHERE THE CONTRACT NOTES ARE ENCLOSED. A FRAUD CAME TO THE NOTICE OF THE ASSESSEE IN NATIONAL SPOT EXCHANGE LIMITED (NSEL). THEREFORE, THE AMOUNT WAS WRITTEN OFF AND CLAIMED AS BAD DEBT. LD. COUNSEL SUBMITTED THAT BOTH THE AUTHORITIES BELOW HAVE DISALLOWED THE CLAIM OVERLOOKING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S. TRF LIMITE D VS. [ITA NO.605/IND/2017 [SHRI MOHAN JAIN, INDORE] 4 CIT (2010) 323 ITR 397 (SC) AND ALSO CIRCULAR NO.12 OF 2016 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBD T). 5. LD. D.R. OPPOSED THE SUBMISSIONS AND SUPPORTED TH E ORDER OF THE A.O. IN THE REJOINDER, THE LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE RECOVERY PROCEEDINGS OF P ART OF SUM IS MADE THROUGH THE COURT, WHICH HAS BEEN DULY OFFERED FOR TAX, THEREFORE, IT CANNOT BE SAID THAT THE AMOUNT HAS NOT BECOME BAD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE HONBLE SUPREME COURT IN THE CASE OF M/S. TRF LIMITED VS. CIT (SUPRA) HAS HELD AS UNDER: FOR THE SAKE OF CLARIFY, WE REPRODUCE HEREIN BELOW THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, BOTH PRIOR TO APRIL 1, 1989 AND POST APRIL 1, 1989. PRE-APRIL 1, 1989: 36. OTHER DEDUCTIONS (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28-- [ITA NO.605/IND/2017 [SHRI MOHAN JAIN, INDORE] 5 (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) , THE AMOUNT OF ANY DEBT, OR PART THEREOF, WHICH IS ESTABLISHED TO HAVE BECOME A BAD DEBT IN THE PREVIOUS YEAR. POST-APRIL 1,1989: 36. OTHER DEDUCTIONS(1) THE DEDUCTIONS PROVIDED F OR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28-- THIS POSITION IN LAW IS WELL SETTLED. AFTER APRIL 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FAC T, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOV ERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESS ING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF T HE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDAY DE BTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER, IN FACT , THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. TH IS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MA TTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. 7. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E ASSESSEE HAS WRITTEN OFF THE DEBT AND IT IS ALSO NOT IN DISPUTE THAT PROCEEDINGS AGAINST THE NSEL IS PENDING BEFORE THE COURTS. THEREFORE, FOLLOWING THE RATIO L AID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S. TRF LIMITED VS. CIT(SUPRA), WE DIRECT THE A.O. TO ALLOW T HE CLAIM OF BAD DEBT. 8. APROPOS TO GROUND NO.2, NO ARGUMENT IS MADE BY TH E LD. COUNSEL FOR THE ASSESSEE AND HE HAS NOT POINTED O UT AS [ITA NO.605/IND/2017 [SHRI MOHAN JAIN, INDORE] 6 WHAT WAS THE CLAIM BEFORE THE AUTHORITIES BELOW, THEREF ORE, IN THE ABSENCE OF THE SAME, THIS GROUND OF THE ASSESSE ES APPEAL IS REJECTED. 9. GROUND NO.3 IS GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 05. 02.2019. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIALMEMBER INDORE; DATED : 05/02/2019 VG/SPS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE