Income Tax Appellate Tribunal - Mumbai
Idbi Trusteeship Services Ltd , Mumbai vs Department Of Income Tax on 17 April, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "I", MUMBAI
BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI VIVEK VARMA, J.M.
ITA No. : 4544/Mum/2009
Assessment Year : 2005-06
Dy. Commissioner of Income M/s. IDBI Trusteeship Services
tax -3(2); Room No.608, 6th Ltd.
Floor; Aayakar Bhavan 10th floor, Nariman Bhavan,
Mumbai-400 020. Nariman Point
Vs.
Mumbai-400 021.
PAN NO: AABPV 3278 L
(Appellant) (Respondent)
Appellant by : Shri Atik Ahmed
Respondent by : Shri Ravi Mulchandani
Date of hearing : 17.04.2012
Date of Pronouncement : 27.04.2012
ORDER
PER RAJENDRA SINGH, AM:
This appeal by the revenue is directed against the order dated 5.5.2009 of CIT(A) for the assessment year 2005-06. The disputes raised by the revenue in this appeal relates to claim of bade debts and method of accounting of income.
2. Facts in brief are that the assessee who was engaged in the trusteeship business, was following mercantile system of accounting. However, from assessment year 2004-05 assessee changed the method of accounting and income in respect of which no recovery was made within a period of 7 months was being shown as bad debts and only recurring bad debt in subsequent years was being shown as income. In assessment year 2004-05, AO had rejected the method of 2 ITA No. 4544/M/09 A.Y.05-06 accounting and disallowed the claim of bade debt. In the assessment year 2005-06 which is under consideration in this appeal, the assessee following the new method claimed bad debts at Rs.8,20,344/- and also declared additional income of Rs.14,64,623/- in respect of bad debts claimed in the earlier years. The AO following the decision in assessment year 2004-05 rejected the claim of bad debts of Rs.8,20,344.- based on the new accounting method. He, however, taxed the additional income of Rs.14,64,623/- on accrual basis in respect of debts which had been written off by the assessee in the earlier years. In appeal CIT(A) observed that in assessment year 2004-05 he had already accepted the new method followed by the assessee as bonafide change and accordingly he directed the AO to allow claim of bad debt and as a consequence tax the additional income received on account of bad debts claimed by the assessee in the earlier year. Aggrieved by the said decision, the revenue is in appeal before the Tribunal.
3. Before us, the ld. AR submitted that though the assessee was following the mercantile system of accounting from assessment year 2004-05, the income accrued in respect of which there has been no recovery for 7 months was being claimed as bad debt and in respect of bad debts claimed if any income was received in the subsequent year the same was declared as income. It was pointed out that in assessment year 2004-05 the CIT(A) accepted the new method of accounting being followed by the assessee. Though the revenue had filed appeal to the Tribunal against the order of CIT(A) in assessment year 2004-05, the department could not obtain COD approval and appeal had been dismissed by the Tribunal and order of CIT(A) has become final. It was accordingly requested that the claim of the assessee should be allowed. The ld. AR further pointed out that in 3 ITA No. 4544/M/09 A.Y.05-06 assessment years 2008-09 and 2009-10, AO had himself accepted the new method followed by the assessee. The ld. DR placed reliance on the order of AO.
4. We have perused the records and considered the rival contentions carefully. The dispute is regarding claim of bad debt and taxability of additional income declared by the assessee in view of new accounting method followed since 2004-05. The assessee since assessment year 2004-05 was writing off the debts in respect of income in which there was no recovery for 7 months and in respect of bad debts claim if any income was received in the subsequent year, the same was offered as income. We find that the new method adopted by the assessee was upheld by the CIT(A) in assessment year 2004-05 and order of CIT(A) has become final. In assessment years 2008-09 and 2009-10, AO has himself accepted the new method being followed by the assessee. Therefore, following the principle of consistency, the method followed in assessment year 2005-06 can not be rejected. Order of CIT(A) upholding the method is therefore sustained and AO is directed to allow the claim of bad debt and tax the additional income offered in respect of bad debt claimed in the earlier year.
5. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 27.04.2012 Sd/- Sd/-
(VIVEK VARMA) (RAJENDRA SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 27.04.2012.
Jv.
4 ITA No. 4544/M/09
A.Y.05-06
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR " " Bench
True Copy
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.