DELOITTE TOUCHE TOHMATSU INDIA P. LTD, MUMBAI V. DCIT 1(1), MUMBAI

ITA 635/MUM/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9814 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Set aside
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “D”, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA No.635/M/2019 Assessment Year: 2006-07 M/s. Deloitte Touche Tohmatsu India Pvt. Ltd. (Now converted into Deloitte Touche Tohmatsu India LLP), India Bulls Finance Centre, Tower 3, 27 th to 32 nd Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Elphinstone (W), Mumbai – 400 013 PAN: AABCD1147R Vs. DCIT 1(1), Aayakar Bhavan, M.K. Road, Mumbai - 400020 (Appellant) (Respondent) Present for: Assessee by : Shri Ketan Ved, A.R. Revenue by : Shri Mahendra Ahuja, Sr. Ar. CIT Date of Hearing : 22.11.2021 Date of Pronouncement : 24.01.2022 O R D E R Per Rajesh Kumar, Accountant Member: The present appeal has been preferred by the assessee against the order dated 24.07.2014 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2006-07. 2. The issue raised in ground No.1 is against the confirmation of disallowance of Rs.72,12,274/- by ld CIT(A) as made by the AO on account of bad debts written off. ITA No.635/M/2019 M/s. Deloitte Touche Tohmatsu India Pvt. Ltd. 2 3. The facts in brief are that the assessee has written of bad debts in the P&L Account of Rs.72,12,274/-during the year. Accordingly, the AO called upon the assessee to furnish the justification for the same. The assessee filed the details before the AO in respect of these bad debts, however, AO rejected the claim of the assessee on the ground that assessee has not filed any documentary evidences and accordingly added the same to the income of the assessee. 4. In the appellate proceedings, the Ld. CIT(A) also dismissed the appeal of the assessee on this issue and hence the assessee is in appeal before us. 5. At the outset, the Ld. Counsel of the assessee submitted that ground No.1 is squarely covered by the decision of the Apex Court in the case of TRF Ltd. vs. CIT (2010) 323 ITR 397(SC) wherein it has been held that if the bad debts have been written off in the books of accounts as the irrecoverable, the said bad debts ought to be allowed in terms of section 36(1)(vii) of the Act. The Ld. A.R. drew our attention to the page No.177 of the paper book which is the financial statement to corroborate its claim of bad debts in the books of accounts. The Ld. A.R. also referred to page No.52 of the paper book wherein the comprehensive details of bad debts written off were given. The Ld. A.R. therefore prayed that the claim of the assessee may be allowed. 6. The Ld. D.R., on the other hand, relied on the order of authorities below. 7. After hearing both the parties and perusing the material on record, we find that the assessee has made a claim of bad debts ITA No.635/M/2019 M/s. Deloitte Touche Tohmatsu India Pvt. Ltd. 3 in the financial statements/books of accounts the details whereof are available in the paper book at page No.52. The assessee has also furnished the invoices raised in respect of which the bad debts were written off at page No.53 to 58, 63 to 77, 85 to 108 and 159 to 163 with journal entries passed for effecting those entries. We find that the authorities below have observed that amount claimed as bad debts were not correlated to the income of the earlier year which is wrong as the cross reference of the invoices which have been written off as non recoverable have duly been submitted by the assessee before the authorities below. We note that at page No.53, 54 & 55 of the paper book the copies of invoices are available and these are duly appearing in the ledger account of the assessee, a copy whereof is filed at page No.56 of the paper book. Similarly, the copy of invoices as filed at page No .100 & 101 were duly recorded in the ledger of the assessee a copy whereof is filed at page No.102 of the paper book. In view of these facts, we are of the considered view that assessee is entitled to the claim of bad debts in terms of section 36(1)(vii) read with section 36(2) of the Act. Moreover, the case of the assessee is squarely covered by the decision of the Apex Court in the case of TRF Ltd. vs. CIT (supra) wherein the Apex Court has held that mere claim of bad debts would be suffice and the bad debts ought to be allowed in terms of section 36(1)(vii) of the Act. Accordingly, we set aside the order of Ld. CIT(A) on this issue and direct the AO to allow the claim of bad debts to the assessee. Ground No.1 is allowed. 8. The issue raised in ground No.2 is in respect of confirmation of addition of Rs.58,060/- by Ld. CIT(A) as made by the AO on account of unaccounted receipts. ITA No.635/M/2019 M/s. Deloitte Touche Tohmatsu India Pvt. Ltd. 4 9. The facts in brief are that during the course of assessment proceedings the AO provided the assessee with a copy of statement of income showing Rs.10,24,69,375/- on which tax at source was deducted by various parties as per department’s record and the assessee was asked to provide details in relation thereto as to in which year corresponding income was offered to tax. The assessee filed the details reconciling the income to the tune of which have been offered to tax however balance information pertaining to Rs.58,060/- could not be provided due to lack of information being made available and thus only 0.06% of the total reconciliation was treated as unaccounted receipt. The ld CIT(A) also confirmed the same. 10. We find that similar issue has been decided by the co- ordinate Bench of the Tribunal in favour of the assessee in assessee’s own case in ITA No.3017/M/2016 A.Y. 2011-12 and ITA No.276 & 277/M/2016 A.Y. 2010-11. The operative part is as under: “21. We have considered rival submissions and perused materials on record. As could be seen from the facts emanating from record, in course of assessment proceedings the assessee to some extent has reconciled the discrepancies pointed out as per the AIR information. However, in respect of payments alleged to have been received from certain parties, the assessee though made all efforts to obtain information from the concerned parties, however, it failed in its attempt. It is evident, simply because the assessee was unable to reconcile a part of the payment allegedly received as per AIR information, the Assessing Officer proceeded to make the addition without making any further enquiry. As rightly observed by the learned Commissioner (Appeals), the minimum the Assessing Officer could have done is to issue notices under section 133(6) or 131 of the Act to the concerned parties whose identities were available before the Assessing Officer, to ascertain the correct fact. When the assessee has asserted before the Assessing Officer that it has not received any such income, the Assessing Officer is duty bound to make proper enquiry before concluding that the disputed amount was earned by the assessee during the relevant assessment year. Instead of doing that the Assessing Officer has made the addition simply on the basis of AIR information, which, in our view is ITA No.635/M/2019 M/s. Deloitte Touche Tohmatsu India Pvt. Ltd. 5 absolutely Incorrect. Therefore, we do not find any infirmity in the order of the learned Commissioner (Appeals) on this issue. Ground raised is dismissed.” 11. Since the facts of the issue before us are materially same , we, therefore, respectfully following the decision of the co- ordinate Bench of the Tribunal, set aside the order of Ld. CIT(A) and direct the AO to delete the disallowance. Ground No.2 is allowed. 12. The issue raised in ground No.3 is against the part confirmation of disallowance of Rs.3,09,631/- being 10% of Rs.30,96,315/- under various heads. The detail whereof is given as under: Subscription 2,33,970 Books, periodicals and CD’s 29,619 Office expenses 5,405 Clearing and forwarding expenses 1,835 Club dues and memberships 1,03,419 Miscellaneous expenses 16,72,824 Legal fees 5,538 Office supplies 1,901 Printing and Coyping 5,00,784 Photocopying charges 1,23,306 Security charges 1,77,623 Brokerage 2,38,974 Firm Meetings 1,117 Total 30,96,315 13. The AO during the course of assessment proceedings vide order sheet entry dated 15.12.2008 called upon the assessee as to why the appropriate disallowance be not made in respect of sundry expenses as the assessee has failed to file the details in respect of these expenses and finally added a sum of Rs.6,19,263/- being 1/5 th of the sundry expense of ITA No.635/M/2019 M/s. Deloitte Touche Tohmatsu India Pvt. Ltd. 6 Rs.30,96,315/- on the ground that verification of the said expenses could not be made. 14. In the appellate proceedings the Ld. CIT(A) partly allowed the appeal of the assessee by restricting the disallowance to 10% of the total expenses claimed of Rs.30,96,315/- and hence the assessee is in appeal before us. 15. After hearing both the parties and perusing the material on record, we note that the assessee has attached sample bills from page No.141 to 152 in respect of subscription expenses and printing and copying expenses. Besides the assessee has also filed the ledger account of miscellaneous expenses along with sample bills at page No.3 to 8. We note that the disallowance made by the authorities below is purely on adhoc basis and is on the higher side. We note that no such disallowance was made either in the subsequent year or in the earlier years. In our opinion, it would meet the ends of justice if a sum of Rs.1,00,000/- is disallowed out of these expenses. Accordingly, we modify the order of Ld. CIT(A) and direct the AO to add only Rs.1,00,000/-. Ground No.3 is partly allowed. 16. In the result, the appeal of the assessee is partly allowed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board Sd/- Sd/- (Ravish Sood) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 24.01.2022. * Kishore, Sr. P.S. ITA No.635/M/2019 M/s. Deloitte Touche Tohmatsu India Pvt. Ltd. 7 Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order Dy/Asstt. Registrar, ITAT, Mumbai.