Sachi Molding Solutions Pvt. Ltd., Surat V. The Income Tax Officer, 2(1)(1), Surat

ITA 92/AHD/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2368 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 29-03-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 13-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SUTARIA
• Assessee Lawyers: R N VEPARI
• Keywords: Bad and doubtful debts
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 92/AHD/2016 (ASSESSMENT YEAR: 2012-13) SACHI MOLDING SOLUTIONS PRIVATE LTD. 3- VRUNDAVAN FLAT,, B/H KAKADIA COMPLEX GHODDOD ROAD, SURAT-395007 V/S INCOME TAX OFFICER, WARD- 2 (1) (1), SURAT (APPELLANT) (RESPONDENT) PAN: AADCS 0403K APPELLANT BY : SHRI R.N. VEPARI, AR RESPONDENT BY : SHRI DEEPAK SUTARIA, SR. D.R . ( )/ ORDER DATE OF HEARING : 29 -03-201 6 DATE OF PRONOUNCEMENT : 31 -03-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-II, SURAT DATED 02.11.2015 PERTAINING TO A.Y. 2012-13 ITA NO. 92/A HD/2016 . A.Y. 2012-13 2 2. THE ASSESSEE IS AGGRIEVED BY-(I) ADDITION OF RS. 4, 80,763/- MADE U/S. 41(1) OF THE ACT AND (II) DISALLOWANCE OF BAD DEBTS OF RS. 1,30,712/-. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PET, PREFORM MOULD, MOULD SPARS, PET BOTTLES AND JO B WORK. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O NOTICED THAT THERE IS AN OPENING BALANCE IN THE CAS E OF FOLLOWING FOUR PERSONS:- 1. HARI OM ENGINEERING RS. 42,144/- 2. SHREE AMBIKA SUGAR RS. 61,754/- 3. ALNOS PLASTICS RS. 2,02,426/- 4. PARLE INFORMATION RS. 1,74,440 TOTAL RS. 4,80,763/- 5. THE A.O FOUND THAT THE PAYMENT TO THESE CREDITORS H AS NOT BEEN MADE TILL DATE. THEREFORE, IN ORDER TO VERIFY THE GENUIN ENESS OF THE CREDITORS NOTICES U/S. 133(6) OF THE ACT WERE ISSUED. NOTICES IN RESPECT OF TWO CREDITORS WERE RECEIVED BACK AS UNSERVED AND TWO CR EDITORS DID NOT RESPOND TO THE NOTICES. THE ASSESSEE WAS ASKED TO S HOW CAUSE WHY THE LIABILITY SHOULD NOT BE TREATED AS CEASED U/S. 41(1) OF THE ACT. IN ITS REPLY, THE ASSESSEE EXPLAINED THAT THE PAYMENTS HAVE NOT BEEN MADE TO THESE PARTIES EITHER FOR NON SUPPLY OF EXCI SE INVOICE OR ON ACCOUNT OF DISPUTE. THE A.O DID NOT ACCEPT THIS SUB MISSION OF THE ASSESSEE AND TREATED RS. 4,80,763/- AS CEASED LIABI LITY AND MADE AN ADDITION U/S. 41(1) OF THE ACT. 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSE E VEHEMENTLY STATED THAT THE A.O HAD NO AUTHORITY TO EXAMINE THE GENUIN ENESS OF THE CREDIT ITA NO. 92/A HD/2016 . A.Y. 2012-13 3 ENTRIES COMING FROM EARLIER YEARS. IT IS SAY OF THE LD. COUNSEL THAT THERE IS NO CESSATION OF LIABILITY, THE LIABILITIES STILL EXIST AND, THEREFORE, NO ADDITION IS CALLED FOR. THE D.R. HEAVILY RELIED UPO N THE FINDINGS OF THE A.O. 7. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AU THORITIES BELOW. WE FIND FORCE IN THE CONTENTION OF THE LEARNED COUN SEL THAT THE A.O CANNOT QUESTION THE GENUINENESS OF THE CREDITORS WH ICH ARE COMING FROM EARLIER YEARS M ERELY BECAUSE THE LIABILITI ES ARE FOUND EXISTING IN THE BALANCE SHEET WOULD NOT JUSTIFY THE APPLICAT ION OF THE PROVISIONS OF SECTION 41(1) OF THE ACT. THERE IS NOTHING ON RE CORD TO SHOW THAT THE IMPUGNED CREDITORS HAVE FOREGONE THEIR DEBTS IN FAVOUR OF THE ASSESSEE. IN OUR CONSIDERED OPINION, ADDITION U/S. 41(1) OF THE ACT CANNOT BE MADE UNLESS AND UNTIL IT IS FOUND THAT TH ERE WAS REMISSION AND/OR CESSATION OF LIABILITY. WE THEREFORE SET ASI DE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O TO DELETE THE ADDITIO N OF RS. 4,80,763/-. GROUND NO. 1 IS ALLOWED. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF B AD DEBTS. 8. WHILE SCRUTINIZING THE PROFIT AND LOSS ACCOUNT, THE A.O FOUND THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 12,36,236/- A S BAD DEBTS. ON FURTHER VERIFICATION, THE A.O FOUND THAT RS. 1,30,7 12/- IS TREATED AS BAD DEBTS IN THE NAME OF BISLERI INTERNATIONAL. THE A.O FURTHER FOUND THAT THE ASSESSEE HAS SHOWN ADVANCES OF RS. 2,34,550/- A ND RS. 1,76,560/- IN THE NAME OF BISLERI INTERNATIONAL. TH E A.O WAS OF THE FIRM BELIEF THAT ON THE ONE HAND, THE ASSESSEE IS H AVING ADVANCE IN BALANCE SHEET FROM BISLERI INTERNATIONAL AND ON THE OTHER HAND THE ITA NO. 92/A HD/2016 . A.Y. 2012-13 4 ASSESSEE IS SHOWING BAD DEBT OF THE SAME PARTY WHIC H CANNOT BE ALLOWED. 9. THE A.O ASKED THE ASSESSEE TO EXPLAIN THE EFF ORTS MADE TO RECOVER THE AMOUNT OF THESE BAD DEBTS AS THE ASSESSEE HAS A DVANCES FROM THE SAME PARTY. ACCORDING TO THE A.O, THE ASSESSEE COUL D HAVE ADJUSTED THIS AMOUNT FROM THE ADVANCES LYING WITH IT. THE A. O WAS OF THE BELIEF THAT NO PRUDENT MAN WOULD WRITE OFF BAD DEBTS OF A PERSON WHOSE ADVANCES ARE LYING WITH IT. THE A.O THEREFORE, DISA LLOWED RS. 1,30,712/-. 10. BE AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFOR E THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE ASSESSEE IS DEALING WIT H BISLERI INTERNATIONAL AND AS PER THE POLICY OF BISLERI TRAN SACTIONS WITH DIFFERENT UNITS OF BISLERI ARE TREATED AS SEPARATE TRANSACTIO N AND ACCORDINGLY SHOWN SEPARATELY IN THE STATEMENT OF ACCOUNT, FOR E .G. TRANSACTION WITH GHAZIABAD UNIT IS SHOWN AS BISLERI INTERNATIONAL PV T. LTD., GHAZIABAD AND TRANSACTION WITH MUMBAI UNIT ARE SHOWN AS BISLE RI INTERNATIONAL PVT. LTD., MUMBAI. IT IS THE SAY OF THE LD. COUNSEL THAT ONE ACCOUNT CANNOT BE ADJUSTED WITH ANOTHER ACCOUNT. IT WAS FUR THER EXPLAINED BY THE LD. COUNSEL THAT IN EARLIER YEARS, THE ASSESSEE HAD SOLD GOODS TO M/S. BISLERI INTERNATIONAL AND SINCE THE DEBTS WERE NOT RECOVERED THE SAME WERE WRITTEN OFF. THE LD. D.R. SUPPORTED THE F INDINGS OF THE A.O. 11. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. UNDISPUTEDLY, THE ASSESSEE IS SH OWING TRANSACTIONS WITH DIFFERENT UNITS OF BISLERI INTERNATIONAL PVT. LTD. IN ITS BOOKS OF ACCOUNTS SEPARATELY. SECONDLY, THE A.O CANNOT SIT O N THE DRIVING SEAT ITA NO. 92/A HD/2016 . A.Y. 2012-13 5 AND DIRECT THE ASSESSEE TO DO THE BUSINESS IN A PAR TICULAR MANNER. IF THE ASSESSEE IS OF THE OPINION THAT A CERTAIN DEBT HAS BECOME BAD AND DESERVES TO BE WRITTEN OFF, THE ASSESSEE IS FREE TO WRITE IT OFF AS PER THE PROVISIONS OF SECTION 36(VII) OF THE ACT. AS THE AS SESSEE HAS COMPLIED WITH THE RELEVANT PROVISIONS; WE DO NOT FIND ANY RE ASON FOR NOT ALLOWING BAD DEBTS AS A WRITE OFF. WE THEREFORE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O TO DELETE THE ADDITION OF RS. 1,30,712/-. GROUND NO. 2 IS ALLOWED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31 - 03 - 2016. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD