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2018 (6) TMI 1034 - AT - Income TaxRectification of mistake - adjustment made under Section 115JB in respect of provision for doubtful debts - debatable issue - Held that - In the case of CIT v. Indian Petrochemicals Corpn. Ltd. 2016 (9) TMI 110 - GUJARAT HIGH COURT rejected the Revenue s appeal involving a question of adding back provision for doubtful debts in terms of section 115JB, holding that if provision is obliterated from accounts, it would amount to write-off and such actual write-off would not hit by clause(i) of Explanation 1 to section 115JB of the Act. Thus the assessee should succeed on merits - the issue as to whether the provision for doubtful debts debited to Profit and Loss Account and reduced from debtors account at the end of the year tantamount to write-off of debt is highly debatable and this can only be arrived after a long drawn process of reasoning and it is not an obvious and patent mistake apparent on record. Hence, we direct the Assessing Officer to delete the adjustment made under Clause (i) of Explanation 1 to Section 115JB in respect of provision for doubtful debts computed while passing the order u/s. 154 of the Act. - Decided in favour of assessee.
Issues:
Appeal against order of Commissioner of Income Tax (Appeals) -4, Mumbai for Assessment Year 2009-10 under section 154 of the Act. Analysis: 1. The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) -4, Mumbai for the Assessment Year 2009-10 arising from the order passed by the Assessing Officer under section 154 of the Act. The grounds raised by the assessee included issues related to the treatment of bad and doubtful debts, provision for doubtful debts, and the computation of business income under section 36(1)(vii) of the Act. 2. The facts revealed that the Assessing Officer disallowed certain amounts during the assessment, and subsequently, under section 154 of the Act, made adjustments including disallowance of provision for doubtful debts. The assessee contended that the provision for doubtful debts should have been allowed as a deduction under section 36(1)(vii) of the Act based on the decision of the Hon'ble Supreme Court in a specific case. 3. The Commissioner (Appeals) held that the Assessing Officer rightly rectified the apparent mistake by adding back the provision for doubtful debts. The assessee argued that the issue of whether the provision was made for doubtful debts or write off was debatable, citing the Supreme Court's decision. The assessee provided evidence to support that the provision was debited to the Profit and Loss Account and reduced from debtors' accounts, satisfying the conditions laid down by the Supreme Court. 4. The counsel for the assessee reiterated the submissions made before the lower authorities, emphasizing that the issue was debatable and outside the scope of section 154 of the Act. The counsel relied on various decisions to support the contentions made regarding the treatment of doubtful debts and write-offs. 5. After considering the submissions and case laws, the Tribunal found that the assessee had followed the prescribed procedure as per the Supreme Court's decision, and the provision for doubtful debts was effectively a write-off of debt. The Tribunal also noted that the issue was highly debatable and not an obvious mistake apparent on record. Consequently, the Tribunal directed the Assessing Officer to delete the adjustment made under Clause (i) of Explanation 1 to Section 115JB of the Act regarding the provision for doubtful debts. 6. Ultimately, the Tribunal allowed the appeal of the assessee, emphasizing that the treatment of provision for doubtful debts as a write-off was in line with legal precedents and the issue was indeed debatable, warranting the deletion of the adjustment made by the Assessing Officer under section 154 of the Act. 7. The Tribunal's decision was based on the interpretation of legal provisions, relevant case laws, and the specific facts and circumstances of the case, ensuring that the assessee's rights were upheld in the matter of the treatment of bad and doubtful debts for the Assessment Year in question.
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