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TMI Blog2018 (2) TMI 1716X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, for the above purpose it is necessary that the party to be given an opportunity to establish its claim. Therefore, in the present facts, adjustment by way of disallowing deduction by intimation under section 143(1)(a) of the Act is not proper. - Decided in favour of assessee. - Income Tax Reference No. 25 of 2000 - - - Dated:- 23-2-2018 - M.S. SANKLECHA RIYAZ I. CHAGLA JJ. Ms. Vasanti Patel for the applicant Mr. Charanjeet Chanderpal a/w Ms. Namita Shirke for the respondent ORAL JUDGMENT: (Per M.S. Sanklecha, J.) 1. This Reference under Section 256(1) of the Income Tax Act, 1961 (the Act) at the instance of the applicant assessee seeks our opinion on the following question of law: (i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the Assessing Officer was justified in making an adjustment u/s 143(1)(a) relating to disallowance of the claim for bad debts under Section 36(1)(viii) in respect of a sum of ₹ 1,69,37,818/representing provision for doubtful overdue installments under hire purchase finance agreements ? 2. This Reference relates to Assessment Year 199394. The facts le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout conducting further enquiries in the matter, which was permissible only after issuing a notice u/s 143(2), he was not competent to issue intimation of adjustment and reject the assessee's prayer made for rectification u/s 154. 4. Before the Tribunal, the same pleas were reiterated as had been made in the first appeal. Further reliance was placed upon the decision of the Bombay High Court in the case of Khatau Junkar Ltd. V. K.S. Pathania (196 ITR 55), decision of the Delhi High Court in S.R.F. Charitable Trust Vs. Union of India (193 ITR 95) and the decision of the Bombay High Court in Bank of America N.T. S.A. Vs. Dy.CIT (200 ITR 739). 5. As against the above, it was submitted by the learned departmental representative that the assessee's claim of deduction in respect of provision for doubtful overdue installments under Hire Purchase Finance Agreements was prima facie inadmissible on the basis of the information available in the return, accounts and documents within the meaning of clause (iii) of first proviso to claim (a) of sub-sec. (1) of sec. 143 and, therefore, the Assessing Officer was fully justified in issuing an intimation of adjustment. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 411Bom.) (5) CIT V. Pranlal Kesurdas (49 ITR 931 Bom.) 6. The Tribunal, after consideration of all the relevant facts and circumstances and the relevant provisions of law and the case law cited before it, came to be conclusion that on the basis of the return of income itself and the accounts and documents accompanying it, the claim of provision for doubtful overdue installments under Hire Purchase Finance Agreements was clearly distinct and separate from one of claim of bad debt and was prima facie inadmissible on its own tenor. The Assessing Officer was, therefore, justified in issuing an intimation of adjustment and rejecting the assessee's application u/s 154. For the same reason, the learned CIT(A) was justified in dismissing the assessee's appeal. The assessee's appeal before the Tribunal was accordingly dismissed. 6. Ms. Patel, learned Counsel appearing in support of the application submits as under : (a) relief / deduction of provision of bad debt claimed in the return of income cannot be disallowed by way of intimation under Section 143(1)(a) of the Act when the issue prima facie gives rise to a debatable issue; (b) the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aws. Therefore, mere provision would not make it bad debt as a provision lacks certainty. For the purposes of write off under Section 36(1)(vii) of the Act, there must be certainty of debt becoming irrecoverable. Thus, it is submitted that the view of the Tribunal is correct and the question as proposed should be answered in favour of the Revenue. 8. Before dealing with the rival contentions, it would be necessary to reproduce Section 143(1)(a) of the Act, at the relevant time which read as under : 143(1)(a) Where a return has been made under Section 139, or in response to a notice under subsection (1) of section 142, (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly ; and (ii) if any refund is due on the basis of such return, it shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment by intimation under Section 143(1)(a) of the Act can be made where the issue which arises for consideration is a debatable issue. In the present facts, the computation of total income submitted along with return indicates that claim for bad debts has been made by relying upon the decision of Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala (supra). 11. However, the Assessing Officer completely ignored the note made by the applicant in its computation of return, indicating that the basis of claim for bad debts is the decision in Gujarat High Court in Vithaldas H.Dhanjibhai Bardanwala (surpa) . In the above case, even a provision debited to the profit and loss account was allowed as bad debts, where corresponding credit entires are posted in the bad debts reserve account. It held that is was not necessary to post credit entries in the ledger account of the concerned parties. It was on the basis of the aforesaid decision of the Gujarat High Court that the claim in respect of the provision for bad debts was made by the applicant assessee. Once, reliance is placed upon a decision of a Court and / or Tribunal to make a claim, then even if the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the applicant was by following the decision of the Gujarat High Court in Vithaldas H.Dhanjibhai Bardanwala (Supra). Thus, a debatable issue. Therefore, the same could not have been disallowed by way of an intimation under section 143(1)(a) of the Act. 14. We are conscious of the fact that Section 36(1)(vii) of the Act was amended by the Finance act, 2001 by insertion of Explanation to Section 36(1)(vii) of the Act w.e.f. 1st April, 1989. We are also conscious of the fact that while disposing of a Reference under Section 256(1) of the Act, the question proposed for our opinion shall be answered taking into account the subsequent amendment to the law with retrospective effect, as they are clarificatory in nature. 15. In the aforesaid background, we find that the insertion done by Explanation to Section 36(1)(vii) of the Act (w.e.f. 1989) would arise for consideration while answering the proposed question in respect of Assessment Year 1993-94. The above amendment by addition of Explanation to Section 36(1)(vii) of the Act was a subject matter of consideration by the Supreme Court in Vijaya Bank (supra). In the above decision, the Court while applying the amended ..... X X X X Extracts X X X X X X X X Extracts X X X X
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