A.C.I.T. CENTRAL CIRCLE-20, MUMBAI V. C.M.S. SECURITIES LTD., MUMBAI

ITA 7531/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4045 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Depreciation; Bad and doubtful debts; Revised return
• Section: 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . . , , BEFORE SHRI B.R. MITTAL, JM AND SHRI RAJENDRA, AM ./I.T.A. NO.7531/MUM/2011 ( / ASSESSMENT YEAR: 2008-09) DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-20, ROOM NO.402, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S C.M.S. SECURITIES LTD. , 201, ARCADIA, NARIMAN POINT, MUMBAI-400021. ./ ./PAN/GIR NO. : AAACC9734C ( ! /APPELLANT ) .. ( ' ! / RESPONDENT ) ! / APPELLANT BY : SHRI MOHIT JAIN ' ! $ /RESPONDENT BY : SHRI PRAKASH K.JOTWANI $ ( / DATE OF HEARING : 18.07.2013 $ ( /DATE OF PRONOUNCEMENT : 26.07.2013 / O R D E R PER B.R.MITTAL JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSM ENT YEAR 2008-09 AGAINST THE ORDER OF LD. CIT(A) DATED 9.8.2011 ON FOLLOWING GRO UNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION OF BAD DEBTS OF RS.1,87,70,011/- AS AGAINST CLAIM OF BAD DEBT OF RS.1,04,78,436/- MADE IN THE RETURN OF INCOME WHEN THE ASSESSEE HAD FAILED TO CLAIM SUCH DEDUCTIO N BY FILING REVISED RETURN OF INCOME U/S 139 OF THE INCOME TAX ACT 2. AO STATED THAT DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE ASSESSEE SUBMITTED THAT IN THE PROFIT AND LOSS ACCOUNT, BAD DEBTS WRITTEN OFF HAS BEEN SHOWN ON THE NET BASIS AMOUNTING TO RS.1,04,78,436/-, BRE AK OF WHICH IS AS UNDER : BAD DEBTS WRITTEN OF RS.1,87,70,011 /- LESS : PROVISION FOR DOUBTFUL DEBS RS.82,91,575/- I.T.A. NO.7531/MUM/2011 2 ASSESSEE STATED THAT BAD DEBTS SHOULD HAVE BEEN CL AIMED ON GROSS BASIS AS THE PROVISION OF DOUBT DEBTS OF RS.82,91,575/- AS PRO VISIONS HAD BEEN DISALLOWED IN THE EARLIER YEARS. ASSESSEE REQUESTED, AT THE TIME OF ASSESSMENT TO INCREASE THE CLAIM OF BAD DEBTS WRITTEN OFF BY RS.82,91,575/-. THE AO D ID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT TO ENHANCE THE CLAIM O F BAD DEBTS, THE ASSESSEE IS REQUIRED TO FILE REVISED RETURN AS PER THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. V/S CIT REPORTED IN 284 ITR 323 (SC). SINCE NO REVISED RETURN HAS BEEN FILED BY THE ASSESSEE TO ENHANCE TH E CLAIM OF BAD DEBT, AO DID NOT INCREASE THE CLAIM OF BAD DEBT ACCORDINGLY. ASSESS EE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. LD. CIT(A) HAS STATED THAT THE ASSESSEE HAS FILE D THE STATEMENT OF ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS WHICH HE HAS EXTRACTED IN PARA 4 OF THE IMPUGNED ORDER. ASSESSEE STATED BEFORE LD. CIT(A) THAT ACTUAL DEBT S WRITTEN OFF IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION IS RS.1,87,70,011/ AND THERE IS A MISTAKE IN THE RETURN OF INCOME. LD. CIT(A) CONSID ERED THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT EVEN IF THE CLAIM IS NOT MADE IN THE RETURN OF INCOME AND IT IS MADE BEFORE THE FIRST APPELLANT AUTHORITY, THE CLAIM CAN BE ENTERTAINED. THE FIRST APPELLATE AUTHORITY REFERRED THE DECISION OF THE THIRD MEMBE R OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF JCIT V/S HERO HONDA FINLEASE LTD REP ORTED IN 115 TTJ (DEL) TM 752, WHEREIN THE TRIBUNAL HAS HELD AS UNDER : I HAVE CAREFULLY CONSIDERED THE QUESTIONS, THE OR DERS OF THE IT AUTHORITIES AND THE RIVAL CONTENTIONS. THE PRECISE DIFFERENCE BETWE EN THE TWO LEARNED MEMBERS IS REGARDING THE QUESTION WHETHER THE CIT(A) OUGHT TO HAVE FIRST DECIDED THE QUESTION OF ENTERTAINABILITY OF THE ASSESSEE'S HIGH ER CLAIM OF DEPRECIATION BY A LETTER AND NOT BY A REVISED RETURN, BEFORE DECIDING THE MERITS OF THE CLAIM. IN GOETZE ( INDIA) LTD. V. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC), THE SUPREME COURT HELD THAT THE ASSESSEE CAN MAKE A CLAIM FOR DEDUCTION, WHICH HAS NOT BEEN CLAIMED IN THE RETURN, ONLY BY FILING A REVISED RETURN WITHIN THE TIME ALLOWED. IN THE SAME DECISION, IT WAS MADE CLEAR TH AT THE POWER OF THE TRIBUNAL TO ADMIT AN ADDITIONAL GROUND UNDER S. 254 IS NOT A FFECTED BY ITS DECISION. IT WAS HOWEVER CLARIFIED THAT THE CASE WAS CONCERNED WITH ONLY THE POWER OF THE ASSESSING AUTHORITY AND NOT THE APPELLATE AUTHORITY . UNDER S. 250(5), THE CIT(A) HAS THE POWER TO ALLOW THE APPELLANT TO GO INTO ANY GROUND OF APPEAL NOT SPECIFIED IN THE GROUNDS OF APPEAL IF HE SATISFIED THAT THE OMISSION OF THE GROUND FROM THE FORM OF APPEAL WAS NOT WILLFUL AND UNREASO NABLE. DEALING WITH SUCH A POWER, THE BOMBAY HIGH COURT IN CIT V. PRABHU STEEL INDUSTRIES (P) LTD. (1988) 171 ITR 530 (BOM), HELD THAT WHERE A CLAIM FOR SPEC IAL DEDUCTION WAS MADE BY THE ASSESSEE NOT IN HIS RETURN BUT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS AND THE ITO FAILED TO CONSIDER THE SAME, IT WAS OPE N TO THE AAC TO ENTERTAIN THE CLAIM. IN CIT V. KANPUR COAL SYNDICATE (1964) 53 IT R 225 (SC), IT WAS HELD BY THE SUPREME COURT THAT THE POWERS OF THE CIT(A) SIT TING IN APPEAL OVER AN I.T.A. NO.7531/MUM/2011 3 ASSESSMENT WERE PLENARY AND CONTERMINOUS WITH THOSE OF THE AO AND THAT HE CAN DO WHAT THE ITO CAN DO AND ALSO DIRECT HIM TO D O WHAT HE HAS FAILED TO DO. IN THE LIGHT OF THE LAW LAID DOWN IN THIS JUDGMENT BY THE SUPREME COURT, IT WAS OPEN TO THE CIT(A) TO CONSIDER THE ASSESSEE'S CLAIM ON MERITS BY VIRTUE OF HIS CO- EXTENSIVE POWER OVER THE ASSESSMENT PROCEEDINGS AND ALSO BY VIRTUE OF S. 250(5). THAT APART, THE JUDGMENT OF THE SUPREME COU RT IN GOETZE (SUPRA) IS DISTINGUISHABLE ON FACTS BECAUSE IN THAT CASE THE C LAIM WAS MADE FOR THE FIRST TIME IN THE LETTER FILED BY THE ASSESSEE IN THE COU RSE OF THE ASSESSMENT PROCEEDINGS WHEREAS IN THE PRESENT CASE THE CLAIM O F DEPRECIATION ON THE TRUCKS @ 20 PER CENT WAS ALREADY MADE IN THE RETURN OF INC OME AND IT WAS MERELY ENLARGED TO 40 PER CENT ON THE FOOTING THAT THE ASS ESSEE WAS RUNNING THE TRUCKS ON HIRE. IT CANNOT BE SAID TO BE AN ENTIRELY NEW CL AIM MADE FOR THE FIRST TIME IN THE LETTER FILED BY THE ASSESSEE IN THE COURSE OF T HE ASSESSMENT PROCEEDINGS. THE CIT(A) THEREFORE COMMITTED NO ERROR IN DEALING WITH THE ASSESSEE'S APPEAL ON MERITS. MOREOVER, THE AO HIMSELF HAS EXAMINED THE C LAIM ON MERITS THOUGH HE EARLIER HELD THAT THE CLAIM WAS NOT ENTERTAINABLE A ND THE LETTER WAS NON EST. A DECISION HAVING BEEN GIVEN BY HIM ON MERITS IT WAS OPEN TO THE CIT(A) TO DEAL WITH THE MERITS. I, THEREFORE, AGREE WITH THE LEARN ED AM THAT THE C1T(A) WAS NOT PRECLUDED FROM DEALING WITH THE ASSESSEE'S CLAIM FO R HIGHER DEPRECIATION ON MERITS. 4. L.D CIT(A) HAS STATED THAT THE FACTS IN THE CASE BEFORE HIM ARE SIMILAR TO THE ABOVE MENTIONED DECISION AND ACCORDINGLY ALLOWED TH E CLAIM OF RS.1,87,70,011/- AS BAD DEBTS AMOUNT ACTUALLY WRITTEN OFF BY THE ASSESSEE. HENCE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 5. DURING THE COURSE OF HEARING LD.DR RELIED ON TH E ORDR OF THE AO AND WHEREAS LD.AR RELIED ON THE ORDER OF LD. CIT(A). HE FURTHE R SUBMITTED THAT THE ASSESSEE ACTUALLY WRITTEN OF AMOUNT OF RS.1,87,70,011/- AS BAD DEBTS AND THE PROVISIONS MADE IN THE EARLIER YEAR OF THE AGGREGATE AMOUNT OF RS.82,91,5 75/- HAD BEEN DISALLOWED IN THE EARLIER YEAR. 6. THE ABOVE FACTS HAVE NOT BEEN DISPUTED BY LD.DR THAT THE ASSESSEE HAS ACTUALLY WRITTEN OFF IN THE ASSESSMENT YEAR UNDER CONSIDERAT ION AS BAD DEBTS OF RS.1,87,70,011/-. THE HONBLE APEX COURT IN THE CA SE OF T.R.F. LTD. V/S CIT (2010) 323 ITR 397 (SC) HAS HELD THAT W.E.F. 1-4-1989, IT IS ENOUGH IF BAD DEBT IS WRITT EN OFF AS IRRECOVERABLE IN ACCOUNTS OF ASSESSEE TO SATISFY TH E CONDITION OF SECTION 36(1)(VII) OF THE INCOME-TAX ACT, 1961. IN VIEW OF THE ABOVE AMENDMENT W.E.F. 1-4-1989 TH E ASSESSEE IS ENTITLED TO CLAIM DEDUCTION AS IT WOULD SATISFY THE PURPOSE OF THE ACT. IN VIEW OF ABOVE, IN THE FACTS OF CASE, WE UPHOLD THE ORDER OF LD. CIT(A) AND REJECT GROUND OF APPEAL TAKEN BY THE DEPARTMENT. HENCE, APPEAL OF TH E DEPARTMENT IS DISMISSED. I.T.A. NO.7531/MUM/2011 4 7. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED AFTER HEARING LD. REPRESENTATIVE OF THE PARTIES IN THE OPEN COURT ON 26TH JULY, 2013 $ / 0 26 TH JULY, 2013 $ SD SD (RAJENDRA) (B.R. MITTAL) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 0 DATED 26/07/2013 . . ./ SRL , SR. PS ! '! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. ' ! / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 5 '7 , ( 7 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI