SHRI AMIT BASU, Jaipur v. DCIT, Jaipur

ITA 1459/JPR/2010 | 2007-2008
Pronouncement Date: 04-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 145923114 RSA 2010
Assessee PAN ABFPB2314J
Bench Jaipur
Appeal Number ITA 1459/JPR/2010
Duration Of Justice 10 month(s) 5 day(s)
Appellant SHRI AMIT BASU, Jaipur
Respondent DCIT, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 04-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 04-11-2011
Assessment Year 2007-2008
Appeal Filed On 30-12-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 1459/ JP/2010 ASSESSMENT YEAR 2007-08 PAN: ABFPB 2314 J SHRI AMIT BASU VS. THE DCIT PROP: M/S. GLOBAL VISION CO. CIRCLE- 2 21/59 BHIRGU PATH MANSAROVAR JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY: SHRI P.C. PARWAL DEPARTMENT BY : SHRI VINOD JOHRI DATE OF HEARING: 13-09-2011 DATE OF PRONOUNCEMENT: 04-11-2011 ORDER PER N.L. KALRA AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-I JAIPUR DATED 03-11-2010 FOR THE ASSESSMENT YEAR 2007-08. 2.1 THE FIRST GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM OF EXEMPTION U /S 10BA AMOUNTING TO RS. 30 07 895/-. 2.2 THE ASSESSEE IS ENGAGED IN THE PRODUCTION AND E XPORT OF WOODEN HANDICRAFTS AND OTHER RELATED COMMODITIES. THE ASSE SSEE IS REGISTERED UNDER EXPORT PROMOTION COUNCIL FOR HANDICRAFT AS MANUFACT URER/ EXPORTER. THE ASSESSEE FILED THE RETURN ON 31-10-07 CLAIMING EXEMPTION U/S 10 BA AT RS. 30 07 895/-. 2 THE AO WHILE FRAMING ASSESSMENT ORDER U/S 143(3) FO R THE AY 2004-05 & 2005- 06 DISALLOWED THE CLAIM U/S 10BA WHICH WAS ALSO UPH ELD BY THE CIT(A). THEREFORE THE ASSESSEE IN ORDER TO AVOID LITIGATIO N REVISED THE RETURN FOR THE AY 2007-08 ON 07.05.2008 AND WITHDREW THE CLAIM OF DED UCTION U/S 10BA MADE IN ORIGINAL RETURN. AFTER THE REVISION OF RETURN THE HONBLE ITAT VIDE ORDER DATED 21/08/09 REVERSED THE ORDER OF CIT(A) AND ALLOWED T HE CLAIM OF ASSESSEE U/S 10BA FOR AY 04-05 & 05-06 . ACCORDINGLY THE ASSESSEE FILED AN APPLICATION DATED 07/09/2009 DURING THE ASSESSMENT PROCEEDINGS REQUESTING FOR ALLOWING THE CLAIM OF DEDUCTION U/S 10BA CLAIMED IN THE ORIGINAL RETURN. 2.3 THE AO DISALLOWED THE CLAIM OF EXEMPTION OF RS. 30 07 895/- U/S 10BA ON THE FOLLOWING GROUNDS:- (I) ASSESSEE IS NOT MANUFACTURING/ PRODUCING ANY GOODS RATHER IT IS ENGAGED IN PROCESSING OF GOODS. FURTHER FROM THE STATEMENTS OF THE SUPPLIERS OF THE ASSESSEE IT IS EVIDENT THAT THE GOODS ARE MANU FACTURED BY THE SUPPLIERS THROUGH THE USE OF POWER AND MACHINES AND THE ASSESSEE IS JUST DOING THE WORK OF FINISHING POLISHING AND PACKING. (II) THE ITEMS EXPORTED BY THE ASSESSEE ARE NOT OF ARTIS TIC VALUE BUT ROUTINE FURNITURE. (III) ASSESSEE WITHDREW THE CLAIM IN THE REVISED RETURN W HICH STANDS VALID OVER THE ORIGINAL RETURN. HENCE ANY CLAIM RAISED L ATER ON CANNOT BE ENTERTAINED IN VIEW OF AMENDMENT IN 80A 3 2.4 THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF CL AIM OF EXEMPTION OF RS.30 07 895/- U/S 10BA BY GIVING THE FOLLOWING FIN DINGS AT PAGE 4-5 OF HIS ORDER :- - POLISHING FINISHING & PACKING ALONE CAN NOT BE CO NSIDERED AS MANUFACTURING AS THESE ACTIVITIES MAY BE PART OF MA NUFACTURING BUT THE VITAL PART OF MANUFACTURING IS CUTTING THE TIMBER I NTO DIFFERENT SIZES & GIVING IT SHAPE OF DIFFERENT ITEMS. AS THESE ACTIVI TIES ARE NOT DONE IN THE PREMISES OF THE APPELLANT THE ACTIVITIES BEING DON E BY THE APPELLANT CAN NOT BE CONSIDERED AS MANUFACTURING THOUGH IT MAY BE A LESSER IMPORTANT PART OF MANUFACTURING PROCESS BUT CERTAIN LY NOT COMPLETE MANUFACTURING. - NOTHING WAS SUBMITTED BEFORE THE AO WHICH MAY LEAD TO THE CONCLUSION THAT THE ITEMS EXPORTED WERE OF ARTISTIC VALUE. THUS THE SUB CLAUSE (B) OF EXPLANATION WHICH DEFINES ELIGIBLE A RTICLES OR THINGS DOES NOT MEET THE REQUIRED CONDITION. - THE FACTS IN THE YEAR UNDER CONSIDERATION ARE DIFF ERENT FROM A.Y. 04- 05 05-06 & 06-07 SINCE IN THE ORIGINAL RETURN FILE D FOR THE YEAR UNDER CONSIDERATION THE CLAIM OF DEDUCTION WAS MADE BUT THE CLAIM WAS SUBSEQUENTLY WITHDRAWN BY FILING THE REVISED RETURN . AS IN THE PRESENT CASE RETURN MEANS ONLY REVISED RETURN & NO CLAIM WE RE MADE IN THE REVISED RETURN CLAIM OF DEDUCTION U/S 10BA IS NOT ADMISSIBLE IN VIEW OF AMENDMENT MADE BY FINANCE ACT 2009 BY INSERTING SUB SECTION 5 OF 80A W.R.E.F. 01.04.2003 WHICH PROVIDES THAT WHERE T HE ASSESSEE FAILS TO MAKE A CLAIM IN HIS RETURN OF INCOME FOR ANY DEDUCT ION U/S 10A OR 10BA NO DEDUCTION SHALL BE ALLOWED TO HIM THERE UN DER. 2.5 THE LD. AR HAS SUBMITTED AS UNDER:- 1. THE FACTS OF THE CASE ARE EXACTLY SAME AS THAT I N A.Y. 2004-05 & 2005-06. THE APPEAL FOR BOTH THESE YEARS ARE DECIDED BY THE HONBLE ITAT JAIPUR BENCH VIDE ITS ORDER DT. 21 .08.2009 IN ITA NO.198 318 & 1660/JP/2008 WHEREIN IT WAS HELD THAT THE ASSESSEE 4 IS ENGAGED IN MANUFACTURING OF WOODEN HANDICRAFT IT EMS HAVING ARTISTIC VALUE. IT SATISFIES THE CONDITIONS LAID DO WN FOR CLAIMING EXEMPTION U/S 10BA & THEREFORE THE AO IS DIRECTED T O ALLOW THE CLAIM OF EXEMPTION U/S 10BA TO THE ASSESSEE. AGAIN HONBLE ITAT IN A.Y. 06-07 VIDE ITS ORDER DT. 30.07.2010 IN ITA NO. 960/JP/09 ALLOWED THE CLAIM OF THE ASSESSEE. THE CIT(A) HAS A LSO ACCEPTED THE FACT THAT THE ISSUE IS IDENTICAL AS IN EARLIER YEAR EXCEPT THAT IN THIS YEAR CLAIM WAS WITHDRAWN BY FILING THE REVISED RETU RN (THOUGH SUBSEQUENTLY CLAIMED IN ASSESSMENT PROCEEDINGS BY F ILING A LETTER). THIS IS NOT CHALLENGED BY THE DEPARTMENT. HENCE FO LLOWING THE PRECEDENCE THE CLAIM OF ASSESSEE U/S 10BA BE DIRECT ED TO BE ALLOWED. 2. IT IS A SETTLED LAW THAT THERE CAN BE NO ESTOPPE L AGAINST THE LAW. IF A CLAIM IS LEGITIMATELY ALLOWABLE TO THE AS SESSEE THE SAME HAS TO BE ALLOWED EVEN IF ASSESSEE MAKES SUCH A CLAIM IN ASSE SSMENT PROCEEDINGS. IN THE PRESENT CASE ASSESSEE HAD ORIGINALLY MADE THE CLAIM BUT FOR THE REASONS STATED IN THE FACTS OF THE CASE ASSESSEE WITHDREW T HE SAID CLAIM AND THEN IN THE VIEW OF DECISION OF HONBLE ITAT IN THE ASSESSE ES OWN CASE FOR AY 2004-05 & 2005-06 THE CLAIM WAS AGAIN MADE. THIS FACT WAS ALSO EXPLAINED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS VIDE LETTER DT. 3.12.2009. HENCE THE LEGITIMATE CLAIM OF ASSESSEE HAS TO BE ALLOWED. FOR THIS RELIANCE IS PLACED ON THE FOLLOWING CASES:- RAJESH RASIK LAL SHAH VS DCIT 35 DTR 388 (MUM.) H AS HELD THAT EVEN THOUGH THERE IS MISTAKE ON PART OF ASSESS EE IN OFFERING CAPITAL GAINS WHICH IS NOT TAXABLE UNDER THE ACT BUT IN RESPECT OF WHICH ALL THE DETAILS INCLUDING THE DETAIL OF STT PAID WAS SHOWN IN THE RETURN OF INCOME THE SAME SHOULD HAVE BEEN EXC LUDED BY THE 5 AO AS THE ENTIRE INFORMATION WAS AVAILABLE ON RECOR D AND IT SHOULD NOT COME UNDER THE TECHNICALITIES OF NOT FILING THE REVISED RETURN. ASCHARAJLAL RAM PARKASH VS. CIT [1973] 090 ITR 0477 (ALL) THOUGH THE ASSESSEE IN HIS RETURN DID NOT CLAIM DEP RECIATION FOR A TRUCK PURCHASED IN THE PREVIOUS YEAR NOR GAVE THE N ECESSARY PARTICULARS IN THE FORM OF RETURN THE ITO IF IN T HE COURSE OF ASSESSMENT PROCEEDINGS HE COMES TO KNOW OF THE REL EVANT PARTICULARS NECESSARY FOR THE GRANT OF DEDUCTION FO R DEPRECIATION WAS BOUND TO GIVE EFFECT TO IT AND ALLOW DEPRECIATI ON AS THE ITO WAS BOUND TO ARRIVE AT THE TRUE FIGURE OF PROFITS A ND GAINS OF THE BUSINESS OF THE ASSESSEE. IT CANNOT BE CONTENDED TH AT MERELY BECAUSE THE ASSESSEE DID NOT FILE THE NECESSARY PARTICULARS IN THE RETURN THE ITO DID NOT HAVE JURISDICTION TO GRANT THE DEPRECIA TION ALLOWANCE. DOUBLE DOT FINANCE LTD. VS. ACIT 38 DTR 220 (MUM.) MERE ADMISSION OF INCOME BY THE ASSESSEE DOES NOT GIVE AUTHORITY TO THE AO TO TAX THE AMOUNT UNLESS IT COM ES WITHIN THE PURVIEW OF TAXABLE INCOME EVEN IF THE ASSESSEE HA S INADVERTENTLY INCLUDED A PARTICULAR AMOUNT AS INCOME THE AO IS S UPPOSED TO DETERMINE THE CORRECT INCOME BY EXCLUDING THE SAME- IT IS THE BASIC FUNCTION OF THE AO TO FIND OUT THE CORRECT TAX LIAB ILITY UNDER THE PROVISIONS OF LAW THAT CAN BE IMPOSED AND COLLECTED FROM THE ASSESSEE THUS MERE INCLUSION OF THE SAID AMOUNT IN THE RETURN WAS OF NO CONSEQUENCE. CIT VS. RAMCO INTERNATIONAL 332 ITR 306 (P&H) IT WAS HELD THAT ASSESSEE HAS NOT MADE ANY FRESH C LAIM & DULY FURNISHED DOCUMENTS & FORM 10CCB DURING ASSESSMENT PROCEEDINGS DEDUCTION U/S 80IB CAN NOT BE DISALLOW ED ON THE GROUND THAT ASSESSEE HAS NOT FILED A REVISED RETURN FOR MAKING SUCH CLAIM. 3. WE MAY FURTHER POINT OUT THAT THE AMENDMENT BY W AY OF INSERTION OF SECTION 80A(5) BY FINANCE ACT(2) 2009 WITH RETROSPECTIVE EFFECT FROM 01-02-2003 IS APPLICABLE ONLY WHEN THE ASSESSEE FAILS TO MAKE A CLAIM IN HIS RETURN OF INC OME. IN THE PRESENT CASE ASSESSEE HAS MADE A CLAIM IN THE ORIGINAL RET URN OF INCOME AND 6 THEREFORE THE ASSESSEES CASE IS NOT COVERED BY TH E PROVISION OF SECTION 80A(5) AND THE CLAIM OF EXEMPTION U/S 10BA IS TO BE ALLOWED. CIT(A) HAS INCORRECTLY INTERPRETED THE SAI D CLAUSE BY STATING THAT RETURN MEANS ONLY REVISED RETURN & SIN CE NO CLAIM WAS MADE IN THE REVISED RETURN DEDUCTION U/S 10BA IS N OT ADMISSIBLE. HE HAS IGNORED THAT IN THE SECTION THERE IS NO WORD LIKE REVISED RETURN. HENCE A CLAIM MADE IN THE ORIGINAL RETURN BUT WITHDRAWN IN REVISED RETURN BUT AGAIN CLAIMED IN ASSESSMENT PROC EEDINGS BY WAY OF LETTER NEED TO BE CONSIDERED. IN THESE CIRCUMST ANCES ONLY BECAUSE IN THE REVISED RETURN FILED THE CLAIM WAS W ITHDRAWN CANNOT BE A GROUND FOR NOT ALLOWING THE CLAIM. IN VIEW OF ABOVE THE LOWER AUTHORITIES BE DIRECTED TO ALLOW THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE U/S 10B A. 2.6 THE LD DR SUPPORTED THE ORDERS OF THE AUTHORITI ES BELOW. 2.7 DURING THE COURSE OF PROCEEDINGS THE LD.AR WAS INFORMED THAT ONE OF US (ACCOUNTANT MEMBER) WAS A PARTY TO THE ORDER OF BAN GALORE BENCH IN THE CASE OF ACIT VS JSW STEELS LTD. 4 ITR (TRIB) 202 IN WHICH IT WAS HELD THAT DEPRECIATION CANNOT BE ALLOWED BY ADVERTING TO PART ICULARS FURNISHED IN THE ORIGINAL RETURN WHEN REVISED RETURN HAS BEEN FILED. THE LD.AR RELIED ON THE DECISION OF HONB'LE APEX COURT IN THE OF BAJAJ TEM PO LTD. 196 ITR 188 IN WHICH IT HAS BEEN HELD THAT A PROVISION GRANTING IN CENTIVE SHOULD BE CONSTRUED LIBERALLY. RELIANCE HAS BEEN PLACED ON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS ANDHRA COTTON MILLS LT D. 219 ITR 404 IN WHICH IT IS 7 HELD THAT REVISED RETURN CANNOT BE FILED FOR WITHDR AWING CLAIM IN ORIGINAL RETURN CORRECTLY MADE. THE HON'BLE CALCUTTA HIGH COURT HEL D THAT REVISED RETURN CANNOT WASH AWAY ORIGINAL RETURN. 2.8 WE HAVE HEARD BOTH THE PARTIES. IT IS USEFUL TO REPRODUCE THE PROVISIONS OF SECTION 139(5) 80A(5) AND 80AC SECTION 139 (5) IF ANY PERSON HAVING FURNISHED A RETURN UNDER SUB-SECTION (1) OR IN PURSUANCE OF A NOTICE ISSUED UNDER SUB- SECTION (1) OF SECTION 142 DISCOVERS ANY OMISSION OR ANY WRONG STATEMENT THEREIN HE MAY FURNISH A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT WHICHEV ER IS EARLIER: PROVIDED THAT WHERE THE RETURN RELATES TO THE PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL 1988 OR ANY EARLIER ASSESSMENT YEAR THE REFERENCE TO ONE YEAR AFORESAID SHALL BE CONSTRUED AS A REFERENCE TO TWO YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. SECTION 80A(5) WHERE THE ASSESSEE FAILS TO MAKE A CLAIM IN HIS RETURN OF INCOME FOR ANY DEDUCTION UNDER SECTIO N 10A OR SECTION 10AA OR SECTION 10B OR SECTION 10BA OR UNDER ANY PR OVISION OF THIS CHAPTER UNDER THE HEADING C. DEDUCTIONS IN RESPEC T OF CERTAIN INCOMES NO DEDUCTION SHALL BE ALLOWED TO HIM THER EUNDER. SECTION 80AC. DEDUCTION NOT TO BE ALLOWED UNLESS RE TURN FURNISHED.--WHERE IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR C OMMENCING ON THE 1ST DAY OF APRIL 2006 OR ANY SUBSEQUENT ASSESS MENT YEAR ANY DEDUCTION IS ADMISSIBLE UNDER SECTION 80-IA OR SECT ION 80-IAB OR SECTION 80-IB OR SECTION 80-IC **OR SECTION 80-ID OR SECTION 80-IE NO SUCH DEDUCTION SHALL BE ALLOWED TO HIM UNLESS HE FURNISHES A RETURN OF HIS INCOME FOR SUCH ASSESSMENT YEAR ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB-SECTION (1) OF SECTION 139 . 8 2.9 SECTION 80A(5) HAS BEEN INSERTED BY THE FINANCE (NO.2) ACT 2009 WITH RETROSPECTIVE EFFECT FROM 1-4-2003. BUT FOR THIS SU B-SECTION THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10BA BEFORE THE TRIBUNAL AS IN THE CASE OF THE ASSESSEE FOR EARLIER YEAR IT HAS BEEN HELD THAT IT IS ELIGI BLE FOR DEDUCTION U/S 10BA OF THE ACT. IN RESPECT OF CLAIM NOT BEING MADE IN THE REVI SED RETURN THE ASSESSEE COULD HAVE RAISED ADDITIONAL GROUND FOR THE PURPOSE OF CL AIM OF DEDUCTION. SECTION 80A(5) SAYS THAT DEDUCTION IS NOT TO BE ALLOWED IF THE ASSESSEE FAILS TO MAKE A CLAM IN HIS RETURN. THE ASSESSEE MADE A CLAIM IN TH E ORIGINAL RETURN AND THEREAFTER FILED A REVISED RETURN. AFTER ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE IT AGAIN FILED A LETTER THAT DEDUCTION BE ALLOWED. THE HONB'LE APEX COURT IN THE OF GOETEZ INDIA LTD. VS. CIT 284 ITR 323 HAS HELD THAT AO CAN ALLOW DEDUCTION IN CASE THE CLAIM IS MADE IN THE RE TURN AND NOT OTHERWISE 2.10 THE LD.AR HAS RELIED ON THE DECISION IN THE CA SE OF RAJESH RASIK LAL SHAH (SUPRA). THIS DECISION IS NOT APPLICABLE AS IN THE INSTANT CASE THE ACT HAS PROVIDED THAT DEDUCTION SHOULD NOT BE ALLOWED IN CA SE THE CLAIM IS NOT MADE. 2.11 THE LD.AR HAS REFERRED TO THE DECISION OF HON' BLE ALLAHABAD HIGH COURT IN THE CASE OF ASCHARAJLAL RAM PRAKASH (SUPRA). THE H ONB'LE APEX COURT HAS NOT APPROVED THIS DECISION IN THE CASE OF CIT VS MAHEND RA MILLS 243 ITR 56. AT PAGE 79 IT IS OBSERVED AS UNDER:- 9 IN ASCHARAJLAL RAM PARKASHS CASE [1973] 90 ITR 477 THE ALLAHABAD HIGH COURT SAID THAT SINCE IT IS NOT MEN TIONED IN SECTION 34 AS TO IN WHAT FORM THE PRESCRIBED PARTICULARS O F DEPRECIATION MUST BE FURNISHED AND THAT THEREFORE THERE IS NO REQUIREMENT IN THAT SECTION THAT THE PARTICULARS MUST BE FURNISHE D. THE HIGH COURT FURTHER WENT ON TO SAY THAT MERELY BECAUSE THE FOR M OF RETURN PROVIDES FOR A PLACE WHERE THE STATEMENT OF SUCH P ARTICULARS SHOULD BE SET OUT WOULD NOT MEAN THAT IN THE ABSENCE OF SUCH STATEMENT THE INCOME-TAX OFFICER HAS NO POWER TO ALLOW THE DEPREC IATION. THIS IS CONTRARY TO THE MANDATE OF SECTION 34 AS WELL AS TH E BOARD CIRCULAR DATED AUGUST 31 1965. THE MADRAS HIGH COURT IN DAS APRAKASH BOTTLING COS CASE [1980] 122 ITR 9 FOL LOWING THE ALLAHABAD HIGH COURT IN THE CASE OF ASCHARAJAL RAM PARKASH [1973] 90 ITR 477 S AID THAT THE INCOME- TAX OFFICER CAN DISALLOW THE C LAIM OF DEPRECIATION IF THE ASSESSEE DID NOT FURNISH THE P RESCRIBED PARTICULARS. IT FURTHER WENT ON TO HOLD THAT IT WOU LD BE OPEN TO THE INCOME-TAX OFFICER TO GRANT DEPRECIATION EVEN IF TH E ASSES- SEE HAD NOT FURNISHED THE PRESCRIBED PARTICULARS. IN THIS C ASE THE ASSESSEE DID NOT GIVE THE PARTICULARS RELATING TO DEPRECIATI ON IN THE RETURN FORM NOR DID IT CLAIM DEPRECIATION. ON BEING CALLE D UPON BY THE INCOME-TAX OFFICER TO FURNISH NECESSARY PARTICULAR S THE ASSESSEE IN RESPONSE THERETO FURNISHED THE PARTICULARS UNDER P ROTEST. ON THAT BASIS THE INCOME-TAX OFFICER GRANTED THE DEPRECIA TION. WE DO NOT THINK THAT THE VIEWS EXPRESSED BY THE MADRAS HIGH COURT LAY DOWN THE CORRECT LAW. SECTION 34 IS NOT IN THE NATURE O F MERELY AN ENABLING PROVISION. IN THE ABSENCE OF PARTICULARS OF DEPRECIATION AS REQUIRED BY SECTION 34 THERE IS NO MANDATE ON THE INCOME-TAX 10 OFFICER UNDER SECTION 29 TO COMPUTE THE INCOME BY A LLOWING DEPRECIATION UNDER SECTION 32. IN THE SECOND MADRAS CASE IN CIT V. SOUTH- ERN PETRO CHEMICAL INDUSTRIES CORPORATION LT D. (NO. 2) [1998] 233 ITR 400 THE ASSESSEE DID CLAIM DEPRECIATION BUT HE WITHDREW THE SAME IN THE REVISED RETURN. ON THAT B ASIS IT WAS HELD THAT SINCE THE ASSESSEE HAD FURNISHED THE PARTICULA RS REGARDING THE CLAIM OF DEPRECIATION IN THE ORIGINAL RETURN THE ASSESSEE WOULD NOT BE ABLE TO WITHDRAW HIS CLAIM FOR DEPRECIATION. IT WOULD APPEAR THAT THE HIGH COURT PROCEEDED ON THE BASIS THAT THE REV ISED RETURN WAS NOT A VALID RETURN UNDER SECTION 139(5) OF THE ACT. THE HIGH COURT FOLLOWED ITS EARLIER DECISION IN DASAPRAKASH BOTTLI NG CO.S CASE [1980] 122 ITR 9. TO US IT APPEARS THAT IF THE REVISED RETURN IS A VALID RETURN AND THE ASSESSEE HAS WITHDRAWN THE CL AIM OF DEPRECIATION IT CANNOT BE GRANTED RELYING ON THE O RIGINAL RETURN WHEN THE ASSESSMENT IS BASED ON THE REVISED RETURN . 2.12 THE HONB'LE APEX COURT IN THE OF CASE OF CIT VS MAHENDRA MILLS (SUPRA) HAS OVERRULED THE FOLLOWING DECISIONS. 1. ASCHARAJLAL RAM PRAKASH VS CIT 90 ITR 477 (ALL.) 2. CIT VS GUJARAT WAREHOUSING CORP. 104 ITR 1 (GUJ.) 3. CIT VS SOUTHERN PETRO CHEMICAL INDUSTRIES (NO.2) 2 33 ITR 400 (MAD.) 4. DASAPRAKASH BOTTLING CO. VS CIT 122 ITR 9 (MAD) 2.13 THE ASSESSEE HAS PLACED RELIANCE ON THE DECISI ON OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS RAMCO INT ERNATIONAL 332 ITR 306. IN 11 THE CASE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH C OURT THE ASSESSEE CLAIMED DEDUCTION U/S 80IB BY WAY OF APPLICATION AND THE AO DID NOT ALLOW DEDUCTION BECAUSE THE CLAIM WAS NOT MADE EITHER IN THE RETURN OR IN THE REVISED RETURN. IN THAT CASE THE APPELLATE AUTHORITY ALLOWED THE DEDU CTION. THE DECISION OF HON'BLE HIGH COURT IS DATED 8 TH DEC. 2008 . THIS DECISION IS BEFORE INSERTION OF SECTION 80A(5). NOW THE STATUTE PROVIDES THAT DEDUCTION WIL L NOT BE ALLOWED UNLESS THE ASSESSEE MAKES A CLAIM IN THE RETURN. HENCE THIS D ECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IS NOT APPLICABLE. THE LD.AR HAS RELIED UPON THE DECISION OF HONB'LE APEX COURT IN THE OF BAJAJ TEMPO LTD. VS C IT (SUPRA). IF THE PROVISIONS IS CLEAR AND UNAMBIGUOUS THEN THERE IS NO NEED OF M AKING ANY LIBERAL CONSTRUCTION OF THE PROVISION. SECTION 80A(5) CLEARLY SAYS THAT DEDUCTION IS TO BE ALLOWED IN CASE THE CLAIM IS MADE IN THE RETURN. 2.14 THE LD.AR PLACED RELIANCE ON THE DECISION OF H ON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS ANDHRA COTTON MILL S LTD. 219 ITR 404. IT IS NOT THE CASE OF THE ASSESSEE THAT THE ASSESSEE HAS NOT FILED THE REVISED RETURN. IF THERE IS ANY DEFECT OR OMISSION OR MISTAKE IN THE R ETURN THEN THE ASSESSEE CAN FILE A REVISED RETURN. IN THE INSTANT CASE THE DEDUCTIO N U/S 10BA WAS NOT ALLOWED TO THE ASSESSEE IN EARLIER YEARS AND THE DECISION OF T HE AO WAS UPHELD BY THE FIRST APPELLATE AUTHORITY. IN THE CASE BEFORE THE HON'BLE ANDRA PRADESH HIGH COURT THE ASSESSEE FILED THE REVISED RETURN SO AS TO CLAIM SE T OFF BUSINESS LOSS OF EARLIER YEAR 12 AS BUSINESS LOSS CAN BE SET OFF FOR A LIMITED PERIO D. THE DEPRECIATION IS THE FIRST CHARGE. HON'BLE ANDRA PRADESH HIGH COURT REFERRING TO THE D ECISION OF HONB'LE APEX COURT IN THE OF IN THE CASE OF MOTHER INDIA R EFRIGERATION INDUSTRIES (P) LTD. 155 ITR 711 OBSERVED THAT DEPRECIATION WHICH I S A FIRST CHARGE CANNOT BE IGNORED BY UPHOLDING THE PARTICULARS SO AS TO AVAIL OF SET OFF OF EARLIER YEARS LOSSES WHICH LAPSES BY PRESCRIBED PERIOD OF LIMITAT ION. THE HONB'LE APEX COURT ALSO OBSERVED THAT THE ASSESSEE CANNOT WITHDRAW THE CLAIM FOR DEPRECIATION ALLOWANCE WHEN THE PARTICULARS ARE AVAILABLE IN ACC ORDANCE WITH SECTION 34 AND CANNOT WITHDRAW CLAIM FOR THE PURPOSE OF SETTING OF F OF LOSSES OF EARLIER YEARS. HENCE IN THIS CASE BEFORE HON'BLE ANDHRA PRADESH HON'BLE HIGH COURT PARTICULARS WERE AVAILABLE. ACCORDING TO THE ASSESS EE IN THE CASE BEFORE US THERE WAS A MISTAKE IN THE ORIGINAL RETURN AND THEREFORE HE FILED THE REVISED RETURN. IT HAS NOWHERE BEEN CONTENDED THAT REVISED RETURN WAS NOT A VALID RETURN. HENCE IN THE INSTANT CASE THERE WAS NOT A CASE OF WITHDRAWI NG ANY CORRECT CLAIM BUT WAS FILED NOT TO MAKE CLAIM WHICH HAS NOT BEEN UPHELD B Y THE AO AND THE FIRST APPELLATE AUTHORITY IN THE CASE OF THE ASSESSEE FOR THE EARLIER YEARS. THE LD.AR HAS RELIED UPON THE DECISION OF HON'BLE CALCUTTA HI GH COURT IN THE CASE OF LD CIT(A) VS CHITRANJALI 159 ITR 801. IN THIS CASE T HE HON'BLE CALCUTTA HIGH COURT HELD THAT REVISED RETURN DOES NOT WASH AWAY T HE ORIGINAL RETURN. WE HAD EARLIER REPRODUCED THE OBSERVATION OF THE HONB'LE A PEX COURT IN THE OF CIT VS 13 MAHENDRA MILLS (SUPRA) IN WHICH IT HAS BEEN HELD TH AT CLAIM OF DEPRECIATION CANNOT BE GRANTED RELYING ON THE ORIGINAL RETURN WH EN THE ASSESSMENT IS BASED ON THE REVISED RETURN. 2.15 THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BECO ENGINEERING CO. LTD. VS CIT 148 ITR 478 HAD AN OCC ASION TO CONSIDER THE FACT OF FILING OF REVISED RETURN. THE HON'BLE HIGH COURT OBSERVED AS UNDER:- IT IS WELL SETTLED THAT IN CASE AN ASSESSEE FILES REVISED RETURNS THEY ARE TO BE TAKEN INTO CONSIDERATION FO R THE PURPOSE OF MAKING AN ASSESSMENT. THE ORIGINAL RETURNS CANNOT B E ADVERTED TO FOR THAT PURPOSE. IN THIS VIEW WE ARE FORTIFIED BY THE OBSERVATION OF THE ALLAHABAD HIGH COURT IN NIRANJAN LAL RAM CHANDR A VS CIT (1982) 134 ITR 352 WHEREIN IT WAS OBSERVED THAT O NCE A REVISED RETURN HAS BEEN FILED U/S 139(5) THE ORIGINAL RETU RN IS SUBSTITUTED BY THE REVISED RETURN AS A RESULT OF THE AMENDMENTS MA DE IN THE ORIGINAL RETURN BY THE REVISED RETURN. CONSEQUENTLY THE I.T . AUTHORITIES COULD NOT TAKE INTO CONSIDERATION THE ORIGINAL RETU RNS FOR THE ASSESSMENT OF THE ASSESSEE. 2.16 THE HON'BLE KARNATAKA HIGH COURT IN THE CASE O F CHIEF COMMISSIONER OF INCOME TAX (ADM.) VS MACHINE TOOL CORPORATION OF I NDIA LTD. 201 ITR 101 HAD AN OCCASION TO CONSIDER THE FACT OF FILING OF R EVISED RETURN. THE HON'BLE HIGH COURT OBSERVED AS UNDER:- 14 THE NEXT POINT FOR CONSIDERATION IS REGARDING THE EFFECT OF A REVISED RETURN. THIS ASPECT HAS BEEN CONSIDERED AT LENGTH BY THE GUJARAT HIGH COURT IN CIT V. ARUN TEXTILE 'C' [1991 ] 192 ITR 700. IT IS HELD THAT ONCE A REVISED RETURN IS FILED UNDE R SECTION 139(5) THE ORIGINAL RETURN IS SUBSTITUTED BY THE REVISED RETUR N. CONSEQUENTLY THE ENTRIES IN THE RELEVANT COLUMN OF THE ORIGINAL RETU RN SEEKING DEPRECIATION CANNOT BE USED FOR ANY PURPOSE. IT IS THEREFORE NOT OPEN TO THE INCOME TAX OFFICER TO ADVERT TO THE ORI GINAL RETURNS OR THE STATEMENT FILED ALONG WITH IT FOR THE PURPOSE O F ALLOWING DEDUCTIONS AFTER SUCH CLAIM WAS EXPRESSLY WITHDRAWN UNDER THE REVISED RETURN. 2.17 THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS ARUN TEXTILES C 192 ITR 700 HAS HELD THAT AO CANNOT ADVERT TO THE O RIGINAL RETURN FOR THE PURPOSE OF ALLOWING DEDUCTION WHICH CLAIM WAS EXPRESSLY WIT HDRAWN BY FILING THE REVISED RETURN. 2.18 THE HON'BLE KARNATAKA HIGH COURT IN THE CASE O F CIT VS MANGALORE CHEMICALS & FERTILIZERS LTD. 191 ITR 156 HELD THA T ONCE THE ORIGINAL RETURN IS WITHDRAWN OR IS SUBSTITUTED BY FILING A VALID REVIS ED RETURN THE NATURAL CONSEQUENCE IS THAT THE EARLIER RETURN WOULD BE EFF ACED OR OBLITERATED FOR ALL PURPOSES UNDER THE ACT. 2.19 THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE O F DHAMPUR SUGAR MILLS LTD. VS CIT 90 ITR 236 HAD AN OCCASION TO CONSIDER A CASE WHERE ORIGINAL RETURN 15 WAS FILED BEFORE APRIL 01 1962 AND REVISED RETURN WAS FILED ON OCTOBER 30 1962. THE INDIAN INCOME-TAX ACT 1962 CAME INTO EFF ECT FROM APRIL 01 1962 AND HON'BLE ALLAHABAD HIGH COURT HELD THAT THE PROCEEDI NGS GET A NEW FORM WHEN THE ASSESSEE FILED THE REVISED RETURN AND THEREFORE THE ASSESSMENT WAS VALIDLY COMPLETED BY VIRTUE OF CLAUSE (B) OF SUB-SECTION 2 OF SECTION 297 OF 1961 ACT IN ACCORDANCE WITH THE PROCEDURE SPECIFIED IN THE ACT. A RETURN WHICH HAS BEEN SUBSTITUTED BY THE REVISED RETURN IS FOR ALL PRACT ICAL PURPOSES. THE RETURN OF INCOME AND THE ASSESSMENT HAS TO BE COMPLETED ON T HE BASIS OF THE REVISED RETURN. AFTER REVISED RETURN IS FILED THE ASSESSEE HAS TO PROVE THE CORRECTNESS AND COMPLETENESS OF THE REVISED RETURN. 2.20 THE HON'BLE KARNATAKA HIGH COURT IN THE CASE O F CIT VS K VENKATESH DUTT 319 ITR 331 HELD THAT ASSESSEE CAN RETRACT FR OM THE RETURN OR REVISED RETURN FILED FOR THE VALID REASONS IN LAW. IN THE INSTANT CASE THE ASSESSEE HAS FILED THE REVISED RETURN AFTER NOTING A MISTAKE AND THEREFORE IT CANNOT BE SAID THAT RETURN IS NOT VALID. 2.21 THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS DEEPAK NITRITE LTD. 307 ITR 287 HAD AN OCCASION TO CONSIDER THE CASE IN WHICH THE ASSESSEE CLAIMED DEDUCTION U/S 32A IN THE ORIGINAL RETURN AND CLAIME D DEDUCTION U/S 32AB INSTEAD OF SECTION 32A IN THE REVISED RETURN FILED ON 31 ST DEC. 1990. THE HON'BLE GUJARAT HIGH COURT HELD THAT THE REVISED RETURN IS VALID. T HUS THE REVISED RETURN FILED BY 16 THE ASSESSEE IN WITHDRAWING THE CLAIM OF DEDUCTION U/S 10BA IS TO BE CONSIDERED AS VALID. 2.22 THE HON'BLE MADRAS HIGH COURT IN THE CASE OF C IT VS PYRAMID SAMIRIA THEATRE LTD. 316 ITR 75 HAD AN OCCASION TO CONSIDER AS TO WHETHER THE ASSESSEE CAN BE CONSIDERED AS AN ASSESSEE IN DEFAULT ON THE BASIS OF THE ORIGINAL RETURN AND NOT DEPOSITING THE TAX U/S 140A IN CASE THE ASSESS EE FILES THE REVISED RETURN U/S 139(5) OF THE ACT. THE HON'BLE MADRAS HIGH COURT HE LD THAT THE ASSESSEE WILL NOT BE DEFAULT AFTER FILING OF THE REVISED RETURN. THE REVISED RETURN FILED U/S 139(5) OF THE ACT BECOMES THE RETURN U/S 139(1) ON THE BASIS OF THE DOCTRINE OF SUBSTITUTION. THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF DH AMPUR SUGAR MILLS LTD. VS CIT 90 ITR 236 HELD AS UNDER:- THE EFFECTIVE RETURN FOR PURPOSES OF ASSESSMENT I S THUS THE RETURN WHICH IS ULTIMATELY FILED BY AN ASS ESSEE ON THE BASIS OF WHICH HE WANTS HIS INCOME TO BE ASSESSED.. . BUT WHEN AN ASSESSMENT HAS TO BE MADE THE ASSESSEE IS GIVEN A RIGHT TO FILE A CORRECT AND COMPLETE RETURN IF HE DISCOVERS AN ERROR OR OMISSION IN THE RETURN FILED EARLIER. THE ASSESSMEN T CAN BE COMPLETED ONLY ON THE BASIS OF THE CORRECT AND COMP LETE RETURN. ONCE A REVISED RETURN IS FILED THE ORIGIN AL RETURN MUST BE TAKEN TO HAVE BEEN WITHDRAWN AND TO HAVE BE EN SUBSTITUTED BY A FRESH RETURN FOR THE PURPOSE OF AS SESSMENT. 17 2.23 THE HON'BLE MADRAS HIGH COURT IN THE CASE OF HALIMA FANCY STORES VS CIT 104 ITR 190 HAD AN OCCASION TO CONSIDER AS TO WHETHER THE ASSESSEE CAN BE ENTITLED FOR REGISTRATION WHEN THE DECLARATION WHIC H WAS REQUIRED TO BE FILED ALONGWITH RETURN OF INCOME WAS FILED ALONGWITH REVI SED RETURN. IN THIS CASE THE DECLARATION WAS FILED ONLY WITH REVISED RETURN. IT WAS MERELY A DUPLICATION OF THE ORIGINAL RETURN EXCEPT THAT AS AGAINST NAME OF ONE PERSON SHOWN AS PARTNER IN THE ORIGINAL RETURN. THE WORDS MINOR ADMITTED TO THE BENEFITS OF THE PARTNERSHIP HAD BEEN ADDED IN THE REVISED RETURN IN VIEW OF THE ADMITTED TO THE BENEFITS OF THE PARTNERSHIP. THE HON'BLE HIGH COURT HELD THAT THE F IRM WAS NOT ENTITLED TO THE BENEFIT OF REGISTRATION. ONCE THE DECLARATION IS TO BE TREATED AS DIRECTORY AS REGISTRATION HAS A BEARING ON THE TAX EFFECT THEN D ECLARATION IS TO BE FILED ALONGWITH RETURN. THE DECLARATION FILED SUBSEQUENT TO THE RETURN COULD NOT BE TREATED AS IN ACCORDANCE WITH THE PROVISIONS OF LAW . 2.24 THE REQUIREMENT U/S 80A(5) IS DIRECTORY AND TH E CLAIM IS TO BE MADE IN THE RETURN. THE ORIGINAL RETURN HAS BEEN SUBSTITUTED BY THE REVISED RETURN AND IN THE REVISED RETURN THERE HAS BEEN NO CLAIM OF DEDUCTIO N U/S 10BA OF THE ACT. HENCE WE HOLD THAT THE LD CIT(A) WAS JUSTIFIED IN NOT ALL OWING THE DEDUCTION U/S 10BA OF THE ACT TO THE EXTENT OF RS. 30 07 895/-. 18 3.1 THE SECOND GRIEVANCE OF THE ASSESSEE IS THAT TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 68 345/- ON ACCO UNT OF DELAY IN DEPOSIT OF EMPLOYEES CONTRIBUTION TO PF. 3.2 THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN THE CASE OF ITO VS INSTRUMENTATION LTD. KOTA (ITA NO. 331/JP/ 2011 DA TED 05-08-2011). IT WILL BE USEFUL TO REPRODUCE PARA 4.2 AND 4.3 OF THAT DECISI ON. 4.2 THE ABOVE REFERRED ISSUE STANDS DECIDED AGAIN ST THE REVENUE BY THE TRIBUNAL IN THE CASE OF SOMA BLO CK PRINTS (P) LTD. IN ITA NO.1173/JP/2010 DATED 28 TH APRIL 2011 FOR THE ASSESSMENT YEAR 2007-08. IT WILL BE USEFUL TO R EPRODUCE THE PARA 5.2 FROM THE ABOVE DECISION. 5.2 THIS ISSUE HAS BEEN DECIDED AGAINST THE REVEN UE BY THE TRIBUNAL IN THE CASE OF M/S. SWASTIK METAL C ASTING VS. ACIT (ITA NO.964/JP/2010) VIDE ORDER DATED 20-04-2 011. IT WILL BE USEFUL TO REPRODUCE PARA 3.2 AND 3.3 OF THE ABOVE REFERRED ORDER 3.2 THE LD. CIT(A) HELD THAT THE EMPLOYEES CONTRIBUTION TO PF AND ESI IS NOT TO BE ALLOWED AS THE SAME HAS NOT BEEN PAID WITHIN THE STIPULATED TIME AS PROVIDE D IN RESPECTIVE ACT OF PF AND ESI. THE LD. CIT(A) CONFIR MED THE ACTION OF THE AO. 3.3 WE HAVE HEARD BOTH THE PARTIES. HON'BLE APEX COURT IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD. 3 19 ITR 306 HAS HELD THAT THE PROVISO INTRODUCED BY THE FINANCE ACT 2003 IS 19 CURATIVE IN NATURE AND IS RETROSPECTIVE. HOWEVER W E ARE CONCERNED WITH THE ASSESSMENT YEAR 2007-08. THE HON 'BLE APEX COURT HAS REFERRED TO THE EXPLANATION GIVEN IN SECT ION 36(1)(V)(A) OF THE ACT. THE ISSUE OF EMPLOYEES CON TRIBUTION COVERED U/S 43B HAS BEEN CONSIDERED BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS SABRI ENTERPRISES 298 ITR 141. THE HON'BLE APEX COURT HAS UPHELD THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS SABRI EN TERPRISES (SUPRA) WHILE DECIDING THE APPEAL IN THE CASE OF CI T VS ALOM EXTRUSIONS LTD. (SUPRA). THE HON'BLE APEX COURT HAS DISMISSED THE SLP IN THE CASE OF CIT VS VINAY CEMENT 313 ITR 1 (ST.). WHILE DISMISSING THE SLP THE HON'BLE APEX COURT HA S REFERRED TO DECISION OF HON'BLE GAUHATI HIGH COURT IN THE C ASE OF CIT VS GEORGE WILLIAMSON (ASSAM) LTD. 284 ITR 619. IN THE CASE BEFORE HON'BLE GAUHATI HIGH COURT THE ISSUE WAS IN RESPECT OF CONTRIBUTION OF PF AND ESI RELATING TO EMPLOYEES SH ARES. IT IS NOTICED FROM THE AUDIT REPORT THAT ALL THE PAYMENTS HAVE BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN AND TH EREFORE THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT DELETING THE SUM OF RS. 150 294/- . THE SAME IS DELETED. THUS THE LD. CIT(A) HAS RIGHTLY DELETED THE DISALLO WANCE MADE BY THE AO. 4.3 MOREOVER THE HON'BLE DELHI HIGH COURT IN THE CASE CIT VS. AIMIL LTD. 321 ITR 508 HAS HELD THAT NO DISALLOWANCE CAN BE MADE IN RESPECT OF EMPLOYERS P.F. CONTRIBUTION AND EMPLOYEES P.F. CONTRIBUTION IN CAS E SUCH CONTRIBUTIONS ARE PAID BEFORE DUE DATE OF FILING. I T IS NOT IN 20 DISPUTE BEFORE US THAT THE CONTRIBUTIONS HAVE NOT B EEN PAID BEFORE DUE DATE OF FILING OF THE RETURN. WE THEREFO RE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE EMPLOY ERS P.F. CONTRIBUTION AND EMPLOYEES P.F. CONTRIBUTION. 3.3 FOLLOWING OUR FINDINGS ON THE ISSUE UNDER REFER ENCE WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION OF RS.68 345/- U/ S 43B OF THE ACT. 4.1 THE THIRD GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 59 72 506/- ON A CCOUNT OF BAD DEBT. 4.2 THE ISSUE OF NOT ALLOWING BAD DEBT HAS BEEN CON SIDERED BY THE LD CIT(A) AND IT WILL BE USEFUL TO REPRODUCE THE FOLLOWING DI SCUSSION FROM THE ORDER OF THE LD CIT(A). THE AO HAS OBSERVED THAT BAD DEBTS OF RS. 5972506 /- WAS CLAIMED. THE DEBTS BELONG TO COMPANY NAMED M/S PASSAGE TO IN DIA PVT. LTD. FROM THE ACCOUNT OF THAT COMPANY IT WAS FOUND THAT IT WAS R UNNING ACCOUNT WHEREIN THE APPELLANT TOOK ORDERS FROM THE COMPANY SUPPLY GOOD S AND RECEIVED PAYMENTS. HOWEVER THE APPELLANT FOUND IN RECEIPT OF LETTER O F LIQUIDATOR DATED 04.05.07 WHICH PERTAINED TO NEXT FINANCIAL YEAR 2007-08 WHER EIN LIQUIDATORS ARE ASKED FOR RAISING PENDING CLAIM FOR SETTLEMENT. THE AO HA S OBSERVED THAT FOR CLAIM U/S 36(1)(VII) BAD DEBTS OR PART THEREOF WHICH SHOU LD BE WRITTEN OFF IRRECOVERABLE IN THE ACCOUNTS OF THE APPELLANT FOR THE PREVIOUS YEAR. AS PER THE PROVISIONS THERE SHOULD BE DEBT AND IT SHOULD BE BA D. THERE SHOULD NOT BE REASONABLE LIKELIHOOD THAT THE DEBT WILL BE PAID. T HAT THE LONGER DEBT IS OUTSTANDING IT IS MORE LIKELY TO BE CONSIDERED AS BAD DEBT BY A PRUDENT BUSINESS 21 MAN. RELIABLE INFORMATION ABOUT THE DEBTOR SHOULD B E COLLECTED SUCH AS FINANCIAL DIFFICULTIES AND DEFAULTS OF THE DEBTOR T OWARDS OTHER CUSTOMERS OR INSOLVENCY. THE AO RELIED UPON VARIOUS CASE LAWS WH EREIN IT HAS BEEN HELD THAT THERE MAY BE CERTAIN CONDITIONS OR PARAMETERS REGAR DING DECISION WHETHER A PARTICULAR DEBT HAS BECOME BAD OR NOT. THE APPELLAN TS ACCOUNT IS RUNNING ACCOUNT WHEREIN CONSTANT ORDERS WERE MADE AND PAYME NTS WERE MADE IN EARLIER AS WELL AS IN THE YEAR UNDER CONSIDERATION. THE APP ELLANT FAILED TO PRODUCE ANY LETTER OF THE LIQUIDATOR RECEIVED DURING THE YEAR U NDER CONSIDERATION AND THEREFORE THE LETTER RECEIVED IN THE SUBSEQUENT YE AR CANNOT BECOME A BASIS FOR DECISION TAKEN AT THE END OF CURRENT FINANCIAL YEAR I.E. 31.03.07. AS THE APPELLANT FAILED TO PRODUCE ANY EVIDENCE REGARDING DEBT BECOM ING BAD CLAIM WAS REJECTED BY THE AO. CONTENTION OF THE AR IS THAT THE APPELLANT WAS SELL ING GOODS TO M/S PASSAGE TO INDIA PVT. LTD. SINCE 1998-99. IT WAS MA JOR BUYER BUT UNFORTUNATELY IN LAST TWO YEARS IT WAS NOT IN GOOD FINANCIAL POS ITION. THE APPELLANT THEREFORE REDUCED THE VOLUME OF BUSINESS WITH THIS CONCERN ON CREDIT. EXPORT SALES HAVE COME DOWN FROM RS. 2.80 CRORES IN FINANCIAL YEAR 20 04-05 TO RS. 910074/- IN FINANCIAL YEAR 2006-07. VIDE LETTER DATED 09.12.06 THE PARTY REQUESTED THE APPELLANT TO EXTENT CREDIT PERIOD. AGAIN VIDE LETTE R DATED 15.03.07 PARTY INFORMED THE COMPANY THAT IT WAS PUT UNDER LIQUIDAT ION. ON 04.05.07 THE LIQUIDATOR CALLED MEETINGS OF THE CREDITORS. ALL TH ESE FACTS SHOW THAT THERE WAS NO PROSPECT OF RECOVERING THE BALANCE AMOUNT AND T HEREFORE THE SAME WAS WRITTEN OFF AS BAD DEBT. 4.3 WE HAVE HEARD BOTH THE PARTIES. PAGE NO. 22 AND 23 OF THE PAPER BOOK CONTAINS THE LEDGER ACCOUNT OF THE DEBTORS NAMELY M /S. PASSAGE TO INDIA (P) LTD. A SUM OF RS. 59 72 506/- HAS BEEN CREDITED IN THE ACCOUNT OF DEBTORS. THE SUM HAS BEEN DEBITED IN THE PROFIT & LOSS A/C AS PER FA CTS MENTIONED IN THE ASSESSMENT ORDER. IT IS THEREFORE CLEAR THAT THE ASSESSEE HAS WRITTEN OFF ALL THE BAD DEBTS. IN 22 VIEW OF THE DECISION OF HONB'LE APEX COURT IN THE O F TRF LTD. VS CIT 323 ITR 397 THE ASSESSEE IS ENTITLED TO DEDUCTION OF BAD D EBT TO THE EXTENT OF RS. 59 72 506/-. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 04-11 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 04 /11/2011 *MISHRA COPY FORWARDED TO :- 1. SHRI AMIT BASU JAIPUR 2. THE DCIT CIRCLE- 2 JAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.1425/JP /10) A.R ITAT JAIPUR 23 24 25