Dharma Lube Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 648/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5593 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 26-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: KK SHAH
• Keywords: Bad and doubtful debts; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.648/AHD/2010 A.Y.: 2004-05 DHARMA LUBES PVT. LTD., 6-7, RAHHANS COMPLEX, OPP. SUB JAIL, RING ROAD, SURAT VS THE D.C. I. T., CIRCLE-1. SURAT PA NO. AABFD 7716 K (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K. K.SHAH, AR RESPONDENT BY SHRI R. K. DHANESTA, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-I, SURAT DA TED 04-02-2010 FOR ASSESSMENT YEAR 2004-05. 2. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUNDS NO.1 AND 3 OF THE APPEAL, THE SAME ARE DISMISSED AS WITH DRAWN. 3. ON GROUND NO.2, THE ASSESSEE CHALLENGED ADDITION OF RS.51,43,547/-ON ACCOUNT OF CLAIM OF BAD DEBT. THE ASSESSEE CLAIMED BAD DEBT OF RS.51,43,547/- IN THE PROFIT & LOSS ACC OUNT. THE AO NOTED THAT THE ASSESSEE HAD NOT GIVEN ANY EVIDENCE TO SHO W THAT ALL POSSIBLE EFFORTS WERE MADE TO RECOVER THE SAME. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF BAD DEBTS BY GIVING EVIDENCE OF ALL PO SSIBLE EFFORTS TO MAKE RECOVERY OF THE BAD DEBT AND THAT THE DEBT ACTUALLY BECAME IRRECOVERABLE. THE ASSESSEE SUBMITTED DETAILS OF THE BAD DEBTS CLA IMED IN RESPECT OF DAMAN OFFICE RS.6,88,377/-, ANKLESHWAR OFFICE RS.40 ,53,022/- AND SURAT OFFICE IN A SUM OF RS.4,02,148/-.THE ASSESSEE FILED PARTY WISE ITA NO.648/AHD/2010 DHARMA LUBES PVT. LTD. VS DCIT, CIR-1, SURAT 2 DETAILS OF DEBTS WHICH COULD NOT BE RECOVERED FOR L AST 3 TO 4 YEARS BUT CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BECAUSE THE ASSESSEE HAS NOT GIVEN ANY EVIDENCE IN RESPECT OF EFFORTS MADE FOR R ECOVERY OF THE AMOUNT. THE AO FOLLOWING THE DECISION OF THE HONBLE GUJARA T HIGH COURT IN THE CASE OF DHALL ENTERPRISES & ENGINEERS PVT. LTD. REP ORTED IN 162 TAXMAN 114 DISALLOWED THE CLAIM OF BAD DEBT. THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE THE LEARNED CIT(A) AND FILED COM PLETE DETAILS AND SUBMITTED THAT SINCE MORE THAN 5 YEARS HAVE ELAPSED AND THE DIRECTORS WHO WERE OF THE OPINION THAT NO TIME SHOULD BE WAST ED FOR FURTHER RECOVERY, THE ASSESSEE, THEREFORE, WRITTEN OFF ALL THESE AMOUNTS DURING THE YEAR AS PER THE PROVISIONS OF LAW. IT WAS SUBMITTED THAT IT IS ENOUGH IF THE DEBTS ARE WRITTEN OFF FOR CLAIMING THE SAME. THE LE ARNED CIT(A) ON THE REASONING GIVEN BY THE AO CONFIRMED THE DISALLOWANC E AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ISSUE IS NOW SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. VS CIT 323 ITR 397 IN WHI CH IT WAS HELD AS UNDER: THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTAB LISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT C ASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN ACCOUNTS OF THE A SSESSEE. WHEN BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBIT ED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSI NG THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATE D ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETH ER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OF F IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEE N UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MAT TER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO ITA NO.648/AHD/2010 DHARMA LUBES PVT. LTD. VS DCIT, CIR-1, SURAT 3 CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AN D THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. 4. ON THE OTHER HAND, THE LEARNED DR DID NOT DISPUT E THE ABOVE FACTS. 5. CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE RECENT DECISION OF THE HONBLE SUPREME COURT NOTED ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE ISS UE TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THE ISSUE IN ACCORDANCE WITH THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. L TD. (SUPRA) BECAUSE NO FINDING HAS BEEN GIVEN WHETHER THE DEBTS IN FACT HA VE BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. 6. AS A RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23-07-2010 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 23-07-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD