ROWEENA M. BHATIA, MUMBAI V. ACIT 19(3), MUMBAI

ITA 811/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2506 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 04-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2014
• Court: TRIBUNAL
• Assessee Lawyers: BHUPEN SHAH
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & PAWAN SINGH (JM) I.T.A. NO. 811 /MUM/ 20 1 4 (ASSESSMENT YEAR 200 9 - 1 0 ) MISS ROWEENA M. BHATIA 14, FLEMINGO CHS ST. ALLEXIUS ROAD BANDRA WEST MUMBAI - 400 050. VS. ACI T 19(3) PIRMAL CHAMBER PAREL MUMBAI - 400 012. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAEPB6380L ASSESSEE BY SHRI BHUPEN SHAH DEPARTMENT BY SHRI NITIN WAGHMODE DATE OF HEARING 12 . 7 . 201 6 DATE OF PRONOUNCEMENT 20. 7 . 201 6 O R D E R PER B.R. BAS KARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18.11.2013 PASSED BY LEARNED CIT(A) - 18, MUMBAI AND IT RELATES TO A.Y. 2009 - 10. 2. S OLITARY ISSUE URGED IN THIS APPEAL RELATES TO ADDITION OF ` 7,77,430/ - ON ACCOUNT OF P ROFESSIONAL/TECHNICAL RECEIPT S . THE ASSESSEE IS PRO VIDING WEB DESIGNING SERVICES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE PROFESSIONAL RECEIPT S DECLARED BY THE ASSESSEE WAS ` 48,21,947/ - . HOWEVER, FROM THE TDS C ERTIFICATE S FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE GROSS AMOUNT OF PROFESSIONAL RECEIPTS WORKED OUT TO ` 55,99,375/ - . HENCE, THE ASSESSING OFFICER ASKED THE ASSESSEE TO CLARIFY THE DIFFERENCE OF ` 7,77,428/ - . 3. THE ASSESSEE SUB MITTED THAT S HE HAD RAISED BILL OF ` 13.84 LAKHS AGAINST MIDDLE EAST HOTEL PVT. LTD. , BUT SHE COULD RECOVER ONLY A SUM OF ` 4.50 LAKHS MISS ROWEENA M. BHATIA 2 AND HENCE SHE WAS CONSTRAINED TO WRITE OFF THE BALANCE AMOUNT OF ` 9.34 LAKHS. HOWEVER, THE SAID WRITE OFF WAS REDUCED FR OM THE GROSS PROFESSIONAL RECEIPT S INSTEAD OF CLAIMING THE SAME SEPARATELY AS BAD DEBTS. HOWEVER, THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE HAS FAILED TO SATISFY THE CONDITION S PRESCRIBED U/S. 36(2) AND 36(1)(VII) OF THE ACT BY HOLDING THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE DEBTS HAS ACTUALLY BECAME BAD. ACCORDINGLY , HE ADDED THE DIFFERENCE AMOUNT OF ` 7,77,428/ - REFERRED ABOVE TO THE INCOME OF THE ASSESSEE. 4. LEARNED CIT(A) ALSO CONFIRMED THE SAME BY FURTHER HOLDING THAT THE ASSESS EE HAS FAILED TO SHOW THAT THE AMOUNT SO WRITTEN OFF AS BAD DEBT H AS NOT BEEN OFFERED AS INCOME IN THE EARLIER YEARS. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. L EARNED AR INVITED OUR ATTENTION TO COPY OF LEDGER ACCOUNT OF PROFESSIONAL FEE RECEIPT S PLACED AT PAGE NO. 44 - 45 OF THE PAPER BOOK AND ALSO COPY OF MIDDLE EAST HOTEL PVT. LTD. PLACED AT PAGE NO. 43 OF THE PAPER BOOK. LEARNED AR SUBMITTED THAT THE ASSESSEE HAS CREDITED ACCOUNT O F MIDDLE EAST HOTEL PVT. LTD. WITH A SUM OF ` 8 ,17,721/ - AND DEBITED ACCOUNT OF PROFESSIONAL FEE WITH A SUM OF ` 7,77,428/ - WITH NARRATION THAT THE AMOUNT HAS BEEN WRITTEN OFF DUE TO DISPUTE AND NOT REALISED. LEARNED AR SUBMITTED THAT THE DIFFERENCE BETWEE N TWO REPRESENTS SERVICE TAX PAYABLE AND SAME HAS BEEN DEBITED TO SERVICE TAX ACCOUNT. ACCORDINGLY, LEARNED AR SUBMITTED THAT THAT THE ASSESSEE HAS REVERSED A PART OF BILL RAISED ON MIDDLE EAST HOTEL PVT. LTD. BY DEBITING PROFESSIONAL FEE RECEIPT S ACCOUNT INSTEAD OF DEBITING THE SAME TO BAD DEBTS ACCOUNT. HE ALSO SUBMITTED THAT PROVISIONS OF SECTION 36(2)(I) STAT E S THAT THE AMOUNT SO WRITTEN OFF SHOULD HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT IS WRITTEN OFF OR AN EARLIER YEAR. ACCORDINGLY THE LD AR SUBMITTED THAT THE DECLARATION OF INCOME DURING THE CURRENT YEAR ALSO WOULD SATISFY THE CONDITIONS PRESCRIBED IN SEC. 36(2)(I) OF THE ACT. LEARNED AR FURTHER SUBMITTED THAT THE ASSESS EE HAS CREDITED MISS ROWEENA M. BHATIA 3 PR OFESSIONAL FEE RECEIPT S WITH FULL AMOUNT OF BILL BASED UPON MIDDLE EAST HOTEL PVT. LTD. AND AGAIN DEBITED PROFESSIONAL FEE A CCOU NT WITH THE AMOUNT WRITTEN OFF AND HENCE PROVISIONS OF SECTION 36(2)(I) HAS BEEN DULY COMPLIED BY THE ASSESSEE . 6. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT OFFERED AMOUNT SO WRITTEN OFF BY HIM IN THE COMPUTATION OF INCOME AND HENCE LEARNED CIT(A) HAS CONFIRMED THE DISALLOWANCE. 7. HAVING HEARD THE RIVAL SUBMISSIO NS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE. THE AMOUNT RECEIVABLE FROM MIDDLE EAST HOTEL P. LTD. HAS BEEN CREDITED TO THE PROFESSIONAL FEE AMOUNT AT THE FIRST INSTANCE. SUBSEQUENTLY, WHEN THE ASSESSEE FOUND THAT A PART OF THE BILL AMOUNT IS NOT REALIS ABLE , THE ASSESSEE HAS DEBITED PROFESSIONAL FEE ACCOUNT BY THE AMOUNT NOT SO REALISABLE AN D CREDITED THE CONCERNED PARTYS ACCOUNT. THE A CCOUNTING ENTRY SO PASSED BY THE ASSESSEE MAY ALSO BE INTERPRETED AS A CASE OF OFFERING D ISCOUNT TO THE CLIENT . EVEN IF IT IS CONSIDERED AS BAD DEBT, THE FACT THAT THE ASSESSEE HAS CREDITED ENTIRE BILL AMOUNT TO THE PROFESSIONAL FEE ACCOUNT, IN OUR VIEW , WOULD SATISFY THE REQUIREMENT S OF SECTION 36(2)(I) OF THE ACT. ACCORDINGLY, WE ARE OF TH E VIEW THAT THE IMPUGNED CLAIM IS ALLOWABLE AS DEDUCTION AND HENCE WE DO NOT FIND MERIT IN THE ADDITIONS MADE BY THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 7,77, 428/ - . 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 20 .7.2016 SD/ - SD/ - (PAWAN SINGH) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 20 / 7 / 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT MISS ROWEENA M. BHATIA 4 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS