TaxTMI 
TaxTMI 
2018 (2) TMI 1716
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....r : "2. The assessee company had debited in its profit and loss account a sum of Rs. 1,69,37,818/representing "provision for doubtful overdue installments under Hire Purchase Finance Agreements". In its return of income, the assessee claimed the said provision as bad debts u/s 36(1)(vii) of the Income Tax Act. In the Notes on computation of total income submitted with the return, it was clarified that the said amount was claimed as a deduction, relying on the decision of the Gujarat High Court in the case of Vithaldas H.Dhanjibhai Bardanwala (130 ITR 95). The Assessing Officer disallowed the claim u/s 141(1)(a) on the ground that the amount represented mere provision for doubtful debts and, as such, could not be treated as bad debts. The assessee filed an application u/s 154 for deletion of the adjustment. It was contended before the Assessing Officer that the adjustment could not be made in respect of a provision for doubtful installments, as its allowability was a debatable issue. The Assessing Officer rejected the application u/s 154. 3. It was contended before the learned C.I.T.(A) that since the "provision for doubtful overdue installments under Hire Purchase Agreement" ....
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.... of 'bad debts'. This claim of bad debts appeared separately immediately after the claim of 'provision for doubtful overdue installments under Hire Purchase Finance Agreements" in Schedule 10 of the assessee's accounts for the year. Thus, according to its own showing of the assessee, the claim of deduction of Rs. 1,69,37,818/on account of "provision for doubtful overdue installments under Hire Purchase Finance Agreements" was a distinct and separate item of deduction and was not treated as equivalent to a claim for bad debts. Elaborating his discussion, the learned departmental representative submitted that, firstly, the "provision for doubtful overdue installments" could not validly be held to be write off of irrevocable debts so as to be treated as bad debt. Secondly, this claim was not made with reference to any specific debts which were perceived to be bad debt. Rather, it was a provision of an adhoc nature and was part of the annual exercise which the assessee made in all the preceding years and the subsequent years. With a view to buttress his argument, the learned departmental representative referred to the annual reports and accounts of the assessee for t....
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....n of Gujarat High Court in the case of Vithaldas H.Dhanjibhai Bardanwala Vs. Commissioner of Income Tax, 130 ITR 95 as is evident from note in the return. Therefore, disallowance of a claim which has been allowed by High Court, would at the very least be a debatable issue; (c) the words "prima facie inadmissible" found in clause (iii) of Section 143(1)(a) of the Act, has been construed by this Court in Khatau Junkar Ltd. Vs. K.S. Pathania, 196 ITR 157 to mean not available on the face of it i.e. where no further inquiry is necessary to hold so. However, when there is a different interpretation accepted by Court, then, adjustment under Section 143(1)(a) of the Act is not permissible. It would at the very least require giving an opportunity to the assessee to support his claim before disallowing the same. (d) Instruction No.1814 dated 4th April, 2009 issued by the Central Board of Direct Taxes (CBDT) explains the scope of the word "prima facie disallowance" under Section 143(1)(a) of the Act as being different from a debatable issue. It clarifies that a debatable issue is one where a claim made by an assessee on the basis of a decision of a Court / Tribunal. A debatable claim c....
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....adjustments shall be made in the income or loss declared in the return, namely : (i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified; (ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed: (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed ; ... . Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustment. Provided ......" 9. The written submission as filed by the Revenue ignores the fact that only one question has been referred to us for consideration. The issue referred to us is in respect of applicability of Section 143(1)(a) of the Act to disallow a claim for provision for bad debt by intimation i.e. without calling....
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....h April, 1989 issued by the CBDT in respect of the scope of prima facie disallowance under Section 143(1)(a) of the Act. In fact, paragraph no.9 thereof provides that where a claim for deduction has been made on the basis of a decision of a High Court / Tribunal, then, even if there is contrary view expressed by another High Court and / or Tribunal or an appellate Authority, the issue itself becomes debatable. In such cases, no adjustment under Section 143(1)(a) of the Act is permissible. Thus, disallowance of a claim can be made only after hearing the assessee who has made the 12. Further, our Court in Khatau Junkar Ltd. (supra) had while dealing with the word "prima facie inadmissible" in clause (iii) of Section 143(1)(a) of the Act has held that the word "prima facie" means on the face of it the claim is not admissible. It means the claim does not require any further inquiry before disallowing the claim. The Court observed that where a claim has been made which requires further inquiry, it cannot be disallowed without hearing the parties and / or giving the party an opportunity to submit proof in support of its claim. In the absence of Section 143(1)(a) of the Act bein....