ITO 2(1)(1), MUMBAI V. ARONI CHEMICALS INDUSTRIES LTD, MUMBAI

ITA 6254/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54902 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-08-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 03-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JIGAR SHAH
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A NO.6254/ MUM/2009 ASSESSMENT YEAR: 1998-99 INCOME TAX OFFICER 2(1)(1) .. APPELLANT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI VS ARONI CHEMICALS INDUSTRIES LTD., ,. RESPONDE N T 1 ST FLOOR, 29, BANK STREET, FORT, MUMBAI-400 023 PA NO.AAACA 8974 A APPEARANCES: PARSHASARATHI NAIK, FOR THE APPELLANT JIGAR SHAH , FOR THE RESPONDENT DATE OF HEARING : 8.8.2011 DATE OF PRONOUNCEMENT : 12 -08-2011 O R D E R PER PRAMOD KUMAR: 1. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL IS, WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN DELETING THE DIS ALLOWANCE OF RS.27,18,598 ON ACCOUNT OF BAD DEBTS. THE ASSESSMENT YEAR INVOLVED IS 1998-99 AND THE IMPUGNED I.T.A NO.6254/ MUM/2009 ASSESSMENT YEAR: 1998-99 2 CIT(A)S ORDER DATED 18.9.2009 WAS PASSED IN THE MA TTER OF ASSESSMENT UNDER SECTION 143 (3) R.W.S 254 OF THE I.T. ACT, 1961. 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIA L FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE O F ALUMINIUM CHLORIDE. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 30.11.1998 D ECLARING TOTAL INCOME OF ` .28.76 LAKHS UNDER NORMAL PROVISIONS AND ` .45.90 LAKHS U/S. 115JA OF THE ACT. ORIGINAL ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF ` .57,65,173 UNDER NORMAL PROVISIONS OF THE ACT, WHICH INCLUDES BAD DEBTS AMO UNTING TO ` .27,18,598. THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE CIT(A). HOWEVER, THE MATTER DID NOT REST THERE AND THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE ITAT. THE TRIBUNAL CONFIRMED THE COMPUTATION OF INCOME BUT SE T ASIDE THE ISSUE OF BAD DEBTS TO THE FILE OF THE AO. IN COMPLIANCE WITH THE DIREC TION OF THE TRIBUNAL, THE ASSESSING OFFICER HAS PASSED THE REASSESSMENT UNDER SECTION 1 43(3) R.W.S. 254 ONCE AGAIN DISALLOWED THE BAD DEBTS OF ` .27,18,598 ON THE GROUND THAT THE BASIC CONDITIONS LAID DOWN IN SECTION 26(2)(I) HAS NOT BEEN FULFILLED BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). THE CIT(A) DIRECTED THE AO TO ALLOW THE BAD DEBT CLAIMED BY THE ASSESSEE, OBSE RVING AS FOLLOWS: I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE AR AND I FIND THAT THE AO IS NOT JUSTIFIED IN DISALLOWING THE BAD DEBTS AS THE ASSESSEE HAS PRODUCED THE COPY OF SPECIAL RESOLUTION WHICH AUTHORIZED THE CHANGE OF OBJECTS OF THE COMPANY AS THE MAIN BUSINESS OF FINANCING IN 199 5. ALL THE MONEY WAS ADVANCED AFTER THIS DATE. HENCE, IT CANNOT BE S AID THAT THE ASSESSEE HAS NOT ADVANCED THE MONEY IN DUE COURSE OF BUSINESS . SINCE THE ADVANCES WERE GIVEN IN DUE COURSE OF BUSINESS AND TH E ASSESSEE HAS WROTE OFF THESE ADVANCES IN THE BOOKS OF ACCOUNT AS THEY BECAME BAD, THE SAME IS REQUIRED TO BE ALLOWED U/S.36(1)(VII) R. W.S. 3692). RELIANCE IS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN TH E CASE OF STAR CHEMICALS (313 ITR 126). THE AO IS DIRECTED TO ALL OW THE SAID BAD DEBT CLAIMED BY THE APPELLANT. THIS GROUND OF APPEAL IS ALLOWED. 3. THE ASSESSING OFFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US. I.T.A NO.6254/ MUM/2009 ASSESSMENT YEAR: 1998-99 3 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE DO NOT FIND ANY REASON TO INTERFERE IN T HE ORDER OF THE CIT(A). IN THE IMPUGNED ORDER, THE CIT(A) NOTED THAT THE ASSESSEE HAS PRODUCED COPY OF SPECIAL RESOLUTION WHICH AUTHORIZED THE CHANGE OF OBJECTS O F THE COMPANY AS THE MAIN BUSINESS OF FINANCING IN 1995. ALL THE MONEY WAS A DVANCED AFTER THIS DATE. THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD VS CI T (323 ITR 397), HAS HELD THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THE ASSESSEE HAS WRITTEN OFF THE ADVANCES IN THE BOOKS OF ACCOUNT AS THEY BECOME BAD. IN VIEW OF THIS, WE RE JECT THE GRIEVANCE RAISED BY THE REVENUE. 5. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2011 SD/- (VIJAY PAL RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 12 TH AUGUST, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),4, MUMBAI 4. COMMISSIONER OF INCOME TAX, 2 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI