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TMI Blog2010 (12) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of bad debts which are written off as irrecoverable to the Profit and Loss Account under section 36(1)(vii) read with section 36(2) of the Act, notwithstanding satisfying the conditions for allowance thereof under section 36(2) read with section 36(1)(vii) of the Act; and (e) considering the appellant's returned income at Rs.55,80,99,210/- instead of Rs.55,71,09,800/- in assessing the total income U/s. 143(3) of the Act;" 3. The issue in ground No. 1(a) pertains to bringing to tax an amount of Rs.12,72,914/- stated to be disallowance out of payment made to RMG David Communications P. Ltd. under section 40A(2)(a). The A.O. noticed that an amount of Rs.3,85,31,541/- was paid to sister concern M/s. RMG David Communications P. Ltd. on which provisions of section 40A(2)(a) are attracted. The assessee explained that it has entered into an agreement with SBI LIFE for their advertisement and the entire work of hoardings was assigned to the sister concern on profit sharing basis. It was submitted that the total bill raised by the assessee on SBI LIFE was Rs.3,67,89,416/- whereas the total bill amount of RMG David Communications P. Ltd. was to the tune of Rs.3,52,43, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the prevailing profit rate in this hoarding business was at 15%, yet the appellant could not bring any evidence even during the appeal proceedings to prove that the income (profit margin) in such trade is no 15% and is actually less than that. No satisfactory explanation could be offered by the appellant before the undersigned to show that the income disclosed by it from the hoarding business was reasonable and correct. The profit margin prevailing in any particular line of business of identical nature, cited by the AO, cannot be ignored. 1.8. In view of the above mentioned observations and findings it is noted that the reasons given by the AO are correct and justified and in view of the same, the addition of Rs.12,72,914/- is confirmed." 5. Drawing our attention to the business done by the assessee during the year in various clients' accounts and billing done and income earned in various advertising activities the learned Counsel submitted that the profit margin varied from 5.71% to 15% except in the case of one client (name withheld) on which there was a margin of 44%. It was the contention that the assessee has not concealed any percentage and different profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessee that assessee's sister concern has rendered services in the joint agreement in the hoarding business with the SBI LIFE. Since the A.O. has not made out any case either for showing less margin in the said business or correctly invoked provisions of section 40A(2)(b), there is no need for any addition made at 3.46% of the margin. We are surprised that the learned CIT(A) also has not understood provisions of section 40A(2) and confirmed the addition on presumptions. The assessee has furnished details of its client-wise billing and income statement which indicates that profit margin varies from 5.1% to 9% in large number of clients' accounts. Since the A.O. has not rejected the books of account nor countered the facts as submitted by the assessee in the business with reference to other Ad business conducted, we are of the view that the A.O. has wrongly invoked provisions of section 40A(2) for making an addition on so called profit margin which itself is not sustainable in any other way considering the facts of the case. In view of this, we delete the addition so made. Assessee's ground on this is allowed. 8. Ground No. 1(b) pertains to the issue of software e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.w.s. 36(2) of the I.T. Act. 12. Briefly stated, the assessee had written off Rs.3,43,35,822/- as bad debts and the A.O., after examining certain high volume debtors disallowed an amount of Rs.2,23,56,514/- on the pretext that assessee has not satisfied the conditions under section 36(2). The considered the same holding that the write off is not bonafide and assessee has not been able to answer Assessing Officer's query as to how it had not been able to recover the dues even from its own sister concern, namely RMG David Communications P. Ltd. in which it has controlling interest. On this basis the CIT(A) considered that the write off is not a bonafide act and accordingly confirmed the disallowance. 13. Drawing our attention to the details filed in the paper book, it was the submission of the learned counsel that these bad debts are not actually bad debts but they are the amounts settled less than the billed amount as a sort of settlement amount or remission/discount amount in the day to day business of the assessee. It was her explanation that sometimes the clients do not pay full amount due to excessive billing/hoarding not up to the standard/variations in size, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for write off. On both legal principles and on facts the bad debt claims are allowable. In our view the A.O. has not examined the nature of the amounts that is written off in its correct perspective. Therefore, we are of the view that this issue can be re-examined by the A.O. and allow the amounts after due verification. Assessee should be given an opportunity to explain its claim fully. With this the ground is allowed for statistical purposes. 16. Ground No. 1(e) pertains to the claim of the assessee that its returned income was taken at Rs.55,80,99,2120/- instead of Rs.55,71,09,880/-. The assessee has filed revised computation of income at a lesser figure in the course of assessment which the A.O. has not discussed at all in the assessment order. The CIT(A) dismissed the claim of the assessee stating that the assessee cannot revise its income just by filing revised computation of income without filing a revised return and relying of the Apex Court judgement in the case of Goetze (India) Ltd. vs. CIT 284 ITR 323. 17. On consideration of the arguments we hold that the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT 284 ITR 323 makes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment. b) in any appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; c) in any other case, he may pass such orders in the appeal as he thinks fit.:" 21.2 The issue related power of first appellate Authority has been examined by the Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Nirbheram Deluram 224 ITR 610(SC). The brief facts of that case were that during reassessment proceedings the ITO made addition to the assessee's income to the extent of Rs.2,45,000 on account of ostensible transactions in hundi loans shown by the assessee. On appeal, the AAC, while sustaining the aforesaid addition also too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Officer, and if that is so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income-tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise, an appellate authority while hearing the appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitation, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer." (p. 693) Taking note of the decision in Gurjargravures (P.) Ltd.'s case (supra), the Court has said: ".. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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