PSB PAPERS PRIVATE LIMITED,U.S. NAGAR vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX , BAREILLY

This is an appeal by the assessee against order dated

18.03.2021 passed by learned Principal Commissioner of Income

Tax, Bareilly, pertaining to assessment year 2016-17.

whether the learned Principal Commission of Income Tax (PCIT) was

justified in invoking revisionary jurisdiction under section 263 of

the Income-tax Act, 1961 (in short ‘the Act’) in the facts and

circumstances of the instant case.

materials available on record. The return of income was filed by the

assessee company for the assessment year 2016-17 electronically

on 08.09.2016 declaring total income of Rs.1,58,06,880/-. The

assessment was completed under section 143(3) of the Act on

28.06.2018 determining the total income of the assessee at

Rs.1,62,15,717/- after making disallowance on account of packing

expenses in the sum of Rs.4,08,837/-. In the said assessment

order, learned Assessing Officer had mentioned the fact that along

with notice under section 142(1) of the Act, questionnaire was

issued to the assessee on various dates calling for various details,

which were duly complied by the assessee. This assessment was

sought to be revised by learned PCIT by invoking jurisdiction under

section 263 of the Act by treating the order passed by the learned

Assessing Officer as erroneous, inasmuch as, it is prejudicial to the

interest of the Revenue on the ground that no examination was

carried out by learned Assessing Officer in respect of bad debts

claimed by the assessee as deduction in sum of Rs.26,07,725/-. 2

Accordingly, a show-cause notice was issued under section 263 of

the Act by learned PCIT on 12.03.2021 fixing the case for hearing

on 17.03.2021. Learned PCIT has recorded in his revision order

under section 263 of the Act that no reply was received from the

assessee for the said show-cause notice. Accordingly, he directed to

set aside the assessment order passed by the Assessing Officer to

the limited extent of examining the issue of claim of deduction of

bad debts in the sum of Rs.26,07,725/- in accordance with law

after giving sufficient opportunity of being heard to the assessee.

reply was indeed furnished by the assessee in electronic mode

before learned PCIT but the same has not been taken cognizance by

him. However, he fairly admitted that no query was raised by

learned Assessing Officer in the course of assessment proceedings

with regard to the claim of deduction on account of bad debts.

Learned AR also pleaded that even after disallowance of packing

charges (as made in the assessment) and bad debts written off

(pursuant to section 263 order) that the assessment finally result in

computation of income under section 115JB of the Act as book

profit is more than the income computed under the normal

provisions of the Act.

show-cause notice, the assessee is not able to produce any evidence

on record that whether any reply was filed before learned PCIT in

electronic mode. The learned DR also submitted that any way there

would be no prejudice that would be caused to the assessee as

learned PCIT had merely directed the Assessing Officer to examine

the eligibility of claim of deduction of bad debts after giving

sufficient opportunity of being heard to the assessee.

attention to page no. 27 of the paper-book, containing the

screenshot available in Income Tax Department portal qua the

assessee. On perusal of the said screenshot, the reply stated to

have been filed by the assessee before the learned PCIT is not

discernible thereon. With regard to the computation of total income

under section 115JB of the Act, even after the disallowance of bad

debts, in our considered opinion, the said argument would be

premature as learned PCIT had not directed the Assessing Officer to

disallow the bad debts, instead, he had merely directed to examine 4

the claim of deduction of bad debts after giving sufficient

opportunity to the assessee.

queries on various issues during the course of assessment

proceedings has not raised any query regarding the allowability of

bad debts to the sum of Rs.26,07,725/-. There was no occasion for

either the learned Assessing Officer or the learned PCIT to examine

the facts on the allowability of bad debts as directed under section

36(1)(vii) of the Act. Hence, in these facts and circumstances of the

case, we do not find any infirmity in the action of learned PCIT

assuming revisionary jurisdiction under section 263 of the Act.

the claim of direction under section 36(1)(vii) of the Act. The

assessee is also at liberty to furnish evidences to prove that the

income has already been offered by it in terms of section 36(2) of

the Act which had become irrecoverable and accordingly triggered

the action of write off as bad debt. The assessee is also given further

liberty to furnish evidences in respect of amounts paid as advance,

if any, to certain parties in the normal course of business, which

has become irrecoverable and to that extent, the bad debts account 5

is debited in the books. With regard to the third issue of write off of

regular advances given in the normal course of business, the

assessee is duty-bound to prove that the said advance had become

irrecoverable, to justify its claim of deduction as bad debts thereon.

Accordingly, we uphold the revision order passed by learned PCIT

under section 263 of the Act. Grounds raised by the assessee are

hereby allowed for statistical purposes and the Assessing Officer is

directed to pass the order giving effect in accordance with the

aforesaid directions.

statistical purposes.

Order pronounced in Open Court on 23rd June, 2023

Sd/- Sd/- (SAKTIJIT DEY) (M. BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 23/06/2023 RK/Sr.PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI (Dehradun Circuit Bench, Dehradun)