EAT INDIA PVT LTD.,MUMBAI vs. ITO 4(1)(4), MUMBAI

This appeal in A.Y. 2015-16 arise out of the order by the learned Commissioner of Income-tax (Appeals)-9, Mumbai [in short learned CIT (A)] in appeal No. CIT (A)-9/158/2017-18 dated 19th July, 2019 against the order of assessment passed under Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘Act’) dated 18th December 2017, by the learned Income Tax Officer, Ward -4(1)(4), Mumbai (hereinafter referred to as learned AO).

At the outset, there is a delay of 133 days in filing of appeal by the assessee before us. We find that the

The only issue to be decided in this appeal is as to whether the ld CIT(A) was justified in confirming the disallowance of Rs 8,08,045/- towards sales rebates, rate difference, discounts, sales returns in the facts and circumstances of the case.

We have heard the rival submissions and perused the materials available on record. We find that the assessee is a company engaged in the business of trading in plant and machinery of weavings. It also exported machinery spares and dealt in supersizing material during the year under consideration. During the course of assessment proceedings, the assessee was asked by the ld. AO to reconcile the figures mentioned in Form 26AS with the sales turnover disclosed by the assessee in its profit and loss account on account of contract receipts u/s 194C of the Act. The total contract receipts was Rs 23,64,243- as per Form 26AS while as per Profit and Loss Account, it was Rs 15,75,066/- The assessee was asked to reconcile the difference. The assessee vide its letter dated 30.11.2017 submitted the reconciliation statement before the ld. AO.

Admittedly, the contract receipts were duly offered to tax in earlier years on accrual basis. Admittedly, the parties had made the payments to the assessee only during the year, wherein, they had deducted a sum of Rs 8,08,045/- towards rate difference, discounts, rebates, returns etc. This fact is also evident from the confirmation letters filed by the parties and the ledger accounts produced before the ld. AO. Hence income has been duly offered to tax by the assessee in terms of section 36(2) of the Act in earlier years. It is not in dispute that the assessee had duly written off the irrecoverable portion of the debts in the sum of Rs 8,08,045/- in its books during the year under consideration. In our considered opinion, merely because the assessee had not claimed the differential irrecoverable amount of Rs 8,08,045/- as bad debts written off and the same was reduced from the gross contract receipts, it would only result in the same impact as far as the determination of net profit is concerned and it would not alter the taxable income in any manner. We hold that the lower authorities ought to have appreciated the substance of the transaction than its form. Since income is already offered to tax in terms of section 36(2) of the Act in earlier years, the irrecoverable portion which is written off in the books becomes an allowable deduction as bad debts u/s 36(1)(vii) of the Act. Hence we have no hesitation in

In the result, the appeal of the assessee is allowed.