TMI Blog2013 (11) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... n the profit the assessee ought to have got the benefit of deduction u/s 80HHC – Deduction not permissible – Decided against assessee. Penalty u/s 271(1)(c) – Held that:- The assessee had not appeared before the Revenue Authorities - In the light of the order now pronounced by department pertaining to the quantum addition, the assessee deserves right to explain his case pertaining to the concealment of penalty to learned CIT(A) – The issue was restored for fresh decision. - ITA No.1369/Ahd/2010 and 997/Ahd/2012 - - - Dated:- 31-10-2013 - Mukul Kr Shrawat And T R Meena, JJ. For the Appellant : Shri O P Batheja, Sr.DR For the Respondent : Shri S N Soparkar, AR ORDER:- PER : Mukul Kr Shrawat These two appeals pertain to the same assessee hence consolidated and hereby decided by this common order. A. ITA No.1369/Ahd/2010 (for A.Y. 1996-97) 2. This appeal has been filed by the assessee emanating from an order of learned CIT(A)-XI, Ahmedabad, dated 18.02.2010 and the grounds raised are reproduced below: "1. Learned CIT (A) has erred in law and on facts in confirming the disallowance of claim of bad debt amounting to Rs. 2,70,22,276/ made by AO since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il" returned income. At the time of original assessment three major additions were made as follows: "i) Bad debts claimed Rs. 2,70,22,278/- ii) Sales not recorded in the books Rs. 13,75,921/- iii) Unexplained investment Rs. 3,29,450/-." 3.1 The matter reached before learned CIT(A) who has granted relief to the assessee, which was challenged by the Revenue Department. When the matter reached upto the Tribunal then ITAT 'C' Bench Ahmedabad in ITA No.1429/Ahd/2010, A.Y. 1996-97, titled as "DCIT, Ahmedabad V/s. Robinson Impex (India) Ahmedabad, dated 21.07.2006 restored the issued to the file of the AO, as per following directions: "In the case before us the assessee did not have opportunity to place the submissions and evidence to establish his claim for deduction in respect of explanation u/s. 36(1)(vii)(i) as it was inserted by Finance Act, 2001. We, therefore, set aside the order of the CIT(A) as well as that of the Asssessing Officer and restore the matter back to the file of the Assessing Officer to consider the claim of the assessee afresh in accordance with law after giving a reasonable opportunity of being hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the accepted factual position according to learned CIT(A) was that the assessee company had made the "provision" for the bad debts in the P L A/c, therefore, in the light of the provisions of the Act, the same was not allowable. Rather, learned CIT(A) has mentioned that, quote "In other words ld AR fairly conceded that in view of the explanation the appellant is not entitled to deduction u/s 36(1)(vii). Therefore, I uphold the A.O.'s finding that the appellant's claim u/s 36(1)(vii) is not allowable in accordance with the provisions of law." Unquote. 4.1 An alternative plea was therefore raised by the assessee that the amount in question was in the nature of irrecoverable export sale proceeds so the impugned amount should be allowed as a "trading loss". The assessee has referred Ramchandra Shivnarayan, 111 ITR 263 (SC) for the legal proposition that during the course of business operation the amount became irrecoverable, therefore, as per commercial standards it was a trading loss. Hence, it was pleaded that on commercial principles the loss may be treated as a business loss as it was held in the case of SNASA Annamali Chaitairh, 86 ITR 607 (SC). Few other case laws in suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is still deductible as trading loss and therefore this alternate claim calls for adjudication. In this connection it is seen that such a contention was raised by the A.R before the Tribunal. However, the Tribunal did not give any finding on this issue nor was any direction given to the A.O. (to whom the matter was restored) to consider the same. Further in the assessment proceedings consequent to the Tribunal's order, no such plea was taken and therefore, the assessment order does not contain any discussion what so ever on this issue, in view of the foregoing discussion I am of the considered opinion that the appellant's claim for treating the impugned amount as trading loss is beyond the mandate given by the Tribunal. . 7. Since the assessment year under consideration is assessment year 1996- 97 and this is the second round of the appellant proceedings, I deem it worthwhile to go into the merits of the appellant's claim inspite of my above finding that this issue is beyond the purview of the present appellate proceedings. In the instance case, the appellant made a provision for bad and doubtful debts. The debts were not actually written off during the previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, therefore, now it was requested that the claim of trading loss deserves to be considered. He has raised two folds of argument, first that a bad debt is required to be allowed if it is written off by debting the P L A/c. as per the provisions of law. Second that if this plea is not acceptable then the same is required to be allowed as "trading loss", which was not adjudicated upon by the lower authorities. 6. From the side of the Revenue, learned D.R. Mr. O.P. Batheja appeared and vehemently objected the argument of learned AR, mainly on the ground that the issue of trading loss was duly considered by learned CIT(A) and on merits it was disallowed. It is not correct on the part of learned AR to argue that the alternate claim of trading loss was not duly considered by learned CIT(A). Learned DR has therefore pleaded that both the arguments are against the facts of the case, hence, deserves to be rejected. 7. Having heard the submissions of both the sides, we are of the considered opinion that even in the second round of appeal the assessee has not improved his stand in respect of the claim of bad debt, for which undisputedly a 'provision' was made in the books of account. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication for extention for getting the export proceeds back to the office of the CIT and the relevant document which shows that the proceeds to be realized had become bad and also whether the permission of RBI has been obtained before declaring the export proceeds as bad debts. The assessee was also asked to produce details in respect of status of the debtor whether the debtor had become bankrupt and was not in a position to pay." Even during the first round of proceedings or in the second round of appellate proceedings the assessee has not given any evidences in support of the claim of "trading loss". The case laws as cited by the assessee also do not support the claim of business loss in the absence of any proof. We, therefore, hold that the assessee is not entitled for such claim. This part of ground is also dismissed. 8. Now we are left with the claim of bad debt viz-a-viz the computation of the deduction u/s. 80HHC of IT Act. This issue has been raised as per ground no. 4 as reproduced above. As far as the direction of the Tribunal in the first round of appeal was concerned, the relevant portion of the said order of the Tribunal, dated 21.07.2006 is reproduced above. The Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.3 It was contended that the profit from export was required to be worked out as provided u/s. 80HHC(3)(b) of IT Act. For working out the profit derived from export of trading goods, it shall be export turnover as reduced by direct and indirect cost attributable to such turnover. Further, in accordance with Explanation (b) below Section 80HHC(4C), 'export turnover' means the sale proceeds received in or brought into India by the assessee in convertible foreign exchange. Learned CIT(A) has given a finding that the impugned bad debt is not the sale proceeds received in or brought into India. Because of this reason, the assessee is not eligible for further deduction pertaining to the disallowance of bad debts. Rather, learned CIT(A) has noted that in the absence of any revised computation of deduction u/s. 80HHC, it appears that the learned AR has fairly admitted the view taken by the AO. He has concluded that there was no requirement that the deduction u/s. 80HHC would undergo any upward revision on account of disallowance of bad debts. In the result, the deduction as made by the AO was upheld. 9. We have heard both the sides. On careful consideration of the facts, we are of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of deduction u/s 80HHC : (i) there shall be an export of goods out of India, (ii) there shall be a sale of the exported goods (iii) there shall be profit on exported sales, and (iv) there shall be receipt of foreign exchange brought in India. According to us these basic conditions have not been fulfilled in the present case. Facts of the case have demonstrated that the amount is question pertained to the year under consideration. It is not a case that it related to the past years. For argument sake, even if it pertained to the past years then being a debt must be part of the assets reflected in the Balance-sheet, meaning thereby that the sales should have been shown in those years and over which on the profit the assessee ought to have got the benefit of deduction u/s 80HHC. Because of this reason the claim for this year even then not permissible. If the bad-debt is for the year under consideration, then also as discussed above, not permissible as per law. We, therefore, hold that both the lower authorities have correctly appreciated the facts of the case as also the law applicable in respect of the computation of deduction u/s.80HHC; hence, no interference is required. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the assessing officer is justified in levying the penalty under section 271(1)(c) of the IT Act, 1961. Accordingly, the order levying the impugned penalty amounting to Rs.1,20,47,061/- is hereby confirmed." 12. From the side of the appellant, learned AR Mr. Soparkar argued that the return was filed under a bonafide belief that the claim of bad debt was admissible as per law. Learned AR has further argued that at the time when the return was filed there was no provision for disallowance of bad debt, which was introduced subsequently. He has pleaded that even the matter was disputed one, that is why the Tribunal had restored the issue back to AO for denovo consideration. On account of these facts and considering the doubtful nature of the claim the assessee could not be penalized. All the facts in respect of the claim of bad debt was very much on record and the assessee had not anticipated, when the return was filed, that on those facts that the claim of bad debt was going to be disallowed by the Revenue Department. However, learned DR has drawn our attention primarily on the non-genuineness. According to learned DR, the assessee had preferred not to appear before the AO and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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