ACIT, Pune v. NICHROME INDIA LTD., Pune

ITA 1639/PUN/2012 | 2007-2008
Pronouncement Date: 31-10-2013 | Result: Dismissed

Appeal Details

RSA Number 163924514 RSA 2012
Assessee PAN AAACT4161C
Bench Pune
Appeal Number ITA 1639/PUN/2012
Duration Of Justice 1 year(s) 3 month(s)
Appellant ACIT, Pune
Respondent NICHROME INDIA LTD., Pune
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-10-2013
Assessment Year 2007-2008
Appeal Filed On 31-07-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A PUNE BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.1623/PN/2012 (ASSESSMENT YEAR : 2007-08) NICHROME INDIA LIMITED 4 SAFFIRE PARK GALLERIA PUNE-MUMBAI ROAD WAKADEWADI PUNE 411 005. PAN : AAACT4161C . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 7 PUNE . RESPONDENT ITA NO.1639/PN/2012 (ASSESSMENT YEAR : 2007-08) ASST. COMMISSIONER OF INCOME TAX CIRCLE 7 PUNE . APPELLANT VS. NICHROME INDIA LIMITED 4 SAFFIRE PARK 2 ND FLOOR WAKADEWADI PUNE-MUMBAI ROAD PUNE 411 005. PAN : AAACT4161C . RESPONDENT ITA NO.1624/PN/2012 (ASSESSMENT YEAR : 2008-09) NICHROME INDIA LIMITED 4 SAFFIRE PARK GALLERIA PUNE-MUMBAI ROAD WAKADEWADI PUNE 411 005. PAN : AAACT4161C . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 7 PUNE . RESPONDENT ITA NO.1640/PN/2012 (ASSESSMENT YEAR : 2008-09) ASST. COMMISSIONER OF INCOME TAX CIRCLE 7 PUNE . APPELLANT VS. NICHROME INDIA LIMITED 4 SAFFIRE PARK 2 ND FLOOR WAKADEWADI PUNE-MUMBAI ROAD PUNE 411 005. PAN : AAACT4161C . RESPONDENT ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 ASSESSEE BY : MR. C. H. NANIWADEKAR DEPARTMENT BY : MR. P. L. PATHADE DATE OF HEARING : 29-10-2013 DATE OF PRONOUNCEMENT : 31-10-2013 ORDER PER G. S. PANNU AM THE AFORESAID APPEALS RELATE TO THE SAME ASSESSEE F OR TWO DIFFERENT ASSESSMENT YEARS AND INVOLVE CERTAIN COMMON ISSUES THEREFORE THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. ITA NO.1623/PN/2012 AND ITA NO.1639/PN/2012 ARE CROSS-APPEALS PREFERRED BY THE ASSESSEE AND THE REVENUE RESPECTIV ELY AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- III PUNE DATED 31.10.2011 WHICH IN TURN HAS ARISEN FROM THE ASSESSMENT ORDER DATED 29.12.2009 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCO ME TAX ACT 1961 (IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2007- 08. 3. IN THE APPEAL OF THE ASSESSEE THE FIRST ISSUE R ELATES TO THE ACTION OF THE CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSING OFF ICER IN DENYING THE ASSESSEES CLAIM FOR BAD DEBTS WRITTEN-OFF U/S. 36( 1)(VII) OF THE ACT AMOUNTING TO RS.18 32 840/-. 4. BRIEFLY PUT THE RELEVANT FACTS ARE THAT ASSESSE E IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT 1956 AND IS INTER- ALIA ENGAGED IN THE BUSINESS OF MANUFACTURE AND MARKETIN G OF VARIOUS PACKAGING MACHINERY AND SYSTEMS. THE ASSESSING OFFI CER NOTICED THAT FOR THE ASSESSMENT YEAR 2007-08 ASSESSEE HAD CLAIMED DEDUC TION ON ACCOUNT OF BAD DEBTS WRITTEN-OFF U/S. 36(1)(VII) OF THE ACT AMOUNT ING TO RS.40 89 839/-. NOT ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSE E ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. IN APPEAL BEF ORE THE CIT(A) CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.22 56 998/- WAS ALLOWE D BY THE CIT(A) AND THE BALANCE OF RS.18 32 840/- WAS DENIED. THE ASSESSEE BY WAY OF GROUND OF APPEAL NO. 1 HAS CHALLENGED THE SUSTENANCE OF DISAL LOWANCE OF RS.18 32 840/- WHEREAS THE REVENUE IN ITS CROSS-APP EAL IN ITA NO.1639/PN/2012 HAS CHALLENGED THE PARTIAL RELIEF A LLOWED BY THE CIT(A) AMOUNTING TO RS.22 56 998/-. SINCE THE CROSS-GROUND S RELATE TO THE SAME ISSUE THEY ARE BEING ADJUDICATED TOGETHER. 5. THE ASSESSING OFFICER NOTED THAT THE CLAIM OF BA D DEBTS PERTAINED TO ESTABLISHED BUSINESS CONCERNS WITH SOUND FINANCIAL BACKGROUND AND WITH CERTAIN PARTIES ASSESSEE WAS ALSO TRANSACTING IN F UTURE. THEREFORE HE DID NOT FIND ANY JUSTIFICATION FOR ASSESSEE HAVING WRITTEN- OFF THE DEBTS DUE FROM THE SAID CONCERNS AS BAD DEBTS U/S. 36(1)(VII) OF THE A CT. ACCORDINGLY THE ASSESSING OFFICER CONSIDERING THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SURGICAL CO. LTD. VS. AC IT (2006) 287 ITR 62 (MAD) HELD THAT THE JUDGMENT OF THE ASSESSEE TO WRITE-OFF THE DEBTS WAS NOT HONEST. AS PER THE ASSESSING OFFICER ASSESSEE HAD FAILED T O ESTABLISH THAT THE DEBTS HAVE BECOME BAD. ACCORDINGLY ASSESSEES CLAIM FOR BAD DEBTS WRITTEN-OFF AMOUNTING TO RS.18 32 840/- IN TERMS OF SECTION 36( 1)(VII) OF THE ACT WAS DISALLOWED. 6. IN APPEAL BEFORE THE CIT(A) ASSESSEE FURNISHED THE DETAILS OF BAD DEBTS WRITTEN-OFF ALONGWITH THE BILL-WISE DETAILS S HOWING THE YEAR IN WHICH THE RESPECTIVE INCOMES WERE OFFERED FOR TAX AND ALSO TH E REASONS FOR TREATING THE AMOUNTS AS BAD DEBTS AND FURNISHED COPIES OF ACCOU NT IN RESPECT OF THE CONCERNED PARTIES. THE CIT(A) SEGREGATED THE BAD DE BTS WRITTEN-OFF IN TWO CATEGORIES. THE FIRST CATEGORY WAS OF DEBTORS WITH WHOM ASSESSEE HAD NO TRANSACTIONS DURING THE YEAR; AND FOR SUCH CATEGORY OF DEBTORS THE CIT(A) ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 UPHELD ASSESSEES JUDGMENT OF TREATING THE DEBTS AS BAD WITH NO PROSPECTS OF RECOVERY. ACCORDINGLY WRITE-OFF OF SUCH DEBTS AMOU NTING TO RS.22 56 998/- WAS ALLOWED AS A DEDUCTION U/S. 36(1)(VII) OF THE A CT. WITH REGARD TO THE SECOND CATEGORY OF DEBTORS THE CIT(A) NOTICED THAT ASSESSEE CONTINUED TO HAVE TRANSACTIONS DURING THE YEAR AND THEREFORE FOR SUCH DEBTS HE HELD THAT THE SAME COULD NOT BE ESTABLISHED TO BE IRRECOVERABLE. AS PER THE CIT(A) THERE WAS NO MATERIAL TO SHOW THAT THE AMOUNTS WERE NOT R ECOVERABLE ESPECIALLY IN VIEW OF THE SITUATION THAT ASSESSEE WAS HAVING OTHE R TRANSACTIONS WITH THE SAID PARTIES. ACCORDINGLY IT WAS HELD THAT ASSESSEE FAI LED TO ESTABLISH THAT THE DEBTS IN QUESTION HAVE BECOME BAD DURING THE YEAR UNDER C ONSIDERATION. THE RELIANCE MADE BY THE ASSESSING OFFICER ON THE JUDGM ENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SURGIC AL CO. LTD. (SUPRA) WAS AFFIRMED AND ACCORDINGLY AN AMOUNT OF RS.18 32 840/ - WAS DISALLOWED. 7. IN THIS BACKGROUND RIVAL COUNSELS HAVE MADE THE IR SUBMISSIONS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS REFERRED TO PA GES 4 TO 9 OF THE PAPER BOOK WHEREIN IS PLACED THE DETAILS OF THE BAD DEBTS WRITTEN-OFF AMOUNTING TO RS.40 89 838/-. IT IS POINTED OUT THAT EACH OF THE AMOUNT WAS OUTSTANDING FOR RECOVERY FROM THE RESPECTIVE DEBTOR FOR A LONG TIME AND THEREFORE IT WAS WRITTEN-OFF AS IRRECOVERABLE U/S. 36(1)(VII) OF THE ACT. ACCORDING TO THE LEARNED COUNSEL THE REQUIREMENT OF PROVING A DEBT AS IRREC OVERABLE IS NO LONGER FASTENED ON AN ASSESSEE BEFORE CLAIMING DEDUCTION U /S. 36(1)(VII) OF THE ACT. FOR THIS PROPOSITION RELIANCE WAS PLACED ON THE JUD GMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT ( 2010) 323 ITR 397 (SC). IT WAS ALSO CONTENDED THAT ASSESSEE SATISFIES ALL THE CONDITIONS PRESCRIBED IN SECTION 36(1)(VII) R.W.S. 36(2) OF THE ACT AND IN V IEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (S UPRA) THE CLAIM HAS BEEN WRONGLY DISALLOWED BY THE CIT(A). ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 8. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE CONTENDED THAT THE CIT(A) ERRED IN ALLOWING PARTIAL RELIEF INASMUCH AS FOR BOTH THE CATEGORY OF DEBTORS IDENTI FIED BY THE CIT(A) ASSESSEE HAD NOT ESTABLISHED THAT THE DEBTS HAD BEC OME IRRECOVERABLE FOLLOWING THE RATIO OF THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SURGICAL CO. LTD. (SUPRA). 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. SECTION 36(1)(VII) OF THE ACT PROVIDES THAT SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 36 OF THE ACT THE AMOUNT OF ANY BAD DEBT OR PART T HEREOF WHICH IS WRITTEN-OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE SHALL BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF THE RELEVANT PREVIOUS YEAR. FURTHER SUB-SECTION (2) OF SECTION 36 PRESCRIBES THE CONDITIONS IN ORDER TO CL AIM DEDUCTION FOR WRITE-OFF OF BAD DEBTS. IN SO FAR AS THE PRESENT CASE IS CONCERN ED THE CONDITION APPLICABLE IS TO THE EFFECT THAT SUCH DEBT OUGHT TO HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME EITHER IN THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF WRITTEN-OFF OR OF AN EARLIER P REVIOUS YEAR. 10. WITH RESPECT TO THE AFORESAID STATUTORY REQUIRE MENT THERE IS NO DISPUTE IN THE PRESENT CASE. FIRSTLY THE DEBTS IN QUESTION HAVE BEEN WRITTEN-OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE; AND SECONDLY IT IS ALSO NOT IN DISPUTE THAT THE SAME HAVE ALREADY BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE IN THE PRECEDING YEARS. HOWE VER THE STAND OF THE REVENUE IS THAT ON FACTS ASSESSEE HAS NOT BEEN AB LE TO ESTABLISH THAT THE DEBTS HAVE BECOME IRRECOVERABLE. THE ASSESSING OFFI CER AS WELL AS THE CIT(A) HAVE PROCEEDED ON THE PROPOSITION THAT THE ASSESSEE WAS REQUIRED TO ESTABLISH THAT THE DEBTS HAD BECOME BAD; OR IN OTH ER WORDS THAT THE DEBTS WERE IRRECOVERABLE AND ONLY THEN THE WRITTE-OFF O F SUCH BAD DEBTS WOULD QUALIFY FOR DEDUCTION U/S. 36(1)(VII) OF THE ACT. I N OUR CONSIDERED OPINION THE CONTROVERSY ON THIS POINT HAS BEEN ANSWERED BY THE HONBLE SUPREME COURT IN ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 THE CASE OF T.R.F. LTD. (SUPRA). THE HONBLE SUPREM E COURT COMPARED THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT WHICH E XISTED PRIOR TO 01.04.1989 WITH THAT WHICH ARE ON STATUTE POST01.04.1989. ASSESSME NT YEARS BEFORE THE HONBLE SUPREME COURT WERE 1990-91 AND 1993-94 I.E . BOTH POST 01.04.1989. AS PER THE HONBLE SUPREME COURT PRIOR TO 01.04.1989 EVERY ASSESSEE HAD TO ESTABLISH AS MATTER OF FACT THAT THE DEBT ADVANCED BY THE ASSESSEE HAD IN FACT BECOME IRRECOVERABLE. FURTHE R EXPLAINING THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT AS AMEN DED W.E.F. 01.04.1989 THE HONBLE SUPREME COURT OBSERVED THAT UNDER THE AMEND ED PROVISIONS IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT IN FACT HAS BECOME IRRECOVERABLE. IT IS ENOUGH THAT THE BAD DEBT IS WR ITTEN-OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IN ORDER TO EMPHASIZE THE POINT SOUGHT TO BE MADE OUT WE REPRODUCE HEREUNDER THE RELEVANT PORTI ON OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (S UPRA) :- 2. .. PRIOR TO APRIL 1 1989 EVERY ASSESSEE HA D TO ESTABLISH AS A MATTER OF FACT THAT THE DEBT ADVANCED BY THE ASSESSEE HAD IN FACT BECOME IRRECOVERABLE. THAT POSITION GOT ALTERED BY DELETION OF THE WORD ESTABLISHED WHICH EARLIER EXISTED IN SECTION 36( 1)(VII) OF THE INCOME-TAX ACT 1961 (THE ACT FOR SHORT). 3. FOR THE SAKE OF CLARITY WE REPRODUCE HEREINBELO W THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT BOTH P RIOR TO APRIL 1 1989 AND POST- APRIL 1 1989 : PRE-APRIL 1 1989 : 36. OTHER DEDUCTIONS.(1) THE DEDUCTIONS PROVIDE D FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT O F THE MATTERS DEALT WITH THEREIN IN COMPUTING THE INCOME REFERRED TO IN SEC TION 28 . . . (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) THE AMOUNT OF ANY DEBT OR PART THEREOF WHICH IS ESTABLISHED TO HAVE BECOME A BAD DEBT IN THE PREVIOUS YEAR. POST-APRIL 1 1989 : 36. OTHER DEDUCTIONS.(1) THE DEDUCTIONS PROVIDE D FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT O F THE MATTERS DEALT WITH THEREIN IN COMPUTING THE INCOME REFERRED TO IN SEC TION 28 . . . (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OF F AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. 4. THE POSITION IN LAW IS WELL-SETTLED. AFTER APRIL 1 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT IN FACT HAS BECOME ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. .. 11. THUS IN SO FAR AS THE ASSESSMENT YEAR BEFORE U S IS CONCERNED WHICH IS POST01.04.1989 IN TERMS OF THE JUDGMENT OF THE HO NBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA) THE STAND OF THE R EVENUE THAT ASSESSEE WAS REQUIRED TO ESTABLISH THAT THE DEBTS IN QUESTION I N-FACT HAD BECOME IRRECOVERABLE IN ORDER TO ALLOW THE CLAIM U/S. 36(1 )(VII) OF THE ACT IS QUITE MISPLACED. 12. NEVERTHELESS EVEN ON FACTS ALSO WE FIND THAT IN SO FAR AS THE IRRECOVERABILITY OF THE IMPUGNED DEBTS IS CONCERNED THERE CANNOT BE ANY DOUBT. IN THIS CONTEXT WE HAVE PERUSED THE DETAILS OF AMOUNTS DUE FROM DIFFERENT DEBTORS WHICH HAS BEEN WRITTEN-OFF AS BAD DEBTS AMOUNTING TO RS.40 89 838/- THE RELEVANT DETAILS ARE AT PAGES 4 TO 9 OF THE PAPER BOOK. AGAINST EACH AND EVERY ENTRY ASSESSEE HAS EXPLAINED THE REASONS FOR TREATING THE SAME AS A BAD DEBT. A PERUSAL OF THE SAME REV EALS THAT AMOUNTS WRITTEN- OFF ARE OUTSTANDING FOR RECOVERY FOR PERIODS RANGIN G FROM 2 TO 10 YEARS. IN-FACT AN OVERWHELMING MAJORITY OF THE ENTRIES ARE OF SMAL L AMOUNTS AND ARE OUTSTANDING FOR 4 YEARS AND ABOVE. NO DOUBT WITH S OME OF THE PARTIES IN QUESTION ASSESSEE HAS UNDERTAKEN DEALINGS IN THE I NSTANT YEAR ALSO. SO HOWEVER THE AMOUNTS THAT HAVE BEEN WRITTEN-OFF AS DETAILED IN THE PAPER BOOK ARE SPECIFIC BILLS OR PART OF SPECIFIC BILLS RAISED BY THE ASSESSEE WHICH HAVE NOT BEEN COLLECTED FROM SUCH PARTIES. THEREFOR E MERELY BECAUSE ASSESSEE HAD DEALING WITH THAT PARTICULAR CONCERN O R THAT THE CONCERNS ARE OTHERWISE FINANCIALLY VIABLE DOES NOT DISTRACT FROM THE FACT THAT THE AMOUNTS IN QUESTION WHICH ARE INDIVIDUALLY OF SMALL VALUES W ERE SPECIFIC BILLS OF THE ASSESSEE OR PART THEREOF WHICH WERE OUTSTANDING FO R A LONG PERIOD OF TIME AND THEREFORE CONSIDERING THE AFORESAID ASPECT ON FACT S THE JUDGMENT OF THE ASSESSEE OF TREATING THEM AS IRRECOVERABLE CANNOT BE FAULTED. THUS IN OUR ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 CONSIDERED OPINION THE CLAIM OF THE ASSESSEE FOR W RITING-OFF OF SUCH AMOUNTS U/S. 36(1)(VII) OF THE ACT AS IRRECOVERABLE WAS F AIR AND PROPER. 13. IN SO FAR AS THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT RELIED UPON BY THE REVENUE IN THE CASE OF SOUTH INDIA SURGICAL CO. LTD. (SUPRA) IS CONCERNED THE SAME IN OUR VIEW DOES NOT HELP THE REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA) HA S OPINED THAT POST01.04.1989 IT IS NO LONGER NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN-FACT HAS BECOME IRRECOVERABLE BEFORE C LAIMING DEDUCTION U/S.36(1)(VII) OF THE ACT. THUS CANVASSING TO THE CONTRARY BASED ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF SOUTH INDIA SURGICAL CO. LTD. (SUPRA) IN OUR VIEW DOES NOT HELP THE RE VENUE. 14. IN CONCLUSION WE HOLD THAT ON FACTS AND ALSO I N LAW THE ENTIRE CLAIM OF THE ASSESSEE FOR WRITE-OFF OF BAD DEBTS U/S. 36(1)( VII) OF THE ACT AMOUNTING TO RS.40 89 838/- WAS JUSTIFIED AND THE CIT(A) OUGHT T O HAVE ALLOWED IT INSTEAD OF RESTRICTING IT TO RS.22 56 998/- ONLY. THEREFORE W E SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE T HE ENTIRE DISALLOWANCE OF RS.40 89 838/-. 15. THUS GROUND OF APPEAL NO. 1 IN THE APPEAL OF T HE ASSESSEE IS ALLOWED AND THE CROSS-GROUND RAISED IN THE APPEAL OF THE RE VENUE IS DISMISSED. 16. THE SECOND GROUND RAISED BY THE ASSESSEE IS WIT H REGARD TO THE ACTION OF THE CIT(A) IN UPHOLDING THE DISALLOWANCE OF RS.7 34 265/- AS PRIOR PERIOD EXPENDITURE. IN BRIEF THE FACTS ARE THAT ASSESSEE CLAIMED EXPENDITURE ON ACCOUNT OF MAINTENANCE CHARGES PAID TO M/S. SAFIRE HOTELS LTD. FOR OFFICE PREMISES HIRED BY THE ASSESSEE AT SAFIRE PARK GALLE RIA A PROPERTY OWNED BY M/S. SAFIRE HOTELS LTD.. THE ASSESSING OFFICER NOT ICED THAT THE INVOICE RAISED BY M/S. SAFIRE HOTELS LTD. WAS DATED 28.01.2006 AND THE MAINTENANCE CHARGES ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 CLAIMED FROM THE ASSESSEE PERTAINED TO THE PERIOD 2 003 TO 2005 A COPY OF SUCH INVOICE HAS BEEN PLACED AT PAGE 47 OF THE PAPE R BOOK. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE FOR THE REASON T HAT IT DID NOT PERTAIN TO THE PERIOD UNDER CONSIDERATION AND WAS A PRIOR PERIOD E XPENDITURE. THE CIT(A) HAS ALSO SUSTAINED THE DISALLOWANCE FOR THE REASON THAT THE LIABILITY FOR THE IMPUGNED EXPENDITURE WAS NOT CRYSTALLIZED DURING TH E YEAR AND FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSE SSEE IT WAS NOT ALLOWABLE IN THE YEAR UNDER CONSIDERATION. AGAINST THE AFORESAID ASSESSEE IS IN FURTHER APPEAL BEFORE US. 17. BEFORE US THE PLEA OF THE ASSESSEE IS TO THE E FFECT THAT THE LIABILITY TO PAY THE AFORESAID EXPENDITURE CRYSTALLIZED DURING T HE YEAR UNDER CONSIDERATION AND THEREFORE AS PER THE MERCANTILE SYSTEM OF ACCOU NTING FOLLOWED BY THE ASSESSEE IT WAS AN ALLOWABLE EXPENDITURE IN THE PE RIOD UNDER CONSIDERATION. 18. WE HAVE CONSIDERED THE PLEA OF THE ASSESSEE AND FIND THAT THE LOWER AUTHORITIES MADE NO MISTAKE IN DENYING THE CLAIM OF THE ASSESSEE. OSTENSIBLY THE EXPENDITURE IN QUESTION DOES NOT PERTAIN TO THE PERIOD UNDER CONSIDERATION WHICH IS EVIDENT FROM THE INVOICE RAISED BY M/S. SA FIRE HOTELS LTD.. THERE IS ALSO NO MATERIAL ON RECORD TO SHOW THAT THE LIABILI TY REPRESENTED BY THE INVOICE OF M/S. SAFIRE HOTELS LTD. DATED 20.01.2006 CRYSTAL LIZED DURING THE YEAR SO AS TO BE DEDUCTIBLE IN COMPUTING ASSESSEES INCOME FOR THE YEAR UNDER CONSIDERATION FOLLOWING THE MERCANTILE SYSTEM OF AC COUNTING. IN THE COURSE OF HEARING IT WAS SPECIFICALLY PUT TO THE LEARNED COU NSEL FOR THE ASSESSEE TO SHOW AS TO IN WHAT MANNER THE LIABILITY CRYSTALLIZED DUR ING THE YEAR AND NOT IN THE PRECEDING ASSESSMENT YEAR AS SOUGHT TO BE CANVASSED BY THE REVENUE BASED ON THE DATE OF THE INVOICE RAISED BY M/S. SAFIRE HO TELS LTD.. NO SATISFACTORY EXPLANATION HAS BEEN RENDERED BEFORE US AND THEREFO RE WE DEEM IT FIT AND PROPER TO SUSTAIN THE ACTION OF THE LOWER AUTHORITI ES IN DISALLOWING THE ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 IMPUGNED CLAIM OF RS.7 34 265/- BEING A PRIOR PERIO D EXPENDITURE. THUS ON THIS GROUND ASSESSEE FAILS. 19. THE LAST GROUND IN THE APPEAL OF THE ASSESSEE I S WITH REGARD TO THE DISALLOWANCE OF RS.7 42 435/- MADE OUT OF LEGAL AND PROFESSIONAL CHARGES. THE RELEVANT FACTS ARE THAT OUT OF THE TOTAL LEGAL AND PROFESSIONAL CHARGES AMOUNTING TO RS.32 90 757/- ASSESSING OFFICER DISA LLOWED A SUM OF RS.8 52 435/- AS PER THE DETAILS IN PARA 5.1 OF THE ORDER OF THE CIT(A) FOR THE REASON THAT NO SUPPORTING DETAILS/VOUCHERS WERE FUR NISHED BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THE LEARNED COUNSEL FO R THE ASSESSEE EXPLAINED THAT OUT OF THE TOTAL DISALLOWANCE OF RS.8 52 435/- THE CIT(A) HAS ALLOWED RELIEF WITH REGARD TO AN AMOUNT OF RS.1 10 000/- RE PRESENTING PAYMENTS TO S. SUDHIR KUMAR AND VIJAY DAMLE AND THE ASSESSEE IS IN APPEAL WITH RESPECT TO THE BALANCE DISALLOWANCE OF RS.7 42 435/- SUSTAI NED BY THE CIT(A). 20. AT THE OUTSET THE LEARNED COUNSEL POINTED OUT THAT THE DISALLOWANCE HAS BEEN MADE BY THE LOWER AUTHORITIES WITHOUT APPRECIA TING THE FACTS IN THEIR PROPER PERSPECTIVE. THE LEARNED COUNSEL POINTED OUT THAT THE ENTIRE EXPENDITURE WAS INCURRED ON THE BASIS OF BILLS/INVO ICES OR AGREEMENTS WITH THE RECIPIENTS OF THE MONEYS WHO HAD RENDERED LEGAL AN D PROFESSIONAL SERVICES TO THE ASSESSEE. IT WAS POINTED OUT THAT A SUM OF RS.2 40 000/- HAS BEEN DISALLOWED WHICH REPRESENTED PAYMENTS TO ONE MRS. M RUNAL JOSHI IN SPITE OF THE FACT THAT SIMILAR PAYMENTS IN EARLIER YEARS HAV E NOT SUFFERED ANY DISALLOWANCE. THE LEARNED COUNSEL POINTED OUT THAT THE MRS. MRUNAL JOSHI IS THE SPOUSE OF THE THEN MANAGING DIRECTOR OF THE ASS ESSEE COMPANY AND THE SAID SUM WAS ALSO DISALLOWED IN TERMS OF SECTION 40 A(2)(B) OF THE ACT WHICH HAS OF-COURSE BEEN DELETED BY THE CIT(A). IT IS POI NTED OUT WITH RESPECT TO OTHER RECIPIENTS THAT THE EXPENDITURE HAS BEEN INCU RRED ON THE BASIS OF RESPECTIVE AGREEMENTS AND BILLS/INVOICES AND THAT A SSESSEE WOULD BE IN A POSITION TO JUSTIFY INCURRENCE OF THE IMPUGNED EXPE NDITURE IF THE MATTER IS ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER SO THAT ASSESSEE IS ABLE TO FURNISH THE NECESSARY EVIDENCE AS THE SAME COULD N OT BE FURNISHED BEFORE THE LOWER AUTHORITIES ON ACCOUNT OF THE FACT THAT NO SU PPLEMENTARY QUERIES WERE RAISED BY THE RESPECTIVE AUTHORITIES WITH RESPECT T O THE SUBMISSIONS MADE BY THE ASSESSEE. 21. THE LEARNED DEPARTMENTAL REPRESENTATIVE APPEARI NG FOR THE REVENUE HAS NOT SERIOUSLY DISPUTED ASSESSEES PLEA FOR REMI TTING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRE SH IN THE LIGHT OF THE MATERIAL SOUGHT TO BE BROUGHT OUT BY THE ASSESSEE. 22. HAVING CONSIDERED THE RIVAL STANDS AND THE ORDE RS OF THE AUTHORITIES BELOW WE DEEM IT FIT AND PROPER THAT THE MATTER BE RE-VISITED BY THE ASSESSING OFFICER AFTER ALLOWING THE ASSESSEE A REASONABLE OP PORTUNITY TO PRODUCE ALL THE RELEVANT MATERIAL IN SUPPORT OF THE IMPUGNED EXPEND ITURE. NEEDLESS TO SAY THE ASSESSING OFFICER SHALL CONSIDER THE SUBMISSIONS AN D MATERIAL PUT-FORTH BY THE ASSESSEE ON ITS MERITS AND THEREAFTER ADJUDICATE TH IS ASPECT AFRESH AS PER LAW. WE MAY ADD HERE THAT IF THE ASSESSING OFFICER IS NO T SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE AND PROCEEDS TO MAKE A DISALLOWANCE THE SAME SHALL NOT EXCEED A SUM OF RS.7 42 435/- I.E. THE A MOUNT SUSTAINED BY THE CIT(A) IN THE IMPUGNED ORDER. THUS ON THIS GROUND ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 23. IN THE RESULT WHEREAS THE APPEAL OF THE ASSESS EE FOR ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED THAT OF THE REVENUE IS DI SMISSED. 24. NOW WE TAKE-UP ITA NO.1624/PN/2012 AND ITA NO.1640/PN/2012 WHICH ARE ALSO CROSS-APPEALS PREFERRED BY THE ASSES SEE AND THE REVENUE RESPECTIVELY AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- III PUNE DATED 31.10.2011 WHICH IN TURN HAS ARIS EN FROM THE ASSESSMENT ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 ORDER DATED 30.12.2010 PASSED BY THE ASSESSING OFFI CER UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 (IN SHORT THE A CT) FOR THE ASSESSMENT YEAR 2008-09. 25. IN THE APPEAL OF THE ASSESSEE THE FIRST ISSUE RELATES TO THE ACTION OF THE CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSING OFF ICER DENYING THE ASSESSEES CLAIM FOR BAD DEBTS WRITTEN-OFF U/S. 36(1)(VII) OF THE ACT AMOUNTING TO RS.27 94 728/-. 26. BRIEFLY PUT THE RELEVANT FACTS ARE THAT THE AS SESSING OFFICER NOTICED THAT FOR THE ASSESSMENT YEAR 2008-09 ASSESSEE HAD CLAIM ED DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN-OFF U/S. 36(1)(VII) OF THE ACT AMOUNTING TO RS.92 50 953/- WHICH WAS DISALLOWED BY THE ASSESSI NG OFFICER. IN APPEAL BEFORE THE CIT(A) CLAIM OF THE ASSESSEE TO THE EXT ENT OF RS.64 55 225/-/- WAS ALLOWED AND THE BALANCE OF RS.27 94 728/- WAS DENIE D. THE ASSESSEE BY WAY OF GROUND OF APPEAL NO. 1 HAS CHALLENGED THE SUSTEN ANCE OF DISALLOWANCE OF RS.27 94 728/- WHEREAS THE REVENUE IN ITS CROSS-APP EAL IN ITA NO.1639/PN/2012 HAS CHALLENGED THE PARTIAL RELIEF A LLOWED BY THE CIT(A) AMOUNTING TO RS.64 56 225/-. SINCE THE CROSS-GROUND S RELATE TO THE SAME ISSUE THEY ARE BEING ADJUDICATED TOGETHER. 27. IT WAS A COMMON GROUND BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES ON THE IMPUGNED DISPUTE STANDS ON AN IDENTICAL FOOTING TO THAT CONSIDERED BY US IN THE EARLIER PARAGRAPHS FOR ASSE SSMENT YEAR 2007-08. THEREFORE FOLLOWING OUR DECISION ON THIS ISSUE IN ASSESSMENT YEAR 2007-08 WE HOLD THAT THE CLAIM OF THE ASSESSEE FOR WRITE-OF F OF BAD DEBTS U/S. 36(1)(VII) OF THE ACT AMOUNTING TO RS.92 50 953/- WAS JUSTIFIE D AND THE CIT(A) OUGHT TO HAVE ALLOWED THE ENTIRE CLAIM OF THE ASSESSEE INSTE AD OF RESTRICTING IT TO RS.64 56 225/- ONLY. THEREFORE WE SET-ASIDE THE OR DER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ENTIRE DISALLOW ANCE OF RS.92 50 953/-. ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 28. THUS GROUND OF APPEAL NO. 1 IN THE CASE OF THE ASSESSEE IS ALLOWED AND THE CROSS-GROUND RAISED IN THE APPEAL OF THE RE VENUE IS DISMISSED. 29. THE GROUNDS OF APPEAL NO. 2 AND 3 RAISED BY THE ASSESSEE RELATE TO A DISALLOWANCE OF RS.11 94 950/- OUT OF LEGAL AND PRO FESSIONAL CHARGES. OUT OF TOTAL EXPENDITURE OF RS.52 15 082/- UNDER THE HEAD LEGAL AND PROFESSIONAL CHARGES THE ASSESSING OFFICER DISALLOWED AN AD-HO C AMOUNT OF RS.5 21 505/- AND IN APPEAL BEFORE THE CIT(A) IT WAS ENHANCED TO RS.11 94 956/-. THE AFORESAID HAS BEEN ASSAILED IN APPEAL BEFORE US. 30. BEFORE US IT WAS A COMMON POINT BETWEEN THE PA RTIES THAT THIS ISSUE BE DECIDED IN THE LIGHT OF SIMILAR CONTROVERSY DECIDED IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-08. FOLLOWING OUR DECISION IN ASSESSMENT YEAR 2007-08 THIS ISSUE IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO BE ADJUDICATED AFRESH IN THE LIGHT OF OUR DIRECTIONS F OR ASSESSMENT YEAR 2007-08. NEEDLESS TO SAY THE ASSESSING OFFICER SHALL CONSID ER THE SUBMISSIONS AND MATERIAL PUT-FORTH BY THE ASSESSEE ON ITS MERITS AN D THEREAFTER ADJUDICATE THIS ASPECT AFRESH AS PER LAW. WE MAY ADD HERE THAT IF T HE ASSESSING OFFICER IS NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE AND PROCEEDS TO MAKE A DISALLOWANCE THE SAME SHALL NOT EXCEED A SUM OF RS .11 94 950/- I.E. THE AMOUNT OF DISALLOWANCE SUSTAINED BY THE CIT(A) IN T HE IMPUGNED ORDER. THUS ON THIS GROUND ASSESSEE SUCCEEDS FOR STATISTICAL PU RPOSES. 31. IN THE RESULT WHEREAS THE APPEAL OF THE ASSESS EE FOR ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWED THAT OF THE REVENUE IS DI SMISSED. 32. RESULTANTLY WHEREAS THE CAPTIONED APPEALS OF T HE REVENUE ARE DISMISSED THAT OF THE ASSESSEE ARE PARTLY ALLOWED. ITA NO.1623/PN/2012 ITA NO.1639/PN/2012 ITA NO.1624/PN/2012 ITA NO.1640/PN/2012 ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 31 ST OCTOBER 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III PUNE; 4) THE CIT-III PUNE; 5) THE DR A BENCH I.T.A.T. PUNE; 6) GUARD FILE. //TRUE COPY// BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T. PUNE