M/S. N.H. HASORA PVT. LTD, MUMBAI V. THE DCIT 5(2), MUMBAI

ITA 6873/MUM/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3481 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-12-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 15-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARIGOVIND SINGH
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Bad and doubtful debts; Set aside

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER. I.T.A. NO. 6873/MUM/2007. ASSESSMENT YEAR : 2003-04 N.H. HASORA PVT. LTD., DY. COMMISSIONER OF INCOME-TAX, HASORA CENTRE, VS. 5(2), MUMBAI. DR. HAKIMWADI, GRANT ROAD, MUMBAI 400 007. PAN AAACN1875B APPELLANT. RESPONDENT. APPELLANT BY : SHRI SANJAY R. PARIKH. RESPONDENT BY : SHRI HARI G OVIND SINGH. . O R D E R PER J. SUDHAKAR REDDY, A.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE CIT(APPEALS)-V, MUMBAI DATED 01-10-2007. 2. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT TH E FIRST GROUND I.E. DISALLOWANCE OF BAD DEBTS IS COVERED IN FAVOUR OF T HE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF T.R.F. LTD. VS. CIT 323 ITR 397 (S.C.) WHEREIN IT IS HELD AS FO LLOWS : 2 AFTER THE AMENDMENT OF SECTION 36(1)(VIII) OF THE INCOME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE : IT IS ENOUGH IF TH E BAD DEBT IS WRITTEN OFF A IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THE ENTIRE BASIS ON WHICH THE DISALLOWANCE IS MADE BY THE AO AND CONFIRMED BY THE CIT(APPEALS), IS THAT THE DEBTS WRITTEN OFF BY THE ASSESSEE, ARE IN FACT NOT IRRECOVERABLE AND THAT THE WRITE OFF IS PRE-MATURE. 3. THE SECOND FINDING OF THE AO IS THAT IN RESPECT OF M/S VISHAL ENGINEERS, THE SALES INVOICES PERTAINED TO THE ASSESSMENT YEARS 19 99-2000 TO 2000-01. THUS THE CONCLUSION THAT THIS AMOUNT IS WRITTEN OFF WITHIN A SHORT PERIOD, IS NOT FACTUALLY CORRECT. EVEN IN THE CASE OF GENERAL ELECTRONIC AND TELECOMMUNICATIONS, ONLY A PART OF THE AMOUNT PERTAINED TO THE CURRENT YEAR AN D THE AMOUNTS ARISE OUT OF INVOICES RAISED FROM THE ASSESSMENT YEAR 1999-2000 TO 2003-04. THUS THE FACTUAL FINDING THAT SUDDENLY WITHIN FOUR MONTHS THE DEBTOR HAS BECOME BAD AND THE WRITE OFF IS NOT GENUINE, IS NOT CORRECT. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW GROUND NO.1 OF THE ASSESSEE. 4. GROUND NO. 2 IS ON THE ISSUE OF DISALLOWANCE OF INTEREST U/S 14A. THE AO HAS NOT INVOKED SECTION 14A. BUT THE CIT(APPEALS) H AS DONE SO. 5. AS AGREED BY BOTH THE PARTIES, THIS ISSUE IS SET ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN LINE WITH THE DECISION OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURIN G CO. LTD. 234 CTR 1 AND THE DECISION OF THE MUMBAI G-BENCH OF THE TRIBUNAL IN ITA NO. 1629/MUM/2009 IN THE CASE OF M/S GODREJ AGROVEL LTD., ORDER DATED 17 TH SEPT., 2010. THE AO SHALL ALSO KEEP IN MIND THE DECISION OF HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. REPORTED IN 3 13 ITR 340. 3 6. WITH THE ABOVE OBSERVATIONS, WE SET ASIDE THE MA TTER TO THE FILE OF THE AO. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DEC. , 2010. SD/- SD/- (R.S. PADVEKAR) (J. SUD HAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER MUMBAI, DATED: 31 ST DEC., 2010. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, B-BENCH (TRUE COPY) BY ORDER ASSTT. REGISTRAR, ITAT, M UMBAI.