The ACIT, Central Circle-2(3), Ahmedabad V. Clio Infotech Ltd., Ahmedabad

ITSSA 468/AHD/2010

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8297 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJNISH VOHRA SRDR
• Assessee Lawyers: P M MEHTA; S N SOPARKAR SRAR
• Keywords: Bad and doubtful debts
• Section: 143(3); 142(1); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER IT(SS)A NO.468/AHD/2010 & C.O. NO.289/AHD/2010 (A/O ITA NO.468/AHD/2010 ASSESSMENT YEAR :2006-07 DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(3), AHMEDABAD M/S CLIO INIFOTECH LTD., A-64, PARISEEMA COMPLEX, OPP. LAL BUNGALOWS, C.G. ROAD, AHMEDABAD PAN NO.AAACC1809Q V/S . V/S . M/S. CLIO INFOTECH LTD., A-64, PARISEEMA COMPLEX, OPP. LAL BUNGALOWS, C.G. ROAD, AHMEDABAD DCIT, CENTRAL CIRCLE- 2[3], AHMEDABAD (APPELLANT) .. (RESPONDENT) /BY ASSESSEE SHRI S.N.SOPARKAR, SR-AR & SHRI P.M.MEHTA, AR /BY REVENUE SHRI RAJNISH VOHRA, SR-DR /DATE OF HEARING 03-07-2012 /DATE OF PRONOUNCEMENT 09-08-2012 O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THE REVENUE HAS FILED THIS PRESENT APPEAL AND ASSE SSEE HAS FILED CROSS OBJECTION (CO) DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-III, AHMEDABAD DATED 15-02-201 0 FOR THE ASSESSMENT YEAR 2006-07. IT(SS)A NO.468/AHD/2010 & CO 289/AHD/2010 A.Y.2006-07 DCIT, CC-2(3) ABD V. M/S. CLIO INFOTECH LTD. PAGE 2 FIRST WE TAKE UP REVENUES APPEAL. 2. THE REVENUE HAS RAISED SOLE GROUNDS, WHICH READS AS UNDER:- I) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AN D CIRCUMSTANCES OF THE CASE IN RESTRICTING THE ADDITION OF RS.1.85 CRORES MADE ON A/C OF DISALLOWANCE OF BAD DEBTS TO THE EXTENT OF RS.5 LAC S. 3. BRIEFLY STATED FACTS ARE THAT A SEARCH ACTION U/ S. 132 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WA S CARRIED OUT IN THE GROUP CASES OF HIMANSHU J SHAH ON 22-09-2005. A WARRANT O F AUTHORIZATION U/S. 132 OF THE ACT WAS ISSUED IN THE NAME OF THE ASSESSEE-C OMPANY. SUBSEQUENTLY, A NOTICE U/S. 153A(A) WAS ISSUED ON 22-05-2006 AND A NOTICE U/S. 143(2) AND 142(1) OF THE ACT WAS ISSUED ON 15-10-2007 AND THE ASSESSMENT U/S 153A R.W.S. 143(3) WAS FAMED VIDE ORDER DATED 31-12-2007 . THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT DISALLOWED THE CLAIM O F RS.1.85 CRORES AS BAD DEBT RELYING ON THE CASE LAW OF DHALL ENTERPRISES AND ENGINEERING PVT. LTD. 2007 CTR 729. 4. THE ASSESSEE FEELING AGGRIEVED BY THE ORDER OF A SSESSING OFFICER FILED APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL THEREBY BAD DEBT IN RESPECT OF M/S TOP CASSETTES OF RS.1.80 CRORES DIRECTED TO ASSESSING O FFICER TO DELETE THE DISALLOWANCE, HOWEVER, IN RESPECT OF BAD DEBT OF RS .5 LAKH OF S.M. INTERNATIONAL WAS UPHELD. 5. NOW, THE REVENUE HAS FILED APPEAL BEFORE THE TRI BUNAL AGAINST THE DISALLOWANCE OF RS.1.80 CRORES. 6. LD. DEPARTMENTAL REPRESENTATIVE OF THE REVENUE S TRONGLY RELIED UPON THE ORDER OF ASSESSING OFFICER WHEREAS LD. AUTHORIZ ED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT BAD DEBT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ASSESSEE DOES NOT HAVE TO ESTABLIS H THE BAD DEBT BECOME IT(SS)A NO.468/AHD/2010 & CO 289/AHD/2010 A.Y.2006-07 DCIT, CC-2(3) ABD V. M/S. CLIO INFOTECH LTD. PAGE 3 BAD. LD. AR RELIED UPON THE JUDGMENT OF HONBLE SUP REME COURT RENDERED IN THE CASE OF T.R.F. LTD. V. CIT (2010) 323 ITR 397 (SC). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND CASE LAW CITED BY LD. AR OF THE ASSES SEE. IT IS NOT DISPUTED THAT ASSESSEE HAS WRITTEN OFF THE AMOUNT IN ITS BOOKS OF ACCOUNT AND THE ISSUE WITH REGARD TO BAD DEBT HAS NOW BEEN SETTLED BY THE HON BLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA) HAS HELD IN PARA-4 AS UNDER:- 4. THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH HAT THE DEB T, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWE VER, IN THE PRESENT CASE, THE AO HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD D EBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATE D ABOVE, THE AO HAS NOT EXAMINED WHETHER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE AO. HENCE, THE MATTER IS REMITTED TO THE AO FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AN D THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. RESPECTFULLY, FOLLOWING THE RATIO OF HONBLE SUPREM E COURT IN THE CASE OF T.R.F. LTD. (SUPRA), WE DO NOT FIND ANY INFIRMITY INTO THE ORD ER PASSED BY LD. CIT(A). THIS GROUND OF REVENUES APPEAL IS REJECTED AND ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF BAD DEBT. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. IT(SS)A NO.468/AHD/2010 & CO 289/AHD/2010 A.Y.2006-07 DCIT, CC-2(3) ABD V. M/S. CLIO INFOTECH LTD. PAGE 4 COMING TO ASSESSEES CO NO.289/AHD/2010. 9. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF ITS CO:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF BAD DEB TS OF RS.5 LACS OF SM INTERNATIONAL, ON THE GROUND THAT NO DETAILS HAV E BEEN FURNISHED FOR THE SAME. 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT IN THE STATEMENT OF FACTS FILED BEFORE THE CIT(A) ON PAGE NO.2 ASSESSEE HAD SUBMITT ED THAT IT HAD PROVIDED LEDGER ACCOUNTS OF THE SAID PARTY FOR THE LAST TWO YEARS AND IT WAS FURTHER SUBMITTED THAT THE BAD DEBT HAD ARISEN IN THE COURSE OF LOANS ADVANCED TO THE SAID PARTY, AND DETAILED SUBM ISSIONS WERE MADE ON THE SAID ISSUE, WHICH WERE ALSO FILED BEFORE THE ASSESSING OFFICER, VIDE ASSESSEES REPLY DATED 28.12.2007 IN VIEW OF T HE ABOVE FACTS, THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE CLAIM OF THE A SSESSEE FOR BAD DEBTS OF RS.5 LACS. 10. LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE S UBMITTED THAT LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF BAD DEBT OF RS.5 LAKH ON THE GROUND THAT NO DETAILS HAVE BEEN FURNISHED. IT IS C ONTENDED BY LD. AR THAT BEFORE LD. CIT(A) ASSESSEE HAD FURNISHED LEDGER ACC OUNT AND DEBT SUBMITTED THAT DEBT HAD BECAME BAD IN THE COURSE OF LOAN ADVA NCED TO THE SAID PARTY. NOW LD. AR HAS TAKEN US TO PAGE NO. 13 AND 14 OF TH E ASSESSEES PAPER BOOK, WHEREIN THE LEDGER ACCOUNT OF ASSESSEE AND TH E LEDGER ACCOUNT FOR S.M. INTERNATIONAL IS FILED. LD. AR SUBMITTED THAT SINCE AMOUNT HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS BAD DEBT APPLYING THE RATIO OF T.R.F. LTD. (SUPRA) THIS AMOUNT DESERVES TO BE ALLOWED AS BAD DEBT. ON THE CONTRARY, LD. DR OF THE REVENUE RELIED UPON THE ORD ERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS NOT GIVEN DETAI LS BEFORE THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND SINCE THE ASSESSEE HAS WRIT TEN OFF THE BAD DEBT IN ITS BOOKS OF ACCOUNT IN RESPECT OF S.M. INTERNATIONAL A PPLYING THE RATIO IN THE IT(SS)A NO.468/AHD/2010 & CO 289/AHD/2010 A.Y.2006-07 DCIT, CC-2(3) ABD V. M/S. CLIO INFOTECH LTD. PAGE 5 JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA). THIS GROUND OF ASSESSEES CO IS ALLOWED AND ASSESSING OF FICER IS DIRECTED TO DELETE THE SAME MADE ON ACCOUNT OF BAD DEBT. THIS G ROUND OF ASSESSEES CO IS ALLOWED. 12. IN THE RESULT, APPEAL OF REVENUE STANDS DISMISSED A ND THAT OF ASSESSEES CO IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP - /08/2012 !'# $ % & & & & '(()*+ '(()*+ '(()*+ '(()*+ !,* !,* !,* !,* / COPY OF ORDER FORWARDED TO:- 1. !+.) /0 / APPELLANT 2. '12/0 / RESPONDENT 3. $(4 2 25 / CONCERNED CIT 4. 2 25- !+.) / CIT (A) 5. *8 9.2 '(((4, 2 !+.).2 !(4, !'# $ / DR, ITAT, AHMEDABAD 6. 9 <= > ?) / GUARD FILE. BY ORDER/ & , @+/' 2 + . 2 !+.).2 !(4, !'# $ % STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 25/07 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 25/07 4) DATE OF CORRECTION 27/07 5) DATE OF FURTHER CORRECTION 6) DATE OF INITIAL SIGN BY MEMBERS 7) ORDER UPLOADED ON 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 13-08-2012