Smt. Indra Rani, Ludhiana V. ITO, Ludhiana

MA 22/CHANDI/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9255 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 25-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA
• Keywords: Bad and doubtful debts; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER M.A. NO. 22/CHD/2011 (IN ITA NO. 398/CHD/2009) ASSESSMENT YEAR: 2005-06 SMT. INDRA RANI, V THE I.T.O., C/O M/S DAULAT RAM AGGARWAL, WARD V(2), VISHWKARMA CHOWK, LUDHIANA. LUDHIANA. (APPLICANT) (RESPONDENT) APPELLANT BY: SHRI SUDHIR SEHGAL RESPONDENT BY: SHRI ASHOK KHANNA DATE OF HEARING: 14.09.2012 DATE OF PRONOUNCEMENT: 04.10.2012 ORDER PER SUSHMA CHOWLA, JM THE PRESENT MISCELLANEOUS APPLICATION IS FILED BY T HE APPLICANT AGAINST THE ORDER OF THE TRIBUNAL IN ITA NO. 398/CH D/2009, DATED 28.2.2011. 2. THE APPLICANT IS AGGRIEVED BY THE ORDER OF THE TRIBUNAL IN RESPECT OF CONFIRMATION OF ADDITION OF RS. 2,20,000/- IN RELATION TO BAD DEBTS IN RESPECT OF M/S MEGHA ALLO YS LTD TO THE TUNE OF RS. 2,20,000/-. 3 THE LD. AR FOR THE ASSESSEE DREW OUR ATTENTION T O PARA 8 OF THE ORDER OF THE TRIBUNAL VIDE WHICH IT HAS BEEN OBSERV ED THAT THE CLAIM OF THE DEDUCTION U/S 36(1)(VIII) OF THE ACT IS SUBJECT TO THE PROVISIONS OF SECTION 36(2) OF THE ACT. THE LD. AR FOR THE ASSES SEE FURTHER REFERRED TO THE OBSERVATIONS OF THE TRIBUNAL IN PARA 8 WHEREIN IT WAS OBSERVED THAT ON BEING SPECIFICALLY ASKED AS TO HOW THE AFORESAID CONDITIONS ARE SATISFIED BY THE ASSESSEE, THE LD. COUNSEL OF THE A SSESSEE COULD NOT GIVE 2 ANY SATISFACTORY EXPLANATION. IN THIS VIEW OF THE MATTER THE ASSESSEE IS NOT ENTITLED TO SUCCEED IN ITS U/S 36(1)(VIII) OF T HE ACT. THE TRIBUNAL THUS REVERSED THE ORDER OF THE LD. CIT(A) AND RESTO RED THE ADDITION MADE BY AO. OUR ATTENTION WAS DRAWN TO PARA 5.2 AT PAGE S 17 AND 18 OF THE ASSESSMENT ORDER WHEREIN COPY OF THE ACCOUNT OF M/S MEGHA ALLOYS LTD IS REPRODUCED. IT WAS FURTHER STATED BY HIM THAT T HE TOTAL TRANSACTION WITH M/S MEGHA ALLOYS LTD. WAS ON ACCOUNT OF SALES MADE TO THE SAID PARTY AND THE SAID SUM OF RS. 2,20,000/- WAS DUE FR OM THE SAID PARTY, WHICH HAS BEEN ACKNOWLEDGED BY PARTY AND THE CLAIM OF DEBT WAS REJECTED BY THE ASSESSING OFFICER AS THE SAID COMPA NY HAD ACKNOWLEDGED THE PENDING PAYMENT OF SAID AMOUNT TO THE ASSESSEE. 4 THE LD. DR FOR THE REVENUE FAIRLY POINTED OUT THA T IN RESPECT OF FIRST ADDITION OF RS. 14,30,300/- I.E. BAD DEBT IN RESPECT OF M/S NEEPAZ METALIKS LTD. THE ASSESSEE HAD NOT SATISFIED THE PR OVISIONS OF SECTION 36(2) OF THE ACT AND HENCE THE DISALLOWANCE. IN RE SPECT OF SECOND ADDITION OF RS. 2,22,000/- RELIANCE WAS PLACED ON T HE ORDER OF THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ON PERUSAL OF THE ASSESSMENT RECORD WE FIND THAT IN PA RA 5.2 THE AO HAS REPRODUCED COPY OF ACCOUNT OF ASSESSEE IN THE BOOKS OF M/S MEGHA ALLOYS LTD. WHEREIN THE PURCHASES MADE FROM THE ASS ESSEE DURING THE FINANCIAL YEAR 2004-05 ARE INCORPORATED AND THE BAL ANCE OF RS. 2,21,000/- WAS DUE TO BE PAID TO THE ASSESSEE, WHI CH WAS NOT PAID AS ON 31.3.2006 ALSO. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2005-06 HAD BOOKED THE SAID EXPENSE S AS BAD DEBT, WHICH WAS NOT ALLOWED BY THE AO AS THE OTHER PARTY CONTINUED TO ACKNOWLEDGE THE DEBTS. WE FIND THAT AFTER THE AMEN DMENT TO THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, SUCH D EBTS WHICH HAVE 3 BECOME BAD, CAN BE BOOKED AS AN EXPENSES SUBJECT TO FULFILLMENT OF THE CONDITIONS OF SECTION 36(2) OF THE ACT. THE TRIBUN AL WHILE PASSING THE ORDER DATED 28.2.2011 HAD NOT ALLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF NON FULFILLMENT OF PROVISIONS OF SECTION 36(2) O F THE ACT. WE FIND THAT THE SAID CONDITION STAND FULFILLED IN CASE OF THE ASSESSEE, IN RELATION TO BAD DEBT OF M/S MEGHA ALLOYS LTD. WE FIND A MIS TAKE HAS OCCURRED IN THE ORDER OF THE TRIBUNAL AND WE PROCEED TO RECTIFY THE SAME BY PASSING THIS ORDER. PARA 8 OF THE ORDER OF THE TRIBUNAL WO ULD NOW READ AS UNDER:- 8 WE HAVE HEARD BOTH THE PARTIES. THE CLAIM OF DE DUCTION U/S 36(1)(VII) IS SUBJECT TO THE PROVISIONS OF SECTION 36(2). SECTION 36(2)(I) SPECIFICALLY PROVIDES THAT NO DEDUCTION FO R A BAD DEBT OR PART THEREOF WOULD BE ALLOWED UNLESS SUCH DEBT OR P ART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE CLAIM OF T HE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR AN EARLIER PREVIOUS YEAR. ON BEI NG SPECIFICALLY ASKED AS TO HOW THE AFORESAID CONDITIONS ARE SATISF IED BY THE ASSESSEE, THE LD. COUNSEL OF THE ASSESSEE COULD NOT GIVE ANY SATISFACTORY EXPLANATION. IN THIS VIEW OF THE MATT ER THE ASSESSEE IS NOT ENTITLED TO SUCCEED IN ITS U/S 36(1)(VII) OF TH E ACT. IN THIS VIEW OF THE MATTER, THE ORDER OF THE CIT(A) IS REVERSED AND THAT OF THE AO RESTORED. THE JUDGMENT/DECISIONS RELIED UPON BY THE LD. CIT(A) ARE NOT RELEVANT IN THAT THEY DO NOT HOLD THAT DEDU CTION U/S 36(1)(VII) SHOULD BE ALLOWED EVEN IF THE CONDITIONS STIPULATED BY SECTION 36(2) ARE NOT FULFILLED. HOWEVER, IN RESPECT OF BAD DEBT RELATING TO M/S MEGHA ALLOYS LTD. THE ASSESSEE HAVI NG FULFILLED THE CONDITION LAID DOWN IN SECTION 36(2) OF THE ACT , IS ENTITLED TO THE CLAIM OF DEDUCTION U/S 36(1)(VII) OF THE ACT. GROUND NO. 1 TAKEN BY THE DEPARTMENT IS PARTLY ALLOWED. 6. THE REST OF THE ORDER IN THE AFORESAID ITA NO.39 8/CHD/2009 WOULD REMAIN THE SAME. 7. IN THE RESULT, MISCELLANEOUS APPLICATION FILED B Y THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF OCTOBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 4 TH OCTOBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH