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2023 (11) TMI 29 - AT - Income TaxRevision u/s 263 - Provision for bad debts/ Bad-debts - As per CIT AO has not gone through into the write off of Desire Pen and Stationery where even the PAN number is not given by the assessee-company - HELD THAT - Hon ble Supreme Court in the case of TRF Ltd 2010 (2) TMI 211 - SUPREME COURT has stated that the position of law is well settled After 1 April 1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debt in fact has become irrecoverable, it is enough if bad debt is written off as irrecoverable in the books of accounts of assessee . Therefore, we note that assessing officer has taken a possible view to allow this claim, therefore order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue so far issue of bad debts is concerned. Examine the new issue - Additions to the fixed assets during the financial year which have been shown along with work in progress - From the above judgment of Amitabh Bachchan 2016 (5) TMI 493 - SUPREME COURT it is vivid that what is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. We note that to examine the new issue, namely, the additions to the fixed assets, the ld PCIT has issued notice to the assessee, u/s 263 - In compliance to the said notice, the assessee has replied, however, PCIT did not consider the reply of the assessee at all, and ignored the reply of the assessee. Therefore, without giving an opportunity of hearing to the assessee, ( in respect of said new issue) the CIT has passed the order, hence order passed by the ld PCIT is not in accordance with the mandatory provisions of section 263 of the Act, therefore we quash the order of ld PCIT. Appeal filed by the Assessee is allowed.
Issues Involved:
1. Jurisdictional conditions for invoking Section 263. 2. Examination of bad debts/provision for bad debts. 3. Verification of additions to fixed assets. Summary: 1. Jurisdictional Conditions for Invoking Section 263: The assessee challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax (Ld. PCIT) under Section 263 of the Income Tax Act, 1961, arguing that the jurisdictional conditions of "erroneous" and "prejudicial to the interest of the revenue" were not satisfied. The Tribunal noted that the Ld. PCIT must demonstrate how the assessment order was erroneous and caused a loss to the revenue. 2. Examination of Bad Debts/Provision for Bad Debts: The Ld. PCIT questioned the allowance of bad debts amounting to Rs. 2,31,18,532/- without proper verification by the Assessing Officer (AO). The Tribunal observed that the AO had issued a notice to the assessee and received a reply, thus examining the issue. The Tribunal cited CBDT Circular No. 12 of 2016 and the Supreme Court judgment in the case of TRF Ltd., which stated that it is sufficient for the assessee to write off bad debts in the books of accounts. Therefore, the Tribunal concluded that the AO's decision to allow the bad debts was a possible view and not erroneous or prejudicial to the interest of revenue. 3. Verification of Additions to Fixed Assets: The Ld. PCIT raised an issue regarding discrepancies in the additions to fixed assets reported in the annual report and the Income Tax Return (ITR). The Ld. PCIT issued a notice to the assessee on 29.03.2023, and the assessee replied on 30.03.2023. However, the Ld. PCIT did not consider the assessee's reply and passed the order on 31.03.2023. The Tribunal highlighted the violation of the principle of natural justice, as the Ld. PCIT did not provide an opportunity of hearing to the assessee. The Tribunal referred to the Supreme Court judgment in the case of Amitabh Bachchan, which emphasized the necessity of providing an opportunity of hearing during revision proceedings under Section 263. Consequently, the Tribunal quashed the order passed by the Ld. PCIT for not adhering to the principles of natural justice. Conclusion: The Tribunal allowed the appeal filed by the assessee, quashing the order passed by the Ld. PCIT under Section 263 of the Income Tax Act, 1961. The Tribunal emphasized the importance of following the principles of natural justice and the necessity for the Ld. PCIT to provide an opportunity of hearing to the assessee before passing an order. The order was pronounced on 16/10/2023 in the open court.
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