Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri J. Sudhakar Reddy & Shri S.S. Viswanethra Ravi
ORDER Shri S.S.Viswanethra Ravi, JM:
This appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals), 9, Kolkata dt. 22-03-2016 for the A.Y 2010-11.
At the time of hearing before us the ld. DR submits that the CIT-A was wrong in deleting the impugned addition as the issue relating to doubtful debt shown in the balance sheet against sundry debtors despite the fact that this was never considered by the AO and in support of this, referred to para 2.1 of the A.O’s order and page-2 of the CIT-A’s order. He further argued that the CIT-A decided the allowability of provisions of doubtful debt as business expenditure and the issue of netting off of provision for doubtful debt was never discussed in ground nos. 1 to 3 in pages 2 to 6 of his order. Therefore, the question of deletion of impugned addition does not arise at all and in view of this, this issue of revenue’s appeal is liable to be allowed. In support of the contention, he relied on the order of the AO.
On the other hand, the ld.AR submits that the issue in hand is covered by the order dt. 31-10-2017 in assessee’s own case of the Co-ordinate Bench, ITAT, C Bench, Kolkata in 754/Kol/2017 for the A.Y 2013-14 and in support of the contention referred to para 26.2 of the said order, wherein the CIT u/s. 263 of the Act quashed the order of AO as erroneous in so far as prejudicial to the interest of revenue. The Tribunal vide its said order dt. 31-10- 2017 also held that the principles laid down by the Hon’ble Supreme Court in the case of Vijaya Bank are squarely applicable to the facts of the case in hand. In support of the contention, he relied on the order of the CIT-A in allowing the same.
Heard rival submissions and perused material on record including the case laws as relied on by the assessee before us. We find that the assessee made the provisions for doubtful debt under the head ‘administrative and other expenses to its P & L account. The assessee netted off the said provision for doubtful debt against sundry debtors and claimed deduction before the AO. In support of this, the assessee relied on the decision of the Hon’ble Supreme Court in the case of Vijaya Bank reported in 323 ITR 166 (SC). But the AO denied to allow said deduction by stating that the principles laid down by the Supreme Court in the case of supra are applicable only to banks and not otherwise. We further find that the Co-ordinate Bench of this Tribunal vide its order found satisfied that the provisions of doubtful debts have been duly adjusted against sundry debt and provisions for doubtful debt cannot be treated as uncertain liability by taking support from the decision of the Hon’ble Supreme Court in the case of supra. The operative portion of tribunal order dt. 31-10-2017 in the case of supra is reproduced herein below for better understanding:-
“26.2 Now coming to the issue whether the impugned provision for doubtful debts represent the unascertained liabilities. After perusal of balance-sheet of assessee we find that there remains no ambiguity that the amount of provision of doubtful debts was adjusted against the sundry debtors as shown in the balance-sheet of the assessee as detailed under:-
"Sundry debtors (Unsecured considered loan) Over six months 15,932.687 11,268,990 Under six months 40,527,856 40,361,839 56,650,543 51,576,829 Consolidated debited 10,847,866 10,817,855 Less: provision for doubtful debts 8,912,583 5,941,583 1,935,283 58,395,826 4,506,583 56,483,112
On perusal of above balance-sheet, we hold that the provision of doubtful debt has been duly adjusted against the sundry debtors. Therefore, the amount shown under the head provision for doubtful debt amounting to ₹29.71 lakh cannot be treated as unascertained liability. In holding so, we find support and guidance from the judgment of Hon'ble Supreme Court in the case of Vijaya Bank vs. CIT 323 ITR 166 (SC) wherein the relevant question raised by Hon'ble Apex Court and the finding Their Lordship stand as under:-
"After insertion of Explanation to s. 36(1)(vii), assessee is required not only to debit the P&L a/c but simultaneously also reduce loans and advances or the debtors from the assets side of the balance sheet to the extent of the corresponding amount so that at the end of the year the amount of loans and advances/debtors is shown as net of provision for impugned bad debt; assessee-bank having, besides debiting the P&L a/c and creating a provision for bad and doubtful debts, simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet, it was entitled to benefit of deduction under s. 36(1)(vii); it was not necessary to close the individual account of each debtor in the books."
Besides we also find support and guidance from the order of this Co-ordinate Bench of this Tribunal in the case of Deepak Industries Ltd vs. ITO in dated 10.06.2011. The relevant extract of the order is reproduced below:-
"6. We have considered the submissions of both the parties and have perused the records of the case. It is well settled that before assumption of jurisdiction u/s. 263 by Ld. CIT, two conditions have to be simultaneously fulfilled. Firstly, assessment order should be erroneous and secondly, the order should be prejudicial to the interest of the revenue. If either of the ingredient missing, the proceedings u/s. 263 of the Act cannot stand. In the present case, the main aspect to be examined is whether the sundry debtors had been written of or not. The details of sundry debtors is as under:- 'SUNDRYDEBTORS Outstanding for a period exceeding six months Considered Good 1,88,96,530/- 2,31,44,97-/- Considered Doubtful 1,76,63,989/- 1,24,55,468/- Less: provision 1,76,63,989/- 1,24,55,468/-
Outstanding for a period Of less than six months 19,09,51,709/- 13,84,56,260/- 16,16,01,230/- 20,98,48,239/-
Thus, to the extent, the debts were considered doubtful, the same were written off by actually writing off in profit and loss account and also in the books of account by crediting the sundry debtors on the asset side of balance sheet. This methodology was in conformity with the decision of Hon'ble Supreme Court in the case of Vijaya Bank's case (supra) and, therefore, could not be disputed.
6.1 The other aspects pointed out by Ld. CIT regarding circumstances under which the assessee wrote off the amount could not be gone into because after 01.04.89, the only requirement is of writing off the amount. Once actual write off the amount. Once actual write off of the amount is thee, then the deduction on bad debt is to be allowed. Since from the records, it is evident that assessee had actually written off this amount, which was allowed by Assessing Officer, it could not be said that the assessment order was erroneous. Hence, Ld. CIT was not justified in assuming jurisdiction u/s. 263 of the Act. We, accordingly, cancel the order of Ld. CIT."
The principles laid down by Hon'ble Supreme Court in the case of Vijaya Bank (supra) are squarely applicable to the facts of the present case. Therefore, we hold that the impugned order passed by Ld. CIT(A) u/s 263 holding the order of AO as erroneous in so far as prejudicial to the interest of revenue is not sustainable in the eyes of law. Hence, this ground of assessee's appeal is allowed.
In view of above, we are of the view that the CIT-A was justified in entertaining and deciding the issue regarding allowability of provisions for doubtful debts as business expenditure and deduction on bad debt therein is liable to be allowed. The Tribunal has discussed the issue thoroughly analyzing the facts of the case following the decision of the Hon’ble Supreme Court in the case of supra. The case laws as relied on by the assessee before us is covered in favour of assessee and against the revenue. Therefore, the AO was not justified in not allowing the claim of the assessee. The grounds in 1 and 2 raised by the revenue in the appeal are dismissed.
In the result, the appeal of revenue is dismissed. Order pronounced in the open court on 23-03-2018