ACIT 8(1), MUMBAI v. FREIGHTWINGS & TRAVELS PVT. LTD, MUMBAI

ITA 2729/MUM/2009 | 2005-2006
Pronouncement Date: 28-01-2010 | Result: Dismissed

Appeal Details

RSA Number 272919914 RSA 2009
Assessee PAN AAACF0628G
Bench Mumbai
Appeal Number ITA 2729/MUM/2009
Duration Of Justice 8 month(s) 29 day(s)
Appellant ACIT 8(1), MUMBAI
Respondent FREIGHTWINGS & TRAVELS PVT. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 28-01-2010
Date Of Final Hearing 25-01-2010
Next Hearing Date 25-01-2010
Assessment Year 2005-2006
Appeal Filed On 29-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI BEFORE SHRI R V EASWAR SENIOR VICE PRESIDENT AND SHRI RAJENDRA SINGH ACCOUNTANT MEMBER I T A NO: 2729/MUM/2009 (ASSESSMENT YEAR: 2005-06) ASSISTANT COMMISSIONER OF INCOME TAX 8(1) MUMBAI APPELLANT VS M/S FREIGHTWINGS & TRAVELS PVT. LTD. MUMBAI RE SPONDENT (PAN: AAACF0628G) APPELLANT BY: SHRI S B MOREY RESPONDENT BY: SHRI JAYESH DADIA O R D E R R V EASWAR SENIOR VICE PRESIDENT: THIS APPEAL IS BY THE DEPARTMENT AND THE ONLY GROU ND TAKEN IS THAT THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF BAD DE BTS OF RS.19 48 792/- WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF AIR CARGO AGENT. IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 3 1.03.2005 RELEVANT TO THE ASSESSMENT YEAR 2005-06 THE ASSESSEE DEBITED A SUM OF RS.38 06 874/- AS BAD DEBTS. WHILE COMPLETING THE ASSESSMENT UNDER SECTI ON 143(3) OF THE INCOME TAX ACT THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS RELATING TO THE BAD DEBTS SUCH AS WHEN THOSE DEBTS WERE OFFE RED FOR TAXATION STEPS TAKEN FOR RECOVERY AND JUSTIFICATION FOR THE WRITE OFF. THE ASSESSEE SUBMITTED A DETAILED REPLY DATED 20.09.2007 AND FURNISHED THE RELEVANT D ETAILS. THE ASSESSEE ALSO POINTED OUT THAT THE DEBTS WERE OFFERED AS INCOME I N THE EARLIER YEARS WHICH WOULD BE EVIDENT FROM THE STATEMENT OF ACCOUNTS FIL ED FOR THOSE YEARS SEPARATELY AND THAT THEY HAD ACTUALLY BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT AND THE ACCOUNT OF THE DEBTORS HAS BEEN REDUCED ACCORDINGLY . THE ASSESSING OFFICER 2 HOWEVER HELD THAT IN RESPECT OF DEBTS AGGREGATING TO RS.19 48 792/- THE ASSESSEE WAS UNABLE TO ADDUCE PROPER EVIDENCE AND J USTIFICATION IN RESPECT OF THE CLAIM THAT THE DEBTS WERE WORTHLESS AND BAD. H E ALSO REFERRED TO THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT AND POI NTED OUT THAT EVEN AFTER THE AMENDMENT MADE WITH EFFECT FROM 01.04.1989 IT WAS REQUIRED OF THE ASSESSEE TO ESTABLISH THAT THE DEBT HAD BECOME BAD IN THE RELEV ANT YEAR OF ACCOUNT. IN THIS VIEW OF THE LEGAL POSITION AND ALSO NOTING THAT THE ASSESSEE DID NOT FURNISH DETAILS AS TO WHAT STEPS WERE TAKEN TO RECOVER THE AFORESAI D AMOUNT HE DISALLOWED AND ADDED BACK RS.19 48 792/- AND COMPLETED THE ASSESSM ENT ACCORDINGLY. 3. ON APPEAL THE ASSESSEE SUBMITTED BEFORE THE CIT( A) ON THE BASIS OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. STAR CHEMICALS (BOMBAY) P. LTD. (2009) 313 ITR 126 (BOM) THAT AFTER THE AMENDMENT MADE TO THE ABOVE SECTION IF THE ASSESSEE HAD WRIT TEN OFF THE DEBT AS BAD THAT WOULD SATISFY THE PURPOSE OF THE SECTION. IT WAS A CCORDINGLY CONTENDED THAT THE DISALLOWANCE OF THE BAD DEBTS TAKING A DIFFERENT V IEW OF THE STATUTORY PROVISION AS AMENDED WITH EFFECT FROM 01.04.1989 WAS UNJUSTIFIE D. THE CIT(A) ACCEPTED THE SUBMISSION OF THE ASSESSEE AND FOLLOWING THE JUDGME NT CITED ABOVE AS ALSO THE ORDER OF THE SPECIAL BENCH OF THE ITAT (MUMBAI) IN DCIT VS. OMAN INTERNATIONAL BANK SAOG (2006) 100 ITD 285 (MUM) (SB) DELETED TH E DISALLOWANCE OF RS.19 48 792 AND ALLOWED THE APPEAL. 4. IT IS AGAINST THE AFORESAID DECISION OF THE CIT( A) THAT THE REVENUE HAS PREFERRED THE PRESENT APPEAL. 5. WE HAVE CONSIDERED THE FACTS AND THE RIVAL CONTE NTIONS. THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN DIRECTOR OF INCOME -TAX (INTERNATIONAL TAXATION) VS. OMAN INTERNATIONAL BANK (2009) 313 IT R 128 (BOM) DIRECTLY COVERS 3 THE PRESENT CASE. IN THIS JUDGMENT THE ORDER OF TH E SPECIAL BENCH CITED SUPRA WAS AFFIRMED AND IT WAS HELD THAT AFTER THE AMENDME NT MADE TO SECTION 36(1)(VII) WITH EFFECT FROM 01.04.1989 IT WAS NEITHER OBLIGAT ORY NOR THE BURDEN OF THE ASSESSEE TO PROVE THAT THE DEBT HAS BECOME BAD SO LONG AS THE WRITING OFF OF THE DEBT WAS BONA FIDE AND BASED ON COMMERCIAL WISDOM O R EXPEDIENCY. IN THE PRESENT CASE THERE IS NO DISPUTE THAT THE DEBTS AGG REGATING TO RS.19 48 792/- WERE WRITTEN OFF IN THE BOOKS OF ACCOUNT FOR THE YE AR UNDER APPEAL. THE ASSESSEE IN ITS LETTER TO THE ASSESSING OFFICER HAS ALSO POI NTED OUT THAT THESE PARTIES WERE NOT RESPONDING TO THE CALLS AND THE COST OF FILING COURT CASES AGAINST SUCH PARTIES WOULD AMOUNT TO THROWING GOOD MONEY AFTER BAD MONEY AND HENCE THE MANAGEMENT TOOK A DECISION TO DECLARE THEM AS BAD D EBTS. THIS CLAIM OF THE ASSESSEE WAS ALSO NOT DOUBTED BY THE ASSESSING OFFI CER. THE WRITE OFF CANNOT THEREFORE BE SAID TO BE NOT BONA FIDE OR NOT BASED ON COMMERCIAL WISDOM OR EXPEDIENCY. IN THIS SITUATION THE LEGAL POSITION TAKEN BY THE ASSESSING OFFICER IS CLEARLY WRONG AS HAS BEEN HELD BY THE BOMBAY HIGH C OURT IN THE JUDGMENT CITED SUPRA. THEREFORE RESPECTFULLY FOLLOWING THE JUDGM ENT OF THE HONBLE BOMBAY HIGH COURT IN THE ABOVE CASE AS ALSO IN THE CASE OF CIT VS. STAR CHEMICALS (BOMBAY) P. LTD. (SUPRA) WE CONFIRM THE DECISION O F THE CIT(A) DELETING THE DISALLOWANCE OF THE BAD DEBTS OF RS.19 48 792/- AND DISMISS THE APPEAL FILED BY THE REVENUE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON 28 TH JANUARY 2010. SD/- SD/- (RAJENDRA SINGH) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI DATED 28 TH JANUARY 2010 SALDANHA 4 COPY TO: 1. M/S FREIGHTWINGS & TRAVELS PVT. LTD. MAKWANA ROAD MAROL ANDHERI (EAST) MUMBAI 400 059 2. ACIT 8(1) 3. CIT-VIII 4. CIT(A)-VIII 5. DR F BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI