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2022 (11) TMI 244 - AT - Income TaxRevision u/s 263 - provision for bad and doubtful debts as debited to the P&L accounts due to non-receipts of amounts Water charges receivable from Kothagudem Municipality since 1999, Amount receivable toward reimbursement of salaries of the staff counted against the Government posts from the Government for the period from 01.02.1999 to 31.03.2004, Bill of cost for an amount from various companies to the end of 31.03.2010. HELD THAT:- It is an admitted fact that the assessee has debited an amount in the P&L A/c towards miscellaneous losses and provisions written off which include provisions for bad and doubtful debts. Although the assessee has given the details of miscellaneous losses and provisions written ofhowever, the AO failed to consider the provisions for bad and doubtful debts since any provision for bad and doubtful debts cannot be allowed as an expenditure. Similarly, in the computation of income statement u/s 115JB, the assessee has taken the book profit at Rs.28866.02 lakhs and arrived at the income of Rs.484,74,65,032/- u/s 115JB as against Rs. 51008.45 lakhs. Despite the figures available on record, the Assessing Officer failed to examine the short computation of income u/s 115JB of the Act. Similarly, the Miscellaneous losses and provisions for bad and doubtful debt of Rs.24.55 crores includes Rs.15,03,01,740/- towards obsolete stores etc., and Rs.3434340 towards loss on sale of scarp. However, the Assessing Officer failed to examine the issue properly since the assessee is having scarp a/c separately and therefore, the obsolescence of store a/c should have been transferred to the scarp a/c and scarp receipts thereof, if any, should have been offered to tax. Since the Assessing Officer in the instant case has not examined the vital issues properly, therefore, the order passed by the Assessing Officer, in our opinion, has become erroneous as well as prejudicial to the interest of the revenue. Therefore, CIT, in our opinion, has rightly invoked the jurisdiction u/s 263 of the I.T. Act. The various decisions relied upon by the learned Counsel for the assessee, in the instant case, are distinguishable and not applicable to the facts of the present case since the Assessing Officer in the instant case has not at all examined the issue for which he has raised the queries. Accordingly, the order passed by the learned CIT is upheld and the grounds raised by the assessee are dismissed. Addition of disallowance towards provision for bad and doubtful debts - AO made the addition on the ground that the provision for bad and doubtful debt is not an allowable expenditure - HELD THAT:- A perusal of the order passed by the learned CIT (A) for the A.Y 2011-12 shows that similar addition made by the Assessing Officer was sustained by hi towards provision for bad and doubtful debts and the learned Counsel for the assessee admitted that the assessee has accepted the same and has not filed any appeal. Further, any provision for bad and doubtful debt debited to P&L A/c is not an allowable expenditure. In this view of the matter, we do not find any infirmity in the order of the learned CIT (A) on this issue. Accordingly, the same is upheld and the ground raised by the assessee is dismissed. Addition on account of loss on sale of scrap - HELD THAT:- Since the scrap is valued at saleable value, there cannot be any loss on account of sale of scrap. Further, the sale of scrap is not the basic business of the assessee. In this view of the matter and in view of the detailed reasoning given by the learned CIT (A), we do not find any infirmity in the order of the learned CIT (A) on this issue. So far as the argument of the learned Counsel for the assessee that in subsequent years, the learned CIT (A) has allowed such type of claim by deleting the addition made by the Assessing Officer on this issue and the Revenue has not filed any appeal against the relief granted by the learned CIT (A) is concerned, we do not find any merit in the same argument. Merely, because some wrong has been followed, the same cannot be perpetuated. Further, it is the settled proposition of law that the principle of res judicata does not apply to Income Tax Proceedings and every A.Y is separate and distinct. In this view of the matter, the order of the learned CIT (A) is upheld and the ground raised by the assessee is dismissed. Loss on obsolescence of stores - AO made addition being amount debited towards obsolescence of stores etc., under the head ‘Misc. Losses and Provisions” on the ground that the assessee is having scrap a/c separately and therefore, the same is not an allowable expenditure - HELD THAT:- CIT (A) sustained the addition. We do not find any infirmity in the order of the learned CIT (A) on this issue. As mentioned earlier, the assessee has made a provision towards obsolescence of stores and as mentioned by us in the preceding paragraphs, provision cannot be allowed as an expenditure especially when the assessee was unable to show us as to whether such provision was quantified in a scientific basis or not - whether there is any reversal of entry on account of increase or decrease in the provision in the subsequent years was also not shown by the assessee. Under these circumstances, we do not find any infirmity in the order of the CIT (A) on this issue and the ground raised by the assessee is dismissed.
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