Dr. Sabharwal's Manufacturing Labs Ltd., Kanpur V. Asstt. Commissioner of Income Tax-VI, Kanpur

ITA 786/LKW/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78551 (ITAT-LUCKNOW)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-05-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 17-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: GOVIND KRISHAN
• Keywords: Bad and doubtful debts

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.786/LKW/2013 ASSESSMENT YEAR:2001 - 02 DR. SABHARWALS MANUFACTURING LABS LTD., 117/H - 2/160 PANDU NAGAR, KANPUR. VS. A.C.I.T., RANGE - VI, KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI GOVIND KRISHAN, C. A. RESPONDENT BY SHRI ALOK MITRA, D. R. DATE OF HEARING 20/05/2014 DATE OF PRONOUNCEMENT 1 3 /06/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A) - I, KANPUR DATED 20 TH SEPTEMBER, 2013 FOR ASSESSMENT YEAR 2001 - 2002. 2. THE GROUND RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE LEARNED CIT ( APPEAL) I HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF LEARNED ASSESSING OFFICER, IMPOSING THE PENALTY U/ S 271 ( 1 )(C) OF THE INCOME TAX ACT IN RESPECT OF DISALLOWANCE OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF A/C. 2. THAT THE LEARNED CIT (APPEAL S) I HAS FURTHER ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE WRITTEN SUBMISSION FILED DURING THE COURSE OF APPELLATE PROCEEDINGS. 3. THAT THE LEARNED CIT (APPEALS) I HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT NO PENALTY IS LEVIA BLE IN THE CASES WHERE THE ISSUE INVOLVED IN THE PENALTY IS DEBATABLE ISSUE. 2 4. THAT THE LEARNED CIT (APPEALS) I HAS FURTHER ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAS ACTED IN BONA FIDE MANNER AND DISCLOSED ALL THE FACT S RELATING TO AND MATERIAL TO COMPUTATION OF INCOME AND THEREFORE THE APPELLANT IS OUTSIDE THE PREVIEW OF EXPLANATION (1) TO SECTION 271 (1) (C ) OF THE ACT. 5. THAT THE ORDER OF LEARNED CIT (APPEALS) I, SO FAR AS IT RELATES TO CONFIRMING THE IMPOSITION OF PENALTY IN RESPECT OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF A/CS, IS ERRONEOUS AND THEREFORE THE SAME IS LIABLE TO BE DELETED AND THEREBY PENALTY IMPOSED BE DROPPED. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS PENALTY WAS IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A) IN RESPECT OF TWO DISALLOWANCES. HE POINTED OUT THAT ONE DISALLOWANCE IS OF RS.1,70,703/ - ON ACCOUNT OF BAD DEBTS WRITTEN OFF AND THE SECOND IS OF RS.55,000/ - , WHICH IS DISALLOWED BY THE ASSESSING OFFICER OUT OF SOFTWARE DEVELOPMENT EXPENSES. HE SUBMITTED THAT BOTH THESE ISSUES ARE DEBATABLE ISSUES AND THEREFORE, PENALTY IS NOT JUSTIFIED. 4. AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION S. WE FIND FORCE IN THE SUBMISSIONS OF LEARNED A.R. OF THE ASSESSEE. THE FIRST ISSUE IS REGARDING DISALLOWANCE OF CLAIM OF THE ASSESSEE REGARDING WRITE OFF OF BAD DEBTS OF RS.1,70,703/ - . THIS CLAIM WAS DISALLOWED ON THE BASIS THAT SINCE THE ASSESSEE WAS MAKING SALES AND REALIZING PAYMENTS FROM ITS CUSTOMER DURING THIS YEAR ALSO, WRITE OFF OF BAD DEBTS IS NOT ALLOWABLE. WE ARE OF THE CONSIDERED OPINION THAT AS PER THE AMENDED PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, IF THE BAD DEBTS HAVE BEEN WRITTEN OFF IN THE BOOKS, THE SAME IS ALLOWABLE. UNDER THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT AT LEAST PENALTY IS NOT JUSTIFIED IN RESPECT OF THIS DISALLOWANCE. SIMILARLY, THE SECOND DISALLOWANCE OUT OF 3 SOFTWARE DEVELOPMENT IS DISALLOWANCE OF A DEBA TABLE NATURE BECAUSE WHETHER THE EXPENDITURE IS CAPITAL OR REVENUE IS ALWAYS A DEBATABLE ISSUE AND FOR SUCH DISALLOWANCE, PENALTY IS NOT JUSTIFIED. UNDER THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE PENALTY IS NOT SUSTAINABLE. WE, THEREFORE, DE LETE THE PENALTY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 /06/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR