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Deputy Commissioner of Income-tax, Circle 4 (1) (2) , Bangalore Versus M/s. Measurements & Controls India Ltd.

2016 (3) TMI 212 - ITAT BANGALORE

Rectification of mistake - claim of bad debts written off disallowed - assessee written off the said amount out of the total provision made during the assessment year 2004-05 and claimed the same while computing income of the assessee - CIT(A) accepted the explanation of the assessee and allowed the claim of the assessee in respect of the said amount. It was also observed that this issue cannot be examined in proceedings u/s 154.

Held that:- Assessee has duly explained that during the .....

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puted this fact while passing the impugned order u/s 154. Even before us, revenue has not disputed these facts explained by the assessee. During the year under consideration, the assessee has written off a sum of ₹ 98,00,327/- out of the total provision made for bad and doubtful debts of ₹ 1,32,94,610/-. Thus, in the books of account, the assessee has reversed provision to the extent of said amount which was not recoverable and passed entries by debiting provision for bad and doubtfu .....

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bad debts written off has been carried out by the assessee along with provision for bad and doubtful debts made during the financial year 2003-04 relevant to assessment year 2004-05. Therefore, as per provisions of sec.36(1)(vi), the assessee is not required to establish that debts actually gone bad once the assessee has written off the amounts in the books of account. The CIT(A) has allowed the claim of the assessee by taking note of the fact that in the books of account, assessee has made entr .....

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ent : Shri D. S. Vivek, CA. ORDER Per Vijay Pal Rao, JM This appeal by the revenue and the cross objections by the assessee are directed against the order dated 2/3/2015 of the CIT(A) arising from the order passed u/s 154 of the IT Act, 1961 [ the Act for short] for the assessment year 2009-10. 2. In this case, assessment was completed u/s 143(3) on 13/12/2011 determining the total income at ₹ 1,25,09,850/-. Subsequently, the AO proposed to rectify a mistake in the order by invoking the pr .....

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f ₹ 98,00,327/- was part of the provisions for bad and doubtful debts made by the assessee in the assessment year 2004-05 though no claim of bad debts was made by the assessee in the said assessment year. Thus, in the current year, assessee written off the said amount out of the total provision made during the assessment year 2004-05 and claimed the same while computing income of the assessee. The CIT(A) accepted the explanation of the assessee and allowed the claim of the assessee in resp .....

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, assessee has filed new evidence in support of the claim which was accepted by the CIT(A) without giving an opportunity to AO. Therefore, there is a violation of rule 46A of the IT Rules. He has relied upon the order passed u/s 154. 5. On the other hand, learned AR of the assessee has submitted that nothing new has been filed by the assessee before the CIT(A) except written submissions wherein assessee has explained the fact that this amount of ₹ 98,00,327/- was part of the provisions of .....

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that no new document or evidence was filed in support of the claim before the CIT(A) but the documents and evidence which were filed before the assessing authority were placed before the CIT(A). Thus, learned AR of the assessee has submitted that the entire relevant document and details were produced before the AO. 6. Having considered rival submissions as well as relevant material on record, we find that in response to the notice by the AO to rectify the assessment order u/s 154 for withdrawal .....

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y d . At the tine of tax computation, the entire provision made for bad and doubtful debts debited to the profit and loss account was added to the profit shown in the profit and loss account and taxes on the same was paid. We are enclosing herewith the computation of total and taxable income for the A. Y.2004-05 marked as annexure-2. b. In the A. Y. 2009-10 the assessee company out of the total provision made for bad and doubtful debts of ₹ 1,32,94,610/- during F. Y. 2003-04 (A. Y.2004- 05 .....

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count. The company has adopted the same principles and accordingly reversed the earlier provisions made towards the doubtful debts amounting to ₹ 98,00,327/- by crediting the same to profit and loss account under the other income and at the same time written off the debtors who have become bad from the books by transferring the same to profit and loss account as bad debts. d. The effect of the above entries in the profit and loss account is contra since it is already accounted as an expens .....

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provision is not an allowable expenditure under the I.T. Act, any provision reversed would also be not an income which would be chargeable to tax under the Income Tax Act. Accordingly, the Assessee has adopted the same yard stick in the computation of total income for A.Y.2009-10 by reducing the provision reversed and credited to the Profit and Loss account from the profit shown as per the profit and loss account. g. Any provision made in the books and the reversal thereof in any of the years, i .....

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epresent would have been to shows as reduction from taxable profit the Reversal of Provision of ₹ 98,00,327/- and not claim a deduction in computation of the Bad debts written off of ₹ 98,00,327/-. The net effect of the final taxable income/loss would have been the same. Thus, there is no error in the taxable income/loss computed as per the assessment order". It is clear from the reply filed by the assessee that the assessee has duly explained that during the financial year 2003 .....

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e passing the impugned order u/s 154. Even before us, revenue has not disputed these facts explained by the assessee. During the year under consideration, the assessee has written off a sum of ₹ 98,00,327/- out of the total provision made for bad and doubtful debts of ₹ 1,32,94,610/-. Thus, in the books of account, the assessee has reversed provision to the extent of said amount which was not recoverable and passed entries by debiting provision for bad and doubtful debts and credited .....

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