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TMI Blog2011 (4) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... on - disallowance of depreciation Rs.6,40,000/- on let out property made by the A.O - A.O. had not examined the claim of depreciation of the assessee vis-à-vis each of the let out property owned by it - nothing in the assessment order which gives a break-up of the disallowance made by the A.O - omission by the A.O. in making a scrutiny of each of the claim of depreciation of the assessee - no error in the order of the CIT in considering such non-application of mind to be erroneous and prejudicial to the interest of the Revenue - order of CIT that the A.O. shall disallow the claim of the assessee cannot be accepted. Hence, vis-à-vis the depreciation claim, order of CIT modified and direct the A.O. to verify the claim of the assessee and deal with it in accordance with law. Deduction of bad debts – power of Tribunal under section 254 - double deduction - as mentioned by the learned CIT, nothing was produced by the assessee to prove that it consistently followed an accounting practice whereby provision made in one year was reversed it to the extent debts were considered bad, in a subsequent year and a write-off effected for such bad debts - arguments taken by the learned A.R. that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 5JB of the Act. Reply of the assessee vis- -vis item No.(i) was that the said amount represented an advance given to one M/s Sical Ships (India) Ltd., which was engaged by the assessee-company to transport imported raw material from other countries for use in its manufacture of chemical fertilizers and the said Sical Ships (India) Ltd. was under winding up. According to assessee, a petition was already filed before Hon ble High Court Judicature at Madras in this regard and Hon ble High Court vide its order dated 4.9.2003 had directed that the said company be wound up. Therefore, as per the assessee, the provision made was against an ascertained liability and would not come within the purview of Explanation 1 to Section 11 5JB(2) of the Act. Vis- -vis the second item reply of the assessee was that it had considered the amounts due from various parties doubtful of recovery and hence, made a provision. According to assessee, this was also an ascertained liability. Assessee also pointed out that whole of the provision totalling to Rs. 16,90,09,556/- was added back in its Memo of Income while computing total income under normal provisions of the Act and the Assessing Officer had, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the currency of the relevant financial year, had decided only to make a provision. As per the CIT, assessee had effected an actual write off only in the next assessment and this by itself clearly showed that the sum of Rs.16,03,61,290/- represented unascertained liability. In so far as item No.(ii) was concerned, CIT noted that these were amounts due from various Government Departments and could not be considered as bad or doubtful. Vis- -vis the third item, ld. CIT noted that it was only a deposit made pursuant to High Court direction and was only a contingent liability. Vis- -vis item No.(iv), ld. CIT was again of the opinion that it represented only a contingent liability. He, therefore, directed the A.O. to disallow all these amounts for the purpose of computation of book profit under Section 115JB of the Act. 9. Now before us, learned A.R. strongly assailing the order of CIT, submitted that Hon ble Apex Court in the case of CIT v. HCL Comnet Systems And Services Ltd. (2008) 305 ITR 409 (SC) vide its order dated 23rd September, 2008, had held that provision for bad and doubtful debts could not be considered for addition while computing book profit under Section 115JA of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to him, the provision for bad debts of Rs. 16.04 Crores relating to M/s Sical Ships was already deducted from its loans and advances appearing in the balance sheet. For this contention, he placed reliance on audited accounts statement of the assessee company for the relevant previous year and Schedule X thereto. Similarly, according to him, the other amount of Rs. 86.48 lakhs was also deducted from its sundry debtors balance and Schedule VII to the audited accounts would substantiate this. Therefore, as per the learned A.R., the whole of the provision for bad and doubtful debts though it was called a provision, stood actually deducted from the balances due to the debtors and therefore, it clearly implied that these were ascertained liabilities only. In any case, according to him, the CIT in each of the above item had given a direction to the Assessing Officer to disallow the amounts under Section 11 5JB of the Act and the CIT had no powers to give any directions under Section 263 of the Act to do an assessment in a particular manner. 10. Per contra, the learned D.R. supporting the order of the CIT, submitted that the question of consideration of a computation made under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich it had by itself added back in its normal computation. Obviously, Assessing Officer would not have found any need of discussion on these items since assessee had made a suo‑ motu disallowance. No doubt, just because the order of Assessing Officer was cryptic, we cannot consider it as erroneous. But, where there is a total lack of enquiry, we cannot say that the order is not erroneous and prejudicial to the interest of the Revenue. All the discussions in the assessment order were only regarding application of normal provisions of the Act. May be, it is true that retrospective amendment to the Act would not be a ground for invoking jurisdiction under Section 263 of the Act in every case as per the law laid down by Hon ble Apex Court in the case of Max India Ltd. (supra), but it is also to be mentioned that the law so laid down by the Apex Court cannot be considered divorced from the circumstances in which Hon ble Apex Court gave such a ruling. In the case of Max India Ltd. (supra) Hon ble Apex Court was dealing with an issue regarding amendments retrospectively made to Section 80HHC of the Act. It is pertinent to note that in para 4 of the said order, Hon ble Apex Court ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of [fifteen percent]. A duty is thus cast on an Assessing Officer to work out book profit as defined under subsequent sub-section, and apply 7.5% thereon, and make a comparison thereof with total income under normal provisions of the Act. The Assessing Officer had failed to discharge this duty cast on him. In so far it relates to the electricity tax, undoubtedly, the tax audit report of the assessee clearly mentioned the amount to be contingent in nature. It is for this reason that the A.O. held it as not allowable while computing the total income under the normal provisions of the Act. Even at that point, the Assessing Officer never made any effort to make a book profit computation as mandated under Section 115JB of the Act. The simple reason for not doing so was that such an aspect never came to his mind at all when he passed the assessment order. Non consideration of law and not making a computation prescribed under law would definitely render the order of the A.O. erroneous and prejudicial to the interest of the Revenue. In s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such double claim. According to assessee, it was following an accounting practice whereby party-wise receivables were considered and provisions made to the extent it had become doubtful by charging the same to the profit and loss account. Nevertheless, as per the assessee, when the amounts really become irrecoverable, there was a reversal of the amounts earlier charged from the provision and equivalent write-off thereafter effected. Therefore, as per the assessee, there was no double deduction. 14. Ld. CIT was however not impressed. According to him, just because an issue was in appeal, did not preclude him from exercising his jurisdiction under Section 263 of the Act. According to him, the income from let out property having been computed under the head Income from House Property , the claim of depreciation could not be allowed. Vis- -vis the double claim of bad debts, ld. CIT was of the opinion that the assessee was not able to explain how the charge to profit and loss account was reversed in the subsequent year, and assessee never furnished copies of ledger accounts and details of actual entries passed in support. According to CIT, the Assessing Officer while completing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by the assessee to prove that it consistently followed an accounting practice whereby provision made in one year was reversed it to the extent debts were considered bad, in a subsequent year and a write-off effected for such bad debts. In any case, nothing is there in the assessment order which would show that there was any application of mind by the Assessing Officer in this regard. Therefore, we cannot find any lacunae in the order of CIT in directing the Assessing Officer to examine the contention of the assessee and deal with it in accordance with law. Obviously, there was an error by sheer non-application of mind of the A.O. in this regard. 19. Before parting it, it would be inappropriate if we do not deal with one of the arguments taken by the learned A.R. that this Tribunal did not have any power under Section 254 of the Act to modify an order of CIT under Section 263 of the Act. We cannot accept this contention since sub-section (1) of Section 254 of the Act, empowers this Tribunal to pass such orders as it thinks fit. As already mentioned by us where the order of the A.O. was palpably erroneous and prejudicial to the interest of the Revenue, just because the CIT slig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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