Neelkanth Intermediates, Surat v. The ACIT.,Circle-2,, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 213/AHD./2008 ASSESSMENT YEAR : 2004-2005 NEELKANTH INTERMEDIATES SURAT -VS.- ASSISTANT C OMMISSIONER OF INCOME TAX (PAN : AACFN 6036 B) CIRCLE-2 SURAT (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DENNIS CHOKSH I RESPONDENT BY : SHRI SANJEEV KASHYAP SR. D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 25.10.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II SURAT FOR T HE ASSESSMENT YEAR 2004-05. 2. GROUND NO. 1 OF THIS APPEAL IS AGAINST CONFIRMIN G THE DISALLOWANCE OF RS.2 19 074/- MADE BY THE ASSESSING OFFICER IN RESPECT OF CLAIM OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNTS UNDER SECTION 36(1)(VII) OF THE I.T. ACT. 3. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI DENNIS CHOKSHI APPEARED AND CONTENDED THAT IN THE ASSESSMENT ORDER THE ASSESSI NG OFFICER DISALLOWED RS.2 19 074/- BEING THE CLAIM OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCO UNTS. THE LD. COUNSEL OF THE ASSESSEE EXPLAINED THAT THE ASSESSING OFFICER MAINLY DISALLOWED THE BA D DEBTS CLAIMED ON THE GROUND THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS AS THERE WAS A HOPE OF RECOVERY. IN THE IMPUGNED ORDER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ACTION OF ASSESSING OFFICER FOR THE DETAILED REASONS GIVEN IN PARA 6.7. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THE AMOUNT IN QUESTION WAS ACTUALLY WRITTEN OFF IN THE BOOKS OF A CCOUNTS AND AS PER THE LATEST JUDGMENT OF THE 2 ITA NO. 213/AHD/2008 HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. V S.- CIT REPORTED IN [2010] 230 CTR (SC) 14 THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE SAME. 4. ON THE OTHER HAND SHRI SANJEEV KASHYAP SR. D.R . APPEARING ON BEHALF OF THE REVENUE FAIRLY ADMITTED THAT THE MATTER IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. HE POINTED OUT THA T THE DIRECTION BE GIVEN TO THE ASSESSING OFFICER TO TAX THE AMOUNT IN QUESTION UNDER SECTION 41(1) OF THE INCOME TAX ACT IN THE SUBSEQUENT YEAR IF IT IS RECEIVED. 5. AFTER HEARING BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND PERUSED THE MATERIAL PLACED BEFORE US. TH E HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA) HELD AS UNDER :- .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 ACCOUNTS OF THE ASSESSEE. 5.1. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE AMOUNT IN QUESTION IN THE BOOKS OF ACCOUNTS THEREFORE WE DIRECT THE ASS ESSING OFFICER TO ALLOW THE SAME AS BAD DEBTS. HOWEVER WE MAY OBSERVE THAT IN SUBSEQUENT YEAR IN CASE THIS AMOUNT OR PART THEREOF IS RECEIVED THE ASSESSING OFFICER MAY TAX THE SAME UN DER SECTION 41(1) OF THE INCOME TAX ACT 1961. 6. THE ONLY OTHER GROUND OF APPEAL RAISED BY THE AS SESSEE IN GROUNDS NO. 2 TO 4 READS AS UNDER :- (2) ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.44 260/- AS MADE BY THE AO I N RESPECT OF 1/4 TH OF MOTOR CAR DEPRECIATION AMOUNTING TO RS.1 77 041/- BY ALLEGING POSSIBLE PERSONAL USE WHICH IS ABSOLUTELY ERRONEOUS AND THUS NEEDS TO BE DELET ED. (3) ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.15 276/- AS MADE BY THE AO I N RESPECT OF 1/4 TH OF VEHICLE EXPENSES AMOUNTING TO RS.61 105/- BY ALLEGING POSSI BLE PERSONAL USE WHICH IS ABSOLUTELY ERRONEOUS AND THUS NEEDS TO BE DELETED. 3 ITA NO. 213/AHD/2008 (4) ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.35 105/- AS MADE BY THE AO I N RESPECT OF 1/4 TH OF TELEPHONE EXPENSES AMOUNTING TO RS.1 40 419/- BY ALLEGING POS SIBLE PERSONAL USE WHICH IS ABSOLUTELY ERRONEOUS AND THUS NEEDS TO BE DELETED. 7. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THE 1/4 TH DISALLOWANCE AMOUNTING TO RS.44 260/- RS.15 276/- & RS.33 105/- IN RESPECT O F MOTOR CAR DEPRECIATION VEHICLE EXPENSES AND TELEPHONE EXPENSES RESPECTIVELY MADE BY THE ASS ESSING OFFICER AND CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS EXCESSIVE THEREFORE IT MAY BE REDUCED TO 10%. 8. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESEN TATIVE POINTED OUT THAT 1/4 TH DISALLOWANCE IN RESPECT OF MOTOR CAR DEPRECIATION VEHICLE EXPENSES AND TELEPHONE EXPENSES MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS FAIR AND REASONABLE. 9. RIVAL SUBMISSIONS WERE CONSIDERED. IN OUR CONSID ERED OPINION DISALLOWANCE OF 1/4 TH IS EXCESSIVE LOOKING TO THE FACTS AND CIRCUMSTANCES. I T WILL MEET THE END OF JUSTICE IF DISALLOWANCE OF ALL THE AFORESAID THREE ITEMS OF EXPENDITURE IS RESTRICTED TO 1/5 TH . WE DIRECT THE ASSESSING OFFICER ACCORDINGLY. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 21.05.2010 . SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 / 05 /2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.