ACIT14(3), MUMBAI v. INDOCHEM MARKETING CORPORATION, MUMBAI

ITA 1379/MUM/2010 | 2006-2007
Pronouncement Date: 15-12-2010 | Result: Dismissed

Appeal Details

RSA Number 137919914 RSA 2010
Bench Mumbai
Appeal Number ITA 1379/MUM/2010
Duration Of Justice 9 month(s) 27 day(s)
Appellant ACIT14(3), MUMBAI
Respondent INDOCHEM MARKETING CORPORATION, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 15-12-2010
Assessment Year 2006-2007
Appeal Filed On 18-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI P. M. JAGTAP A.M I.T.A. NO.1379/MUMBAI/2010 ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF INCOME TAX -14(3) MUMBAI M/S. INDOCHEM MARKETING CORPORATION 316/318 HIMALAY HOUSE 79 PALTON ROAD MUMBAI-400 001 PAN NO: AAAF10362H (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI S.K. SINGH RESPONDENT BY : SHRI SAMEER DALAL ORDER PER P.M. JAGTAP (AM) : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF LEARNED CIT(APPEALS)-25 MUMBAI DATED 24.11.2009 WHEREBY H E DELETED THE ADDITION OF RS.60 74 204/- MADE BY THE AO BY WAY OF DISALLOWANC E OF ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF BAD DEBTS. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY W HICH IS ENGAGED IN THE BUSINESS OF WHOLESALE DEALING IN CHEMICALS DYE S PIGMENTS SHOE COMPONENTS AND PAPERS ETC. THE RETURN OF INCOME FOR THE YEAR U NDER CONSIDERATION WAS FILED BY IT ON 30.10.2006 DECLARING TOTAL INCOME OF RS.5 9 19 520/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN THE ASSESSEE COMPANY HAD DEBITED A 2 SUM OF RS.60 74 204/- ON ACCOUNT OF BAD DEBTS WRITT EN OFF. AFTER HAVING EXAMINED THE DETAILS FURNISHED BY THE ASSESSEE COMP ANY IN RESPECT OF ITS CLAIM RELATING TO THE BAD DEBTS WRITTEN OFF AND AFTER MAK ING CERTAIN ENQUIRIES ON HIS OWN THE ASSESSING OFFICER CAME TO THE CONCLUSION T HAT SUFFICIENT EFFORTS WERE NOT TAKEN BY THE ASSESSEE TO RECOVER THE RELEVANT DEBTS BEFORE WRITING OF THE SAME AS BAD IN THE BOOKS OF ACCOUNTS. HE ALSO HELD THAT FOR CLAIMING DEDUCTION ON ACCOUNT OF BAD DEBTS U/S.36(1)(VII) THE ASSESSEE WAS REQUI RED TO PROVE THAT THE RELEVANT DEBTS HAVE ACTUALLY BECOME BAD IN THE PARTICULAR YE AR. ACCORDING TO HIM THE ASSESSEE HOWEVER HAD FAILED TO SATISFY THIS CONDI TION AND THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS THE REFORE WAS DISALLOWED BY HIM IN THE ASSESSMENT COMPLETED U/S.143(3) VIDE AN ORDE R DATED 30.12.2008. 3. AGAINST THE ORDER PASSED BY THE A.O. U/S.143 (3 ) AN APPEAL WAS FILED BY THE ASSESSEE BEFORE THE LEARNED CIT (APPEALS) CH ALLENGING INTERALIA THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF BAD DEBTS WRITTEN OFF AND AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE A SSESSEE BEFORE HIM THE LEARNED CIT(APPEALS) DELETED THE SAID DISALLOWANCE MADE BY THE AO FOR THE FOLLOWING REASONS GIVEN BY HIM IN PARAGRAPH 9 OF HI S IMPUGNED ORDER :- 9. I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBMI SSIONS OF THE APPELLANT AND ALSO PERUSED THE ORDER OF THE AO. THE RE IS NO DISPUTE REGARDING THE FACT THAT ALL THE DETAILS REQUIRED TO BE FILED IN RESPECT OF THE CLAIM OF BAD DEBTS WERE FILED BY THE APPELLA NT DURING THE ASSESSMENT PROCEEDINGS INCLUDING THE LEDGER ACCOUN TS OF ALL THE PARTIES VIZ. THE DEBTORS FOR THE YEARS COMMENCING F ROM 01.04.2003 TO 31.03.2008 INCLUDING COPIES OF NIL TRANSACTIONS I N THE SUBSEQUENT YEARS AND COPIES OF ALL THE SALES BILLS IN RESPECT OF WHICH DUES WERE 3 WRITTEN OFF. I ALSO FIND THAT THE AO HAD ISSUED NOT ICE U/S.133 (6) ON THE BASIS OF THE DETAILS FILED BY THE APPELLANT TO THE DEBTORS WHOSE DEBTS WERE WRITTEN OFF BY THE APPELLANT. IN SOME OF THE CASES THE NOTICES ISSUED WERE RETURNED UNSERVED AND IN SOME O THER CASES THERE WAS NO RESPONSE. SURPRISINGLY THE AO ASKED THE APP ELLANT TO FURNISH THE PRESENT ADDRESS AND CONFIRMATIONS OF THERE PART IES WITHOUT TAKING NOTE OF THE FACT THAT IF THE APPELLANT WAS H AVING ANY CONTACT WITH THESE PARTIES THERE WAS NO NEED OF WRITING OF F THE DEBTS AS BAD DEBTS. CONVERSELY NON SERVICE OF NOTICE U/S.133(6 ) AND NON COMPLIANCE TO THESE NOTICES BY THE PARTIES TO WHOM THE NOTICES WERE SERVED STRENGTHENS THE APPELLANTS CONTENTION THAT THE DEBTORS HAVE STOPPED PAYING THE DUES AND THE SAME ARE UNRECOVERA BLE AS SOME OF THEM ARE NON EXISTING AND OTHERS ARE NOT RESPONDING . THE AO HAS ALSO NOT DISPUTED THE CLAIM OF THE APPELLANT THAT T HE BAD DEBTS WRITTEN OFF HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTI NG THE INCOME OF THE ASSESSEE IN PREVIOUS AND /OR IN AN EARLIER YEAR AND BEING IRRECOVERABLE HAVE BEEN ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT. IN VIEW OF THESE ADMITTED FACTS I FIND THAT THE TW IN CONDITIONS CONTAINED IN SEC. 36(2) OF THE I.T. ACT ARE SATISFI ED BY THE APPELLANT. MOREOVER IT IS ALSO A FACT THAT WHENEVER THE BAD D EBTS WRITTEN OFF ARE RECOVERED OR REALIZED THE SAME IS OFFERED FOR TAX U/S.41 OF THE I.T. ACT BY THE APPELLANT SUO MOTO AS HAS BEEN INFO RMED BY THE APPELLANT IN THE ABOVE SUBMISSIONS OF HAVING DONE I N A.YS. 2007-08 AND 2008-09. IN VIEW OF THESE FACTS AND ON FINDING THAT THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SUPPORT THAT THE BAD DEBTS WRITTEN OFF WERE ACTUALLY NOT BECOME BAD I FIND TH AT THE AO IS NOT JUSTIFIED IN MAKING DISALLOWANCE OF BAD DEBTS WRITT EN OF AMOUNTING 4 TO RS.60 74 204/-. MORE OVER THE RELIANCE PLACED BY THE APPELLANT ON THE DECISION OF THE HONBLE ITAT SPECIAL BENCH MU MBAI IN THE CASE OF OMAN INTERNATIONAL BANK (SUPRA) ON THE FAC TS AND CIRCUMSTANCE OF THE CASE IS APPLICABLE IN APPELLANT S CASE. ACCORDINGLY THE DISALLOWANCE MADE IS DELETED. THIS GROUND IS DECIDED IN FAVOUR OF THE APPELLANT. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) THE REV ENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LEARN ED REPRESENTATIVES OF BOTH THE SIDES BEFORE US THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISIO N OF HONBLE SUPREME COURT IN CASE OF T.R.F. VS. CIT REPORTED IN 323 ITR 397 WHE REIN IT WAS HELD THAT AS PER THE PROVISIONS OF SECTION U/S.36(1)(VII) AMENDED W ITH EFFECT FROM 01.04.1989 IT IS NO MORE NECESSARY FOR THE ASSESSEE INORDER TO CL AIM DEDUCTION ON ACCOUNT OF BAD DEBTS TO ESTABLISH THAT THE SAID DEBTS HAVE ACT UALLY BECOME BAD AND IT IS ENOUGH IF THE SAID BAD DEBTS ARE WRITTEN OFF AS IR RECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAID DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LIMITED (SUPRA) WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEAL) DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF BAD DEBTS BY HOLDING THAT THE ASSESSEE HAVING WRITT EN OFF THE RELEVANT DEBTS AS IRRECOVERABLE IN HIS BOOKS OF ACCOUNTS WAS ENTITLED TO CLAIM DEDUCTION U/S.36(1)(VII). 5 5. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON THIS 15 TH DAY OF DECEMBER 2010. SD/- SD/- ( D. MANMOHAN ) ( P.M. JAGTAP ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 15/12/2010 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR I - BENCH ITAT MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ROSHANI