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TMI Blog2013 (8) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal vide ITA No. 1814/Del/2010 for Assessment Year 2005-06. 4. Brief facts of the case are that the assessee company, in the relevant assessment year, was engaged in supply of assemblies, Metallurgical equipments, providing consultancy and technical services in design and engineering related to Steel industry. The assessee had filed its return of income declaring total income of Rs. Nil/- . The assessment was completed by making following additions: i) Provision for contractual obligations of ₹ 64,692,683/-. ii) Provision for doubtful debts in the P L Accounts of ₹ 39,872,234/-. 5. The assessee s appeal against the above noted additions was dismissed by ld. CIT(A). Being aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us and has taken following grounds of appeal:- 1. On the facts and circumstances of the case and in law, the order passed by Ld. Commissioner of Income-tax (appeals) (CIT(A)) is bad in law. 2.1 That the Ld. CIT(A), without properly appreciating the facts of the case provisions of the Act, has erred in confirming the disallowance amounting to ₹ 6,46,92,683/- in respect of Provisions for Contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal s decision for the Assessment Year 1998-99. 8. Ld. DR submitted that the Tribunal s decision pertains to Assessment Year 1998-99 and presently we are concerned with the Assessment Year 2005-06. He, therefore, submitted that without ascertaining the facts, the Tribunal s order cannot be applied. He submitted that matter may be restored back to the file of Assessing Officer for examining the issue in the light of the Tribunal s decision. Ld DR further submitted that the date of Tribunal order is 12.03.2008 and the date of assessment order is 23.12.2008. Therefore, the assessee should have brought the Tribunal s order to the notice of the Assessing Officer instead of placing the same before Ld. CIT(A). 9. We have considered the rival submissions and have perused the record of the case. We find substance in the submission of the Ld DR that since the Tribunal s order is dated 29.12.2008 the same should have been brought to the notice of the Assessing Officer. Ld counsel in the course of hearing submitted that there is reference to Tribunal s order in the assessment order but we do not find any such reference in the assessment order. Further, Ld CIT(A) has also not taken int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,462 as against the total claim of ₹ 2,63,71,552 made by the assessee-company. It shows that the assessee has already incurred a major portion of the provision by way of actual expenditure. Therefore, we do not find any reason to disallow the balance portion of ₹ 62,36,462. The said disallowance is deleted. The Assessing Authority is directed to allow the amount in full. 10. In the result this issue is allowed for statistical purposes. 11. The second issue vide ground No 3.1 and 3.2. is regarding disallowance of bad and doubtful debts to the extent of ₹ 37,995,597/- Assessing Officer noted that assessee had debited an amount of ₹ 39,872,234/- as provision for doubtful debts in Profit and Loss account. He observed that this provision was also similar to the provision for contractual obligations and treating the same contingent in nature, disallowed the assessee s claim. Ld. CIT(A) dismissed the assessee s appeal. 12. Ld counsel for the assessee referred to the balance sheet contained at Page No. 1 of the paper book and pointed out that no separate liability has been shown in balance sheet in regard to the provision for bad debts and the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied that any bad debt written off as irrecoverable in the account of the assessee will not include any provision for bad and doubtful debt made in the accounts of the assessee. The said amendment indicates that before April 1, 1989, even a provision could be treated as a write off. However, after April 1, 1989, a distinct dichotomy is brought in by way of the said Explanation to section 36(1) (vii). Consequently, after April 1, 1989, a mere provision for bad debt would not be entitled to deduction under section 36(1)(vii). To understand the above dichotomy, one must understand `how to write off'. If an assessee debits an amount of doubtful debt to the profit and loss account and credits the asset account like sundry debtor's account, it would constitute a write off of an actual debt. However, if an assessee debits `provision for doubtful debt' to the profit and loss account and makes a corresponding credit to the `current liabilities and provisions' on the liabilities side of the balance-sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would not be entitled to deduction after April 1, 1989. 14. Ld counsel submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations. 3.1 That the Ld. CIT(A) without properly appreciating the facts of the case provisions of the Act erred in confirming disallowance representing bad and doubtful debts to the extent of ₹ 3,22,17,327/-. 3.2 Without prejudice to the above, the Ld. CIT(A) has erred in not adjusting/ reducing an amount of ₹ 61,83,775/- being amount written back to the Profit and Loss account and suo-mottu offered to tax by the appellant during the relevant year assessment year. 4. That the Ld. CIT(A) has erred on facts and in law in not granting set off of brought forward business loss and unabsorbed depreciation as claimed by the appellant in its return of income. 5. That the Ld. CIT(A) has erred in upholding the levy of interest u/s 234B of the Act. 6. That the appeal within time since the order was received on 24th February 2010. 21. The first issue vide ground Nos. 2.1 to 2.3 is in regard to provision for contractual obligations and second issue vide Ground Nos. 3.1 to 3.3 is in regard to provision for bad and doubtful debts. Both these issues are identical to the issues considered in Assessment Year 2005-06 vide ITA No. 1814/Del/2010. Therefore, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee losses are shown, penalty can still be imposed in a case where on setting off the concealed income against any loss incurred by the assessee under other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even a minus figure. The court was of the opinion that the tax sought to be evaded‟ will mean the tax chargeable not as if it were the total income. Once, we apply this rationale to Explanation 4 given by the Surpeme Court, in the present case, it will be difficult to sustain the penalty proceedings. Reason is simple. No doubt, thre was concealment but that had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed under section 115JB of the Act which has become the basis of assessment as it was higher of the two. Tax is thus, paid on the income assessed under section 115JB of the Act. Hence, when the computation was made under section 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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