TMI Blog2010 (5) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance on account of bad debt – in favor of assessee - IT APPEAL NO. 645/AHD./2010 - - - Dated:- 7-5-2010 - BHAVNESH SAINI AND N.S. SAINI, JJ. Bhavin Marfatia for the Appellant . C.K. Mishra for the Respondent . ORDER Bhavnesh Saini, Judicial Member - This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-V, Baroda dated December 11, 2009 for the assessment year 2001-02 on the following effective grounds : "1. The learned Commissioner of Income-tax (Appeals) erred in fact and in law in confirming action of the Assessing Officer in reopening the assessment by invoking the provisions of section 147 of the Income-tax Act, 1961 and completing the assessment, commenced under invalid exercise of power under section 147 of the Act despite the fact that assessment under section 143(3) was framed in the case of the appellant on February 27, 2004. 2. The learned Commissioner of Income-tax (Appeals) erred in fact and in law in confirming action of the Assessing Officer in reopening the assessment without satisfying the conditions mentioned in the proviso to section 147, especially when there was regular assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scrutiny of assessment records reveals that debit balance shown against these parties has been reduced from the previous year balance. It shows that the assessee has recovered some amount during the year under consideration. Therefore, in the prevailing circumstances it was premature to treat the outstanding dues as bad debt. Therefore the claim of the assessee-firm regarding bad debt was not correct. Therefore, I have reason to believe that the assessee has not disclosed true particulars of its income for the financial year 2000-01 relevant to the assessment year 2001-02. Further I have reasons to believe that income to the extent of Rs. 11,03,569 has escaped assessment within the meaning of section 147 of the Act." 4. It was further submitted that the said proceeding was dropped vide order dated December 24, 2007. Thereafter, the Assessing Officer reopened the case under section 147 of the Income-tax Act again by recording the same reasons for reopening vide letter dated March 5, 2008. It was submitted that reopening of assessment was bad in law because it was issued beyond the period of 4 years from the end of the assessment year. It was submitted that the proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier proceedings. The learned Commissioner of Income-tax (Appeals) also noted that reopening was done because audit objection was raised and on this issue of bad debt no opinion was framed by the Assessing Officer. Therefore, it is not a case of change of opinion. The learned Commissioner of Income-tax (Appeals) noted that in this case there was a chance of recovery. Therefore, debt cannot be considered as bad and dismissed the appeal of the assessee on both the counts. 5. Learned counsel for the assessee reiterated the submissions made before the authorities below and submitted that it is a case of change of opinion because this issue was considered by the Assessing Officer in the original assessment proceedings and the assessee filed detailed reply before the Assessing Officer and the Assessing Officer was satisfied that the debt has become bad and, therefore, no addition was made in this issue. Learned counsel for the assessee also submitted that the issue on merit is now covered by the judgment of the hon'ble Supreme Court in the case of T.R.F. Ltd. v. CIT [2010] 323 ITR 397 . 6. The learned Departmental representative relied upon the orders of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Direct Tax Laws (Amendment) Act". The hon'ble Supreme Court in the case of Indian Oil Corporation v. ITO [1986] 159 ITR 956 held that "no case under section 148 is made out when the facts were known all along to the Revenue while making the original assessment." The hon'ble Supreme Court in the case of Associated Stone Industries (Kotah) Ltd. v. CIT [1997] 224 ITR 560 held that "the assessee shall have to disclose only the primary facts." Considering the above legal propositions decided in the above cases, it is clear that the Assessing Officer is not justified in reopening the assessment on mere change of opinion. 8. Learned counsel for the assessee pointed out the reply filed before the Assessing Officer at the original assessment proceedings under section 143(3) of the Income-tax Act (paper book 67) in which the assessee has filed specific reply before the Assessing Officer regarding bad debt written off by the assessee in the books of account during the assessment year in question in respect of all the above parties. The Assessing Officer on consideration of the reply of the assessee and material on record did not make any disallowance out of bad debt while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) considering the above provisions and the earlier provisions on the same issue held that (page 398) "This position in law is well-settled. After April 1, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in the accounts of the assessee. When bad debt occurs, the bad debt account is debited and 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 stated 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 for de novo consideration of the abovementioned aspect only and that too only to the extent of the write off." Admittedly, in this case the assessee has written off the bad debt as irrecoverable in its account. Therefore, the case of the assessee would be covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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