9911796707
TMI Blog2001 (10) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... March 23, 1981: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the issue arising from the order of the Inspecting Assistant Commissioner (Assessment) was highly debatable and it is clearly beyond the purview of section 13 of the Companies (Profits) Surtax Act, 1964?" An application under section 256(1) was rejected by the Tribunal, inter alia, on the ground that the Tribunal has found as a fact that the amount was set apart by the company which could not be said that it was set apart to meet a known liability or the liability was well known on the date of the balance sheet and, therefore, the amount set apart as a reserve for bad and doubtful debts was not a provision but a reserv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee the order was affirmed by the Commissioner of Income-tax (Appeals). On second appeal, the Tribunal allowed the appeal, and held that whether a sum of Rs. 5,50,000 set apart by the assessee constituted a reserve for bad and doubtful debts, or a provision only is highly debatable. For coming to this conclusion, it relied on the decision of the Karnataka High Court in the case of Addl. CIT v. Indian Telephone Industries [1979] 118 ITR 291, in which the Karnataka High Court in similar circumstances held that: "Since the sums set apart as 'reserve for bad and doubtful debts' were not in regard to any known liability on the dates of the balance-sheets, we do not find any substance in the contention urged on behalf of the Department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e court looks for issuing a writ of certiorari for correcting a mistake apparent from the record. The state of law about the scope of rectification was stated by the Supreme Court in T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 reads as under: "The power of the officers mentioned in section 154 of the Income-tax Act, 1961, to correct 'any mistake apparent from the record' is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an 'error apparent on the face of the record'. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions." So far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommitment or diminution in the value of assets known to exist at the date of the balance-sheet is a reserve, but an amount set aside out of profits and other surpluses to provide for any known liability of which the amount cannot be determined with substantial accuracy is a provision." The Supreme Court further held that: "Substantial amounts were set apart by the assessee, a banking company, as reserves. No amount of bad debt was actually written off or adjusted against the amount claimed as reserves. No claim for any deduction by way of bad debts were made during the relevant assessment years. The assessee never appropriated any amount against any bad and doubtful debts. The amounts throughout remained in the account of the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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