The ACIT, Circle-1(2),, Baroda v. M/s. Bayer Diagnostic India Ltd.,, Baroda

ITA 3973/AHD/2007 | 2004-2005
Pronouncement Date: 26-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 397320514 RSA 2007
Assessee PAN AAACB8542M
Bench Ahmedabad
Appeal Number ITA 3973/AHD/2007
Duration Of Justice 2 year(s) 3 month(s) 27 day(s)
Appellant The ACIT, Circle-1(2),, Baroda
Respondent M/s. Bayer Diagnostic India Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 26-02-2010
Date Of Final Hearing 25-02-2010
Next Hearing Date 25-02-2010
Assessment Year 2004-2005
Appeal Filed On 29-10-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI BHAVNESH SAINI JM & SHRI A.N. PAHUJA A M I.TA. NO. 484/AHD/2007 - AY 2002-03 I.TA. NO.3973/AHD/2007 - AY 2004-05 ACIT CIRCLE- 1(1) VS BAYER DIAGNOSTICS INDIA LT D BARODA 589 SAYAJIPURA AJWA ROAD BARODA [PAN : AAACB8542M] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SS PANWAR DR ASSESSEE BY : SHRI JP SHAH AR O R D E R A.N. PAHUJA : THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST TWO SEPARATE ORDERS DATED 30.11.2006 FOR THE AY 2002-03 AND DAT ED 24.8.2007 FOR THE AY 2004-05 OF THE LD CIT(A)-I BARODA. SINCE SIMILAR ISSUES WERE INVOLVED IN THESE TWO APPEALS IN THE CASE OF SAME ASSESSEE THESE WE RE HEARD TOGETHER FOR THE SAKE OF CONVENIENCE AND ARE BEING DISPOSED OF THRO UGH THIS COMMON ORDER. 2. ADVERTING FIRST TO GROUND NO. 1 IN APPEAL F OR THE AY 2002-03 FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING IN COME OF RS.8 40 49 260/- FILED ON 31.10.2002 BY THE ASSESSEE MANUFACTURING DIAGNO STIC REAGENT STRIPS AND KITS AFTER BEING PROCESSED ON 25.3.2003 U/S 143(1) OF T HE INCOME-TAX ACT 1961[HEREINAFTER REFERRED TO AS THE ACT] WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 24.6.2003 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE HAD MADE PROVISION FOR PAYMENT OF RS.9 50 000/- UNDER THE HEAD LEGAL AND PROFESSIONAL FEES. TO A QUERY BY THE AO SEEKI NG DETAILS AND EVIDENCE OF SERVICES RENDERED THE ASSESSEE REPLIED THAT THE PR OVISION OF RS.7 50 000/- WAS REVERSED IN THE NEXT YEAR ON 31-12-2002 AND PROVISI ON OF RS.2 LAKHS REVERSED IN THE SUBSEQUENT YEAR ON 31.12.2003. THE ASSESSSEE SUBMITTED THAT PROVISION FOR FEES FOR LEGAL AND PROFESSIONAL FEES WAS MADE ON ES TIMATED BASIS. HOWEVER THE AO DISALLOWED THE PROVISION ON THE GROUND THAT THE ASSESSEE WAS FOLLOWING THE ITA NO.484 & 3973/AHD/2007 2 MERCANTILE SYSTEM OF ACCOUNTING WHICH PERMITTED AL LOWABILITY OF EXPENSES IN RESPECT OF ASCERTAINED LIABILITIES. SINCE THE LIABI LITY OF RS.9 50 000/- FOR THE YEAR UNDER CONSIDERATION AS ON 31-03-2002 WAS AN UNASCER TAINED LIABILITY NOR WAS THERE ANY EVIDENCE OF SERVICES RENDERED BY THE PER SONS FOR WHOM THE PROVISION WAS MADE AND NO PAYMENT AGAINST THESE PROVISIONS WA S ACTUALLY MADE AND ULTIMATELY THE AMOUNT HAD BEEN REVERSED IN THE SUCC EEDING YEARS THE AO DISALLOWED THE CLAIM. 3. ON APPEAL THE ASSESSEE CONTENDED THAT IT HA D MADE A TOTAL PROVISION OF RS.22 50 000/- ON 31-12-2001 ON ACCOUNT OF VARIOUS ARBITRATION AND EXCISE MATTERS AGAINST WHICH BILLS FOR RS.13 00 000/- HAD BEEN RECEIVED AND THE BALANCE OF RS. 9 50 000/- HAS SUBSEQUENTLY BEEN REV ERSED . THE ASSESSEE ARGUED THAT SINCE THE ASSESSEE IS FOLLOWING A UNIFO RM SYSTEM CONSISTENTLY THE DEDUCTION SHOULD BE ALLOWED ON ACCRUAL BASIS FOLLO WING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS VS CIT (2000) 112 TAXMAN 61 (SC) AND CALCUTTA CO LTD. VS CIT (1959) 37 ITR 1 (SC). IN THE LIGHT OF THESE SUBMISSIONS THE LD.CIT(A) MERELY FOLLOWING THE DE CISION OF THE HONBLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS (SUPRA) A LLOWED THE CLAIM OF THE ASSESSEE. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR WHILE CARRYING US THROUG H THE IMPUGNED ORDERS CONTENDED THAT THE ASSESSEE NEITHER FURNISHED THE BASIS OF AFORESAID PROVISION NOR ANY EVIDENCE OF SERVICES RENDERED BY THE PERSO NS FOR WHOM THE PROVISION WAS MADE WHILE THE LD. CIT(A) WITHOUT RECORDING A NY FINDINGS ON THESE ASPECTS DELETED THE DISALLOWANCE. INTER ALIA THE LD. DR RE LIED UPON A DECISION IN THE CASE OF INDIAN MOLASSES COMPANY PRIVATE LIMITED. VS. CIT 37 ITR 66(SC).ON THE OTHER HAND THE LD. AR ON BEHALF OF THE ASSESSEE W HILE RELYING UPON DECISIONS IN THE CASE OF CALCUTTA CO LTD.(SUPRA) CONTENDED THAT SERVICES WERE BEING RENDERED AND IN ACCORDANCE WITH THEIR CONSISTENT PRACTICE PROVISION HAD BEEN WRITTEN OFF. ITA NO.484 & 3973/AHD/2007 3 SINCE TAX RATES WERE SAME AND THE PROVISION HAD AL READY BEEN WRITTEN OFF IN SUBSEQUENT YEARS THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS HELD BY THE HONBLE APEX COURT IN INDIAN MOLASSES COMPANY PRIVATE LIMITED (SUPRA) EXPENDITURE WHICH IS DEDUCTIBLE FOR INCOM E-TAX PURPOSES IS ONE WHICH IS TOWARDS A LIABILITY ACTUALLY EXISTING AT T HE TIME BUT THE PUTTING ASIDE OF MONEY WHICH MAY BECOME EXPENDITURE ON THE HAPPENING OF AN EVENT IS NOT EXPENDITURE.THE LAW IS WELL SETTLED THAT IF A BUSI NESS LIABILITY HAS DEFINITELY ARISEN IN THE ACCOUNTING YEAR THE DEDUCTION SHOULD BE ALL OWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DA TE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SHOULD ALSO BE C APABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATI ON MAY NOT BE POSSIBLE . IN THE INSTANT CASE DESPITE SPECIFIC REQUEST MADE BY THE AO TO FURNISH BASIS FOR THE SAID PROVISION AND EVIDENCE OF SERVICES RENDERED BY THE PERSONS FOR WHOM PROVISION WAS MADE THE ASSESSEE DID NOT FURNISH T HE REQUISITE DETAILS AND EVIDENCE. THE LD. CIT(A) WITHOUT RECORDING ANY FIN DING ON THESE ASPECTS SIMPLY DELETED THE DISALLOWANCE FOLLOWING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS (SUPRA). AFTER CONS IDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION TH AT THE LD. CIT(A) HAS NOT PASSED A SPEAKING ORDER . THE APPLICATION OF MIND T O THE MATERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECT ION 250(6) OF THE ACT MANDATES THAT THE ORDER OF THE CIT(A) WHILE DISPOSI NG OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POINTS FOR DETERMINATIO N THE DECISION THEREON AND THE REASON FOR THE DECISION. AS IS APPARENT FROM THE I MPUGNED ORDER IN OUR OPINION THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE NAMELY THA T EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER WHICH SHOU LD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINT S RAISED BEFORE IT. THE REQUIREMENT OF RECORDING OF REASONS AND COMMUNICATI ON THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PROCEDUR E. THE REQUIREMENT OF RECORDING ITA NO.484 & 3973/AHD/2007 4 OF REASONS BY THE QUASI-JUDICIAL AUTHORITIES IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARIT Y CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZ ES ARBITRARINESS IN THE DECISION-MAKING PROCESS. WE MAY REITERATE THAT A D ECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB (1995)1SCC 760(SC)]. IN VIEW OF THE FOREGOING ESPECIALLY WHEN THE LD. CIT( A) HAS NOT PASSED A SPEAKING ORDER WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE F OR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF OUR AFORESAI D OBSERVATIONS AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES . NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL THE LEARNED CIT(A) SHA LL PASS A SPEAKING ORDER KEEPING IN MIND INTER ALIA THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT AND RECORD HAS SPECIFIC FINDINGS ON THE BASIS OF AFORESAID PROVISION AND AS TO WHETHER OR NOT SERVICES WERE AC TUALLY RENDERED BY THE PERSONS ON ACCOUNT OF WHOM PROVISION WAS MADE. WIT H THESE DIRECTIONS GROUND NO. 1 IN THE APPEAL FOR THE AY 2002-03 IS D ISPOSED OF. 6. GROUND NOS.2(A) (B) & (C) IN THE APPEAL F OR THE AY 2002-03 PERTAINS TO EXCLUSION OF SALES-TAX AND EXCISE DUTY FROM THE TOT AL TURNOVER WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT. THE AO WHILE COM PUTING DEDUCTION U/S 80HHC OF THE ACT EXCLUDED SALES TAX AND EXCISE DUTY FROM THE TOTAL TURNOVER RELYING INTER ALIA ON THE DECISIONS IN THE CASE O F CHOWRINGHEE SALES BUREAU 87 ITR 542(SC) MCDOWELL & CO. 154 ITR 148(SC) NAVJIVAN UDYOG MANDIR PVT. LTD. VS. CIT 207 IT 40(GUJ) AND SUDARSHAN CHEMICAL INDUS TRIES LTD. 245 ITR 769(BOM.). ON APPEAL THE LD. CIT(A) FOLLOWING THE DECISION OF SPECIAL BENCH IN THE CASE OF IFB AGRO INDUSTRIES LTD. VS. DCIT 261 I TR (AT)17(SB)(CAL.) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. ITA NO.484 & 3973/AHD/2007 5 7. THE REVENUE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDIGS OF THE LD. CIT(A). THE LD. DR SUPPORTED THE ORDER OF T HE AO IN THE LIGHT OF PROVISIONS OF SEC. 145A OF THE ACT WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE ORDER OF THE AO IN VIEW OF JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS LAKSHMI MACHINE WORKS 290 ITR 667 (SC). 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE. WE ARE NOT INCLINED TO ACCEPT THE CONTENTIONS OF THE L D. DR THAT THE PROVISIONS OF SEC. 145A WERE APPLICABLE TO THE CONCEPT OF TOTAL TURNOV ER EVEN WHILE DETERMINING THE DEDUCTION U/S 80HHC OF THE ACT IN VIEW OF THE FOL LOWING OBSERVATIONS OF THE HONBLE APEX COURT IN THE CASE OF LAXMI MACHINE WO RKS(SUPRA) WHEREIN IT WAS HELD AS UNDER: WE HAVE TO READ THE WORDS 'TOTAL TURNOVER' IN SECTI ON 80HHC AS PART OF THE FORMULA WHICH SOUGHT TO SEGREG ATE THE 'EXPORT PROFITS' FROM THE 'BUSINESS PROFITS'. THEREFORE WE HAVE TO READ THE FORMULA IN ENTIRETY. IN THAT FORMULA THE ENTIRE BUS INESS PROFITS IS NOT GIVEN DEDUCTION. IT IS THE BUSINESS PROFIT WHICH IS PROPORTIONATELY REDUCED BY THE ABOVE FRACTION/RATIO OF EXPORT TURNO VER + TOTAL TURNOVER WHICH CONSTITUTES SECTION 80HHC CONCESSION (DEDUCTION). INCOME IN THE NATURE OF 'BUSINESS PROFITS' WAS THE REFORE APPORTIONED. THE ABOVE FORMULA FIXED A RATIO IN WHI CH 'BUSINESS PROFITS' UNDER SECTION 28 OF THE ACT HAD TO BE APPO RTIONED. THEREFORE ONE HAS TO GIVE WEIGHTAGE NOT ONLY TO TH E WORDS 'TOTAL TURNOVER' BUT ALSO TO THE WORDS 'EXPORT TURNOVER' 'TOTAL EXPORT TURNOVER' AND 'BUSINESS PROFITS'. THAT IS THE REASO N WHY WE HAVE QUOTED HEREINABOVE EXTENSIVELY THE ILLUSTRATION FRO M THE DIRECT TAXES (INCOME-TAX) READY RECKONER OF THE RELEVANT WORD. I N THE CIRCUMSTANCES WE CANNOT INTERPRET THE WORDS 'TOTAL TURNOVER' IN THE ABOVE FORMULA WITH REFERENCE TO THE DEFINITION OF T HE WORD 'TURNOVER' IN OTHER LAWS LIKE CENTRAL SALES TAX OR AS DEFINED IN ACCOUNTING PRINCIPLES. GOODS FOR EXPORT DO NOT INCUR EXCISE DU TY LIABILITY. AS STATED ABOVE EVEN COMMISSION AND INTEREST FORMED A PART OF THE PROFIT AND LOSS ACCOUNT HOWEVER THEY WERE NOT ELI GIBLE FOR DEDUCTION UNDER SECTION 80HHC. THEY WERE NOT ELIGIBLE EVEN WI THOUT THE CLARIFICATION INTRODUCED BY THE LEGISLATURE BY VARI OUS AMENDMENTS BECAUSE THEY DID NOT INVOLVE ANY ELEMENT OF TURNOVE R. FURTHER IN ALL OTHER PROVISIONS OF THE INCOME-TAX ACT PROFITS AND GAINS WERE REQUIRED TO BE COMPUTED WITH REFERENCE TO THE BOOKS OF ACCOUNT OF THE ASSESSEE. HOWEVER AS CAN BE SEEN FROM THE INCO ME-TAX RULES AND FROM THE ABOVE FORM NO. 10CCAC IN THE CASE OF D EDUCTION ITA NO.484 & 3973/AHD/2007 6 UNDER SECTION 80HHC A REPORT OF THE AUDITOR CERTIFY ING DEDUCTION BASED ON EXPORT TURNOVER WAS SUFFICIENT. THIS IS BE CAUSE THE VERY BASIS FOR COMPUTING SECTION 80HHC DEDUCTION WAS 'BU SINESS PROFITS' AS COMPUTED UNDER SECTION 28 A PORTION OF WHICH HA D TO BE APPORTIONED IN TERMS OF THE ABOVE RATIO OF EXPORT T URNOVER TO TOTAL TURNOVER. SECTION 80HHC(3) WAS A BENEFICIAL SECTION . IT WAS INTENDED TO PROVIDE INCENTIVES TO PROMOTE EXPORTS. THE INCENTIVE WAS TO EXEMPT PROFITS RELATABLE TO EXPORTS. IN THE CASE OF COMBINED BUSINESS OF AN ASSESSEE HAVING EXPORT BUSINESS AND DOMESTIC BUSINESS THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCERTAIN EXPORT PROFITS BY APPORTIONING THE TOTAL BUSINESS P ROFITS ON THE BASIS OF TURNOVERS. APPORTIONMENT OF PROFITS ON THE BASIS OF TURNOVER WAS ACCEPTED AS A METHOD OF ARRIVING AT EXPORT PROFITS. THIS METHOD EARLIER EXISTED UNDER THE EXCESS PROFITS TAX ACT I T EXISTED IN THE BUSINESS PROFITS TAX ACT. THEREFORE JUST AS COMMIS SION RECEIVED BY AN ASSESSEE IS RELATABLE TO EXPORTS AND YET IT CANN OT FORM PART OF 'TURNOVER' EXCISE DUTY AND SALES TAX ALSO CANNOT F ORM PART OF THE 'TURNOVER'. SIMILARLY 'INTEREST' EMANATES FROM EXP ORTS AND YET 'INTEREST' DOES NOT INVOLVE AN ELEMENT OF TURNOVER. THE OBJECT OF THE LEGISLATURE IN ENACTING SECTION 80HHC OF THE ACT WA S TO CONFER A BENEFIT ON PROFITS ACCRUING WITH REFERENCE TO EXPOR T TURNOVER. THEREFORE 'TURNOVER' WAS THE REQUIREMENT. COMMISSI ON RENT INTEREST ETC. DID NOT INVOLVE ANY TURNOVER. THEREF ORE 90 PER CENT. OF SUCH COMMISSION INTEREST ETC. WAS EXCLUDED FROM TH E PROFITS DERIVED FROM THE EXPORT. THEREFORE EVEN WITHOUT THE CLARIF ICATION SUCH ITEMS DID NOT FORM PART OF THE FORMULA IN SECTION 80HHC(3 ) FOR THE SIMPLE REASON THAT THEY DID NOT EMANATE FROM THE' EXPORT T URNOVER' MUCH LESS ANY TURNOVER. EVEN IF THE ASSESSEE WAS AN EXCL USIVE DEALER IN EXPORTS THE SAID COMMISSION WAS NOT INCLUDIBLE AS IT DID NOT SPRING FROM THE' TURNOVER'. JUST AS INTEREST COMMISSION E TC. DID NOT EMANATE FROM THE 'TURNOVER' SO ALSO EXCISE DUTY AN D SALES TAX DID NOT EMANATE FROM SUCH TURNOVER. SINCE EXCISE DUTY A ND SALES TAX DID NOT INVOLVE ANY SUCH TURNOVER SUCH TAXES HAD TO BE EXCLUDED. COMMISSION INTEREST RENT ETC. DO YIELD PROFITS B UT THEY DO NOT PARTAKE OF THE CHARACTER OF TURNOVER AND' THEREFORE THEY WERE NOT INCLUDIBLE IN THE 'TOTAL TURNOVER'. THE ABOVE DISCU SSION SHOWS THAT INCOME FROM RENT COMMISSION ETC. CANNOT BE CONSID ERED AS PART OF BUSINESS PROFITS AND THEREFORE THEY CANNOT BE HEL D AS PART OF THE TURNOVER ALSO. IN FACT IN CIVIL APPEAL NO. 4409 OF 2005 THE ABOVE PROPOSITION HAS BEEN ACCEPTED BY THE ASSESSING OFFI CER IF SO THEN EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PART OF THE 'TOTAL TURNOVER' UNDER SECTION 80HHC(3) OTHERWISE THE FOR MULA BECOMES UNWORKABLE. IN OUR VIEW SALES TAX AND EXCISE DUTY ALSO DO NOT HAVE ANY ELEMENT OF 'TURNOVER' WHICH IS THE POSITION EVE N IN THE CASE OF RENT COMMISSION INTEREST ETC. IT IS IMPORTANT TO BEAR IN MIND THAT EXCISE DUTY AND SALES TAX ARE INDIRECT TAXES. THEY ARE RECOVERED BY ITA NO.484 & 3973/AHD/2007 7 THE ASSESSEE ON BEHALF OF THE GOVERNMENT. THEREFORE IF THEY ARE MADE RELATABLE TO EXPORTS THE FORMULA UNDER SECTIO N 80HHC WOULD BECOME UNWORKABLE. THE VIEW WHICH WE HAVE TAKEN IS IN THE LIGHT OF THE AMENDMENTS MADE TO SECTION 80HHC FROM TIME TO T IME. 8.1 SECTION 80HHC OF THE INCOME-TAX ACT 1961 IS A BENE FICIAL SECTION AND WAS INTENDED TO PROVIDE INCENTIVE TO PROMOTE EXPORT S. THE INTENTION WAS TO EXEMPT PROFITS RELATABLE TO EXPORTS. AS OBSERVED B Y THE HONBLE APEX COURT ONE CANNOT INTERPRET THE WORDS TOTAL TURNOVER WITH RE FERENCE TO THE DEFINITION OF THE WORD TURNOVER IN OTHER LAWS LIKE THE CENTRAL SALE S TAX OR AS DEFINED IN ACCOUNTING PRINCIPLES. THE WORDS 'TOTAL TURNOVER' I N SECTION 80HHC HAVE TO BE READ AS PART OF THE FORMULA WHICH SOUGHT TO SEGREGA TE THE 'EXPORT PROFITS' FROM THE 'BUSINESS PROFITS . THEREFORE WE ARE OF THE O PINION THAT EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PART OF THE TOTAL TURNO VER UNDER SECTION 80HHC(3) OF THE ACT. 8.2 RECENTLY IN THE CASE OF SONY INDIA PVT. LTD. VS. DCIT IN ITA NO. 1181/DEL/2005 DATED 23/9/2008 FOR THE AY 2001-02 I TAT DELHI BENCH FOLLOWING THE AFORESAID DECISION OF THE HONBLE SUPREME COURT DIRECTED TO EXCLUDE EXCISE DUTY WHILE WORKING OUT TOTAL TURNOVER FOR THE PURPO SE OF DEDUCTION U/S 80HHC OF THE ACT. 8.3. IN VIEW OF AFORESAID DECISION OF THE HONB LE SUPREME COURT THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO EXCLUDE EXCIS E DUTY AND SALES TAX WHILE WORKING OUT TOTAL TURNOVER FOR THE PURPOSE OF DEDUC TION U/S 80HHC OF THE ACT. THUS GROUND NO. 2(A) (B) & (C) RAISED IN THE APPEA L OF THE REVENUE ARE DISMISSED. 9. NEXT GROUND NOS. 3(A) & (B) IN THE APPEAL FO R THE AY 2002-03 AND GROUND NOS.1(A) & (B) IN THE APPEAL FOR THE AY 2004-05 PE RTAIN TO REDUCTION OF INDIRECT COSTS FROM THE EXPORT TURNOVER THEREBY ENHANCING TH E DEDUCTION U/S 80HHC OF THE ACT. THE AO NOTICED THAT THE ASSESSEE WAS CAR RYING ON MANUFACTURING AS WELL AS TRADING ACTIVITIES AND INDIRECT EXPENSES I NCURRED BY THE ASSESSEE HAVE TO BE ATTRIBUTED TO TRADING ACTIVITIES WHILE DETER MINING PROFITS DERIVED FROM EXPORT ITA NO.484 & 3973/AHD/2007 8 OF TRADING GOODS. THOUGH THE ASSESSEE ATTRIBUTED FEW INDIRECT EXPENSES TO TRADING ACTIVITY THE ASSESSEE DID NOT CONSIDER RE NT RATES AND TAXES PRINTING AND STATIONARY COMMUNICATION TRAVELLING AND SERVICE C HARGES AS PART OF INDIRECT EXPENSES. TO A QUERY BY THE AO THE ASSESSEE REPLIE D THAT IN CASE OF THE RENT THE SAME HAD BEEN PAID TO M/S BAYER INDIA LTD WHICH IS OUTSIDE THE HEAD OFFICE AND NO EXPORT ACTIVITY HAS BEEN CONDUCTED FROM THAT OFFICE. AS REGARDS RATES AND TAXES THEY WERE ENTIRELY FOR MANUFACTURED SALES WH ILE PRINTING AND STATIONERY COMMUNICATION TRAVELLING AND CONVEYANCE FREIGHT SERVICE CHARGES DID NOT RELATE TO THE EXPORT ACTIVITIES. THE AO HOWEVER DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT THE MANUFACTURING AS WE LL AS TRADING AND EXPORT TRADING WERE AN INTEGRAL PART OF THE ASSESSEES BUS INESS ACTIVITY AND THEREFORE THE AFORESAID INDIRECT EXPENSES HAVE TO BE ATTRIBU TED TO THE EXPORT TRADING BUSINESS ALSO. ACCORDINGLY THE AO RECOMPUTED THE DEDUCTION U/S 80HHC OF THE ACT AFTER APPORTIONING THE EXPENSES IN THE RATIO OF TOTAL TURNOVER TO TRADING EXPORT TURNOVER. 10. ON APPEAL THE ASSESSEE ARGUED THAT ALLOCAT ION OF INDIRECT EXPENSES WAS MADE IN ACCORDANCE WITH PRACTICE CONSISTENTLY FOLLO WED IN THE EARLIER YEARS AND EVEN IN SUBSEQUENT YEAR AND THEREFORE THERE WAS NO JUSTIFICATION FOR DISTURBING THE SAME. IT WAS ARGUED THAT SIMILAR ALLOCATION IN THE EARLIER YEARS AND EVEN IN AY 2003-04 HAS BEEN ACCEPTED BY THE AO. IN THE LIG HT OF THESE SUBMISSIONS THE LD. CIT(A) OBSERVED THAT THE AO DID NOT DELVE DEEP INTO THE QUESTION AND HAS NOT MADE ENQUIRIES TO SEE WHETHER OR NOT DIFFERENT SET S OF BOOKS OF ACCOUNT WERE BEING MAINTAINED IN RESPECT OF THE TWO ACTIVITIES; WHETHER THE PRODUCT TRADED LOCALLY AND THE FOREIGN COUNTRIES WAS THE SAME; WHE THER THE TWO ESTABLISHMENTS / SET-UPS WERE CLEARLY IDENTIFIABLE AND WERE SO DEMAR CATED ETC. AND HOW THE TRADING ACTIVITY AND EXPORT TRADING WRE AN INTEGRA L PART OF THE ASSESSEES BUSINESS ACTIVITY. SINCE THE AO ALLOCATED THE AFOR ESAID EXPENSES MERELY ON PRESUMPTION WHILE THE ASSESSEE WAS FOLLOWING A CON SISTENT PRACTICE THE LD. CIT(A) DELETED THE DISALLOWANCE. ITA NO.484 & 3973/AHD/2007 9 11. THE REVENUE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR WHILE RELYING UPON DECIS IONS IN THE CASE OF CIT VS. PARY AGRO INDUSTRIES LTD. 257 IT 41(KERALA) CIT VS. JOSE THOMAS 253 ITR 553(KERALA) & CIT VS. V CHINNAPANDI 282 ITR 389 (MA DRAS) SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSE E SUPPORTED THE FINDINGS OF THE LD. CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS. THOUGH THE AO TREATED RENT RATES AND TAXES PRINTING AND STAT IONARY COMMUNICATION TRAVELLING AND SERVICE CHARGES AS PART OF INDIRECT EXPENSES THERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT THESE HAVE ANY RELATIO N WITH THE EXPORT ACTIVITIES OF THE ASSESSEE NOR THE AO CARED TO ASCERTAIN AS TO WH AT WAS THE BASIS ADOPTED BY THE ASSESSEE IN THE PRECEDING YEARS AND WHAT WAS WR ONG WITH THE CONSISTENT PRACTICE FOLLOWED BY THE ASSESSEE IN THE PRECEDING AND SUCCEEDING YEARS . IN VIEW OF THE FINDINGS OF THE LD. CIT(A) THAT INDIREC T EXPENSES HAD BEEN ALLOCATED IN ACCORDANCE WITH CONSISTENT PRACTICE FOLLOWED BY TH E ASSESSEE IN THE PRECEDING YEARS AND ACCORDING TO THE ASSESSEE EVEN IN AY 2003 -04 SAME METHOD HAD BEEN ACCEPTED BY THE AO WHILE THE LD. DR COULD NOT POINT OUT ANY INFIRMITY IN THESE FINDINGS OF THE LD. CIT(A) NOR DEMONSTRATED A S TO HOW THE DECISIONS RELIED UPON BY HIM WERE APPLICABLE TO THE FACTS AND ISSUE IN THE INSTANT CASE WE ARE NOT INCLINED TO TAKE A DIFFERENT VIEW IN THE MATTER. TH EREFORE GROUND NOS. 3(A) & (B) IN THE APPEAL FOR THE AY 2002-03 AND GROUND NOS.1(A) & (B) IN THE APPEAL FOR THE AY 2004-05 ARE DISMISSED. 13. NEXT GROUND NOS. 2(A) (B) & (C) IN THE AP PEAL OF THE REVENUE FOR THE AY 2004-05 RELATE TO CLAIM FOR DEDUCTION OF RS.53 29 7 38 U/S 36(1)(VII) READ WITH SEC. 36(2) OF THE ACT. THE AO DISALLOWED THE CLAI M FOR DEDUCTION ON THE GROUND THAT THE ASSESSEE FAILED TO PROVE THAT THE DEBTS HA D BECOME BAD. THE ASSESSEE DID NOT FURNISH ANY EVIDENCE BEFORE THE AO TO SHOW THAT THE AMOUNTS WERE TAKEN IN TO ACCOUNT IN THE INCOME OF THE EARLIER YEARS NO R PRODUCED ANY EVIDENCE IN THE FORM OF COPY OF ACCOUNTS TO SHOW THAT THE SAID AMOU NTS WERE WRITTEN OFF DURING ITA NO.484 & 3973/AHD/2007 10 THE YEAR UNDER CONSIDERATION. ON THE OTHER HAND T HE AO FOUND THAT THE ASSESSEE WAS CONTINUING ITS TRANSACTIONS WITH THE C ONCERNED DEBTORS.THOUGH THE ASSESSEE RELIED UPON DECISION IN THE CASE OF DCIT VS OMAN INTERNATIONAL BANK 100 ITD 285(MUM)(SB) THE AO WHILE RELYING UPON THE DECISIONS IN THE CASE OF DCIT VS. INDIA THERMIT CORPORATION LTD. 56 ITD 307( DELHI) AND SOUTH INDIA SURGICAL CO. LTD. VS. ACIT 287 ITR 62(MAD ) DISALLO WED THE CLAIM ON THE GROUND THAT THE ASSESSEE DID NOT FULFILL THE CONDITIONS ST IPULATED U/S 36(1)(VII) OF THE ACT AND WAS CONTINUING TRANSACTIONS WITH THE DEBTORS. 14. ON APPEAL THE LD. CIT(A) WITHOUT RECOR DING ANY FINDINGS ON THE FACTS FOUND BY THE AO OR THE DECISIONS RELIED UPON HIM MERELY FOLLOWED THE DECISION IN THE CASE OF OMAN INTERNATIONAL BANK(SUPRA) AND CONCLUDED THAT THE ASSESSEE FULFILLED THE CONDITIONS STIPULATED U/S 36(1)(VII) OF THE ACT. ACCORDINGLY CLAIM OF THE ASSESSEE WAS ALLOWED. 15.. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(APPEALS). THE LD. DR RELIED UPON THE DE CISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DHALL ENTE RPRISED AND ENGINEERS PVT. LTD VS. CIT 295 ITR 499(GUJ) AND CONTENDED THA T SINCE ASSESSEE FAILED TO ESTABLISH THE SAID DEBT BECOME BAD THE LD. CIT(APP EALS) WAS NOT JUSTIFIED IN ALLOWING THE CLAIM. ON THE OTHER HAND THE LD. AR O N BEHALF OF THE ASSESSEE WHILE RELYING UPON THE DECISIONS IN THE CASE OF CIT VS. GIRISH BHAGWAT PRASAD 256 ITR 772(GUJ) & CIT VS. AHMEDABAD ELECTRICITY CO. L TD. 262 ITR 97(GUJ) SUPPORTED THE ORDER OF THE LD. CIT(A). 16. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH T HE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. WE ARE OF THE OPINI ON THAT THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT HIS CLAIM FALLS WITHIN T HE PROVISIONS OF SEC. 36(1)(VII) READ WITH SEC. 36(2) OF THE ACT. WHILE ADJUDICATING A SIMILAR CLAIM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DHALL ENT ERPRISED AND ENGINEERS P. LTD. V. CIT 295 ITR 481 (GUJ) HELD THAT ITA NO.484 & 3973/AHD/2007 11 EVEN IF WE GO BY THE PLAIN READING OF CLAUSE (VII) THE REQUIREMENT FOR ALLOWING DEDUCTION ON ACCOUNT OF BA D DEBT IS THAT THE BAD DEBT SHOULD BE WRITTEN OFF AS IRRECOVERABLE . MERE DEBITING THE AMOUNT IS NOT SUFFICIENT. THE REQUIREMENT IS TH AT THE ASSESSEE SHOULD ALSO PROVE THAT THE DEBT HAS BECOME BAD IN T HAT PARTICULAR YEAR. AS POINTED OUT RIGHTLY BY THE TRIBUNAL THERE WAS CORRESPONDENCE REGARDING THE AMOUNT IN QUESTION THA T DUE TO SOME DIFFERENCES THE AMOUNT WAS NOT PAID IN THAT PARTICU LAR YEAR. BUT WHEN CORRESPONDENCE WAS THERE TO THE EFFECT THAT TH E ASSESSEE WAS INSISTING FOR PAYMENT FOR RECOVERY OF THE DEBT IT CANNOT BE SAID THAT THE DEBT HAS BECOME BAD IN THE RELEVANT ASSESSMENT YEAR. WE THEREFORE SEE NO INFIRMITY IN THE ORDER OF THE TRI BUNAL AND WE ANSWER THE FIRST QUESTION AGAINST THE ASSESSEE. 16.1. IN A RECENT JUDGMENT DATED 5.11.2009 HONB LE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KOHLI BROTHERS COLOR LAB (P) LT D. IN ITA NO.2 OF 2007 AFTER CONSIDERING AN EARLIER DECISION OF THE HONBLE GU JRAT HIGH IN THE CASE OF CIT VS. GIRISH BHAGWAT PRASAD 256 ITR 772 O BSERVED AS UNDER: THE INTENTION OF LEGISLATURE IS CLEAR THAT ONCE IN ASSESSMENT YEAR IN QUESTION DEBT OR PART THEREOF HAS BEEN WRITTEN OFF AS IRRECOVERABLE QUA THE SAME DEDUCTIONS ARE TO BE ACCORDED AS PER PROVISION OF SECTION 36(1)(VII) OF THE ACT SUBJECT TO THE PROVISIONS OF 36(2) OF T HE ACT. PRIOR TO AMENDMENT IN THE AFOREMENTIONED SECTION W.E.F. 1.4.1989 THE W ORDS ' ANY BAD DEBT OR PART TO HAVE BECOME A BAD DEBT IN THE PREVIOUS YEA R' WERE USED AND AFTER THE AMENDMENT W.E.F. 1.4.1989 SAME HAS BEEN SUBSTITUTED BY ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF ASSESSEE FOR THE PR EVIOUS YEAR. EFFECT OF SAID AMENDMENT IS THAT NOW IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT DEBT HAD BECOME BAD IN THE PREVIOUS YEAR BEFORE GETTING DEDUCTIONS AND MERE WRITING OF AS IRRECOVERABLE OF DEBT OR PART THEREOF IS SUBSTANTIAL COMPLIANCE OF THE SAME. THE QUESTION IS IS SAID ENTRY OF WRITING OF BAD DEBT OR PART THEREOF MADE IN BOOKS OF ACCOU NTS CONCLUSIVE AND ASSESSING OFFICER IS PRECLUDED FROM MAKING INQUIRIE S BEFORE ACCORDING/REFUSING DEDUCTIONS. UNDER THE SCHEME AS PROVIDED FOR UNDER INCOME TAX ACT THE ENTRIES WHICH HAVE BEEN MADE A S TO WHETHER SAME ARE GENUINE ENTRY AND NOT IMAGINARY AND FANCIFUL EN TRY QUA THE SAME ASSESSING OFFICER IS FULLY EMPOWERED TO MAKE INQUIR Y HOWEVER WISDOM OF THE RESPONDENT-ASSESSEE CANNOT BE IN SUCH MATTER QU ESTIONED AND NO DEMONSTRATIVE OR INFALLIBLE PROOF OF BAD DEBT HAVIN G BECOME BAD IS REQUIRED AND COMMERCIAL EXPEDIENCY IS TO BE SEEN F ROM THE POINT OF VIEW OF ASSESSEE DEPENDING ON NATURE OF TRANSACTION CA PACITY OF DEBTOR ETC. ITA NO.484 & 3973/AHD/2007 12 BUT QUA ENTRY SEMBLANCE OF GENUINENESS HAS TO BE T HERE AND SAME SHOULD NOT BE MERE PAPER WORK. ALL THE JUDGMENT WHICH HAV E BEEN CITED AT THE BAR GENUINENESS OF ENTRIES HAVE NEVER BEEN DOUBTE D THEREIN WHEREAS IN THE CASE IN HAND SPECIFIC QUERY HAS BEEN MADE FROM RESPONDENT- ASSESSEE TO FURNISH I.E. (A) COMPLETE NAMES AND A DDRESSES OF THE PERSONS (WITH REFERENCE TO WHOM BAD DEBTS WRITTEN OFF CLAIMED MENTIONING AGAINST EACH AMOUNT.(B) COPIES OF LEDGER ACCOUNT OF THESE PERSONS FOR THE RELEVANT AS SESSMENT YEAR AND THREE PRECEDING YEARS. (C) EFFORTS MADE TO REALIZE THESE DUES. ADMITTED POSITION IS THAT SAID QUERIES HAVE NOT AT ALL BEEN REPLIED AND REQUISITE INFORMATION HAS NOT AT ALL BEEN FURNISHED RATHER S TAND HAS BEEN TAKEN THAT ENTRY HAS BEEN MADE NO PROOF IS REQUIRED. UNDER S ECTION 143(2) OF THE ACT ASSESSING OFFICER IS EMPOWERED TO REQUIRE THE ASSESSEE TO PRODUCE THE EVIDENCE IN SUPPORT OF THE RETURN AS SUCH WHER E RESPONDENT-ASSESSEE HAS CLAIMED AS BAD DEBT OR PART THEREOF WRITTEN OF F AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE UNDER THE PROVISION OF SEC TION 36(1)(VII) OF THE INCOME TAX ACT 1961 THEN ON THE STRENGTH OF THE A MENDMENT MADE ON 1.4.1989 IT CANNOT BE SAID THAT AN INQUIRY IS NOT PERMISSIBLE UNDER THE PROVISION OF INCOME TAX ACT TO SEE AND SATISFY THAT THERE IS SOME SEMBLANCE OF THE GENUINENESS IN THE ENTRY WHICH HA D BEEN MADE SAME IS NOT AT ALL TOTALLY FAKE ENTRY AS RESPONDENT- ASSESS EE WOULD BE ENTITLED FOR DEDUCTION ONLY IF ITS BAD DEBT OR PART THEREOF. HON'BLE APEX COURT IN THE CASE OF TRAVANCORE TEA ESTATES CO. LTD. VS. CIT (19 99) 151 CTR (SC) 231; (1998) 233 ITR 203 (SC) HAS TAKEN THE VIEW THAT AS TO WHETHER A DEBT HAS BECOME BAD OR AT WHAT POINT OF TIME IT BEC AME BAD ARE PURE QUESTION OF FACT. THOUGH STANDARD OF PROOF OF PROVI NG THE SAME IS BAD DEBT IS NOT REQUIRED TO BE ADOPTED AND IS TO BE DECIDED ON THE WISDOM OF THE RESPONDENT ASSESSEE AND NOT ON THE WISDOM OF ASSESS ING OFFICER BUT TO SHOW THAT ENTRY WHICH HAD BEEN MADE AS BAD DEBT THE RE HAS TO BE SOME MATERIAL IN SUPPORT OF THE SAME GIVING SOME SEMBLA NCE OF GENUINENESS AND TRUTHFULNESS TO THE SAME IN THE DIRECTION OF FO RMING OPINION THAT SAID DEBT WAS ARISING OUT OF TRADING ACTIVITY THERE WAS RELATIONSHIP OF DEBTOR OR CREDITOR SAME WAS IRRECOVERABLE. MERELY BECAUSE EN TRIES HAVE BEEN MADE IN RESPECT OF BAD DEBT OR PART THEREOF WRITI NG IT OFF CLAIMING DEDUCTION THE SAID ENTRIES CAN ALWAYS BE EXAMINED BY THE ASSESSING OFFICER BEFORE PROCEEDING TO AWARD DEDUCTIONS AND NOT BY MERELY BLINDLY FOLLOWING THE SAME BUT STAND OF THE ASSESSEE HAS T O BE TESTED FROM THE POINT OF VIEW OF ASSESSEE AND ASSESSEE CANNOT COME FORWARD AND SAY THAT ON ACCOUNT OF CHANGE BROUGHT IN BY WAY OF AMEN DMENT W.E.F. 1.4.1989 UNDER SECTION 36(1)(VII) INQUIRY IS NOT P ERMISSIBLE. THUS IN THE PRESENT CASE ON THE SUBSTANTIAL QUESTION OF LAW P OSED PROVISION OF SECTION 143 (2) OF INCOME ACT VIZ-A-VIZ SECTION 36( 1)(VII) OF THE INCOME TAX ACT 1961 READ WITH SECTION 36(1) BOTH WOULD BE HAR MONIZED TO GIVE ITA NO.484 & 3973/AHD/2007 13 PURPOSEFUL MEANING TO BOTH THE STATUTORY PROVISIONS AS ONE EXTENDS BENEFIT TO THE RESPONDENT-ASSESSEE OF DEDUCTION FOR THEIR DEBT OR PART THEREOF BECOMING BAD AND OTHER AUTHORIZES ASSESSING OFFICER TO SEE THAT PROVISION OF INCOME TAX ACT ARE NOT FLOUTED BY ANY MEANS. CONSEQUENTLY IMPUGNED ORDER DATED 04.08.2006 PASSED BY THE INCOM E TAX APPELLATE TRIBUNAL LUCKNOW BENCH LUCKNOW IS HEREBY QUASHED AND SET ASIDE. AS IN THE PRESENT CASE NO REPLY HAD BEEN SUBMITTED TO THE QUERY MADE AS SUCH IN CASE SUCH REPLY IS SUBMITTED THEN IN THAT EVENT ASSESSING OFFICER IS DIRECTED TO TAKE FRESH DECISION IN ACCORDANCE WI TH LAW AFTER AFFORDING OPPORTUNITY OF THE RESPONDENT-ASSESSEE ON THE BASIS OF THE RECORD PRODUCED. 16.2. RECENTLY HONBLE SUPREME COURT IN THEIR D ECISION DATED 9.2.2010 IN THE CASE OF TRF LTD. VS. CIT IN CIVIL APPEAL NO.5293 OF 2003 HELD THAT THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FAC T HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER IN THE PRESENT CASE THE ASSESSI NG OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS IN FACT BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS THE BAD DEBT ACCOUNT IS DEBITED AN D THE CUSTOMER'S ACCOUNT IS CREDITED THUS CLOSING THE ACCOUNT OF THE CUSTOMER . IN THE CASE OF COMPANIES THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS S TATED ABOVE THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER IN FACT THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE THE MATTER IS REMITTE D TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. 16.3 IN THE INSTANT CASE THE AO DISALLOWED T HE CLAIM INTER ALIA SINCE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE BEFORE HIM TO SHOW THAT THE AMOUNTS WERE TAKEN IN TO ACCOUNT IN THE INCOME OF THE EARLI ER YEARS NOR PRODUCED ANY EVIDENCE TO SHOW THAT THE SAID AMOUNTS WERE WRITTE N OFF DURING THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) DID NOT RECORD HIS S PECIFIC FINDINGS AS TO WHETHER OR NOT THE DEBTS HAD BEEN TAKEN IN TO ACCOUNT IN THE INCOME OF THE EARLIER YEARS AND IF SO IN WHICH YEARS NOR SPECIFIED AS TO WHETH ER OR NOT THESE AMOUNTS WERE WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. EVEN NO FINDINGS WERE RECORDED ON THE DECISIONS RE LIED UPON BY THE AO AND DID NOT EVEN CONSIDER THE DECISIONS OF THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF DHALL ENTERPRISED AND ENGINEERS P. LTD.(SUP RA) OR OTHER TWO DECISIONS ITA NO.484 & 3973/AHD/2007 14 RELIED UPON BY THE LD. AR ON BEHALF OF THE ASSESSEE BEFORE US. IN THESE CIRCUMSTANCES ESPECIALLY WHEN THERE IS NO FINDING IN THE IMPUGNED ORDER AS TO WHETHER OR NOT THE AMOUNTS CLAIMED AS BAD DEBTS WER E WRITTEN OFF IN THE YEAR UNDER CONSIDERATION NOR THE LD. CIT(A) HAD BENEFIT OF AFORESAID DECISION OF THE HONBLE APEX COURT IN TRF LTD.(SUPRA) WE CONSID ER IT FAIR AND APPROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE T HE MATTER TO HIS FILE WITH THE DIRECTIONS TO RE-EXAMINE THE CLAIM OF THE ASSESSE E IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE AFORESAID DECISION OF THE HONBLE APEX COURT AND THEREAFTER ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. THE LD. CIT(A) INT ER ALIA SHALL RECORD HIS SPECIFC FINDINGS AS TO WHETHER OR NOT THE AMOUNT CLAIMED AS BAD DEBTS HAD BEEN WRITTEN OFF IN THE ACCOUNTS OF THE YEAR UNDER CONSIDERATION . WITH THESE DIRECTIONS GROUND NOS. 2(A) (B) & (C) ARE DISPOSED OF 17. NO ADDITIONAL GROUND HAVING BEEN RAISED I N TERMS OF RESIDUARY GROUND NO. 4 IN THE APPEAL FOR THE AY 2002-03 & GROUND NO.3 IN THE APPEAL FOR THE AY 2004- 05 THESE GROUNDS ARE DISMISSED. 18. IN THE RESULT BOTH THESE APPEALS ARE PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26TH D AY OF FEBRUARY 2010. SD/- SD/- (BHAVNESH SAINI) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED :26 TH FEBRUARY 2010 PK/- COPY TO: 1. THE ASSESSEE 2. ACIT CIRCLE- 1(1) BARODA 3. CIT(A)-I BARODA 4. CIT-CONCERNED BARODA BY ORDER 5. DR B BENCH DEPUTY REGISTRAR ITAT AHMEDABAD