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TMI Blog2011 (12) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the said deduction vide his order Annex. 4 dt. 16th May, 2007. The Revenue went up in second appeal before the learned Tribunal, which allowed the Revenue's appeal vide its order Annex. 2 dt. 30th May, 2008; the relevant paras 12 to 14 of the Tribunal's order are reproduced hereinbelow for ready reference:- "12. Briefly stated the facts of the case are that the assessee company is engaged in the export of marble tiles and granite slabs and tiles. It had claimed an income of Rs. 1,75,31,353 exempt under s. 10B in respect of granite division. Return of income showing total loss of Rs. 1,87,13,265 was filed on 31st Dec., 1999 accompanied by tax audit report in Form No. 3CD. The return was processed under s. 143(1) on 16th Feb., 2000. Later on, the case was reopened under s. 147 by issuing notice under s. 148 of the Act. The assessee reduced a sum of Rs. 2,29,70,959 as doubtful advances/debts written off during the year in the P and L a/c. This list of doubtful debts with serial number, name of party, purpose and amount is given at pp. 6 to 9 of the impugned order from which the AO found that three parties, namely, M/s Jalkanta Technical and Financial Services (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f employees they have left the organization. In case of three concerns of Gajendra Porwal Group, the advances were given in accounting years 1994-95 and 1995-96 for purchase of raw material. There was a search in the place of Porwal group on 11th March, 2005. Therefore, the transaction was found to be 10 years old. Apart from that, Shri Gajendra Porwal admitted that the accommodation entries were provided by taking cash equivalent to the amount of accommodation entries and the same were deposited in their bank account. Thereafter the cheques for accommodations were issued to the concerned parties. Me further admitted that normally the commission ranged between 0.5 per cent to 2 per cent of the accommodation entry amount charged by him and such commission was received in cash. But in the case of the assessee, the issue is just reverse. The appellant has given the advance for purchase of raw material and not taken any loan/share application money, gift or share capital subscription. The learned CIT(A), therefore, concluded that there was no question of taking accommodation entry from the above three concerns of Gajendra Porwal Group. These are real transactions taking place long back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the issue was found satisfied by the assessee during the course of assessment proceedings or before the learned CIT(A). The learned CIT(A) also has not considered this issue in this line even though this is an important aspect for sustaining the claim of the assessee of bad debts or part thereof is written off or of any previous year. This part of the ingredient having not been satisfied by the assessee, the claim of the assessee cannot be allowed. Therefore, under these facts and circumstances, he sought for setting aside the order of the learned CIT(A) and restoring that of the AO by allowing the ground raised by the Department. 14. On careful analysis of the material made available before the Tribunal and in the light of rival submissions of both the parties, it is found that undisputedly the bad debts represent advances made by the assessee as long back as 10 years prior to the period under consideration and they were not required to be examined in those periods as the assessee has not claimed them as allowable expenditure of the business. Since, the assessee is claiming them as allowable as they became irrecoverable, he has to establish primarily that all are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the asst. yr. 1999-2000. 4. The assessee filed miscellaneous application under s. 254(2) of the Act seeking rectification of the order passed by the learned Tribunal on 30th May, 2008 but the said miscellaneous application also came to be rejected by the learned Tribunal by its impugned order Annex. 1, dt. 27th April, 2010. 5. Being aggrieved by the same, the assessee preferred this writ petition before this Court for quashing of order dt. 27th April, 2010 Annex. 1 of learned Tribunal and said writ petition was filed on 6th Sept., 2010. 6. The Revenue has not filed any reply to the writ petition and only oral arguments were made by learned counsel for the Revenue. 7. Learned counsel for the petitioner, Mr. Anurag Kalavatiya urged that learned Tribunal, with respect, has erred in not appreciating that after the amendment of s. 36(1)(vii) of the Act, which was amended by Direct Tax Laws (Amendment) Act, 1987, w.e.f. ast April, 1989, mere writing off as irrecoverable of bad debts in the books of accounts of the assessee for the previous year was enough to allow such deduction from the profits and gains of the business under s. 36(1)(vii) of the Act, si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an exporter of marble. Since, during the contemporary period, the goods purportedly supplied by the supplier of the said group were of inferior quality, the assessee naturally could not accept such goods for export outside India, and at the same time since the said debtors failed to refund the business advances made by the assessee, during the said period after waiting for about ten years, the assessee had written off the said advances as having turned bad and irrecoverable and, therefore, claimed deduction of the same in asst. yr. 1999-2000 in the present year. He, therefore, submitted that the premise of the assessing authority as well as learned Tribunal on appeal filed by the Revenue was absolutely wrong for disallowing the said deduction and such a mistake being apparent on the face of record was a rectifiable error under s. 254(2) of the Act, and the learned Tribunal was not justified in rejecting such application under s. 254(2) of the Act. 9. On the other hand, Mr. K.K. Bissa, learned counsel for the Revenue submitted that firstly the present writ petition is not even maintainable, since the assessee has alternative remedy by way of appeal under s. 260A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of the High Court. A Co-ordinate Bench of this Court in the case of Apex Metchem (P) Ltd. (supra) has held that where final order under s. 254(1) of the Tribunal is recalled and matter is directed to be decided afresh by the learned Tribunal, it cannot be said to be an order appealable under s. 260A of the Act, and therefore, a writ petition against such a recall order of learned Tribunal would be maintainable under Art. 226 of the Constitution of India before the High Court. 12. The Division Bench of Bombay High Court in the case of Chem Amit vs. Asstt. CIT (2005) 194 CTR (Bom) 141 : (2005) 272 ITR 397 (Bom) also similarly held that orders of Tribunal refusing rectification under s. 254(2) of the Act are not appealable under s. 260A of the Act. The Bombay High Court held that expression "appeal shall lie to the High Court from every order passed in appeal by the Tribunal" obviously is referable to such orders passed under s. 254(1) of the Act. Thus, an order passed by the Tribunal on application for rectification under s. 254(2) of the Act, rejecting rectification application cannot be said to be order passed in appeal by the Tribunal within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the extern of write off." 16. This legal position settled by the Hon'ble Supreme Court and in view of the amendment in law w.e.f. ast April, 1989, admittedly, applicable to asst. yr. 1999-2000 involved in the present case, appears to have escaped the attention of the learned Tribunal while passing the original appellate order on 30th May, 2008 and again in the impugned order Annex. 1 dt. 27th April, 2010 under s. 254(2) of the Act even though CIT(A) had dealt with the same. 17. The requirement on the part of the assessee to establish that debts in question had really turned bad is no longer there after ast April, 1989 and it is left to the business prudence of the assessee to claim such deduction by merely writing off such advances or debts as bad debts in the books of accounts and debiting the same in the P and L a/c of the assessee. Otherwise, any advance would have been shown on the assets side of the balance sheet under the heading of 'Debtors' or 'loans and advances' under the heading current assets. So long as the outstanding debt is shown on the assets side of the balance sheet, there is no question of claiming the same as deduction from profits and gain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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