M/s.Mark Media Advertising Promotions, Trichur v. The ACIT, Trichur

ITA 791/COCH/2013 | 2006-2007
Pronouncement Date: 25-04-2014

Appeal Details

RSA Number 79121914 RSA 2013
Assessee PAN AAAAM6109R
Bench Cochin
Appeal Number ITA 791/COCH/2013
Duration Of Justice 4 month(s) 9 day(s)
Appellant M/s.Mark Media Advertising Promotions, Trichur
Respondent The ACIT, Trichur
Appeal Type Income Tax Appeal
Pronouncement Date 25-04-2014
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 25-04-2014
Date Of Final Hearing 09-04-2014
Next Hearing Date 09-04-2014
Assessment Year 2006-2007
Appeal Filed On 16-12-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE S/SHRI N.R.S.GANESAN JM AND B.R.BASKAR AN AM I.T.A. NO. 791/COCH/2013 ASSESSMENT YEAR : 2006-07 M/S. MARK MEDIA ADVERTISING PROMOTIONS DOOR NO. 10/1256 ERINJERI ANGADI THRISSUR-680 001. [PAN: AAAAM 6109R] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-2(1) RANGE-2 THRISSUR. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI C.A. VARGHESE CA REVENUE BY SHRI K.K. JOHN SR. DR DATE OF HEARING 09/04/2014 DATE OF PRONOUNCEMENT 25/04/2014 O R D E R PER B.R.BASKARAN ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 21- 10-2013 PASSED BY THE LD. CIT(A)-V KOCHI AND IT RE LATES TO THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF BAD DEBT CLAIM OF RS. 11 35 060 /-. 3. THE FACTS RELATING TO THE ISSUE CITED ABOVE ARE STATED IN BRIEF. THE ASSESSEE A PARTNERSHIP FIRM IS ENGAGED IN THE BUS INESS OF ADVERTISING AND I.T.A. NO.791 /COCH/2013 2 PRINTING. IN THE RETURN OF INCOME FILED FOR THE YE AR UNDER CONSIDERATION THE ASSESSEE CLAIMED DEDUCTION TOWARDS BAD DEBTS OF RS. 13 64 276/- IN RESPECT OF THE FOLLOWING PARTIES: (A) M/S. METRO SILKS ANGAMALY : RS. 11 35 060/- (B) SREENIVAS FOOD PRODUCTS : RS. 2 20 400/- (C) SREENIVAS PEARLS : R S. 8 816/- TOTAL : RS. 13 64 276/- 4. THE ASSESSING OFFICER EXAMINED THE ABOVE SAID CL AIM. THE AO ACCEPTED THE DEDUCTION CLAIMED IN RESPECT OF M/S. SREENIVAS FOOD PRODUCTS AND M/S. SREENIVAS PEARLS UPON MAKING ENQUIRIES WITH REGARD TO THE ABOVE TWO PARTIES. HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT THE C LAIM OF BAD DEBT IN RESPECT OF M/S. METRO SILKS ANGAMALY ON THE FOLLOWING REASONS : HOWEVER IN THE CASE OF M/S. METRO SILKS ANGAMALL Y IT IS SEEN THAT THE BILLS WERE RAISED ON 5.10.2005 AND ON 31.3.2006 THE ASSESSEE HAS WRITTEN OFF THIS DEBTS WITHOUT NEGOTIATING WITH THE DEBTOR FOR THE PAYMENT AND IT HAS ALSO BEEN NOT ESTABLISHED TH AT THE DEBTS HAS REALLY BECOME BAD DURING THE YEAR. IN VIEW OF WHATEVER STATED IN THE EARLIER PARAGRAPHS AND CONSIDERING THE JUDIC IAL DECISIONS MENTIONED IN THOSE PARAGRAPHS AND SINCE THE ASSESSE E HAS NOT ESTABLISHED THAT THE DEBTS AGAINST M/S. METRO SILKS ANGAMALLY HAS REALLY BECOME BAD DURING THE YEAR THE SAME IS NOT ALLOWED TO THE ASSESSEE. THEREFORE THE AMOUNT OF RS. 11 35 060/- IS DISALLOWED AND ADDED TO INCOME. THUS THE AO TOOK THE VIEW THAT THE ASSESSEE HEREIN HAS FAILED TO SHOW THAT THE AMOUNT DUE FROM M/S METRO SILKS HAS BECOME BAD DURI NG THE YEAR UNDER CONSIDERATION AND HENCE MERE WRITING OFF A DEBT IN ITS BOOKS OF ACCOUNTS WOULD NOT ENTITLE THE ASSESSEE TO CLAIM THE SAME AS BAD D EBT IN TERMS OF SEC. 36(1)(VII) OF THE ACT. IN THIS CONNECTION THE AO PLACED RELI ANCE ON THE FOLLOWING CASE LAW:- I.T.A. NO.791 /COCH/2013 3 (A) DCIT VS. PASUPATY NEW TEC. LTD (2006) 7 SOT 107 (DEL- ITAT) (B) INDUSTRIAL CABLES INDIA LTD VS. ACIT (97 ITD 267)(CHD). ACCORDINGLY HE DISALLOWED THE CLAIM OF DEDUCTION O F RS. 11 35 060/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE THE LD. CIT(A) THE ASSESSEE PLACED RELIA NCE ON THE FOLLOWING CASE LAW AND SUBMITTED THAT THE WRITING OFF OF DEBT AS B AD IN THE BOOKS OF ACCOUNT IS SUFFICIENT TO CLAIM DEDUCTION U/S. 36(1)(VII) OF TH E ACT. (A) LAWLYS ENTERPRISES (P) LTD. VS. CIT (314 ITR 29 7) (PATNA). (B) CIT VS. GLOBAL CAPITAL LTD. (306 ITR 332) (DEL HI) (C) TRF LTD. VS. CIT (323 ITR 397) (SC). THE ASSESSEE ALSO PLACED RELIANCE ON THE CIRCULAR N O. 551 DATED 23-01-1990 ISSUED BY CBDT WHEREIN IT WAS STATED THAT THERE WAS NO NECESSITY FOR THE ASSESSEE TO PROVE THE NATURE OF DEBT AND THE ONLY C ONDITION TO BE FULFILLED IS THAT THE DEBT SHOULD BE WRITTEN OFF. HOWEVER THE CONTE NTIONS OF THE ASSESSEE WAS NOT FOUND CONVINCING TO THE LD. CIT(A) AND HENCE H E UPHELD THE DISALLOWANCE MADE WITH THE FOLLOWING OBSERVATION: 1.3 HOWEVER IN COMMISSIONER OF INCOME TAX V/S. KO HLI BROTHER COLOR LAB PVT. LTD. (2010) 186 TAXMAN 62 (ALL) THAT EFFECT OF AMENDMENT TO SECTION 36(1(VII) R.W.S. 36(II) WITH E FFECT FROM 1.4.1989 IS ONLY THAT NOW FOR CLAIMING DEDUCTION U /S. 36(1)(VII) IT IS NOT NECESSARY FOR ASSESSEE TO ESTABLISH THAT DEBT H AS BECOME BAD IN PREVIOUS YEAR AND MERE WRITING OFF OF DEBT OR PART THEREOF AS IRRECOVERABLE IS SUBSTANTIAL COMPLIANCE OF SAME; ON STRENGTH OF AMENDMENT IT CANNOT BE SAID THAT ANY ENQUIRY IS NO T PERMISSIBLE TO SEE AND SATISFY THAT THERE IS SOME SEMBLANCE OF GEN UINENESS IN SUCH ENTRY AND SAME IS NOT TOTALLY FAKE ENTRY . IT MEANS THAT IN ORDER TO PROVE GENUINENESS OF A DEBT HAS BECOME BAD THE APP ELLANT SHOULD HAVE MENTIONED CIRCUMSTANCES AND THE FACTS . THE ASSESSING OFFICER HAS NOTED THAT THE BAD DEBT CLAIMED IN THE CASE OF SREENIVAS FOOD PRODUCTS IS BECAUSE OF THE FACT THAT THE BUSINESS O F THE DEBTOR WAS I.T.A. NO.791 /COCH/2013 4 FOUND TO BE CLOSED AND THE ASSESSING OFFICER HAS AC CEPTED THIS AMOUNT OF RS. 2 20 400/- AND ALLOWED THE CLAIM OF T HE ASSESSEE FOR BAD DEBTS. HOWEVER IN THE CASE OF METRO SILKS AN GAMALLY THE BILLS RAISED ON 5.10.2005 AND 31.3.2006 THE ASSESSEE HAS WRITTEN OFF THIS DEBT WITHOUT NEGOTIATING WITH THE DEBTOR FOR THE PA YMENT AND IT HAS ALSO BEEN NOT ESTABLISHED THAT THE DEBTS HAS REALLY BECOME BAD DURING THE YEAR. 1.4 IT IS SEEN THAT THE ORDER OF THE ASSESSING OFFI CER HAS BEEN CONSIDERATE WHILE DECIDING WHETHER THE DEBT HAS BEC OME REALLY BAD. HE HAS DISCRIMINATED THE BAD DEBTS WITH THOSE OF TH E DEBTS WHICH CANNOT SAID TO BE HAS BECOME BAD. IF THE ASSESSING OFFICER IS DISCRIMINATE AND HAS DECIDED THE ISSUED BASED ON TH E ACTUAL FACTS NOW IT CANNOT BE PLEADED THAT THE RATIO OF THE HON BLE SUPREME COURT IN THE CASE OF TRF LTD. COULD HAVE DIRECT APP LICATION AS THE SAME HAS BEEN DIFFERENTIATED BY THE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S. KOHLI BROTHERS C OLOR LAB PVT. LTD. IT IS THE DISCRETION OF THE ASSESSING OFFICER TO SEE WHETHER THE CLAIM OF THE DEBT HAS BECOME BAD IS GENUINE CLAIM OR A FAKE CLAIM. IN THE INSTANT CASE THE ASSESSING OFFICER HAS WELL -DIFFERENTIATED THE GENUINENITY OF SUCH CLAIM. ACCORDINGLY THE DISALL OWANCE MADE BY THE ASSESSING OFFICER IS UPHELD AND THE APPEAL ON T HIS GROUND IS DISMISSED . AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFOR E US. 6. THE LD COUNSEL APPEARING FOR THE ASSESSEE SU BMITTED THAT THE CHEQUES ISSUED BY M/S METRO SILKS ANGAMALY WERE RETURNED B Y THE BANK AND HENCE THE ASSESSEE WAS CONSTRAINED TO FILE A COMPLAINT U/S 19 0(1)(A) OF CRIMINAL PROCEDURE CODE AND SEC. 142 OF THE NEGOTIABLE INSTRUMENTS ACT . HENCE THE ASSESSEE HAS TREATED THE AMOUNT DUE FROM M/S METRO SILKS AS BAD DEBT AND ACCORDINGLY WROTE OFF THE SAME IN THE BOOKS OF ACCOUNT. SINCE THE AB OVE SAID DEBT WAS WRITTEN OFF THE SAME WAS CLAIMED AS BAD DEBT IN THE INCOME TAX RETURN. THE LD A.R BY PLACING STRONG RELIANCE ON THE CIRCULAR ISSUED BY C BDT (REFERRED SUPRA) AND THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF M/S T.R.F LTD I.T.A. NO.791 /COCH/2013 5 (SUPRA) CONTENDED THAT IT IS NOT NECESSARY FOR THE ASSESSEE IN TERMS OF SEC. 36(1)(VII) TO ESTABLISH THAT THE DEBT HAS BECOME BA D AND IT IS SUFFICIENT IF THE DEBT IS WRITTEN OFF AS BAD IN THE BOOKS OF ACCOUNT. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS WRITTEN OF THE AMOUNT DUE FROM M/S MET RO SILKS AS BAD AND HENCE THE SAME IS ALLOWABLE U/S 36(1)(VII) OF THE ACT. 7. ON THE CONTRARY THE LD D.R PLACED STRONG RE LIANCE ON THE ASSESSMENT ORDER AS WELL AS THE ORDER PASSED BY LD CIT(A). HE SUBMI TTED THAT THE WRITING OFF OF DEBT AS BAD IN THE BOOKS OF ACCOUNT IS ONE OF THE C ONDITIONS PRESCRIBED IN SEC. 36(1)(VII) OF THE ACT BUT THE SAID CONDITION WILL NOT PRECLUDE THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF BAD DEBT IN ORDER TO ASCERT AIN WHETHER THE SAID CLAIM IS GENUINE OR NOT. THE LD D.R SUBMITTED THAT THE ASSE SSEE HAS RENDERED SERVICE TO M/S METRO SILKS DURING THE YEAR UNDER CONSIDERATION AND ACCORDINGLY RAISED THE BILL ONLY ON 05.10.2005. HOWEVER THE ASSESSEE HAS CHOSEN TO WRITE OFF THE SAME AT THE YEAREND WITHOUT SUBSTANTIATING THAT THE SAME HAS BECOME BAD. THE LD D.R PLACED RELIANCE ON THE DECISION RENDERED BY THE BANGALORE BENCH OF TRIBUNAL IN THE CASE OF EMBASSY CLASSIC P LTD (2012)(20 TAXMA NN.COM 291)(BANG) WHEREIN THE TRIBUNAL HAS HELD THAT THE ASSESSEE CAN NOT CONVERT ANY LIVE AMOUNT INTO A BAD DEBT ONLY THE BASIS OF THE TECHNICAL RUL E OF WRITING OFF. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE IS PLACING STRONG RELIANCE ON THE CIRCULAR ISSUED BY CBDT I.T.A. NO.791 /COCH/2013 6 (REFERRED SUPRA) AND THE DECISION RENDERED BY HONB LE SUPREME COURT IN THE CASE OF M/S T.R.F LTD (SUPRA) TO CONTEND THAT THE ASSESS EE IS NOT REQUIRED TO SHOW THAT THE DEBT HAS REALLY BECOME BAD AND MERE WRITIN G OFF OF THE SAME IN THE BOOKS OF ACCOUNT WOULD AUTOMATICALLY ENTITLE THE AS SESSEE TO CLAIM BAD DEBT IN TERMS OF SEC. 36(1)(VII) OF THE ACT. HOWEVER THE CASE OF THE REVENUE IS THAT THE DEBT PERTAINING TO M/S METRO SILKS HAVE NOT BECOME BAD DURING THE YEAR UNDER CONSIDERATION AND U/S 36(1)(VII) OF THE ACT THE AS SESSEE WOULD BE ENTITLED TO CLAIM DEDUCTION IN RESPECT OF DEBTS WHICH HAVE REA LLY BECOME BAD. 9. THE FACTUAL MATRIX OF THE ISSUE UNDER CONSID ERATION SHOWS THAT THE ASSESSEE HAS RAISED BILLS ON M/S METRO SILKS ONLY ON 05.10.2 005 IN RESPECT OF SERVICES RENDERED TO THEM DURING THE PERIOD FROM 14.8.2005 T O 18.9.2005. THUS IT IS SEEN THAT THE ASSESSEE HAS RENDERED SERVICE AND ALS O RAISED BILL DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDE R CONSIDERATION. IT IS FURTHER NOTICED THAT THE ASSESSEE HAS RECEIVED CHEQUES DRAW N ON UNION BANK OF INDIA MUVATTUPUZHA BRANCH FROM M/S METRO SILKS AS DETAILE D BELOW:- S.NO. CHEQUE NO. DATE AMOUNT IN (RS.) 1 302826 04.11.2005 94 588 2 302825 10.11.2005 94 588 3 302824 15.11.2005 94 588 4 302823 20.11.2005 94 588 5 302827 29.10.2005 94 588 I.T.A. NO.791 /COCH/2013 7 6 302816 24.10.2005 94 588 7 302813 19.10.2005 94 588 8 302814 13.10.2005 94 588 9 302822 25.11.2005 71 630 10 302815 06.10.2005 94 588 THE ASSESSEE HAS PRESENTED THE CHEQUES LISTED AS 1 -5 AND 10 ON 03-04-2006 AND THE REMAINING CHEQUES ON 04-04-2006 FOR COLLECT ION THROUGH HIS BANKER. THE CHEQUES LISTED AS 1 9 WERE RETURNED BACK ON 1 0.04.2006 AND THE REMAINING CHEQUE WAS RETURNED BACK ON 06.04.2006 AS UNPAID DUE TO INSUFFICIENCY OF FUNDS IN THE BANK ACCOUNT OF M/S M ETRO SILKS. 10. THUS IT CAN BE NOTICED THAT THE FIRST OCCAS ION ON WHICH THE ASSESSEE COULD HAVE SMELLED ABOUT THE BAD NATURE OF ACCOUNT OF M/S METRO SILKS ONLY ON 06.04.2006. ADMITTEDLY THIS DATE FALLS IN THE SUCC EEDING YEAR. HENCE THE ASSESSEE COULD HAVE CONSIDERED THE AMOUNT DUE FROM M/S METRO SILKS AS BAD ONLY IN THE SUCCEEDING YEAR AND NOT DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS CLAIMED THE IMPUGNED AMOUNT AS DEDUCTI ON U/S 36(1)(VII) OF THE ACT AND THE SAID SECTION READS AS UNDER:- (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2 ) THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECO VERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR I.T.A. NO.791 /COCH/2013 8 A CAREFUL READING OF THE ABOVE SAID PROVISION WOULD SHOW THAT (A) THE ASSESSEE SHOULD HAVE FIRST TAKEN A DECISION THAT A DEBT HAS BECOME BAD DEBT (B) THE SAME SHOULD BE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. THEN SUBJECT TO THE PROVISIONS OF SEC. 36(2) THE SAID CLAIM IS ALLOWABLE U/S 36(1)(VII) OF THE ACT. HENCE IN OUR VIEW IT WOUL D NOT BE UNREASONABLE ON THE PART OF THE ASSESSING OFFICER TO EXPECT THAT THE AS SESSEE SHOULD SHOW SOME JUSTIFIABLE CIRCUMSTANCES TO CLASSIFY A DEBT AS A B AD DEBT FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 36(1)(VII) OF THE ACT THOUG H IT IS NOT REQUIRED TO ESTABLISH THAT THE DEBT HAS BECOME REALLY BAD. 11. IN THE INSTANT CASE AS NOTICED EARLIER TH E LATEST OCCASION ON WHICH THE ASSESSEE COULD HAVE SMELLED ABOUT THE BAD NATURE OF ACCOUNT OF M/S METRO SILKS IS ONLY ON 06.04.2006 I.E. THE DATE ON WHICH THE CHEQUE ISSUED BY THE ABOVE SAID PARTY WAS RETURNED BACK BY HIS BANKERS DUE TO INSUFFICIENCY OF FUNDS. HENCE THE ASSESSEE COULD HAVE CONSIDERED THE ACCOU NT OF M/S METRO SILKS AS A GOOD / LIVE ACCOUNT ONLY AS ON 31.3.2006 I.E. THE LAST DATE OF THE YEAR UNDER CONSIDERATION MEANING THEREBY THE AMOUNT DUE FROM M/S METRO SILKS COULD NOT HAVE BEEN CONSIDERED BY THE ASSESSEE AS A BAD DEBT AS ON 31.3.2006. IN THAT CASE THE QUESTION OF CLAIMING DEDUCTION U/S 36(1)( VII) AS BAD DEBT IN ASSESSMENT YEAR 2006-07 SHOULD NOT HAVE ARISEN IN R ESPECT OF THE AMOUNT DUE FROM M/S METRO SILKS. I.T.A. NO.791 /COCH/2013 9 12. AT THIS JUNCTURE WE FEEL IT PERTINENT TO EX TRACT OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER WHEREIN THE AO HAS PLAC ED RELIANCE ON THE DECISIONS RENDERED BY THE TRIBUNAL :- THE FIRST DECISION WAS IN THE CASE OF DCIT VS. PAS UPATHY NEW TEC. LIMITED. THE SECOND DECISION RELATES TO CASE OF IN DUSTRIAL CABLES INDIA LTD. VS. A.C.I.T. IN THE FIRST REFERRED DECISION O F THE DELHI BENCH IT HAS BEEN CLEARLY HELD THAT THE INTENTION OF THE LEGISLA TURE CANNOT BE PRESUMED TO ALLOW DEDUCTION OF ANY DEBTS WRITTEN OF F BY THE ASSESSEE IN BOOKS OF ACCOUNTS AND THE ASSESSING OFFICER WOULD BE JUSTIFIED IN VERIFYING THE CASE OF THE DEDUCTION MADE BY THE ASS ESSEE U/S. 37(1). IN THE SECOND DECISION IT HAS BEEN HELD THAT THE ASSES SEE IS REQUIRED TO ESTABLISH THAT THE DEBTS HAS BECOME BAD DURING THE YEAR. IT HAS ALSO BEEN HELD THAT IT WOULD BE FOR THE ASSESSEE TO EST ABLISH THAT THE DEDUCTION CLAIMED IS OF BAD DEBTS AND NOT ONLY A DE BTS WHICH MAY NOT BE A BAD DEBTS. THE BURDEN TO ESTABLISH THAT THE AS SESSEE HAS SUFFERED A LOSS IS UNDOUBTEDLY UPON THE ASSESSEE. IN THE SECO ND DECISION AS MENTIONED ABOVE IT HAS BEEN HELD AND OBSERVED BY T HE HONABLE ITAT THAT IF THE DEBT HAS BECOME BAD OR IRRECOVERABLE T HE DEPARTMENT CAN NOT INSIST UPON DEMONSTRATIVE AND INFALLIBLE PROOF THAT THE DEBT HAS BECOME BAD BUT CERTAINLY THE ONUS IS ON THE ASSESSEE TO PROVE THE SAME . THE WORD BAD USED IN CONJUNCTION WITH THE WORD DEBTS IN SEC. 36(1)IVII) MEANS WORTHLESS DEBTS . IN ORDER TO TAKE ADVANTAGE OF THIS PROVISION THE ASSESSEE IS REQUIRED TO ESTAB LISH THAT A DEBT DUE TO IT HAS BECOME A WORTHLESS DEBTS. THE ASSESSEE FOR H IS CONVENIENCE MIGHT DECIDE THAT THE DEBTOR WAS TOO SMALL AND IT W AS NOT WORTHWHILE TO PURSUE THE DEBTOR BUT THAT JUDGMENT OF THE ASSESSEE WOULD NOT BE A HONEST JUDGMENT WHICH WOULD ESTABLISH THAT THE DEBT HAD BECOME A BAD DEBTS OR WORTHLESS DEBTS. THE FACTS ON WHICH THE J UDGMENT HAS TO BE TAKEN BY THE ASSESSEE SHOULD REVEAL THE RECOVERABIL ITY OF THE DEBTS FROM THE ANGLE OF THE DEBTOR AND NOT ON THE BASIS OF THE ABILITY OF THE ASSESSEE TO RECOVER THE SAME. BAD DEBTS IS CLAIMED AS AN ALLOWANCE BY THE ASSESSEE AND THEREFORE THE BURDEN IS ON HIM TO SHOW THAT HE HAD NO REASONABLE EXPECTATION OF RECOVERY AT THE TIME H E WROTE IT OFF OR THERE IS NO RAY OF HOPE AT ALL ON WHICH HE COULD RE LY UPON THE RECOVERY OF THE AMOUNT FROM THE DEBTOR. VARIOUS OTHER JUDI CIAL CITATIONS HAVE BEEN REFERRED BY THE CHANDIGARH ITAT WHILE DISPOSIN G OFF THE ABOVE JUDGMENT. THE DELHI ITAT D-BENCH HAS APPLIED THE D ECISION IN THE CASE OF CIT VS. CALCUTTA AGENCY LIMITED (1951) 19 ITR 19 1 (SC) AND ASSOCIATED BANKING CORPORATION OF INDIA LIMITED (19 56) 56 ITR 1 (SC). I.T.A. NO.791 /COCH/2013 10 13. IN THE CASE OF EMBASSY CLASSIC P LTD (SUPRA) WHICH IS RELIED UPON BY LD D.R THE BANGALORE BENCH OF TRIBUNAL HAS HELD AS UN DER:- 17. EVEN THOUGH WRITING OFF A DEBT AS BAD DOUBTFUL MAY BE A SUFFICIENT MODE OF DISCHARGING THE PROOF THE SAID FORMAT OF S TATUTORY EVIDENCE IS NOT AN EMPTY FORMALITY. IT IS NOT NECESSARY FOR TH E ASSESSEE TO PROVE THAT THE DEBT HAS BECOME BAD. BUT AT THE SAME TIME THE ASSESSEE CANNOT CONVERT ANY LIVE AMOUNT INTO A BAD DEBT ONLY ON THE BASIS OF THE TECHNICAL RULE OF WRITING OFF. IN THE PRESENT CASE EVEN THOUGH THE AMOUNT WAS NOT RECEIVED ON THE BALANCE-SHEET DATE THE AMOUNT WAS RECEIVED BY THE ASSESSEE BEFORE FILING OF THE RETUR N ITSELF. IN FACT THE BALANCE CONSIDERATION OF THE SALE TRANSACTION COVER ED BY THE DISHONOUR OF THE CHEQUE WAS RECEIVED BY THE ASSESSEE-COMPANY ON AUGUST 30 2005. THE ASSESSEE HAD FILED THE RETURN OF INCOME ONLY THEREAFTER ON OCTOBER 29 2005. THEREFORE IT IS VERY CLEAR THAT WHEN THE RETURN OF INCOME WAS FILED BY THE ASSESSEE NO DEBT WAS RECOV ERABLE FROM THE BUYERS OF THE PROPERTY. WE FIND A LOT OF FORCE IN THE ARGUMENT OF THE LEARNED COMMISSIONER OF INCOME-TAX REGARDING THE NO N-COMMITTAL OF THE ASSESSEE-COMPANY IN PURSUING THE LEGAL REMEDIES AVA ILABLE BEFORE IT FOR THE RECOVERY OF THE AMOUNT. THEREFORE IN THESE CI RCUMSTANCES WE DO NOT FIND THAT THE DEBT HAS BECOME BAD DEBT. IT WAS ONLY A CASE OF DELAYED PAYMENT. THEREFORE WE FIND THAT THE JUDGM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (2010) 323 ITR 397 DOES NOT APPLY TO THE FACTS OF THE PRESENT CASE. IN THE INSTANT CASE WE HAVE ALREADY NOTICED THAT T HE DEBT DUE FROM M/S METRO SILKS WAS A LIVE DEBT AS ON 31.3.2006 AND THE ASSES SEE AT THE BEST COULD HAVE FORESEEN THE THREAT OF RECOVERY ONLY BY 06.4.2006. 14. THE LD A.R CONTENDED BEFORE US THAT THE ASSE SSEE WROTE OFF THE AMOUNT DUE FROM M/S METRO SILKS IN THE ACCOUNTING YEAR END ING ON 31.3.2006 SINCE THE POSSIBILITY OF NON-RECOVERY WAS KNOWN TO IT BEFORE FINALIZING THE ACCOUNTS RELATING TO THAT YEAR. BUT THE QUESTION HERE IS WHETHER THE RE EXISTED ANY HONEST OPINION BASED ON SOME JUSTIFIABLE MATERIAL TO SHOW THAT THE AMOUNT DUE FROM M/S METRO I.T.A. NO.791 /COCH/2013 11 SILKS HAS BECOME BAD AS ON 31.3.2006 ? THE FOREGOI NG DISCUSSIONS WOULD SHOW THAT THE ASSESSEE DID NOT HAVE ANY JUSTIFIABLE MATE RIAL TO SHOW THAT THE AMOUNT DUE FROM M/S METRO SILKS HAS BECOME BAD ON 31.3.200 6. ON THE CONTRARY THE ASSESSEE ITSELF COULD HAVE FORESEEN THE THREAT OF R ECOVERY OF AMOUNT ONLY IN THE SUCCEEDING YEAR WHEN THE CHEQUES ISSUED BY M/S METR O SILKS WERE DISHONOURED. HENCE IN OUR VIEW THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO IN RESPECT OF THE BAD DEBT CLAIM REL ATING TO M/S METRO SILKS. ACCORDINGLY WE UPHOLD HIS DECISION. 15. IN THE RESULT THE APPEAL FILED BY THE ASSE SSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 25-04-2014. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 25TH APRIL 2014 GJ COPY TO: 1. M/S. MARK MEDIA ADVERTISING PROMOTIONS DOOR NO. 10/1256 ERINJERI ANGADI THRISSUR-680 001. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCL E-2(1) RANGE-2 THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-V KOCHI . 4. THE COMMISSIONER OF INCOME-TAX THRISSUR. 5. D.R. I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T COCHIN