Commissioner Of Income Tax,Ludhiana v. M/S. K.d. Enterprisesludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 251 of 2006Date of decision: December 1, 2010 Commissioner of Income Tax,Ludhiana --- Appellant Versus M/s. K.D. EnterprisesLudhiana --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Rajesh Katoch, Central Government StandingCounsel for the appellant-Revenue. Mr. S.K. Mukhi, Advocatefor the respondent-assessee. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961(for short “the Act”) has been filed by the Revenue against the order dated28.9.2005, passed by the Income Tax Appellate Tribunal, ChandigarhBench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No.393/CHANDI/2004, relating to the assessment year 1997-98. The following substantial question of law has been claimed fordetermination of this Court: “Whether on the facts and law, the Hon’ble Income TaxAppellate Tribunal was legally justified to hold the sundry debtsof trading receipts as bad debt to allow its deduction u/s 36(1)(vii) of I.T. Act?” The facts, in brief, necessary for adjudication, as narrated in theappeal are that the assessee-firm, filed return on 31.10.1997 for theassessment year in question, declaring total income of Rs. 34,457/- and thesame was processed under Section 143(1)(a) of the Act on 27.2.1998. Theassessment was completed under Section 143(3) on total income of Rs.56,460/- on 15.3.2000. The case was re-opened under Section 263 of theAct. The reassessment was completed under Section 143(3)/263 of the Acton 26.2.2003 at a total income of Rs. 15,91,890/-, including Rs. 12,52,350/-which the assessee had claimed as bad debts written off. TheCommissioner of Income-tax (Appeals) {in short “the CIT(A)”}, allowed theappeal of the assessee on the issue of disallowance of Rs. 12,52,350/-,vide order dated 16.1.2004. Aggrieved by the said order, the Revenuepreferred appeal before the Tribunal. The Tribunal by the order underappeal dismissed the appeal and upheld the order of the CIT(A).We have heard learned counsel for the parties and haveperused the record. The point for consideration in this appeal is, “whether bad debtas claimed by the assessee was admissible under Section 36(1)(vii) of theAct”. The Tribunal on the aforesaid issue recorded its finding asunder: “On perusal of record and after hearing rival contention, it isseen that undisputedly the amount has been debited in profit and loss account by the assessee. In our considered opinion,the assessee is the best judge to decide whether the debt isreally bad and not the department. In the present case, eventhe assessee lodged an FIR with the Police Station though nofruitful result arrived. The Assessing Officer has not doubted thecondition for allowing bad debts. The only objection of theAssessing Officer is that whether it has really become bad?There is an amendment in proviso to Section 36(1)(vii) witheffect from 1.4.89 which provides that is bad debt which iswritten off as irrecoverable in the books of accounts of theassessee is allowable as against the earlier provision theassessee was bound to establish that it has become really bad.The decision pronounced in the case of Taylor Instrument Co.India Ltd. Vs. CIT, 254 ITR 125 wherein on similar facts andcircumstances, the issue was held to be allowable as bad debtsupports the case of the assessee. In the case of A.W. Figgis &Co. Pvt. Ltd. Vs. CIT, 254 ITR 63 wherein criminal proceedingswere filed against the debtor. The amount not recovered washeld to be deductible as a bad debt clearly supports the case ofthe assessee. The following decisions also throw light on theissue: a. 143 ITR 166 (Gujarat) b. 74 ITR 723 (Bombay) c. 120 ITR 792 (Bombay) d. 80 TTJ 696 (Bombay) e. 152 CTR 199 (Gujarat) f. 256 ITR 772 (Gujarat) In view of these facts, we have not found any mistake in the a. 143 ITR 166 (Gujarat) b. 74 ITR 723 (Bombay) c. 120 ITR 792 (Bombay) d. 80 TTJ 696 (Bombay) e. 152 CTR 199 (Gujarat) f. 256 ITR 772 (Gujarat) In view of these facts, we have not found any mistake in the order of the Ld. CIT(A) on the basis of which different view maybe possible. The same is upheld.” The CIT(A) had recorded a finding of fact that the amount of Rs.12,52,350/- had become irrecoverable from M/s. Shakti Enterprises and,therefore, was bad debt. The said finding had been affirmed by theTribunal. Learned counsel for the Revenue could not point out any faultwith the aforesaid reasons recorded by the Tribunal which may warrantinterference by this Court. Finding no element of illegality or perversity inthe impugned order, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE December 1, 2010*rkmalik* (ADARSH KUMAR GOEL) JUDGE