M/S. HEMAKUTA INDUSTRIAL INVESTMENT CO. LTD, MUMBAI V. THE ITO WD-6(3)(2),

ITA 9651/MUM/2004

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100603 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 23-06-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 31-12-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N PADMANABHAN
• Assessee Lawyers: GOVIND ZAVERI
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

HEMAKUTA INDUSTRIAL INVESTMENT CO LTD. ITA 9 6 5 1 /M/20 0 4 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K , MUMBAI . . , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , J UDICIAL MEMBER ITA NO. : 9 6 5 1 /MUM/20 0 4 (ASSESSMENT YEAR: 200 1 - 0 2 ) HEMAKUTA INDUSTRIAL INVESTMENT CO LTD., 5, D S BABRAKAR MARG, OFF, VEER SAVARKAR MARG, PRABHADEVI, M UMBAI - 400 028 .: PAN : AAAC H 2019 R VS IT O WARD NO. 6(3)(2) , R. NO. 451, 4 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GOVIND ZAVERI RESPONDENT BY : SHRI N PAD M A NA BHAN /DATE OF HEARING : 23 - 0 6 - 2015 / DATE OF PRONOUNCEMENT : 12 - 08 - 2015 ORDER PER AMIT SHUKLA , J.M. : TH E AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 27 . 08 .20 04 PASSED BY CIT(A) - 2 6 , MUMBAI FOR THE QUANTUM OF ASSESSMEN T PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2001 - 02. THE SOLE ISSUE RAISED BY THE ASSESSEE IS ADDITION OF RS. 1,43,82,021/ - ON ACCOUNT OF BAD DEBTS WRITTEN OFF. 2. AT THE OUTSET, THE LD. COUNSEL SUBMITTED THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE A SSESSEE BY THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1997 - 98 IN ITA NO. 7061/MUM/2003 VIDE ORDER DATED 31.10.2014. 3. BRIEF FACTS Q UA THE ISSUE INVOLVED ARE THAT THE ASSESSEE IS AN INVESTMENT COMPANY AND HAD SHOWN BAD DEBTS OF RS. 1,60,06,467/ - WHICH COMPRISED OF MAJOR PART OF OTHER EXPENSES CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER CALL ED FOR THE LIST OF HEMAKUTA INDUSTRIAL INVESTMENT CO LTD. ITA 9 6 5 1 /M/20 0 4 2 BAD DEBTS WHEREIN IT WAS SUBMITTED THAT TOTAL BAD DEBTS WERE RS. 1,64,73,804/ - WHICH WAS INCLUSIVE OF AMOUNT OF RS. 2,82,409/ - COMPRISING BAD DEBTS BELOW RS. 1 ,00,000/ - LAKH AND AS REDUCED BY AN AMOUNT OF RS. 4,67,338/ - , BEING THE AMOUNT OF BAD DEBTS WRITTEN OFF IN THE EARLIER YEARS. ACCORDINGLY , AN AMOUNT OF R S. 1,60,06,467/ - WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT. AT PAGE 2 OF THE ASSESSMENT ORDER, AT PARA 5.1, THE LIST HAVE BEEN INCORPORATED BY THE ASSESSING OFFICER WHEREIN THE DETAILS OF THE PARTIES, AMOUNT AND THE REASONS GIVEN FOR WRITE OFF HAS BEEN MENTIONED. THE ASSESSING OFFICER HELD THAT THE ASSESSE E COMPANY HAS NOT MADE ANY EFFORTS TO RECOVER THE AMOUNTS FROM THE PARTIES AS SHOWN AND EVEN THE FORMAL SUIT AGAINST THE PARTIES HAS NOT BEEN FILED BY THE ASSESSEE. ACCORDINGLY AFTER DETAILED DISCUSSION, HE HELD THAT THE BAD DEBT CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE AND ACCORDINGLY HE DISALLOWED THE BAD DEBTS AT RS. 1,43,82,021/ - . 4. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE DID NOT GET PROPER OPPORTUNIT Y BEFORE THE ASSESSING OFFICER TO EXPLAIN THE ENTIRE FACTS . IN FACT T HE ASSES S EE HAD GIVEN LEGAL NOTICES TO THESE PARTIES, HOWEVER EVEN AFTER IMMENSE PERSUASION , ASSESSEE COULD NOT GET RESPONSE FROM THE ABOVE PARTIES. ACCORDINGLY , DECISION WAS TAKEN TO WRITE OFF THESE DEBTS AS BAD DEBTS IN THE BOOKS OF ACCOUNT. T HE LD. CIT(A), ALLOWED PART RELIEF AND DELETED THE ADDITION TO THE EXTENT OF RS. 55,98,151/ - AND BALANCE WAS CONFIRMED . 5. BEFORE US, THE LD. DR SUBMITTED THAT THE LD. ASSESSING OFFICER AS WELL AS CIT(A) HAS GIVEN DETAILED REASONS AS TO WHY S UCH BAD DEBTS ARE NOT ALLOWABLE AND WHEREAS THE ASSESSEE HAD PRODUCED EVIDENCE IN THE FORM OF LEGAL NOTICES ETC. IN RESPECT OF THE PARTIES, THE CIT(A) HAS ALREADY GIVEN RELIEF. THEREFORE THE ORDER OF THE CIT(A) SHOULD BE CONFIRMED. 6. AFTER CONSIDERING THE RELEVANT MA TERIAL ON RECORD AND FINDING GIVEN BY THE CIT(A), WE FIND THAT IT IS AN UNDISPUTED FACT THAT THE HEMAKUTA INDUSTRIAL INVESTMENT CO LTD. ITA 9 6 5 1 /M/20 0 4 3 ASSESSEE HAS WRITTEN - OFF THE BAD DEBTS IN THIS YEAR ON THE GROUND THAT FIRSTLY, THE PARTIES WERE NOT TRACEABLE EVEN AFTER SEVERAL CORRESPONDENCE AND LEGAL NOTI CES; AND SECONDLY, THE REQUIREMENT OF THE LAW IS THAT IT IS THE ASSESSEE WHO HAS TO TAKE A DECISION FOR WRITING OFF THE BAD DEBTS AND IF SUCH BAD DEBTS HAVE BEEN WRITTEN OFF , THEN SAME SHOULD BE ALLOWED. WE FIND THAT THIS PRECISE ISSUE HAD COME FOR CONSIDE RATION IN THE ASSESSEES OWN CASE FOR THE AY 1997 - 98 BEFORE THE TRIBUNAL , WHEREIN FOLLOWING THE RATIO OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. VS CIT, REPORTED IN 323 ITR 397 , THE TRIBUNAL HELD THAT , IF THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE BAD DEBTS IN THE BOOKS OF ACCOUNT, IT WOULD BE SUFFICIENT TO ALLOW SUCH BAD DEBTS . FOLLOWING THE SAME RATIO, WE ALSO HOLD THAT THE BAD DEBTS WRITTEN OFF BY THE ASSESSEE IN THE ACCOUNT SHOULD BE ALLOWED. MOREOVER , IN THIS CASE, THE ASSESSEE HAVE BEEN ABLE TO D EMONSTRATE BEFORE THE CIT(A) REGARDING THE EFFORTS MADE BY THE ASSESSEE REGARDING THE RECOVERY OF THE AMOUNTS FROM THE DEBTORS. ACCORDINGLY, WE FIND NO REASON TO SUSTAIN THE ADDITION AND ASSES S EES CLAIM FOR BAD DEBTS IS ALLOWED. 7. REGARDING THE CHARGING OF INTEREST U/S 234B, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT THIS IS A CONSEQUENTIAL AND HENCE SHOULD BE TREATED AS DISMISSED BEING CONSEQUENTIAL. WE, ACCORDINGLY DISMISS THIS GROUND FILED BY THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST , 2015. SD/ - SD/ - ( . . ) ( ) ( B R BASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 12 TH AUGUST , 2015 HEMAKUTA INDUSTRIAL INVESTMENT CO LTD. ITA 9 6 5 1 /M/20 0 4 4 / COPY TO: - 1 ) / THE APPEL LANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 2 6 , MUMBAI 4 ) THE CIT 6 , MUMBAI . 5 ) , , / THE D.R. K BENCH, MUMBAI. 6 ) COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS