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Income Tax Appellate Tribunal, HYDERABAD BENCHES “SMC”, HYDERABAD
Before: SHRI LALIET KUMAR
Assessment Year: 2017-18 SDS Metals (I) Private Vs. The Income Tax Officer, Limited, Hyderabad. Ward –3(1), C/o. P. Murali & Co., Hyderabad. Chartered Accountants, 6-3-655/2/3, Somajiguda, Telangana – 500082. PAN : AASCS1826P. (Appellant) (Respondent) Assessee by: Shri P. Murali Krishna, C.A. Revenue by: Shri B. Yadagiri, Sr.AR Date of hearing: 07.03.2024 Date of pronouncement: 07.03.2024 O R D E R PER LALIET KUMAR, J.M. The appeal of the assessee for A.Y. 2017-18 arises from the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.18.09.2023 invoking proceedings under section 143(3) of the Income Tax Act, 1961 (in short, “the Act”).
The appeal filed by the assessee is barred by limitation by 77 days. He has moved a condonation application explaining reasons thereof. I have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, I allow the application for condonation of delay. Accordingly, the delay is condoned and the appeal of the assessee is admitted for hearing.
2.1 The grounds raised by the assessee read as under : “
1. The order passed by the Ld. CIT(A) u/ s 250 of the Act is erroneous both on facts and in law to the extent the order is prejudicial to the interest of the appellant.
2. The delay in filing of the appeal before the Hon'ble ITAT is due to technical defect in the E-filing portal due to which the order could not be downloaded and it could only be downloaded on ()1.01.2024, which is reasonable cause for delay in filing appeal before the Hon'ble ITAT.
3. The Ld.CIT(A) erred in not considering the fact that the AO has passed the order without actually considering the facts of the case and submissions made by the assessee which is against the provisions of law and principles of natural justice.
4. The Ld. CIT(A) erred in not appreciating the fact that the revised return filed u/ s 139(5) dated 30.03.2019 by the assessee makes the original return non-existent and no action can be taken against non- existent Return of Income.
5. The Ld. CIT(A) erred in considering the fact that the Original Return of Income u/ s 139(1) has been revised with the intention to rectify the mistake made in the original ROI i.e., not adjusting the Bad Debts written off and not considering the same would result in incorrect conclusions and is unjustifiable and against the principles of natural justice.
6. The Ld. CIT(A) ought to have appreciated the fact that the AO erred in ignoring the statutorily filed Revised Return of Income u/ s 139(5), without considering or examining the accounts as per the revised ROI which is invalid and bad in law.
7. The Ld. CIT(A) ought to have appreciated the fact that the AO erred in wrongfully disallowing the bad debts written off claimed by the assessee amounting to Rs. 25,50,458/- without considering the facts and submissions made by the assessee, which is incorrect and unjustifiable in law.
8. The Ld. CIT(A) erred in not allowing the claim of deduction towards bad debts u/ s 37 without appreciating the fact that such bad debts have been recorded in the revised ROI and such disallowance is invalid and bad in law. 2
9. The Ld. CIT(A) erred in not adjudicating the ground that the AO erred in disallowing the claim of bad debts without conducting any kind of independent enquiries of his own to prove and strengthen his conclusion which is against the provisions of natural justice.
10. The Ld. CIT(A) erred in upholding the initiation of penalty proceedings u/ s 270A of the Income Tax Act, 1961 when the assessee has not under reported his income for the Assessment year under consideration.”
The brief facts of the case are that assessee is a company engaged in trading of iron and steel items like MS angles, MS channels, TMT bars, etc., It had filed return of income for the Assessment year 2017-18 on 31.10.2017 admitting income of Rs.25,37,070/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 11.08.2010. Later, the appellant company filed a revised return of income on 30.03.2019 admitting loss of Rs.13,390/-. Thereafter, a notices u/s 142(1) of the Act were issued calling for information. The assessee has claimed bad debts of Rs.25,50,458/- as written off on 31.03.2017 against the debtor, M/s Trade Syndicate and increase in other expenses, finance costs etc. On verification of the information submitted by the assessee, Assessing Officer observed that the audited profit and loss account dt.31.08.2017 does not show any scope that the amount of bad debts was claimed therein and he had disallowed the bad debts claimed by the assessee by revising original return of income and thereafter made an addition of Rs. 63,583/- on account of interest late deposit of TDS. Thus, Assessing Officer completed the assessment and passed assessment order on 06.12.2019 u/s 143(3) of the Act.
Feeling aggrieved with the order of Assessing Officer assessee filed an appeal before the ld.CIT(A) who granted partial relief to the assessee.
Before me, ld. AR submitted that the Assessing Officer has not taken into account the revised return while passing the assessment order. In fact, the assessment order was passed on 30.12.2019 whereas the revised return was filed on 30.03.2019 itself i.e., the assessment order was passed after six months of the filing of the revised return. As per law, the Assessing Officer has a bounden duty to consider the revised return while passing the assessment order and hence, it is the ground to remand the matter back to the file of Assessing Officer. The ld. AR also submitted that while passing the assessment order, at page 01 of the assessment order, Assessing Officer clearly mentioned that the assessee has filed a revised return on 30.03.2019 admitting loss of Rs.13,390/-. However, there is no discussion by the Assessing Officer either he accepted the revised return or not in the body of the order. The ld. AR further submitted that once the Assessing Officer has accepted the revised return, then it is mandatory to issue notice u/s 143(2) of the Act, which is not done in the present case. He also relied on the decision of Hon’ble Supreme Court in the case of ACIT Vs. Hotel Blue Moon reported in (2010) 321 ITR 362 (SC)
Per contra, ld. DR has submitted that in the present case, we have to observe three days, which are important for disposal of the appeal :- 1) 31.10.2017, which is the date of original filing of return, 2) 11.08.2018, which is the date of issuance of notice under section 143(2) of the Act and 3) 30.03.2019, after a gap of almost 18 months from the scrutiny notice, assessee admitted loss of Rs.13,390/-. The contention of the ld. DR is that the scrutiny proceedings cannot be for the benefit of assessee and the assessee cannot revise the return after issuance of section 143(2) notice. The ld. DR has submitted that the ld.CIT(A) has dismissed the case on merits. He also submitted that once the scrutiny proceedings has started, then revise return filed by the assessee cannot be taken into account for disposal of the appeal. The ld. DR further relied on para 7.1 at page 7 of the order of ld.CIT(A), which is to the following effect : “7.1. The basic and most important condition of allowing bad debts is that the debts must be written of in the books of account. But in the instant case the debts has been shown neither in the audit report nor the balance sheet and profit and loss account of the appellant company which proves that the debts were not actually written off in books of the appellant company, rather it was claimed by revising of return of income. Thus, primary condition for allowing bad debts is not fulfilled. Secondly, bad debts are allowable in the financial year in which they become bad and irrecoverable, not in preceding financial year when they were not termed as bad and irrecoverable. In the instant case, bad debts have been claimed after two years by revising the return of income.”
In rebuttal, the ld. AR submitted that there is no prohibition under the Act to file revised return and that in the present case, the revised return was filed within the period of limitation.
I have heard both sides and perused the material available on record. Section 139(5) of the Act provides as under :
Section 139(5) - If any person, having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time 57[before three months prior to the end] of the relevant assessment year or before the completion of the assessment, whichever is earlier.
8.1. The bare reading of section 139(5) makes abundantly clear that if the assessee fulfilled the conditions, then the assessee can file valid return. Section 139(5) of the Act is not drafted in a manner to restrict the right of the assessee to file the return of income. It is very plain and simple which gives the right to assessee to file revised return prior to the framing of the assessment order by the Assessing Officer. The argument of the ld. DR that once the scrutiny proceedings are open, the assessee cannot file a revised return is without any merit, as this argument is contrary to the provision of Income Tax Act. The right on the assessee cannot be curtailed by the revenue merely because this assessment has commenced. Hence, the same is not sustainable. Even some guidance can be taken from the observation of the Hon'ble Supreme Court in the case of Goetz (India) Limited Vs. CIT wherein the Hon'ble High Court has held that in case, the valid return is filed at the early stage, then the ld.CIT(A) shall consider the same and pass the appeal accordingly.
8.2. In the light of the above, the assessee was within its rights to file the revised return within the time frame granted by the Act. 6 Having held that the assessee has the right to file the revised return even though the scrutiny proceedings are on, I am left with no other option to remand back the matter to the Assessing Officer to pass afresh order after considering the revised return. In view of the above reasons, the matter is remanded back to the file of Assessing Officer with a direction to decide the issue after considering the revised return filed by the assessee and affording the opportunities of hearing to the assessee in accordance with law.
The assessee shall be at liberty to file documents, if any, as required for proving his case and the Assessing Officer shall consider the evidences, if any, filed by the assessee. Needless to say the Assessing Officer shall examine those documents / evidence filed by the assessee and also the other documents available on record. After considering the revised return and the documents, if any, filed by the assessee and the submissions made by the assessee, the Assessing Officer shall pass a detailed speaking order dealing with the contentions of the assessee. I have not adjudicated the other grounds on merits as I am setting aside the orders passed by the lower authorities to the file of Assessing Officer for fresh adjudication. Thus, the grounds of the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the Open Court on 7th March, 2024.