Shri Prashant Subhash Bedmutha, Sangli V. JCIT, Range-2, Sangli

ITA 873/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9735 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 20-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MISHRA
• Keywords: Bad and doubtful debts
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ITA.NO.873/PN/2011 (ASSTT. YEAR : 2006-07) PRASHANT SUBHASH BEDMUTHA, PROP. NEW PASHIM MAH. PATRA DEPOT, GAT NO.723/304, BHUDHGAON ROAD, MADHAVNAGAR, SANGLI. PAN: ABVPB4014D .. APPELLANT VS. JCIT, RANGE-2, SANGLI. .. RESPONDENT APPELLANT BY : SHRI KISHORE PHADKE RESPONDENT BY : SHRI ALOK MISHRA DATE OF HEARING : 10.08.2012 DATE OF PRONOUNCEMENT : 22.08.2012 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) ON FOLLOWING GROUNDS: 1. LEARNED CIT(A) HAS ERRED IN LAW & IN FACT IN CONFIR MING DISALLOWANCE OF CLAIM OF BAD DEBTS. A. WITHOUT APPRECIATING THE FACT THAT THE HONEST JUDGM ENT OF THE APPELLANT THAT ALL THE ABOVE DEBTS ARE BAD. B. WITHOUT APPRECIATING THE FACT THAT THERE IS NO NEED TO ESTABLISH FOR THE APPELLANT THAT THE DEBTS HAS BECO ME BAD. 2. LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF CLAIM OF BAD DEBTS IN LAW & IN FACT IN CONCLUDING THAT TH ERE IS EVERY POSSIBILITY OF RECOVERY, (AT PARA 5.5.5) WITHOUT AP PRECIATING THE SUBMISSION, HONEST BUSINESS DECISION & ALSO MORE IM PORTANTLY THAT DEBTS ARE NOT AT ALL RECOVERABLE & THERE IS NO CONTRARY EVIDENCE ON RECORD TO TREAT DEBTS AS GOOD DEBTS. 3. LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF CLAIM OF BAD DEBTS WITHOUT APPRECIATING THE LEGAL POSITIO N VIZ., 2 SECTION 36(2)(I) CLEARLY SAYS THAT NO SUCH DEDUCTI ON SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THERE OF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE PREVIOUS YEA R IN WHICH THE AMOUNT OF SUCH DEBT OR PART IS WRITTEN OF F ------ & HENCE DEBT WHICH IS RESULTED OUT OF SALE OF CURRENT YEAR WHICH IS PART OF CURRENT YEARS INCOME CAN ALSO BECOME BA D & THERE IS NO LEGAL BAR ON IT. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORISED REP RESENTATIVE POINTED OUT THAT ISSUE OF BAD DEBTS IS COVERED IN F AVOUR OF THE ASSESSEE VIDE ORDER OF HON'BLE SUPREME COURT WHEREI N IT IS HELD AS UNDER: THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT TH E DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF TH E BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WRITTE N OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS, TH E BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CR EDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DE BTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAM INED WHETHER, IN FACT, THE BAD DEBT OR PART THEREOF IS W RITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NO T BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE, THE MA TTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSI DERATION OF THE ABOVE MENTIONED ASPECT ONLY AND THAT TOO ONLY T O THE EXTENT OF THE WRITE OFF. SUBJECT TO THE ABOVE, THE CIVIL APPEALS FILED BY T HE ASSESSEE ARE DISPOSED OF WITH NO ORDER AS TO COSTS. 3. IN THIS BACKGROUND, CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF CLAIM OF BAD DEBTS. NOW IT IS NOT N ECESSARY TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECO VERABLE. IT IS ENOUGH IF THE BAD DEBTS IS WRITTEN OFF AS IRRECOVER ABLE IN THE ACCOUNTS OF THE ASSESSEE. ASSESSEE HAS WRITTEN THE DEBTS AS IRRECOVERABLE. IN SUCH SITUATION, ASSESSING OFFICE R SHOULD ALLOW THE SAME. THE ASSESSING OFFICER IS DIRECTED ACCORDINGL Y. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 3 PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF AUGUST, 2012. SD/- SD/- ( R.K.PANDA ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 22 ND AUGUST, 2012 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE JCIT, RANGE-2, SANGLI. 3. THE CIT(A), KOLHAPUR. 4. THE CIT, KOLHAPUR. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.