LATE SURENDRA KUMAR BANSAL T/H LEGAL HEIR SMT. SAROJ BANSAL,JAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh Hkkxpan] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM vk;dj vihy la-@ITA No. 730/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke Late Surendra Kumar Bansal ACIT, Vs. Through legal Heir Smt. Saroj Bansal Circle-1 D-14, Bansal Villa, Path No. 03, Jaipur. Jamna Nagar, Behind Petrol Pump, Sodala, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACGPB4341M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Tanuj Agrawal (Adv.) jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 31/01/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 06/02/2018 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M.

This appeal by the assessee is directed against the order dated 26.07.2017 of CIT (A), Jaipur for the A.Y. 2013-14. The assessee has raised the following grounds as under:-

“1 That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining a disallowance of Rs. 3,54,212/- on account of bad debts claimed u/s 36(1)(vii) of the Income Tax Act, 1961, thereby ignoring the judgment of Hon’ble Supreme Court in the case of TRF Ltd. vs. CIT [2010] 190 Taxman 391(SC).

debts written off Rs. 7,27,022/- however, the Assessing Officer made a

disallowance of Rs. 3,54,212/- on the ground that he had written off the

amount of 01.09.2012 just after survey carried out u/s 133A in the case

of the assessee on 30.08.2012. The assessee challenged the action of

the AO before the ld. CIT(A) but could not succeed.

the year under consideration the assessee written off debts as bad and

irrecoverable to the extent of Rs. 7,27,022/- out of which the AO

allowed the claim to the extent of Rs. 3,72,880/- and balance of Rs.

3,54,2012/- was disallowed on the ground that the amount was written

off on 01.09.2012 without waiting for the financial year to end. The ld.

AR has referred to the amount of debts in respect of the four parties

and submitted that the assessee has explained the reasons for treating

the said outstanding amount as bad and not recoverable as under:-

S.No. Name of Debtor Amount Reasons for bad debts given by appellant to AO (Rs.) (also reproduced at page no. 2 &3 of the assessment order) 2 1 Radhika Cloth Store 87,295 Cheque received from party was dishonoured and amount no longer recoverable. 2 Bombay Textiles 45,112 Goods were returned on 23.12.2010. No goods sold thereafter and party denied payment for balance money. 3 Sagar Garments 1,88,060 Parcel of goods lost and payment was not made by this party. No further sales to this party and balance could not be recovered. 4 Girraj Saree Centre 33,675 Some goods were returned in preceding year and party informed for loss of some goods and payment of balance money was also denied. No further sales to this party. Total 3,54,142/-

Thus, the ld. AR has submitted that when the cheques received from

the party got dishonoured and the assessee had no further transaction

with any of the parties then, the claim of the assessee cannot be

disallowed on the ground that the assessee has written off the amount

as on 01.09.2012 without waiting till the end of the financial year. In

support of his contention he has relied upon the decision of Hon’ble

Supreme Court in case of TRF Ltd. vs. CIT 190 taxman 391. The ld. AR

has also referred to the CBDT Circular No. 12/2016 dated 30.05.2016

and submitted that the CBDT has clarified that in view of the decision of

Hon’ble Supreme Court in case of TRF the claim of debt shall be

admissible u/s 36(1)(vii) of the Act, if it is written off as irrecoverable in

the books of accounts of the assessee in the previous year and it fulfills

the conditions stipulated in sub-section (2) of Sub-section 36 of the Act. 3 Hence, the ld. AR has submitted that once the assessee has written off

this amount and satisfy the condition as prescribed u/s 36(2) of the Act

then, the claim of the assessee of bad debts cannot be denied.

authorities below and submitted that the decision of written off the

debts in respect of the four parties is not a proper and honest decision

of the assessee but to avoid the tax liability as the assessee has written

off the debts just after survey conducted on 30.08.2012. He has relied

upon the orders of the AO and the ld. CIT(A).

material on record. During the year under consideration the assessee

written of the total debits of Rs. 7,27,022/- as bad and claimed the

deduction u/s 36(1)(vii) of the Act. The AO allowed the claim of the

assessee in respect of the other debts written off except four party, the

details of which have been produced in the earlier part of this order.

The only reason for disallowance made by the AO is that the assessee

has written off the debts of these four parties on 01.09.2012 just after

the survey carried out u/s 133A on 30.08.2012. The Assessing Officer

has not disputed the facts that these amounts represents as written off

by the assessee gone bad and irrecoverable on the reasons as given in 4 the reply filed before the AO. We note that in case of Radhika Cloth

Store the cheque issued by the said party got dishonoured in case of

second party in the table the amount represents goods sold to Bombay

Textiles and were return on 23.12.2010 and thereafter no goods were

sold to the said party. In case of Sagar Garments the goods sold were

lost in transit and therefore, the said parties has not paid the amount.

In case of Girraj Saree Centre the amount is regarding goods returned

in the preceding year and other were reported as lost and therefore,

the payment was not made by the said parties. It is also not disputed

by the AO that after the written off the debits in respect of these four

parties there is no business transaction between the assessee and these

parties. Hence, the assessee has written off debts as gone bad and

irrecoverable and the condition u/s 36(2) is also satisfied then the claim

of deduction u/s 36(1)(vii) cannot be denied. The Hon’ble Supreme

Court in case of TRF Ltd. vs. CIT (Supra) has held that post amendment

of section 36(1)(vii) w.e.f. 01.04.1989 what is required for claim of

deduction in respect of bad debts is that the bad debts is written off

irrecoverable and there is no necessity for the assessee to establish that

the debt has become irrecoverable. Therefore, the decision of the

assessee to write off the debts as irrecoverable cannot be questioned if the other conditions are satisfied being the amount was considered as

the income in the previous year or in the earlier year as per section

36(2) of the Act then the AO has to allowed the claim of deduction until

and unless the decision of writing of the debts is not an honest decision

and is only a device to avoid the tax. The CBDT circular No. 12/2016

also clarified this position as under:-

“3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debit by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reasons that the debit has not been established to be irrecoverable. The Hon’ble Supreme Court in the case of TRF Ltd. in CA Nos. 5292 to 5294 of 2003 vide judgment dated 9-2-2010, has stated that the position of law is well settled. “After 1-4-1989, for allowing deduction for the amount of any bad debit or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debit, in fact has become irrecoverable; it is enough if had debit is written off as irrecoverable in the books of account of assessee.” 4. In view of the above, claim for any debt or part thereof in any previous year, shall be admissible under section 36(1(vii) of the Act, if it is written off as irrecoverable in the books of account of the assessee for that previous year and it fulfills the conditions stipulated in sub-section(2) of Sub-section36(2) of the Act. 5. Accordingly, no appeals my henceforth be filed on this ground and appeals already filed, if any, on this issue before various courts/Tribunals may be withdrawn/not pressed upon.”

In view of the above facts and circumstances of the case as well as the decision of Hon’ble Supreme Court in case of TRF Ltd. vs. CIT(supra) as well as CBDT Circular No. 12/2016 we are of the considered opinion that the assessee has satisfied the conditions as provided u/s 36(1)(vii) as well as section 36(2) of the Act and therefore, the claim of bad debts is allowable deduction. Accordingly we set aside the orders of the authorities below qua this issue and allowed the claim of bad debts.

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

Order pronounced in the open court on 06/02/2018

Sd/- Sd/- ¼Hkkxpan ½ ¼fot; iky jko½ (Bhagchand) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial MemberTk;iqj@Jaipur fnukad@Dated:-06/02/2018. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Late Surendra Kumar Bansal, Jaipur. 2. izR;FkhZ@ The Respondent- ACIT, Circle-1, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 730/JP/2017} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत 7