M/s. Miraa Precessors Pvt. Ltd., Surat V. The Income tax Officer, Ward-1(3), Surat

ITA 723/AHD/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8964 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-09-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 22-03-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: J P SHAH
• Keywords: Period of limitation; Bad and doubtful debts; Assessment record; Set aside
• Section: 133(6); 143(1); 143(2); 139(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AHMEDABAD BEN CHES D BENCH: AHMEDABAD (BEFORE S/SHRI R.V. EASWAR, VP AND A N PAHUJA, AM) ITA NO. 723/AHD/2006 AY: 2003-04 M/S. MIRAA PROCESSORS PVT. LTD., 257-258, SANKHESHWAR COMPLEX, MAJURA GATE, SURAT [PAN: AABCM 6161 E] VS THE INCOME TAX OFFICER, WARD-1(3),ROOM NO. 113,AAYAKAR BHAVAN, MAJURA GATE,SURAT APPELLANT RESPONDENT ITA NO. 1680/AHD/2006 AY: 2003-04 THE INCOME TAX OFFICER, WARD -1(3),SURAT VS M/S. MIRAA PROCESSORS PVT. LTD., 257-258, SANKHESHWAR COMPLEX, MAJURA GATE, SURAT APPELLANT RESPONDENT ASSESSEE BY SHRI JP SHAH, AR REVENUE BY SHRI C. K. MISHRA, DR ORDER A N PAHUJA: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVEN UE DIRECTED AGAINST AN ORDER DATED 27-2-2006 OF THE LE ARNED CIT(A)-I, SURAT, RAISES THE FOLLOWING GROUNDS: ITA NO. 723/AHD/2006[ ASSESSEE] 1 THE LD. CIT(APPEALS) ERRED IN NOT QUASHING THE A SSESSMENT ORDER IN TOTO. 2. THE LD. CIT(APPEALS) OUGHT TO HAVE ALLOWED TH E CLAIM OF SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS OF RS.11 ,69,559/-. 3. THE CLAIM OF THE ASSESSEE MAY KINDLY BE ALLOWED KEEPING IN VIEW THE OVERALL FACTS AND CIRCUMSTANCES AND LEGAL CONTENTIONS. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALT ER THE AFORESAID GROUNDS OF APPEAL AT THE TIME OF HEARING, IF THE NEED ARISE. ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 2 ITA NO.1680/AHD/2006[ REVENUE] (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A)-I, SURAT HAS ERRED IN DELETING T HE ADDITION OF RS.18,72,597/- MADE US 41(1) A) ON ACCOUNT OF CE SSATION OF OUTSTANDING LIABILITIES IGNORING THE FACT THAT T HE ASSESSEE FAILED TO LEAD ANY COGENT EVIDENCE TO PROVE THAT TH E SAID LIABILITIES HAVE NOT CEASED OR ABANDONED BY THE CRE DITORS. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A)-I, SURAT HAS ERRED IN RELYING UP ON THE DECISIONS GIVEN BY HONBLE MUMBAI HIGH COURT IN THE CASE OF CHASE BRIGHT STEEL LTD. (177 ITR 124), HONBLE KARN ATAKA HIGH COURT IN THE CASE OF LIQUIDATOR MYSORE AGENCIE S PVT. LTD. (114 ITR 853), HONBLE GUJARAT HIGH COURT IN T HE CASE OF BHARAT IRON & STEEL INDUSTRIES (1999 ITR 67) AND TH E HONBLE SUPREME COURT IN THE CASE OF SUGAULI SUGAR WORKS PV T. LTD. (234 ITR 518) IGNORING THE FACT THAT RATIO OF SUCH DECISIONS ARE NOT APPLICABLE ON THE FACTS OF THIS CASE. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A)-I, SURAT HAS ERRED IN DELETING T HE ADDITION OF RS.2,32,277/-MADE BY WAY OF DISALLOWANCE OF BAD DEBTS CLAIMED IGNORING THE FACT THAT HE ASSESSEE FAILED T O LEAD ANY COGENT EVIDENCE TO PROVE THAT THE DEBTS RELATE TO B USINESS OR TRADE OF THE ASSESSEE AND THE SAME HAS BEEN TAKEN I NTO ACCOUNT IN COMPUTING THE INCOME OF THE PREVIOUS OR EARLIER YEARS AND IT DOES NOT REPRESENT ANY CAPITAL INVEST MENT. (4) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. (5) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 2. ADVERTING FIRST TO THE APPEAL OF THE REVENUE, FA CTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING NIL INCOME FILED O N 30.4.2004 BY THE ASSESSEE, ENGAGED IN THE BUSINESS OF PROCESSING OF CLOTH, AFT ER BEING PROCESSED U/S 143(1) ON 08-07-2004 OF THE INCOME-TAX ACT, 1961 (HEREINAF TER REFERRED TO AS THE ACT) WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 05-10- 2004. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER [AO ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 3 IN SHORT] NOTICED THAT IN THE BALANCE SHEET OF THE ASSESSEE, SUNDRY CREDITORS OF RS.18,72,597/- WERE SHOWN AS OUTSTANDING. TO A QUER Y BY THE AO, THE ASSESSEE EXPLAINED VIDE LETTER DATED 05-09-2005 THAT THE FOL LOWING AMOUNTS WERE OUTSTANDING: SR. NO. NAME OF THE PARTY AMOUNT OUTSTANDING DATE FROM WHICH OUTSTANDING 1. VAIBHAV TEXTILES 1,38,700 - 2. INDTEX COMBUSTIION PVT. LTD. 3,17,520 31-03-1995 3. NAVRATNA INDUSTRIES 2,22,710 12-05-1995 4. S.M. TECHNIC & ELECTRONICS LTD. 6,11,232 - 5. CREDITROS BELOW 1 LAKH 5,82,435 - TOTAL 18,72,697 THE ASSESSEE FURNISHED ADDRESSES OF ONLY THE PARTIE S SPECIFIED AT SR. NO.2 AND 3 ABOVE. HOWEVER, NOTICES ISSUED U/S 133(6) OF THE AC T TO THESE TWO PARTIES WERE RETURNED UNSERVED BY POSTAL AUTHORITIES. TO A FURTH ER QUERY BY THE AO, SEEKING AGE WISE ANALYSIS AND DETAILS OF SUCH SUNDRY CREDIT ORS ALONG WITH COPIES OF THEIR CONFIRMATION , NAME AND ADDRESS, THE ASSESSEE DID NOT SUBMIT ANY REPLY. IN RESPONSE TO A SHOW CAUSE NOTICE DATED 02-12-2005, T HE ASSESSEE REPLIED VIDE LETTER DATED 15-12-2005 THAT THE AMOUNT OF RS.15,2 6,454/- IS ATTRIBUTED TO CREDITORS FOR CAPITAL GOODS AND THEREFORE, PROVISIO NS OF SECTION 41(1)(A) WERE NOT ATTRACTED. AS REGARDS OTHER TWO CREDITORS FOR AN AM OUNT OF RS.1,38,700/- AND RS.2,07,443/-, THE ASSESSEE CONTENDED THAT EVEN IF PROVISIONS OF SECTION 41 (1) (A) OF THE ACT ARE INVOKED, THERE IS NO SOURCE FROM WHICH TAX LIABILITY WOULD BE DISCHARGED, THE BUSINESS OF THE ASSESSEE HAVING BEE N CLOSED DOWN IN 1999. HOWEVER, THE AO DID NOT ACCEPT THESE CONTENTIONS OF THE ASSESSEE AND ADDED THE AMOUNT OF RS.18,72,597/-, HAVING RECOURSE TO TH E PROVISIONS OF SECTION 41 (1)(A) OF THE ACT ON THE GROUND THAT IN RESPECT OF LIABILITY OF RS. 1,38,700/- AND RS. 2,07,443/- THE BUSINESS OF THE ASSESSEE HAVING CLOS ED IN 1999, THE ASSESSEE AGREED THAT THE PROVISIONS OF SEC. 41(1)(A) ARE APP LICABLE. AS REGARDS LIABILITY FOR THE CAPITAL GOODS, THE ASSESSEE CLAIMED DEPRECIATI ON IN THE FORM OF SUNDRY CREDITORS IN THE EARLIER YEARS AND THEREFORE, A CLE AR BENEFIT ACCRUES TO THE ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 4 ASSESSEE. MOREOVER, THE ASSESSEE HAD SOLD THESE ASS ETS IN EARLIER YEARS, THEREFORE, LIABILITY CEASED TO EXIST, THE AO CONCLU DED . 3. ON APPEAL, WHILE RELYING ON THE DECISIONS IN TH E CASE OF CIT VS CHASE BRIGHT STEEL LTD. (1989) 177 UTR 124, CIT VS KUTTAP PU & SONS (1994) 96 ITR 327 (KER.), CIT VS PRE PRESSED CONCRETE COMPANY PVT . LTD. (1980) 55 CTR 380 (MAD) LIQUIDATOR MYSORE AGENCIES (P) LTD. VS CIT (1 978) 114 ITR 853 (KAR), AMBICA MILLS VS CIT (1964) 54 ITR 167 (GUJ.), KOHIN OOR MILLS LTD. VS CIT (1963) 49 ITR 578, J. K. CHEMICALS LTD. VS CIT (1966) 62 I TR 34 (BOM.), BHAGWATIPRASAD & CO. VS CIT (1975) 99 ITR 111 (ALL) , GANNON DUNKERLY & CO. LTD. VS CIT (1976) 102 ITR 428 (BOM.) AND CIT VS B. N. ELIAS & CO. PVT. LTD. (1987) 160 ITR 45 (CAL) ,THE ASSESSEE CONTENDED THA T INVOCATION OF PROVISIONS OF SECTION 41 (1) (A)OF THE ACT IS NOT IN CONSONANCE W ITH THE PROVISIONS OF THAT ACT AND JUDICIAL VIEW IN THE MATTER. IN VIEW OF THESE S UBMISSIONS, THE LEARNED CIT(A) AFTER ANALYZING VARIOUS DECISIONS MENTIONED ABOVE, CONCLUDED AS UNDER: 6.1 IT WILL BE SEEN THAT THE FOLLOWING WORDS IN S ECTION 41(1) OF THE ACT ARE IMPORTANT: THE ASSESSEE HAD OBTAINE D, WHETHER IN CASH OR ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN R ESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY HIM. IN THIS WAY, IT IS SEEN THAT SECT ION CONTEMPLATES THE OBTAINING BY THE ASSESSEE OF AN AMOUNT EITHER I N CASH OR IN ANY OTHER MANNER WHATSOEVER OF A BENEFIT BY WAY OF REM ISSION OR CESSATION AND IT SHOULD BE A PARTICULAR AMOUNT OBTA INED BY HIM. THUS, THE OBTAINING BY THE ASSESSEE OF A BENEFIT BY VIRTUE OF REMISSION OR CESSATION IS A SINE QUA NON FOR THE AP PLICATION OF THIS SECTION. 6.2 THE CRUCIAL WORDS IN THE SECTION REQUIRE THAT THE ASSESSEE HAS TO OBTAIN ANY CASH OR IN ANY OTHER MAN NER SOME BENEFIT. THESE WORDS HAVE BEEN CONSIDERED BY A FULL BENCH OF HONBLE GUJARAT HIGH COURT IN DETAIL IN THE CASE OF CIT VS BHARAT IRON AND STEEL INDUSTRIES (1993) 199 ITR 67 BY OBSE RVING AS UNDER: IN OUR OPINION, FOR CONSIDERING THE TAXABILITY OF AMOUNT COMING WITHIN THE MISCHIEF OF SECTION 41(1) OF THE ACT, THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS OF NO RELEVANT OR CONSEQUENCE. WE HAVE TO GO BY THE LANGU AGE ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 5 USED IN SECTION 41(1) TO FIND OUT WHETHER OR NOT SO ME BENEFIT IN RESPECT OF TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF WAS OBTAINED BY THE ASSESSEE AND IT IS IN T HE PREVIOUS YEAR IN WHICH THE AMOUNT OR BENEFIT, AS TH E CASE MAY BE, HAS BEEN OBTAINED THAT THE AMOUNT OR THE VA LUE OF THE BENEFIT WOULD BECOME CHARGEABLE TO INCOME-TAX A S INCOME OF THAT YEAR. 6.3 FURTHER IN A LAND MARK JUDGEMENT IN THE CASE O F CIT VS SUGAULI SUGAR WORKS (P) LTD. 236 ITR 518, THE HO NBLE SUPREME COURT HAS APPROVED THE DECISION OF HONBLE GUJARAT HIGH COURT AS DELIVERED IN THE CASE OF CIT VS BHARAT IRON & STEEL INDUSTRIES (SUPRA) AS DISCUSSED ABOVE. 6.4 I, THEREFORE, IN VIEW OF THE SUBMISSION AS MAD E BY THE A. R. AND ALSO THE JUDICIAL FINDINGS AS DISCUSSED A BOVE, HOLD THAT THE TREATMENT OF THE LIABILITY OF RS.18,72,597/-, W HICH IS CONTINUOUSLY SHOWN BY THE APPELLANT COMPANY IN ITS BALANCE SHEET BY THE ASSESSING OFFICER AS CEASED AND BRINGING IT INTO TH E MISCHIEF OF SECTION 41(1) OF THE ACT WAS TOTALLY UNCALLED FOR A ND HAS NO LEGAL SUPPORT AND THEREFORE, THE SAME IS DELETED. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED. 4. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORESA ID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE SUPPORTED THE FINDING S OF THE LEARNED CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. THE PROVISIONS OF S EC. 41(1)(A) STIPULATE THAT WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN TH E ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILIT Y INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, THE ASSESSEE OBTAINS WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPE CT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND G AINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INC OME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WH ICH THE ALLOWANCE OR ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 6 DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEA R OR NOT. UNDISPUTEDLY AND AS FOUND BY THE LD. CIT(A), THE ASSESSEE DID NOT RECEI VE ANY BENEFIT NOR THE AMOUNT HAS BEEN TRANSFERRED TO PROFIT AND LOSS ACCOUNT AND THUS, THE AMOUNT DID NOT BECOME THE ASSESSEE'S OWN MONEY. IN THESE CIRCUMSTA NCES, AS CONCLUDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN BHARAT IRON AND STEEL INDUSTRIES(SUPRA), PROVISIONS OF SEC. 41(1)(A) ARE NOT ATTRACTED. 5.1 HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. SILVER COTTON MILLS CO. LTD., 254 ITR 728(GUJ) HELD THAT SIMPLY BECA USE THE PERIOD OF LIMITATION HAD COME TO AN END FOR THE PURPOSE OF FILING A SUIT FOR RECOVERY OF THE SAID AMOUNT OR FOR TAKING APPROPRIATE ACTION AGAINST THE ASSESSEE, IT CANNOT BE SAID THAT THERE WAS A CESSATION OF LIABILITY. THE LIABILITY STILL R EMAINS, THOUGH IT MAY NOT BE ENFORCEABLE AT LAW ON ACCOUNT OF THE PROVISIONS OF THE LAW OF LIMITATION. RELYING UPON THE DECISION IN THE CASE OF SUGAULI SUGAR WOR KS (P.) LTD. [1999] 236 ITR 518 .SC), HONBLE JURISDICTIONAL HIGH COURT FURTHER HEL D THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE IS A REMISSION OF L IABILITY BY THE CREDITOR, THE LIABILITY SUBSISTS AND, THEREFORE, EVEN IF THE ENTRIES ARE MA DE TO WRITE BACK THE EXPENDITURE, THE AMOUNT SO WRITTEN BACK CANNOT BE A DDED IN THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT. 5.2 HONBLE BOMBAY HIGH COURT IN ANOTHER CASE OF CIT VS. CHASE BRIGHT STEEL LTD.,177 ITR 128(BOMBAY) WHILE RELYING UPON THEIR JUDGMENT IN J. K. CHEMICALS LTD. VS. CIT, [1966] 62 ITR 34 HELD THAT T HE LIABILITY OF AN ASSESSEE DOES NOT CEASE MERELY BECAUSE THE LIABILITY HAS BECOME BARRE D BY LIMITATION. THE LIABILITY CEASES WHEN IT HAS BECOME BARRED BY LIMITATION AND THE ASSESSEE HAS UNEQUIVOCALLY EXPRESSED ITS INTENTION NOT TO HONOUR THE LIABILITY EVEN WHEN DEMANDED. 5.3 HONBLE SUPREME COURT IN THE CASE OF BOMBAY DYEING & MANUFACTURING CO. LTD. V. STATE OF BOMBAY, AIR 1958 SC 328, IN PA RA 23 OF THEIR DECISION OBSERVED AS FOLLOWS : ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 7 ' 23. IT HAS BEEN ALREADY MENTIONED THAT WHEN A DEB T BECOMES TIME BARRED, IT DOES NOT BECOME EXTINGUISHED BUT ONLY UNENFORCEABLE IN A COURT OF LAW. ' 5.4 IN VIEW OF THE FOREGOING, IT IS NOT, THE REFORE, CORRECT TO HOLD THAT THERE WAS CESSATION OF THE LIABILITY OF THE ASSESSEE IN RESPE CT OF THE SAID AMOUNT OF 18,72,597/-, SIMPLY BY REASON OF THE LAW OF LIMITAT ION. IN THE INSTANT CASE,SINCE THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE HAS O BTAINED ANY BENEFIT EITHER BY WAY OF REMISSION OR CESSATION OF ANY LIABILITY WHIL E THE LD. CIT(A)CONCLUDED THAT THE LIABILITY IS CONTINUALLY ADMITTED BY THE ASSESS EE IN THEIR BALALNCESHEET AND THE REVENUE HAVE NOT REFERRED US TO ANY MATERIAL CONROV ERTING THESE FINDINGS OF FACTS RECORDED BY THE LD. CIT(A), WE ARE NOT INCLINED TO HAVE A DIFFERENT VIEW IN THE MATTER. THEREFORE, GROUND NOS.1& 2 IN THE APPEAL OF THE REVENUE ARE DISMISSED. 6. GROUND NO.3 IN THE APPEAL OF THE REVENUE RELATES TO ADDITION OF RS. 2,32,277/- BY WAY OF DISALLOWANCE OF BAD DEBTS. THE AO NOTICED THAT THE ASSESSEE CLAIMED DEDUCTION OF RS. 2,32,277/- ON ACC OUNT OF BAD DEBTS. TO A QUERY BY THE AO, THE ASSESSEE EXPLAINED VIDE LETTER DATED 15-12-2005 THAT THESE BAD DEBTS WERE REPRESENTED BY THE FOLLOWING: A. AMIT YEARN RS. 2,305/- CONFIRMATION ENC LOSED. B. ADON EXPORT HOUSE RS. 1,79,972/- BOM BAY PARTY NOT TRACEABLE C. SILVER EXPORTS RS. 50,000/- -DO- THE ASSESSEE PLEADED THAT IT HAS CLOSED DOWN ITS BU SINESS AND AS SUCH THE ASSESSEE DID NOT HAVE ANY RECORD INCLUDING ADDRESS OF THE SAID PARTIES. SINCE THE ASSESSEE DID NOT EVEN FURNISH THE NATURE OF OUTSTAN DING DEBTS DESPITE OPPORTUNITY PROVIDED NOR CLARIFIED AS TO WHETHER TH E DEBTS WERE TRADING DEBTS OR CAPITAL IN NATURE, THE AO DISALLOWED THE CLAIM FOR DEDUCTION OF THE AFORESAID AMOUNTS. 7. ON APPEAL, THE LEARNED CIT(A) CONCLUDED AS UNDER : 7.4 I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER IN HIS ORDER AND ALSO CAREFULLY WENT THROUGH THE SU BMISSION AS ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 8 MADE BY THE A. R. AND THE JUDICIAL RULINGS RELIED U PON BY HIM. AFTER THE PERUSAL OF THE DETAILS, IT IS SEEN THAT DURING THE YEAR UNDER CONSIDERATION THE BAD DEBTS OF RS.232,277/- OUTSTAN DING IN THE NAMES OF THREE PARTIES WERE WRITTEN OFF AS BAD DEBT S BY THE APPELLANT AFTER CONSIDERING THE SAME AS IRRECOVERAB LE. FURTHER, IT IS ALSO SEEN THAT THE PARTIES WERE ALSO NOT TRACEABLE IN SPITE OF BEST EFFORTS PUT IN BY IT. IT IS A RECOGNIZED FACT THAT IN THE TRADE CIRCLE NO PRUDENT BUSINESS MAN WILL LIKE TO FORGET OR WRITE O FF AN AMOUNT WHICH IS RECOVERABLE FROM ITS DEBTORS. IT IS ALSO A FACT THAT IT IS AFTER BELIEVING THAT CERTAIN DEBTS CANNOT BE RECOVERED FR OM THE DEBTORS IN SPITE OF BEST EFFORTS ONLY THEN, THE BUSINESS WILL RESTART TO WRITING OFF HIS BETS. HERE, FROM THE FACTS OF THE CASE, IT IS S EEN THAT THE VERY PURPOSE OF WRITING OFF OF BAD DEBTS WAS THAT FIRSTL Y, THE PARTIES WERE NOT PAYING BACK THE OUTSTANDING AMOUNTS TO THE APPE LLANT COMPANY AND SECONDLY, IN THE CASE OF SOME DEBTORS EVEN THES E WERE NOT TRACEABLE ALSO AND IN SUCH A SITUATION THERE WAS NO OTHER OPTION AVAILABLE BUT TO WRITE OFF SUCH DEBTS AND CLAIM THE SAME ACCORDINGLY. I, THEREFORE, AFTER ANALYZING THE FACT S OF THE CASE AND ALSO AFTER KEEPING IN VIEW THE JUDICIAL DECISIONS A S RELIED UPON BY THE A. R., HOLD THAT THE DISALLOWANCE OF BAD DEBT S OF RS.232,277/- BY THE ASSESSING OFFICER WAS TOTALLY UNCALLED FOR A ND THEREFORE, THE SAME IS DELETED. IN THE RESULT, THIS GROUND OF APPE AL IS ALLOWED. 8. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORESA ID FINDINGS OF THE LD. CIT(A).AT THE OUTSET, BOTH THE PARTIES AGREED THAT THE ISSUE IS REQUIRED TO BE ADJUDICATED IN THE LIGHT OF THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DHALL ENTERPRISE AND ENGINEERS PVT. LTD . VS. CIT 295 ITR 481 (GUJ). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. IN THIS CASE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE BEFORE THE AO THAT THE DEBTS WERE TRADING IN NATURE AND THAT THE CONDITIONS STIPULATED U/S 36(1)(VII) OF THE ACT WERE FULFILLED. WE FIND THAT THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE BUSINESS OF THE ASSESSEE HAVING BEEN CLOSED , THE ASSESSEE RIGHTLY WROTE OFF THE AMOUNT AND CHARGED TO THE PROFIT AND LOSS ACCOUNT. THE LD. CIT(A) DID NO T CARE TO ASCERTAIN AS TO WHETHER OR NOT THE ENTIRE AMOUNT WAS REFLECTED AS I NCOME IN THE EARLIER YEARS NOR WE HAVE BEEN REFERRED TO ANY SUCH MATERIAL. THE O NUS IS ON THE ASSESSEE TO ESTABLISH THAT HIS CLAIM FALLS WITHIN THE PROVISION S OF SEC. 36(1)(VII) READ WITH SEC. ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 9 36(2) OF THE ACT. IN THIS CONNECTION, HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF DHALL ENTERPRISED AND ENGINEERS P. LTD. V. CIT 295 ITR 481 (GUJ), HELD THAT EVEN IF WE GO BY THE PLAIN READING OF CLAUSE (VII) , THE REQUIREMENT FOR ALLOWING DEDUCTION ON ACCOUNT OF BA D DEBT IS THAT THE BAD DEBT SHOULD BE WRITTEN OFF AS IRRECOVERABLE . MERE DEBITING THE AMOUNT IS NOT SUFFICIENT. THE REQUIREMENT IS TH AT THE ASSESSEE SHOULD ALSO PROVE THAT THE DEBT HAS BECOME BAD IN T HAT PARTICULAR YEAR. AS POINTED OUT RIGHTLY BY THE TRIBUNAL, THERE WAS CORRESPONDENCE REGARDING THE AMOUNT IN QUESTION THA T DUE TO SOME DIFFERENCES THE AMOUNT WAS NOT PAID IN THAT PARTICU LAR YEAR. BUT, WHEN CORRESPONDENCE WAS THERE TO THE EFFECT THAT HE ASSESSEE WAS INSISTING FOR PAYMENT FOR RECOVERY OF THE DEBT, IT CANNOT BE SAID THAT THE DEBT HAS BECOME BAD IN THE RELEVANT ASSESSMENT YEAR. WE, THEREFORE, SEE NO INFIRMITY IN THE ORDER OF THE TRI BUNAL AND WE ANSWER THE FIRST QUESTION AGAINST THE ASSESSEE. 9.1 AS IS EVIDENT FROM THE VIEW TAKEN IN AFORE SAID DECISION, MERELY DEBITING THE AMOUNT IS NOT SUFFICIENT, THE ASSESSEE HAS TO B E PROVE THAT THE DEBT HAS BECOME BAD AND WRITTEN OFF AS IRRECOVERABLE. WE F IND THAT THE ASSESSEE DID NOT FURNISH ANY DETAILS OR EVIDENCE BEFORE THE AO IN SU PPORT OF THEIR CLAIM FOR DEDUCTION OF BAD DEBTS WHILE THE LD. CIT(A) DID NOT HAVE THE BENEFIT OF AFORESAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT NOR WE HAVE BEEN REFERRED TO ANY MATERIAL AS TO WHETHER OR NOT THE ENTIRE AMOUNT WA S REFLECTED AS INCOME IN THE EARLIER YEARS AND HAD BECOME BAD IN THE YEAR UNDER CONSIDERATION. IN VIEW OF THE FOREGOING , WE FIND MERIT IN THE CONTENTIONS OF BOT H THE PARTIES AND THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, VACATE THE F INDINGS OF THE LD. CIT(A) AND RESTORE THE ISSUE BACK TO THE FILE OF THE AO WITH T HE DIRECTIONS TO RE-EXAMINE THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE , KEEPING IN VIEW, INTER ALIA, THE AFORESAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DHALL ENT ERPRISED AND ENGINEERS P. LTD.(SUPRA). WITH THESE DIRECTIONS, GROUND NO. 3 I N THE APPEAL OF THE REVENUE IS DISPOSED OF. 10. ADVERTING NOW TO THE APPEAL OF THE ASSESSEE, TH E AO NOTICED THAT IN THE COMPUTATION OF INCOME THE ASSESSEE CLAIMED SET OFF OF BROUGHT FORWARD SHORT ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 10 TERM CAPITAL LOSS OF RS. 11,69,559/- FROM ASSESSMEN T YEAR 2000-01. ON VERIFICATION OF RELEVANT ASSESSMENT RECORDS FOR TH E AY 2000-01, THE AO NOTICED THAT NO SUCH SHORT TERM CAPITAL LOSS WAS CLAIMED TO BE CARRIED FORWARD NOR THE AO ALLOWED ANY SUCH CARRY FORWARD, THE RETURN OF INCOM E HAVING BEEN FILED ONLY ON 24-01-2001. TO A QUERY BY THE AO, THE ASSESSEE CLAR IFIED THAT DUE TO TYPOGRAPHICAL ERROR, THE ASSESSMENT YEAR WAS MENTI ONED AS 2000-01 INSTEAD OF 2001-02. SINCE THE RETURN FOR AY 2001-02 WAS ALSO F ILED ON 3-01-2002 I.E BEYOND THE TIME STIPULATED U/S 139(1) OF THE ACT ,THE AO D ISALLOWED THE CLAIM FOR SET OFF OF SHORT TERM CAPITAL LOSS OF THE AY 2001-02. 11. ON APPEAL, THE LEARNED CIT(A) REJECTED THE CLAI M OF THE ASSESSEE, HOLDING AS UNDER: 8.3 I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER AS DISCUSSED BY HIM IN HIS ASSESSMENT ORDER AND ALS O CAREFULLY WENT THROUGH THE SUBMISSION AS MADE BY THE A. R. AN D THE JUDICIAL FINDINGS RELIED UPON BY HIM. IT IS PERTINENT TO MEN TION HERE THAT THE FINDINGS OF HONBLE KERALA HIGH COURT IN THE CASE O F JOSEPH RAJAPPAN (SUPRA) WAS BASED ON THE FINDINGS OF HONB LE SUPREME COURT OF INDIA IN THE CASE OF CIT VS KULU VALLEY TR ANSPORT PVT. LD. (SUPRA) BUT HOWEVER, LATER ON, DUE TO THE DIRECT TA X LAWS (AMENDMENT) ACT, 1989 W.E.F. A. Y. 1989-90, THE FIN DINGS OF THE HONBLE COURT HAS BEEN NEGATED. BUT THIS, AMENDMENT , IT HAS BEEN DECIDED BY THE LEGISLATURE THAT NO LOSS WHICH HAS N OT BEEN CLAIMED IN PURSUANCE OF A RETURN FILED IN ACCORDANCE WITH T HE PROVISIONS OF SUB SECTION (3) OF SECTION 139 SHALL BE ALLOWED FOR CARRIED FORWARD AND THUS, THERE IS NO LONGER ANY DOUBT THAT THE PRO VISION OF SECTION 139(3) OF THE ACT WOULD PREVAIL OVER THE SAID SECTI ON 139(4). FURTHER THE PROVISIONS OF SECTION 80 CANNOT BE TREATED TO H AVE AN OVERRIDING EFFECT ON THE PROVISIONS OF SECTION 139(3) OF THE A CT BECAUSE SECTION 80 DISCUSSES ABOUT SPECIAL DEDUCTIONS OF CH APTER VI OF THE ACT WHEREIN THE ASSESSEES HAVE BEEN ALLOWED CERTAIN CONCESSIONS WITH REGARD TO THEIR TRADING ACTIVITIES. 8.4 AGAIN, AFTER GOING THROUGH THE DECISION OF HON BLE INDORE ITAT IN THE CASE OF JAGDISH MALPANI VS ACIT 94 TTJ (INDORE) (SUPRA) AS RELIED UPON BY THE A. R., IT IS SEEN THAT THE FACTS OF THE CASE OF THE ASSESSEE BEFORE THE HONBLE ITA T, INDORE ARE TOTALLY DISTINGUISHABLE FROM THE FACTS OF THE CASE OF THE APPELLANT BEFORE ME. IN THE CASE OF JAGDISH MALPANI, THERE WE RE CERTAIN REASONS BEYOND HIS POWER AND CONTROL WHICH RESULTED INTO DELAY IN ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 11 FILING THE RETURN OF LOSS WHEREAS IN THE CASE OF TH E APPELLANT NO SUCH SITUATION WAS FOUND IN EXISTENCE. DURING THE APPELL ATE PROCEEDINGS, THE A.R. ALSO DID NOT POINT OUT ANY SUCH EMERGENT S ITUATION WHICH COULD PREVENT HIM FROM NOT FILING ITS RETURN OF LOS S IN TIME AS PER THE PROVISIONS OF SECTION 139(1) OF THE I. T. ACT. 8.5 I, THEREFORE, IN VIEW OF THE ABOVE FACTS, HOLD THAT THE FINDINGS OF THE ASSESSING OFFICER IS LEGALLY CORREC T IN VIEW OF THE EXPRESS PROVISION OF SECTION 139(3) OF THE I. T. AC T AND ACCORDINGLY CONFIRM THE DISALLOWANCE OF CLAIM OF THE APPELLANT COMPANY REGARDING CARRIED FORWARD SHORT TERM CAPITAL LOSS A T RS.11,69,554/-. IN THE RESULT, THIS GROUND OF APPEAL IS DISMISSED. 12. THE ASSESSEE IS NOW IN APPEAL AGAINST THE AFORE SAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON BEHALF OF THE ASS ESSEE RELIED UPON THEIR SUBMISSIONS BEFORE THE LEARNED CIT(A) WHILE THE LEA RNED DR SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE RELEVANT PROVISIONS OF SECTION 80 OF THE ACT , READ AS UNDER: NOTWITHSTANDING ANYTHING CONTAINED IN THIS CHAPTER , NO LOSS WHICH HAS NOT BEEN DETERMINED IN PURSUANCE OF A RETURN FI LED [IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (3) O F SECTION 139], SHALL BE CARRIED FORWARD AND SET OFF UNDER SUB-SECT ION (1) OF SECTION 72 OR SUB-SECTION (2) OF SECTION 73 OR SUB-SECTION (1) [OR SUB- SECTION (3)] OF SECTION 74 [OR SUB-SECTION (3) OF S ECTION 74A] UNDER SUB-SECTION (3) OF SECTION 143 OF THE ACT, T HERE HAS TO BE DETERMINATION OF NOT ONLY THE TOTAL INCOME BUT ALSO THE LOSS, AS OBS ERVED BY THE HONBLE APEX COURT IN CIT V. DALMIA CEMENT (BHARAT) LTD. [1995] 216 ITR 79 . THE AFORESAID PROVISIONS OF SECTION 80 START WITH A NON OBSTANTE CLAUSE. THE SAID PROVISION SPECIFICALLY STATES THAT NOTWITHSTANDING ANYTHING C ONTAINED IN THE CHAPTER, I.E., CHAPTER VI, NO LOSS WHICH HAS NOT BEEN DETERMINED I N PURSUANCE OF A RETURN FILED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 139 SH ALL BE CARRIED FORWARD AND SET OFF UNDER SUBSECTION (1) OF SECTION 72 OR SUB-SECTI ON (2) OF SECTION 73 OR SUB- SECTION (1) OR SUB-SECTION (3) OF SECTION 74 OR SUB-SECTION (3) OF SECTION 74A. SECTION 72 DEALS WITH CARRY FORWARD AND SET-OFF OF BUSINESS LOSSES. SINCE SECTION ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 12 80 STARTS WITH A NON OBSTANTE CLAUSE AND TAKES WITH IN ITS AMBIT ANY OTHER PROVISION AS CONTAINED IN THE CONCERNED CHAPTER, I. E., CHAPTER VI, OBVIOUSLY IT IS FULLY OPERATIONAL IN RESPECT OF ALL THE MATTERS C OVERED. AS OBSERVED BY THE HONBLE APEX COURT IN T. R. THANKUR V. UNION OF IND IA AIR 1996 SC 1643, A NON OBSTANTE CLAUSE IS USED AS A LEGISLATIVE DEVICE TO MODIFY THE AMBIT OF THE PROVISION OR LAW MENTIONED IN THE NON OBSTANTE CLAU SE OR TO OVERRIDE IT IN SPECIFIED CIRCUMSTANCES. A CLAUSE BEGINNING WITH, N OTWITHSTANDING ANYTHING CONTAINED IN THIS ACT OR IN PARTICULAR PROVISION IN THE ACT OR IN SOME PARTICULAR ACT OR IN ANY LAW FOR THE TIME BEING IN FORCE IS APPEND ED TO A SECTION IN THE BEGINNING WITH A VIEW TO GIVE THE ENACTING PART THEREOF IN CA SE OF CONFLICT, AN OVERRIDING EFFECT OVER THE PROVISION OR ACT MENTIONED IN THE N ON OBSTANTE CLAUSE. IT IS EQUIVALENT TO SAYING THAT IN SPITE OF THE PROVISION OR THE ACT, MENTIONED IN THE NON OBSTANTE CLAUSE, THE ENACTMENT FOLLOWING IT WILL HA VE ITS FULL OPERATION OR THAT THE PROVISIONS EMBRACED IN THE NON OBSTANTE CLAUSE WILL NOT BE AN IMPEDIMENT FOR THE OPERATION OF THE ENACTMENT [ ORIENT PAPER AND INDUS TRIES LTD. V. STATE OF ORISSA, AIR 1991 SC 672 ; PARAYANKANDIYAL ERAVATH KANAPRAVA N KALLIANI AMMA (SMT.) V. K. DEVI, AIR 1996 SC 1963]. IN VIEW OF THE FOR EGOING AND IN THE LIGHT OF THE AFORESAID SPECIFIC PROVISIONS OF SEC. 80 OF THE ACT , ESPECIALLY WHEN THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT POINT OUT ANY INFIRM ITY IN THE FINDINGS OF THE LD. CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS FINDINGS . THEREFORE, GROUND NO.2 IN THE APPEAL OF THE ASSESSEE IS DISMIS SED 14. GROUNDS NOS. 4 AND 5 IN THE APPEAL OF THE REVE NUE AND GROUND NOS. 1 & 3 IN THE APPEAL OF THE ASSESSEE ,BEING GENERAL IN N ATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HA S BEEN RAISED IN TERMS OF RESIDUARY GROUND IN THE APPEAL OF THE ASSESSEE, ALL THESE GROUNDS ARE DISMISSED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED WHILE THAT OF THE ITA NO.723 AND 1680/AHD/2006 M/S. MIRAA PROCESSORS PVT. LTD. 13 REVENUE IS PARTLY ALLOWED, BUT FOR STATISTICAL PUR POSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH SEPTEMBER,2009 SD/- SD/- (R. V. EASWAR) (A.N. PAHUJA) VICE PRESIDENT ACCOUNTANT MEMBER DATE; 18TH SEPTEMBER,2009 LAKSHMIKANT/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE 2. THE INCOME TAX OFFICER,WARD -1(3),SURAT 3. CIT(A)-I,SURAT 4. THE CIT CONCERNED 5. THE D.R. ITAT, AHMEDABAD, 6. GUARD FILE BY ORDER DR / AR, ITAT, AHMEDABAD