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Income Tax Appellate Tribunal, ‘’ D’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED & SHRI SIDDHARTHA NAUTIYAL
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-XX, Ahmedabad, dated 28/02/2014 arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2004-2005.
The assessee has raised the following grounds of appeal:
Dismissing the ground taken by the Appellant challenging the reopening of the assessment for the reasons recorded by the AO 2. Dismissing the ground taken by the Appellant against the AO having passed an order without complying with the specific requirements as carved out by Hon’ble Supreme Court of India in the case of GKN Driveshafts (India) Ltd. vs ITO, as reported at (2003) 259 ITR 19 (SC) 3. Confirming the addition of Rs.22,43,329/- which was made by invoking the provisions of section 68 of the Act. 4. Not entertaining the additional ground and thereafter without prejudice dismissing the same, being the alternative claim of the Appellant about eligibility of deduction under section 36(1))(vii), if the realization from debtors was required to treated as subject matter of addition under section 68 of the Act. The assessee craves leave to add, amend, delete or alter one or more grounds of appeal.
3. At the outset, the Ld. Counsel for the assessee submitted that he has been instructed not to pressed ground Nos. 1 to 3 attached with the memo of appeal. Therefore, we dismissed all these grounds as not pressed.
4. The only effective ground raised by the assessee is that the Ld. CIT(A) has not allowed the bad debts under the provision of section 36(1)(vii) of the Act amounting to Rs. 22,43,329/- only.
The facts in brief are that the assessee in the present case is a private limited company and claimed to be engaged in the business of shipbreaking. The assessee in the year under consideration has shown certain credit entries amounting to Rs. 22,43,329/- in the bank account, representing the receipt from M/s JD Steel and its other associates concerns.
However, the assessee failed to justify the credit worthiness of the parties and genuineness of the transaction in the manner provided u/s 68 of the Act. Therefore, the same was treated as unexplained cash credit u/s 68 of the Act by the AO and consequently added to the total income of the assessee.
Aggrieved, assessee preferred an appeal to the Ld. CIT(A) who has also confirmed the order of the AO. However, the assessee during the appellate proceedings has filed the additional ground of appeal by contending that out of amount of Rs. 22,43,329/- a sum of Rs. 16,43,329/- has been shown as received from the debtors. Thus, if the impugned amount of Rs. 16,43,329/- is treated as unexplained cash credit u/s 68 of the Act, then the corresponding amount of debtors should be allowed as deduction under the provisions of section 36(1)(vii) of the Act. As per the assessee the impugned amount of Rs.16,43,329/- was not recoverable from the debtors, therefore the same should be allowed as deduction.
8. However, the Ld. CIT(A) disregarded the contention of the assessee by observing that the assessee has taken contradictory stand. As per the Ld. CIT(A), the assessee is giving colour to the impugned receipt of Rs. 16,43,329/- as realization from the debtors, once the same has been treated as unexplained cash credit under section 68 of the Act in order to avail the benefit of bad debts under the provision of section 36(1)(vii) of the Act. According to the Ld. CIT(A) this kind of adjustment was not permissible under the provisions of the Act. Therefore, the Ld. CIT(A) disallowed the additional grounds raised by the assessee.
9. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
The Ld. AR before us filed a paper book running from pages 1 to 6 and submitted that the authorities below have made the addition receipts aggregating to Rs. 22,43,329/- treated the same as unexplained cash credit u/s 68 of the Act, but after ignoring the fact that the sum of Rs.16,43,329/- was adjusted against the outstanding debtors. Thus it was submitted by the Ld. AR that there is no grievance to the assessee if the addition to the extent of Rs. 22,43,329/- is sustained under the provision of section 68 of the Act, but the deduction of Rs. 16,43,329/- should be allowed under the provision of section 36(1) (vii) of the Act on account of the bad debts. In other words, the Ld. AR agreed for the addition of Rs. 6 lacs out of the total addition of Rs. 22,43,329/- which was treated as unexplained cash credit u/s 68 of the Act.
On the other hand, the Ld. DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute as far as the addition made by the authorities below to the extent of Rs. 22,43,329/- under the provisions of section 68 of the Act. What has been pleaded by the assessee before the Ld.CIT(A) is to allow the bad debts for Rs. 16,43,329 only. The details of the same stand as under:
Sr.No. Date Name of the debtor Amt. Realized (Rs.) 1. 16/03/2004 Mahavir Petrolium 1,97,360.00 2. -do- Mayur Scrap Re-Cyling Co. P. 1,49,639.00 Ltd. 3. -do- Metro Steel Traders 2,00,000.00 4. -do- Metro Steel Traders 3,38,498.00 5. -do- Pushpanjali Steels 2,00,000.00 6. -do- Pushpanjali Steels 3,14,503.00 7. 17/03/2004 SLM Steel 1,43,329.00 Total 16,43,329.00 12.1 Indeed, the amount of unexplained cash credit was adjusted by the assessee against the debtors meaning thereby the debtors in the books of accounts of the assessee were written off on account of such adjustment. However, the authorities below treated the sum of Rs. 16,43,329/- as unexplained cash credit u/s 68 of the Act. Thus, there remains no ambiguity to the fact that assessee has made its debtors at NIL value and accordingly the assessee is entitled to claim the deduction by way of writing off bad debts of these sundry debtors within the meaning of the provision of section 36(1)(vii) of the Act. Thus, we set aside the order of the Ld. CIT(A) and direct the AO to allow the deduction for the bad debts amounting to Rs. 16,43,329/- only. Thus, ground of appeal of the assessee is partly allowed
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the Court on 09/11/2022 at Ahmedabad.