PR COMMISSIONER OF IT AJMER vs. M/S MAHAVEER AUTO AGENCIES AJMER

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 225 / 2016 Pr. Commissioner of Income Tax,, Ajmer ----Appellant Versus M/s Mahaveer Auto Agencies,, JLN Hospital Road, Bajrangarh Chouraha, Ajmer ----Respondent _____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 20/04/2017 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has reversed the view taken by the CIT (A) and has partly allowed the appeal of the assessee. 2. Counsel for the Department has taken us to the order of the Tribunal and framed the following substantial questions of law: “1. Whether the Tribunal was legally justified in reversing the findings of the CIT(A) and deleting the addition made on account of closing stock u/s. 69 when there was difference in stock as per bank statements vis-a-vis the return filed? 2. Whether the Tribunal was legally justified in deleting the addition made on account of closing stock as per the bank statement specifically when after the set aside, the Assessing Officer ascertained the position of stock as on 31.03.2006 as per the bank statement dated 14.02.2006 and considered the statement of the partner? 3. Whether the Tribunal was legally justified in reversing the findings of the CIT(A) and deleting the addition made on account of interest specifically

(2 of 4) [ITA-225/2016] when after the set aside, the Assessing Officer called for details and evidences in respect of amount given to sister concern and to prove the business expediency which the assessee failed to produce? 4. Whether the Tribunal was legally justified in reversing the findings of the CIT (A) and deleting the addition made on account of bad debts specifically when after the set aside, the Assessing Officer called for details and evidences in respect of amount taken into consideration in the profit and loss account on account of sale made in earlier years and written off which the assessee failed to produce?” 3. We have gone through the order of the Tribunal. The Tribunal while considering ground No.1 has specifically observed that previous year, the view was taken which is contrary to the view taken by the AO. In our considered opinion, the Tribunal rightly relied upon the decision of the Supreme Court in Radhaswami Satsangh & ors. wherein it has been held as under: “Held, reversing the decision of the High Court, on the facts, (i) that property given to the Satguru was intended for the common purpose of furthering the purpose of the institution. The central council had authority to manage the properties of the institution and, on revocation of the trust, the property was not to go back to the Satguru, and, at the most, in the place of the trust, the central council would exercise authority. The Tribunal was justified in holding that the properties were subject to a legal liability of being used for the religious or charitable purposes of the Satsang. (ii) That, in the absence of any material change justifying the Department to take a different view from that taken in earlier proceeings, the question of the exemption of the assessee appellant should not have been reopened. Strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to all the

(3 of 4) [ITA-225/2016] position to be changed in a subsequent year.” 4. Even on the ground of bad debts of earlier years, the Tribunal has specifically observed as under: “9.3 We have heard the rival contentions and perused the material available on record. As per section 36(1)(vii) of the Act, the amount of bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year is required to be deducted while computing the income of the assessee. Section 36(2) provides as under:- “Section 36(2): In making any deduction for a bad debt or part thereof, the following provisions shall apply- (i) No such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee; (ii) If the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made; (iii) Any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year), but the Assessing Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year; (iv) Where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year (being a previous year relevant to the earlier assessment year) and the Assessing Officer is satisfied that falling beyond a period of four previous years immediately preceding the previous year in which such debt or part is written off, the provisions of sub-section (6) of section 155 shall apply; (v) Where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous

(4 of 4) [ITA-225/2016] year to the provision for bad and doubtful debts account made under that clause. We have noticed that in all the previous years the assessment order has been passed under section 143(3) of the IT Act and the said debts were mentioned. On perusal of the record, it transpired that it is not the case of the AO that the debtors, (as mentioned at pages 61 to 106 of the paper book) were not taken into account in computing the income of the assessee for the previous year.” 5. In view of the above, we are of the considered opinion that no substantial question of law arises in this appeal. The appeal stands dismissed.

(VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. /bm gandhi 158