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Facts
The assessee claimed a write-off of Rs. 4,32,37,204/- as provision for doubtful debts. This was related to advances given to airlines which became non-recoverable. The assessee had made a larger disallowance in the previous assessment year (AY 2017-18).
Held
The Tribunal noted that the expenses pertained to the assessee's business activities and were linked to losses from earlier years. However, the assessee had erroneously claimed it under an incorrect head. For justice, the assessee was given another opportunity to substantiate the expenses.
Key Issues
Whether the provision for doubtful debts written off by the assessee was an allowable expense. Whether the assessment order was bad in law due to the absence of a draft order.
Sections Cited
250, 143(3), 144B, 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI ANIKESH BANERJEE
Instant appeal of the assessee was filed against the order of the National Faceless Appeal Centre (NFAC), Delhi *for brevity, ‘Ld.CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act’) for Assessment Year 2018-19, date of order 23/02/2024. The impugned order was emanated from the order of the National e-Assessment Centre, Delhi (NEAC) (for brevity the “Ld. AO”)passed under section 143(3) read with section 144B of the Act, date of order 22/04/2021.
TC Tours Limited 2. The assessee has taken the following grounds of Appeal:- “The following grounds of appeal are independent and without prejudice to each other. The appellant objects to the order dated
22. April 2021 passed under section 143 r.w.s. 1448 of the Income-tax Act (the Act) by the National Faceless Assessment Centre, Delhi(Ld. AO) for the aforesaid assessment year on the following among other grounds:
Ground 1-Assessment Order is bad in law The Assessing Officer (hereinafter referred to as "the AO") erred in completing the assessment vide order under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "The Act") dated 22.04.2021, without passing any draft order as mandated under the E-assessment Scheme, 2019, rendering the impugned assessment order invalid.
Ground 2 Disallowance of Provision for doubtful debts write back/considered bad during the year Rs. 4,32,37,204/- 2.1. The Ld. AO erred in disallowing write back of provision for doubtful debts of Rs. 4,32,37,204/-claimed by the appellant to the taxable total income computed as per normal provisions of the Act.
The Ld. AO erred in law and facts in not appreciating the facts that the provision for doubtful debts was disallowed by the appellant in the prior year AY 2017-18, since it was doubtful during that year. He further failed to consider that the same is write back/considered bad during AY 2018-19, hence the same is allowable during AY 2018-19.
2.3. The Ld. AO failed to consider that the provision for doubtful debts was claimed in profit and loss account in AY 2017-18, hence the same is not required to be claimed in profit and loss account of AY 2018-19 again.
24 Without prejudice to above, if the claim of the provision for doubtful debt is not allowed in AY 2018-19, then the same should be allowed in AY 2017-18 when the same is claimed in Profit & Loss Account TC Tours Limited Ground 3: The Ld. erred in concluding that the Appellant has furnished inaccurate particulars of income and hence directed to initiate penalty proceedings u/s 270A.
The Appellant craves leave to add, alter, amend, substitute or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing so as to enable the Hon'ble Tribunal members to decide these according to the law.”
3. We heard the rival submissions and considered the documents available in the record. The Ld.AR stated that the ground No.1 of the assessee is not pressed. Hence, ground 1 of the assessee is dismissed as not pressed.
4. The assessee is engaged in the business of providing air tickets and working as agent of various airlines. During the impugned assessment year, the assessee has written off the bad debt amount to Rs.4,32,37,204/-. The Ld.AR submits that the assessee has a business of air ticket booking with International Air Transport Association (IATA) licence where it procures air tickets by paying deposits amount to various airlines for future transactions. In case the assessee is not able to meet the commitment given to individual airlines on account of cancellation of tours, etc., the airlines forfeits the proportionate deposit amount and which becomes business loss in relation to the same nature of business. The assessee claimed write off provision for doubtful debts of Rs.4,32,37,204/- during this impugned assessment year. The assessee had made this disallowance of Rs.4,69,61,192/- on account of provision for doubtful debts in the previous assessment year, i.e. A.Y. 2017-18. Since this was an amount of provision for doubtful debts debited to P&L Account in A.Y. 2017-18, in the subsequent A.Y., out of the provision for doubtful debt for previous year, an amount of Rs.4,32,37,2043/- was written off, which was considered as non –recoverable bad debts on advance given to airlines.
TC Tours Limited Therefore, the same was claimed as an allowable expense in the return of income by considering it as bad debt. During assessment proceedings the Ld.AO found that in the return of income (ROI), the assessee claimed this deduction in Schedule “BP” under the head, “Any other amount allowable as deduction” amount to Rs.4,32,37,204/-. In reply, the assessee filed the submission, but the Ld.AO disallowed the said expenses and added back with the total income of the assessee. The aggrieved assesse filed an appeal before the Ld. CIT(A). The Ld.CIT(A) has considered all the written submissions of the assessee, but finally appeal of the assessee was dismissed.
The Ld.DR argued and fully relied on the order of the revenue authorities.
In our considered view, the assessee had claimed the expenses in prior years as provisions for doubtful debts. These expenses pertain to the assessee’s business activities and are linked to the loss of funds invested during the ticket booking process in earlier years. We note that the expenses in question are non- refundable bad debts arising from advances given to airlines for ticket bookings. However, the assessee had erroneously claimed the income under an incorrect head in the Return of Income (ROI), which was not accepted by the Ld. AO. Considering the nature of the expenses, we find that there is a clear nexus between the expenses and the assessee’s business activities. In the interest of justice, we believe the assessee should be given another opportunity to substantiate these expenses before the Ld. AO with relevant evidence and supporting documentation. Both parties have agreed to remand the matter to the file of the ld. AO. It is imperative that the ld. AO provides the assessee with a fair and adequate opportunity of being heard during the reassessment proceeding. Any evidence or explanation submitted by the assessee TC Tours Limited in her defense must be admitted and considered by the ld. AO, who shall adjudicate the matter on its merits in accordance with the law. Similarly, the assessee is expected to act diligently and cooperate fully during the reassessment proceedings.
In the result, the appeal of the assessee bearing is allowed for statistical purpose.