M/S PUNJAB AGRO FOOD GRAINS CORPN. LTD.,CHANDIGARH vs. ITO, W-4(2), CHANDIGARH

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ITA 345/CHANDI/2018Status: DisposedITAT Chandigarh13 June 2018AY 2014-152 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that if a debt written off in a previous year is recovered, the recovered amount is taxable in the year of recovery. Since the Rs. 50,50,000 was already offered to tax in FY 2015-16, the addition made by the AO was incorrect.

What were the facts?

The assessee recovered bad debts amounting to Rs. 2,09,21,368. An amount of Rs. 50,50,000 was reversed in an expense account in March 2016 for the financial year 2015-16.

What were the issues?

Whether the recovery of bad debts should be accounted for on an accrual basis, and if the amount already offered to tax in a subsequent year can be added back in the current assessment year.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH’A’, CHANDIGARH

Before: SMT. DIVA SINGH & DR. B.R.R. KUMAR

For Appellant: Shri. Nayan Jain
For Respondent: Shri. Manoj Kumar
Hearing: 11/06/2018Pronounced: 13/06/2018

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH’A’, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.345/Chd/2018 Assessment Year: 2014-15

M/s Punjab Agro Food Grain Vs. The ITO Corporation Ltd. Ward 4(2), Plot No. 2A, Sector 28A Chandigarh Chandigarh PAN No. AADCP1290P (Appellant) (Respondent) Appellant By Shri. Nayan Jain (Proxy Counsel) Respondent By : Shri. Manoj Kumar

Date of hearing : 11/06/2018 Date of Pronouncement : 13/06/2018

ORDER PER DR. B.R.R. KUMAR, A.M:

The present appeal has been filed by the assessee against the order of the Ld. CIT(A)-2, Chandigarh dated 30/01/2018 pertaining to Assessment Year 2014-15. 2. The assessee has raised the following grounds: 1. That the order of Ld. CIT(A) in dismissing the appeal is bad & against the facts of present case. 2. That the Ld. CIT(A) & Ld. AO are not justified in making the assessment under section 143(3). 3. That the Ld. CIT(A) & Ld. AO has erred in making the addition of Rs. 50,50,000/- on account of recoveries in accounts, whereas the said account has already been added to the income of assessee corporation in March 2016.

3.

The effective ground of appeal pertains to recoveries from the bad debts and accounting thereof.

4.

During the year the assessee has recovered bad debts of Rs. 2,09,21,368as per the auditor’s report.

5.

Before the Assessing Officer, the assessee submitted that an amount of Rs. 1,58,71,368/- received during the year has been reversed in the accounts on receipt of the payments. It was also submitted before the Assessing Officer that

the amount of Rs. 50,50,000/- was reversed in expense account for the year 2015-16 in March 2016.

6.

The Ld. CIT(A) confirmed the addition on the grounds that the recovery of the bad debts have to be accounted on accrual basis.

7.

The ld. DR argued that since assessee is following accrual system the realizations have to be accounted on accrual basis.

8.

The facts on record depict that the amount of Rs. 50,50,000/- has been received during the Financial Year 2013-14 and accounted.

9.

Regarding the recovery of bad debts if in any previous year, the debt has been written off as bad and the relevant deduction has also been claimed but later on the same debt is recovered in full or part, then the amount so recovered will be included as income of the financial year in which such amount has recovered. If in any previous year, the assessee has written off a part of the debt and the said deduction was also allowed by the Assessing Officer and in future, some money is received from the debtors, then the amount so recovered will be treated as a normal realization of debts.

10.

Since the amount of Rs. 50,50,000/- has already been taken as income and offered to tax, in the F.Y. 2015-16, the appeal of the assessee is hereby allowed.

Order pronounced in the open Court.

Sd/- Sd/- (DIVA SINGH) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated : 13/06/2018 AG

Copy to:

1.

The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) The DR 5.

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