2021 (7) TMI 825 - AT - Income Tax

Undisclosed income - Treating the receipts wrongly appearing in Form 26AS as income of the appellant - As contended by the Ld. Representative of the assessee that the appellant claimed TDS credit on the basis of credit appearing in Form 26AS - as assessee has argued that the entry of receipts from Goa Hotels and Clubs Pvt. Ltd., D. S. Gupta Construction Pvt. Ltd. were not recorded and raised by the appellant as though in Form 26AS, therefore, the same is liable to be deleted - HELD THAT - Since both the parties agreed to re-confirm the transactions, therefore, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to re-consider all the entries and to decide the matter of controversy in accordance with law. Needless to say that an opportunity of being heard is required to be given to the assessee. Disallowance on account of doubtful advances u/s 36(1)(vii) r.w.s. 36(2) for the purpose of computing total income under normal provisions of the Act - HELD THAT - Once a provision in respect of doubtful debts stood created and ultimately carried to the Balance-sheet, wherein Loans and Advances or debtors stood reduced by the amount of such provision, then such treatment amounted to actual write off because, in the final analysis, at the year end, the so called provision does not remain and the balance-sheet only carries the amount of loans and advances or debtors, net of such provision made by the assessee for the impugned bad/doubtful debt. It is also held that it is not necessary to square up each individual account. A provision for doubtful debt such presented in accounted would be regarded as an allowable expenditure u/s 37(1)(vii) - See case of Bank of India 2012 (9) TMI 790 - ITAT, MUMBAI DR has refuted the said contention but the issue has already been settled in the above mentioned case. However, the CIT(A) has allowed the doubtful debts but declined the claim of doubtful advances on the ground of that the assessee is not in the banking business. The claim has wrongly been declined, therefore, we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee.

Summary

Issues Involved:
1. Allowance of deduction of leave encashment.
2. Treatment of receipts wrongly appearing in Form 26AS as income.
3. Disallowance of provision for doubtful advances.
4. Allowance of depreciation on customer contracts.

Issue No. 1 - Deduction of Leave Encashment:
The appellant challenged the denial of deduction for leave encashment claimed on a provision basis. The contention was based on the computation of total income under normal provisions of the Act. However, this issue was not pressed by the representative of the assessee, leading to a decision in favor of the revenue against the assessee.

Issue No. 2 - Treatment of Receipts in Form 26AS:
The appellant disputed the inclusion of receipts amounting to ?22,13,259 in Form 26AS as income. The appellant claimed that certain entries were not recorded and raised, thus, should be deleted. Both parties agreed to re-confirm the transactions, leading to the decision to set aside the CIT(A)'s finding and restore the issue before the AO for further consideration in accordance with the law. Consequently, this issue was decided in favor of the assessee against the revenue.

Issue No. 3a - Disallowance of Provision for Doubtful Advances:
The assessee contested the disallowance of ?22,64,464 on account of doubtful advances for computing total income under normal provisions of the Act. The representative of the assessee argued that the issue was covered by the decision of the Hon'ble Apex Court in the case of Vijaya Bank vs. CIT. The contention was supported by previous judgments and interpretations regarding provisions for bad debts and doubtful debts. The CIT(A) disallowed the claim citing that the assessee was not in the banking business, which was deemed incorrect. The ITAT allowed the claim of the assessee, overturning the CIT(A)'s decision.

Issue No. 3b - Provision for Doubtful Advances as Business Loss:
This issue was deemed academic in nature and did not require adjudication.

Issue No. 4 - Allowance of Depreciation on Customer Contracts:
The revenue challenged the allowance of depreciation on customer contracts. The CIT(A) allowed the claim based on the nature of customer contracts as intangible assets, citing relevant provisions of the Act and precedents. The ITAT upheld the CIT(A)'s decision, relying on previous judgments in the assessee's own case and the decision of the Hon'ble ITAT. The issue was decided in favor of the assessee against the revenue.

In conclusion, the ITAT Mumbai partially allowed the appeal filed by the assessee and dismissed the appeal filed by the revenue, based on the detailed analysis and decisions made on the various issues raised by both parties.