9911796707
TMI Blog2022 (2) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the profit and loss account and simultaneously been reduced from the value of the total sundry debtors in its audited balance sheet would be sufficient requirement for write off of bad debts. In the instance, the assessee has reduced the amount of provision for bad and doubtful debts from the amount of sundry debtors in the balance sheet, which is sufficient compliance of write off of bad debts going by the dictum laid down by the Hon ble jurisdictional High Court, cited supra. Therefore, the A.O. cannot make the addition of provision for bad debts in view of the Hon ble jurisdictional High Court judgment in the case of CIT v. M/s.Sandvik Asia Limited. [ 2013 (2) TMI 900 - KARNATAKA HIGH COURT] Hence, there cannot be any prejudice caused to the Revenue. In such circumstances, we hold that the order passed u/s 263 of the Act is to be quashed and we do so. Appeal filed by the assessee is allowed - ITA No.1637/Bang/2018 (Asst. Year 2011-2012) - - - Dated:- 22-12-2021 - Shri George George K, JM And Shri B.R.Baskaran, AM Appellant by : Sri.Anand Sondur, CA Respondent by : Smt.Priyadarshini Besaganni. JCIT-DR ORDER Per George George K, JM This a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriate relief. 3. The brief facts of the case are as follows: The assessee is a company engaged in the business of development software, dealing in automotive components, etc. For the assessment year 2011-2012, the return of income was filed on 25.11.2011, admitting total income of ₹ 62,89,17,687. The assessment u/s 143(3) r.w.s. 144C of the Act was completed vide order dated 28.01.2016, wherein the assessment was completed at ₹ 174,07,49,300. Subsequently, the CIT issued notice dated 12.09.2016 u/s 263 of the Act. The reasons for issuance of the notice was regarding the claim of provision for bad and doubtful debts amounting to ₹ 45,54,137. According to the CIT, the AO has not considered the allowability of a sum of ₹ 45,54,137, which was debited to the profit and loss account as doubtful advances. The reasons given in the show cause notice, reads as follows:- An amount of ₹ 45,54,137/- being provision or doubtful debts was debited to P L a/c (schedule M) and the same was not an allowable expenditure. Hence, the provision or doubtful advance should have been added back to the taxable income. 4. The assessee filed objections vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble jurisdictional High Court in the case of CIT v. M/s.Sandvik Asia Limited (supra), which was followed by the Tribunal in assessee s own case for assessment year 2010-2011 in IT(TP)A No.1556 1582/Bang /2014 (order dated 16.09.2020). 8. The learned Departmental Representative strongly supported the orders of the Income Tax Authorities. 9. We have heard rival submissions and perused the material on record. On perusal of the assessment order, which was subjected to revision u/s 263 of the Act, we notice that there is no inquiry conducted by the A.O. in allowing the provision for bad and doubtful debts. Therefore, the CIT was correct in invoking his revisionary powers u/s 263 of the Act. However, on merits, we notice that the assessee has charged off to its profit and loss account provision for doubtful debts amounting to ₹ 45,54,370 and has simultaneously reduced the same from the value of total sundry debtors in its audited balance sheet. The details of the same are placed from pages 7 to 10 of the paper book filed by the assessee. The Hon ble jurisdictional High Court in the case of CIT v. M/s.Sandvik Asia Limited (supra) by following the judgment of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, a Division Bench of this Court in the case of Southern Technologies Limited v. Joint Commissioner Of Income Tax, Coimbatore reported in (2010) 320 ITR 577, (in which one of us S.H Kapadia J. was a party) had an occasion to deal with the first question and it has been answered, accordingly, in favour of the assessee, vide paragraph 25, which reads as under (page 604 Prior to April 1, 2989, the law, as it then stood, took the view that even in cases in which the asssssee(s) makes only a provision in its accounts for bad debts and interest thereon and even though the amount is not actually written off by debiting the profit and loss account of the assessee and crediting the amount to the account of the debtor, the assessee was still entitled to deduction under section 36(1)(vii), (See CIT v. Jwala Prasad Tiwarl (1953) 24 ITR 537 (Bom) and Vithaladas H. DhanjibhaiBardanwaia v. CIT (1981) 130 ITR 95 (Guj), Such state of law prevailed up to and including the assessment year 1988-1989, However, by insertion (with effect from April 1, 1989) of a new Explanation in Section 36(2)(vii), it has been clarified that any bad debt written off as irrecoverable in the account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) at pages 66, 67 and 72 of the paper book, which refers to the apprehensions of the Assessing Officer). In this context, it may be noted that there is no finding of the Assessing Officer that the assesses had unauthorisedly claimed the benefit of deduction under section 36(1)(vii) twice over. The order of the Assessing Officer is based on an apprehension that, if the assessee fails to close each and every individual account of its debtor, it may result in the assessee claiming deduction twice over. In this case, we are concerned with the interpretation of Section 36(1)(vii) of the 1961 Act. We cannot decide the matter on the basis of apprehension/desirability. It is always open to the Assessing Officer to call for details of individual debtor's account if the Assessing Officer has reasonable grounds to believe that the assessee has claimed deduction, twice over. In fact, that exercise has been undertaken in subsequent years. There is also a flip side to the argument of the Department. The assessee has instituted recovery suits in courts against its debtors. If individual accounts are to be closed, then the debtor/defendant in each of those suits would rely upon the bank stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
