Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 2012 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-04-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
06-04-2016
Assessment Year
2004-2005
Appeal Filed On
02-05-2014
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.896/PN/2014 '% % / ASSESSMENT YEAR : 2004-05 DCIT, CIRCLE-8, PUNE . / APPELLANT V/S EAGLE FLASK INDUSTRIES LTD., EAGLE ESTATE, TALEGAON DABHADE, DIST. PUNE 410507 PAN NO.AAACE4197M . / RESPONDENT / APPELLANT BY : SHRI M.K. KULKARNI / RESPONDENT BY : SHRI RAVI PRAKASH JAIN & B / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 21-01-2014 OF THE CIT(A)-V, PUNE RELATING TO ASSES SMENT YEAR 2004-05. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN ALLOWING THE SUND RY BALANCES WRITTEN OFF, WHEN THE ASSESSEE HAS NOT SUBMITTED ANY DETAILS OF BA D DEBTS BEFORE THE ASSESSING OFFICER? / DATE OF HEARING :06.04.2016 / DATE OF PRONOUNCEMENT: 07 .04.2016 2 ITA NO.896/PN/2014 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN ALLOWING THE SUND RY BALANCES WRITTEN OFF, WHEN THE ASSESSEE HAS NOT ESTABLISHED THAT THE DEBTS W RITTEN OFF WERE OFFERED TO TAX IN EARLIER YEARS. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING GLASS REFILLS, VACUUM FLASKS AND INSULATED WARES. THE ASSESSEE COMPANY HAS STOPPED THE MANUFACTURING ACTIVITIES SINCE OCTOBER 2003 DUE TO HEAVY ACCUMULATED LOSSES. IT FILED ITS RETURN OF INCOME ON 01-11- 2004 DECLARING LOSS OF RS.18,66,24,699/-. DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE AO ON PERUSAL OF SCHEDULE TO PROFIT AND LO SS ACCOUNT NOTICED THAT ASSESSEE HAS DEBITED SUNDRY BALANCE OF DEB TORS AND ADVANCES WRITTEN OFF (NET) AMOUNTING TO RS.3,74,58,951/-. HE, THEREFORE, ASKED THE ASSESSEE TO PRODUCE THE DETAILS OF SUCH WRITE OFF. THE ASSESSEE VIDE LETTER DATED 06-12-2006 SUBMITTED T HE DETAILS OF SUNDRY BALANCES WRITTEN OFF/RETURN BACK. WHEN ASKED BY THE AO TO PROVE THE SAME THE ASSESSEE ONLY SUBMITTED NARRATION OF EXPENSES CLAIMED WITHOUT ANY DOCUMENTARY EVIDENCE. SINCE THE ASSE SSEE COULD NOT ESTABLISH THE GENUINENESS OF THE AMOUNT WRITTEN OFF, T HE AO DISALLOWED THE ENTIRE AMOUNT OF RS.3,74,58,951/-. 4. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE SAID AM OUNTS WERE UNDISPUTEDLY TAKEN INTO ACCOUNT WHILE COMPUTING PROFIT OF EARLIE R YEAR. RELYING ON VARIOUS DECISIONS, IT WAS ARGUED THAT AF TER THE AMENDMENT OF THE LAW W.E.F.1-04-1989 THE ASSESSEE IS NOT R EQUIRED TO PROVE THAT ANY DEBT HAS BECOME BAD. 3 ITA NO.896/PN/2014 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A), FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF TRF LTD. VS. CIT REPORTED IN 323 ITR 397, WHERE IT HAS BEEN HELD THAT MERE WRITING OFF OF THE DEBTS IN THE BOOKS OF ACCOUN T IS SUFFICIENT AND NO FURTHER EVIDENCE IS REQUIRED TO BE PRODUCED BY T HE ASSESSEE, DELETED THE DISALLOWANCE MADE BY THE AO. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE WHILE SUPPORTING T HE ORDER OF THE AO SUBMITTED THAT THE ORDER OF THE CIT(A) IS ERRONEOUS BECAUSE THE ASSESSEE HAS NOT BROUGHT ANYTHING ON REC ORD TO PROVE THAT THE AMOUNTS WRITTEN OFF WERE TAKEN INTO ACCOUNT FOR COMPUTING THE PROFIT OF EARLIER YEARS. THE ASSESSEE HAS NOT GIVEN ANY DOCUMENTARY EVIDENCE WITH RESPECT TO THE EFFORTS MADE B Y THE ASSESSEE TO RECOVER THE AMOUNTS. 7.1 REFERRING TO THE DECISION OF THE BANGALORE BENCH OF TH E TRIBUNAL IN THE CASE OF EMBASSY CLASSIC PVT. LTD. VS. ACIT REPORTED IN 20 TAXMANN.COM 291 HE SUBMITTED THAT THE TRIBUNAL IN THE SA ID DECISION HAS HELD THAT EVEN THOUGH WRITE OFF OF DEBT AS BAD AND D OUBTFUL MAY BE SUFFICIENT MODE OF DISCHARGING THE PROOF, THE SAID FORMAT O F STATUTORY EVIDENCE IS NOT AN EMPTY FORMALITY. IT IS NOT NECESSARY FOR THE ASSESSEE TO PROVE THAT THE DEBT HAS BECOME BAD. BUT AT THE TIME SAME, THE ASSESSEE CANNOT CONVERT ANY LIVE AMOUNT INTO A BAD DEBT ONLY ON THE BASIS OF THE TECHNICAL RULE OF WRITING OFF. 7.2 REFERRING TO THE DECISION OF THE HONBLE MADRAS HIGH CO URT IN THE CASE OF SOUTH INDIA SURGICAL COMPANY LTD. VS. ACIT RE PORTED IN 287 ITR 62 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT FOR CLAIMING BAD DEBT AS AN ALLOWABLE 4 ITA NO.896/PN/2014 DEDUCTION THE ASSESSEE HAS TO PROVE THAT THOSE DEBTO RS WERE NOT IN A POSITION FINANCIALLY TO PAY THE DEBT OR HAD EVER REFUSED O R EXPRESSED THEIR DESIRE NOT TO PAY AND UNILATERAL ACT ON PART OF ASS ESSEE TO WRITE OFF ALL THOSE AMOUNT AS BAD DEBTS CANNOT BE ALLOWED AS DE DUCTION U/S.36(1)(VII). HE ACCORDINGLY SUBMITTED THAT THE ORDER OF T HE CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. 8. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND WHILE RELYING ON THE ORDER OF THE CIT(A) DREW THE ATTENTION OF THE BENCH TO PAGE 2 OF THE ASSESSMENT ORDER WHERE THE AO AT PARA 3 OF THE ORDER HAS MENTIONED THAT THE ASSESSEE COMPANY HAS STOPPED THE MANUFACTURING ACTIVITIES SINCE OCTOBER 2003 DUE TO HEAVY ACCUMULATED LOSSES. REFERRING TO THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF TRF LTD. (SUPRA) HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT AFTER 01 -04-1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT INFACT HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. SINCE THE LD.CIT(A) FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT HAS DELE TED THE DISALLOWANCE MADE BY THE AO, THEREFORE, THERE IS NO INFIRMITY IN THE SAME. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE S HOULD BE DISMISSED. 9. SO FAR AS THE DECISIONS RELIED ON BY THE LD. DEPARTME NTAL REPRESENTATIVE ARE CONCERNED HE SUBMITTED THAT THE DE CISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SU RGICAL COMPANY LTD. (SUPRA) IS PRIOR TO THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF TRF LTD. (SUPRA). SO FAR AS THE DEC ISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF EMBASSY C LASSIC PVT. 5 ITA NO.896/PN/2014 LTD.(SUPRA) IS CONCERNED THE LD. COUNSEL FOR THE ASSESSE E DREW THE ATTENTION OF THE BENCH TO PARA 17 OF THE ORDER WHICH READS AS UNDER : 17. EVEN THOUGH WRITING OFF A DEBT AS BAD AND DOUB TFUL MAY BE A SUFFICIENT MODE OF DISCHARGING THE PROOF, THE SAID FO RMAT OF STATUTORY EVIDENCE IS NOT AN EMPTY FORMALITY. IT IS NOT NECESSARY FOR THE ASSESSEE TO PROVE THAT THE DEBT HAS BECOME BAD. BUT AT THE SAME T IME, THE ASSESSEE CANNOT CONVERT ANY LIVE AMOUNT INTO A BAD DEBT ONLY ON THE BASIS OF THE TECHNICAL RULE OF WRITING OFF. IN THE PRESENT CASE, EVEN THOUGH THE AMOUNT WAS NOT RECEIVED ON THE BALANCE-SHEET DATE, THE AMOUN T WAS RECEIVED BY THE ASSESSEE BEFORE FILING OF THE RETURN ITSELF. IN FACT , THE BALANCE CONSIDERATION OF THE SALE TRANSACTION COVERED BY THE D ISHONOUR OF THE CHEQUE WAS RECEIVED BY THE ASSESSEE COMPANY ON 30.08,200 5. THE ASSESSEE HAD FILED THE RETURN OF INCOME ONLY THEREAFTER ON 29.10.2005. THEREFORE, IT IS VERY CLEAR THAT WHEN THE RETURN OF INCOME WAS FILED BY THE ASSESSEE, NO DEBT WAS RECOVERABLE FROM THE BUYERS OF THE PROPERTY. WE FIND A LOT OF FORCE IN THE ARGUMENT OF THE LEARNED COMMISSIONER OF INCOME-TAX REGARDING THE NON-COMMITTAL OF THE ASSESSEE COMPANY IN PURSUING THE LEGAL REMEDIES AVAILABLE BEFORE IT FOR T HE RECOVERY OF THE AMOUNT. THEREFORE, IN THESE CIRCUMSTANCES, WE DO NOT F IND THAT THE DEBT HAS BECOME BAD DEBT. IT WAS ONLY A CASE OF DELAYED PAY MENT. THEREFORE, WE FIND THAT THE JUDGEMENT OF THE HON'BLE SUPREME C OURT IN THE CASE OF T R F LTD., DOES NOT APPLY TO THE FACTS OF THE PRESENT C ASE. IN SHORT, WE FIND THAT THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY CON FIRMED THE DISALLOWANCE OF RS.3,66,71,850/-. 10. REFERRING TO THE ABOVE HE SUBMITTED THAT IT IS VERY CLEAR THAT THE FACTS IN THE CASE RELIED ON BY THE LD. DEPARTMENTAL REPR ESENTATIVE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE. IN THAT CASE, THE ASSESSEE HAD RECEIVED BACK THE AMOUNTS PRIOR TO FILING OF THE RETURN. UNDER THESE CIRCUMSTANCES THE TRIBUNAL H AD HELD THAT THE BAD DEBT CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE SINC E IT IS NOT A BAD DEBT BUT A CASE OF DELAYED PAYMENT. HOWEVER, IN TH E INSTANT CASE, THE ASSESSEE HAS NOT RECEIVED ANY AMOUNT EVEN T ILL TODAY. THEREFORE, THE ORDER OF THE CIT(A) BEING IN ACCORDANCE WIT H LAW SHOULD BE UPHELD. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INST ANT CASE 6 ITA NO.896/PN/2014 HAS CLAIMED SUNDRY BALANCE OF DEBTORS AND ADVANCES WRITT EN OFF (NET) AMOUNTING TO RS.3,74,58,951/- AS BAD DEBT. WE FIND THE AO DISALLOWED THE SAME ON THE GROUND THAT ASSESSEE COULD N OT ESTABLISH THE GENUINENESS OF THE AMOUNT WRITTEN OFF. WE FIND THE LD.C IT(A) DELETED THE DISALLOWANCE BY RELYING ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA). WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). WE FIND BEFORE CIT(A) TH E ASSESSEE HAD SUBMITTED THAT THE AMOUNTS WERE TAKEN IN TO ACCOUNT WHILE COMPUTING THE PROFIT OF EARLIER YEAR. IN THE ASSESSME NT ORDER ALTHOUGH THE AO HAS ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF THE CLAIM OF BAD DEBT, HE HAS NEVER PUT ANY QUESTION REG ARDING TAKING OF THE AMOUNTS WRITTEN OFF AS BAD DEBT AS INCOME OF EAR LIER YEARS. THEREFORE, THE GROUNDS RAISED BY THE REVENUE AT THIS JU NCTURE ON THE ISSUE OF TAKING THE AMOUNT AS INCOME IN PRECEDING YEARS IN OUR OPINION IS WITHOUT ANY MERIT. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE THAT ASSESSEE HAS NOT TAKEN INTO CONSIDER ATION THE SAID AMOUNTS IN THE INCOME OF THE PRECEDING ASSESSMENT ORDER . SINCE THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT HAS WRITTEN OFF T HE AMOUNT, THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF TRF LTD. (SUPRA) ASSESSEE IS NOT REQUIRED TO ESTA BLISH THAT THE DEBT HAS BECOME IRRECOVERABLE. THEREFORE, THE LD.CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE. 12. SO FAR AS THE VARIOUS DECISIONS RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE ARE CONCERNED THOSE DECISIO NS ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE. THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF S OUTH INDIA SURGICAL COMPANY LTD. (SUPRA) IS PRIOR TO THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA). THE DECISIO N OF 7 ITA NO.896/PN/2014 BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF EMBASSY CLA SSIC PVT. LTD. (SUPRA) IS ALSO NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE SINCE IN THAT CASE THE ASSESSEE HAS RECOVERED THE AMO UNT WRITTEN OFF AS BAD DEBT PRIOR TO FILING OF THE RETURN. HOWEVER, IN THE INSTANT CASE IT IS NOT SO. THEREFORE, THE DECISION OF THE BANGALORE B ENCH OF THE TRIBUNAL RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE ALSO IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. SINCE THE CI T(A) HAS DELETED THE DISALLOWANCE BY FOLLOWING THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF TRF LTD. (SUPRA), THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE OF BAD D EBT. WE ACCORDINGLY UPHOLD THE SAME. GROUNDS RAISED BY THE REV ENUE ARE ACCORDINGLY DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07-04-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 07 TH APRIL 2016 ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) , / THE CIT(A)-V, PUNE 4. % / THE CIT-V, PUNE 5 . 6. ( ++,, ,, / DR, ITAT, A PUNE; 1 / GUARD FILE. / BY ORDER , ( + //TRUE ( + //TRUE COPY// 34 + , / SR. PRIVATE SECRETARY ,, / ITAT, PUNE
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