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Income Tax Appellate Tribunal, DELHI BENCH “C”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
ORDER ORDER ORDER ORDER
PER PER H.S. SIDHU : JM PER PER H.S. SIDHU : JM H.S. SIDHU : JM H.S. SIDHU : JM
This Appeal filed by the Revenue is directed against the impugned order passed by the Ld. Commissioner of Income Tax (Appeals)-V, New Delhi for the assessment year 2005-06.
The grounds raised in the Revenue’s read as under:-
“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 45,84,283/- made by the AO on account of bad debts, by completely ignoring the fact that the assessee failed to establish that such debts have been offered for taxation in earlier years. 1
2. The appellant craves to add, alter, amend, modify, add or forego any ground of appeal at any time before or during the hearing of this appeal.
3. The brief facts of the case are that assessee has filed the return of income of Rs. 3,79,926/- on 31.10.2015 and the same was processed u/s. 143(1) of the I.T. Act, 1961. Thereafter, the case was selected for scrutiny. Notice u/s. 143(2) of the I.T. Act was issued and questionnaire dated 7.2.2007 alongwith statutory notice u/s. 142(1) of the I.T. Act was issued to the assessee, but AO observed that due to assessee’s casual approach, non-cooperative throughout the assessment proceedings and also the assessment was getting barred by time on 31.12.2007, AO completed the assessment exparte u/s. 144 of the I.T. Act, 1961 on 28.7.2007 on the basis of material available on record and made various additions and assessed the income at Rs. 2,06,01,460/-.
4. Aggrieved with the aforesaid order of the AO, the assessee filed appeal before the Ld. CIT(A) who vide impugned order dated 13.2.2014 partly allowed the appeal of the assessee.
5. Against the order of the learned CIT(A) the Revenue is in appeal before the Tribunal.
Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal.
In this case, Notice of hearing to the assessee was sent by the Registered AD post at the address given by the in Form No. 36 vide para no. 11 filed by the Department, which was returned back with the remarks “no such person”. No other address is available with the Tribunal. Keeping in view the facts and circumstances of the present case and the issue involved in the present Appeal, we are of the view that no useful purpose would be served to issue notice again and again to the assessee, therefore, we are deciding the present appeal exparte qua assessee, after hearing the Ld. DR and perusing the records.
We have heard the Ld. DR and perused the records. We find that the Ld. CIT(A) has elaborately discussed the issue in dispute and gave his finding vide para no. 5.1 at page no. 6 to 7 of his impugned order.
For the sake of convenience, the relevant finding of the Ld. CIT(A) is reproduced below:-
5.1 I have gone through findings of AO in assessment order and from the same it is noted that the only ground on which the said amount of Rs. 45,84,283/- which is “sundry debtors written off has not been allowed as a deduction by the AO is that the assessee failed to furnish evidence that income / receipts in respect of the debtors have already been taxed in earlier years.
In this connection, it is seen from the submission and the paper book filed by the appellant that these debtors relate to parties / clients on whom bills have been raised by the appellant for whom construction work was started by the appellant between 1995 to 2001. The details and nature of work done for 14 of such parties have also been provided (page -22 of the paper book) as also the copy of ledger ale of all these parties from 1.4.2002 to 31.3.2005. The reason why these amounts have been written off as bad debts is that they have been treated as irrecoverable in the opinion of the appellant that these contractee parties usually make deduction on account of variation in sizes, quality of material, deviation in specification, rate difference etc. The appellant has also filed his auditor's report dated 8.9.2006. From Schedule 11 thereof it is seen that the stated accounting policy of the company, includes revenue recognition from contract receipts on basis of the running bills raised by the company during the year. In view of all these facts taken together there is a strong prima facie case in favour of the appellant that the receipts from the debtors (who are parties for whom the appellant has carried out construction work) which is now being written off, would necessarily have been shown in the books of accounts as income by way of contract receipts and have therefore been offered for tax in the earlier years. Moreover, the AO has not disputed the correctness of the assessee's contention that it could not recover the same of Rs.45,84,283/- from debtors.
Once the Assessee is unable to recover the amount from his debtors, such non-recoverable receipts could appropriately be legally written off as bad debt by Assessee. This aspect has been examined by the Hon'ble Apex Court in the case of T.R.F. Ltd. vs CIT - [2010] 323 ITR 397 (SC) wherein it is held that after the amendment of Section 36(1 )(vii) of the Income-tax Act, 1961 with effect from 1st April, 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt has in fact, become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. In the case of the assessee, it is undisputed that the sum of Rs.45,84,283/- has already been written off in the books of account.
In view of the above discussion in its totality the Ground no.3 of appeal is allowed and the AO is directed to delete the addition made for Rs.45,84,283/-.”
8.1 After perusing the aforesaid Ld. CIT(A)’s finding, we find that Ld. CIT(A) has referred and followed the decision of the Hon’ble Apex Court in the case of TRF Ltd. vs. CIT (2010) 323 ITR 397 (SC) wherein it is held that after the amendment of Section 36(1)((vii) of the Income Tax At, 1961 with effect from 1st April, 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt has in fact, become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. We further find that Ld. CIT(A) has rightly observed that it is undisputed that the sum of Rs. 45,84,283/- has already been written off in the books of account, hence, the AO was rightly directed to delete the addition of Rs. 45,84,283/-. In view of the above, we are of the view that Ld. CIT(A) has passed a well reasoned order which does not need any interference on our part, hence, we uphold the same and dismiss the ground raised by the Revenue.
9. In the result, the appeal filed by the Revenue stands dismissed. Order pronounced in the Open Court on 26/12/2016.