Income Tax Appellate Tribunal - Ahmedabad
Dcit, Circle-11,, Ahmedabad vs P. Gautam & Co.,, Ahmedabad on 8 December, 2016
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'बी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" B " BENCH, AHMEDABAD
सव ी राजपाल यादव, या यक सद य एवं द प कुमार के डया, लेखा सद य के सम ।
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
And SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
1. आयकर अपील सं./I.T.A.No.1689/Ahd/2013
2. आयकर अपील सं./I.T.A. No.1810/Ahd/2013
( नधा रण वष / Assessment Year : 2009-10)
1. M/s.P.Gautam & Co. बनाम/ 1. The ACIT
C/o. Vinod & Narendra Vs. Range-11
101/102, "Shaily" Ahmedabad
9, Nehru Park Soc.
Nr.Old Guj.High Court
Navrangpura,
Ahmedabad
2. The ACIT 2. M/s.P.Gautam &
Range-11 Co.
Ahmedabad Ahmedabad
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AACFP 2004 M
(अपीलाथ% /Appellants) .. ( &यथ% / Respondents)
Assessee by : Shri Jyotish M.Shah, AR
Revenue by : Shri James Kurian, Sr.DR
ु वाई क) तार ख /
सन Date of Hearing 08/11/2016
घोषणा क) तार ख /Date of Pronounce ment 08/12/2016
आदे श / O R D E R
PER PRADIP KUMAR KEDIA, AM:
These two appeals by the Assessee and Revenue are directed against the common order of the Commissioner of Income-tax(Appeals)-
ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10 -2- XVI, Ahmedabad [CIT(A) in short] dated 29/04/2013 passed for Assessment Year (AY0 2009-10.
2. First, we shall take up the Revenue's appeal in ITA No.1810/Ahd/2013, wherein following ground has been taken by the Revenue:-
(1) The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of credit notes of Rs.18,93,666/-, which was claimed on provisional basis, without considering the fact that provision for credit notes is a contingent liability and not allowable on accrual basis.
3. At the time of hearing, it was submitted by the Ld.AR for the assessee that appeal filed by the Revenue is hit by CBDT Circular No.21 of 2015 dated 10/12/2015. As per aforesaid Circular, all pending appeals filed by Revenue are liable to be dismissed as a measure for reducing litigation where the tax effect does not exceed the prescribed monetary limit which is Rs.10 lakhs. In the instant case, the tax effect on the disputed issue raised by the Revenue is less Rs.10 lakhs and therefore appeal of the Revenue is required to be dismissed in limine.
4. The Ld.DR for the Revenue fairly admitted the applicability of the CBDT Circular No.21 of 2015. Accordingly, appeal of the Revenue is dismissed as not maintainable. However, it will be open to the Revenue ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10 -3- to seek restoration of its appeal on showing inapplicability of the aforesaid CBDT Circular in any manner.
5. In the result, the appeal of the Revenue is dismissed.
6. Now, we take up the Assessee's appeal in ITA No.1689/Ahd/2013. The Assessee has raised the following grounds of appeal:-
I) Disallowance & enhancement of Bad debt claim
a) The Commissioner of Income Tax (Appeals)XVI, Ahmedabad erred in not only confirming disallowance of bad debt Rs.2,58,046/- made by Jt.Commissioner of Income Tax, but enhanced the said amount to Rs.11,14,090/-, holding that amount claimed as bad debts do not wholly fall in the category of bad debts defined u/s.36(1)(VII)/36(2).
b) The Commissioner of Income tax (Appeals)XVI, Ahmedabad erred in disallowing & enhancing the disallowance relying on judgments of High Court and Tribunal, holding that it is mandatory upon the tax payer to file all the details in support of its claim of bad debts.
c) The Commissioner of Income tax (Appeals)XVI, Ahmedabad erred in disallowing and enhancing the claim of bad debt without considering submission in its proper perspective that debt is created and income is accounted and what is written off is said debt as bad debt.
d) The action of Commissioner of Income Tax (Appeals) to disallow and enhance the disallowance of bad debt is unjustified and bad in law.
ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10 -4- II) The Commissioner of Income Tax (Appeals) erred in confirming charge of interest u/s.234-B Rs.342063/- & u/s.234-C Rs.33654/- holding that they are automatic.
7. Briefly stated, the assessee is stated to be an advertising agent and release advertisements on behalf of clients as per their order in newspapers, magazines, radio and outdoor holdings. The assessee is also catering multi-media services including services of bulk SMS, Website developing, Web promotion and event management. During the year, the assessee has written off bad debt amounting to Rs.25,80,457/- comprising of short payments, bills twice time raised, new bills raised against old bills, advertisements cancelled and payments of receivable refused by customers etc. The Assessing Officer (AO) was not satisfied with the genuineness of the claim of bad debt and accordingly rejected the claim of bad debt estimated at 10% of the gross amount and accordingly disallowed Rs.2,58,046/- out of the total bad debt claim. In the first appeal by the assessee, the CIT(A) however felt that an amount of Rs.11,14,090/- being aggregate of short payments, bills raised twice, new bills raised against old bills and bad debt on account of advertisement cancelled etc. do not qualify as bad debt under section 36(1)(vii) r.w.s. 36(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). He, thus, opined that the disallowance towards bad debts ought to have been at an enhanced figure of Rs.11,14,090/- instead of Rs.2,58,046/- estimated by AO. He accordingly issued show-cause ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10 -5- notice for enhancement of disallowance of bad debt to Rs.11,14,090/- and thereafter in its appellate order rejected the bad debt claim at enhanced figure of Rs.11,14,090/-. The relevant extract of the order of the CIT(A) in this regard is reproduced hereunder:-
"4.2 I have carefully considered the facts of the case and the submissions made by the appellant. The controversy at hand is as to whether the amount of Rs. 2,58,046/- added by the A O on account of bad debts is a legally correct action or not. While analysing the submissions made by the appellant, it was noted that the A O had actually erred in making the correct amount of addition on account of inadmissible bad debts. It was noted that owing to the facts of the case, the amount of bad debts which was liable to be added was higher than the one added by the A O. It was seen that the amounts claimed by the appellant as bad debts u/s. 36(i)(vii) were not strictly falling within the realm of said section. Consequently, a notice of enhancement dated 27-6-2012 was issued to the appellant which is reproduced hereunder:- ' ".... Please refer to the appeal No. ClT(A)-XWJt. CIT. R.11/431/11-12 in your case for the A.Y. 2009-10. Perusal of the assessment order u/s. 143(3) dated 19-12-2011 passed by Jt CIT, Range-11, A'bad indicates that during the year under consideration you have claimed bad debts amounting to Rs. 25,80,457/-. (Reference also to Schedule K of your P & L Account for year ending 31-03-2009). After considering the explanations tendered by you, the A.O. disallowed an amount of Rs. 2,58,0457- being 10% of the total claims made by you.
2. Reference to your pending appeal before undersigned, you have contested the above disallowance made by the A.O. on justification tendered through your written submissions hitherto filed in this office. Thus, you have classified your total claim of bad debts aggregating to Rs. 26,07,595/-as under:-
Sr No Particulars of bad debt Amount Rs. Justification for claim ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10 -6- 1 Short payment 3,85,158/- The case where short payment is received by clients and balance amount not paid inspite of persuasions Rs. 3,85,158/-
2. Bills twice time raised 27,351/- Bills twice raised Rs. 27,351/-
3. BNew bill raised against old 1,64,861/- When new bills are issued bill against old bills. When clients inform that the old bills are not received by them Rs. 1,64,862/-
4 Advertisement cancelled 5,36,720/- On account of some fast minute development, advertisement are not released in the Media of those clients Rs. 5,36,720/-
5 Refused payment 74,93,505/- In certain cases clients refuses to make payments fully Rs. 74,93,505/-
3. During the course of appellate proceedings, your A.R. have also orally reiterated your above claims and justifications of bad debts.
4. Perusal of your above claims however indicate that the entire amounts of bad debts claimed by you, with reference to submissions made and justifications hitherto offered do not fall within the meaning of section 36(i)(vii) r.w.s. 36(2) of the I T Act.
Thus, your claim of bad debt, disallowed by A.O. at 10% amounting to Rs. 2,58,046/-, on estimation basis, deserves to be enhanced by disallowing an amount higher than the one disallowed by the A.O.
5. You are therefore, requested to please explain as to why not the claim of bad debt amounting to Rs. 25,80,457/- is accordingly restricted and such excess disallowed amount added back to your total income for the year under consideration.
ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10 -7- Since, the disallowance of excess claim, amounts to enhancement of income, this show cause notice is issued to you. Your explanation to this show cause notice should be received in my office latest by 16-07-2012 i.e. the next date of scheduled hearing....."
In response to the reply of the appellant dated 7-7-2012, another show cause for enhancement was issued on 20-3-2013 which is reproduced hereunder :-
"......Please refer to appeal No.CIT(A)-XVI/Jt.R.11/431/11-12 in your case for the A.Y.2009-10. and notice of enhancement of income dated 27/06/2012. In response you have filed reply dated 7/7/2012 through tapal on 16/07/2012. Contesting your proposed enhancement of income It has been , inter alia, indicated therein that the show cause notice does not mentions the amount of enhancement as well as debts in respect of which enhancement is required to be now made.
2 As per details hitherto filed by you against total claim of bad debts made by you of Rs 26,07,595/-, amounts of Rs 3,85,758/-, Rs.27,351/- , Rs 7,64,867/-, and Rs. 5,36,720/- cumulatively aggregating to Rs 11,14,090/- pertain to short payments received, bills twice time raised, new bills raised against old bitl and advertisement cancelled respectively. Section 36(1) (vii) of IT Act provides that bad debts can be allowed subject to satisfaction of conditions laid therein. Honourable apex court in the case of TRF Ltd has also held that bad debts can only be allowed subject to satisfaction of conditions laid down under Section 36(1) (vii) of IT Act. Details hither to filed by you indicate that the above amounts of monies with respect to nature of transactions indicated therein do not qualify as bad debts under Section 36(1) (vii) of IT Act and hence cannot be allowed as a deduction under the said section.
3 Accordingly you are requested to explain why the amount of Rs 11,14,090/- be not added to your income for the year under consideration and your income be enhanced.
Your reply on the above matter should reach this office positively by 30.03.2013 failing which it be safely presumed that you have nothing to say on the matter and the pending appeal shall be decided on the basis of material currently available on records. For your immediate ready reference a formal notice of hearing is also enclosed here with....."
4.3 The appellant has objected to proposed enhancement of his income on the plea that its claim of bad debts is resting on firm legal grounds. In support of its ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10 -8- contentions, the appellant has relied upon decision of Hon'ble Apex Court in the case of TRF Limited 323 ITR 397.
4.4 section 36(1)(vii) of the Act provides for claim of deduction in respect of an amount of bad debt which is written off as irrecoverable in his accounts by an assessee. Section 36(2) provides that the amounts claimed as bad debt must have been disclosed as income in a preceding year. In the instant case, the appellant has, inter alia, claimed deduction on account of bad debts in respect of head of accounts named as 'short payment', 'bills twice times raised', 'new bills raised against old bills' and 'advertisement cancelled' aggregating to Rs. 11,14,090/-, It is seen that the.. very nomenclature of this accounts do not fall in the category of bad debts. Bills twice times raised and new bills raised against old bills are explained as amounts where the original bills were lost and duplicate bill were issued. Similarly, short payments are explained as amounts received in respect of bills where the full billed amounts were not paid by the party. Again, advertisement cancelled are explained as transactions where the parties who had earlier ordered for release of certain advertisement, indulge in last minute cancellation. The central point which is noteworthy in all these transactions is that they are not in the nature of bad debts defined u/s. 36(1)(vii) rws 36(2). The amounts claimed by the appellant are more in the nature of discount, trade losses etc. but do not qualify as bad debts. Section 36(1)(vii) rws 36(2) primarily addressed to a situation where an amount of sales booked in a particular year remained outstanding and the party or the debtor failed to pay the same on account of his insolvency or otherwise. Amounts of monies representing cancelled orders, twice bills / or new bills raised etc do not fall in this category. Hon'ble Apex Court in the case of TRF Ltd have also held that the claim of bad debt has to be allowed provided conditions of section 36(1)(vii) / 36(2) are satisfied. In the instant case, the amounts claimed as bad debts do not wholly fall in the category of bad debts defined u/s. 36(1)(vii) / 36(2). It is pertinent to point out that Hon'ble Kerala High Court, on the issue of admissibility of claim of bad debts u/s. 36(1)(vii), in the case of Sampanna Kuries Pvt Ltd vs DCIT 206 Taxman 57 Ker 2012 have observed as under :-
".....The appellant is engaged in kurry business and the assessment involved is for the year 1995-96. The assessee returned a net income of Rs. 1,00,550/- after claiming deduction of Rs. 3,69,5507- towards bad debt written off. Though the Assessing Officer allowed the claim, the Commissioner of Income Tax perused the records and noticed that the bad debt did not represent debts which had become irrecoverable or written off as bad debt in the accounts for the previous year relevant for the assessment yean He, therefore, declared the assessment as prejudicial to the interest ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10 -9- of the Revenue and directed revision of the same. It is against this order of the Commissioner assessee filed appeal before the Tribunal., The Tribunal through a detailed order held that the assessee had neither written off the debt by debiting the Profit and Loss Account nor is there anything to indicate that the debts had become irrecoverable which were still shown as payable by the debtors in the accounts of the assessee. What is clear from the finding of all the authorities is that the amounts remaining as debt due from the various subscribers who have got the chitty price amount, is claimed by the assessee as bad debt. Since on facts the Tribunal found that there is no write off of bad debt while finalising the accounts for the relevant previous years, the Tribunal did not go into the question as to whether the debts had become irrecoverable. It is against this order of the Tribunal assessee has come up in appeal before us.
3. Before us Senior counsel has relied on the decision of the Delhi High Court in CIT v. Global Capital Ltd. [2008] 306 /TR 332 and that of the Patna High Court in Lawlys Enterprises (P.) Ltd. v. CIT [2009] 314 ITR 297 wherein both the High Courts have held that in order to claim deduction under Section 36(1)(vii) under the amended provisions after 1st April, 1989, the assessee need not prove debt as irrecoverable or bad, but it is enough the assessee writes off the debt. Section 36(1)(vii) provides for write off of bad debt that has become irrecoverable. In our view, the qualifying terms of debt, both bad and doubtful have got definite meaning and content, the scope of which is not considered in the above decisions. The High Courts of Delhi and Patna seem to have been influenced by the deletion of the words "established to have become bad debt in the previous year" from the Section. In our view, even after deletion of these words, the Section makes it clear that the debt to be written off should be irrecoverable. We do not know how a debt that is recoverable, particularly debts of chitty companies which are covered by adequate security, can be written off when debt could be easily recovered by resort to legal process. In any case we do not think there is any need to consider whether we agree with the view expressed by the two High Courts in the above two decisions in this case because on facts the Tribunal has found that the appellant has not written off the bad debts by debiting the Profit and Loss Account. On the other hand the finding of the lower authorities including the Commissioner is that the amounts claimed as bad debt are still shown in the accounts of the debtors and so much so, the appellant-assessee has not written off bad debt entitling him to claim deduction.
4. Assessee 's counsel contended before us that/writing off of bad debt in the Profit and Loss Account is not a mandatory requirement for claiming deduction of bad debt. We are unable to accept this proposition because Profit and Loss Account is the final ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10
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computation of profit made by the assessee based on which assessment has to be made. Unless bad debt is written off by debiting the Profit and Loss Account which necessarily means that the debtors' account should be credited or so much of the amount debited in the Profit and Loss Account should be written off from amount due from the debtors, the writing off as contemplated under Section 36(1)(vii) is not satisfied. Even though counsel for the appellant-assessee contended that when bad debt is recovered, there is provision for assessment of the same under Section 41, we do not think such a safety provision will entitle the assessee to claim bad debt as a deduction without satisfying the conditions contained in Section 36(l)(vii) of the Act. We, therefore, dismiss the appeal as devoid of any merit....."
4.5 Similarly, Hon'ble ITAT, Hyderabad in the case of Natco Pharma Ltd vs DCIT 140 ITD 502 (Hyd) observed as under :-
".....We have heard both the parties and perused the material on record. There is an amendment to the provisions of section 36(1)(vii) of the Act w.e.f. 1.4.1989 applicable to the A.Y. 1989-90 thereby claim of bad debts or part thereof has to be allowed for and from the A.Y. 1989-90 in the year in which such bad debts or part thereof has been actually written off as irrecoverable in the accounts of the assessee for the relevant previous year. The assessee plea before us that the impugned debt had actually been written off in the books of account of the assessee. Effect of the said amendment is that it is not necessary for the assessee to establish that a debt had become bad in the previous year, before getting deduction, and mere write off as irrecoverable of debt or part thereof is substantial compliance with the provisions of section 36(1)(vii) of the Act. The question is, if the said entry of write off of bad debts or part thereof made in the books of account is conclusive and Assessing Officer is precluded from making enquiries, before receiving/accruing the deduction under the scheme as provided for under the Income-tax Act, entries which have been made as to whether the same are genuine entries or imaginary and fanciful entries, qua the same the Assessing Officer is fully empowered to make enquiry, however, wisdom of the assessee cannot be in such manner questioned and no demonstrative or infallible proof of bad debt having become bad is required, and commercial expediency is to be seen from the point of view of the assessee, depending on the nature of transaction, capacity of debtor, etc., but qua entry, semblance of genuineness has to be there and the same should not be mere paper work. All the citations put before us by the assessee's counsel wherein genuineness of the entries was never doubted therein, wherein in case any specific doubt has been expressed by the lower authorities regarding genuineness thereby required to furnish by the assessee i.e., (a) complete name and address of the persons, (b) ledger accounts of these persons and (c) efforts ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10
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made to realised the dues. It is a fact that queries by the Assessing Officer were not properly addressed by the assessee and requisite information was not furnished. The only plea made by the assessee is that the debt has been written off in the books of account and no further proof is required. U/s. 143(2) of the Act the Assessing Officer is empowered to require the assessee to produce the evidence in support of the return, as such where the assessee has claimed as bad debt or part thereof .written off as irrecoverable in the accounts of the assessee under the provisions of section 36(1)(vii) of the Act, then on the strength of the amendment made on April 1, 1989, it cannot be said that an inquiry is not permissible under the provision of the Income- tax Act to see and satisfy that there is some semblance of the genuineness in the entry, which had been made, the same is not at all totally fake entry as the assessee would be entitled for deduction only if it is bad debt, or part thereof. The Hon'ble apex Court in the case of Travancore Tea Estates Co. Ltd. v. CIT [1999] 233 ITR 203 has taken the view, that as to whether a debt has become bad or at what point of time if became bad, are pure questions of fact. Though standard of proof of proving the same as bad debt, is not required to be adopted and is to be decided on the wisdom of the assessee and not on the wisdom of AO, but to show that entry which had been made as bad debt there has to be some material in support of the same, giving some semblance of genuineness and truthfulness to the same in the direction of forming opinion, that said debt was arising out of trading activity, there was relationship of debtor or creditor, same was irrecoverable. Merely because entries have been made, in respect of bad debt or part thereof, writing it off, claiming deduction, the said entries can always be examined by the AO, before proceeding to award deductions, and not by merely blindly following the same, but stand of the assessee has to be tested from the point of view of assessee, and assessee cannot come forward and say that on account of change brought in by way of amendment w.e.f. 1st April, 1989, under s. 36(1)(vii) inquiry is not permissible.
18. Thus, as it is evident from the provisions of section itself, the Assessing Officer as well as the appellate authority have examined the claim of the assessee and held that the assessee has failed to prove that the debt in question had actually become irrecoverable during the previous year in question. The assessee only furnished list of debts and the details called for by the authorities have not been furnished. The claim of the bad debts has been disallowed by considering the material on record by finding as a fact that the debt has not been proved as bad debt. Even otherwise as held by the jurisdictional High Court in the case of Sirpur Paper Mills (supra) only the debt which constitutes trade debt could be claimed as bad debt if it is irrecoverable. In the present case it is observed by the flower authorities that the debts which were written ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10
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off were not trade debts as seen from para 13.2 of the CIT(A) order. Accordingly, we confirm the order of the CIT(A) on this issue...."
4.6 An upshot of above cited decision is that it is mandatory upon the tax payer to file all the details in support of its claim of bad debts and that the same cannot be allowed as a matter of routine. It is accordingly held that the appellants claim of bad debt to the extent of Rs.11,14,690/- remains in admissible within the meaning of section 36(1)(viii) rws 36(2) of the Act. Consequently, the amount of Rs. 2,58,046/- added by the AO on account of bad debts is enhanced to Rs. 11,14,090/-. The ground of appeal raised by the appellant is therefore dismissed and the income of the appellant accordingly is enhanced."
8. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal.
9. The Ld.AR for the assessee reiterated the submissions made before the CIT(A) and submitted that having regard to the nature of business of the assessee, failure to recover some amount receivable from the customers and other incidental claim towards short payment and cancellation of advertisement etc. is a normal incident. The Ld.AR for the assessee submitted that the bad debt claim had been rejected by the CIT(A) in contravention of the long line of judicial precedents quoted before him without any sound basis. The Ld.AR simultaneously submitted that the relevant details of the bad debts have been submitted by way of paper-book before the Tribunal which were also submitted before the lower authorities. In the circumstances, the action of the CIT(A) in making enhancement instead of granting relief pleaded before ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10
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him is opposed to the facts as well as law. He accordingly pleaded for suitable relief.
10. The Ld.DR on the other hand relied upon the order of the CIT(A).
11. We have carefully considered the rival submissions and perused the orders of the authorities below as well as the case-laws referred to the lower authorities. The substantive issue involved in the present case is allowability of bad debts in terms of section 36(1)(vii) r.w.s. 36(2) of the Act. We note that the AO has resorted to estimate disallowance of bad debt at Rs.2,58,046/- being 10% of the total bad debts claimed. We totally fail to understand the rationale for such estimation. Clearly, the AO has acted in a non challant and mechanical manner without any accord with the purport of the provisions of section 36(1)(vii) r.w.s.36(2) of the Act. The allowance for bad debt is either allowable or not allowable based on evaluation of facts objectively. There is no scope for estimation for determining eligibility of such claims. Such uncalled for action cannot be thus sustained at all. On facts, the AO has admitted that party-wise break-up of the bad debt has been provided by the assessee for his consideration. The sole basis for rejection of the bad debt is lack of justification towards genuineness of bad claim without any elaboration. The CIT(A), on the other hand, has resorted to enhancement on the ground that requisite details have not been filed. The stand of the AO for disallowance and that of CIT(A) are on a mutually contradictory footing.
ITA No.1689 & 1810/Ahd/2013 (by Assessee and Revenue) P. Gautam & CO. vs. DCIT Asst.Year - 2009-10
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We note that there is no quarrel to the fact that the assessee has written off the debt as irrecoverable in its financial account. It is well settled that the Department cannot insist on demonstrative and infallible proof that a debt has turned bad. There is no requirement in law for the assessee to establish that the impugned debt in fact has become bad in the view of the decision of the Hon'ble Supreme Court in the case of TRF Ltd. vs. CIT (2010) 190 Taxman 391(SC). As per the scheme of the Act, the aforesaid claim of the assessee is admissible for deduction either in the form of bad debt or alternatively in the form of business loss and thus cannot be denied in wholesome without any sound basis. Both the authorities have failed to pinpoint any justifiable cause for drawing adverse inference. Thus, the action of the CIT(A) cannot be validated and requires to be reversed. As a result, appeal of the Assessee is allowed.
12. In the combined result, the appeal of the Assessee is allowed, whereas the appeal of the Revenue is dismissed.
This Order pronounced in Open Court on 8/12/2016
Sd/- Sd/-
(राजपाल यादव) ( द प कुमार के डया)
या यक सद य लेखा सद य
(RAJPAL YADAV) ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 8/ 12 /2016
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
ITA No.1689 & 1810/Ahd/2013
(by Assessee and Revenue)
P. Gautam & CO. vs. DCIT
Asst.Year - 2009-10
- 15 -
आदे श क त"ल#प अ$े#षत/Copy of the Order forwarded to :
1. अपीलाथ% / The Appellant
2. &यथ% / The Respondent.
3. संबं4धत आयकर आयु6त / Concerned CIT
4. आयकर आयु6त(अपील) / The CIT(A)-XVI, Ahmedabad
5. 7वभागीय त न4ध, आयकर अपील य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स&या7पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 7.12.16 (dictation-pad 12- pages attached at the end of this appeal-file)
2. Date on which the typed draft is placed before the Dictating Member ...7.12.16
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......8/12/2016
7. Date on which the file goes to the Bench Clerk.....................8/12/2016
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................