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TMI Blog2014 (5) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... racted as there has been no remission or cessation of such liability – there is no reason to interfere in the order of the CIT(A) – Decided against Revenue. Deletion of bad debts – Held that:- There is no infirmity arrived at in the impugned order as the assessee has shown the amount as sales in the previous years which has formed part of its income - when the bad debts claimed have formed part of sales of the assessee in the previous year the occasion for it not forming part of its income does not arise - claim of bad debts cannot be disallowed and added to its income as it fully meets the requirement of Section 36(2) (i) of the Act - The CIT(A) has rightly allowed the assessee’s claim – Decided against Revenue. - I.T.A .No. 1608/Del/2012 - - - Dated:- 29-4-2014 - Shri G. D. Agrawal And Smt Diva Singh,JJ. For the Appellant : Sh. Gagan Sood, Sr. DR For the Respondent : Sh. Rajeev Mahajan, F.C.A ORDER Per Diva Singh, JM This is an appeal filed by the Revenue against the order dated 2/1/2012 of CIT(A) XI, New Delhi pertaining to 2008-09 assessment order on the following grounds:- 1. The Ld. CIT(A) erred in law and on facts of the case in dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in August 2005. After that, the assessee has not carried out any business activity. The transactions which are subject matter of S. No. 1 to 3 of Grounds of Appeal owe their origin to period prior to August 2005. On 26/2/2004, assesssee received an advance of Rs.1,00,00,000/- for supply of Glass bottles from M/s. Jai Glass Works, Mumbai and supplied goods worth Rs.23,09,633/- and the balance Rs.76,90,367/- remained outstanding in the books of assessee. The assessee and the said M/s. Jai Glass Works (JGW) never denied/contradicted this position. JGW further raised factitious bills of Rs.88,07,240/- on a/c supply of moulds, the consignee being Haryana Sheet Glass Ltd, 14, RIIOO Indl. Area, Neemrana, Rajasthand ( the assessee was running lass container manufacturing at Neemrana, Rajasthan owned by Haryana Sheet Glass Ltd.). In fact, the period to which the said supply and the corresponding bills pertain, the Neemrana unit remained through out closed. As a result of raising this factitious bill by JGW, the books of JGW shown Rs.1,64,97,607/- (76,90,367+ 88,07,240) as due from the assessee. The said bills was never accounted for in its books by the assessee. JGW received Rs.1,65,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt due at Rs.76,90,367/- while JGW claims it to be Rs.1,64,97,607/- ) payment of Rs.1,65,00,000/- was made by L T to JGW on a/c of the assessee and was neither adjusted o the a/c of L T nor to the account of JGW in the books of assessee. JGW actually received the money due to it by the assessee from L T, and L T in turn, owed money to the assessee. The balance standing credit to the a/c of JGW in the books of assessee in no way can be treated as income of the assessee in view of the fact that JGW has actually received this amount on a/c of the assessee from L T. Since, the amount of Rs.76,90,367/- has already been received by JGW from L T on a/c of the assessee to give effect to this transaction in books of assessee all that is needed to be done is that the said amount will be debited to the a/c of JGW and credited to the a/c of L T in the books of the assessee. It will have the effect of reducing the debit balance of rs.11,65,00,000/- of L T by Rs.76,90,367/- and balance of JGW to NIL. Rs.76,90,367/- will not be written back and treated as income u/s 41 of the Act but will be adjusted to the account of L T in the books of assessee. The observation made by the A.O t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted for. In this regard the assessee furnished its reply vide letter dated 29/10/2010 which reds as below:- Bad debts of Rs.24,20,229/- in Profit and Loss Account represent amount due from M/s Jai Drinks Pvt. Ltd Copy of account of the party for F.Y 2005-06 and 2007-08 an Copy of bad debt account for F.Y 2007-08 in the books of assessee is at Annexure-4. Please note that the amount which has been written off as bad debts during the year was included in its income by the assessee in F. Y 2005-06 Rs.23,91,016/- and in F.Y 2004-05 Rs.29,2133/-. 5.1 It is noticed from the annexure attached to the said reply that the assessee has enclosed only copy of ledger account of the party Jai Drinks Pvt. Ltd. for the period 1/4/2005 to 31/3/2006 and 1/4/2007 to 31/3/2008. However, the submissions filed by the assessee did not establish he fact that he account of rs.24,20,229/- claimed as bad debts written off was ever included in its income and accordingly was offered for taxation. In its reply it has stated that eh bad debts so written off has been included in income by the assessee in F.Y 2005-06 Rs.23,91,016/- and in F.Y 2004-05 Rs.29,213/-. But no evidence has been filed. It can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual debit. So, when in the ledger a/c is credited with the same amount. This fact is very much clear form the ledger a/c submitted. Moreover, the relevant bill no and quantity supplied to Jai Drinks Pvt. Ltd. have been clearly stated in the enclosed ledger a/c. Since the amount written off as bad debts was included in sales made to jai Drinks Ltd. in the F.Y 2005-06 Rs.23,91,016/- and in F.Y 2004-05 Rs.29,213/- as a natural corollary it was included in its income for those years and offered for taxation accordingly. It is important to note here that the assessment for A.Y 2006-07 (F.Y 2005-06) and A.Y 2005-06 (F.Y 2004-05) were completed u/s 143(3) and copy of the assessment orders for these years were submitted to the A.O vide letter dated 19/10/2010. In appeal before your honor it is submitted that the said amount of Rs.24,20,229/- was written off as Bad debts as the assessee formed confirmed opinion by then that the amount will not be recovered at all in future. The assessee on its part, followed the provisions of Section 36(2) of the Income Tax Act, 1961 to claim the debts of Rs.24,20,229/- as bad. It has actually written off the debt as bad debts in its accounts. The accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the previous years. However the AO further states that the prerequisites of Section 36(2) are not satisfied. I am unable to agree with the contentions of the AO. If the appellant has shown an amount as sales in the previous year, the amount would naturally form part of its income. To claim it as bad debt thereof would be in compliance with 36(2)(i) complied with. In this case the amount of Rs.24,20,229/- has been claimed as bad debt and has been shown by the appellant as sales/income in the previous years. Section 36(2)(i) is therefore clearly applicable and the addition made is deleted. Ground No. 3 is upheld. 8. Aggrieved by this the Revenue is in appeal before the Tribunal. The Ld. Sr. DR placed reliance on the assessment order, however, no argument assailing the finding arrived at in the impugned order on the submissions advanced by the assessee were brought to the notice to the Bench. The Ld. AR on the other hand relying upon the impugned order and the detailed submissions advanced before the CIT(A) submitted that the departmental ground has no merit. 9. We have heard the rival submissions and perused the material available on record. Considering the arguments a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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