ACIT, CC-2 (3), Bangalore V. M/s. MABA Corporate Services Pvt Ltd, Bangalore

MA 304/BANG/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 6419 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 06-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 30-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: ARAVIND V CHAVAN
• Keywords: Reopening of assessment; Bad and doubtful debts; Revised return
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER M.P. NO. 304/BANG/2017 (IN ITA NO. 1761 /BANG/201 6 ) ASSESSMENT YEAR : 20 13 - 14 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2 (3), BANGALORE. VS. M/S. MABA CORPORATE SERVICES PVT. LTD., NO. 186/1, J.C. COMPLEX ANNEXE, SIRUR PARK ROAD, SESHADRIPURAM, BANGALORE 560 020. PAN: AABCM9318F APPELLANT RESPONDENT APPELLANT BY : SHRI K.V. ARAVIND, STANDING COUNSEL RESPONDENT BY : SHRI ARAVIND V. CHAVAN, ADVOCATE DATE OF HEARING : 06 .0 4 .2018 DATE OF PRONOUNCEMENT : 06 . 0 4 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS M.P. IS FILED BY THE REVENUE AND IT IS CONTEND ED IN THE M.P. THAT THERE ARE CERTAIN APPARENT MISTAKES IN THE IMPUGNED TRIBUNAL ORDER DATED 12.05.2017. 2. FOR THE SAKE OF READY REFERENCE, THE CONTENTIONS OF THE M.P. ARE REPRODUCED HEREINBELOW. THE ASSESSING OFFICER WAS DIRECTED IN ABOVE REFERRE D APPELLATE ORDER TO ALLOW THE CLAIM OF BAD DEBTS WRITTEN OFF O F RS.51,87,360/-, AS THE CLAIM OF DEDUCTION U/S36(1)(VII) DOES NOT REDUC E THE TAXABLE INCOME BELOW THE AMOUNT OF INCOME DECLARED IN ORIGINAL RET URN. 2. THE CLAIM IS BASED ON A DECREE ON A COMPLAINT FI LED BY THE ASSESSEE UNDER THE NEGOTIABLE INSTRUMENTS ACT WHEREIN THE HO N'BLE COURT HAS GIVEN A CLEAR FINDING THAT THE ENTIRE LOAN HAD BEEN REPAID (COPY ENCLOSED). THIS FACT HAS APPARENTLY NOT BEEN PLACE FOR THE CONSIDERATION OF THE HON'BLE TRIBUNAL. M.P. NO. 304/BANG/2017 (IN ITA NO. 1761/BANG/2016) PAGE 2 OF 4 3. ADDITIONALLY, THE FACT THAT THE REVISED RETURN O F THE ASSESSEE ONLY ADMITS 1%INTEREST PER MONTH ON THE OUTSTANDING BALA NCE AND NOT ANY FRESH ADVANCE. IT IS APPARENTLY NOT THE CASE OF THE ASSESSEE THAT ONLY THE 1% ADDITIONAL INTEREST TURNED BAD WHILE THE REST OF THE INTEREST & PRINCIPAL WAS RECOVERABLE AS IT HAS ADDUCED EVIDENC E OF THE AFORESAID COURT ORDER TO CLAIM BAD DEBTS. 4. THEREFORE, IT IS REQUESTED THAT THE HON'BLE ITAT MAY KINDLY RECALL THE ORDER ON THE ISSUE AND CONSIDER RECTIFICATION OR SE T ASIDE THE MATTER FOR FRESH ADJUDICATION AS DONE IN EARLIER ASSESSMENT YE ARS. 2. IN THE COURSE OF HEARING BEFORE US, THE LD. DR O F REVENUE PLACED RELIANCE ON JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CAS E OF T.R.F. LTD. VS. CIT AS REPORTED IN 323 ITR 397 AND SUBMITTED THAT AS PER P ARA 4 OF THIS JUDGEMENT, IT WAS NOTED BY HONBLE APEX COURT THAT THE AO HAS NOT EXAMINED THIS ASPECT AS TO WHETHER THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE AND FOR THIS FACTUAL VERIFICATION, THE MATTER WAS REMAN DED BACK TO THE AO FOR DE NOVO CONSIDERATION FOR THIS ASPECT ONLY I.E. WHETHER THE BAD DEBTS WERE ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT. HE SUBMITTED THAT IN THE PRESENT CASE ALSO, THIS EXERCISE WAS NOT UNDERTAKEN BY THE AO AND THEREFORE , IN THE PRESENT CASE ALSO, THIS ISSUE SHOULD HAVE BEEN REMITTED BACK TO THE FI LE OF AO IN THE LIGHT OF ABOVE JUDGEMENT. SINCE THIS WAS NOT DONE, THIS AMOUNTS T O AN APPARENT MISTAKE IN THE TRIBUNAL ORDER WHICH SHOULD BE RECTIFIED. THE LD. AR OF ASSESSEE SUBMITTED THAT THERE IS NO APPARENT MISTAKE IN THE IMPUGNED TRIBUN AL ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE PARA 5 OF THE IMPUGNED TRIBUNAL ORDER AS PER WHICH THIS ISSUE WAS DECIDED BY THE TRIBUNAL. THIS PARA READS AS UNDER. 5. REGARDING THE SEVENTH ASSESSMENT YEAR I.E. A. Y. 2013 14, ITA NO. 1761(BANG) 2016, THE DISPUTE IS TO BE DECIDED ON ME RIT BECAUSE IN THIS YEAR, THE ASSESSMENT IS U/S 143 (3) AND NOT U/S 153 C. IN THIS YEAR, THE ORIGINAL RETURN WAS FILED ON 27.09.2013 I.E. AFTER SEARCH DECLARING TOTAL INCOME OF RS.84,900/- AND SUBSEQUENTLY, A NOTICE U/ S 142 (1) WAS ISSUED ON 04.12.2014 ASKING THE ASSESSEE TO FILE THE RETUR N OF INCOME AND IN RESPONSE TO THAT, THE ASSESSEE FILED FRESH RETURN O F INCOME ON 04.02.2015 DECLARING TOTAL INCOME OF RS. 10,24,180/-. HENCE, IT IS SEEN THAT EVEN AFTER CLAIMING DEDUCTION ON ACCOUNT OF BAD DEBTS U/ S 36 (1) (VII) OF RS. 51,87,360/-, THE RETURNED INCOME IN THE REVISED RET URN AT RS. 10,24,180/- IS IN EXCESS OF THE INCOME AS PER THE ORIGINAL RETU RN AT RS.84,900/-. M.P. NO. 304/BANG/2017 (IN ITA NO. 1761/BANG/2016) PAGE 3 OF 4 HENCE, NO EXTRA BENEFIT IS BEING CLAIMED BY THE ASS ESSEE IN THIS REVISED RETURN. IN THE CASE OF CIT VS. SUN ENGG. WORKS (P) LTD., 198 ITR 297 (SC), IT WAS HELD BY HONBLE APEX COURT IN PARA 27 OF THIS JUDGMENT THAT IT WOULD BE OPEN TO AN ASSESSEE TO PUT FORWARD CLAI MS FOR DEDUCTION OF ANY EXPENDITURE IN RESPECT OF ESCAPED INCOME OR THE NON TAXABILITY OF THE ITEMS OF ESCAPED INCOME AT ALL. THIS WAS ALSO H ELD THAT ALLOWANCE OF SUCH CLAIMS HAS TO BE LIMITED TO THE EXTENT TO WHIC H THEY REDUCE THE INCOME TO THAT ORIGINALLY ASSESSED. ALTHOUGH THIS J UDGMENT IS IN THE CONTEXT OF REOPENING U/S 147 BUT IN VIEW OF THIS AS PECT THAT DRIVING FORCE OF THIS JUDGMENT IS THIS ASPECT THAT THE REOPENING OF ASSESSMENT IS FOR THE BENEFIT OF THE REVENUE AND NOT FOR THE BENEFIT OF THE ASSESSEE, IT CAN BE VERY MUCH EXTRAPOLATED TO HOLD THAT THE ASSESSME NT PROCEEDINGS AFTER SEARCH ON THE BASIS OF SEIZED MATERIAL IS ALSO FOR THE BENEFIT OF THE REVENUE AND NOT FOR THE BENEFIT OF THE ASSESSEE. BU T BENEFIT ALLOWED BY HONBLE APEX COURT IN THAT CASE TO THE EXTENT THAT IT WOULD BE OPEN TO AN ASSESSEE TO PUT FORWARD CLAIMS FOR DEDUCTION OF ANY EXPENDITURE IN RESPECT OF THAT INCOME OR THE NON TAXABILITY OF THE ITEMS OF INCOME AT ALL HAS TO BE ALLOWED IN THE ASSESSMENT PROCEEDINGS AFT ER SEARCH ALSO SUBJECT TO THE SAME CEILING THAT ALLOWANCE OF SUCH CLAIMS HAS TO BE LIMITED TO THE EXTENT TO WHICH THEY REDUCE THE INCO ME TO THAT ORIGINALLY ASSESSED OR DECLARED IN THE ORIGINAL RETURN. IN OUR CONSIDERED OPINION, WHEN EXTRA INCOME BEING EXTRA 1% INTEREST OF OUTSTA NDING BALANCE WAS NOT ACCOUNTED FOR IN THE BOOKS PRIOR TO SEARCH, ITS WRITE OFF IN BOOKS PRIOR TO SEARCH IS NOT POSSIBLE AND WRITE OFF CAN B E MADE ONLY AFTER ACCOUNTING FOR THIS EXTRA INCOME. THIS IS NOT THE C ASE OF THE REVENUE THAT THERE IS NO WRITE OFF AFTER ACCOUNTING FOR THE EXTR A INCOME. THIS CLAIM OF DEDUCTION UNDER SECTION 36 (1) (VII) DOES NOT RE DUCE THE TAXABLE INCOME BELOW THE AMOUNT OF INCOME DECLARED IN ORIGI NAL RETURN. HENCE, WE HOLD THAT IN THE FACTS OF THE PRESENT CASE, THE CLAIM OF BAD DEBTS WRITE OFF OF RS. 51,87,360/- IS TO BE ALLOWED. WE A LLOW THE SAME. 4. WE ALSO EXAMINE THE ASSESSMENT ORDER AND WE FIND THAT IN PARA 3 OF THE ASSESSMENT ORDER, IT IS NOTED BY THE AO THAT IT WAS SUBMITTED BY ASSESSEE BEFORE HIM THAT ASSESSEE HAS WRITTEN OFF THE BAD DEBTS IN THE REVISED BOOKS OF ACCOUNT. THEREAFTER IN PARA 4 OF THE ASSESSMENT ORDER, THE A O HAS STATED THAT THE ASSESSEE HAS CLAIMED THE BAD DEBT AS PER THE ACCOUN TS PREPARED ON THE BASIS OF THE SEIZED MATERIAL AND HENCE, THE SAME CANNOT B E TREATED THAT THE ASSESSEE HAS WRITTEN OFF THE BAD DEBT AS IRRECOVERABLE IN TH E ACCOUNTS MAINTAINED FOR PREVIOUS YEAR IN THE ORDINARY COURSE OF BUSINESS. HENCE, IT IS SEEN THAT THIS IS NOT THE OBJECTION OF THE AO THAT ASSESSEE HAS NOT W RITTEN OFF THE CLAIM OF THE BAD DEBTS IN THE BOOKS OF ACCOUNT. INFACT, AS PER THIS PARA OF THE ASSESSMENT ORDER, IT IS SEEN THAT THIS ASPECT WAS DULY EXAMINED BY TH E AO IN THE PRESENT CASE AND M.P. NO. 304/BANG/2017 (IN ITA NO. 1761/BANG/2016) PAGE 4 OF 4 OBJECTIONS OF AO IS THIS MUCH ONLY THAT SINCE THE W RITE OFF IS AFTER SEARCH IN REVISED BOOKS, THE SAME CANNOT BE ACCEPTED AS WRITE OFF IN THE BOOKS OF ACCOUNT. HENCE IN OUR CONSIDERED OPINION, THERE IS NO APPARENT MIS TAKE IN THE IMPUGNED TRIBUNAL ORDER BECAUSE EVEN THIS ASPECT HAS BEEN EXAMINED BY THE AO THAT WHETHER THERE IS ANY ACTUAL WRITE OFF IN THE BOOKS OF ACCOUNT OR NOT. THE AOS OBJECTION IS THIS MUCH ONLY THAT WRITE OFF OF DEBTS IN REVISED BOOKS OF ACCOUNT CANNOT BE CONSIDERED AS WRITE OFF IN THE ACCOUNTS MAINTAINED FOR PREVIOUS YEAR IN THE ORDINARY COURSE OF BUSINESS. HENCE, THIS JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF T.R.F. LTD. VS. CIT (SUPRA) IS NOT RENDERING ANY HELP TO REVENUE IN THE PRESENT CASE. HENCE, WE HOLD THAT T HERE IS NO APPARENT MISTAKE IN THE TRIBUNAL ORDER. 5. IN THE RESULT, THE M.P. FILED BY THE REVENUE IS DISMISSED. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 06 TH APRIL, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.