TMI Blog2023 (1) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... d that these amounts were brought forward balances of the preceding years. It was also explained that these were the old outstanding balances on account of sales which were written off. The observation of the ld. Pr. CIT that the assessee had not even reflected under the head bad debts in the relevant column of ITR is concerned, we find that the assessee had duly replied to the ld. Pr. CIT, that though it was mistakenly omitted, however, the assessee company had given the due disclosure of the amount written off in the audited profit and loss account. The issue has not only been brought to the notice of the assessing officer, but the same has also been examined and verified by the assessing officer and under the circumstances there remains no prejudice to the revenue of not reflecting of the aforesaid amount of bad debt under the relevant column of the online ITR form. The issue is otherwise squarely covered by the decision TRF Ltd.[ 2010 (2) TMI 211 - SUPREME COURT] as held that it is not necessary for the assessee to establish that the debt, income, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nafter referred to as PCIT ] agitating against the exercise of revision jurisdiction by him u/s 263of the Income Tax Act ( in short the Act ). 2. The assessee in this appeal has taken following grounds of appeal:- 1. That the Id. Pr. CIT is wrong in passing order u/s 263 to set-aside the claim of bad debt by ignoring the fact that said claim was allowed by the Id. A.O. after making enquiries or verification as required by law and also covered by the Hon'ble SC judgment in the case of TRF Ltd. vs CIT, Ranchi, Civil appeal no. 5293 of 2003, so assessment order passed by Id. A.O. is neither erroneous nor prejudicial to the interest of revenue. 2. That the Id. Pr. CIT is wrong in passing order u/s 263 to set-aside the claim of deduction u/s 80IC by ignoring the fact that said deduction was allowed by the Id. A.O. after making enquiries or verification as required by law and also covered by the Hon'ble SC judgment in the case of CIT vs CM. Knitting Industries (P) Ltd.: 376 ITR 456, so assessment order passed by Id. A.O. is neither erroneous nor prejudicial to the interest of revenue. 3. The brief facts of the case are that assessee is a Limited Company and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain payments received from M/s Metalmine Enterprises against debit balance Rs. 1,67,99,67 in the year 2015, certain payments were made by the assessee to said party raising the debit balance to Rs. 1,66,70,246/- as on 31.03.2016 and then suddenly the said debit entry has been written off on 31.03.2017, for no apparent rhyme or reason. In reply, the assessee submitted as under: In respect to the observation of your goodself that 3 payments were made by the assessee to the said party when the account of the party has been squared-off, it is submitted that it is not the case that after squaring-off the outstanding balance on 10.12.2015, the assessee had made 3 payments to the same party for creating debit balance of Rs. 1,66,70,246/- which is subsequently written-off in the next financial year. These three entries on dated 20.12.2015, 20.12.2015 and 14.01.2016 are debit entries due to reversal of above stated unrealized cheques and not due to payments made to party. Actually, these 3 entries are reversal entries. It is not a case, where payments were made to the party and which were subsequently written-off being irrecoverable. Here is a case, where debit balance became out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, it was also stated that as per Sec 41(4), if the bad debt amount is subsequently recovered then the amount will be chargeable to income tax as the income of the previous year in which it is recovered. During the course of assessment proceedings, the Id. Assessing Officer duly examined the documents and material produced by the assessee along with the documentary evidence (ledger accounts, Debtors List, Profit Loss account, sale register etc.) and on being satisfied about the genuineness of the transaction, accepted the claim of amount written-off of amount of Rs.1,66,70,246/-. Thus, it is the not case that Id. A. O had not conducted enquiry in respect to the written-off amount of Rs.1,66,70,246/-.Since the Id. A.O. duly ascertained the validity of the assessee's claim of write-off from the documentary evidences like ledger accounts, Profit and Loss account, sales register of preceding years, debtors list and by considering the applicable legal provisions. Hence, the assessment order is not erroneous and prejudicial to the interest of the revenue. (iii) The Ld. PCIT noted that there was a regular give and take between the assessee and M/s Metalmine Enterprises, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year in which deduction is claimed. ii) The debt should have been taken into account in computing the income of the previous year in which deduction is claimed or any earlier previous year So, in the case of the assessee, sales were made to the Metalmine Enterprises Pvt. Ltd. in the preceding years which were taken into account in computing the income of those preceding years by including in turnover of those preceding years. Now, when the assessee company did not get any hope to recover the amount, so due to this reason, the recoverable amount is written-off in the books of account of the assessee company during the relevant year. Since the assessee company duly included the sale to the said party in the profit and loss account in the preceding years and recoverable amount was written off during the relevant year, thus satisfying the twin conditions of section 36(1)(vii) and so, it is an allowable expenditure u/s 36(1)(vii) of the Income Tax Act,1961. 4. The Ld. PCIT further show caused the assessee to the effect that the said write off of Rs. 1,66,70,246/-has not even been reflected under the head Bad debts in Col 39 of the ITR-6. That the assessee had camouflag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case from the relevant records, and are discussed in the subsequent paragraphs. 5.1 It was noted that the assessee had debited an amount of Rs. 1,66,70,246/- on account of amount written off in the case of one M/s Metalmine Enterprises Pvt. Ltd. account. It was pointed out in the notice u/s 263(1) that the assessee had not reflected the amount of Rs. 1,66,70,246/- written off in Col no. 39 of ITR-6 under the head Bad debts . In response, the assessee has submitted that it had mistakenly omitted to fill the amount under bad debt column of ITR form, however, even otherwise, assessee company has given the due disclosure of the amount written-off of Rs. 1,66,70,246/- in the audited profit loss account, so it is not the case that assessee company has concealed/hide any information or material fact from the department . The said reply of the assessee, however, is devoid of any strength, as the amount of bad debts written off was large, and, therefore, its omission from the specified column of bad debts in the ITR form was obviously with a view to escape attention and consequent selection for scrutiny assessment under CASS. The assessee's argument that the amount was dul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponse to the said submission of the assessee, the AO had responded as follows through another show cause notice dated 20.12.2019:- The reply furnished by you has been duly considered but not found satisfactorily because of the following reasons:- As regards amount written off of Rs. 1,66,70,246/- for the party Metalmine Enterprises Pvt Ltd, you have submitted that assessee company made the sale in preceding years. But could not recover the amount from the parties and same was written off in the books of accounts and therefore, allowable as bad debts. This plea is not acceptable because from the perusal of the ledger of the said company furnished by you, it is noticed that the said company made transaction during the F.Y. 2013-14, 2014-15, 2015-16 regularly then how it is possible the said company certainly do not made any transactions during the F.Y. 2016-17. Further, you have shown the amount of Rs.1,66,70,246/- as written off in the books of account without furnishing any reasonable reasons alongwith documentary evidence. 5.4 The assessee has now submitted that it had responded to the said notice of the AO, through its reply uploaded on 25.12.2019. It is noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 23,00,000/- 01.11.2014 OBC 03654011000190 CC Receipts / Ch No. 06325 - Rs. 56,66,776/- 12.03.2015 OBC 00384015002793 CC Payment / no. Ch Rs. 56,66,776/- - Total Rs. 1,36,33,552/- Rs. 79,66,776/- Closing balance Rs. 56,66,776/- Rs. 1,36,33,552 Rs. 1,36,33,752/- Ledger Account with M/s Metalmine Enterprises Pvt Ltd (01.04.2015 to 31.03.2016): Date Particulars Vch type/No. Debit Credit 01.04.2015 Opening balance Rs.56,66,776/- 14.10.2015 Metalmine Enterprises P Ltd,. Sadar Journal/Trf Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee despite the fact that the assessee now claims that the cheque of Rs. 56,66,776/- issued by Metalmine to the assessee was dishonored on 12.03.2015. It is because of this debit entry of Rs. 1,11,32,895/- that the assessee raised the so-called outstanding debt of Metalmine Enterprises from Rs. 56,66,776/- to Rs. 1,66,70,246/-. Still further, the assessee has also credited an amount of Rs. 1,29,425/- in the account of Metalmine on 25.11.2015. The AO, however, did not take any note of these transactions. Even during the present submissions, the assessee has not been able to explain the nature of this dr. entry of Rs. 1,11,32,895/- and credit entry of Rs. 1,29,425/- even though this issue was specifically raised in the notice u/s 263(1) supra (d) The AO completely failed to raise any query if the assessee had any evidence to establish that it had made diligent efforts to recover the outstanding payments from Metalmine Enterprises Pvt Ltd, or had taken any legal recourse before writing off such a huge amount suddenly and so quickly. The assessee has not been able to submit the said details even during the course of proceedings u/s 263. Nor has the assessee been able to fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word erroneous includes failure to make the enquiry. In such cases, the order becomes erroneous enquiry or verification has not been made and not because a wrong order has been passed on merits. The Hon'ble Delhi High court in Nagesh Knitwear Pvt. Ltd. (2012) 345 ITR 135 has held as under:- The Assessing officer is both an investigator and an adjudicator, if the assessing officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that audit report was neither furnished along with original return nor at the time of revised return. Because, in the present case, ITR as well as Audit Report both are filed well in advance before the permissible time limit prescribed by law for filing of revised ITR. If both are filed within in time, then it does not matter if one of them is filed in advance vis-a-vis the other. 6. Observations of PCIT in the show cause notice: 4.1 Since the assessee had not furnished the audit report in Form 10CCB alongwith the ITR, the claim of deduction u/s 80IC of the Act is not allowable in this case. However, the deduction of Rs.3,24,45,802/- as claimed by the assessee u/s 80IC of the act has been allowed by the AO, without paying adequate attention to the facts and relevant legal provisions. Thus the excess deduction of Rs.3,24,45,802/- has been wrongly allowed by the AO to the assessee. During the course of assessment proceedings, the assessee had placed reliance on the decision of Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. G.M Knitting Industries (P) Ltd . The AO accepted the said contention of the assessee without examining it at length. The case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/s 80IB. Thus, it is clear from the above that Id. Assessing officer had rightly placed the reliance on the aforesaid Hon'ble Supreme Court judgment as the judgment of Hon'ble Supreme Court is squarely apply to the facts of the case of the assessee. Further, it is submitted that since the audit report was filed much before the expiry of due date of revised ITR, so at the time of the processing of the revised return, the audit report in Form 10CCB was available with the Id. A.O. and was part of the record. It is further submitted that the assessment was completed after taking into consideration this audit report. In view of the above facts and circumstances of the case and respectfully following the judgment of Hon'ble Courts, the requirement of the filing of the audit report in Form 10CCB along with the return of the income is not mandatory in the strict sense of the term, but is only directory. Moreover, in the present case, Audit report is filed before due date of ITR i.e. much before the completion of assessment. Thus, it is requested to your goodself to kindly allow the deduction to the assessee u/s 80IC. It is further submitted that in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort in Form 10CCB was neither furnished by the. assessee at the time of filing of original ITR on 26.10.2017, nor at the time of filing of revised ITR on 07.09.2018. As per the provisions of section 80IC(7) r.w.s. 80IA(7)of the Act, for claiming the deduction u/s 80IC of the Act, filing of audit report in Form 10CCB is mandatory along with the return of income. Relevant sections in this regard are reproduced hereunder: 80-1 A. (7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form82 duly signed and verified by such accountant. (Emphasis supplied) 80-IC. (7) The provisions contained in sub-section (5) and subsections (7) to (12) of section-80-IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section. 9. The assessee has placed reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply to the facts of the present case. In view of the above facts, we do not find any infirmity either in the procedure or in passing of intimation u/s 143(IA) of the act as well as in denying deduction u/s 80 IB of the act to the assessee for non filing of the audit report in electronic manner in time (on or before the due date of filing of the return of income) as prescribed Under income tax rules and having the mandate of the provisions of Section 80 IB (11B) (iv). Accordingly, we dismiss all the grounds of appeal of assessee. 10. The said order has clearly been passed by the Hon'ble ITAT, New Delhi after duly considering the judgment of the Hon'able Supreme Court relied upon by the assessee supra. Given the fact that the Income Tax law and procedure have transitioned to the electronic platform in a radical manner, the assessee cannot justify its dereliction and default on the strength of the facts of the case which pertain to an altogether different time when all the processes were manual, and one could justify the time lag between the submission of various documents at the assessee's end. 10.1 Further, it will not be out of place to mention here th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide the assessment order in this case in exercise of revision jurisdiction u/s 263 of the Act. The twin conditions required for exercise of jurisdiction u/s 263 of the Act i.e. that the order of the AO must be erroneous and prejudicial to the interest of revenue, have not been satisfied in this case. 8. So far as the issue relating to bad debts written off is concerned, the ld. Pr. CIT had raised a query as to the squaring off of the outstanding balance and thereafter making payments to M/s. Metalmine Enterprises Pvt. Ltd., to which the assessee duly explained that the aforesaid entries were not on account of payment made to the said enterprise after squaring off of the accounts, rather, the same were reversal entries. The ld. Counsel for the assessee has invited our attention to the chart reproduced by the ld. Pr. CIT in the impugned order to show that the credit entries were made of Rs.50,00,000/- received vide cheques no. 002315 dt. 10/11/2015, Rs.60,03,470/- received vide cheques no. 002316 dt. 02/12/2015 and of Rs.56,66,776/- received vide cheques no. 005261 dt. 10/12/2015. However, these receipts were debited due to dishonor of the aforesaid cheques and the credit entries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and since the assessee was not able to recover the same from the concerned party, the same was written off in the accounts of the assessee. 9.2. We further note that on the one hand, the ld. Pr. CIT has noted that the Assessing Officer had not made proper enquiries relating to identity of the concerned M/s. Metalmine Enterprise Pvt. Ltd., but at the same time the, ld. Pr. CIT in its question no. 3 of the show cause notice, herself, has observed that it was obvious from the given transactions that there was a regular give-and-take between the assessee and M/s. Metalmine Enterprise Pvt. Ltd., and that there was a relationship of deep trust based on which the assessee was regularly transferring such huge amounts to the concern. The aforesaid observations of the ld. Pr. CIT are selfcontradictory. It is undisputed that there was a regular business transactions of the assessee with the said concern and the amount outstanding was on account of trade receivables and that there were regular business transactions, even in earlier years, between the parties. It was duly explained before the ld. Pr. CIT that the assessee had not made any fresh payment of Rs.1,66,70,246/- to M/s. Metalmine E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the assessee on 07/09/2018 and the requisite audit report in Form 10CCB was filed on 11/09/2018. However, pertinent fact is that the due date of filing of the return was 31/03/2019. It shows that the assessee not only filed the revised return which was also within the due date but also uploaded the audit report within four days of filing of the revised ITR i.e., on 11/09/2018 itself, much before the due date for filing of the same. So not only the return of income but also the audit report was filed much prior to the expiry of due date of furnishing the return. The intention of the legislature, that the audit report should also be filed along with the return of income, cannot be strictly construed to say that even if due to certain reasons the audit report is filed/uploaded a few days after the uploading of the return of income, but much prior to the last date of filing of the return of income, then under such circumstances, the audit report has to be ignored, rather, the intention of the legislature, in this respect is that the return of income as well as the audit report should be filed before the due date meant for filing of the same. 11.2. Nowadays, we come across ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If the assessee is entitled to certain deductions under the provisions of the Income Tax Act, the same should not be disallowed, merely because of any bonafide mistake or error on the part of the tax payer, rather, the Income Tax Authorities should assist the concerned assessees in filing their correct return of income. This is not the case of the Department that the assessee was not entitled to the deduction claimed u/s 80IC of the Act. We find that the assessee having answered and explained to each of the query of the ld. Pr. CIT in detail, the ld. Pr. CIT mistook herself to hold that the order of the Assessing Officer was erroneous. Even as held by the Hon ble Supreme Court in the case of NTPC vs. CIT (1998) 97 Taxman 358 (SC), that even an issue relating to a legal claim which arises from the facts can be entertained at appellate stage also, even though the same could not be raised before the lower authorities. 12. Even otherwise, the ld. Pr. CIT in this case has proceeded to substitute her own view with the views of the Assessing Officer whereas, the view adopted by the Assessing Officer was a legally possible view, in the light of the decisions of the Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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