BINA METAL WAY PVT. LTD.,KOLKATA vs. ITO, WARD-1(3), ASANSOL, KOLKATA

The captioned appeal filed by the Assessee, pertaining to assessment year 2006-07, is directed against the order passed by the ld. Commissioner of Income Tax(Appeals)-1, Kolkata, in Appeal No. 547/ CIT(A)-I/W-1(3)/2008-09 dated 28.08.2014, which in turn arises out of an order passed by the AO u/s 143(3) of the Income Tax Act 1961, (hereinafter referred to as the ‘Act’), dated 26.12.2008.

Brief facts qua the assessee are that the assesseefiled its return of income for assessment year 2006-07 on 29.11.2006 showing total income NIL. The assessee’s case was selected for scrutiny u/s 143(2) of the Act and the Assessing Officer has completed the assessment by

Aggrieved from the order of the Assessing Officer the assessee filed an appeal before the Commissioner of Income Tax (Appeals) who has dismissed the appeal of the assessee. The Ld. CIT(A) observed that the assessee did not get the approval from the Commissioner of Income tax for Gratuity Fund, therefore, the assessee’s claim for payment of gratuity u/s 40A(7) was denied by the Commissioner of Income tax (Appeal).That is, the assessee’s claim for payment of gratuity u/s 40A(7) was only allowable if there was approval of the gratuity fund by the Commissioner of Income tax, but there was no approval available on record therefore, assessee’s claim was denied by the Ld. CIT(A) and therefore, the addition made by the Assessing Officer at Rs. 3,75,120/- was confirmed. Regarding sundry advances written off at Rs. 30,910/-, it has been mentioned by the Assessing Officer that the assessee had claimed 30,910/- on account of sundry balances written off. The Assessing Officer asked the assessee to produce the evidences regarding un-realisibility of such advances. The assessee could not produce the relevant reasons before the Commissioner of Income Tax (Appeals), therefore, the Ld. CIT(A) confirmed the addition made by the Assessing Officer.

Not being satisfied with the order of the Commissioner of Income Tax (Appeals), the assessee is in further appeal before us and has taken the following grounds of appeal:

At the outset, the Ld. Counsel for the assessee has submitted before us that the assessee was unable to produce the approval letter of the Commissioner of Income Tax in respect of gratuity fund. The approval letter of gratuity fund was not available when the appellate proceedings was going on and now the assessee has obtained the approval letter of gratuity fund from the Commissioner of Income Tax and the said approval letter has been submitted before us. Regarding sundry balances return off, the Ld. Counsel for the assessee has submitted that it is a prerogative right of the assessee to write it off sundry balances if it seems to him that these are irrecoverable. For both the grounds of appeal raised by the assessee the Ld. Counsel requested the Bench to remit the case back to the file of the Assessing Officer to adjudicate the issue afresh.

The Ld. DR for the Revenue did not object to remit the matter back to the file of the Assessing Officer.

Having heard the rival submissions, perused the material available on record, we notice that the assessee was unable to produce the approval letter for gratuity fund before the Ld. CIT(A) because it was not available to him at the time of proceedings before ld CIT(A). Since, now the approval letter of gratuity fund of Commissioner of Income tax is available before the assessee and therefore, we are of the view that by following the principle of natural justice and equity we remit the matter back to the file of the Assessing Officer to adjudicate the issue afresh. Regarding sundry balances written off, we note that the Hon`ble Supreme Court Ruling in case of bad debts in the landmark judgment of T.R.F. LTD.(2010) 230 CTR 0014, is relevant. This is what the Hon`ble Supreme Court held, in this case: “After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is Therefore, the assessee has a genuine reason to write it off and Assessing Officer should allow appropriate relief to the assessee as per the provisions of the Act and as per the ruling of Supreme Court. Therefore, we direct the Assessing Officer to consider the submissions of the assessee and give appropriate relief as per the provision of the Act. Therefore, we allow this appeal for statistical purposes.