Income Tax Appellate Tribunal - Hyderabad
M/S Eci Engineering And Construction ... vs Department Of Income Tax on 7 November, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" : HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA. No. 1111/Hyd/2014
Assessment Year 2009-2010
DCIT, Circle 2(2) M/s. ECI Engineering and
Hyderabad. vs. Construction Company
Ltd., Hyderabad - 500 089.
PAN AAACE4411G
(Appellant) (Respondent)
For Revenue : Mr. Rajat Mitra
For Assessee : Mr. I. Rama Rao
Date of Hearing : 09.10.2014
Date of Pronouncement : 07.11.2014
ORDER
PER B. RAMAKOTAIAH, A.M.
This is Revenue appeal against the order of Ld. CIT(A)-III, Hyderabad dated 3rd March, 2014 on the issue of allowing the bad debts claimed/advances written off of Rs.30,29,932.
2. Briefly stated, assessee is a company engaged in the business of construction activity. It filed its return of income for A.Y. 2009-10 declaring total income of Rs.32,18,76,958. Assessing Officer completed the assessment under section 143(3) disallowing inter alia, advances written off of Rs. 30,29,932 and bad debts written off of Rs. 8,02,143. A.O. disallowed on the reason that evidence was not provided to show why the advances/ bad debts had been written off. Assessee submitted the details before A.O. which in turn, were 2 ITA.No.1111/Hyd/2014 M/s. ECI Engineering & Construction Co. Ltd., furnished before Ld. CIT(A) also. Ld. CIT(A) considered the facts and the law on the issue and gave relief holding as under:
"5.3. I have seen carefully the facts and evidence. First of all, it is not the case of the A.O. that the advances paid to over 200 people are bogus. The appellant is a civil contract and is running his business in many locations all over the country. It is a fact of business that certain advances have to be paid to various persons. A look at the advances shows that some of them are very petty and are paid to labourers, drivers etcetera. These have also been carried forward in the books of account for many years. The appellant cannot be expected to bring documentary evidence from these persons after so many years regarding their non-return. Moreover, there is no evidence with the A.O. to prove that the advances in question are bogus, especially since they have been given through the books which and in many cases through cash in hand is duly reflected in the books of account.
5.4. With respect to the bad debt, the appellant has provided all possible details of the running account is and has also provided evidence to show that the debt had become non-recoverable as the entity in question had gone insolvent.
5.5. ....
5.6 From the above decision it is clear that the appellant does not have to establish beyond doubt that the debt had indeed become bad. The judgement of the businessman that in its course of business the debt is irrecoverable would suffice. In the present case the assessing officer has not doubted the fact that the debts have been written off in the books of account. He has also not doubted the genuineness of the entries. Therefore, there is no reason to hold that the bad debts written off are not allowable. I am fortified in my view by the decision of the honourable jurisdictional High Court in the case of CIT vs. Sirpur Paper Mills Ltd. 334 ITR 656. Further, in the case of CIT_II vs. Inventa Chemicals, ITA 186 of 2013, the Hon'ble AP High Court has also supported the above view."3 ITA.No.1111/Hyd/2014
M/s. ECI Engineering & Construction Co. Ltd.,
3. Ld. CIT(A) also extracted the operative part of judgment in the case of TRF Limited vs. CIT 323 ITR 397 of the Hon'ble Supreme Court holding that assessee does not have to establish beyond doubt that the debt had indeed become bad. He also followed the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Sirpur Paper Mills Ltd., 334 ITR 656 and CIT-II vs. Inventa Chemicals ITA.No.186 of 2013. Revenue has preferred appeal only on the advances written off stating that advances are not petty whereas, that was major amount ranging upto Rs. 6 lakhs in the case of single party.
4. We have heard the learned D.R. and Ld. Counsel.
5. It is not a case where assessee has not furnished the details before A.O. However, A.O. disallowed on the reason that assessee has not justified why the amounts are written off. Ld. CIT(A) examined the details and found that most of them are advances in the course of business paid over to more than 200 people and since the amounts are written off in the books of accounts they are eligible for deduction. Both on facts as well as on law, order of CIT(A) is to be upheld. There is no merit in Revenue grounds. Accordingly, the same are dismissed.
6. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 07.11.2014.
Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 07th November, 2015. VBP/- 4 ITA.No.1111/Hyd/2014
M/s. ECI Engineering & Construction Co. Ltd., Copy to
1. The Deputy Commissioner of Income Tax, Circle 2(2), Hyderabad.
2. M/s. ECI Engineering and Construction Company Ltd., Plot No.A-12 & A-13, Panchavati Town Ship, Manikonda, Rajendranagar Mandal, Hyderabad - 500 089.
3. Commissioner of Income Tax (Appeals)-III, Hyderabad.
4. Commissioner of Income Tax-II, Hyderabad.
5. D.R. ITAT "B" Bench, Hyderabad