The ACIT, Circle-8,, Ahmedabad v. M/s. Vishakha Polyfab Pvt.Ltd.,, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. N. PAHUJA AM) ITA NO.1599/AHD/2010 A.Y.: 2007-08 THE A. C. I. T. CIRCLE-8 4 TH FLOR AJANTA COMMERCIAL CENTRE A WING ASHRAM ROAD AHMEDABAD VS VISHKHA POLYFAB PVT. LTD. 505 SAMEDH PAQNCHVATI C. G. ROAD AHMEDABAD PA NO AAACV 6439 R (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K. M. MAHESH DR RESPONDENT BY SHRI MRUNAL N. SHAH AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XIV AHMEDA BAD DATED 19 TH FEBRUARY 2010 FOR ASSESSMENT YEAR 2007-08 CHALLENG ING THE ORDER OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.8 21 024/- MADE BY THE AO ON ACCOUNT OF BAD DEBTS. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL ON RECORD POINTED OUT BY THE PARTIES. 3. ACCORDING TO THE AO THE ASSESSEE HAS NOT COMPLIE D WITH THE CONDITIONS LAID DOWN AS 36(1) (VII) READ WITH SECTI ON 36(2) OF THE IT ACT. DISALLOWANCE OF BAD DEBTS WAS ACCORDINGLY MADE. THE ASSESSEE FILED DETAILS SUBMISSIONS BEFORE THE LEARNED CIT(A) WHICH IS INCORPORATED IN THE APPELLATE ORDER IN WHICH THE ASSESSEE EXPLAINED THAT THE AMOUNT IN QUESTION WAS WRITTEN OFF AS BAD DEBTS AS IRRECOVERA BLE IN THE BOOKS OF ACCOUNT AS PER SECTION 36(1) (VII) OF THE IT ACT. I T WAS SUBMITTED THAT THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF DHALL ITA NO.1599/AHD/2010 ACIT CIR-8 AHMEDABAD VS VISHKHA POLYFAB PVT. LTD. 2 ENTERPRISES AND ENGINEERS PVT. LTD. RELIED UPON BY THE AO IS NOT APPLICABLE AS IS OVER RULED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RAJENDRA Y. SHAH 313 ITR 3 AND IN THE CASE O F CIT VS NALCO LTD. 317 ITR 6. THE LEARNED CIT(A) CONSIDERING THE ABOVE AND THE ORDER OF ITAT IN THE CASE OF M/S. RIDDHI SIDDHI GLUCO BOILS LTD. NOTED THAT ONCE THE DEBT IS WRITTEN OFF IS TO BE ALLOWED AND THE AS SESSEE NEED NOT ESTABLISH THAT IT HAS BECOME BAD. THE LEARNED CIT(A ) NOTED THAT THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS LAID DOWN IN SECTION 36(1) (VII) OF THE IT ACT. ADDITION WAS ACCORDINGLY DELETED. 4. THE LEARNED DR CONCEDED THAT THE ISSUE IS NOW CO VERED BY JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F T. R. F. LTD. VS CIT 323 ITR 397 IN WHICH IT WAS HELD AS UNDER: THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE. IT IS ENOU GH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACC OUNTS OF THE ASSESSEE. HOWEVER IN THE PRESENT CASE THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS IN FACT BEEN WRITTEN OFF IN ACCOUNTS OF THE A SSESSEE. WHEN BAD DEBT OCCURS THE BAD DEBT ACCOUNT IS DEBIT ED AND THE CUSTOMERS ACCOUNT IS CREDITED THUS CLOSI NG THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATE D ABOVE THE ASSESSING OFFICER HAS NOT EXAMINED WHETH ER IN FACT THE BAD DEBT OR PART THEREOF IS WRITTEN OF F IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEE N UNDERTAKEN BY THE ASSESSING OFFICER. HENCE THE MAT TER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AN D THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. 5. CONSIDERING THE ABOVE WE ARE OF THE VIEW THAT T HE ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF HONBLE ITA NO.1599/AHD/2010 ACIT CIR-8 AHMEDABAD VS VISHKHA POLYFAB PVT. LTD. 3 SUPREME COURT IN THE CASE OF T. R. F. LTD. (SUPRA). THEREFORE THERE IS NOT MERIT IN THE DEPARTMENTAL APPEAL. SAME IS ACCORDING LY DISMISSED. 6. AS A RESULT THE DEPARTMENTAL APPEAL IS DISMISSE D. ORDER PRONOUNCED ON 06-08-2010 SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 06-08-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHMEDABAD