Income Tax Appellate Tribunal - Jaipur
Late Surendra Kumar Bansal T/H Legal ... vs Assistant Commissioner Of Income Tax, ... on 6 February, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM
vk;dj vihy la-@ITA No. 730/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2013-14
Late Surendra Kumar Bansal cuke ACIT,
Through legal Heir Smt. Saroj Bansal Vs. Circle-1
D-14, Bansal Villa, Path No. 03, Jaipur.
Jamna Nagar, Behind Petrol Pump,
Sodala, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACGPB4341M
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Shri Tanuj Agrawal (Adv.)
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl. CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 31/01/2018
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 06/02/2018
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 26.07.2017 of CIT (A), Jaipur for the A.Y. 2013-14. The assessee has raised the following grounds as under:-
"1 That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining a disallowance of Rs. 3,54,212/- on account of bad debts claimed u/s 36(1)(vii) of the Income Tax Act, 1961, thereby ignoring the judgment of Hon'ble Supreme Court in the case of TRF Ltd. vs. CIT [2010] 190 Taxman 391(SC).ITA No. 730/JP/2017
Late Surendra Kumar Bansal vs. ACIT
2. That the humble appellant craves leave to add, amend, alter, modify, substitute or delete any ground or grounds of appeal on or before the hearing of the appeal."
2. During the year under consideration the assessee claimed bad debts written off Rs. 7,27,022/- however, the Assessing Officer made a disallowance of Rs. 3,54,212/- on the ground that he had written off the amount of 01.09.2012 just after survey carried out u/s 133A in the case of the assessee on 30.08.2012. The assessee challenged the action of the AO before the ld. CIT(A) but could not succeed.
3. Before us, the ld. AR of the assessee has submitted that during the year under consideration the assessee written off debts as bad and irrecoverable to the extent of Rs. 7,27,022/- out of which the AO allowed the claim to the extent of Rs. 3,72,880/- and balance of Rs. 3,54,2012/- was disallowed on the ground that the amount was written off on 01.09.2012 without waiting for the financial year to end. The ld. AR has referred to the amount of debts in respect of the four parties and submitted that the assessee has explained the reasons for treating the said outstanding amount as bad and not recoverable as under:-
S.No. Name of Debtor Amount Reasons for bad debts given by appellant to AO (Rs.) (also reproduced at page no. 2 &3 of the assessment order) 2 ITA No. 730/JP/2017 Late Surendra Kumar Bansal vs. ACIT 1 Radhika Cloth Store 87,295 Cheque received from party was dishonoured and amount no longer recoverable.
2 Bombay Textiles 45,112 Goods were returned on 23.12.2010. No goods sold thereafter and party denied payment for balance money.
3 Sagar Garments 1,88,060 Parcel of goods lost and payment was not made by this party. No further sales to this party and balance could not be recovered.
4 Girraj Saree Centre 33,675 Some goods were returned in preceding year and party informed for loss of some goods and payment of balance money was also denied. No further sales to this party.
Total 3,54,142/-
Thus, the ld. AR has submitted that when the cheques received from the party got dishonoured and the assessee had no further transaction with any of the parties then, the claim of the assessee cannot be disallowed on the ground that the assessee has written off the amount as on 01.09.2012 without waiting till the end of the financial year. In support of his contention he has relied upon the decision of Hon'ble Supreme Court in case of TRF Ltd. vs. CIT 190 taxman 391. The ld. AR has also referred to the CBDT Circular No. 12/2016 dated 30.05.2016 and submitted that the CBDT has clarified that in view of the decision of Hon'ble Supreme Court in case of TRF the claim of debt shall be admissible u/s 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of accounts of the assessee in the previous year and it fulfills the conditions stipulated in sub-section (2) of Sub-section 36 of the Act.3 ITA No. 730/JP/2017
Late Surendra Kumar Bansal vs. ACIT Hence, the ld. AR has submitted that once the assessee has written off this amount and satisfy the condition as prescribed u/s 36(2) of the Act then, the claim of the assessee of bad debts cannot be denied.
4. On the other hand, ld. DR has relied upon the order of the authorities below and submitted that the decision of written off the debts in respect of the four parties is not a proper and honest decision of the assessee but to avoid the tax liability as the assessee has written off the debts just after survey conducted on 30.08.2012. He has relied upon the orders of the AO and the ld. CIT(A).
5. We have considered the rival submissions as well as relevant material on record. During the year under consideration the assessee written of the total debits of Rs. 7,27,022/- as bad and claimed the deduction u/s 36(1)(vii) of the Act. The AO allowed the claim of the assessee in respect of the other debts written off except four party, the details of which have been produced in the earlier part of this order. The only reason for disallowance made by the AO is that the assessee has written off the debts of these four parties on 01.09.2012 just after the survey carried out u/s 133A on 30.08.2012. The Assessing Officer has not disputed the facts that these amounts represents as written off by the assessee gone bad and irrecoverable on the reasons as given in 4 ITA No. 730/JP/2017 Late Surendra Kumar Bansal vs. ACIT the reply filed before the AO. We note that in case of Radhika Cloth Store the cheque issued by the said party got dishonoured in case of second party in the table the amount represents goods sold to Bombay Textiles and were return on 23.12.2010 and thereafter no goods were sold to the said party. In case of Sagar Garments the goods sold were lost in transit and therefore, the said parties has not paid the amount. In case of Girraj Saree Centre the amount is regarding goods returned in the preceding year and other were reported as lost and therefore, the payment was not made by the said parties. It is also not disputed by the AO that after the written off the debits in respect of these four parties there is no business transaction between the assessee and these parties. Hence, the assessee has written off debts as gone bad and irrecoverable and the condition u/s 36(2) is also satisfied then the claim of deduction u/s 36(1)(vii) cannot be denied. The Hon'ble Supreme Court in case of TRF Ltd. vs. CIT (Supra) has held that post amendment of section 36(1)(vii) w.e.f. 01.04.1989 what is required for claim of deduction in respect of bad debts is that the bad debts is written off irrecoverable and there is no necessity for the assessee to establish that the debt has become irrecoverable. Therefore, the decision of the assessee to write off the debts as irrecoverable cannot be questioned if 5 ITA No. 730/JP/2017 Late Surendra Kumar Bansal vs. ACIT the other conditions are satisfied being the amount was considered as the income in the previous year or in the earlier year as per section 36(2) of the Act then the AO has to allowed the claim of deduction until and unless the decision of writing of the debts is not an honest decision and is only a device to avoid the tax. The CBDT circular No. 12/2016 also clarified this position as under:-
"3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debit by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reasons that the debit has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. in CA Nos. 5292 to 5294 of 2003 vide judgment dated 9-2-2010, has stated that the position of law is well settled. "After 1-4-1989, for allowing deduction for the amount of any bad debit or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debit, in fact has become irrecoverable; it is enough if had debit is written off as irrecoverable in the books of account of assessee."
4. In view of the above, claim for any debt or part thereof in any previous year, shall be admissible under section 36(1(vii) of the Act, if it is written off as irrecoverable in the books of account of the assessee for that previous year and it fulfills the conditions stipulated in sub-section(2) of Sub-section36(2) of the Act.
5. Accordingly, no appeals my henceforth be filed on this ground and appeals already filed, if any, on this issue before various courts/Tribunals may be withdrawn/not pressed upon." 6 ITA No. 730/JP/2017
Late Surendra Kumar Bansal vs. ACIT In view of the above facts and circumstances of the case as well as the decision of Hon'ble Supreme Court in case of TRF Ltd. vs. CIT(supra) as well as CBDT Circular No. 12/2016 we are of the considered opinion that the assessee has satisfied the conditions as provided u/s 36(1)(vii) as well as section 36(2) of the Act and therefore, the claim of bad debts is allowable deduction. Accordingly we set aside the orders of the authorities below qua this issue and allowed the claim of bad debts.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 06/02/2018 Sd/- Sd/-
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(Bhagchand) (Vijay Pal Rao)
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MemberTk;iqj@Jaipur
fnukad@Dated:-06/02/2018.
*Santosh.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Late Surendra Kumar Bansal, Jaipur.
2. izR;FkhZ@ The Respondent- ACIT, Circle-1, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 730/JP/2017} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 7