THE COMMISSIONER OF INCOME TAX V. M/S I.G.PETROCHEMICALS LTD

ITA/381/2009

AI Insights

The case involves an appeal by the Commissioner of Income-Tax and the Joint Commissioner of Income-Tax against M/s. I.G. Petrochemicals Ltd. concerning the disallowance of a claimed deduction of Rs.16,80,13,667 as a bad debt for the assessment year 1998-99. The Assessing Authority initially disallowed the claim due to insufficient proof of the debt's existence and irrecoverability. The First Appellate Authority affirmed this decision. However, the Tribunal set aside these orders and remanded the matter for fresh consideration, leading to the revenue's appeal to the High Court. The High Court upheld the Tribunal's decision, directing the Assessing Authority to verify the claims with the provided documents.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 701123 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 25-11-2014
• Assessment Year: misc
• Other Referred Cases: T.R.F Ltd. Vs. Commissioner of Income Tax (2010) 323 ITR 397
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S PARTHASARATHI
• Assessee Lawyers: K V ARAVIND
• Keywords: Appellate Authority; Assessing Authority; Assessment; Bad debt; Remand; Tribunal
• Section: 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 25TH DAY OF NOVEMBER, 2014 PRESENT: THE HON'BLE Mr.JUSTICE N.KUMAR AND THE HON'BLE Mr.JUSTICE B.MANOHAR INCOME TAX APPEAL NO.381 OF 2009 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX C.R.BUILDING QUEENS ROAD BANGALORE 2. THE JOINT COMMISSIONER OF INCOME-TAX SPECIAL RANGE-4 C.R.BUILDING QUEENS ROAD BANGALORE ...APPELLANTS (BY SRI.K.V.ARAVIND, ADV.) AND: M/S. I.G.PETROCHEMICALS LTD., D-4, JYOTHI COMPLEX 13/1, INFANTRY ROAD BANGALORE ...RESPONDENT (BY SRI.S.PARTHASARATHI, ADV.) 2 THIS APPEAL IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 25.02.2009 PASSED IN ITA NO.1088/BNG/2008, FOR THE ASSESSMENT YEAR 1998-99, PRAYING TO; i. FORMULATE THE SUBSTANTIAL QUESTION OF LAW, ii. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.1088/BNG/2008, DATED 25.02.2009 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE JOINT COMMISSIONER OF INCOME TAX, SPECIAL RANGE-4, BANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR HEARING THIS DAY, N.KUMAR, J., DELIVERED THE FOLLOWING: J U D G M E N T The revenue has preferred this appeal against the order passed by the Tribunal remanding the matter back to the Assessing Authority. 2. The assessee is carrying on the business of manufacturing Chemicals. The assessee had claimed a sum of Rs.16,80,13,667/- as an allowable deduction by writing off the same as a bad debt. The Assessing Authority did not allow the said claim, on the ground that the existence of the debt is not proved and further, the asssessee has not proved that it cannot be recovered. 3 3. Aggrieved by the said order, assessee preferred an appeal to the First Appellate Authority – The Commissioner of Income Tax (Appeals). He affirmed the said order of the Assessing Authority. 4. In the appeal preferred by the assessee before the Tribunal, the orders passed by both the authorities were set-aside and the matter was remanded back for fresh consideration to find out the existence of debt. 5. The revenue has preferred this appeal challenging the said finding of the Tribunal on the ground that no material was placed either before the Assessing Authority or before the Appellate Authority. For the first time the assessee could not have been permitted to place the material to prove the existence of debt and therefore, the Tribunal has committed an error in remanding the matter. 6. The Tribunal in para 12 of its order has clearly referred to several documents on which reliance is placed in support of the claim 4 of the assessee. The debit notes were raised on account of quality and quantity and also on account of not lifting the raw materials. However, the copies of the same are not produced. In those circumstances it was held that, they are not in a position to ascertain as to how much debit notes pertain/obtained in respect of difference in quality and how much quantum related in respect of supplies not lifted on account of fall in rates. Further, it is mentioned after referring to the documents in the paper book that the debit notes have been raised from January 1997 to March 1997, June 1997 to September 1997. In respect of all the debit notes issued in respect of the claim quality report in respect of all claims have not been filed. It is in those circumstances it was held that, bad debt, in case if it is written off in the books of account is allowable and there is no necessity to prove that the debts had become bad during the year in which it is written off. The Appellate Authority has not allowed the claim because the debit notes were not produced. In those circumstances, it was held that the assessing authority may examine the books of account and in case it is found as a fact that discounts were on account of quality and quantity, then these will be allowable on the ground that debts have been written off and in respect of 5 discount in quality, these have not been claimed as part of purchases. It is to verify the said facts before allowing the bad debt, the issue was restored back on the file of the assessing authority for verification. In the circumstances of the case, we cannot find fault with the approach of the Tribunal. Therefore, no grounds for interference is made out. 7. However, the law on the point is now well settled. The Apex Court in the case of T.R.F Ltd., Vs. Commissioner of Income Tax reported in (2010) 323 ITR 397 has clearly set out that the Assessing Authority has to examine whether the debt has, in fact, will be written off in the account of the assessee and then grant appropriate relief. The said judgment shall be taken into consideration by the Assessing Authority while passing the appropriate orders. In that view of the matter, we do not see any merit in the appeal and accordingly, it is dismissed. Sd/- JUDGE Sd/- JUDGE GH "