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2016 (4) TMI 207 - ITAT MUMBAI

2016 (4) TMI 207 - ITAT MUMBAI - [2016] 47 ITR (Trib) 378 - Deduction of bad debts disallowed - Held that:- The claim on account of bad debts written off is now settled on the basis of judgment of the Hon'ble Supreme Court in the case of T.R.F Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT]. There is no dispute on facts that bad debts have been written off. Thus, as per law, the assessee is undisputedly eligible for the claim. The only hurdle created by the AO was that since the claim was not mad .....

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that assessee can resile from its return of income during the course of assessment proceedings if he is able to show that the return filed was not in accordance with the law or if some income was wrongly offered to tax, which was as per law, not liable to tax, or if the assessee finds that there was omission to make a claim in the return of income. The only precaution to be taken here would be that fresh claim of the assessee should be strictly within the four corners of law. If it is so, the cl .....

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Supreme Court in the case of Ramlal vs Rewa Coalfield Ltd (1961 (5) TMI 54 - SUPREME COURT ), held that the state authorities should not raise technical pleas if the citizens have a lawful right, which is being denied to them merely on technical grounds. The state authorities cannot adopt the attitude which private litigants might adopt. - Decided in favour of assessee. - ITA No. 4474/MUM/2013 - Dated:- 26-2-2016 - Saktijit Dey, JM And Ashwani Taneja, AM For the Appellant : Shri S R Kirtney (DR .....

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tion of bad debts of ₹ 1,37,16,718/- as against claim of bad debt of ₹ 96,35,224/- made in the return of income when assessee had failed to claim such deduction by filing revised return of income u/s. 139 of the Income Tax Act. 2. The Appellant craves to leave to add, to amend and/or to alter any of the grounds of appeal, if need be. 3. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-39, Mumbai may be set aside and that of the Assessing Offic .....

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tal Representative (in short 'the DR') relied upon the order of the Assessing Officer (in short 'the AO'). 3. We have gone through the orders of the lower authorities as well as order of the Tribunal for A.Y 2008-09. The solitary issue involved in the Revenue's appeal is that in the return of income the assessee had made claim on account of bad debts written off for ₹ 96,35,224/-. During the course of assessment it was found by the assessee that the assessee had by mist .....

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of the assessment proceedings was allowed on the ground that the aforesaid judgment of the Hon'ble Supreme Court was not applicable on the appellate authority. The CIT(A) also relied upon the circular issued by the Central Board of Direct Taxes no. 14 dt. 11.4.1955, wherein it was guided by the Board to the revenue officers of the Income Tax Department that they must not take advantage of the ignorance of the assessee and that it was one of the duties of the officers to assist the tax payer .....

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2008-09 an identical claim was made by the assessee during the course of the assessment proceeding with respect to additional claim on account of bad debts. The AO in that year had had rejected the claim in an identical manner by relying upon the judgement of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (supra) as has been done in this year. The said claim was allowed by the ld. CIT(A) and Department carried the matter in appeal before the Tribunal. 5. The Tribunal in .....

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ich he has extracted in para 4 of the impugned order. Assessee stated before ld. CIT(A) that actual debts written off in the financial year relevant to the assessment year under consideration is ₹ 1,87,70,011/ and there is a mistake in the return of income. Ld. CIT(A) considered the submissions of the assessee and held that even if the claim is not made in the return of income and it is made before the first appellant authority, the claim can be entertained. The First Appellate Authority r .....

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f depreciation by a letter and not by a revised return, before deciding the merits of the claim. In Goetze (India) Ltd. v. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC), the Supreme Court held that the assessee can make a claim for deduction, which has not been claimed in the return, only by filing a revised return within the time allowed. In the same decision, it was made clear that the power of the Tribunal to admit an additional ground under s. 254 is not affected by its decision. It .....

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where a claim for special deduction was made by the assessee not in his return but in the course of the assessment proceedings and the ITO failed to consider the same, it was open to the AAC to entertain the claim. In CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), it was held by the Supreme Court that the powers of the CIT(A) of income and it was merely enlarged to 40 per cent on the footing that the assessee was running the trucks on hire. It cannot be said to be an entirely new claim mad .....

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t precluded from dealing with the assessee's claim for higher depreciation on merits." 4. Ld CIT(A) has stated that the facts in the case before him are similar to the above mentioned decision and accordingly allowed the claim of ₹ 1,87,70,011/- as bad debts amount actually written off by the assessee. Hence department is in appeal before the Tribunal. 5. During the course of hearing ld.DR relied on the order of the AO and whereas ld.AR relied on the order of ld. CIT(A). He furthe .....

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quot;w.e.f. 1-4-1989, it is enough if bad debt is written off as irrecoverable in accounts of assessee to satisfy the condition of Section 36(1)(vii) of the Income-tax Act, 1961". In view of the above amendment w.e.f. 1-4-1989 the assessee is entitled to claim deduction as it would satisfy the purpose of the Act. In view of above, in the facts of case, we uphold the order of ld. CIT(A) and reject ground of appeal taken by the department. Hence, appeal of the department is dismissed." 6 .....

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in the return of income, therefore, the claim could not have been allowed to the assessee. We do not respectfully agree with the views of the AO. In our considered view, if the assessee is entitled for a deduction, as per law and facts, same should not have been denied to itr merely because the claim was not made in the return of income. That would, in our considered opinion, amount to collecting taxes without authority of law. It is further noted by us that it is well settled position of law th .....

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m made even for the first time during the assessment proceedings should not be rejected. 7. In our view, there are no estoppels on legal issues under the income tax law. Even if, assessee agrees or consents for something contrary to law, the A.O. is obliged under the law, to discharge his duty of making fair assessment of income and to compute amount of tax payable as per law. As per Article 265 of the Constitution of India, "No tax can be collected except by authority of law". Hon' .....

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reproduced below: "It was true that the assessee itself had included that dividend income in its return for the year in question, but there was no estoppel in the Income-tax Act and the assessee having itself challenged the validity of taxing the dividend during the year of assessment in question, it must be taken that it had resiled from the position which it had wrongly taken while filing the return. Quite apart from it, it was incumbent on the income-tax department to find out whether a .....

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ear 1958-59." 8. Further reliance is placed by us on another judgment of Hon'ble Gujarat High Court, in the case of, S.R. Koshti 276 ITR 165 (Guj) in which relief was granted to assessee with following observations: "The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act .....

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J&K) Constitution imposes an embargo on imposition and collection of tax if the same is without authority of law." 10. Lastly, we find it useful to refer to judgment of Hon'ble Bombay High Court in the case of Central Provinces Manganese Ore 112 ITR 734, holding that, the mere fact that a deduction was not claimed before the Income-tax Officer, was not of much importance, since if the liability arises then a claim can be made in a bonafide manner at any stage before the higher autho .....

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urt in the case of Goetze (India) Ltd. v. CIT (supra), has held that the Tribunal has powers to allow fresh claim made by the assessee during the course of assessment proceedings. The relevant observations of Hon'ble High Court are reproduced below :- "12. As clear from the abovesaid facts, there is no dispute that customer introduction charges did not (sic) represent revenue expenditure. The principal ground taken by the Revenue in this appeal is that if no claim for deduction of the a .....

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terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. We do not see any reason to restrict the power of the Tribunal under s. 254 only to decide the grounds which arise from the order of the CIT(A). Both the assessee as well as the Department have a right to file an appeal/cross-objection before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of l .....

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l the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, 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 is no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the .....

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ervations would apply to appeals before the Tribunal also." 17. In Goetze (India) Ltd. vs. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC), wherein deduction claimed by way of a letter before AO, was disallowed on the ground that there was no provision under the Act to make amendment in the return without filing a revised return. Appeal to the Supreme Court, as the decision was upheld by the Tribunal and the High Court, was dismissed making clear that the decision was limited to the p .....

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