Income Tax Appellate Tribunal - Chandigarh
M/S Jain Udhay Hosiery Pvt. Ltd., ... vs Dcit, C-Iii, Ludhiana on 8 February, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, "ए", च डीगढ़
I N T H E I NC O ME T A X A P PE L L A T E T RI B U N AL
D I VI S I O N B E NC H , ' A ' , CH A ND I G AR H
ी संजय गग , या यक सद य एवं ीमती अ नपण
ू ा ग&ु ता, लेखा सद य
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND
Ms. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 1201/ C H D / 2 0 1 7
नधा रण वष / Assessment Year : 2011-12
The DCIT, Central Circle-1II, बनाम M/s Jain Udhay Hosiery Pvt. Ltd.,
Ludhiana 36, Sunder Nagar, Ludhiana
थायी लेखा सं./PAN NO: AAACJ4494N
अपीलाथ /Appellant यथ /Respondent
C.O. No. 50/Chd/2017
(In आयकर अपील सं./ ITA No. 1201/ C H D / 2 0 1 7 )
नधा रण वष / Assessment Year : 2 0 1 1 - 1 2
M/s Jain Udhay Hosiery Pvt. Ltd., बनाम The DCIT, Central Circle-1II,
36, Sunder Nagar, Ludhiana Ludhiana
थायी लेखा सं./PAN NO. : AAACJ4494N
अपीलाथ /Appellant यथ /Respondent
नधा रती क! ओर से/Assessee by : Shri Ashish Gupta, CIT DR
राज व क! ओर से/ Revenue by : Sh. Ashwani Kumar, CA
सन
ु वाई क! तार&ख/Date of Hearing : 12.11. 2018
उदघोषणा क! तार&ख/Date of Pronouncement : 08.02. 2019
आदे श/Order
Per Sanjay Garg, Judicial Member:
The present is the appeal by the Revenue and corresponding Cross Objections (C.O.) by the assessee against order dated 16.5.2017 of the Commissioner of Income Tax (Appeals)-5, Ludhiana [hereinafter referred to as CIT(A)].
ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 2 ITA No. 1201/Chd/2017 - Revenue's appeal
2. The Revenue in this appeal has taken the following grounds of appeal:-
1. The Ld. CIT(A)-5, Ludhiana has erred in law to delete the addition of Rs.1,91,69,262/- made on account of alleged under invoicing of sales, ignoring the fact that the Assessing Officer has worked out the difference between the actual sales and understated sales on the basis of cost price taken during the stock valuation at the time of search operation.
2. The Ld. CIT(A)-5, Ludhiana has erred in law to partly allow the addition of Rs. 10,58,563/- out of the total addition of Rs. 68,44,760/- made on account undervaluation of closing stock of the knitted cloth, ignoring the fact that the assessing Officer has worked out the difference between the value of actual closing stock and understated closing stock on the basis of cost price taken during the stock valuation at the time of search operation.
3. The Ld. CIT(A)-5, Ludhiana has erred in law to partly allow the addition of Rs.53,53,876/- out of the total addition of Rs.93,43,040/- made on account undervaluation of closing stock of the readymade garment, ignoring the fact that the assessing Officer has worked out the difference between the value of actual closing stock and understated closing stock on the basis of cost price taken during the stock valuation at the time of search operation.
4. The Ld. CIT(A)-5, Ludhiana has erred in law to partly allow the addition of Rs.46,63,208/- out of the total addition of Rs. 49,66,510/- made on account undervaluation of closing stock of yarn, ignoring the fact that the assessing Officer has worked out the difference between the value of actual closing stock and understated closing stock on the basis of cost price taken during the stock valuation at the time of search operation.
5. The Ld. CIT(A)-5, Ludhiana has erred in law to delete the addition of Rs.9,70,000/- on account of ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 3 disallowance of bad debts written off u/s 36(i)(vii) ignoring the fact that the assessee has failed to prove the genuineness of the non-recovery of the bad debt.
6. The appellant craves leave to add or amend the grounds of appeals on or before is heard and disposed off.
3. The brief facts of the case are that the assessee company is engaged in the business of manufacturing and trading of knitted cloth and readymade garments. A search and seizure proceedings u/s 132 of Income-
tax Act, 1961 (in short 'the Act') were carried out on 1.3.2011 on the Jain Udhay Group. However, a survey at the business premises of the assessee company was carried out u/s 133A of the Act. During the survey proceedings, several discrepancies were found vis-a-vis stock and the loose documents were found. Keeping in view the difference in the value of stock and nature of documents found, the assessee surrendered additional income of Rs. 250,00000/- under the following heads.
i. Difference in stock valuation : Rs. 100,00000/- ii. Undisclosed sales / unrealized debtors : Rs. 140,00000/- iii. Unexplained documents / expenses : Rs. 10,00000/-
The return of income was filed by the assessee at a loss of Rs.
2,53,54,381/-. However, the Assessing officer in the assessment proceedings rejected the books of account and assessed the taxable income at Rs. 143,03,767/- after making the following additions / disallowance of expenses:-
(i) Under invoicing of sales of Rs. 19169262/-
knitted cloth in the month of March, 2011
(ii) Under valuation of closing Rs. 6844760/-
stocks of knitted cloth as on 31.3.2011 ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 4
(iii) Under valuation of closing Rs. 9343040/-
stocks of readymade
garments as on 31.3.2011
(iv) Under valuation of closing Rs. 4966510/-
stocks of yarns as
on31.3.2011
(v) Disallowance of bad debts Rs. 970,000
written off in the books of
account
Total Rs. 412293572
4. The Ld. CIT(A) though upheld the action of the Assessing officer in rejecting the books of account of the assessee, however, deleted the additions so made by the Assessing officer. The relevant para of the order of the CIT(A) is reproduced as under the for sake of ready reference and conveniences.
"4.2 Ground of Appeal No. l(b) pertains to the addition of Rs. 1,91,69,262/- on account of alleged under-invoicing of sales made by the assessee during the month of March, 2011. The AO has mentioned that the assessee has shown sale of 194247 Kgs of Knitted Cloth during the month of March 2011 for Rs. 5,08,07,588/- giving an average sale rate of Rs. 261/- per Kg. The AO further mentions that on the date of search i.e. 01.03.2011 the inventory of Knitted Cloth weighing 152137 Kgs was valued at Rs. 5,17,71,862/- giving an average rate of Rs. 340/- per Kg. Further, as per AO the G.P. shown for assessment year 2010-11 was 14% and therefore, the average sale rate should be Rs. 387/-(Rs. 340 + Rs. 47 the profit @ 14%). Thus as per AO there was under invoicing of sales by Rs. 126/- (Rs. 387 - Rs. 261) on the cloth sold during the month of March, 2011. A show cause notice was given to the assessee and after considering the reply of the assessee and rejecting the books of accounts, the AO made an addition of Rs. 1,91,69,262/- (calculated as 126 x 152137 = 1,91,69,262/-) on account of under invoicing of sale of Knitted Cloth during the month of March, 2011 out of the cloth found at the time of search on 01.03.2011.
The facts of the case, the basis of addition made by the A.O. and the submissions/arguments of the AR during the appellate proceedings have been considered. The AO ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 5 has made the addition on the ground that the sales of Knitted Cloth during the month of March, 2011 have been shown at a rate lower than the value of Knitted Cloth taken at the time of search on 01.03.2011. On the other hand the AR has argued that there is no independent evidence with the AO to support his presumption that the assessee has resorted to under invoicing of sales. As per AR no such instance has come to notice during any post search inquiry conducted, if any, by the department. The AR further argued that the AO has totally ignored the fact that sales in the month of March 2011 have been made to identifiable customers which the AO could have verified before drawing any adverse inference. Secondly, while calculating the under-invoicing the AQ is taking the quantity of knitted cloth as 152137 kgs only, whereas the total sales during the month of March, 2011 were 194247 kgs and thus ignored the sales made @ Rs. 261/- per Kg, out of the purchases made in the month of March 2011 @ Rs. 233 per kg. The AR argued that the AO has not doubted the sales made during the year in any other month from April, 2010 to February, 2011 where the rates were much below the value of Rs. 3S7/- or Rs. 340/-adopted by the AO. It was further submitted by the AR that calculation of under-invoicing on the basis of average cost of cloth as on 01.03.2011 and ignoring the average cost price in the month of March 2011 is totally wrong in view of the fact also that the average per Kg cost of cloth purchased for the whole year including the opening stock of cloth on 01.04.2010 was required to be taken. Under the facts and the circumstances of the case, these arguments of the AR appear logical. Further a perusal of the assessment order shows that the AO has made the addition on the presumption that the sales cannot be at a rate less than the purchase made. However, no instance of any independent confirmation from the parties who have purchased goods from the assessee, about the under invoicing has been mentioned by the AO. The AR has rightly mentioned that the AO has not carried out any inquiries about the rate from the parties, who purchased goods from the assessee during the month of March, 2011. Also there is no document mentioned by the AO indicating such a practice adopted by the assessee. Since the addition has been made purely on presumption without any basis, therefore the addition made by the AO is not found sustainable and hence deleted.
Accordingly this ground of appeal is allowed.
ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 6 4.3 Ground of Appeal No. l(c) pertains to the addition of Rs. 1,61,87,800/-on account of alleged under valuation of closing stock of Knitted Cloth and Readymade Garments as on 31.03.2011. The addition on account of Knitted Cloth has been calculated at Rs. 68,44,760/- and for Readymade Garments at Rs. 93,43,040/-. These are discussed below:
(i) Knitted Cloth: The AO has mentioned that the assessee has shown the value of closing stock of 190163 Kgs of Knitted Cloth as on 31.03.2011 at Rs. 3,90,09,365/- giving an average rate of Rs. 205/- per Kg. The AO mentions that the stock of knitted cloth weighing 152137 kgs was valued at Rs. 5,17,26,580/- on 01.03.2011 giving an average rate of Rs. 340/-. The assessee purchased 175916 Kgs of knitted cloth during the month of March 2011 for Rs. 4,10,06,126/-
giving an average purchase rate of Rs. 233/-. As per AO, thus there was under valuation of stock as the assessee has taken value of closing stock at below average cost price out of the March 2011 purchases and below average rate of stock as on 01.03.2011. The AO concluded that there was undervaluation of closing stock of knitted cloth @ Rs. 135 (Rs. 340 - Rs. 205) for 14246 kgs left-out out of stock as on 01.03.2011 and @ Rs. 28/- per kg for 175916 kgs purchased during the month of March, 2011, The total undervaluation of closing stock of knitted cloth was arrived at Rs. 68,44,760/-(calculated as Rs. 135 X 14246 = Rs. 19,25,460 plus Rs. 28 X 175916 = Rs. 49,19,300/-).
The facts of the case, the basis of valuation of closing stock of knitted cloth and the addition made by the A.O. on this basis along with the submissions/arguments of the AR during the appellate proceedings have been considered. The AO has made the addition by taking the average price of Rs. 340/- per Kg for valuing the closing stock of Knitted Cloth of 190163 Kgs which includes 14246 kgs left out of the stock of 152137 kgs found on the date of search and 175916 kgs purchases during the month of March, 2011. The AR has argued that the method of valuation of closing stock regularly employed by the assessee was the cost price or market price whichever is lower and this method has been regularly followed by the assessee. The AR argued that there was no justification for valuing the stock of 175916 kgs (purchased during the month of March, 2011 for Rs. 4,10,06,126/- giving average rate of Rs. 233/- per kg) at an higher rate of Rs. 340 per kg. It was also argued that the left over stock, out of the stock found as on 01.03.2011 was old cloth not to be used in manufacturing purposes and hence it cannot be valued ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 7 at higher rate of Rs. 340/- per kg. The AR argued that at the most this could be valued at either the cost price or the realizable price. The AR has submitted that it was not feasible to maintain item wise stock records in respect of each purchase/design/color due to large variety of cloth and the price of each purchase is different. The AR further argued that under such situation the weighted average cost method is best suited method to arrive at the cost price. Therefore, to find out the average cost of purchase during the year the AR was asked to submit the details of the purchases made during the year before the date of search. The AR filed such details and perusal of the same shows that the average purchase cost of the cloth during the period April, 2010 to February 2011 was at Rs. 266 per kg. Thus, the valuation of stock of 14246 kgs left out of the stock of 190163 kgs found as on 01.03.2011 should be made at an average cost price of Rs. 266/- and the value as on 31.03.2011 comes to Rs. 37,89,436/- which is to be taken as the value of the closing stock of 14245 kgs. Regarding the stock of 175916 kgs purchased during the month of March, 2011 there is a merit in the argument of the AR that it cannot be valued on 31.03.2011 at more than the cost price. Hence, the value of closing stock of 175916 kgs as on 31.03.2011 is to be taken at Rs. 4,10,06,126/- which is the purchased price of this cloth.
Hence, the value of 190163 kgs of Knitted cloth as on 31.03.2011 should be Rs. 37,89,436/- + Rs.
4,10,06,126/- = Rs. 4,47,95,562/- as against Rs. 3,90,09,365/- shown by the assessee. Accordingly, the addition on account of under valuation of closing stock is to be made at Rs. 57,86,1977- (Rs. 4,47,95,562 - Rs. 3,90,09,365 ) against the addition of Rs. 68,44,760/- made by the AO. The appellant accordingly gets a relief of Rs. 10,58,5637-.
(ii) Readymade Garments: The AO has mentioned that it was further observed that the assessee has valued closing stock of Garments on 31.03.2011 at Rs. 39,36,675/- for 52489 pieces which gave average value of Rs. 75/- per piece. On the date of search on 01.03.2011 stock of garments was valued at Rs. 1,32,79,710/- for 52489 pieces at an average rate of Rs. 253/-. As per AO this shows that the assessee has made valuation of closing stock of garments below valuation rate taken on 01.03.2011. The AO further observed that thus there was undervaluation of closing stock of garments @ Rs. 178 (Rs. 253 - Rs. 75) for 52489 pieces at total amount of Rs. 93,43,040/-. After giving a show-cause to the assessee and after considering ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 8 the reply of the assessee, the AO made an addition of Rs. 93,43,040/- (calculated as Rs. 178 x 52489 pieces).
The facts of the case, the basis of addition made by the A.O. and the submissions/arguments of the AR during the appellate proceedings have been considered. The AO has made the addition by taking the average price of Rs. 178/- per piece for valuing the closing stock of 52489 pieces on 31.03.2011. On the other hand the AR has argued that there is no basis with the AO for adopting this rate. The AR has argued that the stock of garments should be taken at cost or market/realizable price as on 31.03.2011. The AR was asked to file the average cost price of the Garments and from the details filed it is seen that the average purchase price of the garments during the year was Rs. 151 per piece. The stock at the end of the year should have been valued by taking this as average cost and accordingly the value of readymade garments as on 31.03.2011 comes to Rs.79,25,839/- (i.e. Rs. 151 x 52489 pieces) as against the value taken at Rs.39,36,675/- by the assessee. Therefore, was under valuation of stock of garment. The addition on account of under valuation of stock of readymade garments is to be made at Rs. 39,89,164/- as against the addition of Rs. 93,43,040/- made by the AO. The appellant gets a relief of Rs. 53,53,876/-
To sum up the addition on account of valuation of stock of Knitted Cloth is confirmed at Rs. 57,86,197/- and for valuation of Readymade Garments is sustained at Rs 39,89,164/-. Thus the total addition on account of under valuation of stock of these two items is sustained at Rs. 97,75,361/- as against the addition of Rs. 1,61,87,800/- made by the AO and the appellant gets a relief of Rs. 64,12,439/-.
Accordingly this ground of appeal is partly allowed. 4.4 Ground of Appeal No. l(d) pertains to the addition of Rs. 49,66,510/- on account of alleged under valuation of closing stock of yarns on 31.03.2011. The AO has mentioned that from the moth wise purchases of yarns and knitted cloth it is noticed that the assessee purchased yarns of 232 kgs in the month of March, 2011 at a rate of Rs. 473/- per kg, whereas stock of yarns has been valued on 31.03.2011 @ Rs. 288 per kg. As per AO, thus there was under valuation of stock of yarn by Rs. 185 per kg (Rs. 473- Rs. 288). The total amount of closing stock of yarn as on 31.03.2011 has been shown at 26846 kgs and accordingly the undervaluation of closing stock of yarn has been calculated by the AO at Rs. 49,66,510 (i.e. 26846 kgs x Rs. 185 per kgs). As per AO no explanation ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 9 regarding this has been filed by the assessee and as such the same been added back to the total income of the assessee.
The facts of the case, the basis of valuation of closing stock of yarns and the addition made by the A.O. on this basis along with the submissions/ arguments of the AR during the appellate proceedings have been considered. The AO has made the addition by taking the average price of Rs. 473/- per Kg for valuing the closing stock of yarns of 26846 Kgs on 31.03.2011. The AR has argued that the there is no such bills as referred by the AO. As per the AR the yarns is of different qualities and the rate varies as per the type of the yarn. The AR has argued that the valuation adopted regularly by the assessee was the cost price for different varieties of yarns. The AR was asked to file the month wise purchase of yarns and from the details filed it is seen that the average purchase price of the yarns comes to Rs. 300 per kgs during the financial year 2010-11. Accordingly, the value of closing stock of yarn weighing 26846 kgs as on 31.03.2011 comes to Rs. 80,53,800/- as against the value of Rs. 77,50,498/- taken by the assessee. Therefore, there was under valuation of stock of yarn and the addition-on account of under valuation of stock of yarns is to be made at Rs. 3,03,302/- as against addition of Rs, 49,66,510/- made by the AO and the appellant gets a relief of Rs. 46,63,208/-.
Accordingly, this ground of appeal is partly allowed.
4.5 Ground of Appeal No. l(e) pertains to addition of Rs. 9,70,000/- on account of disallowance of bad debts written off u/s 36(l)(vii). The AO has mentioned that the assessee has written off bad debts amounting to Rs. 12,73,872/- during the year. The AO further mentioned that the assessee was asked to produce evidences for measures taken by the assessee to recover such bad debts. The reply of the assessee was considered and as per AO the explanation is found satisfactory only with respect to debts amounting to Rs. 3,03,872/- and for the balance debts amounting to Rs. 9,70,000/-, the explanation was not found convincing. The AO observes that the claim of bad debts is just like any other expense and the AO was under
obligation to verify the genuineness of such expenses. A s per AO, since the assessee has failed to discharge its onus, hence an addition of Rs. 9,70,000/- was made.
The facts of the case, the basis of addition/disallowance made by the A.O. and the submissions/arguments of the AR during the appellate ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 10 proceedings have been considered. The AR has argued that the claim of the assessee is as per the provision of section 36(l)(vii) of the Income Tax Act, 1961 and the AO has misinterpreted the judgment relied by him. The AR has quoted the Supreme Court Judgment stating that after 1-4- 1989, it is not necessary for assessee to establish that debt, in fact, has become irrecoverable, it is enough if bad debt is written off as irrecoverable in accounts of assessee. The AR has referred to the CBDT Circular No. 551 dated 23.01.1990 also. The AR has taken an alternative plea also and submitted that the assessee has surrendered an amount of Rs. 10,00,000/- as unexplained expenses which is mentioned by the AO also in the assessment order and argued that as an alternative plea the amount of Rs.
9,70,000/- be covered under this surrendered. Under the facts and the circumstances of the case, the arguments of the AR are found acceptable in view of the amended provision of Section 36(l)(vii) and the alternate arguments of the AR. Therefore, the disallowance made by the AO is not found sustainable and hence deleted.
Accordingly, this ground of appeal is allowed."
5. Being aggrieved by the above order of the CIT(A) in deleting the additions made by the Assessing officer, the Revenue has come in appeal before us.
6. We have considered the rival submissions and have also gone through the record. So far as the issue relating to the addition of Rs. 1,91,69,262/-
made by the Assessing officer on account of alleged under invoicing of sales is concerned, the Assessing officer had made the addition on the ground that the sales of the knitted cloth during the month of March 2011 have been shown at a rate lower than the value of knitted cloth taken at the time of survey on 1.3.2011. However, the Ld. CIT(A) deleted the addition so made by the Assessing officer considering the submissions of the assessee that the Assessing officer has made the assumption of fact and further while calculating the under invoicing, the Assessing officer has taken a lesser quantity of knitted cloth in comparison to the actual sales of ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 11 the assessee and further that the market rate also fluctuates from time to time and that there was no evidence before the Assessing officer for any under invoicing of the sales. That the entire addition was made by the Assessing officer on assumption and presumption basis.
7. The Ld. DR could not bring out any discrepancy or infirmity in the factual findings given by the Ld. CIT(A) on this issue. The findings of the Ld. CIT(A) on this issue are, therefore, upheld.
8. So far as the issue relating to the addition of Rs. 1,61,87,800/- on account of alleged under valuation of stock of knitted cloth and readymade garments is concerned, the Ld. CIT(A) has gone through the facts of the case, actual figures of stock and arrived at a conclusion that the value of the closing stock should be Rs. 4,47,95,562/- as against Rs. 3,90,09,365/-
taken by the Assessing officer. He, therefore, restricted the addition on account of under valuation of closing stock at Rs. 57,86,197/- as against the addition of Rs. 68,44,760/- made by the Assessing officer. The Ld. CIT(A) after going through the record has given factual findings on the figures of the closing stock. No new evidence or any other fact has been brought into our knowledge, hence, there is no reason to disturb the order of the CIT(A) on this issue also.
9. So far as the under valuation of readymade garments is concerned, the Ld. CIT(A) similarly after taking into consideration the quantum of stock found and sold, held that the stock at the end of the year should have been valued by taking the average cost and thereby calculated the value of the readymade garments as on 31.3.2011, as against Rs. 79,25,839/- taken by the Assessing officer and at Rs. 39,36,675/- taken by the assessee. He, ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 12 therefore, held that the addition on account of value of stock of readymade garments be made at Rs. 39,89,164/- as against the addition of Rs.
93,43,040/- made by the Assessing officer.
Similarly, in relation to the addition of Rs. 49,66,510/-, the Ld. CIT(A) after going through facts and figures arrived at a conclusion that the addition on account of undervaluation of stock and yarn was to be made at Rs. 3,03,302/- as against the addition of Rs. 49,66,510/- made by the Assessing officer.
So far as the addition of Rs. 49,66,510/- made by the Assessing officer on account of under valuation of closing stock of yarn on 31.3.2011 is concerned, the Ld. CIT(A) after considering the facts of the case, the basis of valuation of closing stock of yarn and the addition made by the Assessing officer along with submissions of the assessee during the appellate proceedings has observed that the Assessing officer has wrongly taken average price at Rs. 473/- . The Ld. CIT(A) considering the average price of yarn at Rs. 300/- per kg during financial year 2010-11 calculated the value of the closing stock of yarn weighing 24846 kgs as on 31.3.2011 at Rs. 80,53,800/- as against the value of Rs. 77,50,498/- taken by the assessee. He, therefore, restricted the addition at Rs. 3,03,302/- on this issue as against the addition of Rs. 49,66,510/- made by the Assessing officer.
10. After considering the rival submissions, we find no infirmity in the above factual findings arrived at by CIT(A) after considering the facts and figures of the case.
ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 13
11. So far as the issue relating to the addition of Rs. 9,70,000/- on account of disallowance of bad debts written off is concerned, the assessee before the Ld. CIT(A) had argued that the aforesaid debts, in fact, had become bad as there was no chance of recovery of the same. That even it had made reasonable efforts to recover such bad debts. Though the Assessing officer accepted the contention of the assessee in respect of some parties, but rejected the contention of the assessee in relation to other parties. The assessee had also relied upon the judicial pronouncements to stress that it was not necessary for the assessee to establish that debt, in fact, had become irrecoverable. That it was enough if bad debt is written off as irrecoverable in the accounts of the assessee. Apart from that, the assessee has taken an alternative plea that assessee had surrendered an amount of Rs. 10 lacs as 'unexplained expenditure' and that the amount of Rs. 9,70,000/- can be covered under surrendered amount. The Ld. CIT(A) accepted the above alternative plea of the assessee and deleted the addition made by the Assessing officer on this issue.
12. After considering the rival submissions of the parties, we do not find any reason to interfere in the order of the CIT(A) on this issue also.
13. It is pertinent to mention that the Ld. counsel has also relied upon the decision of the Tribunal in the case of sister concern of the assessee namely 'M/s Jain Udhay Apparels Pvt Ltd.,' wherein, the Tribunal vide order dated 19.3.2018 has dismissed the appeal of the Revenue contesting the action of the CIT(A) in deleting the additions made on almost identical issues. The Ld. counsel has also relied upon the decision of the Tribunal in the case of another sister concern of the assessee 'M/s Jain Udhay Fabrics Pvt. Ltd'., ITA No. 551/Chd/2015 vide order dated 17.10.2017 and has ITA No. -1201/Chd/2017 & C.O. 50/Chd/2017 M/s Jain Uday Hosiery Pvt Ltd., Ludhiana 14 submitted that identical additions made by the Assessing officer have been deleted by the Ld. CIT(A) in the said case and that even the appeal of the Revenue had also been dismissed.
14. In view of our findings given above, we do not find any reason to disturb the factual findings given by the Ld. CIT(A) on this issue and the same is accordingly upheld.
In the result, the appeal of the Revenue is hereby dismissed.
C.O. No. 50/Chd/2017:
15. The assessee vide its cross objections has agitated the action of the CIT(A) in sustaining the part of the addition made by the Assessing officer on the above issues.
16. However, in view of our findings given above, since we have upheld the order of the CIT(A), hence, the Cross objections of the assessee are hereby dismissed.
In the result, the appeal of the Revenue as well as the cross objections of the assessee are hereby dismissed.
Order pronounced in the Open Court on 08.02.2019.
Sd/- Sd/-
(अ नपण
ू ा ग&ु ता / ANNAPURNA GUPTA) (संजय गग / SANJAY GARG)
लेखा सद य/ Accountant Member या यक सद य/ Judicial Member
Dated : 08.02.2019
"आर.के."
आदे श क! त-ल.प अ/े.षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय0 ु त/ CIT
4. आयकर आय0 ु त (अपील)/ The CIT(A)
5. .वभागीय त न3ध, आयकर अपील&य आ3धकरण, च5डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar