TMI Blog2019 (12) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... . But that amendment would not be available for the Assessing Authority to exercise the power to reopen the assessment. - Decided in favour of assessee. - Tax Case (Appeal) No. 8 of 2013 - - - Dated:- 2-12-2019 - THE HON'BLE DR.JUSTICE VINEET KOTHARI AND THE HON'BLE MR.JUSTICE R.SURESH KUMAR For the Appellant : Mr.T. Ravikumar For the Respondent : Mr. Vikram Vijayaragavan for Mr.Subbaraya Aiyar Padmanabhan JUDGMENT ( Delivered by Dr. Vineet Kothari, J. ) The Revenue has filed this Appeal under Section 260A of the Income Tax Act calling in question the correctness of the order passed by the Income Tax Appellate Tribunal, Chennai C Bench, Chennai, dated 18 May 2012, in I.T.A.No.276/MDS/2012, for the Assessment Year 2003-04. 2. The present appeal was admitted by a Coordinate Bench of this Court on 6 February 2013 by framing the following substantial Questions of Law for consideration :- 1.Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the reassessment proceedings was bad in law and consequently cancelling the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court's decision in HCL Comnet Systems Services Ltd. held the field and therefore, the learned Assessing Officer could not take a contrary view for disallowing the bad and doubtful debt and therefore, the learned Income Tax Appellate Tribunal was justified in setting aside the said impugned assessment order. 5. The learned counsel further submitted that even on the allowability on the merits of the Provision for Bad and Doubtful Debt , the Hon ble Supreme court in Vijaya Bank vs. Commissioner of Income Tax Anr, (2010) 323 ITR 166 has held that if the provision for bad and doubtful debt is created by way of debit to the Profit and Loss Account, then such deduction is a lawful deduction for the purpose of Section 36(1) (vii) of the Act. Similarly, the same would be a lawful deduction for tax provided under Section 115JA of the Act. 6. The learned Counsel further relied upon a judgment of the Bombay High court in Rallis India Ltd. vs. Assistant Commissioner of Income Tax and Anr. (2010) 323 ITR 54, which has also been referred to and relied upon by the learned Income Tax Appellate Tribunal in its order, and submitted that merely because amendment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) of the Explanation to s.115JA. Item (c) is however not attracted in this case. The provision for bad and doubtful debt is made to cover up the probable diminution in the value of asset, i.e. Debt which is an amount receivable by the assessee. Therefore, such a provision cannot be said to be a provision for liability, because even if a debt is not recoverable, not liability could be fastened upon the assessee. In the present case, the debt is the amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore, item (c) of the explanation is not attracted to the facts of the present case. In the circumstances, the AO was not justified in adding back the provision for doubtful debts under cl.(c) of the explanation to s.115JA CIT Vs HCL Comnet Systems Services Ltd. (2008) 2019 CTR (Del) 226 Affirmed. Conclusion:- Provision for bad and doubtful debts being a provision made to cover up the probable diminution in the value of asset i.e. Debt receivable by the assessee, it cannot be said to be a provision for liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguish the judgment in Max India (supra) on the ground that it dealt with Section 80HHC and one of the grounds which weighed with the Supreme Court was that the Section had been amended several times. The judgment of the Supreme Court cannot be distinguished for the reasons as suggested by the Counsel for the Revenue. The principle which has been laid down in the judgment of the Supreme Court cannot be confined to Section 80HHC. In that case, the revisional authority had sought to exercise its revisional jurisdiction under Section 263. The exercise of power was challenged firstly on the ground that two views on the interpretation of the provision were possible and hence, recourse to Section 263 was not permissible. Moreover, the second ground which appears to have been urged was that the retrospective amendment to the statutory provision in question would not have a bearing on the correctness of the recourse to Section 263 since on the date on which the power was exercised by the Commissioner, the legislative amendment had not been brought into force. The judgment of the Supreme Court notes firstly that on the date on which the Commissioner passed his order, two views on the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and creating a provision for bad and doubtful debt, the assessee-Bank had correspondingly/simultaneously obliterated the said provision from it's accounts by reducing the corresponding amount from Loans and Advances/debtors on the asset side of the Balance Sheet and, consequently, at the end of the year, the figure in the loans and advances or the debtors on the asset side of the Balance Sheet was shown as net of the provision for impugned bad debt . In the judgement of the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala [supra], a mere debit to the Profit and Loss Account was sufficient to constitute actual write off whereas, after the Explanation, the assessee(s) is now required not only to debit the Profit and Loss Account but simultaneously also reduce loans and advances or the debtors from the asset side of the Balance Sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is shown as net of provisions for impugned bad debt. This aspect is lost sight of by the High Court in it's impugned judgement. In the circumstances, we hold, on the first question, that the assessee was entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. There is also a flip- side to the argument of the Department. Assessee has instituted recovery suits in Courts against it's debtors. If individual accounts are to be closed, then the Debtor/Defendant in each of those suits would rely upon the Bank statement and contend that no amount is due and payable in which event the suit would be dismissed. 10. In view of the aforesaid settled legal position, reference to the judgments on the side of the learned counsel for the Revenue to CIT Vs. Tamil Nadu Small Industries Development, (2015) 370 ITR 449, Commissioner of Income Tax vs. ILPEA Paramount (P)Ltd., (2010) 78 CCH 192 Delhi HC and Deputy Commissioner of Income Tax vs. Beardsell Ltd., (2000) 244 ITC 256, are of little help to the Revenue because they do not deal with the question relating to reassessment on the basis of the retrospective amendment effected in Explanation-1 to Section 115JB of the Act. 11. Therefore, we are of the clear opinion that the issue raised by the Revenue in this appeal was not at all in issue, when the reassessment notice for the assessment year 2003-04 was issued on 31 March 2008 for disallowing the Provision for Bad and Do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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