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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM
O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the Assessee, pertaining to the Assessment Year 2008-09, is directed against the order passed by ld. CIT(A)-I, Kolkata in Appeal No.281/CIT(A)-I/W-(1)/2010-11, dated 30.01.2014, which in turn arises out of an order passed by the Assessing Officer (AO) Under Section 143(3) of the Income Tax Act 1961, (hereinafter referred to as the ‘Act’), dated 28.12.2010.
Brief facts of the case qua the assessee are that the assessee filed its return of income on 30.09.2008 declaring total income at Nil. The return of the assessee was processed u/s.143(1) on 12.03.2010. Later on, the assessee’s case was selected for scrutiny u/s,143(3) of the Act and the AO has completed the assessment by making addition of Rs.4,31,648/- on account of bad debts/advances irrecoverable and other disallowances. before the ld. CIT(A), who has confirmed the order passed by the AO observing the followings :-
5.2 The submissions of the Appellant have been considered. However it is seen that as pointed out by the AO, the advances were given to the various parties and which not recoverable by the Appellant from these parties. It is also clear from the provisions of Sec.36(1)(vii) that any claim of bad debts, the. amount had to be first shown as income in the accounts of the appellant before the same can be claimed as bad debts, therefore these amounts cannot be claimed as Bad Debts. With respect to the claim as business loss u/s 37, the onus was on the Appellant to establish that these advances had become irrecoverable and to submit evidence that the same were trade advances and could not be recovered. But in this case it seen that the Appellant it is seen that only the copies of the respective ledgers have been submitted, but no evidence was provided to establish that the Appellant was unable to make recovery or even made efforts to do so, merely providing copies of ledger accounts does not establish these advances as irrecoverable. In the absence of the same, the claim of the Appellant is not accepted and the disallowance made by the AO of Rs.4,31,648/- is confirmed.”
Not being satisfied with the order of ld. CIT(A), the assessee is in further appeal before us and has taken the following grounds of appeal :-
1. For that the order of the Ld.CIT(A) is arbitrary, illegal and bad in law.
2. For that the Ld.CIT(A) erred in confirming the addition of Rs.4,31,648/- being business loss claimed as bad debt which arose in the course of business and was allowable deduction. 3. For that on the facts and circumstances of the case the order of the CIT be modified and the assessee be given the relief prayed for.
Although in this appeal, the assessee has raised three grounds of appeal but at the time of hearing, the solitary grievance of the assessee has been confined to ground No.2, that is, the issue relating to addition of Rs.4,31,648/- made by the AO on account of business loss as bad debts claimed by the assessee. given advances to various parties to purchase stores items (stores advances). The suppliers of store items supplied the store materials till 2001, after that they discontinued to supply the store items. The advances given by the assessee to the store suppliers and after discontinued supply, they did not pay the amount in spite of repeated reminders. These advances are time barred and it seemed to the assessee that these are not recoverable, therefore, the assessee took the decision to write it off in the books of account. Ld. AR for the assessee has pointed out that it is a business loss, not a bad debts, because the advances given by the assessee to the store suppliers and the store is connected with the business. The persons to whom the advances were given, denied to pay the amount to the assessee, therefore, amount became irrecoverable and the assessee written off these amounts as business loss/bad debts. Ld. AR has pointed out that these business loss/bad debt is allowable expenditure.
5.2. On the other hand, Ld. DR for the Revenue has primarily relied on the findings of the AO which we have already noted in our earlier para and is not being repeated for the sake of brevity.
5.3. Having heard the rival submissions, perused the material on record, we are of the view that there is merit in the submissions of the assessee, as the proposition canvassed by ld. AR for the assessee are supported by the facts narrated by him above. As Ld. AR for the assessee has pointed out that the assessee gave advance to store suppliers and the said 4 M/s Reliance Jute Mills International Limited store suppliers discontinued in supply since 2001-02 and after that the assessee made several attempts and sent reminders to the customer to whom the advances were given but they did not repay the money to the assessee. Therefore, it is assessee’s decision and the prerogative to decide that if any amount becomes irrecoverable the same can be written off as bad debts/business loss. Considering the factual position, we are of the view that addition made by the AO and confirmed by the ld. CIT(A) needs to be deleted. Accordingly, we delete the addition.
In the result, the appeal filed by the assessee, is allowed. Order pronounced in the open court on this 23/02/2017.
Sd/- Sd/- (A.T.VARKEY) (DR. A.L.SAINI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; �दनांक Dated 23/02/2017 �काश �म�ा/Prakash Mishra,�न.स/ PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant-M/s Reliance Jute Mills International Ltd 2. ��यथ� / The Respondent.- ITO, Ward-1(1), Kolkata 3. आयकर आयु�त(अपील) / The CIT(A), Kolkata. 4. आयकर आयु�त / CIT �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 5. 6. गाड� फाईल / Guard file. स�या�पत ��त //True Copy// आदेशानुसार/ BY ORDER,